Company Quick10K Filing
Thanksgiving Coffee
Price-0.00 EPS0
Shares1 P/E-0
MCap-0 P/FCF-0
Net Debt-0 EBIT0
TEV-0 TEV/EBIT-1
TTM 2019-06-30, in MM, except price, ratios
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8-K 2019-12-12
8-K 2019-07-31

TCCI 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters To A Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
EX-3.1 f10q0318ex3-1_thanksgiving.htm
EX-3.2 f10q0318ex3-2_thanksgiving.htm
EX-31.1 f10q0318ex31-1_thanksgiving.htm
EX-31.2 f10q0318ex31-2_thanksgiving.htm
EX-32.1 f10q0318ex32-1_thanksgiving.htm
EX-32.2 f10q0318ex32-2_thanksgiving.htm

Thanksgiving Coffee Earnings 2018-03-31

Balance SheetIncome StatementCash Flow
1.91.51.10.80.40.02017201820192020
Assets, Equity
1.20.90.70.40.2-0.12017201820192020
Rev, G Profit, Net Income
0.30.20.10.1-0.0-0.12017201820192020
Ops, Inv, Fin

10-Q 1 f10q0318_thanksgiving.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

  

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2018

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period From _______ To _______

 

Commission File Number: 33-96070-LA

 

THANKSGIVING COFFEE COMPANY, INC.

(Exact name of registrant as specified in its charter)

 

California   94-2823626
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
   
19100 South Harbor Drive, Fort Bragg, California   95437
(Address of principal executive offices)   (Zip Code)

 

(707) 964-0118

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company
  Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

There currently does not exist a public trading market for the registrant’s common stock. Over the years, there have been isolated and sporadic privately negotiated transactions in the Company’s shares.  See “Part II, Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”  The Company is not aware of any privately negotiated transactions of the Company’s stock since 2008. The Company is unable to determine the current market value of the common equity held by non-affiliates as no reliable secondary trading price exists.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

On March 31, 2018 the registrant had 1,236,744 shares of Class A common stock, no par value per share, outstanding.

 

Class   Outstanding at March 23, 2018
Common Equity, no par value   1,236,744 shares

 

 

 

 

 

 

FORM 10-Q

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
     
Item 1. Financial Statements 1
     
  Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017. 2
     
  Statements of Operations for the three months ended March 31, 2018 and March 31, 2017 (unaudited) 4
     
  Statements of Cash Flows for the three months ended March 31, 2018 and March 31, 2017 (unaudited) 5
     
  Notes to Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
     
Item 4. Controls and Procedures 14
     
PART II – OTHER INFORMATION
     
Item 1. Legal Proceedings 14
     
Item 1A. Risk Factors 14
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15
     
Item 3.

Defaults Upon Senior Securities

15
     
Item 4. Submission of Matters to a Vote of Security Holders 15
     
Item 6. Exhibits 15
   
Signatures 16

 

i 

 

 

PART I. Financial Information

  

Item 1. Financial Statements

 

The financial statements included herein have been prepared by Thanksgiving Coffee Company, Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such SEC rules and regulations. In the opinion of management of the Company, the accompanying statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2018 and December 31, 2017, and its results of operations for the three month periods ended March 31, 2018 and 2017 and its cash flows for the three month periods ended March 31, 2018 and 2017. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto filed as a part of the Company’s annual report on Form 10-K.

 

 1 

 

 

Thanksgiving Coffee Company, Inc.

Balance Sheets

 

   2018   2017 
   (Unaudited)   See Note 1 
Assets        
Current assets        
Cash  $83,700   $160,392 
Accounts receivable, net of allowance   212,179    229,877 
Inventories   224,126    262,108 
Prepaid expenses   81,918    57,780 
Total current assets   601,923    710,157 
           
Property and equipment          
Property and equipment   1,447,829    1,474,406 
Accumulated depreciation   (1,097,029)   (1,109,787)
Total property and equipment   350,800    364,619 
           
Other assets          
Deposits and other assets   4,032    3,112 
Total other assets   4,032    3,112 
           
Total assets  $956,755   $1,077,888 

 

See accompanying notes to financial statements

 

 2 

 

 

Thanksgiving Coffee Company, Inc.

Balance Sheets

 

   March 31,   December 31, 
   2018   2017 
   (Unaudited)   See Note 1 
Liabilities and shareholders’ equity        
Current liabilities        
Accounts payable  $200,534   $213,942 
Accrued Liabilities   43,901    65,299 
Current portion of long term debt   46,356    46,476 
Total current liabilities   290,791    325,717 
           
Long term debt          
Long-term debt   102,846    114,229 
Less current portion of long term debt   (46,356)   (46,476)
Total long term debt   56,490    67,753 
Total liabilities   347,281    393,470 
           
Shareholders’ equity          
Common stock, no par value, 1,960,000 shares authorized, 1,236,744 shares issued and outstanding   861,816    861,816 
Additional paid in capital   24,600    24,600 
Accumulated deficit   (276,942)   (201,998)
Total shareholders’ equity   609,474    684,418 
           
Total liabilities and shareholders’ equity  $956,755   $1,077,888 

 

See accompanying notes to financial statements

 

 3 

 

 

Thanksgiving Coffee Company, Inc.

Statements of Operations

Unaudited

 

   For the Three Months
Ended
 
   March 31, 
   2018   2017 
Income        
Net sales  $795,036   $819,286 
Cost of sales   483,078    454,925 
Gross profit   311,958    364,361 
           
Operating expenses          
Selling, general and administrative expenses   365,490    362,658 
Depreciation and amortization   21,382    22,176 
Total operating expenses   386,872    384,834 
Operating loss   (74,914)   (20,473)
           
Other income (expense)          
Miscellaneous income   1,608    0 
Interest expense   (1,638)   0 
Total other income (expense)   (30)   0 
           
Loss before income taxes   (74,944)   (20,473)
Income tax expense   -    (800)
Net loss  $(74,944)  $(21,273)
           
Loss per share (basic)  $(0.06)  $(0.02)
           
Loss per share (dilutive)  $(0.06)  $(0.02)
           
Weighted average number of shares   1,236,744    1,236,744 

 

See accompanying notes to financial statements

 

 4 

 

 

Thanksgiving Coffee Company, Inc.

Statements of Cash Flows

Unaudited

 

    For the Three Months Ended  
    March 31,  
    2018     2017  
Operating activities            
Net loss   $ (74,944 )   $ (21,273 )
Adjustments to reconcile net loss to cash flows from operating activities:                
Depreciation and amortization     21,382       22,176  
                 
(Increase) decrease in:                
Accounts receivable     17,698       14,736  
Inventories     37,982       (61,293 )
Prepaid expenses     (24,138 )     34,857  
Deposits and other assets     (920 )     3,442  
Increase (decrease) in:                
Accounts payable     (13,408 )     (14,618 )
Accrued liabilities     (21,398 )     (20,257 )
Net cash provided by (used in) operating activities     (57,746 )     (42,230 )
                 
Investing activities                
Purchases of property and equipment     (7,563 )     (2,710 )
Net cash (used in) investing activities     (7,563 )     (2,710 )
                 
Financing activities                
(Repayments) issuances of notes payable and capital leases     (11,383 )     (10,194 )
Net cash (used in) financing activities     (11,383 )     (10,194 )
                 
Increase (decrease) in cash     (76,692 )     (55,134 )
Cash at beginning of period     160,392       149,936  
Cash at end of period   $ 83,700     $ 94,802  

 

See accompanying notes to financial statements

 

 5 

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

March 31, 2018 and December 31, 2017

 

Cash paid for income taxes was $800 for the three months ending March 31, 2017.

 

1. Basis of Presentation

 

The unaudited condensed financial statements in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The Company has continued to follow the accounting policies disclosed in the financial statements included in its 2017 Form 10-K filed with the Securities and Exchange Commission (SEC). It is suggested that these statements be read in conjunction with the December 31, 2017 audited financial statements and the accompanying notes on Form 10-K, as filed with the SEC.

 

The interim financial information in this Form 10-Q reflects all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of our results of operations for the interim periods. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of results to be expected for the full year.

 

Concentration of Risk

 

In the first quarter of fiscal 2018, one customer accounted for 8.2% of the Company’s revenue. The account has purchased from the Company since 2009. The account is a distributor of the Company’s product. A loss of this account or any other large account, or a significant reduction in sales to any of the Company’s principal customers, could have an adverse impact on the Company.

 

Income Taxes

 

The Company accounts for income taxes under the asset and liability method as prescribed by ASC 740, Accounting for Income Taxes. As such, deferred income tax assets and liabilities are recognized for the future tax consequences of the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basses. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Accordingly, actual results could differ from those estimates.

 

 6 

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

March 31, 2018 and December 31, 2017

 

2.Accounts Receivable

 

Accounts receivable consist of the following:

 

   3/31/2018   12/31/2017 
Accounts receivable  $216,298   $236,116 
Less: allowance for doubtful accounts   (4,119)   (6,239)
Net accounts receivable  $212,179   $229,877 

 

The Company utilizes a percentage method to establish the allowance for doubtful accounts. The estimated allowance ranges from 1% to 10% of outstanding receivables based on factors pertaining to the credit risk of specific customers, historical trends and other information. Delinquent accounts are written off when it is determined that amounts are uncollectible. Bad debt expense (recovery) for the three months ended March 31, 2018 and 2017 was $(1,727) and ($1,263) respectively.

 

3.Inventories

 

Inventories consist of the following:

 

   3/31/2018   12/31/2017 
Coffee        
Unroasted  $138,612   $166,865 
Roasted   43,344    43,689 
Tea   1,607    2,249 
Packaging, supplies and other merchandise held for sale   40,564    49,305 
Total inventories  $224,126   $262,108 

  

4. Property and Equipment

 

Property and equipment consist of the following:

 

   3/31/2018   12/31/2017 
Equipment  $490,189   $517,526 
Furniture and fixtures   145,849    145,089 
Leasehold improvements   358,499    358,498 
Transportation equipment   178,497    178,497 
Pacakge design   41,000    41,000 
Capitalized website development costs   19,000    19,000 
Property held under capital leases   214,796    214,796 
Total property and equipment   1,447,830    1,474,406 
Accumulated depreciation   (1,097,030)   (1,109,787)
Property and equipment, net  $350,800   $364,619 

 

Depreciation expense for the three months ended March 31, 2018 and 2017 was $21,382 and $22,176 respectively.

 

 7 

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

March 31, 2018 and December 31, 2017

 

5. Long Term Debt

 

Capital Lease Obligations  3/31/2018   12/31/2017 
Bank of the West payable in monthly installments of $787.03, including interest at 9.234% collateralized by equipment, final payment due on January 1, 2021  $22,860   $24,665 
           
Bank of the West payable in monthly installments of $1,465, including interest at 9.227%, colateralized by equipment, final payment due on January 1, 2020   29,547    33,204 
           
Hansel Ford, payable in monthly installments of $385, including interest at .90%, collateralized by equipment, final payment due on March 14, 2019.   4,599    5,743 
           
Hansel Ford, payable in monthly installments of $385, including interest at .90%, collateralized by equipment, final payment due on March 14, 2019.   4,599    5,743 
           
Savings Bank of Mendocino, payable in monthly installments of $518, interest at 4.24%, collateralized by a security interest of sustantially all of the Company's assets, final payment due on December 28, 2021.   21,499    22,816 
           
Hansel Ford, payable in monthly installments of $806.38, including interest at 1.939%, collateralized by equipment, final payment due on April 10, 2020.   19,741    22,058 
   $102,846   $114,229 
Less current portion   (46,356)   (46,476)
Long term portion of notes payable  $56,490   $67,753 

 

Interest paid for the three months ended March 31, 2018 and 2017 was $1,659 and $1,966, respectively.

 

 8 

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

March 31, 2018 and December 31, 2017

 

As of March 31, 2018, maturities of notes payable and capital lease obligations for each of the next five years and in the aggregate were as follows:

 

Years Ending March 31,    
2018  $46,356 
2019   36,180 
2020   15,730 
2021   4,580 
   $102,846 

 

6. Income Taxes

 

Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company’s deferred tax assets consist of the benefit from net operating loss (NOL) carryforwards and temporary differences. The net operating loss carryforwards expire in various years through 2034. The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operation loss carryforwards. Net operating loss carryforwards may be further limited by a change in company ownership and other provisions of the tax laws.

 

7. Operating Leases

 

The Company leases some office equipment under non-cancelable operating leases with terms ranging from three to five years.

 

As of March 31, 2018, minimum annual lease payments due under these agreements for each of the next five years and in the aggregate were:

 

Years Ending March 31,    
     
2018   8,553 
2019   6,563 
2020   5,102 
2021   4,344 
2022   3,981 
      
   $28,543 

 

Total operating lease payments for the three months ended March 31, 2018 and 2017 was $2,340 and $2,187 respectively.

 

 9 

 

 

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

March 31, 2018 and December 31, 2017

 

8. Long Term Leases

 

The Company leases its corporate headquarters, warehouse and waterfront facilities from Paul and Joan Katzeff (the Company’s majority shareholders, directors and officers). The lease is classified as an operating lease and provides for monthly rental payments of $8,600. The Company is responsible for all real estate taxes, insurance and maintenance costs related to the facilities. The ten-year lease term ends May 31, 2025.

 

As of March 31, 2017, minimum future rental payments under non-cancelable facilities operating leases for each of the next five years and in the aggregate are as follows:

 

Years ending March 31,    
2018  $103,200 
2019   103,200 
2020   103,200 
2021   103,200 
2022   103,200 
Thereafter   206,400 
   $722,400 

 

9.Related Party Transactions

 

As of March 31, 2018, the Company has green contracts with three cooperatives in Nicaragua, Ethical Trading and Investment Company of Nicaragua (ETICO) is the importer for the transaction. Nicolas Hoskyns, a director of the company, is the managing director of ETICO. At March 31, 2018, amounts owed to ETICO totaled $28,647. All the amounts owed are current and were paid accordance with our standard vendor payment policies. The loss of the ETICO relationship could have an adverse effect on the Company’s business in the short term. Management believes other options are available that could be utilized in the event the ETICO relationship was terminated.

 

 10 

 

 

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FORWARD LOOKING STATEMENTS

 

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. In some cases, forward-looking statements may be identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These statements relate to, among other things, possible expansions into new and existing markets and trends in the operations of Thanksgiving Coffee Company, Inc. (“the Company”). Any forward-looking statements should be considered in light of various risks and uncertainties that could cause results to differ materially from expectations, estimates or forecasts expressed. These various risks and uncertainties include, but are not limited to: changes in general economic conditions, changes in business conditions in the coffee industry, fluctuations in consumer demand for coffee products and in the availability and costs of green beans, continuing competition within the Company’s businesses, variances from budgeted sales mix and growth rate, consumer acceptance of the Company’s products, inability to secure adequate capital to fund its operating expenses and working capital requirements, inability to hire, train and retain qualified personnel, concentration of production and sales in Northern California, the loss of one or more major customers, inability to successfully implement the Company’s sales goals, natural disasters, civil unrest in countries which produce coffee and tea, weather and other risks identified herein. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this Quarterly Report on Form 10-Q. The Company’s forward-looking statements should also be considered in light of its reviewed financial statements, related notes and the other financial information appearing elsewhere in this report and in its other filings with the Securities and Exchange Commission. As a result of these risks and uncertainties, the Company’s actual results may differ materially and adversely from those expressed in any forward-looking statements. The Company assumes no obligation to update any forward-looking statements.

 

SUMMARY

 

Sales of the Company have eroded over the last five years due to declines in the direct distribution sales method of the Company’s business (i.e., delivery by company truck). Increased competition, customer attrition and customers roasting green beans for their own use have all had a negative impact on the Company’s sales. The Company continues to try a number of strategies that may or may not prove effective in abating these declines. The Company has changed its method of distribution to rely less on direct distribution (with only three routes) and instead uses independent distributors or shipping direct (via UPS or other common carrier). In addition, the Company is trying to focus increasing our on-line sales with a continued focus on our presence in social media, growing our email list and linking our search optimization. The effects of these changes on the Company’s sales will reduce our distribution expenses. Because of the limited impact of these changes, as well as the increase in cost of sales and other factors noted herein, there can be no assurances that the Company will be profitable in any future period, and, as a consequence, the Company is considering various strategic alternatives.

 

The Company pays substantially more for its green beans than the market price, because of quality, the organic nature of many of its lines and the fact that it uses fair-traded coffees. Green bean costs have remained stable but any rise will place pressure on margins. If green bean costs continue as is or rise, whether as a consequence of inclement weather in a major producing area or any other event that affects green bean pricing, and if the Company cannot offset costs by raising prices, it would have a negative impact on the Company and its margins.

 

 11 

 

 

Results of Operations

 

Three months ended March 31, 2018 versus March 31, 2017

 

   Increase (Decrease)   Percent Change 
         
Net Sales  $(24,250)   (3.0%)
Cost of Sales   28,153    6.2%
Gross Margin %   (52,403)   (14.4%)
           
Selling, G&A Expense   2,832    0.8%
Depreciation And Amortization   (794)   (3.6%)
Other   770    - 
Net Loss   53,671    252%

 

Net sales for the three months ended March 31, 2018 were $795,036, down 3.0%, or under $24,250 when compared with net sales of $819,286 for the same period in fiscal 2017

 

Distribution revenues (e.g., revenues generated by the Company’s own truck distribution) were down $7,488 or (2.34%) for the three months ended March 31, 2018, when compared with distribution sales for the same period in 2017. The decline appears to be a result of slower volume for existing customers as no customers have been lost.

 

National revenues (e.g., revenues not derived by mail order and direct truck distribution) were down $14,029 or (3.42%) for the three months ended March 31, 2018 when compared to national sales for the same period in 2017.

 

Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) increased $1,006, or.99% for the three months ended March 31, 2018 when compared to mail order sales for the same period in 2017. The increase in the mail order division was attributable to the Company’s increased social media presence on the Company’s online store volume.

 

Cost of sales for the three months ended March 31, 2018 were $483,078, up 6.2%, or up $28,153 when compared with the cost of sales of $454,925 for the same period in 2017. The increase reflects the increase in the green bean costs used in the first three months of 2018.

 

Gross margin percentage (gross profit as a percentage of net sales) for the three months ended March 31, 2018 was, down 12.84% percentage points when compared with the increase of gross margin of 9.49% for the same period in 2017. Higher costs in green bean costs and other supplies in the three months ended 2018 resulted in a decrease in gross margins.

 

Consolidated selling, general and administrative expenses were $365,490 for the three months ended March 31, 2018, an increase of .8% when compared with the selling, general and administrative expenses of $362,658 for the same period in 2017. The increase was a result of being fully invoiced for the audit fee for the 2017 10K.

 

Depreciation and amortization expenses for the three months ended March 31, 2018 were $21,382, a 3.59% decrease, or nearly $794 when compared to depreciation expense of $22,176 for the same period in 2016. The decrease reflects the disposal of old equipment.

 

As a result of the foregoing factors, the Company had a net loss of $74,944 for the three months ended March 31, 2018, compared to a loss of $21,273 for the same period in 2017.

 

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LIQUIDITY AND CAPITAL RESOURCES

 

As of March 31, 2018, the Company had working capital of $311,132 versus working capital of $384,440 as of December 31, 2017. The decrease in working capital is due primarily to the decrease in cash, accounts receivable, inventory and prepaid expenses.

 

Net cash used in operating activities was ($57,746) for the three months ended March 31, 2018 compared to net cash used in operating activities of ($42,230) during the same period in 2017. The decrease in net cash provided by operating activities in the three months of 2018 was the result of decreases in inventory in the amount of ($37,982) and increases in prepaid expenses in the amount of $24,138 and decreases in accounts payable.

 

Cash used in investing activities was ($7,563) for the three months ended March 31, 2018 compared to ($2,710) used in the same period in 2017.

Net cash used in financing activities for the three months ended March 31, 2018 was ($11,383) compared to net cash used in financing activities of ($10,194) during the same period in 2017. The cash used by financing activities was a result of paying existing debt.

 

At March 31, 2017, the Company had total borrowings of $102,846.

 

For long-term debt, see Note 7 of the Notes to Financial Statements. For operating leases, see Note 9 of the Notes to Financial Statements. For real estate leases, see Note 10 and Note 11 of the Notes to Financial Statements.

 

   Payments Due By Period 

Contractual Obligations

 

 

Total

  

Less than

One year

  

 

1-3 years

  

 

4-5 years

  

 

After 5 years

 
Debt  $102,846   $46,356   $56,490   $0   $- 
                          
Operating Leases   28,453    8,553    11,665    8,235    - 
                          
Real Estate Leases   722,400    103,200    206,400    206,400    206,400 
                          
Total Cash Obligations  $853,699   $158,109   $274,555   $214,635   $206,400 

 

The Company is dependent on successfully executing its business plan to achieve profitable operations, obtaining additional sources of borrowings (including normal trade credit) and securing favorable financing arrangements (including lease financing) to finance its working capital needs. There can be no assurance that the Company will be successful in this regard. If the Company is not able to meet its credit obligations the stability of the Company’s business would be in question.

 

RELATED PARTY TRANSACTIONS

 

From time to time, the Company enters into various transactions with its majority shareholders, Paul and Joan Katzeff. See note “11 — Related Party Transactions” in the Notes to the Financial Statements.

 

SEASONALITY AND OTHER FACTORS AFFECTING PERFORMANCE

 

The Company’s business is seasonal in nature. The seasonal availability of green bean coffee in the first two quarters of the year and increased sales in the last quarter historically create a high use of cash and a build up in inventories in the first two quarters, with a corresponding decrease in inventory and increase in cash in the last quarter. In 2017 the Company has been keeping a tighter control on its inventory supply, resulting in less inventory on hand in the first quarter of 2018.

 

Because of the seasonality of the Company’s business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Furthermore, past seasonal patterns are not necessarily indicative of future results.

 

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INDEMNIFICATION MATTERS

 

The Company’s Bylaws provide that the Company may indemnify its directors, officers, employees and other agents to the fullest extent permitted by California law. The Company believes that indemnification under its Bylaws also permits the Company to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether California law would permit indemnification. The Company maintains such liability insurance for its directors and certain officers and employees.

 

At present, there is no pending litigation or proceeding involving any director, officer, employee or agent of the Company where indemnification would be required or permitted. The Company is not aware of any pending or threatened litigation or proceeding that might result in a claim for such indemnification.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company’s stock is generally illiquid and there have been few trades in recent years. There have been three trades in the Company’s Common Stock since 1999. In June 2004, 750 shares were traded at $4.50 per share. In December 2005, 400 shares were traded at $2.00 per share.

 

ITEM 4. CONTROLS AND PROCEDURES

 

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and President, of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2018. Based on that evaluation, the Company’s management, including the Chief Executive Officer, and the President concluded that the Company’s disclosure controls and procedures were effective. There have been no changes in the Company’s Disclosure controls over financial reporting during the first quarter of 2018 that have materially affected or are reasonably likely to affect the Company’s internal controls over financial reporting.

  

Part II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

-None-

 

ITEM 1A. RISK Factors

 

The Company has concerns regarding the current economic situation. The United States and the global economy is experiencing severe instability in the commercial and investment banking systems which are likely to continue to have far-reaching effects on the economic activity in the country for an indeterminable period. The long-term impact on the United States economy and the Company’s operating activities and ability to raise capital cannot be predicted at this time, but may be substantial.

 

Our coffee roasting facility is subject to state and local air-quality and emissions regulations. If we encounter difficulties in obtaining any necessary licenses or complying with these laws and regulations our ability to produce any of our roasted products would be severely limited. We believe that we are in compliance in all material respects with all such laws and regulations and we have obtained all material licenses that are required for the operation of our business. We are not aware of any environmental regulations that have or that we believe will have a material adverse effect on our operations.

 

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

- None -

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

- None -

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

- None -

 

ITEM 5. OTHER INFORMATION

 

- None -

 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

 

Financial Statement Schedules

 

Not Applicable

 

Exhibits

 

3.1 Restated Articles of Incorporation of the Company.*
3.2 Bylaws of the Company and amendments.*
10.4 Sample Coffee Purchase Agreement.**
10.10 License Agreement between the Company and the American Birding Association, Inc. and amendment.**
10.13 Lease agreement for the Company’s headquarters and manufacturing and storage facility dated November 1, 2005 and amendment.**
14.1 Code of Ethics***
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.*
31.2 Certification of President Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS XBRL Instance Document.*
101.SCH XBRL Taxonomy Extension Schema Document.*
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.*

 

* Filed herewith.

** Incorporated by reference to the exhibits to the Company’s Form 10-K for the year ended December 31, 2017.

*** Incorporated by reference to the exhibits to the Company’s Form 10-KSB for the year ended December 31, 2003.

  

a.No reports filed on Form 8-K

 

 15 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, The Registrant has duly caused this Quarterly Report to be signed on it’s behalf by the undersigned, thereunto duly authorized.

 

THANKSGIVING COFFEE COMPANY, INC.

 

Name   Title   Date
         
/s/ Paul Katzeff   Chief Executive Officer   May 10, 2018
Paul Katzeff        
         
/s/ Joan Katzeff   President   May 10, 2018
Joan Katzeff        

 

 

 

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