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
10-Q 2020-09-30 Filed 2020-12-18
10-Q 2020-06-30 Filed 2020-11-23
10-Q 2020-03-31 Filed 2020-11-09
10-K 2019-12-31 Filed 2020-10-26
10-Q 2019-09-30 Filed 2020-08-19
10-Q 2019-06-30 Filed 2019-12-12
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-03-27
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-15
10-Q 2018-03-31 Filed 2018-05-11
10-K 2017-12-31 Filed 2018-03-30
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-15
10-Q 2017-03-31 Filed 2017-05-23
10-K 2016-12-31 Filed 2017-03-29
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-31
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-16
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-31
8-K 2019-12-12
8-K 2019-07-31

TCCI 10Q Quarterly Report

Part 1. 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-31.1 ex_127286.htm
EX-31.2 ex_127287.htm
EX-32.1 ex_127288.htm
EX-32.2 ex_127289.htm

Thanksgiving Coffee Earnings 2018-09-30

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 tcci20180930_10q.htm FORM 10-Q tcci20180930_10q.htm
 


 

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 September 30, 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. ☐

 

Currently, there 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, and 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 September 30, 2018 the registrant had 1,236,744 shares of Class A common stock, no par value per share, and 0 shares of Class B common stock, par value __0_____ per share, outstanding.

 

Class

 

Outstanding at September  30, 2018

Common Equity, no par value

 

1,236,744 shares

 



 

 

 
 

 

FORM 10-Q

 

TABLE OF CONTENTS

 

       
 

 

PART I – FINANCIAL INFORMATION

 
     
Item 1.   Financial Statements 3
       
 

 

Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017.

4
     
 

 

Statements of Operations for the three months and nine months ended September 30, 2018 and September 30, 2017 (unaudited) 

6
     
 

 

Statements of Cash Flows for the nine months ended September 30, 2018 and September 30, 2017 (unaudited)

7
     
 

 

Notes to Financial Statements

8
     

Item 2.        

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13
     

Item 3.        

 

Quantitative and Qualitative Disclosures About Market Risk

16
     

Item 4.        

 

Controls and Procedures

16
     
 

 

PART II – OTHER INFORMATION

16
     

Item 1.        

 

Legal Proceedings

16
     

Item 1A.    

 

Risk Factors

16
     

Item 2.        

 

Unregistered Sales of Equity Securities and Use of Proceeds

17
       
Item 3.    Defaults Upon Senior Securities 17
     

Item 4.        

 

Submission of Matters to a Vote of Security Holders

17
       
Item 5.   Other Information 17

 

   

Item 6.        

 

Exhibits

17
   

Signatures

18

 

2

 

 

PART 1. 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 September 30, 2018 and December 31, 2017, and its results of operations for the three and nine month periods ended September 30, 2018 and September 30, 2017 and its cash flows for the nine month periods ended September 30, 2018 and September 30, 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.

 

3

 
 

 

Thanksgiving Coffee Company, Inc.

 

Balance Sheets

 

 

   

September

   

December 31,

 
   

2018

   

2017

 
   

(Unaudited)

   

See Note 1

 

Assets

               

Current assets

               

Cash

  $ 139,247     $ 160,392  

Accounts receivable, net of allowance

    215,007       229,877  

Inventories

    204,945       262,108  

Prepaid expenses

    65,843       57,780  

Total current assets

    625,042       710,157  
                 

Property and equipment

               

Property and equipment

    1,469,116       1,474,406  

Accumulated depreciation

    (1,144,972 )     (1,109,787 )

Total property and equipment

    324,144       364,619  
                 

Other assets

               

Deposits and other assets

    4,168       3,112  

Total other assets

    4,168       3,112  
                 

Total assets

  $ 953,354     $ 1,077,888  

 

See accompanying notes to financial statements

 

4

 

 

Thanksgiving Coffee Company, Inc.

 

Balance Sheets

 

 

   

September

   

December 31,

 
   

2018

   

2017

 
   

(Unaudited)

   

See Note 1

 

Liabilities and shareholders' equity

               

Current liabilities

               

Accounts payable

  $ 168,245     $ 213,942  

Accrued Liabilities

    43,544       65,299  

Current portion of long term debt

    48,262       46,476  

Total current liabilities

    260,051       325,717  
                 

Long term debt

               

Long-term debt

    97,347       114,229  

Less current portion of long term debt

    (48,262 )     (46,476 )

Total long term debt

    49,085       67,753  

Total liabilities

    309,136       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

    (242,198 )     (201,998 )

Total shareholders' equity

    644,218       684,418  
                 

Total liabilities and shareholders' equity

  $ 953,354     $ 1,077,888  

 

See accompanying notes to financial statements

 

5

 
 

 

Thanksgiving Coffee Company, Inc.

 

Statements of Operations

Unaudited

 
 
   

For the Three Months Ended

Ended September 30,

   

For the Nine Months Ended

Ended September 30,

 
   

2018

   

2017

   

2018

   

2017

 

Income

                               

Net sales

  $ 800,149     $ 856,952     $ 2,413,940     $ 2,625,044  

Cost of sales

    447,840       481,066       1,385,347       1,501,060  

Gross profit

    352,309       375,886       1,028,593       1,123,984  
                                 

Operating expenses

                               

Selling, general and administrative expenses

    323,384       370,867       1,007,248       1,077,586  

Depreciation and amortization

    19,571       22,203       66,839       66,661  

Total operating expenses

    342,955       393,070       1,074,087       1,144,247  

Operating profit/ (loss)

    9,354       (17,184 )     (45,494 )     (20,263 )
                                 

Other Expense

                               

Interest expense

    (2,040 )             (5,444 )        

Miscellaneous income (expense)

    11,463       (1,107 )     11,530       (31,710 )

Total other income (expense)

    9,423       (1,107 )     6,086       (31,710 )
                                 

Profit/ (loss) before income taxes

    18,777       (18,291 )     (39,408 )     (51,973 )

Income tax expense

    0       0       (800 )     (800 )

Net profit/ (loss)

  $ 18,777     $ (18,291 )   $ (40,208 )   $ (52,773 )
                                 

Profit/ (loss) per share (basic and diluted)

  $ 0.015     $ (0.015 )   $ (0.033 )   $ (0.043 )
                                 

Weighted average number of shares

    1,236,744       1,236,744       1,236,744       1,236,744  

 

6

 
 

 

Thanksgiving Coffee Company, Inc.

 

Statements of Cash Flows

Thanksgiving Coffee, Inc.

Unaudited

   

For the Nine Months

 
   

September 30,

 
   

2018

   

2017

 

Operating activities

               

Net loss

  $ (40,208 )   $ (52,773 )

Adjustments to reconcile net loss to cash flows from operating activities:

               

Depreciation and amortization

    66,839       66,661  
                 

(Increase) decrease in:

               

Accounts receivable

    14,870       33,772  

Inventories

    57,163       76,737  

Prepaid expenses

    (8,063 )     34,009  

Deposits and other assets

    (1,056 )     9,130  

Increase (decrease) in:

               

Accounts payable

    (45,697 )     (130,772 )

Accrued liabilities

    (21,755 )     (21,522 )

Net cash provided by operating activities

    22,093       15,242  
                 

Investing activities

               

Purchases of property and equipment

    (26,364 )     2,315  

Net cash (used in) investing activities

    (26,364 )     2,315  
                 

Financing activities

               

Decrease in notes receivables

            29,728  

Repayments of notes payable and capital leases

    (16,874 )     (28,960 )

Net cash (used in) financing activities

    (16,874 )     768  
                 

Increase (decrease) in cash

    (21,145 )     18,325  

Cash at beginning of period

    160,392       149,936  

Cash at end of period

  $ 139,247     $ 168,261  

 

7

 

 

Cash paid for income taxes was $800, separately for each nine months ending September 30, 2018 and September 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 nine months ended September 30, 2018 are not necessarily indicative of results to be expected for the full year.

 

Concentration of Risk

 

In the third quarter of fiscal 2018, one customer accounted for 8.06% 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 bases. 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.

 

8

 

 

 

2.

Accounts Receivable

 

Accounts receivable consist of the following:

 

   

9/30/2018

   

12/31/2017

 

Accounts receivable

  $ 221,128     $ 236,116  

Less: allowance for doubtful accounts

    (6,121 )     (6,239 )

Net accounts receivable

  $ 215,007     $ 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 nine months ended September 30, 2018 and 2017 was ($245) and ($717) respectively.

 

 

 

3.

Inventories

 

Inventories consist of the following:

 

   

9/30/2018

   

12/31/2017

 

Coffee

  $ 105,315     $ 166,865  

Unroasted

    51,529       43,689  

Roasted

    1,895       2,249  

Tea

    46,206       49,305  

Tea Packaging, supplies, and other merchandise held for sale

  $ 204,945     $ 262,108  

Total inventories

               

 

 

 

4.     Property and Equipment

 

Property and equipment consist of the following:

 

   

9/30/2018

   

12/31/2017

 

Equipment

  $ 492,208     $ 517,526  

Furniture and fixtures

    138,008       145,089  

Leasehold improvements

    366,698       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

    233,705       214,796  

Total property and equipment

    1,469,116       1,474,406  

Accumulated depreciation

    (1,144,972 )     (1,109,787 )

Property and equipment, net

  $ 324,144     $ 364,619  

 

 

Depreciation expense for the nine months ended September 30, 2018 and 2017 was $66,839 and $66,661 respectively. 

 

9

 

 

Thanksgiving Coffee Company, Inc.

 

Notes to Financial Statements (continued)

 

September 30, 2018 and December 31, 2017

 

 

 

5. Long Term Debt (continued)

 

Capital Lease Obligations

 

9/30/2018

   

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

  $ 19,122     $ 33,204  
                 

Bank of the West payable in monthly installments of $1,465, including interest at 9.227%, collateralized by equipment, final payment due on January 1, 2020

    21,976       24,665  
                 

Hansel Ford, payable in monthly installments of $385, including interest at .90%, collateralized by equipment, final payment due on March 14, 2019.

    2,305       5,743  
                 

Hansel Ford, payable in monthly installments of $385, including interest at .90%, collateralized by equipment, final payment due on March 14, 2019.

    2,305       5,743  
                 

Savings Bank of Mendocino, payable in monthly installments of $518, interest at 4.24%, collateralized by a security interest of substantially all of the Company's assets, final payment due on December 28, 2021.

    18,831       22,816  
                 

Pawnee Leasing payable in monthly installments of $528, including interest at 15.178%, collateralized by equipment, final payment due on May 15, 2022

    17,732       -  
                 

Hansel Ford, payable in monthly installments of $806.38, including interest at 1.939%, collateralized by equipment, final payment due on April 10, 2020.

    15,076       22,058  
    $ 97,347     $ 114,229  

Less current portion

    (48,262 )     (46,476 )

Long term portion of notes payable

  $ 49,085     $ 67,753  

 

 

Interest paid for the nine months ended September 30, 2018 and 2017 was $5,444 and $5,500, respectively.

 

10

 

 

As of September 30, 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 September 30,

       

2019

  $ 48,262  

2020

    28,690  

2021

    13,616  

2022

    6,780  
    $ 97,348  

 

 

 

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 September 30, 2018, minimum annual lease payments due under these agreements for each of the next five years and in the aggregate were:

 

Years Ending September 30,

       
         

2019

    9,524  

2020

    6,140  

2021

    4,318  

2022

    720  
    $ 20,702  

 

 

Total operating lease payments for the nine months ended September 30, 2018 and 2017 were $8,528 and $6,094 respectively.

 

11

 

 

Thanksgiving Coffee Company, Inc.

 

Notes to Financial Statements (continued)

 

September 30, 2018 and December 31, 2017

 

 

 

 

8.     Long Term Leases

 

The Company leases its corporate headquarters and warehouse 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 September 30, 2018, 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 September 30,

       

2019

  $ 103,200  

2020

    103,200  

2021

    103,200  

2022

    103,200  

2023

    103,200  

Thereafter

    154,800  
    $ 670,800  

 

 

 

9.   Related Party Transactions

Etico

As of September 30, 2018, the Company has green contracts with three cooperatives in Nicaragua. Ethical Trading and Investment Company of Nicaragua (ETICO) is the importer for the transactions. Nicholas Hoskyns, a director of the Company, is the managing director of ETICO. As of September 30, 2018, amounts owed to ETICO totaled $48,634. All the amounts owed are current and were paid in 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.

 

 

Office Lease

As described in note 7, the Company leases its office space from the majority shareholders. The Company paid $77,400 separately for the nine months ending September 30, 2018 for lease payments. The Company paid $25,800 separately for three months ending September 30, 2017 and 2018 for lease payments. No amounts were due to, or due from, between the company and its majority shareholders as of September 30, 2018 or December 31, 2017 in connection with this lease agreement.

 

12

 

 

 

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 business, 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, 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 ships direct (via UPS or other common carrier). In addition, the Company is trying to focus on increasing our on-line sales with a continued emphasis 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 and increase margins. 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 than our competitors, because of quality, the organic nature of many of the varietals we carry and the fact that we use fair-traded coffees as well. 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.

 

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Results of Operations

 

Nine months ended September 30, 2018 versus September 30, 2017

 

   

Increase (Decrease)

   

Percent Change

 
                 

Net Sales

  $ (211,103 )     (8.04 %)

Cost of Sales

    (115,713 )     (8 %)

Gross Margin %

            (.021 %)
                 

Selling, G&A Expense

    (70,338 )     (.07 %)

Depreciation and Amortization

    178       -  

Other

    37,796       119 %

Net Loss

    12,565       24 %

 

Net sales for the nine months ended September 30, 2018 were $2,413,940, down 8.04%, when compared with net sales of $2,625,043 for the same period in fiscal 2017

Distribution revenues (e.g., revenues generated by the Company’s own truck distribution) were down $39,522 or (3.83%) for the nine months ended September 30, 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 who suffered from recent natural disasters.

 

National revenues (e.g., revenues not derived by mail order and direct truck distribution) were down $191,921 or (14.46%) for the nine months ended September 30, 2018 when compared to national sales for the same period in 2017. In 2017 we provided our services to fulfill two unusual orders for one of our customers.

 

Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) increased $8,484, or 2.53% for the nine months ended September 30, 2018 when compared to mail order sales for the same period in 2017.

 

Cost of sales for the nine months ended September 30, 2018 was $1,385,347, down 7.7%, when compared with the cost of sales of $1,501,060, for the same period in 2017. The decrease reflects the decrease in the overall cost of sales in the nine months of 2018.

 

Gross margin percentage (gross profit as a percentage of net sales) for the nine months ended September 30, 2018 was 42.61% down .20% percentage points when compared with the gross margin of 42.81% for the same period in 2017.

 

Selling, general and administrative expenses decreased by $70,338 for the nine months ended September 30, 2018, a decrease of 6.53% when compared with the selling, general and administrative expenses of $1,077,248 for the same period in 2017. The decrease was a result of renegotiating our general insurance.

 

Depreciation and amortization expenses for the nine months ended September 30, 2018 was $66,839, a .30% decrease, or nearly $178 when compared to depreciation expense of $66,661 for the same period in 2017.

 

As a result of the foregoing factors, the Company had a net loss of $40,208 for the nine months ended September 30, 2018, a 23.8% decrease, compared to a loss of $52,773 for the same period in 2017.

 

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LIQUIDITY AND CAPITAL RESOURCES

 

 

As of September 30, 2018, the Company had working capital of $364,991 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 provided by operating activities was $22,093 for the nine months ended September 30, 2018 compared to net cash provided by activities of $15,242 during the same period in 2017. The decrease in net cash provided by operating activities in the first nine months of 2018 was the result of inventory in the amount of $57,163 , a decrease in accounts payable in the amount of ($45,697) and a decrease in accounts receivables of $14,870.

 

Net cash used in investing activities was ($26,364) for the nine months ended September 30, 2018 compared to the same period in 2017.

 

Net cash used in financing activities for the nine months ended September 30, 2018 was ($16,882) compared to net cash used in financing activities of $768 during the same period in 2017. The cash used by financing activities was a result of paying existing debt.

 

At September 30, 2018, the Company had total borrowings of $97,348. This compares to the borrowings of $114,229 as of December 31, 2017.

 

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

  $ 97,348     $ 48,262     $ 49,087     $ 0     $ -  
                                         

Operating Leases

    20,702       2,130       16,528       2,044       -  
                                         

Real Estate Leases

    670,800       103,200       206,400       206,400       154,800  
                                         

Total Cash Obligations

  $ 788,850     $ 125,164     $ 297,906     $ 210,980     $ 154,800  

 

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 “8 and 9 — 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 three 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 three 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 fewer inventory supplies on hand. In the first three quarters of 2018, similar controls continue.

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.

 

15

 

 

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 proceding 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 September 30, 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 nine months 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 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

 

 

 Verification of shareholders

 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 

 

Financial Statement Schedules

 

Not Applicable

 

Exhibits

 

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.

**** Incorporated by reference to the exhibits to the Company’s Form 10-Q for the quarter ended March 31, 2018.

 

17

 

 

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     

November 8, 2018                                                

Paul Katzeff

 

 

 

 

 

 

 

 

/s/ Joan Katzeff        

President           

November 8, 2018                              

Joan Katzeff

 

 

 

18