UNITED
STATES SECURITIES AND EXCHANGE COMMISSION




Washington,
DC 20549




Form
10-K




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




For
the fiscal year ended October 31, 2009






o
            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:  001-32491




COFFEE
HOLDING CO., INC.


(Exact
name of registrant as specified in its charter)




Nevada
            
            11-2238111(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)3475
      Victory Boulevard, Staten Island, New York
            
            10314(Address
      of principal executive offices)
            
            (Zip
      Code)





Registrant’s
telephone number, including area code:  (718) 832-0800




Securities
registered under Section 12(b) of the Act:




Title
      of each class:
            
            Name
      of each exchange on which registered:Common
      Stock, Par Value $0.001 Per Share
            
            American
      Stock Exchange





Securities
registered under Section 12(g) of the Exchange Act:




None




Indicate
by check mark if registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.Yes
oNo þ




Indicate
by check mark if registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act.Yes o  Noþ





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
past 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 þ  No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained in, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.  (Check one):




Large accelerated filer
            o
            Non-accelerated filer
            oAccelerated filer
            o
            Smaller Reporting Company
            þ




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes oNo þ





The
aggregate market value of the common equity held by non-affiliates of the
registrant, computed by reference to the closing price of the registrant’s
common stock on the American Stock Exchange on December 31, 2009, was
$10,224,102.




As of
December 31, 2009, the registrant had 5,440,823 shares of common stock, par
value $0.001 per share, outstanding.




Documents
incorporated by reference




Portions
of the registrant’s proxy statement for the 2010 annual meeting of stockholders
to be filed pursuant to Regulation 14A within 120 days after registrant’s fiscal
year ended October 31, 2009, are incorporated by reference in Part III of this
Form 10-K.












TABLE
OF CONTENTS




PagePART I
              
              1ITEM 1.
              BUSINESS
              1ITEM 1A.
              RISK
    FACTORS
              11ITEM 1B.
              UNRESOLVED STAFF
      COMMENTS
              16ITEM 2.
              PROPERTIES
              16ITEM 3.
              LEGAL
      PROCEEDINGS
              17ITEM 4.
              SUBMISSION OF MATTERS TO A VOTE
      OF SECURITY HOLDERS
              17PART II
              
              18ITEM 5.
              MARKET FOR REGISTRANT’S COMMON
      EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES
              18ITEM 6.
              SELECTED FINANCIAL
      DATA
              19ITEM 7.
              MANAGEMENT’S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION
              20ITEM 7A.
              QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK
              26ITEM 8.
              FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
              27ITEM 9.
              CHANGES IN AND DISAGREEMENTS WITH
      ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
              27ITEM
      9A(T).
              CONTROLS
      AND PROCEDURES
              27ITEM 9B.
              OTHER
      INFORMATION
              28PART
    IIIITEM 10.
              DIRECTORS, EXECUTIVE OFFICERS AND
      CORPORATE GOVERNANCE
              28ITEM 11.
              EXECUTIVE
      COMPENSATION
              28ITEM 12.
              SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS
              28ITEM 13.
              CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS, AND DIRECTOR INDEPENDENCE
              28ITEM 14.
              PRINCIPAL ACCOUNTING FEES AND
      SERVICES
              28PART IVITEM 15.
              EXHIBITS, FINANCIAL STATEMENT
      SCHEDULES
              29SIGNATURES
              
              30INDEX TO
      CONSOLIDATED FINANCIAL STATEMENTS
              F-1









PART
I






ITEM
1.  BUSINESS






General
Overview




Products and
Operations.  We are an integrated wholesale coffee roaster and
dealer in the United States.  Our core products can be divided into
three categories:




●Wholesale
Green Coffee:  unroasted raw beans imported from around the
world and sold to large and small roasters and coffee shop
operators;




● Private Label
Coffee:  coffee roasted, blended, packaged and sold under the
specifications and names of others, including supermarkets that want to have
their own brand name on coffee to compete with national brands;
and




● Branded
Coffee: coffee roasted and blended to our own specifications and packaged
and sold under our seven proprietary and licensed brand names in different
segments of the market.






Our
private label and branded coffee products are sold throughout the United States
and Canada to supermarkets, wholesalers, and individually owned and multi-unit
retail customers.  Our unprocessed green coffee, which includes over
90 specialty coffee offerings, is sold to specialty gourmet
roasters.




We
conduct our operations in accordance with strict freshness and quality
standards.  All of our private label and branded coffees are produced
from high quality coffee beans that are deep roasted for full flavor using a
slow roasting process that has been perfected utilizing our more than thirty
years of experience in the coffee industry.  In order to ensure
freshness, our products are delivered to our customers within 72 hours of
roasting.  We believe that our long history has enabled us to develop
a loyal customer base.




We were
founded and incorporated in New York State in 1971 and have been a family
operated business for almost 40 years.  In 1998, we merged with
Transpacific International Group Corp. and became a Nevada
corporation.  In May 2005, we concluded our initial public offering
and our common stock began trading on the American Stock Exchange under the
symbol “JVA.”  Our fiscal year ends on October 31.




Our
corporate offices are located at 3475 Victory Boulevard, Staten Island, New York
10314.  Our telephone number is (718) 832-0800 and our website address
is www.coffeeholding.com.




Our
Competitive Strengths




To
achieve our growth objectives described below, we intend to leverage the
following competitive strengths:




National
Distribution with Capacity For Growth.From 1991 to 2004, we expanded our
distribution to a national platform while operating from only our Brooklyn, New
York location by making capital investments to improve our roasting, packaging
and fulfillment infrastructure to support the production and distribution of
large quantities of fresh coffee products throughout the United
States.  In February 2004, we acquired certain assets of Premier
Roasters, a roaster-dealer located in La Junta, Colorado, for
$825,000.  The assets purchased by us include all of the operating
equipment located at Premier Roasters’s La Junta and Rocky Ford, Colorado
locations, as well as all labels for all of Premier Roasters’s coffee
products.  In connection with the acquisition of these assets, we
reached an agreement with the City of La Junta, Colorado on a 20-year lease for
a 50,000 square foot facility in La Junta.  We are using the assets
that we purchased to expand our integrated wholesale coffee roaster and dealer
operations in the Western United States.  Our Colorado location allows
us to reduce our freight and shipping costs to the Western United States,
thereby enabling us to be more competitive in bidding for new
business.  In addition, our presence in Colorado has increased the
number of customers we have because of our proximity to the West
Coast.




1





In April
2006, we entered into a joint venture with Caruso’s Coffee, Inc. of Brecksville,
Ohio and formed Generations Coffee Company, LLC, a Delaware limited liability
company (“GCC”), which engages in the roasting, packaging and sale of private
label specialty coffee products.  We own a 60% equity interest in GCC
and are the exclusive supplier of its coffee inventory.  We believe
that the joint venture with GCC allows us to bid on the private label gourmet
whole bean business which we had not been equipped to pursue from an operational
standpoint in the past.  With this specialty roasting facility in
place, in many cases right in the backyard of some of our current wholesale and
retail customers, we believe we will be able to successfully combine our canned
private label business with high-end private label specialty whole bean
business.  High-end specialty whole bean coffee sells for as much as
three times more per pound than the canned coffees.




In
October 2009, we sold our Brooklyn, New York location after ceasing our
manufacturing operations there in May.  The majority of our processing
has been moved to our La Junta, Colorado facility with our Generations Coffee
Company, LLC facility in Brecksville, Ohio becoming more involved with everyday
coffee processing.  We believe that the closing of our Brooklyn
facility will reduce long-term operating expenses, increase efficiencies and
ultimately increase the profitability of the Company.  In addition, we
believe that the savings and the proceeds generated from the sale will improve
our cash flow and provide us with great flexibility as a company to promote our
brands and explore and re-evaluate strategic opportunities to bolster our
long-term growth.




Positioned to
Profitably Grow Through Varying Cycles of the Coffee Market.We believe
that we are one of the few coffee companies to offer a broad array of branded
and private label roasted ground coffees and wholesale green coffee across the
spectrum of consumer tastes, preferences and price points.  While many
of our competitors engage in distinct segments of the coffee business, we sell
products in each of the following areas:




●Retail branded
coffee;


●Mainstream retail
private label coffee;


●Specialty retail
coffees both private label and branded;


●Wholesale specialty
green and gourmet whole bean coffees;


●Food service;


●Instant coffees; and


●Niche products.





Our
branded and private label roasted ground coffees are sold at competitive and
value price levels while some of our other branded and specialty coffees are
sold predominantly at premium price levels.  Premium price level
coffee is high-quality gourmet coffee, such as AA Arabica coffee, which sell at
a substantial premium over traditional retail canned coffee, while competitive
and value price level coffee is mainstream or traditional canned
coffee.  Because of this diversification, we believe that our
profitability is not dependent on any one area of the coffee industry and,
therefore, is less sensitive than our competition to potential coffee commodity
price and overall economic volatility.




2





Wholesale Green
Coffee Market Presence.  As a large roaster-dealer of green
coffee, we believe that we are favorably positioned to increase our specialty
coffee sales.  Since 1998, we have increased the number of our
wholesale green coffee customers, including coffee houses, single store
operators, mall coffee stores and mail order sellers, by 88% from 150 to
282.  We are a charter member of the Specialty Coffee Association of
America and one of the largest distributors of Swiss Water Processed
Decaffeinated Coffees along the East Coast.  In addition, although we
do not have any formalized, material agreements or long-term contracts with
Green Mountain Coffee Roasters (“GMCR”), we have a 17-year relationship with
GMCR, our largest wholesale green coffee customer.  Our almost 40
years of experience as a roaster and a dealer of green coffee allows us to
provide our roasting experience as a value added service to our gourmet roaster
customers.  The assistance we provide to our customers includes
training, coffee blending and market identification.  We believe that
our relationships with wholesale green coffee customers and our focus on selling
green coffee as a wholesaler has enabled us to participate in the growth of the
specialty coffee market while mitigating the risks associated with the
competitive retail specialty coffee environment.




Diverse Portfolio
of Differentiated Branded Coffees.We have amassed a portfolio
of five proprietary name brands sold to supermarkets, wholesalers and
individually owned stores in the United States, including brands for specialty
espresso, Latin espresso, Italian espresso, 100% Colombian coffee and blended
coffee.  In addition, we have entered into a licensing agreement with
Del Monte Corporation for the exclusive right to use the S&W and IL CLASSICO
trademarks in the United States and other countries approved by Del Monte
Corporation in connection with the production, manufacture and sale of roasted
whole bean and ground coffee for distribution to retail customers.  We
plan to broaden our customer base and increase penetration with existing
customers by expanding the S&W label from a well-known brand on the West
Coast to a well-known brand throughout the United States.  In July
2007, we entered into a three-year licensing agreement with Entenmann’s
Products, Inc., a subsidiary of Entenmann’s, Inc., which is one of the nation’s
oldest baking companies.  The agreement gives us the exclusive rights
to manufacture, market and distribute a full line of Entenmann’s brand coffee
products throughout the United States.  We have developed not only
mainstream Entenmann’s coffee items, but upscale flavored Entenmann’s products
in twelve-ounce valve bags as well.  These products will give the line
a visible upscale image to our retailers and their customers, which we believe
will be integral to the long-term success of this arrangement.  Our
first production run was in February 2008 and our Entenmann’s coffee products
began appearing in supermarkets in the Northeast during mid-March
2008.  Our existing portfolio of differentiated brands combined with
our management expertise serve as a platform to add additional name brands
through acquisition or licensing agreements which target product niches and
segments that do not compete with our existing brands.




Management Has
Extensive Experience in the Coffee Industry.  We have been a
family-operated business for three generations.  Throughout this time,
we have remained profitable through varying cycles in the coffee industry and
the economy.  Andrew Gordon, our President, Chief Executive Officer
and Chief Financial Officer, and David Gordon, our Executive Vice President –
Operations, have worked with Coffee Holding for 27 and 29 years,
respectively.  David Gordon is an original member of the Specialty
Coffee Association of America.  We believe that our employees and
management are dedicated to our vision and mission, which is to produce high
quality products, as well as to provide quality and responsive service to our
customers.




3





Our
Growth Strategy




We
believe that significant growth opportunities exist by selectively pursuing
strategic acquisitions and alliances, targeting the rapidly growing Hispanic
market in the United States, increasing penetration with existing customers by
adding new products, and developing our food service business.  By
capitalizing on this strategy, we hope to continue to grow our business with our
commitment to quality and personalized service to our customers.  We
do not intend to compete on price alone nor do we intend to expand sales at the
expense of profitability.




Selectively
Pursue Strategic Acquisitions and Alliances.  We intend to
expand our operations by acquiring coffee companies, seeking strategic alliances
and acquiring or licensing brands, which complement our business
objectives.  Consistent with this strategy, in February 2004, we
acquired certain assets of Premier Roasters and entered into a licensing
agreement with Del Monte Corporation for the exclusive right to use the S&W
and IL CLASSICO trademarks, including Premium, Premium Decaf, French Roast,
Colombian, Colombian Decaf, Swiss Water Decaf, Kona, and Mellow’d Roast lines,
in the United States and other countries approved by Del Monte Corporation in
connection with the production, manufacture and sale of roasted whole bean and
ground coffee for distribution at the retail level.




In April
2006, we entered into a joint venture with Caruso’s Coffee, Inc. of Brecksville,
Ohio and formed Generations Coffee Company, LLC, which engages in the roasting,
packaging and sale of private label specialty coffee products.  We
believe this joint venture allows us to successfully bid on and compete for
specialty private label coffee opportunities which we were not operationally set
up to compete for in the past.




In July
2007, we entered into a licensing agreement with Entenmann’s Products, Inc.,
which gives us the exclusive rights to manufacture, market and distribute a full
line of Entenmann’s brand coffee products throughout the United
States.  We have developed not only mainstream Entenmann’s coffee
items, but upscale flavored Entenmann’s products in twelve-ounce valve bags as
well.  We believe these products give the line a visible upscale image
to our retailers and their customers, which we believe is integral to the
long-term success of this arrangement.




Grow Our Café
Caribe and Café Supremo Products.The Hispanic population in
the United States is growing at nine times the average rate and now represents
the largest minority demographic in the United States.  We believe
there is significant opportunity for our Café Caribe and Café Supremo brands to
gain market share among Hispanic consumers in the United States.  Café
Caribe, which has historically been our leading brand by revenue, is a specialty
espresso coffee that targets espresso coffee drinkers and, in particular,
Hispanic consumers.  Café Supremo is a specialty espresso coffee which
is priced for the more price sensitive Hispanic espresso coffee
drinker.




Further Market
Penetration of Our Niche Products.  We intend to capture
additional market share through our existing distribution channels by
selectively adding or introducing new brand names and products across multiple
price points, including:


●Specialty blends;
 ●Private label “value” blends and
trial-sized mini-brick packages;
 ●Specialty instant
coffees;
 ●Instant cappuccinos and hot
chocolates; and
 ●Tea line
products.






4





Develop Our Food
Service Business.  We plan to expand further into the food
service business by developing new distribution channels for our
products.  Currently, we have a limited presence in the food service
market.  In 2003, we began marketing our upscale restaurant and
Colombian coffee brands to hotels, restaurants, office coffee services companies
and other food service retailers.  In addition, we have expanded our
food service offerings to include instant cappuccinos, tea products and an
equipment program for our customers.  We attend at least four annual
trade shows held by various buying groups, which provide us a national audience
to market our food service products.




Our
Core Products




Our core
products can be divided into three categories:




● Wholesale Green Coffee:




● Private Label Coffee:




● Branded Coffee:




Wholesale Green
Coffee.  The specialty green coffee market represents the
fastest growing area of our industry.  The number of gourmet coffee
houses have been increasing in all areas of the United States.  The
growth in specialty coffee sales has created a marketplace for higher quality
and differentiated products, which can be priced at a premium in the
marketplace.  As a large roaster-dealer of green coffee, we are
favorably positioned to increase our specialty coffee sales.  We sell
green coffee beans to small roasters and coffee shop operators located
throughout the United States and carry over 90 different
varieties.  Specialty green coffee beans are sold unroasted, direct
from warehouses to small roasters and gourmet coffee shop operators, which then
roast the beans themselves.  We sell from as little as one bag (132
pounds) to a full truckload (44,000 pounds) of specialty green coffee beans,
depending on the size and need of the customer.  We believe that we
can increase sales of wholesale green coffee without venturing into the highly
competitive retail specialty coffee environment and that we can be as profitable
or more profitable than our competitors in this segment by selling “one bag at a
time” rather than “one cup at a time.”




Private Label
Coffee.  We roast, blend, package and sell coffee under private
labels for companies throughout the United States and Canada.  Our
private label coffee is sold in cans, brick packages and instants in a variety
of sizes.  As of October 31, 2009, we supplied coffee under
approximately 50 different labels to wholesalers and retailers.We produce private label
coffee for customers who desire to sell coffee under their own name but do not
want to engage in the manufacturing process.  Our private label
customers seek a quality similar to the national brands at a lower cost, which
represents a better value for the consumer.




Branded
Coffee.  We roast and
blend our branded coffee according to our own recipes and package the coffee at
our facilities in La Junta, Colorado and Brecksville, Ohio.  We then
sell the packaged coffee under our brand labels to supermarkets, wholesalers and
individually-owned stores throughout the United States.




We hold
trademarks for each of our proprietary name brands and have the exclusive right
to use the S&W, IL CLASSICO, and Entenmann’s trademarks in the United States
in connection with the production, manufacture and sale of roasted whole bean
and ground coffee for distribution at the retail level.  For further
information regarding our trademark rights, see “Business—Trademarks.”




5





Each of
our name brands is directed at a particular segment of the coffee
market.  Our branded coffees are:




Café Caribeis a specialty espresso coffee that targets espresso coffee drinkers and,
in particular, the Hispanic consumer market;


S&W is
an upscale canned coffee established in 1921 and includes Premium, Premium
Decaf, French Roast, Colombian, Colombian Decaf, Swiss Water Decaf, Kona,
Mellow’d Roast and IL CLASSICO lines;
  Café
Supremois
a specialty espresso that targets espresso drinkers of all backgrounds and
tastes.  It is designed to introduce coffee drinkers to the tastes of
dark roasted coffee;
 Don Manuel
is produced from the finest 100% Colombian coffee beans.  Don Manuel
is an upscale quality product which commands a substantial premium compared to
the more traditional brown coffee blends.  We also use this known
trademark in our food service business because of the high brand
quality;
  Fifth
Avenue is a blended coffee that has become popular as an alternative for
consumers who purchase private label or national branded coffee.  We
also market this brand to wholesalers who do not wish to undertake the expense
of developing a private label coffee program under their own
name;
 Via Roma
is an Italian espresso targeted at the more traditional espresso
drinker;
  Il
CLASSICO is an S&W brand espresso product; and
  Our Entenmann’s
line of coffee products consists of three canned coffees and six different
bagged coffees, each of which is made from superior quality 100% Arabica
specialty coffee beans that represent less than 10% of all coffee beans grown in
the world.






Other
Products




We also
offer several niche products, including:


●trial-sized mini-brick coffee packages; ●         
specialty instant coffees;
 ●         
instant cappuccinos and hot chocolates; and
 ●         
tea line products.





6





Raw
Materials




Coffee is a
commodity traded on the Commodities and Futures Exchange subject to price
fluctuations.  Over the past five years, the average price per pound
of coffee beans ranged from approximately $0.85 to $1.73.  The price
for coffee beans on the commodities market as of October 31, 2009 was $1.36
per pound.  Specialty green coffee, unlike most coffee, is not tied
directly to the commodities cash markets.  Instead, it tends to trade
on a negotiated basis at a substantial premium over commodity coffee pricing,
depending on the origin, supply and demand at the time of
purchase.  We are a licensed Fair Trade dealer for Fair Trade
certified coffee.  Fair Trade certified coffee helps small coffee
farmers to increase their incomes and improve the prospects of their communities
and families by guaranteeing farmers a minimum price of five cents above the
current market price.  Although we may purchase Fair Trade certified
coffee from time to time, we are not obligated to do so and we do not have any
commitments to purchase Fair Trade certified coffee.  Our Ohio
Facility operated by GCC is certified organic by the Organic Crop Improvement
Association (OCIA).  All of our specialty green coffees, as well as
all of the other coffees we import for roasting, are subject to multiple levels
of quality control.




We purchase
our green coffee from dealers located primarily within the United
States.  The dealers supply us with coffee beans from many countries,
including Colombia, Mexico, Kenya, Indonesia, Brazil and Uganda.  In
fiscal year 2009, approximately 83% of all of our green coffee purchases were
from ten suppliers.  One of these suppliers, Rothfos Corporation,
accounted for approximately $16.7 million, or 27% of our total product
purchases.  An employee of Rothfos Corporation is one of our
directors.  Another of these suppliers, Daarnhouwer & Co., B.V.,
accounted for approximately $7.6 million, or 12% of our total product
purchases.  We do not have any formalized, material agreements or
long-term contracts with any of these suppliers.  Rather, our
purchases are typically made pursuant to individual purchase
orders.  We do not believe that the loss of any one supplier,
including Rothfos, would have a material adverse effect on our operations due to
the availability of alternate suppliers.




The supply
and price of coffee beans are subject to volatility and are influenced by
numerous factors which are beyond our control.  Supply and price can
be affected by factors such as weather, politics and economics in the coffee
exporting countries.  Increases in the cost of coffee beans can, to a
certain extent, be passed on to our customers in the form of higher prices for
coffee beans and processed coffee.  Drastic or prolonged increases in
coffee prices could also adversely impact our business as it could lead to a
decline in overall consumption of coffee.  Similarly, rapid decreases
in the cost of coffee beans could force us to lower our sale prices before
realizing cost reductions in our purchases.




We subject
all of our private unroasted green coffee to both a pre-shipment sample approval
and an additional sample approval upon arrival into the United
States.  Once the arrival sample is approved, we then bring the coffee
to one of our facilities to roast and blend according to our own strict
specifications.  During the roasting and blending process, samples are
pulled off the production line and tested on an hourly basis to ensure that each
batch roasted is consistent with the others and meets the strict quality
standards demanded by our customers and us.




Our
Use of Derivatives




Historically,
we have used short-term coffee futures and options contracts primarily for the
purpose of partially hedging and minimizing the effects of changing green coffee
prices and to reduce our cost of sales.  In addition, we acquire
futures contracts with longer terms, generally three to four months, primarily
for the purpose of guaranteeing an adequate supply of green coffee at favorable
prices.  Although the use of these derivative financial instruments
has enabled us to mitigate the effect of changing prices, no strategy can
entirely eliminate pricing risks and we generally remain exposed to loss when
prices decline or increase significantly in a very short period of
time.  In addition, we would generally remain exposed to supply risk
in the event of non-performance by the counter-parties to any futures
contract.  If the hedges that we enter do not adequately offset the
risks of coffee bean price volatility or our hedges result in losses, our cost
of sales may increase, resulting in a decrease in profitability.  See
Quantitative and Qualitative Disclosures About Market Risk—Commodity Price
Risks.




7





Trademarks




We hold
trademarks, registered with the United States Patent and Trademark Office, for
all seven of our proprietary coffee brands and an exclusive license for S&W,
IL CLASSICO, and Entenmann’s  brands for sale in the United
States.  Trademark registrations are subject to periodic renewal and
we anticipate maintaining our registrations.  We believe that our
brands are recognizable in the marketplace and that brand recognition is
important to the success of our branded coffee business.




Customers




We sell our
private label and our branded coffee to some of the largest retail and wholesale
customers in the United States (according to Supermarket News).We sell wholesale green
coffee to GMCR.  Sales to GMCR accounted for approximately $26.4
million, or 35% of our net sales for the fiscal year ended October 31, 2009 and
$23.6 million, or 32%, for the fiscal year ended October 31, 2008.




Although our
agreements with wholesale customers generally contain only pricing terms, our
contracts with certain customers also contain minimum and maximum purchase
obligations at fixed prices.  Because our profits on a fixed-price
contract could decline if coffee prices increased, we acquire futures contracts
with longer terms (generally three to four months) primarily for the purpose of
guaranteeing an adequate supply of green coffee at favorable
prices.  Although the use of these derivative financial instruments
has enabled us to mitigate the effect of changing prices, no strategy is
effective to eliminate the pricing risks and we would remain exposed to loss
when prices change significantly in a short period of time, and we would remain
exposed to supply risk in the event of non-performance by the counterparties to
any futures contracts.




Marketing




We market our
private label and wholesale coffee through trade shows, industry publications,
face-to-face contact and through the use of our internal sales force and
non-exclusive independent food and beverage sales brokers.  We also
use our web site (www.coffeeholding.com) as a method of marketing our coffee
products and ourselves.




For our
private label and branded coffees, we will, from time to time in conjunction
with retailers and with wholesalers, conduct in-store promotions, such as
product demonstrations, coupons, price reductions, two-for-one sales and new
product launches to capture changing consumer taste preference for upscale
canned coffees.




We evaluate
opportunities for growth consistent with our business objectives.  We
have established relationships with independent sales brokers to market our
products in the Western United States, an area of the country where we have not
had a high penetration of sales.  In addition, we employ a West Coast
Brand Manager who markets our S&W and IL CLASSICO brands, as well as our
other branded and private label coffee products.  We intend to capture
additional market share in our existing distribution channels by selectively
adding or introducing new brand names and products across multiple price points,
including niche specialty blends, private label “value” blends and mini-brick,
filter packages, instant cappuccinos and tea line products.  We also
intend to add specialty instant coffees to our extensive line of instant coffee
products.




8





Charitable
Activities




We are also a
supporter of several coffee-oriented charitable organizations.




● For
      over 15 years, we have been members of Coffee Kids, an international
      non-profit organization that helps to improve the quality of life of
      children and their families in coffee-growing communities in Mexico,
      Guatemala, Nicaragua and Costa
Rica.




● We are
      members of Grounds for Health, an organization that educates, screens, and
      arranges treatment for women who have cancer and live in the rural coffee
      growing communities of Mexico.




● We are
      a licensed Fair Trade dealer of Fair Trade certified
      coffee.  Fair Trade helps small coffee farmers to increase their
      incomes and improve the prospects of their communities and
      families.  It guarantees farmers a minimum price of $1.25 per
      pound or twelve cents above the current market
  price.




● Most
      recently, we are the administrative benefactors to a new non-profit
      organization called Cup for Education.  After discovering the
      lack of schools, teachers, and basic fundamental learning supplies in the
      poor coffee growing communities of Central and Latin America, “Cup” was
      established by our employee, Karen Gordon, to help build schools, sponsor
      teachers, and purchase basic supplies such as books, chalk and other
      necessities for a proper education.




Competition




The coffee
market is highly competitive.  We compete in the following
areas:




Wholesale
Green Coffee.  There are many green coffee dealers throughout
the United States.  Many of these dealers have greater financial
resources than we do.  However, we believe that we have both the
knowledge and the capability to assist small specialty gourmet coffee roasters
with developing and growing their business.  Our almost 40 years of
experience as a roaster and a dealer of green coffee allows us to provide our
roasting experience as a value added service to our gourmet roaster
customers.  While other coffee merchants may be able to offer lower
prices for coffee beans, we market ourselves as a value-added supplier to small
roasters, with the ability to help them market their specialty coffee products
and develop a customer base.  The assistance we provide our customers
includes training, coffee blending and market identification.  Because
specialty green coffee beans are sold unroasted to small coffee shops and
roasters that market their products to local gourmet customers, we do not
believe that our specialty green coffee customers compete with our private label
or branded coffee lines of business.  We believe that the addition of
our two green coffee salespersons in Florida and Oregon allows us to compete
more effectively throughout the country.




Private Label
Competition.  There are several major producers of coffee for
private label sale in the United States.  Many other companies produce
coffee for sale on a regional basis.  Our main competitor is the
former retail coffee division of Sara Lee Corporation, which was purchased by
Segafredo Zanetti Group in 2006, now known as Massimo Zanetti
Beverage.  Massimo Zanetti Beverage is larger and has more financial
and other resources than we do and, therefore, is able to devote more resources
to product development and marketing.  We believe that we remain
competitive by providing a high level of quality and customer
service.  This service includes ensuring that the coffee produced for
each label maintains a consistent taste and is delivered on time and in the
proper quantities.  In addition, we provide our private label
customers with information on the coffee market on a regular basis.




Branded
Competition.  Our proprietary brand coffees compete with many
other brands that are sold in supermarkets and specialty stores, primarily in
the Northeastern United States.  The branded coffee market in both the
Northeast and elsewhere is dominated by three large companies:  Kraft
General Foods, Inc. (owner of the Maxwell House brand), Smuckers (owner of the
Folgers brand) and Massimo Zanetti Beverage which also markets specialty coffee
in addition to non-specialty coffee.  Our large competitors have
greater access to capital and a greater ability to conduct marketing and
promotions.  We believe that, while our competitors’ brands may be
more nationally recognizable, our Café Caribe brand is competitive in the fast
growing Hispanic demographic and our S&W brand has been a popular and
recognizable brand on the West Coast for over 80 years.  In addition,
our relationship with Entenmann’s resulted in Entenmanns’s entry into the coffee
business being voted as the second best brand extension of 2007 by
Brandweek.com.




9


Government
Regulation




Our coffee
roasting operations are subject to various governmental laws and regulations,
which require us to obtain licenses relating to customs, health and safety,
building and land use and environmental protection.  Our roasting
facility is subject to state and local air-quality and emissions
regulation.  If we encounter difficulties in obtaining any necessary
licenses or if we have difficulty complying with these laws and regulations,
then we could be subject to fines and penalties, which could have a material
adverse effect on our profitability.  In addition, our product
offerings could be limited, thereby reducing our revenues.




We believe
that we are in compliance in all material respects with all such laws and
regulations and that we have obtained all material licenses and permits 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.




Employees




We have 56
full-time employees.  None of our employees are represented by unions
or collective bargaining agreements.  Our management believes that we
maintain good working relationships with our employees.  To supplement
our internal sales staff, we sometimes engage independent national and regional
sales brokers as independent contractors who work on a commission
basis.




10




ITEM
      1A.
            RISK
      FACTORS




An investment
in our common stock is subject to risks inherent in our
business.  Before making an investment decision, you should carefully
consider the risks and uncertainties described below together with all of the
other information included in this report.  In addition to the risks
and uncertainties described below, other risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may materially and
adversely affect our business, financial condition and results of
operations.  The value or market price of our common stock could
decline due to any of these identified or other risks, and you could lose all of
your investment.




Risk
Factors Affecting Our Company




Because our
business is highly dependent upon a single commodity, coffee, any decrease in
demand for coffee could materially adversely affect our revenues and
profitability.  Our business is centered on essentially one
commodity: coffee.  Our operations have primarily focused on the
following areas of the coffee industry:




●


●


●




Demand
for our products is affected by:




●


●


●


●







Because we
rely on a single commodity, any decrease in demand for coffee would harm our
business more than if we had more diversified product offerings and could
materially adversely affect our revenues and operating results.




If we are
unable to geographically expand our branded and private label products, our
growth will be impeded which could result in reduced sales and
profitability.Our business strategy emphasizes, among other
things, geographic expansion of our branded and private label products as
opportunities arise.  We may not be able to implement successfully
this portion of our business strategy.  Our ability to implement this
portion of our business strategy is dependent on our ability to:





●


●


●


●








11





Our sales and
profitability may be adversely affected if we fail to successfully expand the
geographic distribution of our branded and private label products.  In
addition, our expenses could increase and our profits could decrease as we
implement our growth strategy.




If our
hedging policy is not effective, we may not be able to control our coffee costs,
we may be forced to pay greater than market value for green coffee and our
profitability may be reduced.The supply and price of coffee
beans are subject to volatility and are influenced by numerous factors which are
beyond our control.  Historically, we have used short-term coffee
futures and options contracts for the purpose of hedging the effects of changing
green coffee prices.  In addition, during the latter half of fiscal
year 2000, we began to acquire futures contracts with longer terms, generally
three to four months, for the purpose of guaranteeing an adequate supply of
green coffee.  Realized and unrealized gains or losses on futures
contracts are reflected in cost of sales.  Gains on futures contracts
reduce cost of sales and losses on futures contracts increase cost of
sales.  Although we had net gains on futures contracts for the year
ended October 31, 2009, we have incurred losses on futures contracts during some
past reporting periods.  Such losses could materially increase our
cost of sales and materially decrease our profitability and adversely affect our
stock price.




Although the
use of these derivative financial instruments has generally enabled us to
mitigate the effect of changing prices, no strategy is effective in eliminating
pricing risks and we generally remain exposed to loss on futures contracts when
prices decline significantly in a short period of time, and we generally remain
exposed to supply risk in the event of non-performance by the counterparties to
any futures contracts.  Although, historically, we generally have been
able to pass green coffee price increases through to customers, thereby
maintaining our gross profits, we may not be able to pass price increases
through to our customers in the future.  Our hedging strategy and the
hedges that we enter into may not adequately offset the risks of coffee bean
price volatility and our hedges may result in losses.  Failure to
properly design and implement an effective hedging strategy may materially
adversely affect our business and operating results.  In this case,
our costs of sales may increase, resulting in a decrease in
profitability.




Our revenues
and profitability could be adversely affected if our joint venture is not
successful.  In April 2006, we entered into a joint venture
with Caruso’s Coffee, Inc. of Brecksville, Ohio and formed Generations Coffee
Company, LLC (“GCC”), which engages in the roasting, packaging and sale of
private label specialty coffee products.  While we believe that the
GCC joint venture will be successful, losses in this joint venture would hurt
our profitability.




In addition,
we generally will not be in a position to exercise sole decision-making
authority regarding our joint ventures.  Investments in joint ventures
may under certain circumstances, involve risks not present when a third party is
not involved, including the possibility that joint venture partners might become
bankrupt or fail to fund their share of the required capital
contributions.  Joint venture partners may have business interests,
strategies or goals that are inconsistent with our business interests,
strategies or goals and may be, in cases where we have a minority interest, in a
position to take actions contrary to our policies, strategies or
objectives.  Joint venture investments also entail a risk of impasse
on decisions, because neither we nor our joint venture partner would have full
control over the joint venture.  Any disputes that may arise between
us and our joint venture partners may result in litigation or arbitration that
could increase our expenses and could prevent our officers and/or directors from
focusing their time and effort exclusively on our business
strategies.  In addition, we may in certain circumstances be liable
for the actions of our third-party joint venture partners.




12





Any
inability to successfully implement our strategy of growth through selective
acquisitions, licensing arrangements and other strategic alliances could
materially affect our revenues and profitability.Our strategy
of growth through the selective acquisition of coffee companies, the selective
acquisition or licensing of additional coffee brands and other strategic
alliances presents risks that could result in increased expenditures and could
materially adversely affect our revenues and profitability,
including:




●


●


●


●








In





●


●








As has been
our practice in the past, we will continuously evaluate any such acquisitions,
licensing opportunities or strategic alliances as they
arise.  However, we have not reached any agreement or arrangement with
respect to any such acquisition, licensing opportunity or strategic alliance at
this time and we may not be able to consummate any acquisitions, licensing
arrangements or strategic alliances on terms favorable to us or at
all.  The failure to consummate any such acquisitions, licensing
arrangements or strategic alliances may reduce our growth and
expansion.




The loss of
any of our key customers could negatively affect our revenues and decrease our
earnings.  We are dependant upon sales of our private label and
branded coffee to two retailers and upon sales of wholesale green coffee to one
customer, Green Mountain Coffee Roasters ("GMCR").  Sales to GMCR
accounted for approximately 35% of our net sales for the year ended October 31,
2009.




Although no
other customer accounted for greater than 10% of our net sales during this
period, other customers may account for more than 10% of our net sales in future
periods.  We do not have long-term contracts with these or any of our
customers.  Accordingly, our customers can stop purchasing our
products at any time without penalty and are free to purchase products from our
competitors.  The loss of, or reduction in sales to, customers such as
GMCR or any of our other customers to which we sell a significant amount of our
products or any material adverse change in the financial condition of such
customers would negatively affect our revenues and decrease our
earnings.




If we lose
our key personnel, including Andrew Gordon and David Gordon, our revenues and
profitability could suffer.  Our success depends to a large
degree upon the services of Andrew Gordon, our President, Chief Executive
Officer, Chief Financial Officer and Treasurer, and David Gordon, our Executive
Vice President – Operations and Secretary.  We also depend to a large
degree on the expertise of our coffee roasters.  We do not have
employment contracts with our coffee roasters.  Our ability to source
and purchase a sufficient supply of high quality coffee beans and to roast
coffee beans consistent with our quality standards could suffer if we lose the
services of any of these individuals.  As a result, our business and
operating results would be adversely affected.  We may not be
successful in obtaining and retaining a replacement for either Andrew Gordon or
David Gordon if they elect to stop working for us.  In addition, we do
not have key-person insurance on the lives of Andrew Gordon or David
Gordon.




13





If our
planned increase in marketing expenditures fails to promote and enhance our
brands, the value of our brands could decrease and our revenues and
profitability could be adversely affected.  We believe that
promoting and enhancing our brands is critical to our success.  We
intend to increase our marketing expenditures to increase awareness of our
brands, which we expect will create and maintain brand loyalty.  If
our brand-building strategy is unsuccessful, these expenses may never be
recovered, and we may be unable to increase awareness of our brands or protect
the value of our brands.  If we are unable to achieve these goals, our
revenues and ability to implement our business strategy could be adversely
affected.




Our success
in promoting and enhancing our brands will also depend on our ability to provide
customers with high quality products and service.  Although we take
measures to ensure that we sell only fresh roasted coffee, we have no control
over our roasted coffee products once they are purchased by our
customers.  Accordingly, wholesale customers may store our coffee for
longer periods of time or resell our coffee without our consent, in each case,
potentially affecting the quality of the coffee prepared from our
products.  Although we believe we are less susceptible to quality
control problems than many of our competitors because a majority of our products
are sold in cans or brick packs unlike whole bean coffees, if consumers do not
perceive our products and service to be of high quality, then the value of our
brands may be diminished and, consequently, our operating results and ability to
implement our business strategy may be adversely affected.




Our roasting
methods are not proprietary, so competitors may be able to duplicate them, which
could harm our competitive position.  If our competitive position is
weakened, our revenues and profitability could be materially adversely
affected.  We consider our roasting methods essential to the
flavor and richness of our roasted coffee and, therefore, essential to our
brands of coffee.  Because we do not hold any patents for our roasting
methods, it may be difficult for us to prevent competitors from copying our
roasting methods if such methods become known.  If our competitors
copy our roasting methods, the value of our coffee brands may be diminished, and
we may lose customers to our competitors.  In addition, competitors
may be able to develop roasting methods that are more advanced than our roasting
methods, which may also harm our competitive position.




Our operating
results may fluctuate significantly, which makes our results of operations
difficult to predict and could cause our results of operations to fall short of
expectations.  Our operating results may fluctuate from quarter
to quarter and year to year as a result of a number of factors, many of which
are outside of our control.  These fluctuations could be caused by a
number of factors including:





●


●


●


●


●


●






As a result
of the foregoing, period-to-period comparisons of our operating results may not
necessarily be meaningful and those comparisons should not be relied upon as
indicators of future performance.  Accordingly, our operating results
in future quarters may be below market expectations.  In this event,
the price of our common stock may decline.




14





Since we rely
heavily on common carriers to ship our coffee on a daily basis, any disruption
in their services or increase in shipping costs could adversely affect our
relationship with our customers, which could result in reduced revenues,
increased operating expenses, a loss of customers or reduced
profitability.  We rely on a number of common carriers to
deliver coffee to our customers and to deliver coffee beans to us.  We
have no control over these common carriers and the services provided by them may
be interrupted as a result of labor shortages, contract disputes and other
factors.  If we experience an interruption in these services, we may
be unable to ship our coffee in a timely manner, which could reduce our revenues
and adversely affect our relationship with our customers.  In
addition, a delay in shipping could require us to contract with alternative, and
possibly more expensive, common carriers and could cause orders to be cancelled
or receipt of goods to be refused.  Any significant increase in
shipping costs could lower our profit margins or force us to raise prices, which
could cause our revenue and profits to suffer.




If there was
a significant interruption in the operation of our Colorado facility, we may not
have the capacity to service all of our customers and we may not be able to
service our customers in a timely manner, thereby reducing our revenues and
earnings.  A significant interruption in the operation of our
Colorado coffee roasting and distribution facility, whether as a result of a
natural disaster or other causes, could significantly impair our ability to
operate our business.  As a result, our revenues and earnings would be
materially adversely affected.




A worsening
of the United States economy could materially adversely affect our
business.Our revenues and performance depend significantly on
consumer confidence and spending, which have recently deteriorated due to
current worldwide economic downturn.  This economic downturn and
decrease in consumer spending may adversely impact our revenues, ability to
market our products or otherwise implement our business strategy.  For
example, we are highly dependent on consumer demand for specialty coffee and a
shift in consumer demand away from specialty coffee due to economic or other
consumer preferences would harm our business.  If the current economic
situation deteriorates significantly, our business could be negatively
impacted.




Risk
Factors Related to the Coffee Industry




Increases in
the cost of high quality Arabica or Robusta coffee beans could reduce our gross
margin and profit.  Green coffee is our largest single cost of
sales.  Coffee is a traded commodity and, in general, its price can
fluctuate depending on:




●


●


●


●






If the cost
of wholesale green coffee increases due to any of these factors, our margins
could decrease and our profitability could suffer accordingly.  It is
expected that coffee prices will remain volatile in the coming
years.  Although we have historically attempted to raise the selling
prices of our products in response to increases in the price of wholesale green
coffee, when wholesale green coffee prices increase rapidly or to significantly
higher than normal levels, we are not always able to pass the price increases
through to our customers on a timely basis, if at all, which adversely affects
our operating margins and cash flow.  We may not be able to recover
any future increases in the cost of wholesale green coffee.  Even if
we are able to recover future increases, our operating margins and results of
operations may still be materially and adversely affected by time delays in the
implementation of price increases.




15





Disruptions
in the supply of green coffee could result in a deterioration of our
relationship with our customers, decreased revenues or could impair our ability
to grow our business.  Green coffee is a commodity and its
supply is subject to volatility beyond our control.  Supply is
affected by many factors in the coffee growing countries including weather,
political and economic conditions, acts of terrorism, as well as efforts by
coffee growers to expand or form cartels or associations.  If we were
unable to procure a sufficient supply of green coffee, our sales would
suffer.




Some of the
Arabica coffee beans of the quality we purchase do not trade directly on the
commodity markets.  Rather, we purchase the high-end Arabica coffee
beans that we use on a negotiated basis.  We depend on our
relationships with coffee brokers, exporters and growers for the supply of our
primary raw material, high quality Arabica coffee beans.  If any of
our relationships with coffee brokers, exporters or growers deteriorate, we may
be unable to procure a sufficient quantity of high quality coffee beans at
prices acceptable to us or at all.  In such case, we may not be able
to fulfill the demand of our existing customers, supply new retail stores or
expand other channels of distribution.  A raw material shortage could
result in a deterioration of our relationship with our customers, decreased
revenues or could impair our ability to expand our business.




The coffee
industry is highly competitive and if we cannot compete successfully, we may
lose our customers or experience reduced sales and
profitability.  The coffee markets in which we do business are
highly competitive and competition in these markets is likely to become
increasingly more intense due to the relatively low barriers of
entry.  The industry in which we compete is particularly sensitive to
price pressure, as well as quality, reputation and viability for wholesale and
brand loyalty for retail.  To the extent that one or more of our
competitors becomes more successful with respect to any key competitive factor,
our ability to attract and retain customers could be materially adversely
affected.  Our private label and branded coffee products compete with
other manufacturers of private label coffee and branded
coffees.  These competitors, such as Kraft General Foods, Inc. (owner
of the Maxwell House brand), Massimo Zanetti Beverage, and Smuckers (owner of
the Folgers brand), have much greater financial, marketing, distribution,
management and other resources than we do for marketing, promotions and
geographic and market expansion.  In addition, there are a growing
number of specialty coffee companies who provide specialty green coffee and
roasted coffee for retail sale.  If we are unable to compete
successfully against existing and new competitors, we may lose our customers or
experience reduced sales and profitability.




ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS




Not
applicable.




ITEM 2.
            PROPERTIES




We are
headquartered at 3475 Victory Boulevard, Staten Island, New York, where we lease
office and warehouse space.  We pay annual rent of $114,000 under the
terms of the lease, which expires on October 31, 2023.




We lease a
50,000 square foot facility located at 27700 Frontage Road in La Junta, Colorado
from the City of La Junta.  We pay annual rent of $100,093 through
January of 2024.




We also use a
variety of independent, bonded commercial warehouses to store our green coffee
beans.  Our management believes that our facilities are adequate for
our current operations and for our contemplated operations in the foreseeable
future.


16




ITEM
      3.
            LEGAL
      PROCEEDINGS




We are not a
party to, and none of our property is the subject of, any pending legal
proceedings other than routine litigation that is incidental to our
business.  To our knowledge, no governmental authority is
contemplating initiating any such proceedings.




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




None.




17


PART
II




ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES




Our common
stock trades on the American Stock Exchange under the symbol
“JVA.”  On February 28, 2008, we paid a special dividend in the amount
of $0.28 per share.  We have not declared or paid any other dividends
on our common stock during the last three fiscal years.  We do not
intend to pay dividends for the foreseeable future.  At December 31,
2009, there were 375 holders of record of an aggregate of 5,440,823 shares of
our common stock issued and outstanding.




We did not
repurchase any of our common stock during the quarter ended October 31,
2009.




The following
table sets forth the high and low sales prices of our common stock for each
quarter of the last two fiscal years.


High
              
              
              Low20081st Quarter
              
              $
              5.25
              
              
              $
              3.832nd Quarter
              
              $
              4.60
              
              
              $
              2.363rd Quarter
              
              $
              2.58
              
              
              $
              1.984th Quarter
              
              $
              3.09
              
              
              $
              1.2320091st Quarter
              
              $
              1.79
              
              
              $
              0.772nd Quarter
              
              $
              4.91
              
              
              $
              0.563rd Quarter
              
              $
              4.98
              
              
              $
              1.874th Quarter
              
              $
              5.21
              
              
              $
              3.55


18







ITEM
      6.
            SELECTED
      FINANCIAL DATA




The following
table sets forth selected financial data for the last five years from the
consolidated financial statements of Coffee Holding Co., Inc.  The
following information is only a summary, and you should read it in conjunction
with our consolidated financial statements and notes beginning on page
F-1.




For
      the Years Ended October 31,2009
            
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005(Dollars in thousands, except
      per share data)Income
      Statement Data:Net
      sales
            
            $
            74,452
            
            
            $
            71,186
            
            
            $
            57,365
            
            
            $
            51,171
            
            
            $
            41,545Cost
      of sales
            
            
            64,440
            
            
            
            68,762
            
            
            
            49,071
            
            
            
            43,576
            
            
            
            33,876Gross
      profit
            
            
            10,012
            
            
            
            2,424
            
            
            
            8,294
            
            
            
            7,595
            
            
            
            7,669Operating
      expenses
            
            
            6,389
            
            
            
            6,363
            
            
            
            6,842
            
            
            
            6,231
            
            
            
            5,698Income
      (loss) from operations
            
            
            3,623
            
            
            
            (3,939
            )
            
            
            1,452
            
            
            
            1,364
            
            
            
            1,971Other
      income (expense)
            
            
            1,869
            
            
            
            (86
            )
            
            
            (90
            )
            
            
            (68
            )
            
            
            (60
            )Income
      (loss) before income taxes
            
            
            5,492
            
            
            
            (4,025
            )
            
            
            1,362
            
            
            
            1,296
            
            
            
            1,911Provision
      (benefit) for income taxes
            
            
            2,159
            
            
            
            (1,430
            )
            
            
            418
            
            
            
            602
            
            
            
            726Minority
      interest
            
            
            (42
            )
            
            
            (2
            )
            
            
            (7
            )
            
            
            (6
            )
            
            
            –Net
      income (loss)
            
            $
            3,291
            
            
            $
            (2,597
            )
            
            $
            937
            
            
            $
            700
            
            
            $
            1,185Net
      income (loss) per share – Basic and diluted
            
            $
            0.60
            
            
            $
            (0.47
            )
            
            $
            0.17
            
            
            $
            0.13
            
            
            $
            0.25




At October
      31,2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005(Dollars in
      thousands, except per shares data)Balance
      Sheet Data:Total
      assets
              
              $
              19,804
              
              
              $
              21,002
              
              
              $
              20,397
              
              
              $
              18,982
              
              
              $
              16,545Short-term
      debt
              
              
              792
              
              
              
              3,522
              
              
              
              897
              
              
              
              2,543
              
              
              
              1,064Long-term
      debt
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Total
      liabilities
              
              
              8,625
              
              
              
              13,151
              
              
              
              8,194
              
              
              
              7,640
              
              
              
              5,904Stockholders’
      equity
              
              
              11,133
              
              
              
              7,847
              
              
              
              12,202
              
              
              
              11,342
              
              
              
              10,642Book
      value per share
              
              $
              2.05
              
              
              $
              1.44
              
              
              $
              2.05
              
              
              $
              2.05
              
              
              $
              1.92





19




ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION





Cautionary
Note on Forward-Looking Statements




Some of the
matters discussed under the caption “Management’s Discussion and Analysis of
Financial Condition and Results of Operation,” “Business,” “Risk Factors” and
elsewhere in this annual report include forward-looking statements made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995.  We have based these forward-looking statements upon information
available to management as of the date of this Form 10-K and management’s
expectations and projections about future events, including, among other
things:




●

























































In some cases, you
can identify forward-looking statements by terminology such as “may,” “will,”
“should,” “could,” “predict,” “potential,” “continue,” “expect,” “anticipate,”
“future,” “intend,” “plan,” “believe,” “estimate” and similar expressions (or
the negative of such expressions).  Any or all of our forward looking
statements in this annual report and in any other public statements we make may
turn out to be wrong.  They can be affected by inaccurate assumptions
we might make or by known or unknown risks and
uncertainties.  Consequently, no forward-looking statement can be
guaranteed.  In addition, we undertake no responsibility to update any
forward-looking statement to reflect events or circumstances, that occur after
the date of this annual report.




Overview




We are an
integrated wholesale coffee roaster and dealer in the United States and one of
the few coffee companies that offers a broad array of coffee products across the
entire spectrum of consumer tastes, preferences and price points.  As
a result, we believe that we are well-positioned to increase our profitability
and endure potential coffee price volatility throughout varying cycles of the
coffee market and economic conditions.




20









Our
      operations have primarily focused on the following areas of the coffee
      industry:● the
      sale of wholesale specialty green coffee;● the
      roasting, blending, packaging and sale of private label coffee;
      and● the
      roasting, blending, packaging and sale of our seven brands of
      coffee.Our
      operating results are affected by a number of factors
      including:● the
      level of marketing and pricing competition from existing or new
      competitors in the coffee industry;● our
      ability to retain existing customers and attract new
      customers;● fluctuations in purchase prices and
      supply of green coffee and in the selling prices of our products;
      and● our
      ability to manage inventory and fulfillment operations and maintain gross
      margins.




Our net sales
are driven primarily by the success of our sales and marketing efforts and our
ability to retain existing customers and attract new customers.  For
this reason, we have made the strategic decision to invest in measures that will
increase net sales.  In February 2004, we acquired certain assets of
Premier Roasters, LLC, including equipment and a roasting facility in La Junta,
Colorado.  We also hired a West Coast Brand Manager to market our
S&W brand and to increase sales of S&W coffee to new
customers.  In April 2006, we entered into a joint venture with
Caruso’s Coffee, Inc. of Brecksville, Ohio and formed Generations Coffee
Company, LLC (“GCC”), a Delaware limited liability company, which engages in the
roasting, packaging and sale of private label specialty coffee
products.  We own a 60% equity interest in GCC and we are the
exclusive supplier of its coffee inventory.  We believe that the joint
venture will allow us to bid on the private label gourmet whole bean business
which we have not been equipped to pursue from an operational standpoint in the
past.  With this specialty roasting facility in place, in many cases
right in the backyard of our most important wholesale and retail customers, we
believe that we are in an ideal position to combine our current canned private
label business with high-end private label specialty whole bean
business.  High-end specialty whole bean coffee sells for as much as
three times more per pound than the canned coffees in which we currently
specialize.  As a result of these efforts, net sales increased in our
specialty green coffee, private label and branded coffee business lines in both
dollars and pounds sold.  In addition, the number of our customers in
all three areas increased.





We closed our
manufacturing operations at our Brooklyn, New York location in May 2009. The
majority of our processing has been moved to our Colorado facility with our GCC
facility in Brecksville, Ohio becoming more involved with our everyday coffee
production. We have leased office and warehouse space located in Staten Island,
New York to house the corporate offices and serve as temporary storage of our
branded product. We sold the property located in Brooklyn, New York in October
2009 for a pre-tax gain of approximately $2,108,000, which enhanced our already
strong cash position and liquidity.  We used the proceeds of the sale
to pay down our line of credit borrowings and reduce interest
expense.  Although we incurred a related severance cost of $78,500 in
the third quarter of fiscal year 2009, we believe that these measures will
reduce long-term operating expenses, increase efficiencies and ultimately
increase the profitability of our Company.




21





In July 2007, we entered into
a three-year licensing agreement with Entenmann’s Products, Inc., a subsidiary
of Entenmann’s, Inc., which is one of the nation’s oldest baking
companies.  The agreement gives us the exclusive rights to
manufacture, market and distribute a full line of Entenmann’s brand coffee
products throughout the United States.  We are continuing to develop
not only mainstream Entenmann’s coffee items, but upscale flavored Entenmann’s
products in twelve-ounce valve bags as well.  These products will give
the line a visible upscale image to our retailers and their customers, which we
believe will be integral to the long term success of this
arrangement.




Our net sales
are affected by the price of green coffee.  We purchase our green
coffee from dealers located primarily within the United States.  The
dealers supply us with coffee beans from many countries, including Colombia,
Mexico, Kenya, Indonesia, Brazil and Uganda.  The supply and price of
coffee beans are subject to volatility and are influenced by numerous factors
which are beyond our control.  For example, in Brazil, which produces
approximately 40% of the world’s green coffee, the coffee crops are historically
susceptible to frost in June and July and drought in September, October and
November.  However, because we purchase coffee from a number of
countries and are able to freely substitute one country’s coffee for another in
our products, price fluctuations in one country generally have not had a
material impact on the price we pay for coffee.  Accordingly, price
fluctuations in one country generally have not had a material effect on our
results of operations, liquidity and capital resources.  Historically,
because we generally have been able to pass green coffee price increases through
to customers, increased prices of green coffee generally result in increased net
sales.




We have used
short-term coffee futures and options contracts primarily for the purpose of
partially hedging and minimizing the effects of changing green coffee prices and
to reduce our cost of sales.  In addition, we acquire futures
contracts with longer terms, generally three to four months, primarily for the
purpose of guaranteeing an adequate supply of green coffee at favorable
prices.  Although the use of these derivative financial instruments
has enabled us to mitigate the effect of changing prices, no strategy can
entirely eliminate pricing risks and we generally remain exposed to loss when
prices decline significantly in a short period of time.  In addition,
we would remain exposed to supply risk in the event of non-performance by the
counterparties to any futures contracts.  If the hedges that we enter
into do not adequately offset the risks of coffee bean price volatility or our
hedges result in losses, our cost of sales may increase, resulting in a decrease
in profitability.




Critical
Accounting Policies and Estimates




The
preparation of financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States of America (“U.S.
GAAP”) requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes.  Estimates are used for, but not limited to, the accounting for
the allowance for doubtful accounts, inventories, assets held for sale, income
taxes and loss contingencies.  Management bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances.  Actual results could differ from
these estimates under different assumptions or conditions.





We believe
the following critical accounting policies, among others, may be impacted
significantly by judgment, assumptions and estimates used in the preparation of
the financial statements:




● We
      recognize revenue in accordance with the authoritative
      guidance.  Revenue is recognized at the point of passage to the
      customer of title and risk of loss, when there is persuasive evidence of
      an arrangement, the sales price is determinable, and collection of the
      resulting receivable is reasonably assured.  We generally
      recognize revenue at the time of shipment.  Sales are reflected
      net of discounts and returns.




● Our
      allowance for doubtful accounts is maintained to provide for losses
      arising from customers’ inability to make required payments.  If
      there is deterioration of our customers’ credit worthiness and/or there is
      an increase in the length of time that the receivables are past due
      greater than the historical assumptions used, additional allowances may be
      required.  For example, every additional one percent of our
      accounts receivable that becomes uncollectible, would decrease our
      operating income by approximately $102,000 for the year ended October 31,
      2009.




22




● Inventories are stated at lower of
      cost (determined on a first-in, first-out basis) or
      market.  Based on our assumptions about future demand and market
      conditions, inventories are subject to be written-down to market
      value.  If our assumptions about future demand change and/or
      actual market conditions are less favorable than those projected,
      additional write-downs of inventories may be required.  Each
      additional one percent of potential inventory writedown would have
      decreased operating income by approximately $48,000 for the year ended
      October 31, 2009.




● We
      account for income taxes in accordance with the authoritative
      guidance.  Deferred tax assets and liabilities are determined
      based on the liabilities, using enacted tax rates in effect for the year
      in which the differences are expected to reverse.  Deferred tax
      assets are reflected on the balance sheet when it is determined that it is
      more likely than not that the asset will be
      realized.  Accordingly, our net deferred tax asset as of October
      31, 2009 of $150,500 may require a valuation allowance if we do not
      generate taxable income.




Year Ended October 31, 2009 (Fiscal Year
2009) Compared to the Year Ended October 31, 2008 (Fiscal Year
2008)




Net
Income.  We had net income
of $3,291,066, or $0.60 per share (basic and diluted), for the fiscal year ended
October 31, 2009 compared to a net loss of ($2,597,294) or ($0.47) per share
(basic and diluted) for the fiscal year ended October 31, 2008.  The
increase in net income primarily reflects an increase in net sales and a
decrease in cost of sales, which resulted in an increase in gross profit, and a
$1,955,847 increase in other income resulting from the sale of our Brooklyn, New
York facility.




Net
Sales.  Net sales totaled $74,451,673 for the fiscal year ended
October 31, 2009, an increase of $3,265,361, or 4.6%, from $71,186,312 for the
fiscal year ended October 31, 2008.  The increase in net sales
reflects higher coffee prices during fiscal year 2009 as compared to fiscal year
2008, as well as our move into producing and selling higher margin
products.




Cost of
Sales.  Cost of sales for the fiscal year ended October 31,
2009 was $64,439,494, or 86.6%, of net sales, as compared to $68,762,310, or
96.6%, of net sales for the fiscal year ended October 31, 2008.  Cost
of sales consists primarily of the cost of green coffee and packaging materials
and realized and unrealized gains or losses on hedging activity.  The
decrease in cost of sales reflects the decreased cost of green coffee and gains
on options and futures contracts as we held favorable positions in both
throughout fiscal year 2009.  Cost of sales includes purchases of
approximately $16.7 million and $24.2 million in fiscal years 2009 and 2008,
respectively, from a related party.




Gross
Profit.  Gross profit for the fiscal year ended October 31,
2009 was $10,012,179, an increase of $7,588,177 from $2,424,002 for the fiscal
year ended October 31, 2008.  Gross profit as a percentage of net
sales increased to 13.45% for the fiscal year ended October 31, 2009 from 3.41%
for the fiscal year ended October 31, 2008.  The increase in our
margins reflects the decreased cost of sales.




Operating
Expenses.  Total operating expenses increased $26,516, or
0.42%, to $6,389,050 for the fiscal year ended October 31, 2009 from $6,362,534
for the fiscal year ended October 31, 2008 due to increases in bad debt expense
and officers’ salaries, partially offset by a decrease in selling and
administrative expense.  Selling and administrative expenses decreased
$183,675, or 3.2%, to $5,530,357 for the year ended October 31, 2009 from
$5,714,032 for 2008.  The decrease in selling and administrative
expenses reflects several factors, including decreases of approximately $129,000
in shipping costs, $201,000 in insurance costs, and decreases in certain other
selling and administrative expenses, partially offset by increases of $294,000
in contract labor costs and $87,000 in Entenmann’s setup costs.




23





Shipping costs decreased due to
increased sales to our large green coffee customers who pay the shipping
expenses for product they purchase from us, as well as, reduced fuel surcharges
as a result of the lower cost of heating oil and crude oil during fiscal year
2009.  The decrease in insurance cost was associated withthe closing of our
Brooklyn, New York facility.The increase in contract
labor costs reflected increased production in our Ohio facility which produces
our Café Caribe and food service items. The increase in the
Entenmann’s slotting costs reflectedmarketplace expansion of
these products.




Other
Income.  Other income was $1,869,300 for the fiscal year ended
October 31, 2009 as compared to other expense of ($86,547) for the fiscal year
ended October 31, 2008.  The increase in other income was attributable
to an approximately $2,108,000 gain on the sale of our Brooklyn, New York
facility, partially offset by an approximately $111,000 increase in interest
expense.




Income Before
Taxes and Minority Interest in Subsidiary.  We had income of
$5,492,429 before income taxes and minority interest in subsidiary for the
fiscal year ended October 31, 2009 compared to a loss of ($4,025,079) for the
fiscal year ended October 31, 2008.  The increase was primarily
attributable to our increase in gross profit, which is primarily due to our
decreased cost of sales and the sale of our Brooklyn, New York
facility.




Income
Taxes.  Our provision for
income taxes for the fiscal year ended October 31, 2009 totaled ($2,159,319)
compared to a benefit of $1,430,110 for the fiscal year ended October 31,
2008.  The change was attributable to income from operations for the
fiscal year ended October 31, 2009 compared to a loss from operations during the
same period in 2008.




24





Liquidity
and Capital Resources




As of October
31, 2009, we had working capital of $9,544,795, which represented a $4,532,496
increase from our working capital of $5,012,299 as of October 31, 2008, and
total stockholders’ equity of $11,132,963 which increased by $3,285,540 from our
total stockholders’ equity of $7,847,423 as of October 31, 2008.  Our
working capital increased primarily due to an increase of $404,635 in cash and
cash equivalents, a $2,730,579 decrease in line of credit borrowings, a
$2,464,208 decrease in accounts payable and a $1,106,424 increase in net
accounts receivable, partially offset by a decrease of $989,867 in prepaid and
refundable income taxes, a decrease of $637,877 in deferred income taxes, and an
increase of $453,512 in income taxes payable.  At October 31, 2009,
the outstanding balance on our line of credit was $791,628 compared to
$3,522,207 at October 31, 2008.  Total stockholders’ equity increased
due to an increase in retained earnings as a result of our net income for fiscal
year 2009.




On
February 17, 2009, we entered into a Loan and Security Agreement with
Sterling National Bank (“Sterling”) for a new credit facility to provide for our
working capital requirements and we terminated the $4,500,000 line of credit we
previously had under a financing agreement with Merrill Lynch Business Financial
Services Inc. The new credit facility is a revolving $5,000,000 line of credit
and the Company can draw on the line at an amount up to 85% of eligible
accounts receivable and 25% of eligible inventory consisting of green coffee
beans and finished coffee not to exceed $1,000,000.  The credit facility is
payable monthly in arrears on the average unpaid balance of the line of credit
at an interest rate equal to a per annum reference rate (currently 4.25%) plus
1.0%. The initial term of the credit facility is three years and
shall be automatically extended for successive periods of one (1) year each
unless one party shall have provided the other party with a written notice of
termination, at least ninety (90) days prior to the expiration of the initial
contract term or any renewal term. The credit facility is secured by all
tangible and intangible assets of the Company and is personally guaranteed by
two officers and shareholders of the Company. The credit facility contains
covenants that place restrictions on our operations, including covenants
relating to mergers, debt restrictions, capital expenditures, tangible net
worth, leverage, net profit, fixed charge coverage, employee loan restrictions,
distribution restrictions, minimum working capital, dividend restrictions,
restrictions on lease payments to affiliates, restrictions on changes in
business, asset sale restrictions, restrictions on acquisitions, intercompany
transactions, and restrictions on fundamental changes.  However, the
personal guarantees of the two officers and shareholders will be released by
Sterling effective October 31, 2009 upon satisfaction of certain conditions upon
Sterling’s receipt and review of the October 31, 2009 audited consolidated
financial statements.




We closed
our manufacturing operations at our Brooklyn, New York location in
May 2009. The majority of our processing has been moved to our La Junta,
Colorado facility with our GCC facility in Brecksville, Ohio becoming more
involved with our everyday coffee production. We have leased office and
warehouse space located in Staten Island, New York to house the corporate
offices and serve as temporary storage of our branded product. We sold the
property located in Brooklyn, New York in October 2009 for a pre-tax gain of
approximately $2,108,000, which enhanced our already strong cash position and
liquidity.  We used the proceeds of the sale to pay down our line of
credit borrowings and reduce interest expense.  Although we incurred a
related severance cost of $78,500 in the third quarter of fiscal 2009, we
believe that these measures will reduce long-term operating expenses, increase
efficiencies and ultimately increase the profitability of our
Company.




For the
fiscal year ended October 31, 2009 our operating activities provided net cash of
$409,075 as compared to the fiscal year ended October 31, 2008 when net cash
used by operating activities was $443,259.  The increased cash flow
from operations for the fiscal year ended October 31, 2009 was primarily due to
our net income of $3,291,066, a decrease in prepaid and refundable income taxes
of $989,867, and a decrease in inventories of $246,411, partially offset by an
increase of accounts receivable of $1,201,718, a decrease in accounts payable of
$2,464,207 and an increase in prepaid expenses of $134,840.




25





For the fiscal year ended
October 31, 2009, our investing activities provided net cash of $2,731,665 as
compared to the fiscal year October 31, 2008 when net cash used by investing
activities was ($351,482).  The increase in net cash provided by
investing activities for fiscal year 2009 was due to $2,906,473 in proceeds from
the sale of the equipment and the manufacturing facility.




For the
fiscal year ended October 31, 2009, our financing activities used net cash of
($2,736,105) compared to net cash provided in financing activities of $867,390
for the fiscal year ended October 31, 2008.  The change in cash flow
from financing activities for the fiscal year ended October 31, 2009 was
primarily due to larger principal payments under the new line of credit with
Sterling National Bank and paying off the old line of credit with Merrill Lynch
Business Financial Services, Inc. in fiscal year 2009 and partially offset by
increased advances under our new line of credit in fiscal year 2009, the
February 2008 payment of dividends to our stockholders and the repurchase of
outstanding common stock during fiscal year 2008 and 2009.




We expect to
fund our operations, including paying our liabilities, funding capital
expenditures and making required payments on our debts, through October 31, 2010
with cash provided by operating activities and the use of our credit
facility.  In addition, an increase in eligible accounts receivable
and inventory would permit us to make additional borrowings under our line of
credit.




Off-Balance
Sheet Arrangements




We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.




ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Market risks
relating to our operations result primarily from changes in interest rates and
commodity prices as further described below.




Interest Rate
Risks.We
are subject to market risk from exposure to fluctuations in interest
rates.  At October 31, 2009, our debt consisted of $791,628 of
variable rate debt under our revolving line of credit.  Our line of
credit provides for a maximum of $5,000,000 and is payable monthly in arrears on
the average unpaid balance of the line of credit at an interest rate equal to a
per annum reference rate (currently 4.25%) plus 1%.  This loan is
secured by tangible and intangible assets of the Company.




Commodity
Price Risks.The supply and price of
coffee beans are subject to volatility and are influenced by numerous factors
which are beyond our control.  Historically, we have used short-term
coffee futures and options contracts (generally with terms of two months or
less) primarily for the purpose of partially hedging and minimizing the effects
of changing green coffee prices, as further explained in Note 2 of the notes to
financial statements in this report.  In addition, during the latter
half of fiscal 2000, we began to acquire futures contracts with longer terms
(generally three to four months) primarily for the purpose of guaranteeing an
adequate supply of green coffee.  The use of these derivative
financial instruments has enabled us to mitigate the effect of changing prices
although we generally remain exposed to loss when prices decline significantly
in a short period of time or remain at higher levels, preventing us from
obtaining inventory at favorable prices.  We generally have been able
to pass green coffee price increases through to customers, thereby maintaining
our gross profits.  However, we cannot predict whether we will be able
to pass inventory price increases through to our customers in the
future.  We believe our hedging policies remain a vital element to our
business model not only in controlling our cost of sales, but also giving us the
flexibility to obtain the inventory necessary to continue to grow our sales
while minimizing margin compression during a time of historically high coffee
prices.




26





At October
31, 2009, the Company held 50 futures contracts for the purchase of 1,875,000
pounds of coffee at a weighted average price of $1.35 per pound.  The
fair market value of coffee applicable to such contracts was $1.36 per pound at
that date.  At October 31, 2008, the Company did not hold any future
contracts.




ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA




See pages F-1
through F-23 following the Exhibit Index of this Annual Report on Form
10-K.




ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE




None.




ITEM
9A(T).CONTROLS
AND PROCEDURES





Evaluation of
Disclosure Controls and Procedures.Management, which
includes our President, Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Company’s disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) as of the end of the period covered by
this report.  Based upon that evaluation, the Company’s President,
Chief Executive Officer and Chief Financial Officer concluded that the
disclosure controls and procedures were effective to ensure that information
required to be disclosed in the reports that we file and submit under the
Exchange Act is (i) recorded, processed, summarized and reported as and
when required and (ii) accumulated and communicated, as is appropriate, to
the Company’s management, including its principal executive officer and
financial officer to allow timely decisions regarding disclosure.




Management
Report on Internal Control Over Financial Reporting.  The management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting. The Company’s internal control system is a
process designed to provide reasonable assurance to the Company’s management and
board of directors regarding the preparation and fair presentation of published
financial statements.




Our internal
control over financial reporting includes policies and procedures that pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect transactions and dispositions of assets, provide reasonable assurances
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures are being made only
in accordance with authorizations of management and the directors of the
Company, and provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s
assets that could have a material effect on our financial
statements.




Because of
its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.




The Company’s
management assessed the effectiveness of its internal control over financial
reporting as of October 31, 2009.  In making this assessment, the
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control-Integrated
Framework.  Based on our assessment our management believes that, as
of October 31, 2009, the Company’s internal control over financial reporting is
effective based on those criteria.





27





There have been no changes in
the Company’s internal control over financial reporting identified in connection
with the evaluation that occurred during the Company’s last fiscal quarter that
has materially affected, or that is reasonably likely to materially affect, the
Company’s internal control over financial reporting.




Attestation
Report of the Registered Public Accounting Firm.  This annual
report does not include an attestation report from our registered independent
public accounting firm, regarding internal control over financial
reporting. Management’s report was not subject to attestation pursuant to
temporary rules of the SEC that permits the Company to provide only management’s
report.




ITEM
      9B.
            OTHER
      INFORMATION




We are
providing the following disclosure in lieu of providing this information in a
current report on Form 8-K pursuant to Item 2.01, “Completion of Acquisition or
Disposition of Assets.”   On October 15, 2009, the Company closed
the sale of its real property located at 4401 First Avenue, Brooklyn, New York
to 4401 1st Ave
LLC for a total purchase price of $3,000,000.  The sale resulted in a
net gain of approximately $2,108,000, which was booked in the quarter ended
October 31, 2009.  The building on the property previously housed the
executive offices, as well as the plant in which the Company roasted, blended
and packaged its coffee. The majority of the Company’s processing has been moved
to its La Junta, Colorado facility with GCC facility in Brecksville, Ohio
becoming more involved with everyday coffee processing.  Coffee
Holding leased office and warehouse space located in Staten Island, New York to
house the corporate offices and serve as temporary storage of its branded
product.


28
 PART
III








ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE




Information
required by this item is incorporated by reference to the Company’s Proxy
Statement for the 2010 Annual Meeting of Stockholders.




ITEM
      11.
            EXECUTIVE
      COMPENSATION




Information
required by this item is incorporated by reference to the Company’s Proxy
Statement for the 2010 Annual Meeting of Stockholders.




ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS




Information
required by this item is incorporated by reference to the Company’s Proxy
Statement for the 2010 Annual Meeting of Stockholders.




ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE




Information
required by this item is incorporated by reference to the Company’s Proxy
Statement for the 2010 Annual Meeting of Stockholders.




ITEM
      14.
            PRINCIPAL
      ACCOUNTING FEES AND SERVICES




Information
required by this item is incorporated by reference to the Company’s Proxy
Statement for the 2010 Annual Meeting of Stockholders.




29


PART
IV






ITEM
      15.
            EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES




(a)           List
of Documents filed as part of this Report




(1)           Financial
Statements




The financial
statements and related notes, together with the reports of ParenteBeard LLC and
Lazar Levine & Felix, LLP appear at pages F-1 through F-23 following the
Exhibit List as required by Part II, Item 8 “Financial Statements and
Supplementary Data” of this Form 10-K.




(2)           Financial
Statement Schedules




None.




(3)           List
of Exhibits




(a)           Exhibits




The Company
has filed with this report or incorporated by reference herein certain exhibits
as specified below pursuant to Rule 12b-32 under the Exchange Act. See Exhibit
Index following the signature page to this report for a complete list of
documents filed with this report.




Exhibit No.
            
            Description2.1
            
            Agreement
      and Plan of Merger, dated October 31, 1997, by and among Transpacific
      International Group Corp. and Coffee Holding Co., Inc. (incorporated
      herein by reference to Exhibit 2 to Post-Effective Amendment No. 1 to the
      Company’s Registration Statement on Form SB-2 filed on November 10, 1997
      (File No. 333-00588-NY)).2.2
            
            Asset
      Purchase Agreement, dated February 4, 2004, by and between Coffee Holding
      Co., Inc. and Premier Roasters LLC (incorporated herein by reference to
      Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February
      20, 2004 (File No. 333-00588-NY)).3.1
            
            Amended
      and Restated Articles of Incorporation of the Company (incorporated herein
      by reference to Exhibit 3.1 to the Company’s Registration Statement on
      Form 8-A the “2005 Registration Statement” filed on May 2, 2005 (File No.
      001-32491)).3.2
            
            By-Laws
      of the Company (incorporated herein by reference to Exhibit 3.2 to the
      2005 Registration Statement (File No. 001-32491)).4.1
            
            Form
      of Stock Certificate of the Company (incorporated herein by reference to
      the Company’s Registration Statement on Form SB-2 filed on June 24, 2004
      (Registration No. 333-116838)).10.1
            
            Loan
      and Security Agreement, dated February 17, 2009, by and between Sterling
      National Bank and Coffee Holding Co., Inc. (incorporated herein by
      reference to Exhibit 10.21 to the Company’s Current Report on Form 8-K
      filed on February 23, 2009 (File No. 001-32491)).10.2
            
            Lease,
      dated February 4, 2004, by and between Coffee Holding Co., Inc. and the
      City of La Junta, Colorado (incorporated herein by reference to Exhibit
      10.12 to Amendment No. 1 to the Company’s Registration Statement on Form
      SB-2/A filed on August 12, 2004 (Registration No.
      333-116838)).10.3
            
            Trademark
      License Agreement, dated February 4, 2004, between Del Monte Corporation
      and Coffee Holding Co, Inc. (incorporated herein by reference to Exhibit
      10.13 to the Company’s Quarterly Report on Form 10-QSB/A for the quarter
      ended April 30, 2004 filed on August 26, 2004 (File No.
      333-00588-NY)).10.4
            
            Amended
      and Restated Employment agreement, dated April 11, 2008, by and between
      Coffee Holding Co., Inc. and Andrew Gordon (incorporated herein by
      reference to Exhibit 10.14 of the Company’s Current Report on Form 8-K
      filed on April 16, 2008 (File No. 001-32491)).10.5
            
            Amended
      and Restated Employment agreement, dated April 11, 2008, by and between
      Coffee Holding Co., Inc. and David Gordon (incorporated herein by
      reference to Exhibit 10.15 of the Company’s Current Report on Form 8-K
      filed on April 16, 2008 (File No. 001-32491)).10.6
            
            Coffee
      Holding Co., Inc. Non-Qualified Deferred Compensation Plan (incorporated
      herein by reference to the Company’s Quarterly Report on Form 10-QSB filed
      on June 14, 2005 (File No. 001-32491)).10.7
            
            Contract
      of Sale, dated April 14, 2009, by and between Coffee Holding Co., Inc. and
      4401 1st Ave LLC.11.1
            
            Calculation
      of Earnings Per Share.31.1
            
            Principal
      Executive Officer and Principal Financial Officer’s Certification pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Principal
      Executive Officer and Principal Financial Officer’s Certification
      furnished pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.





30




SIGNATURES




In accordance
with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on January 28, 2010.






COFFEE
      HOLDING CO., INC.By:
              /s/ Andrew
      GordonAndrew
      GordonPresident,
      Chief Executive Officer








In accordance
with the Exchange Act, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.




Name
            
            Title
            
            Date/s/
      Andrew GordonAndrew
      Gordon
            
            President,
      Chief Executive Officer, Chief Financial Officer, Treasurer and Director
      (principal executive officer and principal financial and accounting
      officer)
            
            January
      28, 2010/s/ David GordonDavid
      Gordon
            
            Executive
      Vice President – Operations, Secretary and Director
            
            January
      28, 2010/s/
      Gerard DeCapuaGerard
      DeCapua
            
            Director
            
            January
      28, 2010/s/
      Daniel DwyerDaniel
      Dwyer
            
            Director
            
            January
      28, 2010/s/ Barry KnepperBarry
      Knepper
            
            Director
            
            January
      28, 2010/s/
      John RotelliJohn
      Rotelli
            
            Director
            
            January
      28, 2010/s/
      Robert M. WilliamsRobert
      M. Williams
            
            Director
            
            January
      28, 2010






31







EXHIBIT
INDEX




Exhibit No.
            
            Description10.7
            
            Contract
      of Sale, dated April 14, 2009, by and between Coffee Holding Co., Inc. and
      4401 1st Ave LLC.11.1
            
            Calculation
      of Earnings per Share.31.1
            
            Principal
      Executive Officer and Principal Financial Officer’s Certification pursuant
      to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Principal
      Executive Officer and Principal Financial Officer’s Certification
      furnished pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.









COFFEE
HOLDING CO., INC. AND SUBSIDIARY


INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS




PAGEFINANCIAL
      STATEMENTS:REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, PARENTEBEARD LLC
            
            F-2REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, LAZAR LEVINE &
      FELIX, LLP
            
            F-3CONSOLIDATED
      BALANCE SHEETS AS OF OCTOBER 31, 2009 AND 2008
            
            F-4CONSOLIDATED
      STATEMENTS OF OPERATIONS - YEARS ENDED OCTOBER
      31, 2009 AND 2008
            
            F-5CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY - YEARS ENDED OCTOBER 31,
      2009 AND 2008
            
            F-6CONSOLIDATED
      STATEMENTS OF CASH FLOWS - YEARS ENDED OCTOBER
      31, 2009 AND 2008
            
            F-7NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
            
            F-9






* *
*




F-1





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors


Coffee
Holding Co., Inc. and Subsidiary




We have
audited the accompanying consolidated balance sheet of Coffee Holding Co., Inc.
and Subsidiary (the “Company”) as of October 31, 2009 and the consolidated
statements of operations, changes in stockholders’ equity and cash flows for the
year then ended.  These consolidated financial statements are the
responsibility of the Company’s management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.




We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Coffee Holding Co., Inc. and
Subsidiary as of October 31, 2009 and the results of their operations and cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.





/s/ PARENTEBEARD
LLC


PARENTEBEARD
LLC




Morristown,
New Jersey


January
28, 2010




F-2


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors


Coffee
Holding Co., Inc. and Subsidiary




We have
audited the accompanying consolidated balance sheet of Coffee Holding Co., Inc.
and Subsidiary (the “Company”) as of October 31, 2008 and the consolidated
statements of operations, changes in stockholders’ equity and cash flows for the
year then ended.  These consolidated financial statements are the
responsibility of the Company’s management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.




We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We
believe that our audit provides a reasonable basis for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Coffee Holding Co., Inc. and
Subsidiary as of October 31, 2008 and the results of their operations and cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.




/s/ LAZAR LEVINE & FELIX, LLP


LAZAR
LEVINE & FELIX, LLP




New York,
New York


January
28, 2009




F-3


COFFEE
HOLDING CO., INC. AND SUBSIDIARY


CONSOLIDATED
BALANCE SHEETS


OCTOBER
31, 2009 AND 2008




2009
              
              
              2008-
      ASSETS -CURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              1,367,933
              
              
              $
              963,298Commodities
      held at broker
              
              
              482,746
              
              
              
              342,269Accounts
      receivable, net of allowances of $165,078 for 2009 and $141,915 for
      2008
              
              
              10,174,221
              
              
              
              9,067,797Inventories
              
              
              4,800,143
              
              
              
              5,046,554Prepaid
      expenses and other current assets
              
              
              419,740
              
              
              
              284,900Prepaid
      and refundable income taxes
              
              
              36,068
              
              
              
              1,025,935Deferred
      income tax assets
              
              
              286,000
              
              
              
              923,877TOTAL
      CURRENT ASSETS
              
              
              17,566,851
              
              
              
              17,654,630Property
      and equipment, at cost, net of accumulated depreciation of $4,681,558 and
      $5,020,573 for 2009 and 2008, respectively
              
              
              1,648,214
              
              
              
              2,804,053Deposits
      and other assets
              
              
              588,573
              
              
              
              542,893TOTAL
      ASSETS
              
              $
              19,803,638
              
              
              $
              21,001,576-
      LIABILITIES AND STOCKHOLDERS’ EQUITY -CURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
              
              $
              6,655,916
              
              
              $
              9,120,124Line
      of credit borrowings
              
              
              791,628
              
              
              
              3,522,207Income
      taxes payable
              
              
              453,512
              
              
              
              -Deferred
      income tax liabilities
              
              
              121,000
              
              
              
              -TOTAL
      CURRENT LIABILITIES
              
              
              8,022,056
              
              
              
              12,642,331Deferred
      income tax liabilities
              
              
              14,500
              
              
              
              86,000Deferred
      rent
              
              
              99,067
              
              
              
              69,959Deferred
      compensation payable
              
              
              489,782
              
              
              
              352,637TOTAL
      LIABILITIES
              
              
              8,625,405
              
              
              
              13,150,927MINORITY
      INTEREST
              
              
              45,270
              
              
              
              3,226COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITY:Preferred
      stock, par value $.001 per share; 10,000,000 shares authorized; none
      issued
              
              
              -
              
              
              
              -Common
      stock, par value $.001 per share; 30,000,000 shares authorized, 5,529,830
      shares issued; 5,440,823 shares outstanding for 2009 and 5,445,516
      shares  outstanding in 2008
              
              
              5,530
              
              
              
              5,530Additional
      paid-in capital
              
              
              7,327,023
              
              
              
              7,327,023Retained
      earnings
              
              
              4,095,671
              
              
              
              804,605Less:
      Treasury stock, 89,007 and 84,314 common shares, at cost in 2009 and
      2008
              
              
              (295,261
              )
              
              
              (289,735
              )TOTAL
      STOCKHOLDERS’ EQUITY
              
              
              11,132,963
              
              
              
              7,847,423TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              19,803,638
              
              
              $
              21,001,576




The
accompanying notes are an integral part of these consolidated financial
statements.




F-4




COFFEE
HOLDING CO., INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF OPERATIONS


FISCAL
YEARS ENDED OCTOBER 31, 2009 AND 2008




2009
              
              
              2008NET
      SALES
              
              $
              74,451,673
              
              
              $
              71,186,312COST OF SALES(which
      includes purchases of approximately $16.7 million and $24.2 million in
      fiscal years 2009 and 2008, respectively, from a related
      party)
              
              
              64,439,494
              
              
              
              68,762,310GROSS
      PROFIT
              
              
              10,012,179
              
              
              
              2,424,002OPERATING
      EXPENSES:Selling
      and administrative
              
              
              5,530,357
              
              
              
              5,714,032Bad
      debt expense
              
              
              95,294
              
              
              
              37,575Officers’
      salaries
              
              
              763,399
              
              
              
              610,927TOTALS
              
              
              6,389,050
              
              
              
              6,362,534INCOME
      (LOSS) FROM OPERATIONS
              
              
              3,623,129
              
              
              
              (3,938,532
              )OTHER
      INCOME (EXPENSE)Interest
      income
              
              
              9,191
              
              
              
              46,209Other
      income and gains
              
              
              5,700
              
              
              
              9,331Gain
      on sale of manufacturing facility
              
              
              2,107,501
              
              
              
              -Interest
      expense
              
              
              (253,092
              )
              
              
              (142,087
              )TOTALS
              
              
              1,869,300
              
              
              
              (86,547
              )INCOME
      (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST IN
    SUBSIDIARY
              
              
              5,492,429
              
              
              
              (4,025,079
              )Provision
      (Benefit) for income taxes
              
              
              2,159,319
              
              
              
              (1,430,110
              )INCOME
      (LOSS) BEFORE MINORITY INTEREST
              
              
              3,333,110
              
              
              
              (2,594,969
              )Minority
      interest in profit of subsidiary
              
              
              (42,044
              )
              
              
              (2,325
              )NET
      INCOME (LOSS)
              
              $
              3,291,066
              
              
              $
              (2,597,294
              )Basic
      and diluted earnings (loss) per share
              
              $
              .60
              
              
              $
              (.47
              )Weighted
      average common shares outstanding:Basic
              
              
              5,441,462
              
              
              
              5,476,173Diluted
              
              
              5,441,462
              
              
              
              5,476,173




The
accompanying notes are an integral part of these consolidated financial
statements.




F-5


COFFEE
HOLDING CO., INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY


FISCAL
YEARS ENDED OCTOBER 31, 2009 AND 2008




Common
      Stock
            
            Treasury
      Stock
            
            Additional
      Paid-in Capital
            
            Retained
      Earnings
            
            Total$.001
      Par ValueNumber
      of Shares
            
            Amount
            
            Number
      of Shares
            
            AmountBalance,
      10/31/07
            
            5,514,930
            
            
            5,530
            
            14,900
            
            
            (76,677)
            
            
            7,327,023
            
            
            4,946,467
            
            
            12,202,343Stock
      repurchase
            
            (69,414)
            
            
            -
            
            69,414
            
            
            (213,058)
            
            
            -
            
            
            -
            
            
            (213,058)Dividend
            
            -
            
            
            -
            
            -
            
            
            -
            
            
            -
            
            
            (1,544,568)
            
            
            (1,544,568)Net
      loss
            
            -
            
            
            -
            
            -
            
            
            -
            
            
            -
            
            
            (2,597,294)
            
            
            (2,597,294)Balance,
      10/31/08
            
            5,445,516
            
            $
            5,530
            
            84,314
            
            $
            (289,735)
            
            $
            7,327,023
            
            $
            804,605
            
            $
            7,847,423Stock
      repurchase
            
            (4,693)
            
            
            -
            
            4,693
            
            
            (5,526)
            
            
            -
            
            
            -
            
            
            (5,526)Net
      income
            
            -
            
            
            -
            
            -
            
            
            -
            
            
            -
            
            
            3,291,066
            
            
            3,291,066Balance,
      10/31/09
            
            5,440,823
            
            $
            5,530
            
            89,007
            
            $
            (295,261)
            
            $
            7,327,023
            
            $
            4,095,671
            
            $
            11,132,963




The
accompanying notes are an integral part of these consolidated financial
statements.




F-6


COFFEE
HOLDING CO., INC. AND SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FISCAL
YEARS ENDED OCTOBER 31, 2009 AND 2008




2009
              
              
              2008OPERATING
      ACTIVITIES:Net
      income (loss)
              
              $
              3,291,066
              
              
              $
              (2,597,294
              )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Depreciation
              
              
              537,375
              
              
              
              541,204Gain
      on sale of manufacturing facility
              
              
              (2,107,501
              )
              
              
              -Unrealized
      (gain) loss on commodities
              
              
              (329,187
              )
              
              
              587,631Other
      gains
              
              
              (5,700
              )
              
              
              -Bad
      debt expense
              
              
              95,294
              
              
              
              37,575Deferred
      rent
              
              
              29,108
              
              
              
              (4,588
              )Deferred
      income taxes
              
              
              687,377
              
              
              
              (703,877
              )Minority
      interest
              
              
              42,044
              
              
              
              2,326Changes
      in operating assets and liabilities:Commodities
      held at broker
              
              
              188,710
              
              
              
              2,538,630Accounts
      receivable
              
              
              (1,201,718
              )
              
              
              (1,974,905
              )Inventories
              
              
              246,411
              
              
              
              (574,457
              )Prepaid
      expenses and other current assets
              
              
              (134,840
              )
              
              
              239,144Prepaid
      and refundable income taxes
              
              
              989,867
              
              
              
              (789,529
              )Deposits,
      other assets and deferred compensation
              
              
              91,464
              
              
              
              (138,939
              )Accounts
      payable and accrued expenses
              
              
              (2,464,207
              )
              
              
              2,402,981Income
      tax payable
              
              
              453,512
              
              
              
              (9,161
              )Net
      cash provided by (used in) operating activities
              
              
              409,075
              
              
              
              (443,259
              )INVESTING
      ACTIVITIES:Purchases
      of property and equipment including  equipment
      deposit
              
              
              (204,808
              )
              
              
              (341,982
              )Proceeds
      from the sale of equipment
              
              
              30,000
              
              
              
              -Proceeds
      from the sale of manufacturing facility
              
              
              2,906,473
              
              
              
              -Security
      deposits
              
              
              -
              
              
              
              (9,500
              )Net
      cash provided by (used in) investing activities
              
              
              2,731,665
              
              
              
              (351,482
              )FINANCING
      ACTIVITIES:Advances
      under bank line of credit
              
              
              76,276,346
              
              
              
              60,576,960Principal
      payments under bank line of credit
              
              
              (75,484,718
              )
              
              
              (57,951,944
              )Pay-off
      of previous bank line of credit
              
              
              (3,522,207
              )
              
              
              -Payment
      of dividend
              
              
              -
              
              
              
              (1,544,568
              )Purchase
      of treasury stock
              
              
              (5,526
              )
              
              
              (213,058
              )Net
      cash (used in) provided by financing activities
              
              
              (2,736,105
              )
              
              
              867,390NET
      INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              404,635
              
              
              
              72,649Cash
      and cash equivalents, beginning of year
              
              
              963,298
              
              
              
              890,649CASH
      AND CASH EQUIVALENTS, END OF YEAR
              
              $
              1,367,933
              
              
              $
              963,298




The
accompanying notes are an integral part of these consolidated financial
statements.




F-7


COFFEE
HOLDING CO., INC. AND SUBSIDIARY


SUPPLEMENTAL
DISCLOSURE OF CASH FLOW DATA


FISCAL
YEARS ENDED OCTOBER 31, 2009 AND 2008




SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW DATA:Interest
      paid
            
            $
            250,266
            
            
            $
            127,082Income
      taxes paid
            
            $
            737,494
            
            
            $
            33,477Income
      taxes (refunded)
            
            $
            (703,123
            )
            
            $
            -








F-8


COFFEE
HOLDING CO., INC. AND SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


OCTOBER
31, 2009 AND 2008




NOTE
      1
            -
            BUSINESS
      ACTIVITIES:




Coffee
Holding Co., Inc. (the “Company”) conducts wholesale coffee operations,
including manufacturing, roasting, packaging, marketing and distributing roasted
and blended coffees for private labeled accounts and its own brands, and it
sells green coffee.  The Company’s sales are primarily to customers
that are located throughout the United States with limited sales in
Canada.  Such customers include supermarkets, wholesalers, gourmet
roasters and individually-owned and multi-unit retailers.  The Company
closed its manufacturing operations at its Brooklyn, New York location in May
2009.  The majority of the Company’s coffee processing capacity has
been moved to its La Junta, Colorado facility and its facility in Brecksville,
Ohio.  The Company has leased office and warehouse space located in
Staten Island, New York to house the corporate offices and serve as temporary
storage of its branded product.  The Company sold the property located
in Brooklyn, New York in October 2009.




On April
7, 2006, the Company entered into a joint venture with Caruso’s Coffee, Inc. and
formed Generations Coffee Company, LLC (“GCC”).  The Company owns a
60% equity interest in GCC.  GCC operates the facility located in
Brecksville, Ohio and is in the same general business as the
Company.  The Company also exercises control of GCC.  As a
result of its 60% equity interest and control of GCC, the financial statements
of GCC are consolidated with those of the Company.




We have
evaluated subsequent events for recognition or disclosure through January 28,
2010, which was the date we filed this form 10-K with the SEC.




NOTE
      2
            -
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES:




BASIS
OF PRESENTATION:




The
consolidated financial statements include the accounts of the Company and
GCC.  All significant inter-company balances and transactions have
been eliminated in consolidation.




USE
OF ESTIMATES:




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures.  Actual results could differ from those
amounts.




CASH
AND CASH EQUIVALENTS:




Cash and
cash equivalents represent highly liquid investments with maturities of three
months or less at the date of purchase.




F-9




NOTE
      2
              -
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
  (Continued):





ACCOUNTS
RECEIVABLE:




Accounts
receivable are recorded net of allowances.  The allowance for doubtful
accounts represents the estimated uncollectible portion of accounts
receivable.  The Company establishes the allowance for doubtful
accounts based on a history of past writeoffs and collections and current credit
considerations.  The reserve for sales discounts represents the
estimated discount that customers will take upon payment.  The
allowances are summarized as follows:




2009
            
            
            2008Allowance
      for doubtful accounts
            
            $
            105,078
            
            
            $
            92,464Reserve
      for sales discounts
            
            
            60,000
            
            
            
            49,451Totals
            
            $
            165,078
            
            
            $
            141,915





INVENTORIES:




Inventories
are valued at the lower of cost (first-in, first-out basis) or
market.




MACHINERY
AND EQUIPMENT:




Machinery
and equipment are recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the assets.  Purchases of
machinery and equipment and additions and betterments which substantially extend
the useful life of an asset are capitalized at cost.  Expenditures
which do not materially prolong the normal useful life of an asset are charged
to operations as incurred.




COMMODITIES:




The Company uses options and
futures contracts, which are not designated or qualifying as hedging
instruments, to partially hedge the effects of fluctuations in the price of
green coffee beans.  Options and futures contracts are marked to
market with current recognition of gains and losses on such
positions.  The Company’s accounting for options and futures contracts
may increase earnings volatility in any particular period.  The
Company has open position contracts held by a broker which includes primarily
cash and commodities for futures and options in the amount of $482,746 and
$342,269, at October 31, 2009 and 2008, respectively, net of unrealized gains of
$77,306 at October 31, 2009 and unrealized losses of $251,881 at October 31,
2008.  The Company classifies its options and future contracts as
trading securities and accordingly, unrealized holding gains and losses are
included in earnings and not reflected as a net amount as a separate component
of stockholders’ equity.




At
October 31, 2009, the Company held 30 options (generally with terms of two
months or less) covering an aggregate of 1,125,000 pounds of green coffee beans
at $1.35 per pound.  The fair market value of these options, which was
obtained from major financial institutions, was $38,363 at October 31,
2009.  At October 31, 2008, the Company held 50 options (generally
with terms of two months or less) covering an aggregate of 1,875,000 pounds of
green coffee beans at $1.275 per pound.  The fair market value of
these options, which was obtained from major financial institutions, was
$288,375 at October 31, 2008.




F-10




NOTE
      2
            -
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):




The
Company acquires futures contracts with longer terms (generally three to four
months) primarily for the purpose of guaranteeing an adequate supply of green
coffee.  At October 31, 2009, the Company held 50 futures contracts
for the purchase of 1,875,000 pounds of coffee at a weighted average price of
$1.35 per pound.  The fair market value of coffee applicable to such
contracts was $1.36 per pound at that date.  At October 31, 2008, the
Company did not hold any future contracts.




Included
in cost of sales for the years ended October 31, 2009 and 2008, the Company
recorded realized and unrealized gains and losses respectively, on these
contracts as follows:




Year
      Ended October 31,2009
            
            
            2008Gross
      realized gains
            
            $
            1,789,424
            
            
            $
            2,759,642Gross
      realized (losses)
            
            
            (269,702
            )
            
            
            (5,240,461
            )Unrealized
      gains (losses)
            
            
            329,187
            
            
            
            (587,631
            )Total
            
            $
            1,848,909
            
            
            $
            (3,068,450
            )





ADVERTISING:




The
Company expenses the cost of advertising and promotion as
incurred.  Advertising costs charged to operations was $41,724 and
$60,631 for the years ended October 31, 2009 and 2008,
respectively.




INCOME
TAXES:




The
Company accounts for income taxes pursuant to the asset and liability method
which requires deferred income tax assets and liabilities to be computed for
temporary differences between the financial statement and tax basis of assets
and liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income.  Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.  The income tax provision or benefit
is the tax incurred for the period plus or minus the change during the period in
deferred tax assets and liabilities.




On
November 1, 2007, the Company adopted authoritative guidance issued by the
Financial Accounting Standards Board (“FASB”) Accounting for Uncertainty in Income
Taxes.  There was no impact on the Company’s consolidated
financial position, results of operations or cash flows at October 31, 2009 and
2008 and for the years then ended as a result of implementation.  At
the adoption date of November 1, 2007 and at October 31, 2008 and 2009, the
Company did not have any unrecognized tax benefits.  The Company’s
practice is to recognize interest and/or penalties related to income tax matters
in income tax expense.  As of November 1, 2007 and October 31, 2008
and 2009, the Company had no accrued interest or penalties related to income
taxes.  The Company currently has no federal or state tax examinations
in progress.




F-11




NOTE
      2
            -
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):




STOCK
OPTIONS:




The
Company accounts for any stock options in accordance with the recognition and
measurement provisions in the authoritative guidance issued by the
FASB.  The FASB requires compensation costs related to share-based
payment transactions, including employee stock options, to be recognized in the
financial statements.  In addition, the Company adheres to the
guidance set forth by Securities and Exchange Commission (“SEC”) which provides
views regarding the interaction between the FASB and certain SEC rules and
regulations and provides interpretations with respect to the valuation of
share-based payments for public companies.




EARNINGS
(LOSS) PER SHARE:




The
Company presents “basic” and, if applicable, “diluted” earnings (loss) per
common share pursuant to the provisions included in the authoritative guidance
issued by FASB, “Earnings per Share” and certain other financial accounting
pronouncements.  Basic earnings (loss) per common share is computed by
dividing net income (loss) by the sum of the weighted-average




number of
common shares outstanding.  Diluted earnings (loss) per common share
is computed by dividing the net income (loss) by the weighted-average number of
common shares outstanding plus the dilutive effect of common shares issuable
upon exercise of potential sources of dilution.




The
weighted average common shares outstanding used in the computation of basic and
diluted earnings (loss) per share was 5,441,462 and 5,476,173 at October 31,
2009 and 2008, respectively.  Through April 30, 2009 on a common share
equivalent basis, 70,000 warrants, all of which expired as of May 6, 2009, have
been excluded from the diluted earnings (loss) per share calculation due to the
anti-dilution impact.




FAIR
VALUE OF FINANCIAL INSTRUMENTS:




The
carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses and deferred compensation approximate fair value
because of the short-term nature of these instruments.  The carrying
amount of the bank line-of-credit borrowings approximates fair value because the
debt is based on current rates at which the Company could borrow funds with
similar remaining maturities.  Fair value estimates are made at a
specific point in time, based on relevant market information about the financial
instruments when available.  These estimates are subjective in nature
and involve uncertainties and matters of significant judgment and therefore,
cannot be determined with precision.  Changes in assumptions could
significantly affect the estimates.




REVENUE
RECOGNITION:




The
Company recognizes revenue in accordance with the authoritative
guidance.  Revenue is recognized at the point of passage to the
customer of title and risk of loss, when there is persuasive evidence of an
arrangement, the sales price is determinable, and collection of the resulting
receivable is reasonably assured.  The Company generally recognizes
revenue at the time of shipment.




F-12




NOTE
      2
            -
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):




The
Company sells its products without the right of return.  Returns and
allowances are recorded when a customer claims receipt of damaged goods and are
included in the determination of net sales.  The Company in turn seeks
reimbursement from the shipper.




Slotting
fees:  Certain retailers require the payment of slotting fees in order
to obtain space for the Company’s products on the retailer’s store
shelves.  The cost of these fees is recognized when the liability to
the retailer is created.  The amounts are included in the
determination of net sales.




Sales
discounts:  The amount of sales discounts are estimated and recognized
at the date of the sale.  These amounts are included in the
determination of net sales.




Volume-based
incentives: These incentives typically involve rebates or refunds of a specific
amount of cash consideration that are redeemable only if the reseller completes
a specified cumulative level of sales transactions.  Under incentive
programs of this nature, the Company records the cost of the rebate when it is
estimateable.  These amounts are included in the determination of net
sales.




Cooperative
advertising: Under these arrangements, the Company will agree to reimburse the
reseller for a portion of the costs incurred by the reseller to advertise and
promote certain of the Company’s products.  The Company recognizes the
cost of cooperative advertising programs in the period in which the advertising
and promotional activity first takes place.  The costs of these
incentives are included in advertising expense.




SHIPPING
AND HANDLING FEES AND COSTS:




In
accordance with the authoritative guidance pertaining to the “Accounting for
Shipping and Handling Fees and Costs,” shipping and handling fees are reported
in net sales.  The associated shipping costs, aggregating
approximately $1,322,000 and $1,450,000 for the years ended October 31, 2009 and
2008, respectively, are classified as selling and administrative
expenses.




CONCENTRATION
OF RISK:




The
Company maintains cash and cash equivalents deposits with three banks which have
offices located in New York, Ohio and Colorado that, at times, exceed applicable
insurance limits.  The Company performs periodic reviews of the
relative credit rating of its banks to lower its risk.  The Company
has not experienced any losses in such accounts, and believes it is not subject
to any significant credit risk on cash and cash equivalents.




In
addition, see Note 9 for concentration of risks with respect to trade
receivables and purchases from vendors.




OPERATING
LEASES:




Operating
leases which provide for lease payments that vary materially from the
straight-line basis are adjusted for financial accounting purposes to reflect
rental income or expense on the straight-line basis in accordance with the
authoritative guidance issued by the FASB.  The excess of
straight-line rent over actual payments by the Company of $99,067 and $69,959 is
included as deferred rent as of October 31, 2009 and 2008,
respectively.




F-13




NOTE
      3
            -
            RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE
  COMPANY:




Noncontrolling
Interests in Consolidated Financial Statements




In
December 2007, the FASB issued authoritative guidance clarifying that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This guidance requires that a change in a
parent’s ownership interest in a subsidiary be reported as an equity transaction
in the consolidated financial statements when it does not result in a change in
control of the subsidiary.  When a change in a parent’s ownership
interest results in deconsolidation, a gain or loss should be recognized in the
consolidated financial statements.  This guidance will be applied
prospectively and become effective November 1, 2009, except for the presentation
and disclosure requirements, which will be applied retrospectively for all
periods presented.  The adoption of this statement is not expected to
have a material impact on the consolidated financial statements.




Business
Combinations




In
December 2007, the FASB revised the authoritative guidance for business
combinations.  Transaction costs are now required to be expensed as
incurred and adjustments to the acquired entity’s deferred tax assets and
uncertain tax position balances occurring outside the measurement period are
recorded as a component of income tax expense, rather than goodwill, among other
changes.




In April
2009, the FASB revised the authoritative guidance related to the initial
recognition and measurement, subsequent measurement and accounting, and
disclosure of assets and liabilities arising from contingencies in a business
combination.  Generally, assets acquired and liabilities assumed in a
business combination that arise from contingencies must be recognized at fair
value at the acquisition date.  This guidance will be effective for
the Company as of November 1, 2009.  As this guidance is applied
prospectively to business combinations with an acquisition date on or after the
date the guidance became effective, the impact to the Company cannot be
determined until the transactions occur.




Derivative
Instrument and Hedging Activity Disclosures




In March
2008, the FASB amended and expanded the disclosure requirements related to
derivative instruments and hedging activities by requiring enhanced disclosures
about how and why an entity uses derivative instruments, how an entity accounts
for derivative instruments and related hedged items and how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows.  The revised guidance requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit-risk-related contingent
features in derivative agreements.  This guidance was effective for
the Company as of February 1, 2009.  The adoption of this guidance did
not have a material impact on its consolidated financial
statements.




F-14


NOTE 3
            -
            RECENTLY ISSUED ACCOUNTING
      PRONOUNCEMENTS AFFECTING THE COMPANY
      (Continued):




Pension
and Other Postretirement Benefit Plan Asset Disclosures




In
December 2008, the FASB issued authoritative guidance requiring additional
disclosures for employers’ pension and other postretirement benefit plan
assets.  This guidance requires employers to disclose information
about fair value measurements of plan assets, the investment policies and
strategies for the major categories of plan assets, and significant
concentrations of risk within plan assets.  This guidance will be
effective for the Company as of October 31, 2010.  As this guidance
provides only disclosure requirements, the adoption of this standard will not
impact the Company’s results of operations, cash flows or financial
positions.




Fair
Value Measurements




In
February 2008, the FASB delayed the effective date of fair value measurement and
disclosure guidance for all nonrecurring fair value measurements of nonfinancial
assets and liabilities until fiscal years beginning after November 15,
2008.  The delayed guidance will become effective for all nonrecurring
nonfinancial assets and liabilities of the Company as of November 1,
2009.




In April
2009, the FASB issued authoritative guidance clarifying that fair value is
defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants under current
market conditions.  This new guidance requires an evaluation of
whether there has been a significant decrease in the volume and level of
activity for the asset or liability in relation to normal market activity for
the asset or liability.  If there has, transactions or quoted prices
may not be indicative of fair value and an adjustment may need to be made to
those prices to estimate fair value.  Additionally, an entity must
consider whether the observed transaction was orderly (that is, not distressed
or forced).  If the transaction was orderly, the obtained price can be
considered a relevant observable input for determining fair value.  If
the transaction is not orderly, other valuation techniques must be used when
estimating fair value.  This guidance was adopted for the period
ending July 31, 2009.  The adoption of this guidance did not have a
material impact to the Company’s results of operations, cash flows or financial
positions.




In August
2009, the FASB issued authoritative guidance clarifying the measurement of the
fair value of a liability in circumstances when a quoted price in an active
market for an identical liability is not available.  The guidance
emphasizes that entities should maximize the use of observable inputs in the
absence of quoted prices when measuring the fair value of
liabilities.  This guidance became effective for the Company as of
October 31, 2009, and did not have a material impact on their consolidated
financial statements.




In
September 2009, the FASB issued authoritative guidance that provides further
clarification for measuring the fair value of investments in entities that meet
the FASB’s definition of an investment company.  This guidance permits
a company to estimate the fair value of an investment using the net asset value
per share of the investment if the net asset value is determined in accordance
with the FASB’s guidance for investment companies as of the company’s
measurement date.  This creates a practical expedient to determining a
fair value estimate and certain attributes of the investment (such as redemption
restrictions) will not be considered in measuring fair
value.  Additionally, companies with investments within the scope of
this guidance must disclose additional information related to the nature and
risks of the




F-15




NOTE
      3
            -
            RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY
      (Continued):




investments.  This
guidance will become effective for the Company as of October 31, 2010 and is
required to be applied prospectively.  The Company does not expect
that adoption of this statement will have a material impact on its consolidated
financial statements.




Fair
Value of Financial Instruments Disclosures




In April
2009, the FASB issued revised authoritative guidance requiring disclosures about
fair value of financial instruments, currently provided annually, to be included
in interim financial statements.  This guidance was adopted by the
Company for the period ended June 30, 2009.  Since this guidance
provides only disclosure requirements, the adoption of this standard did not
impact the Company’s results of operations, cash flows or financial
positions.




Recognition
and Presentation of Other-Than-Temporary Impairments




In April
2009, the FASB amended authoritative guidance related to accounting for certain
investments in debt and equity securities and accounting for certain investments
held by not-for-profit organizations.  This revised guidance
establishes a new method of recognizing and reporting other-than-temporary
impairments of debt securities.  If it is more likely than not that an
impaired debt security will be sold before the recovery of its cost basis,
either due to the investor’s intent to sell or because it will be required to
sell the security, the entire impairment is recognized in
earnings.  Otherwise, only the portion of the impaired debt security
related to estimated credit losses is recognized in earnings, while the
remainder of the impairment is recorded in other comprehensive income and
recognized over the remaining life of the debt security.  In addition,
the guidance expands the presentation and disclosure requirements for
other-than-temporary impairments for both debt and equity
securities.  This guidance was adopted for the period ended July 31,
2009 and did not have a material impact on the Company’s results of operations,
cash flows, or financial positions.




Subsequent
Events




In May
2009, the FASB issued authoritative guidance which incorporates the principles
and accounting guidance for recognizing and disclosing subsequent events that
originated as auditing standards into the body of authoritative literature
issued by the FASB, and prescribes disclosures regarding the date through which
subsequent events have been evaluated.  The Company is required to
evaluate subsequent events through the date the financial statements are
issued.  This guidance was effective for the Company for the period
ended July 31, 2009.  Since this guidance is not intended to
significantly change the current practice of reporting subsequent events, it did
not have an impact on the Company’s results of operations, cash flows or
financial positions.




Transfers
of Financial Assets




In June
2009, the FASB issued authoritative guidance amending the accounting for the
transfers of financial assets.  Key provisions include (i) the removal
of the concept of qualifying special purpose entities, (ii) the introduction of
the concept of a participating interest, in circumstances in which a portion of
a financial asset has been transferred, and (iii) the requirement that to
qualify for sale accounting, the transferor must evaluate whether it maintains
effective control over transferred financial assets either directly or
indirectly.  Furthermore, this guidance requires enhanced disclosures
about transfers of financial assets and a transferor’s continuing




F-16




NOTE
      3
            -
            RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS AFFECTING THE
      COMPANY (Continued):




involvement.  This
guidance is effective for the Company beginning November 1, 2010, and is
required to be applied prospectively.  The Company does not expect
that adoption of this statement will have a material impact on its consolidated
financial statements.




Consolidation
of Variable Interest Entities (“VIEs”)




In June
2009, the FASB issued authoritative guidance to amend the manner in which
entities evaluate whether consolidation is required for VIEs.  The
model for determining which enterprise has a controlling financial interest and
is the primary beneficiary of a VIE has changed significantly under the new
guidance.  Previously, variable interest holders had to determine
whether they had a controlling financial interest in a VIE based on a
quantitative analysis of the expected gains and/or losses of the
entity.  In contrast, the new guidance requires an enterprise with a
variable interest in a VIE to qualitatively assess whether it has a controlling
financial interest in the entity, and if so, whether it is the primary
beneficiary.  Furthermore, this guidance requires that companies
continually evaluate VIEs for consolidation, rather than assessing based upon
the occurrence of triggering events.  This revised guidance also
requires enhanced disclosures about how a company’s involvement with a VIE
affects its financial statements and exposure to risks.  This guidance
is effective for the Company beginning November 1, 2010.  The Company
is currently assessing the impact, if any, this may have on their consolidated
financial statements.




Accounting
Standards Codification




In June
2009, the FASB issued authoritative guidance which replaced the previous
hierarchy of U.S. GAAP and establishes the FASB Codification as the single
source of authoritative U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities.  SEC rules and interpretive releases are
also sources of authoritative U.S. GAAP for SEC registrants.  This
guidance modifies the U.S. GAAP hierarchy to include only two levels of U.S.
GAAP: authoritative and nonauthoritative.  This guidance was effective
for the Company as of October 31, 2009.  The adoption of this guidance
did not impact the Company’s results of operations, cash flows or financial
positions since the FASB Codification is not intended to change or alter
existing U.S. GAAP.




Revenue
Arrangements with Multiple Deliverables




In
October 2009, the FASB issued authoritative guidance that amends existing
guidance for identifying separate deliverables in a revenue-generating
transaction where multiple deliverables exist, and provides guidance for
allocating and recognizing revenue based on those separate
deliverables.  The guidance is expected to result in more
multiple-deliverable arrangements being separable than under current
guidance.  This guidance is effective for the Company beginning on
November 1, 2011 and is required to be applied prospectively to new or
significantly modified revenue arrangements.  The Company is currently
assessing the impacts this guidance may have on their consolidated financial
statements.




F-17




NOTE
      4
            -
            INVENTORIES:




Inventories
at October 31, 2009 and 2008 consisted of the following:




2009
            
            
            2008Packed
      coffee
            
            $
            1,388,547
            
            
            $
            1,135,700Green
      coffee
            
            
            2,484,518
            
            
            
            3,147,572Packaging
      supplies
            
            
            927,078
            
            
            
            763,282Totals
            
            $
            4,800,143
            
            
            $
            5,046,554





NOTE
      5
            -
            PROPERTY
      AND EQUIPMENT:




Property
and equipment at October 31, 2009 and 2008 consisted of the
following:




Estimated
      Useful Life
            
            2009
            
            
            2008Building
      and improvements
            15-30
      years
            
            $
            161,298
            
            
            $
            1,536,991Machinery
      and equipment
            7
      years
            
            
            5,708,166
            
            
            
            5,723,855Furniture
      and fixtures
            7
      years
            
            
            460,308
            
            
            
            422,7806,329,772
            
            
            
            7,683,626Less,
      accumulated depreciation
            
            
            
            4,681,558
            
            
            
            5,020,5731,648,214
            
            
            
            2,663,053Land
            
            
            
            -
            
            
            
            141,000$
            1,648,214
            
            
            $
            2,804,053





Depreciation
expense was $537,375 and $541,204 for the years ended October 31, 2009 and 2008,
respectively.




The
Company recorded a current asset for assets held for sale at July 31, 2009 since
the Company expected to sell its Brooklyn, New York warehouse and roasting
facility (the “Facility”) within twelve months and had met all other criteria
required to meet held for sale accounting.  The Company sold the
Facility in October 2009 at a gain summarized as follows:




Sales
      price
            
            $
            3,000,000Less:
      net book value of the Facility
            
            
            (798,972
            )Less:
      closing costs
            
            
            (93,527
            )Gain
      on sale of manufacturing facility
            
            $
            2,107,501




NOTE
      6
            -
            LINE
      OF CREDIT:




The
Company had a financing agreement with Merrill Lynch Business Financial
Services, Inc. (“Merrill Lynch”) for a line of credit of up to
$4,500,000.  The line of credit was secured by a blanket lien on all
the assets of the Company and the personal guarantees of two of the Company’s
officers/stockholders, required monthly interest payments at a rate of LIBOR
plus 1.95% and required the Company to comply with various financial
covenants.  This agreement matured on October 31, 2008, and on
November 4, 2008, Merrill Lynch notified the Company that they had elected not
to renew the line of credit.  Merrill Lynch offered the Company an
extension in which to repay the outstanding principal and accrued interest until
February 28, 2009.




F-18




NOTE
      6
            -
            LINE
      OF CREDIT (Continued):




On
February 17, 2009, the Company entered into a financing agreement with Sterling
National Bank (“Sterling”) for a $5,000,000 credit facility.  The
credit facility is a revolving $5,000,000 line of credit and the Company can
draw on the line at an amount up to 85% of eligible accounts receivable and 25%
of eligible inventory consisting of green coffee beans and finished coffee not
to exceed $1,000,000.  The credit facility is payable monthly in
arrears on the average unpaid balance of the line of credit at an interest rate
equal to a per annum reference rate (currently 4.25%) plus 1.0%.  The
initial term of the credit facility is three years, expiring on February 17,
2012, and shall be automatically extended for successive periods of one year
each unless one party shall have provided the other party with a written notice
of termination at least ninety days prior to the expiration of the initial
contract term or any renewal term.  The credit facility is secured by
all tangible and intangible assets of the Company and is personally guaranteed
by two officers/stockholders of the Company.  However, the personal
guarantees of the two officers/stockholders will be released by Sterling
effective October 31, 2009 upon satisfaction of certain conditions upon
Sterling’s receipt and review of the October 31, 2009 audited consolidated
financial statements.




The
credit facility contains covenants that place annual restrictions on the
Company’s operations, including covenants relating to mergers, debt
restrictions, capital expenditures, tangible net worth, net profit, leverage,
fixed charge coverage, employee loan restrictions, distribution restrictions
(common stock and preferred stock), dividend restrictions, restrictions on lease
payments to affiliates, restrictions on changes in business, asset sale
restrictions, restrictions on acquisitions and intercompany transactions, and
restrictions on fundamental changes.  The credit facility also
requires that the Company maintain a minimum working capital at all
times.  The Company was in compliance with all required financial
covenants as of October 31, 2009.  The initial borrowings under the
revolving credit facility were used to repay the outstanding principal and
accrued interest under the $4,500,000 line of credit previously held with
Merrill Lynch, which was terminated and replaced with the revolving line of
credit, with the excess being available for working capital
purposes.




NOTE
      7
            -
            INCOME
      TAXES:




The
Company’s provision (benefit) for income taxes in 2009 and 2008 consisted of the
following:




2009
            
            
            2008CurrentFederal
            
            $
            1,270,286
            
            
            $
            (14,175
            )State
      and local
            
            
            201,656
            
            
            
            (9,135
            )1,471,942
            
            
            
            (23,310
            )DeferredFederal
            
            
            420,877
            
            
            $
            (1,149,000
            )State
      and local
            
            
            266,500
            
            
            
            (257,800
            )687,377
            
            
            
            (1,406,800
            )Provision
      (benefit) for income taxes
            
            $
            2,159,319
            
            
            $
            (1,430,110
            )





F-19




NOTE
      7
            -
            INCOME
      TAXES (Continued):




A
reconciliation of the difference between the expected income tax rate using the
statutory federal tax rate and the Company’s effective tax rate is as
follows:




2009
            
            
            2008Federal
      income tax statutory rate
            
            $
            1,867,426
            
            
            
            34
            %
            
            $
            (1,368,527
            )
            
            
            (34
            %)State
      income taxes
            
            
            291,893
            
            
            
            5
            %
            
            
            (61,583
            )
            
            
            (2
            %)Effective
      tax rate
            
            $
            2,159,319
            
            
            
            39
            %
            
            $
            (1,430,110
            )
            
            
            (36
            %)





The
      tax effects of the temporary differences that give rise to the deferred
      tax assets and liabilities as of October 31, 2009 and 2008 are as
      follows:




2009
            
            
            2008Deferred
      tax assets:Accounts
      receivable
            
            $
            69,000
            
            
            $
            55,000Deferred
      compensation
            
            
            181,000
            
            
            
            136,000Unrealized
      loss
            
            
            -
            
            
            
            97,000Federal
      net operating loss
            
            
            -
            
            
            
            579,877Inventory
            
            
            36,000
            
            
            
            56,000Total
      current deferred tax asset
            
            $
            286,000
            
            
            $
            923,877Deferred
      tax liabilities:Current
      deferred tax liability:Unrealized
      gains
            
            $
            121,000
            
            
            $
            –Non-current
      deferred tax liability:Property
      and equipment
            
            
            14,500
            
            
            
            86,000Total
      deferred tax liabilities
            
            $
            135,500
            
            
            $
            86,000





The
Company generated a federal taxable net operating loss for the year ended
October 31, 2008 of $3,522,242 primarily attributable to large realized losses
on option and future contracts due to the volatility in the green coffee
markets.  As of October 31, 2008, the Company recorded refundable
taxes of $703,123 as a result of carryback claims of $1,169,292 and $898,717 to
the years ended October 31, 2007 and 2006, respectively.  The
remaining federal net operating loss of $1,454,233 was used to reduce the
Company’s taxable income for the year ending October 31, 2009.




A
valuation allowance was not provided at October 31, 2009 or 2008.  In
assessing the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.  The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible.  Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this
assessment.  Based upon the level of historical taxable income and
projections for future taxable income over the periods in which the deferred tax
assets are expected to be deductible, management believes it is more likely than
not the Company will realize the benefits of these deductible
differences.  The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income are reduced.




F-20




NOTE
      8
            -
            COMMITMENTS
      AND CONTINGENCIES:




OPERATING
LEASES:




a)
            The
      Company occupied warehouse facilities, in Brooklyn, New York under an
      operating lease, which terminated in March 2009, and was originally set to
      expire on December 31, 2011, at a monthly rental of
      $15,000.  The lease required the Company to pay utilities and
      other maintenance expenses.  Rent charged to operations amounted
      to $75,000 and $180,000 for the years ended October 31, 2009 and 2008,
      respectively.




b)
            In
      February 2004, the Company entered into a lease for office and warehouse
      space in La Junta, Colorado.  This lease, which is at a monthly
      rental of $8,341 beginning January 2005, expires on January 31,
      2024.  Rent charged to operations amounted to $95,504 for the
      years ended October 31, 2009 and
2008.




c)
            In
      October 2008, the Company entered into a lease for office and warehouse
      space in Staten Island, New York.  This lease, which is at a
      monthly rental of $9,500 beginning November 2008, expires on October 31,
      2023 and includes annual rent increases.  Rent charged to
      operations amounted to $147,696 for the year ended October 31,
      2009.




d)
            The
      Company also uses a variety of independent, bonded commercial warehouses
      to store its green coffee beans with leases on a month-to-month
      basis.




The
aggregate minimum future lease payments as of October 31, 2009 for each of the
next five years and thereafter are as follows:




October
      31,2010
            
            $
            217,5132011
            
            
            221,0362012
            
            
            223,4542013
            
            
            227,1552014
            
            
            232,238Thereafter
            
            
            2,406,372$
            3,527,768





401(k)
RETIREMENT PLAN:




The
Company has a 401(k) Retirement Plan, which covers all the full time employees
who have completed one year of service and have reached their 21st
birthday.  The Company matches 100% of the aggregate salary reduction
contribution up to the first 3% of compensation and 50% of aggregate
contribution of the next 2% of compensation.  Contributions to the
plan aggregated $59,882 and $60,470 for the years ended October 31, 2009 and
2008, respectively.




F-21




NOTE
      9
            -
            ECONOMIC
      DEPENDENCY:




Approximately
35% of the Company’s sales were derived from one customer in
2009.  This customer also accounted for approximately $3,075,000 of
the Company’s accounts receivable balance as of October 31,
2009.  Approximately 32% of the Company’s sales were derived from one
customer in 2008.  This customer also accounted for approximately
$1,947,000 of the Company’s account receivable balance at October 31,
2008.  Concentration of credit risk with respect to other trade
receivables are limited due to the short payment terms generally extended by the
Company, by ongoing credit evaluations of customers, and by maintaining an
allowance for doubtful accounts that management believes will adequately provide
for credit losses.




During
fiscal 2009, 83% of the Company’s purchases were from ten
vendors.  One of these vendors accounted for 27% of total
purchases.  This vendor accounted for approximately $373,000 of the
Company’s accounts payable at October 31, 2009.  During fiscal 2008,
87% of the Company’s purchases were from ten vendors.  One of these
vendors accounted for 38% of total purchases.  This vendor accounted
for approximately $1,282,000 of the Company’s accounts payable at October 31,
2008.




NOTE
      10
            -
            RELATED
      PARTY TRANSACTIONS:




The
Company has engaged its 40% partner in Generations Coffee Company, LLC as an
outside contractor.  Payments to the partner during the year ended
October 31, 2009 amounted to $274,058 for the processing of finished
goods.




An
employee of one of the top ten vendors is a director of the
Company.  Purchases from that vendor totaled approximately $16,733,000
or 27% and $24,241,000 or 38% in fiscal years 2009 and 2008,
respectively.  This vendor accounted for approximately $829,000 and
$1,282,000 of the Company’s accounts payable at October 31, 2009 and 2008,
respectively.  Management does not believe that the loss of any one
vendor would have a material adverse effect on the Company’s operations due to
the availability of many alternate suppliers.




NOTE
      11
            -
            STOCKHOLDERS’
      EQUITY:




a.
            Warrants
      to Purchase Common Stock:




The
Company entered into an agreement with Maxim Group, LLC (“Maxim”) for Maxim to
serve as the Company’s financial advisors and lead managing underwriter for a
public offering of the Company’s common stock which concluded on June 16,
2005.  Subsequently, Maxim and Joseph Stevens & Company, Inc.
(“Joseph Stevens”) entered into an agreement pursuant to which Joseph Stevens
agreed to act as managing underwriter and Maxim participated in the underwriting
syndicate of the offering.  The Company also sold to Joseph Stevens
and Maxim for $100, warrants to purchase 70,000 shares of common stock at a
price of $6.00 per share.  The fair value of these warrants was
credited to additional paid-in capital.  The warrants were exercisable
for a period of five (5) years and contained provisions for cashless exercise,
anti-dilution and piggyback registration rights.  The warrants expired
on May 6, 2009 and are no longer exercisable.




b.
            Treasury
      Stock:




The
Company utilizes the cost method of accounting for treasury
stock.  The cost of reissued shares is determined under the last-in,
first-out method.  The Company purchased 4,693 shares for $5,526 and
69,414 shares for $213,058 during the years ended October 31, 2009 and 2008,
respectively.




F-22




NOTE
      11
            -
            STOCKHOLDERS’
      EQUITY (Continued):




c.
            Dividends:




On
February 28, 2008, the Company paid a cash dividend of $1,544,568 ($0.28 per
share) to all stockholders of record as of January 31, 2008.




NOTE
      12
            -
            NON-QUALIFIED
      DEFERRED COMPENSATION PLAN:




In
January 2005, the Company established the “Coffee Holding Co., Inc.
Non-Qualified Deferred Compensation Plan.”  Currently, there is only
one participant in the plan:  Andrew Gordon, the
CEO.  Within the plan guidelines, this employee is deferring a portion
of his current salary and bonus.  The deferred compensation liability
at October 31, 2009 and 2008 was $489,782 and $352,637,
respectively.




NOTE
      13
            -
            FAIR
      VALUE MEASUREMENTS:




The
Company adopted the authoritative guidance on “Fair Value Measurements” as of
November 1, 2008.  The guidance defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, not adjusted
for transaction costs.  The guidance also establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value into three broad levels giving the highest priority to quoted prices
in active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3) as described below:




nadjusted
quoted prices in active markets for identical assets or liabilities that is
accessible by the Company;


Quoted
prices in markets that are not active or financial instruments for which all
significant inputs are observable, either directly or indirectly;


Unobservable
inputs for the asset or liability including significant assumptions of the
Company and other market participants.





The
Company determines fair values for its investment assets as
follows:




Investments,
at fair value—the Company investments, at fair value, consists of commodities
securities—marked to market.  The Company’s commodity securities are
classified within Level 1 of the fair value hierarchy as they are valued using
quoted market prices from an exchange.




The
following tables present our assets and liabilities that are measured at fair
value on a recurring basis and are categorized using the fair value
hierarchy.  The fair value hierarchy has three levels based on the
reliability of the inputs used to determine fair value.




Fair
      Value Measurements as of October 31, 2009Total
            
            
            Level
      1
            
            
            Level
      2
            
            
            Level
      3Assets:Commodities
            
            $
            482,746
            
            
            $
            482,746
            
            
            
            -
            
            
            
            -Total
      Assets
            
            $
            482,746
            
            
            $
            482,746
            
            
            $
            -
            
            
            $
            -




F-23