UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, DC 20549-1004

                                    FORM 10-Q

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

      For the quarterly period ended July 31, 1998

                                       OR

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

      For the transition period from ____________ to _______________.

                           Commission file No. _______

                            COFFEE HOLDING CO., INC.
             (Exact name of registrant as specified in its charter)

          Nevada                                               11-2238111
(state or other jurisdiction of                               (IRS employer
incorporation or organization)                            identification number)

4401 First Avenue, Brooklyn, New York                             11232
(address of principal executive offices)                        (zip code)

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

      Securities registered pursuant to Section 12(b) of the Act:

                                      None
                                      ----
                                (Title of Class)

      Securities registered pursuant to Section 12(g) of the Act:

                                      None
                                      ----
                                (Title of Class)

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 and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X .

As of September 30, 2000, the Registrant had 3,999,650 shares of common stock,
par value $.001 per share, outstanding.


<PAGE>

                                     PART I

                            COFFEE HOLDING CO., INC.

ITEM 1. FINANCIAL STATEMENTS



<PAGE>

                            COFFEE HOLDING CO., INC.

                     INDEX TO UNAUDITED FINANCIAL STATEMENTS

                                                                            PAGE
                                                                            ----

BALANCE SHEETS
     JULY 31, 1998 AND OCTOBER 31, 1997                                      F-2

STATEMENTS OF OPERATIONS
     NINE AND THREE MONTHS ENDED JULY 31, 1998 AND 1997                      F-3

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
     NINE MONTHS ENDED JULY 31, 1998                                         F-4

STATEMENTS OF CASH FLOWS
     NINE MONTHS ENDED JULY 31, 1998 AND 1997                                F-5

NOTES TO FINANCIAL STATEMENTS                                             F-6/17

                                      * * *


                                      F-1
<PAGE>

                            COFFEE HOLDING CO., INC.

                                 BALANCE SHEETS
                       JULY 31, 1998 AND OCTOBER 31, 1997

<TABLE>
<CAPTION>
                                                                          July     October
                               ASSETS                                  31, 1998   31, 1997
                               ------                                ----------   ----------
                                                                     (Unaudited) (See Note 1)
<S>                                                                  <C>          <C>
Current assets:
     Cash                                                            $  249,174   $  198,679
     Due from broker                                                    307,047      423,899
     Accounts receivable, net of allowance for doubtful
        accounts of $215,000 and $254,317                             2,461,577    2,858,201
     Inventories                                                      1,584,828    1,379,383
     Cash and cash equivalents restricted under mortgage note           370,237       66,070
     Prepaid expenses and other current assets                           27,756       27,066
                                                                     ----------   ----------
           Total current assets                                       5,000,619    4,953,298
Property and equipment, at cost, net of accumulated
     depreciation of $1,573,928 and $1,422,651                        2,245,041    1,722,194
Deferred mortgage costs, net of accumulated amortization
     of $47,321 and $43,449                                              58,074       61,946
Deposits and other assets                                               152,300       57,191
                                                                     ----------   ----------
           Totals                                                    $7,456,034   $6,794,629
                                                                     ==========   ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current liabilities:
     Due factor                                                                   $2,503,228
     Mortgage note payable                                           $  612,500      650,000
     Current portion of term loan                                        87,312
     Current portion of obligations under capital leases                235,479      127,524
     Accounts payable and accrued expenses                            2,393,858    2,209,420
                                                                     ----------   ----------
           Total current liabilities                                  3,329,149    5,490,172
Term loan, net of current portion                                       301,260
Line of credit borrowings                                             2,634,750
Obligations under capital leases, net of current portion                328,095      233,810
Loans from related parties                                               75,492      475,215
                                                                     ----------   ----------
           Total liabilities                                          6,668,746    6,199,197
                                                                     ----------   ----------

Commitments and contingencies

Stockholders' 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, 3,999,650 shares issued and outstanding               4,000
     Common stock, no par value; 200 shares authorized;
        100 shares issued and outstanding                                            460,000
     Additional paid-in capital                                         480,997
     Retained earnings                                                  302,291      135,432
                                                                     ----------   ----------
           Total stockholders' equity                                   787,288      595,432
                                                                     ----------   ----------
           Totals                                                    $7,456,034   $6,794,629
                                                                     ==========   ==========
</TABLE>

See Notes to Financial Statements.


                                      F-2
<PAGE>

                            COFFEE HOLDINGS CO., INC.

                            STATEMENTS OF OPERATIONS
               NINE AND THREE MONTHS ENDED JULY 31, 1998 AND 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                       Nine Months                      Three Months
                                                                      Ended July 31,                    Ended July 31,
                                                              ---------------------------        --------------------------
                                                                  1998           1997                 1998         1997
                                                              -----------     -----------        -----------      -----------
<S>                                                           <C>             <C>                <C>              <C>
Net sales                                                     $19,865,601     $18,547,105        $ 6,684,459      $ 7,010,081
Cost of sales                                                  17,502,949      15,947,030          6,173,356        6,780,041
                                                              -----------     -----------        -----------      -----------
Gross profit                                                    2,362,652       2,600,075            511,103          230,040
                                                              -----------     -----------        -----------      -----------
Operating expenses:
     Selling and administrative                                 1,444,010       1,221,400            543,091          344,336
     Officers' salaries                                           261,587         183,771             98,412           65,969
                                                              -----------     -----------        -----------      -----------
           Totals                                               1,705,597       1,405,171            641,503          410,305
                                                              -----------     -----------        -----------      -----------
Income (loss) from operations                                     657,055       1,194,904           (130,400)        (180,265)
                                                              -----------     -----------        -----------      -----------
Other expenses:
     Interest expense                                             261,972         298,315             75,569          132,891
     Expenses in connection with
        reverse acquisition                                       180,000
                                                              -----------     -----------        -----------      -----------
           Totals                                                 441,972         298,315             75,569          132,891
                                                              -----------     -----------        -----------      -----------
Income (loss) before income taxes                                 215,083         896,589           (205,969)        (313,156)
Provision (credit) for state and local
     income taxes                                                  24,000         113,000            (22,000)         (29,534)
                                                              -----------     -----------        -----------      -----------
Net income (loss)                                             $   191,083     $   783,589        $  (183,969)     $  (283,622)
                                                              ===========     ===========        ===========      ===========

Basic loss per share                                                                                   $(.05)
                                                                                                       =====
Basic weighted average common
     shares outstanding                                                                            3,999,650
                                                                                                   =========
Unaudited:
     Historical income (loss) before
        income taxes                                          $   215,083     $   896,589                         $  (313,156)
     Pro forma:
        Provision (credit) for income
           taxes                                                   97,000         406,000                            (138,000)
                                                              -----------     -----------                         -----------
        Net income (loss)                                     $   118,083     $   490,589                         $  (175,156)
                                                              ===========     ===========                         ===========
        Basic earnings (loss) per share                              $.03            $.12                               $(.04)
                                                                     ====            ====                               =====
        Basic weighted average
           common shares outstanding                            3,999,650       3,999,650                           3,999,650
                                                              ===========     ===========                         ===========
</TABLE>

See Notes to Financial Statements.


                                      F-3
<PAGE>

                            COFFEE HOLDING CO., INC.

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                         NINE MONTHS ENDED JULY 31, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             Common Stock
                                         ----------------------------------------------
                                                No Par Value            $.001 Par Value
                                         ------------------------    ------------------   Additional
                                          Number of                   Number of            Paid-in    Retained
                                           Shares         Amount       Shares    Amount    Capital    Earnings      Total
                                         ----------    ----------    ---------   ------    --------   --------    --------
<S>                                            <C>      <C>          <C>         <C>       <C>         <C>             <C>
Balance, November 1, 1997,
    as adjusted                                 100    $ 460,000                                      $135,432    $595,432

Effect of reverse acquisition                  (100)    (460,000)    3,999,650   $4,000    $480,997    (24,224)        773

Net income                                                                                             191,083     191,083
                                         ----------    ----------    ---------   ------    --------   --------    --------

Balance, July 31, 1998                           --    $      --     3,999,650   $4,000    $480,997   $302,291    $787,288
                                         ==========    ==========    =========   ======    ========   ========    ========

</TABLE>

See Notes to Financial Statements.


                                      F-4
<PAGE>

                            COFFEE HOLDING CO., INC.

                            STATEMENTS OF CASH FLOWS
                    NINE MONTHS ENDED JULY 31, 1998 AND 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 1998         1997
                                                              ---------    ---------
<S>                                                           <C>          <C>
Operating activities:
     Net income                                               $ 191,083    $ 783,589
     Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation and amortization                           166,477      159,752
        Changes in operating assets and liabilities:
           Due from broker                                      116,852     (311,142)
           Accounts receivable                                  396,624      345,529
           Inventories                                         (205,445)    (262,699)
           Prepaid expenses and other current assets               (690)      (9,402)
           Deposits and other assets                            (95,109)       9,032
           Accounts payable and accrued expenses                185,211     (350,491)
                                                              ---------    ---------
               Net cash provided by operating activities        755,003      364,168
                                                              ---------    ---------
Investing activities - purchases of property and equipment     (396,952)    (180,453)
                                                              ---------    ---------
Financing activities:
     Net repayments of amounts due factor                                    (72,921)
     Principal payments on mortgage note payable                (37,500)     (37,500)
     (Increase) decrease in cash and cash equivalents
        restricted under mortgage note                         (304,167)         300
     Principal payments on term loan                            (65,484)
     Net advances under bank line of credit                     585,578
     Principal payments of obligations under capital leases     (86,260)
     Repayments of loans from related parties                  (399,723)
                                                              ---------    ---------
               Net cash used in financing activities           (307,556)    (110,121)
                                                              ---------    ---------

Net increase in cash                                             50,495       73,594

Cash, beginning of period                                       198,679       11,090
                                                              ---------    ---------
Cash, end of period                                           $ 249,174    $  84,684
                                                              =========    =========
Supplemental disclosure of cash flow data:

     Interest paid                                            $ 261,972    $ 298,315
                                                              =========    =========
     Income taxes paid                                        $ 104,664
                                                              =========
</TABLE>

Supplemental schedule of noncash investing and financing activities:

      During  the  nine  months  ended  July 31,  1998,  the  Company  purchased
      equipment at a cost of $288,500 by incurring capital lease obligations.

      During the nine months  ended July 31,  1998,  the Company  increased  its
      obligations  under the credit  facility  that provides it with the line of
      credit  and term loan and  decreased  the  balance  payable  to its factor
      through a direct transfer of $2,503,288 from the bank to the factor.

See Notes to Financial Statements.


                                      F-5
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 1 - Business activities and reverse acquisition:

            Coffee Holding Co., Inc.  ("Coffee"),  which was incorporated in New
            York on January 22,  1971,  conducts  wholesale  coffee  operations,
            including   manufacturing,   roasting,   packaging,   marketing  and
            distributing   roasted  and  blended  coffees  for  private  labeled
            accounts and its own brands, and sells green coffees.  The Company's
            sales are  primarily to customers  that are located  throughout  the
            United States.

            On February 10,  1998,  the holders of all of the shares of Coffee's
            common  stock  consummated  an exchange  (the  "Exchange")  of their
            shares  for  shares of common  stock of  Transpacific  International
            Group  Corp.  ("Transpacific").  Transpacific  was  incorporated  in
            Nevada on October 9, 1995 and organized originally as a "blind pool"
            or "blank check"  company for the purpose of either  merging with or
            acquiring  an operating  company.  It had been a  development  stage
            company  with no  significant  operating  activities  or assets  and
            liabilities prior to the Exchange.

            Transpacific,  which had, effectively, 999,650 outstanding shares of
            common  stock  (with a par  value of $.001 per  share)  prior to the
            Exchange,  issued  3,000,000  shares of common stock in exchange for
            all of the 100 issued and outstanding shares of common stock (no par
            value) of Coffee. Concurrently,  Coffee was merged into Transpacific
            (the "Merger") and  Transpacific  changed its name to Coffee Holding
            Co., Inc.

            Coffee Holding Co., Inc. after the Exchange, the Merger and the name
            change  is  referred  to below  as the  "Company"  or the  "Combined
            Company." The "Company" is also used to refer to Coffee Holding Co.,
            Inc. prior to the Exchange, the Merger and the name change.

            The stockholders of Coffee also owned 540,040 shares of common stock
            of Transpacific prior to the Exchange and, accordingly, they owned a
            total  of  3,540,400  or  88.5%  of the  outstanding  shares  of the
            Combined  Company  immediately  after the Exchange.  Therefore,  the
            Merger  was  treated,  effective  as  of  February  10,  1998,  as a
            "purchase  business  combination"  and a "reverse  acquisition"  for
            accounting  purposes in which  Transpacific was the "legal acquirer"
            and Coffee was the "accounting acquirer." The carrying values of the
            assets and liabilities of Transpacific,  which were immaterial, were
            recorded at their  historical  carrying  values as of  February  10,
            1998.  Accordingly,  the historical  financial  statements  included
            herein only reflect the operations of Coffee for the period prior to
            February 10,  1998.  All  references  to numbers of shares of common
            stock as of the dates or for periods prior to the Exchange have been
            restated  to  reflect  the ratio of the  number of common  shares of
            Transpacific effectively exchanged for common shares of Coffee.

            Consulting  and  professional  fees  and  other  costs  incurred  in
            connection  with the  reverse  acquisition  totaling  $180,000  were
            charged to expense during the nine months ended July 31, 1998.

            Information  as to the  unaudited pro forma results of operations of
            the Company  assuming the Merger had been consummated as of, and the
            results  of  operations  of  Transpacific  had been  included  from,
            November  1,  1996 has not been  presented  because  such pro  forma
            results would not differ  materially from the historical  results of
            operations  for the  nine  months  ended  July  31,  1998  and  1997
            reflected in the accompanying historical statements of operations.


                                      F-6
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies:

      Basis of presentation:

            In the opinion of management,  the accompanying  unaudited financial
            statements  reflect all adjustments,  consisting of normal recurring
            accruals,  necessary to present fairly the financial position of the
            Company as of July 31, 1998,  its results of operations for the nine
            and three  months  ended  July 31,  1998 and 1997,  its  changes  in
            stockholders' equity for the nine months ended July 31, 1998 and its
            cash  flows  for the  nine  months  ended  July 31,  1998 and  1997.
            Information included in the balance sheet as of October 31, 1997 has
            been  derived  from  the  Company's  audited  financial  statements.
            Pursuant to generally accepted  accounting  principles and the rules
            and  regulations  of the  Securities  and  Exchange  Commission  for
            interim financial  statements,  certain  information and disclosures
            normally  included in financial  statements  prepared in  accordance
            with generally accepted accounting principles have been condensed or
            omitted from these financial  statements.  Operating results for the
            nine and three  month  periods  ended July 31, 1998 and 1997 are not
            necessarily  indicative  of the results that may be expected for the
            years ending October 31, 1998 and 1997.

      Use of estimates:

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

      Cash equivalents:

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

      Inventories:

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

      Property and equipment:

            Property and  equipment are recorded at cost and  depreciated  using
            the  straight-line  method over the  estimated  useful  lives of the
            assets.

      Hedging:

            The Company uses futures and options  contracts to hedge the effects
            of  fluctuations   in  the  price  of  green  coffee  beans.   These
            transactions meet the requirements for hedge  accounting,  including
            designation and correlation. To obtain a proper matching of revenues
            and expenses,  gains or losses  arising from open and closed hedging
            transactions  are included in  inventory as a cost of the  commodity
            and  reflected in the  statement of  operations  when the product is
            sold. Risks arise from the possible  inability of  counterparties to
            meet the terms of their contracts and from movements in the price of
            green  coffee.  Management  believes  that the  overall  exposure to
            credit risk is minimal.

            At July 31, 1998, the Company held options  covering an aggregate of
            3,075,000  pounds of green  coffee  beans which are  exercisable  in
            fiscal  1998 at prices  ranging  from $1.15 to $1.45 per pound.  The
            fair market value of these options,  which was obtained from a major
            financial institution,  was approximately $232,000 at July 31, 1998.
            Due from broker includes the effects of unrealized hedging losses of
            $14,327  and  $299,934  at July  31,  1998  and  October  31,  1997,
            respectively.


                                      F-7
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued):

      Deferred mortgage costs:

            Costs incurred in connection with obtaining  mortgage financing have
            been  capitalized  and are  being  amortized  over  the  term of the
            mortgage  using a method  that  approximates  the  interest  method.
            Amortization  of deferred  mortgage  costs were not material for the
            nine and three months ended July 31, 1998 and 1997.

      Advertising:

            The Company  expenses  the cost of  advertising  and  promotions  as
            incurred.  Advertising costs charged to operations  totaled $128,143
            and  $74,020  for the nine  months  ended  July 31,  1998 and  1997,
            respectively,  and $39,137 and  $23,904 for the three  months  ended
            July 31, 1998 and 1997, respectively.

      Income taxes:

            Prior to the Merger on February 10, 1998,  Coffee,  with the consent
            of its stockholders, had elected to be treated as an "S" Corporation
            under the Internal Revenue Code.  Accordingly,  the Company's income
            or loss prior to that date was  allocated  to Coffee's  stockholders
            for  inclusion  in  their  personal   Federal  income  tax  returns.
            Therefore,  the  Company was not  required to record any  historical
            provision or credit for Federal income taxes for the period prior to
            February 10, 1998.

            The Company had also elected to be treated as an "S" Corporation for
            New York state income tax purposes.  However, New York imposes a tax
            on "S"  Corporation  income at a reduced rate and New York City does
            not recognize "S" Corporations.  Therefore, the Company was required
            to record  appropriate  historical  provisions and credits for state
            and local income taxes in periods  prior and  subsequent to February
            10, 1998.

            The  Company  accounts  for income  taxes  pursuant to the asset and
            liability  method  which  requires  deferred  income  tax assets and
            liabilities  to  be  computed  annually  for  temporary  differences
            between  the  financial  statement  and  tax  bases  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 credit is the tax payable or refundable  for
            the period  plus or minus the change  during the period in  deferred
            tax assets and liabilities.


                                      F-8
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued):

      Stock options:

            In accordance  with the  provisions of Accounting  Principles  Board
            Opinion No. 25,  "Accounting  for Stock  Issued to  Employees,"  the
            Company  will  recognize  compensation  costs  as a  result  of  the
            issuance of stock options to employees based on the excess,  if any,
            of the fair  value of the  underlying  stock at the date of grant or
            award (or at an appropriate  subsequent  measurement  date) over the
            amount the employees must pay to acquire the stock.  Therefore,  the
            Company will not be required to recognize  compensation expense as a
            result of any grants of stock  options to  employees  at an exercise
            price that is equivalent to or greater than fair value.  The Company
            will also make pro forma  disclosures,  as required by  Statement of
            Financial  Accounting Standards No. 123, "Accounting for Stock-Based
            Compensation" ("SFAS 123"), of net income or loss as if a fair value
            based method of accounting  for stock  options had been applied,  if
            such amounts differ materially from the historical amounts.

      Earnings (loss) per share:

            The Company presents "basic" and, if applicable,  "diluted" earnings
            per  common  share  pursuant  to  the  provisions  of  Statement  of
            Financial  Accounting Standards No. 128, "Earnings per Share" ("SFAS
            128") and certain other financial accounting  pronouncements.  Basic
            earnings  (loss) per common  share is  calculated  by  dividing  net
            income or loss by the  weighted  average  number  of  common  shares
            outstanding  during each period. The calculation of diluted earnings
            per common  share is similar  to that of basic  earnings  per common
            share,  except  that the  denominator  is  increased  to include the
            number of additional  common shares that would have been outstanding
            if all potentially  dilutive  common shares,  such as those issuable
            upon the exercise of stock options, were issued during the period.

            Since the Company had elected to be taxed as an "S" Corporation,  it
            was not required to provide for Federal income taxes and it was only
            required to provide for state  income  taxes at a reduced rate prior
            to the date of the Exchange.  SEC rules and regulations prohibit the
            presentation  of  earnings  (loss)  per  common  share  amounts on a
            historical  basis for the periods  during which the "S"  Corporation
            elections were in effect;  instead, they require the presentation of
            basic and,  if  applicable,  diluted  unaudited  pro forma  earnings
            (loss) per common share amounts in the  statements of operations for
            such periods  assuming  that the Company had been subject to Federal
            and  state  income  taxes at  statutory  rates  applicable  to those
            companies that had not made "S" Corporation elections.

            Since the Company had elected to be taxed as an "S"  Corporation for
            part of the nine  months  ended  July  31,  1998 and all of the nine
            months  and  three  months  ended  July  31,  1997  and  it  had  no
            potentially  dilutive securities  outstanding during the nine months
            ended July 31, 1998 and 1997, historical basic earnings per share is
            presented in the  accompanying  statement of operations for only the
            three months ended July 31, 1998 and  unaudited  pro forma  earnings
            (loss) per share is  presented  in the  accompanying  statements  of
            operations  for the nine months ended July 31, 1998 and the nine and
            three months ended July 31, 1997.


                                      F-9
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (concluded):

      Earnings (loss) per share (concluded):

            The  weighted   average  common  shares   outstanding  used  in  the
            computation  of basic  earnings per share for the three months ended
            July 31, 1998 was 3,999,650 which was the number of shares of common
            stock actually  outstanding during that period. The weighted average
            common shares  outstanding  used in the computation of unaudited pro
            forma basic earnings (loss) per share for the nine months ended July
            31, 1998 and the nine and three  months ended July 31, 1997 was also
            3,999,650,  which reflects the retroactive  adjustment of the number
            of common shares of  Transpacific  actually  outstanding  to include
            only the 999,650  shares  effectively  outstanding as of the date of
            the Exchange and the 3,000,000  shares of common stock issued to the
            stockholders of Coffee in connection with the Exchange (see Note 1).

      Recent accounting pronouncements:

            In June 1998, the Financial  Accounting Standards Board (the "FASB")
            issued  Statement  of  Financial   Accounting   Standards  No.  133,
            "Accounting  for  Derivative  Instruments  and  Hedging  Activities"
            ("SFAS  133"),  which is effective  for all fiscal  years  beginning
            after June 15, 1999. SFAS 133 requires that all derivative financial
            instruments  be recognized as either  assets or  liabilities  in the
            balance  sheet and  measured  at fair  value.  Management  is in the
            process of evaluating the impact, if any, that SFAS 133 will have on
            the Company's financial statements.

            The FASB and the  Accounting  Standards  Executive  Committee of the
            American  Institute  of  Certified  Public  Accountants  had  issued
            certain  other  accounting  pronouncements  as of July 31, 1998 that
            will become effective in subsequent periods; however,  management of
            the Company does not believe that any of those  pronouncements would
            have  significantly  affected  the  Company's  financial  accounting
            measurements  or disclosures had they been in effect during the nine
            months ended July 31, 1998 and 1997.

Note 3 - Inventories:

            Inventories  at July 31, 1998 and October 31, 1997  consisted of the
            following:

                                                          July          October
                                                        31, 1998        31, 1997
                                                      ----------      ----------
            Packed coffee                             $  273,218      $  389,796
            Green coffee                               1,041,700         805,780
            Packaging supplies                           269,910         183,807
                                                      ----------      ----------
                 Totals                               $1,584,828      $1,379,383
                                                      ==========      ==========


                                      F-10
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 4 - Property and equipment:

            Property  and  equipment  at July 31,  1998  and  October  31,  1997
            consisted of the following:

<TABLE>
                                                     Estimated            July             October
                                                     Useful Life        31, 1998           31, 1997
                                                     -----------       ----------         ----------
<S>                                                   <C>              <C>                <C>
            Building and improvements                 30 years         $1,195,840         $1,109,696
            Machinery and equipment                    7 years          1,697,694          1,399,084
            Machinery and equipment under
               capital leases                          7 years            694,609            406,109
            Furniture and fixtures                     7 years             89,826             88,956
                                                                       ----------         ----------
                                                                        3,677,969          3,003,845
            Less accumulated depreciation                               1,573,928          1,422,651
                                                                       ----------         ----------
                                                                        2,104,041          1,581,194
            Land                                                          141,000            141,000
                                                                       ----------         ----------
                   Totals                                              $2,245,041         $1,722,194
                                                                       ==========         ==========
</TABLE>

            Depreciation totaled $162,605 and $155,880 for the nine months ended
            July 31,  1998 and 1997,  respectively,  and $63,713 and $51,960 for
            the three months ended July 31, 1998 and 1997, respectively.

Note 5 - Cash and cash equivalents restricted under mortgage note:

            Restricted  cash and cash  equivalents  at July 31, 1998 and October
            31, 1997 consisted of investments in the following  interest-bearing
            accounts:

                                                        July           October
                                                      31, 1998         31, 1997
                                                      --------         -------

            Cash in escrow                            $ 20,237         $66,070
            Certificate of deposit                     350,000
                                                      --------         -------
                   Totals                             $370,237         $66,070
                                                      ========         =======

            Cash in escrow  represents  amounts held in accounts for the payment
            of principal,  interest and various fees in connection  with the New
            York City Industrial  Development  Agency  ("NYCIDA")  mortgage note
            payable (see Note 6).

            The Company did not comply with certain covenants, as defined, under
            the NYCIDA  agreement  at July 31, 1998 and October 31,  1997.  As a
            result of its  noncompliance at October 31, 1997, it was required to
            obtain an irrevocable  letter of credit from ABN Amro Bank to secure
            the mortgage note and to pledge a $350,000 certificate of deposit to
            secure the letter of credit  during the nine  months  ended July 31,
            1998.


                                      F-11
<PAGE>

                                             COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 6 - Mortgage note payable:

            On June 1, 1989,  the  Company  financed  the  purchase  of land and
            building  through  the  issuance of a mortgage  note  payable in the
            principal  amount of  $1,050,000 to the NYCIDA.  The mortgage  note,
            which had an  outstanding  balance of $612,500  and $650,000 at July
            31,  1998 and  October  31,  1997,  respectively,  requires  monthly
            payments of $4,167 plus interest based on a variable rate set weekly
            by Bear Stearns & Co. The final payment is due November 1, 2009. The
            payment of the note is secured by a first  mortgage on the Company's
            land and building.

            The NYCIDA agreement contains certain financial  covenants.  At July
            31,  1998 and October 31,  1997,  the Company was not in  compliance
            with the covenants.  Accordingly,  the mortgage note payable was due
            on demand and classified as a current liability,  and the restricted
            investments  securing the mortgage note (see Note 5) were classified
            as current assets, in the accompanying July 31, 1998 and October 31,
            1997 balance sheets.

Note 7 - Credit facility borrowings:

            The Company was obligated for borrowings under a factoring agreement
            until  November  21,  1997 when it obtained a credit  facility  from
            Nationscredit  Commercial  Corp.  consisting of a revolving  line of
            credit and a term loan.

            The factoring  agreement provided for borrowings of up to (i) 80% of
            the Company's eligible trade accounts receivable and (ii) 50% of its
            eligible  inventories up to a maximum of $400,000.  The  outstanding
            balance of $2,503,228 at October 31, 1997  approximated  the maximum
            amount that the Company  could borrow  based on its  eligible  trade
            accounts  receivable and  inventories as of that date.  Interest was
            payable  monthly  at the  prime  rate plus 2% and  borrowings  up to
            $200,000,  plus  interest  and other costs and  expenses as defined,
            were guaranteed by a stockholder.

            The Company incurred costs of  approximately  $113,000 in connection
            with the  cancellation of the factoring  agreement that were charged
            to interest expense during the nine months ended July 31, 1998.

            The  line of  credit  provides  for  borrowings  of up to 85% of the
            Company's eligible trade accounts receivable and 60% of its eligible
            inventories up to a maximum of $5,000,000  through November 20, 2000
            when the line of credit expires and any outstanding  balance must be
            repaid.  The  outstanding  balance of  $2,634,750  at July 31,  1998
            approximated  the maximum amount that the Company could borrow based
            on its eligible trade accounts receivable and inventories as of that
            date.  Interest  is  payable  monthly  at the prime rate plus 1% (an
            effective rate of 9.5% at July 31, 1998).

            The  term  loan,  which  had  an  outstanding  balance  of  $388,572
            (including a current portion of $87,312) at July 31, 1998,  provides
            for  borrowings  of up to the greater of 80% of the cost of eligible
            equipment or $500,000.  Principal is payable in monthly installments
            of $7,276  plus  interest  which is also at the  prime  rate plus 1%
            until November 20, 2000 at which time the  outstanding  balance must
            also be repaid.

            Two of the Company's  stockholders have each guaranteed  outstanding
            borrowings  under  the  credit  facility  of  up to  $100,000,  plus
            interest and other costs and expenses as defined.


                                      F-12
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 8 - Loans from related parties:

            The Company  had loans  payable to its  stockholders  of $75,492 and
            $475,215 at July 31, 1998 and October 31,  1997,  respectively.  The
            loans are due on demand,  bear interest at 10% and are  subordinated
            to the balance outstanding under the mortgage note payable. Interest
            expense was not  material  for the nine and three  months ended July
            31, 1998 and 1997.

Note 9 - Income taxes:

            As shown in the accompanying  statements of operations,  the Company
            had historical  provisions and credits for income taxes for the nine
            and three months ended July 31, 1998 and 1997 that were attributable
            to state and local income taxes as set forth below:

<TABLE>
<CAPTION>
                                                        Nine Months             Three Months
                                                      Ended July 31,           Ended July 31,
                                                  ---------------------     --------------------
                                                     1998        1997        1998         1997
                                                  --------     --------     --------    -------
<S>                                               <C>          <C>          <C>         <C>
            State                                  $ 5,000     $ 23,000     $ (3,000)   $(10,534)
            Local                                   19,000       90,000      (19,000)    (19,000)
                                                   -------     --------     --------    --------
                Total historical                   $24,000     $113,000     $(22,000)   $(29,534)
                                                   =======     ========     ========    ========
</TABLE>

            As explained in Note 2, prior to February 10, 1998,  the date of the
            Exchange,  the Company had elected to be taxed as an "S" Corporation
            and, accordingly, it was not required to record a provision (credit)
            for Federal  income taxes on its  historical  income  (loss)  before
            income taxes of  approximately  $1,028,000,  $897,000 and $(313,000)
            for the period from  November  1, 1997 to February  10, 1998 and the
            nine and three months ended July 31, 1997, respectively; however, it
            was required to provide for state income taxes at a reduced rate and
            New York City income taxes at the same rates as  companies  that had
            not made such an election during those periods. Although the Company
            became  subject to  Federal,  state and local  income  taxes at full
            statutory rates for periods  subsequent to the date of the Exchange,
            it had a  historical  loss  before  income  taxes  of  approximately
            $813,000 for the period from  February 11, 1998 to July 31, 1998 and
            approximately $206,000 for the three months ended July 31, 1998, and
            it was not required to record any historical provision or credit for
            Federal  income  taxes  during  either  period as further  explained
            below.


                                      F-13
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 9 - Income taxes (continued):

            As a result of the loss for the period  from  February  11,  1998 to
            July 31, 1998 and certain other elections related to the termination
            of its "S" Corporation election,  the Company had net operating loss
            carryforwards  as  of  July  31,  1998  of  approximately   $307,000
            available to reduce future  Federal,  state and local taxable income
            which,  if not  used,  will  expire  in  2012.  There  were no other
            material  temporary  differences  as of July  31,  1998.  Due to the
            uncertainties  related to the  extent  and  timing of the  Company's
            future taxable income, the Company offset the deferred tax assets of
            approximately  $138,000  attributable to the potential benefits from
            the net  operating  loss  carryforwards  as of July  31,  1998 by an
            equivalent  valuation  allowance  and,   accordingly,   it  did  not
            recognize  a credit for Federal  income  taxes for either the period
            from  February  11, 1998 to July 31, 1998 or the three  months ended
            July 31, 1998. As a result of recording the valuation  allowance for
            the period after February 10, 1998, and the "S" Corporation election
            for the period  through  February  10,  1998,  the  Company  did not
            recognize any  provision or credit for Federal  income taxes for the
            nine months ended July 31, 1998.

            The  differences  between the tax provision or credit computed based
            on  the  Company's   historical  pre-tax  income  or  loss  and  the
            applicable  statutory  income tax rate and the Company's  historical
            provisions and credits for Federal, state and local income taxes for
            the nine and three months ended July 31, 1998 and 1997 are set forth
            below:

<TABLE>
<CAPTION>
                                                                          Nine Months           Three  Months
                                                                         Ended July 31,          Ended July 31,
                                                                   ----------------------    ---------------------
                                                                       1998        1997         1998       1997
                                                                   ----------   ---------    --------   ----------
<S>                                                     <C>        <C>          <C>          <C>        <C>
            Tax provision (credit) at statutory rate of 34%        $   73,000   $ 305,000    $(70,000)  $(106,000)
            Adjustments for effects of:
               State income taxes, net of Federal benefit              24,000     113,000     (22,000)    (29,534)
               "S" Corporation election and termination
                   of "S" Corporation election                       (211,000)   (305,000)     34,000     106,000
               Change in valuation allowance                          138,000                  36,000
                                                                   ----------   ---------    --------  ----------

                     Historical provision                          $   24,000   $ 113,000    $(22,000) $  (29,534)
                                                                   ==========   =========    ========  ==========
</TABLE>

            The Company's "S" Corporation election was in effect for part of the
            nine months ended July 31, 1998 and all of the nine and three months
            ended July 31, 1997.  Unaudited pro forma historical  provisions and
            credits for income  taxes  assuming  the  Exchange  had  occurred on
            November 1, 1996 and the  Company was subject to Federal,  state and
            local  income  taxes  at full  statutory  rates  for all of the nine
            months  ended July 31, 1998 and 1997 and three months ended July 31,
            1997 are set forth below:

<TABLE>
<CAPTION>
                                                                   Nine Months
                                                                  Ended July 31,
                                                                  --------------         Three Months
                                                                1998        1997      Ended July 31, 1997
                                                              -------     --------    -------------------
<S>                                                           <C>         <C>             <C>
            Federal                                           $60,000     $252,000        $ (84,000)
            State                                              18,000       73,000          (26,000)
            Local                                              19,000       81,000          (28,000)
                                                              -------   ----------        ---------

                    Total pro forma  (unaudited)              $97,000     $406,000        $(138,000)
                                                              =======     ========        =========
</TABLE>


                                      F-14
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 9 - Income taxes (concluded):

            The  unaudited  pro forma  provisions  and credits for income  taxes
            reflect  an  effective  rate of  approximately  45% for each  period
            comprised  of an 11% rate for state and local income  taxes,  net of
            the  related  Federal  income tax effect,  and a  statutory  Federal
            income tax rate of 34%.

Note 10 - Lease commitments:

      Operating lease:

            The Company occupies  warehouse  facilities under an operating lease
            which expires on August 31, 2002 unless renewed at the option of the
            Company for an additional two years.  The lease requires the Company
            to pay utilities  and other  maintenance  expenses.  Rent charged to
            operations  amounted  to $35,100  and $11,700 for the nine and three
            months  ended  July  31,  1998,  respectively.  The  Company  had no
            obligations  under  noncancelable  operating  leases during the nine
            months ended July 31, 1997. Future minimum rental payments under the
            noncancelable  operating lease in years  subsequent to July 31, 1998
            were as follows:

                  Year Ending
                    July 31,                                       Amount
                  -----------                                     --------

                     1999                                         $ 46,800
                     2000                                           46,800
                     2001                                           46,800
                     2002                                           46,800
                     2003                                            3,900
                                                                  --------
                        Total                                     $191,100
                                                                  ========

      Capital leases:

            As of July 31, 1998, the Company was obligated under various capital
            leases for  machinery  and  equipment  that expire at various  dates
            through  February  2001.  Assets under capital  leases are amortized
            over their  estimated  useful lives of seven years.  Amortization of
            $47,734 and $19,346 was charged to  operations in the nine and three
            months ended July 31, 1998, respectively. The Company had no capital
            lease  obligations  during the nine months ended July 31, 1997.  The
            future  minimum  lease  payments  under  capital  leases and the net
            present value of the future  minimum lease payments at July 31, 1998
            were as follows:

            Total minimum lease payments                             $645,391
            Less amount representing interest                          81,817
                                                                     --------

            Present value of net minimum lease payments               563,574
            Less current portion                                      235,479
                                                                     --------

            Long-term portion                                        $328,095
                                                                     ========


                                      F-15
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 11- Concentrations of credit risk:

            Financial  instruments  that  potentially  subject  the  Company  to
            concentrations  of credit risk consist  principally of cash and cash
            equivalents,  amounts due from broker and trade accounts receivable.
            The  Company  maintains  its cash and cash  equivalents  in bank and
            brokerage  accounts  the  balances  of which,  at times,  may exceed
            Federal  insurance  limits.  At July 31, 1998,  the Company had cash
            balances that exceeded Federal insurance limits by $250,000. The net
            balance  of  the  Company's   investments  in  derivative  financial
            instruments also represents an amount due from a broker. Exposure to
            credit risk is reduced by placing such deposits and investments with
            major financial institutions and monitoring their credit ratings.

            Approximately  20% of the  Company's  sales  were  derived  from one
            customer  during the nine months ended July 31, 1998.  That customer
            also accounted for approximately  $227,000 of the Company's accounts
            receivable  balance at July 31, 1998.  Concentrations 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.

            Management does not believe that credit risk was significant at July
            31, 1998 and October 31, 1997.

Note 12- Stock option plan:

            On February 10, 1998,  the Company's  stockholders  consented to the
            adoption of the  Company's  stock option plan (the  "Plan")  whereby
            incentive and/or  nonincentive  stock options for the purchase of up
            to 2,000,000  shares of the Company's common stock may be granted to
            the  Company's   directors,   officers,   other  key  employees  and
            consultants.  Under the Plan, the exercise price of all options must
            be at least 100% of the fair market value of the common stock on the
            date of grant (the exercise  price of an incentive  stock option for
            an optionee that holds more than 10% of the combined voting power of
            all  classes  of stock of the  Company  must be at least 110% of the
            fair market value on the date of grant).

            As of July 31, 1998, no options had been granted under the Plan.

Note 13- Major vendors:

               During the nine months ended July 31, 1998,  substantially all of
               the  Company's   purchases  were  from  nine  vendors  that  also
               accounted for substantially all of the Company's accounts payable
               at July 31,  1998.  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  alternate
               suppliers.


                                      F-16
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 14- Prior period adjustments:

            The Company's  retained  earnings balance as of November 1, 1997 has
            been  retroactively  adjusted to reflect prior period adjustments to
            annual  financial  statements  it had  previously  issued  that were
            attributable to the net effects of the unrecorded  losses and income
            described below:

<TABLE>
<CAPTION>
<S>                                                                                                <C>
            Retained earnings, November 1, 1997, as previously reported                            $1,044,786
                                                                                                   ----------
            Increase (decrease) from prior period adjustments:
               Write-off of uncollectible accounts receivable                                        (268,182)
               Unrecorded unrealized losses on coffee futures                                        (664,069)
               Unrecorded interest income on restricted cash                                           22,897
                                                                                                   ----------
                   Total adjustments                                                                 (909,354)
                                                                                                   ----------

            Retained earnings, November 1, 1997, as adjusted                                       $  135,432
                                                                                                   ==========
</TABLE>

            The accompanying  financial  statements also reflect  adjustments to
            previously  reported  amounts of net income  (loss) for the nine and
            three months ended July 31, 1997. The components of the  adjustments
            and their effect on net income (loss) follow:

<TABLE>
<CAPTION>
                                                                                  Nine Months       Three Months
                                                                                  Ended July        Ended  July
                                                                                   31, 1997           31, 1997
                                                                                  ----------        ------------
<S>                                                                               <C>                 <C>
            Unrecorded unrealized losses on coffee futures                        $ (360,168)         $(209,358)
            Net income (loss), as previously reported                              1,143,757            (74,264)
                                                                                  ----------          ---------
            Net income (loss), as adjusted                                        $  783,589          $(283,622)
                                                                                  ==========          =========
</TABLE>

                                      * * *


                                      F-17
<PAGE>

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

Forward-Looking Statements

      The Private Securities Litigation Reform Act of 1995 (the "Act") provides
a safe harbor for forward-looking statements made by or on behalf of Coffee
Holding Co., Inc. (the "Company" or "Coffee"). Coffee and its representatives
may from time to time make written or oral forward-looking statements, including
statements contained in this report and in our other filings with the Securities
and Exchange Commission ("SEC"). These statements use words such as "believes",
"expects", "intends", "plans", "may", "will", "should", "anticipates" and other
similar expressions. All statements which address operating performance, events
or developments that the Company expects or anticipates will occur in the
future, including statements relating to volume growth, share of sales or
statements expressing general optimism about future operating results, are
forward-looking statements within the meaning of the Act. The forward-looking
statements are and will be based on management's then current views and
assumptions regarding future events and operating performance. We cannot assure
that anticipated results will be achieved since actual results may differ
materially because of risks and uncertainties. We do not undertake to revise
these statements to reflect subsequent developments.

      The following are some of the factors that could cause actual results to
differ materially from in our forward-looking statements:

      o     the impact of rapid or persistent fluctuations in the price of
            coffee beans;
      o     fluctuations in the supply of coffee beans;
      o     general economic conditions and conditions which affect the market
            for coffee;
      o     the effects of any loss of major customers;
      o     the effects of competition from other coffee manufacturers and other
            beverage alternatives;
      o     changes in consumption of coffee; and
      o     other risks which we identify in future filings with the SEC.

      You are strongly encouraged to consider these factors when evaluating
forward looking statements in this report. We undertake no responsibility to
update any forward-looking statements contained in this report.

Nine Months Ended July 31, 1998 Compared to Nine Months Ended July 31, 1997

      Net sales totaled $19,865,601 in the nine months ended July 31, 1998, an
increase of $1,318,496 or 7% from $18,547,105 in the nine months ended July 31,
1997. The Company had a larger customer base than during the comparable time
period in 1997 which led to increased sales.

      Cost of sales in the nine months ended July 31, 1998 was $17,502,949, or
88% of net sales, as compared to $15,947,030, or 86% of net sales in the nine
months ended July 31, 1997. Cost of sales for the nine month period ended July
31, 1998 was higher as the Company continued to liquidate higher cost inventory.

      The Company's gross profit in the nine months ended July 31, 1998 was
$2,362,652, a decrease of $237,423 or 9% from $2,600,075 in the nine months
ended July 31, 1997. Gross profit as a percentage of net sales decreased by 2%
to 12% in the nine months ended July 31, 1998 from 14% in the nine months ended
July 31, 1997. The Company's gross profits were lower due mainly to management's
decision to reduce prices on certain products to attract larger customers.

      Selling and administrative expenses were $1,444,010 in the nine months
ended July 31, 1998, an increase of $222,610 or 18% from $1,221,400 in the nine
months ended July 31, 1997. As a percentage of net sales, this change
represented a 1% increase from 6% in the nine months ended July 31, 1997 to 7%
in the nine months ended July 31, 1998.

      The Company's interest expense decreased $36,343 or 12% from $298,315 in
the nine months ended July 31, 1997 to $261,972 in the nine months ended July
31, 1998. This decrease was the result of the lower interest rate on the
Company's line of credit versus the rate of interest on the Company's prior
factoring agreement.

      Other expenses in the nine months ended July 31, 1998 also included
$180,000 of consulting and professional fees and other costs incurred in
connection with the reverse acquisition (the "Reverse Acquisition") by
Transpacific International Group Corp. that was effectively completed on
February 10, 1998.


                                       1
<PAGE>

      Primarily as a result of the decrease in gross profit, the increase in
operating expenses and the charge for costs incurred in connection with the
Reverse Acquisition, the Company had income of $215,083 before income taxes in
the nine months ended July 31, 1998 compared to $896,589 in the nine months
ended July 31, 1997.

      As further explained in Notes 2 and 9 of the notes to the financial
statements elsewhere herein, the Company was not required to record a provision
for Federal income taxes in the nine months ended July 31, 1998 and 1997 because
it had elected to be taxed as an "S" Corporation during the period from November
1, 1997 to February 10, 1998 (the date of the Reverse Acquisition) and in the
nine months ended July 31, 1997 and it had a pre-tax loss during the period from
February 11, 1998 to July 31, 1998. Although the Company had potential benefits
of approximately $307,000 from net operating loss carryforwards as of July 31,
1998, it did not record a credit for income taxes in the nine months ended July
31, 1998 due to the uncertainties related to the extent and timing of its future
taxable income. The Company had a historical provision for state and local
income taxes of $24,000 in the nine months ended July 31, 1998 compared to
$113,000 in the nine months ended July 31, 1997 primarily as a result of the
decrease in pre-tax income. Accordingly, the Company had historical net income
of $191,083 in the nine months ended July 31, 1998 compared to $783,589 in the
nine months ended July 31, 1997.

      The statement of operations included in the financial statements elsewhere
herein presents unaudited pro forma provisions for income taxes, net income and
related earnings per share information assuming the Company had not elected to
be taxed as an "S" Corporation during any portion of the nine months ended July
31, 1998 and 1997. The Company would have had a provision for income taxes of
approximately $97,000 in the nine months ended July 31, 1998 compared to
$406,000 in the nine months ended July 31, 1997 assuming the "S" Corporation
elections had not been made primarily as a result of the decrease in pro forma
pre-tax income. The unaudited pro forma provisions for income taxes reflect an
effective rate of approximately 45% for each period comprised of an 11% rate for
state and local income taxes, net of the related Federal income tax effect, and
a statutory Federal income tax rate of 34%. On an unaudited pro forma basis, the
Company would have had net income of $118,083, or $.03 per share, in the nine
months ended July 31, 1998 compared to $490,589, or $.12 per share, in the nine
months ended July 31, 1997.

Three Months Ended July 31, 1998 Compared to Three Months Ended July 31, 1997

      Net sales totaled $6,684,459 in the three months ended July 31, 1998, a
decrease of $325,622 or 5% from $7,010,081 in the three months ended July 31,
1997. Lower retail selling prices resulted in the decline in net sales.

      Cost of sales in the three months ended July 31, 1998 was $6,173,356, or
92% of net sales, as compared to $6,780,041, or 97% of net sales in the three
months ended July 31, 1997.

      The Company's gross profit in the three months ended July 31, 1998 was
$511,103, an increase of $281,063 or 122% from $230,040 in the three months
ended July 31, 1997. Gross profit as a percentage of net sales increased by 4%
to 7% in the three months ended July 31, 1998 from 3% in the three months ended
July 31, 1997.

      Selling and administrative expenses were $543,091 in the three months
ended July 31, 1998, an increase of $198,755 or 58% from $344,336 in the three
months ended July 31, 1997. As a percentage of net sales, this change
represented a 3% increase from 5% in the three months ended July 31, 1997 to 8%
in the three months ended July 31, 1998. The increase in selling expenses for
the three months ended July 31, 1998 was the result of higher freight insurance
and advertising expenses. The increase was also due to higher professional fees
related to payments made to the Company's financial advisor for financial
advisory services.

      Interest expense decreased $57,322 or 43% from $132,891 in the three
months ended July 31, 1997 to $75,569 in the three months ended July 31, 1998.
The decrease was due to lower interest rates payable on borrowings.

      Primarily as a result of the increase in gross profit, the increase in
operating expenses and the decrease in interest expense, the Company had a loss
of $205,969 before income taxes in the three months ended July 31, 1998 compared
to a loss of $313,156 in the three months ended July 31, 1997.

      As a result of the termination of its "S" Corporation election effective
February 10, 1998, the Company was subject to Federal, state and local income
taxes during the entire three month period ended July 31, 1998 whereas it was
not subject to Federal income taxes during the three month period ended July 31,
1997. Although the Company had a pre-tax loss for the three months ended July
31, 1998, it did not record any credit for federal income taxes related to the
potential benefits from its net operating loss carryforwards as of July 31, 1998
due to the uncertainties related to the extent and timing of its future taxable
income. Although the Company had a pre-tax loss for the three months ended July
31, 1998, it did not record any credit


                                       2
<PAGE>

for federal income taxes due to the "S" Corporation election. The Company had a
historical credit for state and local income taxes of $22,000 in the three
months ended July 31, 1998 compared to $29,534 in the three months ended July
31, 1997 primarily as a result of the decrease in the pre-tax loss. Accordingly,
the Company had a historical net loss of $183,969 in the three months ended July
31, 1998 compared to $283,622 in the three months ended July 31, 1997. On an
unaudited pro forma basis, the Company would have had a credit for income taxes
of approximately $138,000 and a net loss of $175,156, or $.04 per share, in the
three months ended July 31, 1997 assuming the "S" Corporation elections had not
been made compared to the historical net loss of $183,969, or $.03 per share, in
the three months ended July 31, 1998.

Liquidity and Capital Resources

      As of July 31, 1998, the Company had working capital of approximately
$1,671,000, an increase of $2,208,000 from its working capital deficiency of
approximately $537,000 as of October 31, 1997. The Company's cash balance also
increased by approximately $50,000 to $249,000 as of July 31, 1998 from $199,000
as of October 31, 1997. The working capital balance increased primarily as a
result of the replacement of borrowings obtained under a factoring agreement
that were payable on a short-term basis with borrowings obtained under a credit
facility from Nationscredit Commercial Corp. The new credit facility provides
for a revolving line of credit of up to $5,000,000 based on eligible trade
accounts receivable and inventories and a term loan for equipment purchases of
up to $500,000. The line of credit provides for borrowings of up to 85% of the
Company's eligible trade accounts receivable and 60% of its eligible
inventories. The outstanding balance of approximately $2,635,000 as of July 31,
1998 approximated the maximum amount that the Company could borrow based on its
eligible trade accounts receivable and inventories as of that date. Interest is
payable monthly at the prime rate plus 1% (an effective rate of 9% at July 31,
1998). Assuming the Company has sufficient collateral, substantially all of the
balances outstanding under the credit facility will not have to be repaid until
November 20, 2000.

      The Company's current liabilities as of July 31, 1998 included a mortgage
note payable with a balance of $613,000 that was due on demand as a result of a
violation of certain covenants. The note was collateralized by restricted cash
investments with an approximate balance of $370,000. The Company repaid the
mortgage note in full on March 3, 1999, and generated a portion of the funds
required for the payment by liquidating the restricted investments.

      During the nine months ended July 31, 1998, net cash provided by operating
activities totaled approximately $755,000 primarily as a result of the net
income generated during that period, adjusted to eliminate the effects of
charges for depreciation and amortization, and decreases in amounts receivable
from the Company's broker and customers and an increase in accounts payable that
were partially offset by an increase in inventories. In addition to repaying the
outstanding balance under the factoring agreement through borrowings under the
line of credit, the Company also borrowed approximately $586,000 under the line
of credit for working capital purposes.

      During the nine months ended July 31, 1998, the Company used approximately
$397,000 of its cash resources to purchase property and equipment and added
property and equipment totaling $288,500 by entering into capital leases. The
capital expenditures were made primarily to refurbish equipment, upgrade
capacity and purchase and install new manufacturing and other equipment
associated with production. Management expects that the Company's capital
expenditures will be made at a reduced rate over at least the next twelve
months. The Company also placed approximately $304,000 in restricted cash
investments to secure the mortgage note, as explained above, and made payments
aggregating approximately $189,000 to reduce its mortgage note, term loan and
capital lease obligations.

      Management believes, but cannot assure, that the Company will be able to
finance its operations, including increases in accounts receivable and
inventories, capital expenditures and debt repayments, over the next twelve
months through its existing cash resources, cash provided by operating
activities and/or borrowings under its credit facility.

Year 2000

      The Year 2000 problem concerns the inability of information systems and
systems with embedded chip technology to properly recognize and process
data-sensitive information beyond December 31, 1999. In the fall of 1997, the
Company and its information technology consultant assessed the Company's
personal computer hardware and its accounting software (which included accounts
receivable and payroll and inventory management) for Year 2000 readiness. The
Company concluded that its then accounting software and computer hardware and
system were not Year 2000 compliant.

      The Company installed software modifications and upgrades to its
accounting software in November 1997 at an approximate cost of $4,300.


                                       3
<PAGE>

      In April and August 1999, the Company replaced its computer hardware and
operating systems including its server and three workstations. The Company also
added an additional workstation. The total cost of the equipment, installation
and follow-up support was approximately $18,800. The Company also paid its
consultant $1,400 to oversee installation of the operating system.

      As of June 30, 2000, with regard to Year 2000, the Company had not
experienced any disruptions in its internal information systems or its business
activities with its suppliers and customers.


                                       4
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Interest Rate Risks

The Company is subject to market risk from exposure to fluctuations in
interest rates. At July 31, 1998, the Company's long-term debt, other than
capitalized leases, consisted of approximately $75,000 of fixed rate debt and
approximately $3,600,000 of variable rate debt under its revolving line of
credit, term loan and mortgage note payable. Interest on the variable rate debt
was payable primarily at 1% above a specified prime rate. The Company does not
expect changes in interest rates to have a material effect on income or cash
flows in fiscal 1998, although there can be no assurance that interest rates
will not significantly change.

Commodity Price Risks

      See Note 2 to the financial statements, Summary of Significant Accounting
Policies - "Hedging" for additional information regarding the Company's hedging
program.

      The supply and price of coffee beans are subject to volatility and are
influenced by numerous factors which are beyond the Company's control. The
Company uses coffee futures and options contracts for hedging purposes to
minimize the effect of changing green coffee prices and, if needed, to
supplement its supply. At July 31, 1998, the Company held options covering an
aggregate of 3,075,000 pounds of green coffee beans, which are exercisable in
fiscal 1998 at prices ranging from $1.15 to $1.45 per pound. The price per pound
of green coffee on the close of business on July 31, 1998 was $1.29 per pound.
The Company generally has been able to pass green coffee price increases through
to its customers, thereby maintaining its gross profits. However, the Company
cannot predict whether it will be able to pass inventory price increases through
to its customers in the future.

                                     PART II

ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit
Number            Exhibit Name
-------           ------------

27                Financial Data Schedule

(b) There were no reports on Form 8-K filed during the period covered by this
report.


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<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.

COFFEE HOLDING CO., INC.

      Signature                       Title                      Date
      ---------                       -----                      ----

/s/ Andrew Gordon        Chief Executive Officer, President,    October 25, 2000
-----------------        Treasurer and Director
Andrew Gordon            (principal executive officer and
                         principal financial officer)


                                       6
<PAGE>

                                INDEX TO EXHIBITS

      27    Financial Data Schedule