**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**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: **April
      30, 2007**




OR




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.)*





**4401
                First Avenue, Brooklyn, New York**
            **11232-0005***(Address
                of principal executive offices)*
            *(Zip
                Code)*




**(718)
      832-0800**


*(Registrant’s
      telephone number including area code)*




**N/A**


*(Former
      name, former address and former fiscal year,*


*if
      changed from last report)*




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




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


Yes
o No
x .




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




**5,529,830
      shares of common stock, par value $0.001 per share, outstanding at May 31,
      2007**









**PAGE****PART
                I — FINANCIAL INFORMATION****Item
                1.**
            **Financial
                Statements**
            
            1Condensed
                Consolidated Balance SheetsApril
                30, 2007 (unaudited) and October 31, 2006
            
            1Condensed
                Consolidated Statements of OperationsThree
                and Six Months Ended April 30, 2007 and 2006 (unaudited)
            
            2Condensed
                Consolidated Statements of Cash FlowsThree
                and Six Months Ended April 30, 2007 and 2006 (unaudited)
            
            3Notes
                To Condensed Consolidated Financial Statements (unaudited)
            
            4**Item
                2.**
            **Management’s
                Discussion and Analysis of Financial Condition****and
                Results of Operations**
            
            10**Item
                3.**
            **Quantitative
                and Qualitative Disclosures About Market Risk**
            
            18**Item
                4.**
            **Controls
                and Procedures**
            
            19**PART
                II****—
                OTHER INFORMATION****Item
                1.**
            **Legal
                Proceedings**
            
            20**Item
                1A.**
            **Risk
                Factors**
            
            20**Item
                2.**
            **Unregistered
                Sales of Equity Securities and Use of Proceeds**
            
            21**Item
                3.**
            **Defaults
                Upon Senior Securities**
            
            21**Item
                4.**
            **Submission
                of Matters to a Vote of Security Holders**
            
            21**Item
                5.**
            **Other
                Information**
            
            21**Item
                6.**
            **Exhibits**
            
            21**Signatures**
            
            22





i


**PART
      I** *—* **FINANCIAL INFORMATION**




**Item
      1.**  **Financial Statements**




**COFFEE
      HOLDING CO., INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**APRIL
      30, 2007 AND OCTOBER 31, 2006**




**April
                30, 2007**
            
            October
                31, 2006**(unaudited)****-
                ASSETS -****CURRENT
                ASSETS:**Cash
            
            **$**
            **1,677,825**
            
            $
            1,112,165Commodities
                held at broker
            
            
            **3,428,114**
            
            
            4,330,489Accounts
                receivable, net of allowance for doubtful accounts of $420,349 for
                2007
                and 2006
            
            
            **4,589,560**
            
            
            6,534,848Inventories
            
            
            **3,938,672**
            
            
            2,899,543Prepaid
                expenses and other current assets
            
            
            **744,693**
            
            
            328,544Prepaid
                and refundable taxes
            
            
            **6,710**
            
            
            302,003Deferred
                income tax assets
            
            
            **452,000**
            
            
            221,000TOTAL
                CURRENT ASSETS
            
            
            **14,837,574**
            
            
            15,728,592Property
                and equipment, at cost, net of accumulated depreciation of $4,317,727
                and
                $4,159,274 for 2007 and 2006, respectively
            
            
            **2,458,544**
            
            
            2,138,951Investment
                in joint venture
            
            
            **281,858**
            
            
            408,798Due
                from joint venture
            
            
            **220,030**
            
            
            73,658Deposits
                and other assets
            
            
            **349,335**
            
            
            631,859**TOTAL
                ASSETS**
            
            **$**
            **18,147,341**
            
            $
            18,981,858**-
                LIABILITIES AND STOCKHOLDERS' EQUITY -****CURRENT
                LIABILITIES:**Accounts
                payable and accrued expenses
            
            **$**
            **4,052,468**
            
            $
            4,828,689Income
                taxes payable
            
            
            **74,707**
            
            
            -Line
                of credit borrowings
            
            
            **1,703,952**
            
            
            2,542,881TOTAL
                CURRENT LIABILITIES
            
            
            **5,831,127**
            
            
            7,371,570Deferred
                income tax liabilities
            
            
            **9,750**
            
            
            12,300Deferred
                compensation payable
            
            
            **316,169**
            
            
            256,284TOTAL
                LIABILITIES
            
            
            **6,157,046**
            
            
            7,640,154**MINORITY
                INTEREST**
            
            
            **-**
            
            
            -**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, 5,529,830
                shares issued and outstanding for 2007 and 2006,
                respectively
            
            
            **5,530**
            
            
            5,530Additional
                paid-in capital
            
            
            **7,327,023**
            
            
            7,327,023Retained
                earnings
            
            
            **4,657,742**
            
            
            4,009,151TOTAL
                STOCKHOLDERS' EQUITY
            
            
            **11,990,295**
            
            
            11,341,704**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            **$**
            **18,147,341**
            
            $
            18,981,858


See
        notes
        to Condensed Consolidated Financial Statements.
  1


**COFFEE
      HOLDING CO., INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**SIX
      AND THREE MONTHS ENDED APRIL 30, 2007 AND 2006**


**(Unaudited)**




**Six
                Months Ended**
              **April
                30**
            
            **Three
                Months Ended**
              **April,
                30****2007**
            
            2006
            
            **2007**
            
            2006**NET
                SALES**
            
            **$**
            **26,829,485**
            
            $
            25,855,773
            
            **$**
            **14,194,373**
            
            $
            12,010,928**COST
                OF SALES**
            
            
            **22,553,727**
            
            
            22,667,636
            
            
            **12,087,210**
            
            
            11,148,234**GROSS
                PROFIT**
            
            
            **4,275,758**
            
            
            3,188,137
            
            
            **2,107,163**
            
            
            862,694**OPERATING
                EXPENSES:**Selling
                and administrative
            
            
            **2,846,734**
            
            
            2,502,295
            
            
            **1,456,044**
            
            
            1,219,458Writedown
                of amount due from joint venture
            
            
            **242,000**
            
            
            -
            
            
            **-**
            
            
            -Bad
                debt expense
            
            
            **31,195**
            
            
            -
            
            
            **31,195**
            
            
            -Officers’
                salaries
            
            
            **234,449**
            
            
            272,180
            
            
            **117,437**
            
            
            136,205**TOTALS**
            
            
            **3,354,378**
            
            
            2,774,475
            
            
            **1,604,676**
            
            
            1,355,663**INCOME
                (LOSS) FROM OPERATIONS**
            
            
            **921,380**
            
            
            413,662
            
            
            **502,487**
            
            
            (492,969
            )**OTHER
                INCOME (EXPENSE)**Interest
                income
            
            
            **66,576**
            
            
            57,289
            
            
            **32,460**
            
            
            26,723Equity
                in loss of joint venture
            
            
            **(93,939**
            **)**
            
            (5,322
            )
            
            **(30,000**
            **)**
            
            (5,322
            )Writedown
                of investment in joint venture
            
            
            **(33,000**
            **)**
            
            -
            
            
            **-**
            
            
            -Management
                fee income
            
            
            **12,046**
            
            
            -
            
            
            **-**
            
            
            -Interest
                expense
            
            
            **(56,406**
            **)**
            
            (38,225
            )
            
            **(32,174**
            **)**
            
            (22,766
            )Impairment
                loss - leasehold improvements
            
            
            **(31,892**
            **)**
            
            -
            
            
            **(31,892**
            **)**
            
            -**(136,615**
            **)**
            
            13,742
            
            
            **(61,606**
            **)**
            
            (1,365
            )**INCOME
                (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST IN
                SUBSIDIARY**
            
            
            **784,765**
            
            
            427,404
            
            
            **440,881**
            
            
            (494,334
            )Benefit
                (provision) for income taxes
            
            
            **(140,050**
            **)**
            
            (192,000
            )
            
            **(102,200**
            **)**
            
            210,100**INCOME
                (LOSS) BEFORE MINORITY INTEREST**
            
            
            **644,715**
            
            
            235,404
            
            
            **338,681**
            
            
            (284,234
            )Minority
                interest in subsidiary
            
            
            **3,877**
            
            
            -
            
            
            **207**
            
            
            -**NET
                INCOME (LOSS)**
            
            **$**
            **648,592**
            
            $
            235,404
            
            **$**
            **338,888**
            
            $
            (284,234
            )Basic
                and diluted earnings (loss) per share
            
            **$**
            **.12**
            
            $
            .04
            
            **$**
            **.06**
            
            $
            (.05
            )


See
        notes
        to Condensed Consolidated Financial Statements.
  2


**COFFEE
      HOLDING CO., INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**SIX
      MONTHS ENDED APRIL 30, 2007 AND 2006**


**(Unaudited)**





**2007**
            
            2006**OPERATING
                ACTIVITIES:**Net
                income
            
            **$**
            **648,592**
            
            $
            235,404Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            **165,478**
            
            
            227,907Writedown
                of amount due from joint venture
            
            
            **242,000**
            
            
            -Loss
                from joint venture
            
            
            **93,939**
            
            
            5,322Writedown
                of investment in joint venture
            
            
            **33,000**
            
            
            -Deferred
                income taxes
            
            
            **(233,550**
            **)**
            
            29,300Impairment
                loss - leasehold improvements
            
            
            **31,892**
            
            
            -Changes
                in operating assets and liabilities:Commodities
                held at broker
            
            
            **902,375**
            
            
            14,443Accounts
                receivable
            
            
            **1,945,288**
            
            
            899,654Inventories
            
            
            **(1,039,129**
            **)**
            
            950,421Prepaid
                expenses and other current assets
            
            
            **(416,149**
            **)**
            
            (116,862
            )Prepaid
                and refundable income taxes
            
            
            **295,293**
            
            
            (104,607
            )Due
                from joint venture
            
            
            **(388,372**
            **)**
            
            -Deposits
                and other assets
            
            
            **14,021**
            
            
            (19,675
            )Accounts
                payable and accrued expenses
            
            
            **(836,106**
            **)**
            
            (502,758
            )Income
                taxes payable
            
            
            **74,707**
            
            
            (217,064
            )Deferred
                compensation payable
            
            
            **59,885**
            
            
            -*Net
                cash provided by operating activities*
            
            
            **1,593,164**
            
            
            1,401,485**INVESTING
                ACTIVITIES:**Purchases
                of property and equipment
            
            
            **(188,575**
            **)**
            
            (113,756
            )Security
                deposits
            
            
            **-**
            
            
            (2,500
            )Investment
                in joint venture
            
            
            **-**
            
            
            (450,501
            )*Net
                cash (used in) investing activities*
            
            
            **(188,575**
            **)**
            
            (566,757
            )**FINANCING
                ACTIVITIES:**Advances
                under bank line of credit
            
            
            **23,967,150**
            
            
            20,737,183Principal
                payments under bank line of credit
            
            
            **(24,806,079**
            **)**
            
            (20,920,638
            )Principal
                payments of obligations under capital leases
            
            
            **-**
            
            
            (1,329
            )*Net
                cash (used in) financing activities*
            
            
            **(838,929**
            **)**
            
            (184,784
            )**NET
                INCREASE IN CASH**
            
            
            **565,660**
            
            
            649,944Cash,
                beginning of year
            
            
            **1,112,165**
            
            
            735,468**CASH,
                END OF PERIOD**
            
            **$**
            **1,677,825**
            
            $
            1,385,412**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW DATA:**Interest
                paid
            
            **$**
            **43,351**
            
            $
            16,873Income
                taxes paid
            
            **$**
            **-**
            
            $
            185,000**SUPPLEMENTAL
                DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:**The
                Company utilized its deposit for the purchase of machinery and
                equipment
            
            **$**
            **328,388**
            
            
            **-**





See
        notes
        to Condensed Consolidated Financial Statements.
  3


**COFFEE
      HOLDING CO., INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**


**(Unaudited)**





**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 sells
      green coffee. The Company’s sales are primarily to customers that are located
      throughout the United States and Canada, consisting of supermarkets,
      wholesalers, gourmet roasters and individually owned and multi - unit
      retailers.




The
      Company owns a 60% interest in Generations Coffee Company, LLC (“GCC”) effective
      April 7, 2006. GCC is in the same business as the Company and had limited
      operations since it commenced its operations during the quarter ended October
      31, 2006. The Company also exercises control of GCC. As a result of its 60%
      interest and control, the financial statements of GCC are consolidated with
      the
      Company.




The
      Company also owns a 50% interest in Cafe La Rica, LLC (“CLR”) effective March
      10, 2006. CLR is in the same business as the Company and is being recorded
      as an
      investment in joint venture since it started its operations during the quarter
      ended April 30, 2006. The Company does not exercise control of CLR. As a result,
      the financial statements of CLR are not consolidated and are accounted for
      by
      the equity method of accounting. (See Note 7 for a discussion on legal
      proceedings regarding the Company’s investment in CLR.)




**NOTE
      2 -**  **BASIS
      OF PRESENTATION:**





The
      interim financial information as of April 30, 2007 and for the six and
      three-month periods ended April 30, 2007 and 2006 have been prepared without
      audit, pursuant to the rules and regulations of the Securities and Exchange
      Commission (the “SEC”). Certain information and footnote disclosures normally
      included in financial statements prepared in accordance with generally accepted
      accounting principles have been condensed or omitted pursuant to such rules
      and
      regulations, although we believe that the disclosures made are adequate to
      provide for fair presentation. These financial statements should be read in
      conjunction with the financial statements and the notes thereto, included in
      the
      Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2006,
      previously filed with the SEC.




In
      the
      opinion of management, all adjustments (which include normal recurring
      adjustments) necessary to present a fair statement of financial position as
      of
      April 30, 2007, and results of operations and cash flows for the six and three
      months ended April 30, 2007 and 2006, as applicable, have been made. The results
      of operations for the six and three months ended April 30, 2007 are not
      necessarily indicative of the operating results for the full fiscal year or
      any
      future periods.




The
      condensed consolidated financial statements include the accounts of the Company
      and GCC. The equity method of accounting was used to record the Company’s share
      of the loss in CLR. All significant inter-company transactions and balances
      have
      been eliminated in consolidation.




4


**COFFEE
      HOLDING CO., INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**


**(Unaudited)**





**NOTE
      3** -  **INSURANCE
      CLAIM RECEIVABLE:**




The
      Company sustained weather related damages to its warehouse facility in Colorado
      during the six months ended April 30, 2007. The Company paid for the repairs
      as
      the work progressed. The Company also paid for labor costs related to the
      repairs and clean-up of the facility. The insurance carrier reimburses the
      Company for the costs of the repairs and the costs of the labor related to
      the
      repairs and clean-up. The Company has been reimbursed $1,200,000 by the
      insurance carrier during the three months ended April 30, 2007. As of April
      30,
      2007, the Company has a receivable from the insurance carrier of $482,094,
      which
      is included with prepaid expenses and other current assets on the balance
      sheet.




**NOTE 4
      -**  **INVENTORIES:**




Inventories
      at April 30, 2007 and October 31, 2006 consisted of the following:




**April
                30, 2007**
            
            October
                31, 2006Packed
                coffee
            
            **$**
            **1,264,821**
            
            $
            700,284Green
                coffee
            
            
            **1,929,565**
            
            
            1,466,161Packaging
                supplies
            
            
            **744,286**
            
            
            733,098Totals
            
            **$**
            **3,938,672**
            
            $
            2,899,543





5


**COFFEE
        HOLDING CO., INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**
 **(Unaudited)**




**NOTE 5
      -**  **HEDGING:**




The
      Company uses options and futures contracts 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 the broker which includes commodities for cash,
      futures and options in the amount of $3,428,114 and $4,330,489 at April 30,
      2007
      and October 31, 2006, respectively. 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 in a
      separate component of shareholders’ equity.




At
      April
      30, 2007, the Company held 600 options (generally
      with terms of two months or less )
      covering an aggregate of 22,500,000 pounds of green coffee beans at a price of
      $1.00 to $1.10 per pound. The fair market value of these options, which was
      obtained from major financial institutions, was $1,338,975 at April 30, 2007.




At
      April
      30, 2006, the Company held 282 options (generally with terms of two months
      or
      less) covering an aggregate of 10,575,000 pounds of green coffee beans at a
      prices of $1.10 and $1.11 per pound. The fair market value of these options,
      which was obtained from a major financial institution, was $407,175 at April
      30,
      2006.




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
      April
      30, 2007, the Company held 148 futures contracts for the purchase of 5,550,000
      pounds of coffee at an average price of $1.12 per pound. The market price of
      coffee applicable to such contracts was $1.06 per pound at that date. At April
      30, 2006, the Company did not hold any futures contracts.




Included
      in cost of sales and commodities held at broker for the six and three
      months ended April 30, 2007 and 2006, the Company recorded realized and
      unrealized gains and losses respectively, on these contracts as
      follows:




**Three
                Months Ended April 30,****2007**
            
            2006Gross
                realized gains
            
            **$**
            **476,381**
            
            $
            195,032Gross
                realized losses
            
            **$**
            **(205,211**
            **)**
            $
            (106,312
            )Net
                unrealized gains (losses)
            
            **$**
            **171,293**
            
            $
            (154,399
            )





**Six
                Months Ended April 30,****2007**
            
            2006Gross
                realized gains
            
            **$**
            **1,164,837**
            
            $
            811,245Gross
                realized losses
            
            **$**
            **(299,612**
            **)**
            $
            (660,761
            )Net
                unrealized gains (losses)
            
            **$**
            **167,554**
            
            $
            229,301





6


**COFFEE
        HOLDING CO., INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**
 **(Unaudited)**




**NOTE 6
      -**  **LINE
      OF CREDIT:**




The
      Company has a financing agreement with Merrill Lynch Business Financial
      Services, Inc. for a line of credit of up to $4,000,000 expiring on October
      31,
      2007. This line of credit is secured by a blanket lien on all the assets of
      the
      Company and the personal guarantees of two of the Company’s
      officer/shareholders, requires monthly interest payments at a rate of LIBOR
      plus
      2.4% (7.47% as of April 30, 2007 and October 31, 2006) and requires the Company
      to comply with various financial covenants. As of April 30, 2007 and 2006,
      the
      Company was in compliance with all financial covenants. As of April 30, 2007
      and
      October 31, 2006, the borrowings under the line of credit were $1,703,952 and
      $2,542,881, respectively.




**NOTE 7
      -**  **LEGAL
      PROCEEDINGS:**




On
      February 5, 2007, the Company dissolved CLR due to CLR’s material breach of the
      Expense Sharing Agreement dated March 2006 between CLR and the Company,
      primarily resulting from non-payment for coffee supplied to CLR by the Company.
      In the notice of dissolution, the Company requested an orderly winding up of
      CLR’s business and the liquidation of its assets.




Coffee
      Bean Trading - Roasting LLC (“CBT”), the joint venture member, denied that any
      breach occurred and filed a lawsuit in the U.S. District Court for the Southern
      District of Florida against the Company alleging breaches of certain agreements
      and responsibilities. The Company countersued CBT alleging conversion of CLR
      funds and breaches of certain agreements and responsibilities. Venue of this
      lawsuit was successfully transferred by the Company to the U.S. District Court
      for the District of Delaware.




While
      the
      Company’s Motion To Transfer Venue was pending in the U.S. District Court for
      the Southern District of Florida, the Company filed a separate action in the
      Delaware Chancery Court against CLR and Ernesto Aguila, a member in Coffee
      Bean
      Trading - Roasting, LLC, individually also alleging breaches of certain
      agreements and responsibilities and conversion of CLR funds. Subsequent to
      the
      transfer to the U.S. District Court for the District of Delaware, the Company
      filed an Amended Complaint in the Delaware Chancery Court to add the claims
      against CBT for conversion of CLR funds and breaches of certain agreements
      and
      responsibilities that the Company was countersuing CBT for in the Florida
      action. CBT has countersued the Company in the Delaware action alleging breaches
      of certain agreements and responsibilities and requesting a liquidating trustee
      to wind up the affairs of CLR and liquidate and distribute its
      assets.




As
      a
      result of all the parties claims being consolidated into the Delaware Chancery
      Court action, in which the Company is now the Plaintiff, the case pending in
      the
      District of Delaware will be voluntarily dismissed. The Company considers the
      allegations against it to be baseless and intends to vigorously defend itself
      and prosecute its claims against CBT, CLR and Ernesto Aguila in the Delaware
      Chancery Court.




The
      Company has written down the amount due from the joint venture by $242,000
      during the six months ended April 30, 2007 representing the least likely amount
      that will not be recovered from CLR. The Company’s investment in the joint
      venture has been written down by $33,000 during the six months ended April
      30,
      2007 to $281,858 as of April 30, 2007 representing the net book value of the
      equipment that was originally contributed by the Company to the joint venture.
      The Company has estimated its share of the losses in CLR to be $93,939 for
      the
      six months ended April 30, 2007 based upon the most recent available
      information.




7


**COFFEE
        HOLDING CO., INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **APRIL
        30, 2007 AND 2006**
 **(Unaudited)**




The
      Company is a party to various other legal proceedings. In the opinion of
      management, these actions are routine in nature and will not have a material
      adverse effect on the Company's results of operations or financial position
      in
      future period.




**NOTE 8
      -**  **EARNINGS
      PER SHARE:**




The
      Company presents “basic” and “diluted” earnings per common share pursuant to the
      provisions of Statement of Financial Accounting Standards No. 128, “Earnings per
      Share.” Basic earnings per share is based on the weighted-average number of
      common shares outstanding and diluted earnings per share as based on the
      weighted-average number of common shares outstanding plus all potential dilutive
      common shares outstanding.




**Six
                Months Ended**
              **April
                30**,
            
            **Three
                Months Ended**
              **April
                30,****2007**
            
            2006
            
            **2007**
            
            2006**Net
                Income (Loss)**
            
            **$**
            **648,592**
            
            $
            235,404
            
            **$**
            **338,888**
            
            $
            (284,234
            )**BASIC
                EARNINGS:****Weighted
                average number of common****Shares
                outstanding**
            
            
            **5,529,830**
            
            
            5,529,830
            
            
            **5,529,830**
            
            
            5,529,830**Basic
                earnings (loss) per common share**
            
            **$**
            **.12**
            
            $
            .04
            
            **$**
            **.06**
            
            $
            (.05
            )**DILUTED
                EARNINGS:****Weighted
                average number of common****Shares
                outstanding**
            
            
            **5,529,830**
            
            
            5,529,830
            
            
            **5,529,830**
            
            
            5,529,830**Warrants
                - common stock equivalents**
            
            
            **70,000**
            
            
            65,030
            
            
            **0**
            
            
            0**Weighted
                average number of common****Shares
                outstanding - as adjusted**
            
            
            **5,599,830**
            
            
            5,594,860
            
            
            **5,529,830**
            
            
            5,529,830**Diluted
                earnings (loss) per common share**
            
            **$**
            **.12**
            
            $
            .04
            
            **$**
            **.06**
            
            $
            (.05
            )





8


**COFFEE
      HOLDING CO., INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**APRIL
      30, 2007 AND 2006**


**(Unaudited)**





**NOTE 9
      -**  **ECONOMIC
      DEPENDENCY:**




For
      the
      six months ended April 30, 2007, sales to two customers were in excess of 10%
      of
      the Company’s total sales. Sales to these customers were approximately
      $7,000,000 and $3,125,000, or 26% and 11%, respectively, and the corresponding
      accounts receivable at April 30, 2007 from these customers was approximately
      $737,000 and $395,000, respectively.




For
      the
      six months ended April 30, 2006, sales to one customer was in excess of 10%
      of
      the Company’s total sales. Sales to this customer were approximately $9,217,000,
      or 35% and the corresponding accounts receivable at April 30, 2006 from this
      customer was approximately $1,002,000.




For
      the
      six months ended April 30, 2007, purchases from two suppliers, were in excess
      of
      10% of the Company’s total purchases. Purchases from these suppliers were
      approximately $7,200,000 and $3,000,000, or 32% and 13%, respectively, and
      the
      corresponding accounts payable to these suppliers at April 30, 2007 were
      approximately $966,000 and $298,000, respectively.




For
      the
      six months ended April 30, 2006, purchases from two suppliers, were in excess
      of
      10% of the Company’s total purchases. Purchases from these suppliers were
      approximately $7,454,000 and $2,662,000, or 34% and 12%, respectively and the
      corresponding accounts payable to these suppliers at April 30, 2006 were
      approximately $723,000 and $284,000, respectively.




**NOTE
      10 -**  **STOCK
      OPTION PLAN:**




The
      Company has a stock option plan whereby options may be granted to the Company’s
      directors, officers, other key employees and consultants. The Company has
      reserved 800,000 shares of common stock for issuance under this plan. As of
      April 30, 2007, no options have been granted under the plan since its
      inception.




9


**Item
      2.**  **Management’s
      Discussion and Analysis** **of
      Financial Condition and Results of Operations.**




**Cautionary
      Note on Forward Looking Statements**




This
      report contains 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 on our current expectations and
      projections about future events, including, among other things:




·
            the
                impact of rapid or persistent fluctuations in the price of coffee
                beans;




·
            fluctuations
                in the supply of coffee beans;




·
            general
                economic conditions and conditions which affect the market for
                coffee;  ·
            our success in implementing our business strategy
              or
              introducing new products;  ·
            our ability to attract and retain
              customers;  ·
            our success in expanding our market presence in
              new
              geographic regions;




·
            the
                effects of competition from other coffee manufacturers and other
                beverage
                alternatives;




·
            changes
                in tastes and preferences for, or the consumption of, coffee;




·
            our
                ability to obtain additional financing;
                and




·
            other
                risks which we identify in future filings with the Securities and
                Exchange
                Commission.




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 which occur after the date of this report.




10


**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.




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, including equipment and a roasting facility located 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.




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, we increased the number of our customers in all three
      areas.




In
      March
      2006, we entered into a joint venture with Coffee Bean Trading-Roasting, LLC
      and
      formed Café La Rica, LLC, a Delaware limited liability company. The joint
      venture engages in the roasting, packaging and sale of the Café La Rica brand
      coffee and other branded and food service coffee products in Miami, Florida.
      We
      own 50% of the joint venture and are the primary supplier of its coffee
      inventory. We had originally invested $585,709 in cash and equipment in Café La
      Rica. We incurred a net loss on our investment in Café La Rica of $93,939 for
      the six months ended April 30, 2007 and $270,850 since Café La Rica was formed
      and wrote the investment down by $33,000 during the six months ended April
      30,
      2007 to equal the net book value of the equipment that was originally
      contributed by us to Café La Rica upon formation. In addition, prior to April
      30, 2007, we were owed $531,890 for coffee supplied by us to Café La Rica and
      for miscellaneous advances. Despite an Expense Sharing Agreement between the
      parties which required Café La Rica to pay us for the coffee supplied to it by
      us within 15 days of the end of each calendar month, $412,113 of this amount
      was
      over 90 days past due as of April 30, 2007. As a result, on April 30, 2007
      we
      wrote down the amounts owed to us by $242,000 during the six months ended April
      30, 2007. On February 5, 2007, we dissolved Café La Rica due to Café La Rica’s
      material breach of the Expense Sharing Agreement. In the notice of dissolution,
      we requested an orderly winding up of Café La Rica’s business and the
      liquidation of its assets. Cafe La Café and Coffee Bean Trading-Roasting, LLC,
      have denied that any breach has occurred. The dispute is now in litigation.
      See
“Legal Proceedings.”




11




In
      April
      2006, we entered into a joint venture with Caruso's Coffee of Brecksville,
      Ohio
      and formed Generations Coffee Company, LLC, a Delaware limited liability
      company, which will engage in the roasting, packaging and sale of private label
      specialty coffee products. There have been limited operations during
      the six and three months ended April 30, 2007. We own 60% of the joint
      venture and are the exclusive supplier of its coffee inventory. We believe
      that
      the Generations Coffee joint venture will allow us to bid on the private
      label gourmet whole bean business 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.




Our
      net
      sales are affected by the price of green coffee. We import green coffee from
      Colombia, Mexico, Kenya, 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, coffee crops in Brazil, which produces
      one-third of the world’s green coffee, are 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 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. However, the average indicator price for Robusta coffee, the main
      component for our leading espresso brands (Café Caribe and Café Supremo) is
      still at its highest level seen in the last eight years. In October 2006,
      national brands reacted to these price increases, raising list prices by $0.12
      per unit, and we were able to increase our prices as well. In addition, we
      initiated another price increase in January 2007 for $0.10 per pound on most
      roasted products.




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
      significantly in a short period of time. 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. In addition, we generally remain exposed to supply risk in the
      event of non-performance by the counter-parties to any futures
      contract.




12


**Critical
      Accounting Policies and Estimates**




The
      preparation of financial statements and related disclosures in conformity with
      accounting principles generally accepted in the United States 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,
      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 Securities and Exchange Commission
                Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”).
                Under SAB 104, 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 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 reduce our operating
                income
                by approximately $46,000.




·
            Inventories
                are stated at cost (determined on a first-in, first-out basis). 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 writedowns of inventories may be
                required. Each additional one percent of potential inventory write-down
                would have reduced operating income by approximately $39,000****for
                the three months ended April 30,
                2007.




·
            We
                account for income taxes in accordance with Statement of Financial
                Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS No.
                109”). Under SFAS No. 109, 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 of $442,250 could need to be written off if we
                do not
                remain profitable.




13


**Comparison
      of Results of Operations for the Three Months Ended April 30, 2006 and
      2007**




***Net
      Income.*** We had
      net income of $338,888, or $.06 per share (basic and diluted), for the three
      months ended April
      30,
      2007 compared
      to a net loss of $284,234, or ($0.05) per share (basic and diluted), for the
      three months ended April 30, 2006. The increase primarily reflects increased
      gross profit and was partially offset by increased operating
      expenses.




***Net
      Sales.*** Net
      sales totaled $14,194,373 for the three months ended April 30, 2007, an increase
      of $2,183,445 or 18.2% from $12,010,928 for the three months ended April 30,
      2006. The increase in green coffee sales reflects higher sales of green coffee
      and private label coffee compared to the second quarter of fiscal year 2006.
      The
      number of our customers in the specialty green coffee area was relatively flat,
      numbering 282  customers
      at April 30, 2007. These customers are predominately independent
      gourmet/specialty roasters, some of whom own their own retail outlets. Because
      the specialty green coffee area is the fastest growing segment of the coffee
      market, we believe that our customer base and sales will grow in this
      area.




***Cost
      of Sales.*** Cost of
      sales for the three months ended April 30, 2007 was $12,087,210 or 85.2% of
      net
      sales, as compared to $11,148,234 or 92.8% of net sales for the three months
      ended April 30, 2006. The increase in cost of sales primarily reflects increased
      purchases of green coffee, partially offset by an increase in net gains on
      futures contracts. Green coffee purchases increased $1,236,191 from $9,123,877
      to $10,360,268 due to higher green coffee and private label sales volumes.
      Net
      gains on futures contracts increased by $508,142 compared to the second quarter
      of fiscal year 2006. We had net gains on futures contracts of $442,463 for
      the
      three months ended April 30, 2007 compared to net losses of $65,679 for the
      three months ended April 30, 2006. The decrease in cost of sales as a percentage
      of net sales reflects increased margins on our private labeled and branded
      coffee products due to the two price increases implemented in October of 2006
      and January of 2007.




***Gross
      Profit.*** Gross
      profit for the three months ended April 30, 2007 was $2,107,163, an increase
      of
      $1,244,199, or 144.2%, from $862,964 for the three months ended April 30, 2006.
      Gross profit as a percentage of net sales increased to 14.8% for the three
      months ended April 30, 2007 from 7.2% for the three months ended April 30,
      2006.
      The increase in our margins is attributable to the effects of the price
      increases implemented in October 2006 as well as an increase in net gains on
      future contracts during the three months ended April 30, 2007 compared to same
      period the previous year. Excluding the impact of future contracts, gross profit
      as a percentage of sales was 11.7% and 7.7% for the three months ended April
      30,
      2007 and 2006, respectively. The increase in these margins is mainly
      attributable to the effects of the price increases we implemented.




***Operating
      Expenses.*** Total
      operating expenses increased by $249,013, or 18.37%, to $1,604,676 for the
      three
      months ended April
      30,
      2007 from
      $1,355,663 for the three months ended April 30, 2006. The increase in operating
      expenses primarily reflects a $236,586 increase in selling and administrative
      expense. The increase in selling and administrative expense was primarily
      attributable to increases of approximately $48,000 in travel and show expenses,
      $28,000 in insurance, $25,000 in professional fees and $18,000 in licenses,
      partially offset by a decrease of approximately $50,000 in office labor
      expenses. The increase in travel and show expenses was attributable to greater
      participation in trade shows to promote our private label and branded coffee
      products. The increase in amortization was due to additional equipment for
      our
      Generations Coffee joint venture and the increase in insurance was due to
      increased premiums on health and liability insurance. Professional fees
      increased due to Sarbanes-Oxley Act compliance and the Café La Rica litigation,
      while the increase in licenses was attributable to a down payment on a new
      licensing arrangement currently being negotiated by us.




***Other
      Expense.*** Other
      expense increased by $60,241 to $61,606 for the three months ended April 30,
      2007 compared to $1,365 for the three months ended April 30, 2006. The major
      components of other expense, interest income and interest expense, increased
      by
      $5,737 and $9,408, respectively, during the second quarter of 2007 compared
      to
      2006. We also incurred expense of $30,000 and $5,322 during the three months
      ended April 30, 2007 and April 30, 2006, respectively, which constituted our
      share of the loss incurred by our Café La Rica joint venture. We also incurred
      an impairment loss of $31,892 on leasehold improvements for our Colorado
      facility.




14




***Income
      Before Income Taxes and Minority Interest in
      Subsidiary.*** We had
      income of $440,881 before income taxes and minority interest in subsidiary
      for
      the three months ended April 30, 2007 compared to a loss of $494,334 during
      the
      comparable period in 2006. The increase was attributable to increased income
      from operations.




***Income
      Taxes*** **.** Our
      provision for income taxes for the three months ended April 30, 2007 totaled
      $102,200 compared to a benefit of $210,100 for the three months ended April
      30,
      2006 as a result of increased income before income taxes for the three months
      ended April 30, 2007 compared to a loss for the three months ended April
      30, 2006.




**Comparison
      of Results of Operations for the Six Months Ended April 30, 2006 and
      2007**




***Net
      Income.*** We had
      net income of $648,592, or $.12 per share (basic and diluted), for the six
      months ended April 30, 2007 compared to net income of $235,404, or $0.04 per
      share (basic and diluted), for the six months ended April 30, 2006. The increase
      primarily reflects increased gross profit and was partially offset by increased
      operating expenses.




***Net
      Sales.*** Net
      sales totaled $26,829,485 for the six months ended April 30, 2007, an increase
      of $973,712 or 3.8% from $25,855,773 for the six months ended April 30, 2006.
      The increase in net sales reflects higher sales of green coffee and private
      label coffee versus the first two quarters of 2006. The number of our customers
      in the specialty green coffee area was relatively flat, numbering
      282  customers
      at April 30, 2007. These customers are predominately independent
      gourmet/specialty roasters, some of whom own their own retail outlets. Because
      the specialty green coffee area is the fastest growing segment of the coffee
      market, we believe that our customer base and sales will grow in this
      area.




***Cost
      of Sales.*** Cost of
      sales for the six months ended April 30, 2007 was $22,553,727, or 84.1% of
      net
      sales, as compared to $22,667,636 or 87.7% of net sales for the six months
      ended
      April 30, 2006. The decrease in cost of sales primarily reflects an increase
      in
      net gains on futures contracts, partially offset by increased purchases of
      green
      coffee. Green coffee purchases increased $803,907 from $18,680,238 to
      $19,484,145 due to higher green coffee and private label sales volumes. Net
      gains on futures contracts increased by $652,994, or 171.9%, from $379,785
      for
      the six months ended April 30, 2006 to $1,032,779 for the six months ended
      April
      30, 2007. The decrease in cost of sales as a percentage of net sales reflects
      increased margins on our private label and branded coffee products due to the
      two price increases implemented in October of 2006 and January of 2007.




***Gross
      Profit.*** Gross
      profit for the six months ended April 30, 2007 was $4,275,758, an increase
      of
      $1,087,621, or 34.1%, from $3,188,137 for the six months ended April 30, 2006.
      Gross profit as a percentage of net sales increased to 15.9% for the six months
      ended April 30, 2007 from 12.3% for the six months ended April 30, 2006. The
      increase in our margins is attributable to the effects of the price increases
      implemented in October 2006 as well as an increase in net gains on future
      contracts during the six months ended April 30, 2007 compared to same period
      the
      previous year. Excluding the impact of future contracts, gross profit as a
      percentage of sales was 12.1% and 10.9% for the six months ended April 30,
      2007
      and 2006, respectively. The increase in these margins is mainly attributable
      to
      the effects of the price increases we implemented.




***Operating
      Expenses.*** Total
      operating expenses increased by $579,903, or 20.9%, to $3,354,378 for the six
      months ended April 30, 2007 from $2,774,475 for the six months ended April
      30,
      2006. The increase in operating expenses primarily reflects a $242,000 writedown
      in amounts due from Café La Rica and a $344,439 increase in selling and
      administrative expense. The writedown pertained to the nonpayment of invoices
      and advances associated with Café La Rica. See “Legal Proceedings.” The increase
      in selling and administrative expense was primarily attributable to increases
      of
      approximately $131,000 in professional fees, $100,000 in insurance, $69,000
      in
      office salaries, $69,000 in commissions, $59,000 in licenses and fees and
      $50,000 in office supplies, partially offset by decreases of approximately
      $56,000 in contract labor costs, $54,000 in shipping costs and $14,000 in travel
      expenses. The increase in professional fees was due to costs related to
      Sarbanes-Oxley Act compliance and the Café La Rica litigation. The increase in
      insurance costs was attributable to increased premiums for health and liability
      insurance. Office salaries increased because of the addition of new personnel
      and costs associated therewith, while commissions increased due to increased
      sales. The increases in licenses and fees were due to a down payment on a new
      licensing arrangement currently being negotiated by us **** and
      the
      increase in office supplies resulted from office upgrades and maintenance.




15




***Other
      Income (Expense).*** Other
      expense increased by $150,357 to an expense of $136,615 for the six months
      ended
      April 30, 2007 compared to income of $13,742 for the six months ended April
      30,
      2006. The increase in other expense was primarily due to a $33,000 writedown
      in
      the investment in our Café La Rica joint venture; our $93,939 share of the loss
      incurred by our Café La Rica joint venture, and increased interest expense and
      an impairment loss of $31,892 on leasehold improvements. These increases in
      expense were partially offset by increased management fee income and interest
      income.




***Income
      Before Income Taxes and Minority Interest in
      Subsidiary.*** We had
      income of $784,765 before income taxes and minority interest in subsidiary
      for
      the six months ended April 30, 2007 compared to $427,406 for the six months
      ended April 30, 2006. The increase was attributable to increased income from
      operations.




***Income
      Taxes*** **.**  Our
      provision for income taxes for the six months ended April 30, 2007 totaled
      $140,050 compared to $192,000 for the six months ended April 30, 2006 as a
      result of the change in our deferred tax asset.




**Liquidity
      and Capital Resources**




As
      of
      April 30, 2007, we had working capital of $9,006,447 which represented a
      $649,425 increase from our working capital of $8,357,022 as of October 31,
      2006,
      and total stockholders’ equity of $11,990,295, which increased by $648,591 from
      our total stockholders’ equity of $11,341,704 as of October 31, 2006. Our
      working capital increased primarily due to an increase in inventories of
      $1,039,129, a decrease in line of credit borrowings of $838,929, a decrease
      in
      accounts payable and accrued expenses of $776,221 and a $565,660 increase in
      cash, offset in part by a $1,945,288 decrease in accounts receivable, net of
      allowances for doubtful accounts, and a $902,375 decrease in commodities held
      at
      broker. At April 30, 2007, the outstanding balance on our line of credit was
      $1,703,952 compared to $2,542,881 at October 31, 2006. Total stockholders’
equity primarily increased due to net income for the six month
      period.




As
      of
      April 30, 2007, we had a financing agreement with Merrill Lynch Business
      Financial Services Inc. This line of credit is for a maximum $4,000,000, expires
      on October 31, 2007 and requires monthly interest payments at a rate of LIBOR
      plus 2.4%. This loan is secured by a blanket lien on all of our assets. The
      credit facility contains covenants that place restrictions on our operations.
      Among other things, these covenants and the personal guarantees of two of the
      Company’s officers/shareholders: require us to maintain certain financial
      ratios; require us to maintain a minimum net worth; and prohibit us from merging
      with or into other companies, acquiring all or substantially all of the assets
      of other companies, or selling all or substantially all of our assets without
      the consent of the lender. These restrictions could adversely impact our ability
      to implement our business plan, or raise additional capital, if needed. In
      addition, if we default under our existing credit facility or if our lender
      demands payment of a portion or all of our indebtedness, we may not have
      sufficient funds to make such payments. As of April 30, 2007, we were in
      compliance with all covenants contained in the credit facility.




16




For
      the
      six months ended April 30, 2007, our operating activities provided net cash
      of
      $1,593,164 as compared to the six months ended April 30, 2006 when net cash
      provided by operating activities was $1,401,485. The increased cash flow from
      operations for the six months ended April 30, 2007 was primarily due to
      increased net income and increases in accounts payable, deferred taxes and
      accrued expenses, partially offset by increased accounts receivable and
      commodities held at broker and the loss due to our interest in, and writedown
      of
      amounts due from, Café La Rica.




For
      the
      six months ended April 30, 2007, our investing activities used net cash of
      $188,575 as compared to the six months ended April 30, 2006 when net cash used
      in investing activities was $566,757. During the six months ended April 30,
      2007, all of the net cash used in investing activities related to purchases
      of
      property and equipment. During the six months ended April 30, 2006, net cash
      used in investing activities included approximately $450,000 of investments
      Café
La Rica and Generations Coffee Company.




For
      the
      six months ended April 30, 2007, our financing activities used net cash of
      $838,929 as compared to the six months ended April 30, 2006 when net cash used
      in financing activities was $184,784. The decreased cash flow from financing
      activities reflects increased net cash payments under our line of
      credit.




We
      expect
      to fund our operations, including paying our liabilities, funding capital
      expenditures and making required payments on our debts, through the next twelve
      months 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. We
      also
      believe we could, if necessary, obtain additional loans by mortgaging our
      headquarters.




**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, results of
      operations, liquidity, capital expenditures or capital resources, that is
      material to investors.




17


**Item
      3.**  **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
      April
      30, 2007, our debt consisted of $1,073,952 of variable rate debt under our
      revolving line of credit. At April 30, 2007, interest on the variable rate
      debt
      was payable at 7.47% (or 2.4% above the one-month LIBOR rate) for the revolving
      line of credit.




***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 primarily for the purpose of
      partially hedging and minimizing the effects of changing green coffee prices,
      as
      further explained in Note 5 of the notes to financial statements in this report.
      At April 30, 2007, we held 600 options (generally with terms of two months
      or
      less) covering an aggregate of 22,500,000 pounds of green coffee beans at a
      price of $1.00 to $1.10 per pound. The fair market value of these options,
      which
      was obtained from major financial institutions, was $1,338,975 at April 30,
      2007. 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
      April
      30, 2007, we held 148 futures contracts for the purchase of 5,550,000 pounds
      of
      coffee at an average price of $1.12 per pound. The market
      price of coffee applicable to such contracts was $1.06 per pound at that
      date.




We
      increased the level of our hedging activity due to a number of factors. First,
      we anticipate a potential tightness in the physical coffee market during the
      second half of 2007 as both Brazil and Vietnam, the top two coffee producing
      countries in the world, should be experiencing a much lower level of exports
      during this period. Inasmuch as Robusta coffee futures contracts on the London
      Robusta Market are at an eight year high and similar market conditions resulted
      in price increases and lower margins last year, we wanted to be prepared for
      a
      similar situation this year. Secondly, we believe that acquiring options and
      futures at current prices at a time when the market is at a six month low will
      allow us to increase our operating margins over the next several months, given
      the level of our price increases compared to the underlying futures
      contract.




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.
      Increased green coffee prices cause our margins to shrink to the extent we
      are
      unable to pass the full amount of increase through to our customers. 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.




18




**Item
      4.**  **Controls
      and Procedures.**





Management,
      including our President, Chief Executive Officer and Chief Financial Officer,
      has evaluated the effectiveness of our disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the
      period covered by this report. Based upon that evaluation, the President and
      Chief Executive Officer, who is also the 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 to the Company’s management,
      including its President and Chief Executive Officer, who is also the principal
      executive officer and principal financial officer, as appropriate to allow
      timely discussions regarding disclosure.




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




19


**Part
      II — OTHER INFORMATION**




**Item
      1.**  **Legal
      Proceedings** **.**





On
      February 5, 2007, we dissolved Café
La
      Rica due
      to
      Café La Rica’s material breach of the Expense Sharing Agreement dated March 2006
      between us and Café La Rica, primarily resulting from non-payment for coffee
      supplied to Café La Rica by us. In the notice of dissolution, we requested an
      orderly winding up of Café La Rica’s business and the liquidation of its
      assets.





Café
La
      Rica’s other member, Coffee Bean Trading-Roasting, LLC, denied that any breach
      occurred and filed a lawsuit in the U.S. District Court for the Southern
      District of Florida against us alleging breaches of certain agreements and
      responsibilities. We countersued Coffee Bean Trading-Roasting, LLC alleging
      conversion of Café La Rica funds and breaches of certain agreements and
      responsibilities. Venue of this lawsuit was successfully transferred by us
      to
      the U.S. District Court for the District of Delaware.





While
      our
      Motion To Transfer Venue was pending in the U.S. District Court for the Southern
      District of Florida, we filed a separate action in the Delaware Chancery Court
      against Café La Rica and Ernesto Aguila, a partner in Coffee Bean Trading -
      Roasting, LLC, individually also alleging breaches of certain agreements and
      responsibilities and conversion of Café La Rica funds. Subsequent to the
      transfer to the U.S. District Court for the District of Delaware, we filed
      an
      Amended Complaint in the Delaware Chancery Court to add the claims against
      Coffee Bean Trading-Roasting, LLC for conversion of Café La Rica funds and
      breaches of certain agreements and responsibilities that we were countersuing
      Coffee Bean Trading-Roasting, LLC for in the Florida action. Coffee Bean
      Trading-Roasting, LLC has countersued us in the Delaware action alleging
      breaches of certain agreements and responsibilities and requesting a liquidating
      trustee to wind up the affairs of Café La Rica and liquidate and distribute its
      assets.





As
      a
      result of all the parties claims being consolidated into the Delaware Chancery
      Court action, in which we are now the plaintiff, the case pending in the
      District of Delaware will be voluntarily dismissed. We consider the allegations
      against us be baseless and intend to vigorously defend our self and prosecute
      our claims against Coffee Bean Trading-Roasting, LLC, Café La Rica and Ernesto
      Aguila in the Delaware Chancery Court.





We
      have
      written down the amount due from the joint venture by $242,000 during the three
      months ended April 30, 2007 representing the least likely amount that will
      not
      be recovered from Café La Rica. Our investment in the joint venture has been
      written down by $33,000 for the three months ended April 30, 2007 to $281,858
      as
      of April 30, 2007 representing the net book value of the equipment that was
      originally contributed by us to the joint venture. We have estimated our share
      of the loss in Café La Rica to be $93,939 for the six months ended April 30,
      2007 based upon the most recent available information.





We
      are a
      party to various other legal proceedings that, in our opinion, are routine
      in
      nature and will not have a material adverse effect on our results of operations
      or financial position in future periods.





**Item
      1A.**  **Risk
      Factors.**





There
      have been no material changes to the risk factors previously disclosed in our
      Annual Report on Form 10-K for the fiscal year ended October 31, 2006 that
      could
      affect our business, results of operations or financial condition.




20




**Item
      2.**  **Unregistered
      Sales of Equity in Securities and Use of Proceeds** **.**




On
      April
      13, 2007, our Board of Directors authorized a stock repurchase plan pursuant
      to
      which we may repurchase up to 5.0%, or 276,491 shares, of our common stock
      outstanding as of April 12, 2007, in either open market or private transactions.
      The stock repurchase plan is not subject to an expiration date.




During
      the three months ended April 30, 2007, no stock was repurchased under the plan.




**Item
      3.**  **Defaults
      upon Senior Securitie** **s.**





None.




**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders** **.**





On
      April
      12, 2007, we held our annual meeting of stockholders. 3,826,141 shares,
      representing a majority of our issued and outstanding shares of common stock,
      were represented at the meeting.





At
      the
      meeting, Gerard DeCapua and Robert M. Williams were elected to our Board of
      Directors for terms expiring at the 2010 annual meeting of stockholders.
      Election of directors was the only proposal at the meeting.





The
      proposal submitted to shareholders and the tabulation of votes for the proposal
      are as follows:





**Election
                of Directors**
            
            **Votes
                For**
            
            **Votes
                Withheld**Gerard
                DeCapua
            
            
            3,825,541
            
            
            32,276Robert
                M. Williams
            
            
            3,826,141
            
            
            31,676




**Item
      5.**  **Other
      Information** **.**





None.




**Item
      6.**  **Exhibits.**





11.1
            Earnings
                Per Share Calculation.31.1
            Rule
                13a - 14(a)/15d - 14a Certification.32.1
            Section
                1350 Certification.




21


**SIGNATURE** **S**




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 thereunto
      duly authorized.


Coffee
                Holding Co., Inc.
              (Registrant)By:
            /s/
              Andrew
              GordonAndrew
                Gordon
              President,
                Chief Executive Officer and Chief Financial Officer
              (Principal
                Executive, Financial and Accounting Officer)


June
      12,
      2007




22