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


**Washington,
      D.C. 20549**







**FORM
      10-Q**




x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
                EXCHANGE ACT OF 1934




For
      the
      quarterly period ended: **January
      31, 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 twelve 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 February
      28,
      2007**







**PAGE****PART
                  I — FINANCIAL
                  INFORMATION****Item
                  1.****Financial
                  Statements**
              
              1Condensed
                  Consolidated Balance Sheets January 31, 2007 (unaudited) and October
                  31,
                  2006
              
              1Condensed
                  Consolidated Statements of Income Three Months Ended January 31,
                  2007 and
                  2006 (unaudited)
              
              2Condensed
                  Consolidated Statements of Cash Flows Three Months Ended January
                  31, 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**
              
              9**Item
                  3.****Quantitative
                  and Qualitative Disclosures About Market Risk**
              
              16**Item
                  4.****Controls
                  and Procedures**
              
              16**PART
                  II****—
                  OTHER INFORMATION****Item
                  1.****Legal
                  Proceedings**
              
              17**Item
                  1A.****Risk
                  Factors**
              
              17**Item
                  2.****Unregistered
                  Sales of Equity Securities and Use of Proceeds**
              
              17**Item
                  3.****Defaults
                  Upon Senior Securities**
              
              17**Item
                  4.****Submission
                  of Matters to a Vote of Security Holders**
              
              17**Item
                  5.****Other
                  Information**
              
              17**Item
                  6.****Exhibits**
              
              18**Signatures**
              
              19





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


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





**COFFEE
      HOLDING CO., INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**JANUARY
      31, 2007 AND OCTOBER 31, 2006**





**January
                31, 2007**
            
            October
                31, 2006**(unaudited)****-
                ASSETS -****CURRENT
                ASSETS:**Cash
            
            **$**
            **1,827,523**
            
            $
            1,112,165Commodities
                held at broker
            
            
            **2,954,528**
            
            
            4,330,489Accounts
                receivable, net of allowance for doubtful accounts of $420,349 for
                2007
                and 2006, respectively
            
            
            **4,343,394**
            
            
            6,534,848Inventories
            
            
            **3,461,025**
            
            
            2,899,543Prepaid
                expenses and other current assets
            
            
            **244,182**
            
            
            328,544Prepaid
                and refundable taxes
            
            
            **45,331**
            
            
            302,003Deferred
                tax asset
            
            
            **442,000**
            
            
            221,000TOTAL
                CURRENT ASSETS
            
            
            **13,317,983**
            
            
            15,728,592Property
                and equipment, at cost, net of accumulated depreciation of $4,219,039
                and
                $4,159,274 for 2007 and 2006, respectively
            
            
            **2,170,413**
            
            
            2,138,951Investment
                in joint venture
            
            
            **311,858**
            
            
            408,798Due
                from joint venture, less reserve of $242,000
            
            
            **289,890**
            
            
            73,658Deposits
                and other assets
            
            
            **803,019**
            
            
            631,859**TOTAL
                ASSETS**
            
            **$**
            **16,893,163**
            
            $
            18,981,858**-
                LIABILITIES AND STOCKHOLDERS' EQUITY -****CURRENT
                LIABILITIES:**Accounts
                payable and accrued expenses
            
            **$**
            **3,961,239**
            
            $
            4,828,689Line
                of credit borrowings
            
            
            **985,219**
            
            
            2,542,881TOTAL
                CURRENT LIABILITIES
            
            
            **4,939,630**
            
            
            7,371,570Deferred
                income tax liabilities
            
            
            **4,100**
            
            
            12,300Deferred
                compensation payable
            
            
            **291,217**
            
            
            256,284TOTAL
                LIABILITIES
            
            
            **5,241,775**
            
            
            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
            
            
            **5,530**
            
            
            5,530Additional
                paid-in capital
            
            
            **7,327,023**
            
            
            7,327,023Retained
                earnings
            
            
            **4,318,835**
            
            
            4,009,151TOTAL
                STOCKHOLDERS' EQUITY
            
            
            **11,651,388**
            
            
            11,341,704**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            **$**
            **16,893,163**
            
            $
            18,981,858




See
      notes to Condensed Financial
      Statements.




1


**COFFEE
      HOLDING CO., INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME**


**THREE
      MONTHS ENDED JANUARY 31, 2007 AND 2006**


**(Unaudited)**





**2007**
            
            2006**NET
                SALES**
            
            **$**
            **12,635,112**
            
            $
            13,844,845**COST
                OF SALES**
            
            
            **10,466,517**
            
            
            11,519,402**GROSS
                PROFIT**
            
            
            **2,168,595**
            
            
            2,325,443**OPERATING
                EXPENSES:**Selling
                and administrative
            
            
            **1,390,690**
            
            
            1,282,837Writedown
                of amount due from joint venture
            
            
            **242,000**
            
            
            -Officers’
                salaries
            
            
            **117,012**
            
            
            135,975TOTALS
            
            
            **1,749,702**
            
            
            1,418,812**INCOME
                FROM OPERATIONS**
            
            
            **418,893**
            
            
            906,631**OTHER
                INCOME (EXPENSE)**Interest
                income
            
            
            **34,116**
            
            
            30,566Equity
                in loss of joint venture
            
            
            **(63,939**
            **)**
            
            -Writedown
                of investment in joint venture
            
            
            **(33,000**
            **)**
            
            -Management
                fee income
            
            
            **12,026**
            
            
            -Interest
                expense
            
            
            **(24,232**
            **)**
            
            (15,459
            )**(75,029**
            **)**
            
            15,107**INCOME
                BEFORE INCOME TAXES AND MINORITY INTEREST IN
                SUBSIDIARY**
            
            
            **343,864**
            
            
            921,738Provision
                for income taxes
            
            
            **37,850**
            
            
            402,100**INCOME
                BEFORE MINORITY INTEREST**
            
            
            **306,014**
            
            
            -Minority
                interest in subsidiary
            
            
            **3,670**
            
            
            **-****NET
                INCOME**
            
            **$**
            **309,684**
            
            $
            519,638Basic
                and diluted earnings per share
            
            **$**
            **.06**
            
            $
            .09Weighted
                average common shares outstanding:Basic
            
            
            **5,529,830**
            
            
            5,529,830Diluted
            
            
            **5,599,830**
            
            
            5,593,250




See
      notes
      to Condensed Financial Statements.




2


**COFFEE
      HOLDING CO., INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**THREE
      MONTHS ENDED JANUARY 31, 2007 AND 2006**


**(Unaudited)**





**2007**
            
            2006**OPERATING
                ACTIVITIES:**Net
                income
            
            **$**
            **309,684**
            
            $
            519,638Adjustments
                to reconcile net income to net cash provided by (used in) operating
                activities:Depreciation
                and amortization
            
            
            **60,630**
            
            
            112,817Writedown
                of amount due from joint venture
            
            
            **242,000**
            
            
            -Loss
                from joint venture
            
            
            **63,939**
            
            
            -Writedown
                of investment in joint venture
            
            
            **33,000**
            
            
            -Deferred
                taxes
            
            
            **(229,200**
            **)**
            
            29,300Changes
                in operating assets and liabilities:Commodities
                held at broker
            
            
            **1,375,961**
            
            
            321,531Accounts
                receivable
            
            
            **1,916,454**
            
            
            754,940Inventories
            
            
            **(561,482**
            **)**
            
            1,039,687Prepaid
                expenses and other assets
            
            
            **84,362**
            
            
            (64,734
            )Prepaid
                and refundable income taxes
            
            
            **256,672**
            
            
            -Accounts
                payable and accrued expenses
            
            
            **(867,450**
            **)**
            
            (1,038,711
            )Deferred
                compensation payable
            
            
            -
            
            
            33,981Due
                from joint venture
            
            
            **(183,232**
            **)**
            
            -Deposits
                and other assets
            
            
            **(136,227**
            **)**
            
            -Income
                taxes payable
            
            
            **-**
            
            
            69,250*Net
                cash provided by operating activities*
            
            
            **2,365,111**
            
            
            1,777,699**INVESTING
                ACTIVITIES:**Purchases
                of property and equipment
            
            
            **(92,091**
            **)**
            
            (74,196
            )*Net
                cash (used in) investing activities*
            
            
            **(92,091**
            **)**
            
            (74,196
            )**FINANCING
                ACTIVITIES:**Advances
                under bank line of credit
            
            
            **11,103,226**
            
            
            10,317,070Principal
                payments under bank line of credit
            
            
            **(12,660,888**
            **)**
            
            (10,909,112
            )Principal
                payments of obligations under capital leases
            
            
            **-**
            
            
            (1,329
            )*Net
                cash used in financing activities*
            
            
            **(1,557,662**
            **)**
            
            (593,371
            )**NET
                INCREASE IN CASH**
            
            
            **715,358**
            
            
            1,110,132Cash,
                beginning of year
            
            
            **1,112,165**
            
            
            735,468**CASH,
                END OF PERIOD**
            
            **$**
            **1,827,523**
            
            $
            1,845,600**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW DATA:**Interest
                paid
            
            **$**
            **18,642**
            
            $
            13,176Income
                taxes paid
            
            **$**
            **3,550**
            
            $
            299,321





See
      notes to Condensed Financial
      Statements.


3


**COFFEE
      HOLDING CO., INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JANUARY
      31, 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. The other 50% owner in CLR is Coffee Bean Trading-Roasting, LLC
      (“CBT”). CLR is in the same business as the Company and is being recorded as an
      investment in joint venture since it commenced its operations during the quarter
      ended April 30, 2006. The Company does not exercise control of CLR even thought
      the Company owns 50%. As a result, the financial statements of CLR are not
      consolidated and is accounted for by the equity method of
      accounting.





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





The
      interim financial information as of January 31, 2007 and for the three-month
      period ended January 31, 2007 and 2006 has 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
      January 31, 2007, and results of operations and cash flows for the three months
      ended January 31, 2007 and 2006, as applicable, have been made. The results
      of
      operations for the three months ended January 31, 2007 are not necessarily
      indicative of the operating results for the full fiscal year or any future
      periods.





The
      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




**NOTE
      3 -**  **CAFÉ
      LA RICA, LLC - JOINT VENTURE:**





The
      following represents condensed financial information of Café La Rica, LLC as of
      January 31, 2007 and for the three months then ended.


Current
                  assets
              
              $
              423,828Machinery
                  and other assets
              
              
              448,555Total
                  assets
              
              $
              872,383Current
                  liabilities
              
              $
              643,172Other
                  liabilities
              
              
              5,889Capital
                  (deficit)
              
              
              223,322Toal
                  liabilities and capital
              
              $
              872,383Sales
              
              $
              314,806Expenses
              
              
              442,684Net
                  loss
              
              $
              (127,878
              )Company’s
                  share of net loss
              
              $
              (63,939
              )




The
      Company’s investment in the joint venture has been written down by $33,000
      during the three months ended January 31, 2007 to $311,858 as of January 31,
      2007 representing the net book value of the equipment that was originally
      contributed by the Company to the joint venture.





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





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





**January
                31, 2007**
            
            October
                31, 2006Packed
                coffee
            
            **$**
            **942,252**
            
            $
            700,284Green
                coffee
            
            
            **1,761,910**
            
            
            1,466,161Packaging
                supplies
            
            
            **756,863**
            
            
            733,098Totals
            
            **$**
            **3,461,025**
            
            $
            2,899,543





**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 $2,954,528 and $4,330,489 at January 31,
      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
      January 31, 2007, the Company held 40 options (generally with terms of two
      months or less) covering an aggregate of 1,500,000 pounds of green coffee beans
      at a price of $1.15 per pound. The fair market value of these options, which
      was
      obtained from major financial institutions, was $54,000 at January 31, 2007.




5




At
      January 31, 2006, the Company held 350 options (generally with terms of two
      months or less) covering an aggregate of 13,125,000 pounds of green coffee
      beans
      at a price of $1.20 per pound. The fair market value of these options, which
      was
      obtained from a major financial institution, was $700,500 at January 31, 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 January 31, 2007, the Company held 75 futures contracts for the
      purchase of 2,812,500 pounds of coffee at an average price of $1.10 per pound.
      The market price of coffee applicable to such contracts was $1.1765 per pound
      at
      that date.





At
      January 31, 2006, the Company held 10 futures contracts for the purchase of
      375,000 pounds of coffee at an average price of $1.1820 per pound. The market
      price of coffee applicable to such contracts was $1.1820 per pound at that
      date.





Included
      in cost of sales for the three months ended January 31, 2007 and 2006, were
      realized and unrealized gains and losses on these contracts as
      follows:





**Three
                  Months Ended January 31,****2007**
            
            2006Gross
                realized gains
            
            **$**
            **688,456**
            
            $
            616,213Gross
                realized losses
            
            
            **(94,401**
            **)**
            
            (554,449
            )Unrealized
                gains and (losses)
            
            
            **(3,739**
            **)**
            
            383,700**$**
            **590,316**
            
            $
            445,464





**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
      officers/shareholders, requires monthly interest payments at a rate of LIBOR
      plus 2.4% (7.47% as of January 31, 2007 and October 31, 2006) and requires
      the
      Company to comply with various financial covenants. As of January 31, 2007
      and
      2006, the Company was in compliance with all financial covenants. As of January
      31, 2007 and October 31, 2006, the borrowings under the line of credit were
      $985,219 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. 
CBT has 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 breach
      of certain agreements and responsibilities. The Company has countersued CBT
      alleging conversion of corporate funds and breach of certain agreements and
      responsibilities. The Company considers the allegations against it to be
      baseless and intends to vigorously defend itself and prosecute its claims
      against CBT. The Company has written down the amount due from the joint venture
      by $242,000 during the three months ended January 31, 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
      three months ended January 31, 2007 to $311,858 as of January 31, 2007
      representing the net book value of the equipment that was originally contributed
      by the Company to the joint venture.




6




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.





Three
                Months Ended January 31,2007
            
            2006Net
                Income
            
            $
            309,684
            
            $
            519,638**BASIC
                EARNINGS:**Weighted
                average number of common sharesoutstanding
            
            
            5,529,830
            
            
            5,529,830Basic
                earnings per common share
            
            $
            0.06
            
            $
            0.09**DILUTED
                EARNINGS:**Weighted
                average number of common sharesoutstanding
            
            
            5,529,830
            
            
            5,529,830Warrants
                - common stock equivalents
            
            
            70,000
            
            
            62,420Weighted
                average number of common sharesoutstanding
                - as adjusted
            
            
            5,599,830
            
            
            5,593,250Diluted
                earnings per common share
            
            $
            0.06
            
            $
            0.09




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





For
      the
      three months ended January 31, 2007, sales to one customer were in excess of
      10%
      of the Company’s total sales. Sales to this customer were approximately
      $3,500,000 and the corresponding accounts receivable at January 31, 2007 from
      this customer were approximately $441,000.





For
      the
      three months ended January 31, 2006, sales to one customer were in excess of
      10%
      of the Company’s total sales. Sales to this customer were approximately
      $3,750,000 and the corresponding accounts receivable at January 31, 2006 from
      this customer were approximately $719,000.





For
      the
      three months ended January 31, 2007, purchases from two suppliers, were in
      excess of 10% of the Company’s total purchases. Purchases from these suppliers
      were approximately $3,100,000 and $1,500,000 and the corresponding accounts
      payable to these suppliers at January 31, 2007 were approximately $537,000
      and
      $271,000, respectively.




7




For
      the
      three months ended January 31, 2006, purchases from two suppliers, were in
      excess of 10% of the Company’s total purchases. Purchases from these suppliers
      were approximately $3,872,000 and $1,154,000 and the corresponding accounts
      payable to these suppliers at January 31, 2006 were approximately $1,315,000
      and
      $91,000, 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
      January 31, 2007 no options have been granted under the plan since its
      inception.





**NOTE
      11 -**  **WARRANTS
      TO PURCHASE COMMON STOCK:**





The
      Company entered into an agreement with Maxim Group, LLC (“Maxim”) for Maxim to
      serve as the Company’s financial advisors and lead managing underwriter for a
      public offering of the Company’s common stock which concluded on June 16, 2005.
      Subsequently, Maxim and Joseph Stevens & Company, Inc. (“Joseph Stevens”)
      entered into an agreement pursuant to which Joseph Stevens agreed to act as
      managing underwriter and Maxim participated in the underwriting syndicate of
      the
      offering. The Company also sold to Joseph Stevens and Maxim for $100, warrants
      to purchase 70,000 shares of common stock in the aggregate at a price of $6.00
      per share. The warrants are exercisable for a period of five (5) years and
      contain provisions for cashless exercise, anti-dilution and piggyback
      registration rights.




8


**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.


9


**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.




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 $63,939 for
      the three months ended January 31, 2007 and $240,850 since Café La Rica was
      formed and wrote the investment down by $33,000 during the three months ended
      January 31, 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 January 31, 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, $342,587
      of this amount was over 90 days past due as of January 31, 2007. As a result,
      on
      January 31, 2007 we wrote down the amounts owed to us by $242,000 during the
      three months ended January 31, 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.”




10




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 three
      months ended January 31, 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.




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.




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.


11


**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 $43,434.




·
            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 $34,610 for
                the three
                months ended January 31, 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 $437,900 could need to be written off if we
                do not
                remain profitable.




12


**Comparison
      of Results of Operations for the Three Months Ended January 31, 2006 and
      2007**




***Net
      Income.*** We had
      net income of $309,684, or $.06 per share (basic and diluted), for the three
      months ended January
      31, 2007 compared
      to net income of $519,638, or $.09 per share (basic and diluted), for the three
      months ended January 31, 2006. The decrease primarily reflects losses related
      to
      our Café La Rica joint venture, including a $63,939 equity loss, a $33,000
      writedown in the investment in the joint venture and a $242,000 writedown in
      amounts due from the joint venture. These losses reduced our net income by
      $338,939, or $0.04 per share, for the three months ended January 31, 2007.
      The
      decrease in net income also reflects increased operating expenses due to
      increased administrative and selling expenses.




***Net
      Sales.*** Net
      sales totaled $12,635,112 for the three months ended January 31, 2007, a
      decrease of $1,209,733 or 8.7% from $13,844,845 for the three months ended
      January 31, 2006. The decrease in net sales reflects lower sales of green coffee
      versus the first quarter of 2006. However, the number of our customers in the
      specialty green coffee area grew approximately 7% from 277 customers at January
      31, 2006 to 299 customers
      at January 31, 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 January 31, 2007 was $10,466,517 or 82.8%
      of
      net sales, as compared to $11,519,402 or 83.2% of net sales for the three months
      ended January 31, 2006. The decrease in cost of sales primarily reflects
      decreased purchases of green coffee. Green coffee purchases decreased $389,175
      from $9,513,052 to $9,123,877 due to lower sales volume in our green coffee.
      The
      decrease in cost of sales also reflected an increase in net gains on future
      contracts of $114,852. 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. We had net gains on futures
      contracts of $590,316 for the three months ended January 31, 2007 compared
      to
      net gains of $445,464 for the three months ended January 31, 2006. The use
      of
      these derivative financial instruments has enabled us to mitigate the effect
      of
      changing prices, to increase our margins as coffee prices have increased and
      to
      be more competitive with our pricing.




***Gross
      Profit.*** Gross
      profit for the three months ended January 31, 2007 was $2,168,595, a decrease
      of
      $156,848 or 6.7%, from $2,325,443 for the three months ended January 31, 2006.
      Gross profit as a percentage of net sales increased to 17.2% for the three
      months ended January 31, 2007 from 16.8% for the three months ended January
      31,
      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 January 31, 2007 compared to
      same
      period the previous year. Excluding the impact of future contracts, gross profit
      as a percentage of sales was 12.5% and 13.6% for the three months ended January
      31, 2007 and 2006, respectively. The decrease in these margins is mainly
      attributable to higher green coffee prices.




***Operating
      Expenses.*** Total
      operating expenses increased by $330,890 or 23.3% to $1,749,702 for the three
      months ended January
      31, 2007 from
      $1,418,812 for the three months ended January 31, 2006. The increase in
      operating expenses primarily reflects a $242,000 writedown in amounts due from
      Café La Rica incurred during the three months ended January 31, 2007 and a
      $107,853 increase in selling and administrative expense, partially offset by
      a
      decrease in officers’ salaries. The increase in selling and administrative
      expense was primarily attributable to increases of approximately $93,000 in
      labor costs, $53,000 in professional fees and $29,000 in packaging development
      costs, partially offset by decreases of approximately $76,000 in shipping costs
      and $29,000 in travel expenses. The writedown pertained to the nonpayment of
      invoices and advances associated with Café La Rica. See “Legal
      Proceedings.”




13




The
      increase in labor costs is attributable to increases in administrative and
      sales
      staff, salaries bonuses and payroll taxes. The increase in professional fees
      was
      due to the requirements of implementing our compliance with Section 404 of
      the
      Sarbanes-Oxley Act. The increase in packaging development costs was due to
      the
      development of several new labels for our private label customers. The decrease
      in shipping costs was attributable to decreased sales and the decreased travel
      expenses resulted from less participation in trade shows.




***Other
      Income (Expense).*** Other
      expense increased by $90,136 to an expense of $75,029 for the three months
      ended
      January 31, 2007 compared to other income of $15,107 for the three months ended
      January 31, 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 $63,939 share
      of the loss incurred by our Café La Rica joint venture, and increased interest
      expense. These increases in expense were partially offset by increased
      management fee income.




***Income
      Before Taxes.*** We had
      income of $343,864 before income taxes for the three months ended January 31,
      2007 compared to income before income taxes of $921,738 for the three months
      ended January 31, 2006. The decrease was attributable to decreased income from
      operations and increased other expense.




***Income
      Taxes*** **.**  Our
      provision for income taxes for the three months ended January 31, 2007 totaled
      $37,850 compared to $402,100 for the three months ended January 31, 2006 as
      a
      result of decreased income before income taxes for the three months ended
      January 31, 2007 compared to the three months ended January 31,
      2006.




**Liquidity
      and Capital Resources**




As
      of
      January 31, 2007, we had working capital of $8,378,353 which represented a
      $21,331 increase from our working capital of $8,357,022 as of October 31, 2006,
      and total stockholders’ equity of $11,651,388, which increased by $309,684 from
      our total stockholders’ equity of $11,341,704 as of October 31, 2006. Our
      working capital increased primarily due to a decrease in line of credit
      borrowings of $1,557,662, a decrease in accounts payable and accrued expenses
      of
      $867,450, a $715,358 increase in cash and a $561,482 increase in inventories,
      offset in part by a $2,191,454 decrease in accounts receivable, net of
      allowances for doubtful accounts, and a $1,375,961 decrease in commodities
      held
      at broker. At January 31, 2007, the outstanding balance on our line of credit
      was $985,219 compared to $2,542,881 at October 31, 2006. Total stockholders’
equity primarily increased due to net income for the three month
      period.




As
      of
      January 31, 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: 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 January 31, 2007, we were in
      compliance with all covenants contained in the credit facility.




14




For
      the
      three months ended January 31, 2007, our operating activities provided net
      cash
      of $2,365,111 as compared to the three months ended January 31, 2006 when net
      cash provided by operating activities was $1,777,699. The increased cash flow
      from operations for the three months ended January 31, 2007 was primarily due
      to
      a decrease in accounts receivable and commodities held at broker, partially
      offset by decreased accounts payable, increased inventories and the increase
      in
      bad debt expense and loss from joint venture associated with our interest in
      Café La Rica.




For
      the
      three months ended January 31, 2007, our investing activities used net cash
      of
      $92,091 as compared to the three months ended January 31, 2006 when net cash
      used in investing activities was $74,196. The increase in net cash used in
      investing activities for the three months ended January 31, 2006 was due to
      increased purchases of property and equipment.




For
      the
      three months ended January 31, 2007, our financing activities used net cash
      of
      $1,557,662 as compared to the three months ended January 31, 2006 when net
      cash
      used in financing activities was $593,371. 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.


15




**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
      January 31, 2007, our debt consisted of $985,219 of variable rate debt under
      our
      revolving line of credit. At January 31, 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 January 31, 2007, we held 40 options covering an aggregate of 1,500,000
      pounds of green coffee beans at a price of $1.15 per pound. The fair market
      value of these options, which was obtained from major financial institutions,
      was $54,000 at January 31, 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 January 31, 2007, we held
      75
      futures contracts for the purchase of 2,812,500 pounds of coffee at an average
      price of $1.10 per pound. The market price of coffee applicable to such
      contracts was $1.1765 per pound at that date.




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.




**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.


16


**Part
      II — OTHER INFORMATION**




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





On
      February 5, 2007, the 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, has denied that any breach occurred and filed a lawsuit
      in the U.S. District Court for the Southern District of Florida against us
      alleging breach of certain agreements and responsibilities. We have countersued
      Coffee Bean Trading-Roasting, LLC alleging conversion of corporate funds and
      breach of certain agreements and responsibilities. We consider the
      allegations against us to be baseless and intend to vigorously defend
      ourselves and prosecute our claims against Coffee Bean Trading-Roasting, LLC.
      We
      have written down the amount due from the joint venture by $242,000 during
      the
      three months ended January 31, 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 January 31, 2007 to
      $311,858 as of January 31, 2007 representing the net book value of the equipment
      that was originally contributed by us to the joint venture.





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.




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





None.




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





None.




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





During
      the three months ended January 31, 2007, no matters were submitted to a vote
      of
      security holders.





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





None.


17




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





11.1
            Earnings
                Per Share Calculation31.1
            Rule
                13a - 14(a)/15d - 14a Certification.32.1
            Section
                1350 Certification.




18


**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





March
      16,
      2007


19