Business Context and Reporting Period
Company: Coffee Holding Co., Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: May 17, 2010
Event: Completion of the acquisition of substantially all assets of Organic Products Trading Company (Seller) by the Company's wholly-owned subsidiary, Organic Products Trading Company LLC (Buyer).
Key Financial Metrics and Transaction Terms
The filing details the consideration paid for the acquisition rather than standard periodic financial performance metrics. The total purchase price structure includes:
- Cash Payment (Closing): $450,000
- Inventory Assumption: $1,809,924.24 (based on cost of inventory transferred)
- Common Stock Issued (Closing): 50,000 shares
- Contingent Cash Payment: Up to $50,000 payable by June 15, 2011, if pre-tax net profit exceeds $300,000 within a specified period.
- Contingent Stock Payment: Up to 10,000 additional shares payable in two tranches (5,000 shares each) by June 15, 2011, and June 15, 2012, subject to pre-tax net profit targets of $300,000.
Executive Compensation: Two-year employment agreements were executed for Garth Smith (President) and Gaylene Smith (Treasurer/Secretary) with an annual base salary of $150,000 each.
Material Changes
Asset Acquisition: The Company acquired inventory, trademarks, and supply-chain relationships from the Seller. The Buyer will operate under the "Organic Products Trading Company" name from the Seller's Vancouver, Washington location.
Personnel: All employees of the Seller became employees of the Buyer upon closing.
Equity Structure: The Company issued 50,000 shares of unregistered common stock to the Seller's stockholder (Garth William Smith and Gaylene Louise Smith Revocable Living Trust) as part of the purchase consideration.
Outlook, Risks, and Contingencies
Forward-Looking Statements: The filing includes standard cautionary language regarding risks such as product demand, pricing, market acceptance, economic conditions, and the ability to complete transactions.
Contingent Liabilities: Future cash and stock payments are contingent upon the Buyer generating specific pre-tax net profit levels ($300,000) within defined periods.
Employment Risks: Executive agreements include severance provisions (50% of base salary for the remaining term) if terminated without cause or due to significant changes in authority.
Investor Verification Checklist
- Verify the current market value of the 50,000 shares issued and the potential dilution from the 10,000 contingent shares.
- Confirm the specific "certain periods" referenced for the $300,000 pre-tax net profit targets to assess the likelihood of contingent payments.
- Review the inventory valuation of $1,809,924.24 to ensure it aligns with the Company's accounting policies for asset acquisitions.
- Monitor the integration of the Vancouver, Washington operations and the retention of key personnel under the new employment agreements.