Business Context and Reporting Period
Company: Coffee Holding Co., Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: April 22, 2010
Event: Entry into a Material Definitive Agreement (Asset Purchase Agreement).
On April 22, 2010, Coffee Holding Co., Inc. and its wholly-owned subsidiary, Coffee Holding Acquisition LLC, entered into an agreement to purchase substantially all assets of Organic Products Trading Company. The target company specializes in importing certified organic green specialty coffee from South and Central America to roasters in the U.S. and Canada.
Key Financial Metrics and Transaction Terms
Target Company Revenue: Approximately $10.0 million annually.
Purchase Price Structure:
- Cash at Closing: $450,000 plus a cash amount based on the cost of inventory transferred.
- Contingent Cash: Up to $50,000 payable by June 15, 2011, if pre-tax net profit exceeds $300,000 within a specified period.
- Stock at Closing: 50,000 shares of Company common stock.
- Contingent Stock: Up to 10,000 additional shares (5,000 shares each on June 15, 2011, and June 15, 2012) if pre-tax net profit targets are met.
Assets Acquired: Inventory, trademarks, and supply-chain relationships.
Operational Details: The transaction is anticipated to close in the Company's third fiscal quarter. All employees of the seller will transition to the buyer, including two-year employment agreements for principals Garth Smith and Gaylene Smith. Operations will be based in Vancouver, Washington.
Material Changes Versus Prior Period
This filing reports a new material agreement and does not provide comparative financial data (revenue, profit, cash flow, or margins) for the Company versus prior periods. The filing text does not provide a clear value for the Company's current financial position outside of the transaction terms.
Guidance, Outlook, and Risks
Outlook: Management anticipates closing the transaction in the third fiscal quarter. The acquisition aims to expand the Company's supply chain and product offerings in the organic specialty coffee sector.
Risks and Contingencies:
- Forward-Looking Statements: Actual results may differ materially from projections due to product demand, pricing, market acceptance, economic conditions, and competitive factors.
- Transaction Completion: Risks exist regarding the ability to complete the transaction as planned.
- Performance Contingencies: A portion of the purchase price is contingent on the acquired assets generating specific pre-tax net profit levels.
Investor Verification Checklist
- Verify the exact closing date of the transaction within the third fiscal quarter.
- Confirm the final valuation of inventory transferred at closing to determine total cash outlay.
- Monitor the performance of the acquired assets against the $300,000 pre-tax net profit threshold to assess contingent payments.
- Review the Company's subsequent filings for integration progress and any changes to the employment agreements of the seller's principals.