Business Context and Reporting Period
Company: Coffee Holding Co., Inc.
Filing Type: Form 8-K (Current Report)
Date: April 1, 2010
Event: Regulation FD Disclosure regarding an agreement in principle to acquire substantially all assets of Organic Products Trading Company.
Key Financial Metrics
Target Revenue: The target company (Organic Products Trading Company) generates approximately $10.0 million in annual revenues.
Transaction Consideration:
- Cash at Closing: $450,000 plus an amount equal to the cost of inventory transferred.
- Contingent Cash: Up to $50,000 if pre-tax net profit of $300,000 is achieved within a specified period.
- Stock at Closing: 50,000 shares of Company common stock.
- Contingent Stock: Up to 10,000 additional shares if pre-tax net profit of $300,000 is achieved within specified periods.
Material Changes
This filing announces a proposed strategic acquisition rather than a change in historical financial performance. The Company intends to expand its operations by acquiring a seller that works directly with coffee farmers in South and Central America to import certified organic green specialty coffee for small and medium-sized roasters in the U.S. and Canada.
Outlook, Risks, and Contingencies
Transaction Status: The deal is subject to final approval by the Boards of Directors of both parties and the execution of a definitive Asset Purchase Agreement.
Operational Changes: Upon closing, all employees of the Seller will become employees of the Buyer. The Buyer will operate from the Seller's Vancouver, Washington location and change its name to Organic Products Trading Co., LLC.
Guarantees: Coffee Holding Co., Inc. will guarantee the performance of the Buyer and pay the Buyer's obligations under the agreement.
Risks: Forward-looking statements are subject to risks including product demand, pricing, market acceptance, economic conditions, intellectual property rights, and the ability to complete the transaction.
Investor Verification Checklist
- Confirm the execution of the definitive Asset Purchase Agreement.
- Verify final Board of Director approvals from both Coffee Holding Co., Inc. and Organic Products Trading Company.
- Monitor future filings for the exact valuation of inventory to be transferred at closing.
- Review the specific time periods and definitions for the $300,000 pre-tax net profit trigger for contingent payments.
- Assess the Company's current liquidity to fund the $450,000 cash portion and inventory costs.