10-K/A 1 form10-ka.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K/A

(Amendment No. 1)

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended October 31, 2020

 

[  ] 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.)
     
3475 Victory Boulevard, Staten Island, New York   10314
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (718) 832-0800

 

Securities registered under Section 12(b) of the Act:

 

Title of each class:   Trading Symbol   Name of each exchange on which registered:
Common Stock, Par Value $0.001 Per Share   JVA   NASDAQ Capital Market

 

Securities registered under Section 12(g) of the Exchange Act: None

 

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

 

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

 

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 past 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 [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Non-accelerated filer [X] Accelerated filer [  ] Smaller Reporting Company [X]

 

Emerging Growth Company [  ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

 

The aggregate market value of the common equity held by non-affiliates of the registrant, computed by reference to the closing price of the registrant’s common stock on the NASDAQ Capital Market on April 30, 2020, was $13,910,209.

 

As of January 20, 2021, the registrant had 5,708,599 shares of common stock, par value $0.001 per share, outstanding.

 

 

 

 

 

 

EXPLANATORY NOTE

 

Coffee Holding Co., Inc., a Nevada corporation (“Coffee” or the “Company”) is filing this Amendment No. 1 (the “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended October 31, 2020, which was originally filed with the Securities Exchange Commission (the “SEC) on February 16, 2021 (the “Original Filing”), solely for the purposes of providing the information required by Items 10, 11, 12, 13 and 14 of Part III of Form 10-K that was not included in the Original Filing. This information was previously omitted from the Original Filing in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items to be incorporated by reference into the Original Filing by reference to the Company’s definitive proxy statement if such definitive proxy statement is filed no later than 120 days after the Company’s fiscal year-end. This Amendment amends Items 10, 11, 12, 13 and 14 of Part III of the Original Filing, and deletes the references included on the cover page and in Part III of the Original Filing to the incorporation by reference of a definitive proxy statement into Part III of the Original Filing. In addition, Item 15 of Part IV of the Original Filing is being amended solely to add as exhibits certain new certifications in accordance with Section 302 of the Sarbanes-Oxley Act of 2002, each as of the filing date of this Amendment.

 

This Amendment does not amend or otherwise update any other information in the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing, as well as with the Company’s other filings filed with the SEC.

 

 

 

 

TABLE OF CONTENTS

 

    Page
     
PART III   1
     
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 1
ITEM 11. EXECUTIVE COMPENSATION 5
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 12
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 12
     
PART IV   13
     
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 13
ITEM 16 FORM 10-K SUMMARY 13
SIGNATURES 14

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Information About Our Board of Directors and Management

 

Name 

Age

(1)

  Term Expires 

Position(s) Held With

Coffee Holding

 

Director

Since

             
Andrew Gordon  59  2021  President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director  1997
             
David Gordon  56  2023  Executive Vice President - Operations, Secretary and Director  1995
             
John Rotelli  62  2023  Director  2005
             
Daniel Dwyer  64  2021  Director  1998
             
Barry Knepper  69  2021  Director  2005
             
Gerard DeCapua  59  2022  Director  1997
             
George F. Thomas  72  2022  Director  2016

 

(1) As of February 28, 2021.

 

The principal occupation and business experience of each director are set forth below. Unless otherwise indicated, each of the following persons has held his present position for at least the last five years

 

Andrew Gordon has been the Chief Executive Officer, President, Treasurer and a director of Coffee Holding since 1997 and its Chief Financial Officer since November 2004. He is responsible for managing Coffee Holding’s overall business and has worked for Coffee Holding for over 36 years, previously as a Vice President from 1993 to 1997. Mr. Gordon has worked in all capacities of Coffee Holding’s business and serves as the direct contact with its major private label accounts. Mr. Gordon received his Bachelor of Business Administration degree from Emory University. He is the brother of David Gordon. Through his experience as President and Chief Executive Officer of the Company, as well as his over 35 years of service with the Company, Mr. Gordon has demonstrated the requisite qualifications and skills necessary to serve as an effective director. We believe Mr. Gordon’s extensive experience with, and institutional knowledge of, Coffee Holding and the industry is an integral contribution to Coffee Holding’s current successes and its ability to grow and flourish in the industry.

 

David Gordon has been the Executive Vice President - Operations, Secretary and a director of Coffee Holding since 1995. He is responsible for managing all aspects of Coffee Holding’s roasting and blending operations, including quality control, and has worked for Coffee Holding for 39 years, previously as an Operating Manager from 1989 to 1995. He is a charter member of the Specialty Coffee Association of America, or SCAA. Mr. Gordon attended Baruch College in New York City. He is the brother of Andrew Gordon. Through his 38 years of service with the Company, Mr. Gordon has demonstrated the requisite qualifications and skills necessary to serve as an effective director. We believe Mr. Gordon’s extensive institutional knowledge and leadership are invaluable to Coffee Holding’s current and future successes. Mr. Gordon’s leadership, as demonstrated by the launch of the Specialty Green segment of the business as well as the founding of the SCAA, is a valuable resource for Coffee Holding’s business development and future strategy.

 

John Rotelli has served as a director of Coffee Holding since 2005. Mr. Rotelli has over 40 years of experience in the green coffee industry business consisting of procurement from growing countries, every aspect of traffic and warehousing, quality analysis, and knowledge of both suppliers and competitors. Mr. Rotelli is currently the Vice President of L.J. Cooper Company, one of the largest green coffee brokers and agents in North America. He is also a director of the Green Coffee Association. Mr. Rotelli’s industry and business experience provides the Board with valuable expertise within the coffee industry as well as beneficial relationships that can help form new beneficial relationships for Coffee Holding.

 

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Daniel Dwyer has served as a director of Coffee Holding since 1998. Mr. Dwyer is the Chief Executive Officer at Rothfos Corporation, a green coffee bean supplier, and prior to that, had been a senior coffee trader at Rothfos, since 1995. Mr. Dwyer is responsible for our account with Rothfos. We paid Rothfos approximately $5.3 million, $8.3 million, and $9.1 million for green coffee purchases in fiscal 2020, 2019, and 2018, respectively. All purchases are made on arms’ length terms. We believe that Mr. Dwyer’s experience with the coffee industry will enable him to provide the Board with beneficial insight for Coffee Holding’s business development and strategy. Mr. Dwyer’s relationship with Rothfos has helped to foster a beneficial relationship between Rothfos and Coffee Holding. Mr. Dwyer serves on the board of directors of the National Coffee Association.

 

Barry Knepper has served as a director of Coffee Holding since 2005. From July 2004 to the present, Mr. Knepper has been the President and Chief Executive Officer of CFO Business Solutions, a management consulting firm. Mr. Knepper was the Chief Financial Officer for TruFoods Corporation, a growth oriented franchise management company from April 2001 through June 2004. From January 2000 through March 2001, he was the Chief Financial Officer of Offline Entertainment, an early stage television and motion picture production company. From 1982 through 1999, he served as the Chief Financial Officer of Unitel Video, Inc., a formerly publicly-traded nationwide high tech service company in the television, film and new media fields. We believe that Mr. Knepper’s diversified financial, accounting and business expertise provide him with the qualifications and skills to serve as a director.

 

Gerard DeCapua has served as a director of Coffee Holding since 1997. Mr. DeCapua has had his own law practice in Rockville Centre, New York since 1986. Mr. DeCapua received his law degree from Pace University. We believe that Mr. DeCapua’s legal experience brings significant knowledge regarding legal issues Coffee Holding faces and provide him with the skills and qualifications to serve as a director.

 

George F. Thomas has served as a director of Coffee Holding since February 2016. Mr. Thomas has over 38 years of domestic and international corporate business experience in top management positions. Since February 2007, Mr. Thomas has served as a Principal at Radix Consulting Corporation, a consulting firm which provides specialized advice in the field of electronic payments. From 1981 through 2007, Mr. Thomas served in a number of positions at The Clearing House Payments Company L.L.C., a limited liability company which operates electronic payment systems, including such positions as Executive Vice President of the Payments Services Division, President of the Electronic Payments Network, Senior Vice President of Business Development and Information Technology and Vice President of Technical Services and Systems Development. Since 2007, Mr. Thomas has served as a director of eGistics, Inc., a provider of cloud-based document and data management solutions which was acquired by Top Image Systems, Ltd. in 2014. We believe that Mr. Thomas’ financial and business experience provide him with the qualifications and skills to serve as a director.

 

CORPORATE GOVERNANCE

 

Board of Directors Operations and Meetings

 

The Board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the Board does not involve itself in the day-to-day operations of Coffee Holding. Our executive officers and management oversee our day-to-day operations. Our directors fulfill their duties and responsibilities by attending meetings of the Board, which are usually held on a quarterly basis. Our directors also discuss business and other matters with other key executives and our principal external advisers (legal counsel, auditors, financial advisors and other consultants).

 

The Board held one meeting during the fiscal year ended October 31, 2020 and acted by written consent on one occasion. Each director serving during the fiscal year ended October 31, 2020 attended at least 75 percent of the meetings of the Board, plus meetings of committees on which that particular director served during the fiscal year ended October 31, 2020.

 

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Coffee Holding is committed to establishing and maintaining high standards of corporate governance. Our executive officers and the Board have worked together to construct a comprehensive set of corporate governance initiatives that we believe will serve the long-term interests of our stockholders and employees. We believe these initiatives comply fully with the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC adopted thereunder. In addition, we believe our corporate governance initiatives fully comply with the rules of the Nasdaq Stock Market LLC (“Nasdaq”). The Board will continue to evaluate, and improve upon as appropriate, our corporate governance principles and policies.

 

Board Leadership Structure and Role in Risk Oversight

 

Andrew Gordon serves as both our principal executive officer and chairman at the pleasure of the Board. The directors have determined that Mr. Gordon’s experience in our industry and in corporate transactions, and his personal commitment to Coffee Holding as an investor and employee, make him uniquely qualified to supervise our operations and to execute our business strategies. The Board is also cognizant of Coffee Holding’s relatively small size compared to its publicly traded competitors. We do not have a lead independent director. Management’s activities are monitored by standing committees of the Board, principally the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each of these committees is comprised solely of independent directors. For these reasons, the Board deems this leadership structure appropriate for us.

 

Code of Ethics

 

The Board has adopted a Code of Conduct and Ethics that applies to each of our directors, officers and employees. The Code of Conduct and Ethics sets forth our policies and expectations on a number of topics, including:

 

  acceptance of gifts;
  financial responsibility regarding both personal and business affairs, including transactions with Coffee Holding;
  personal conduct, including ethical behavior and outside employment and other activities;
  affiliated transactions, including separate identities and usurpation of corporate opportunities;
  preservation and accuracy of Coffee Holding’s records;
  compliance with laws, including insider trading compliance;
  preservation of confidential information relating to our business and that of our clients;
  conflicts of interest;
  the safeguarding and proper use of our assets and institutional property;
  code administration and enforcement;
  reporting, investigating and resolving of all code violations; and
  code-related training, certification of compliance and maintenance of code-related records.

 

The Audit Committee of our Board reviews the Code of Conduct and Ethics on a regular basis, and will propose or adopt additions or amendments to the Code of Conduct and Ethics as appropriate. The Code of Conduct and Ethics is available on our website at www.coffeeholding.com under “Investor Relations - Corporate Governance.” A copy of the Code of Conduct and Ethics may also be obtained free of charge by sending a written request to:

 

David Gordon, Secretary

Coffee Holding Co., Inc.

3475 Victory Boulevard

Staten Island, NY 10314

 

We intend to satisfy the disclosure requirement under Section 5.05(c) of Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Ethics by posting such information on our website.

 

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Independent Directors

 

Our Board currently consists of seven directors, four of whom our Board has determined are independent directors. The standards relied on by the Board in affirmatively determining whether a director is “independent,” in compliance with Nasdaq’s rules, are comprised of those objective standards set forth in the rules promulgated by Nasdaq. The Board is responsible for ensuring that independent directors do not have a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

The Board has determined that Gerard DeCapua, Barry Knepper, John Rotelli and George F. Thomas, comprising a majority of the Board, are “independent” directors under Nasdaq’s rules.

 

Nasdaq’s rules, as well as SEC rules, impose additional independence requirements for all members of the Audit Committee. Specifically, in addition to the “independence” requirements discussed above, “independent” audit committee members must: (1) not accept, directly or indirectly, any consulting, advisory, or other compensatory fees from Coffee Holding or any subsidiary of Coffee Holding other than in the member’s capacity as a member of the Board and any Board committee; (2) not be an affiliated person of Coffee Holding or any subsidiary of Coffee Holding; and (3) not have participated in the preparation of the financial statements of Coffee Holding or any current subsidiary of Coffee Holding at any time during the past three years. In addition, Nasdaq’s rules require that all audit committee members be able to read and understand fundamental financial statements, including Coffee Holding’s balance sheet, income statement, and cash flow statement. The Board believes that the current members of the Audit Committee meet these additional standards.

 

Furthermore, at least one member of the Audit Committee must be financially sophisticated, in that he or she has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including but not limited to being or having been a chief executive officer, chief financial officer, other senior officer with financial oversight responsibilities. Additionally, the SEC requires that Coffee Holding disclose whether the Audit Committee has, and will continue to have, at least one member who is a “financial expert.” The Board has determined that Barry Knepper meets the SEC’s definition of an audit committee financial expert.

 

Committees of the Board

 

The Board of Coffee Holding has established the following committees:

 

Audit Committee. The Audit Committee oversees and monitors our financial reporting process and internal control system, reviews and evaluates the audit performed by our registered independent public accountants and reports to the Board any substantive issues found during the audit. The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of our registered independent public accountants. The Audit Committee reviews and approves all transactions with affiliated parties. The Board has adopted a written charter for the Audit Committee, which is available on our website at www.coffeeholding.com under “Investor Relations - Corporate Governance.” All members of the Audit Committee are independent directors as defined under Nasdaq’s listing standards. Gerard DeCapua, Barry Knepper and George F. Thomas serve as members of the Audit Committee with Barry Knepper serving as its chairman. The Board has determined that Barry Knepper qualifies as an audit committee financial expert as that term is defined by SEC regulations. The Audit Committee held four meetings during the fiscal year ended October 31, 2020.

 

Compensation Committee. The Compensation Committee provides advice and makes recommendations to the Board in the areas of employee salaries, benefit programs and director compensation. The Compensation Committee also reviews the compensation of the President and Chief Executive Officer of Coffee Holding and makes recommendations in that regard to the Board as a whole. The Board has adopted a written charter for the Compensation Committee, which is available on our website at www.coffeeholding.com under “Investor Relations - Corporate Governance.” All members of the Compensation Committee are independent directors as defined under Nasdaq’s listing standards. Barry Knepper, John Rotelli and George F. Thomas serve as members of the Compensation Committee, with John Rotelli serving as its chairman. The Compensation Committee acted by written consent once during the fiscal year ended October 31, 2020.

 

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Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee nominates individuals to be elected to the full Board by our stockholders. The Nominating and Corporate Governance Committee considers recommendations from stockholders if submitted in a timely manner in accordance with the procedures set forth in Article II, Section 11 of our Bylaws and applies the same criteria to all persons being considered. All members of the Nominating and Corporate Governance Committee are independent directors as defined under the Nasdaq listing standards. Gerard DeCapua, John Rotelli and George F. Thomas serve as members of the Nominating and Corporate Governance Committee, with Gerard DeCapua serving as its chairman. The Board has adopted a written charter for the Nominating and Corporate Governance Committee, which is available on our website at www.coffeeholding.com under “Investor Relations - Corporate Governance.” The Nominating and Corporate Governance Committee acted by written consent once during the fiscal year ended October 31, 2020.

 

There are no minimum qualifications that must be met by a Nominating and Corporate Governance Committee-recommended nominee. It is the policy of the Nominating and Corporate Governance Committee to recommend individuals as director nominees who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who will be most effective, in conjunction with the other members of the Board, in collectively serving the long-term interests of our stockholders.

 

Stockholder Communication with the Board of Directors and Attendance at Annual Meetings

 

The Board maintains a process for stockholders to communicate with the Board and its committees. Stockholders of Coffee Holding and other interested persons may communicate with the Board or the chairperson of the Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee by writing to the Secretary of Coffee Holding at 3475 Victory Boulevard, Staten Island, NY 10314. All communications that relate to matters that are within the scope of the responsibilities of the Board will be presented to the Board no later than the next regularly scheduled meeting. Communications that relate to matters that are within the responsibility of one of the Board committees will be forwarded to the chairperson of the appropriate committee. Communications that relate to ordinary business matters that are not within the scope of the Board’s responsibilities, such as customer complaints, will be forwarded to the appropriate officer. Solicitations, junk mail and obviously frivolous or inappropriate communications will not be forwarded, but will be made available to any director who wishes to review them.

 

Directors are expected to prepare themselves for and attend all Board meetings, the Annual Meeting of Stockholders and the meetings of the committees on which they serve, with the understanding that, on occasion, a director may be unable to attend a meeting. All of our directors who served as directors during the 2020 fiscal year attended the 2020 Annual Meeting of Stockholders.

 

ITEM 11. EXECUTIVE COMPENSATION

 

EXECUTIVE COMPENSATION

 

The summary compensation table below summarizes information concerning compensation for the fiscal years ended 2020 and 2019 of the individuals who served as President, Chief Executive Officer, Chief Financial Officer and Treasurer (Andrew Gordon) and Executive Vice President - Operations and Secretary (David Gordon). We refer to these individuals as the “Named Executive Officers.”

 

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SUMMARY COMPENSATION TABLE

 

The following table sets forth information with respect to the compensation of our Named Executive Officers for services in all capacities to us and our subsidiaries.

 

Name and Principal Position  Year  

 

Salary(1)

($) 

  

 

Bonus

($) 

  

 

Stock Option Awards ($)(2) 

  

 

Non-Equity

Incentive Plan Compensation

($) 

  

 

Nonqualified

Deferred Compensation

Earnings(3)

($) 

  

 

All Other

Compensation(4)

($) 

  

 

Total

($) 

 
                                 
Andrew Gordon, President, Chief Executive Officer,   2020   $     357,000   $0   $              0   $       0   $                          0   $                     64,339   $421,339 
Chief Financial Officer and Treasurer   2019   $363,865   $0   $844,580   $0   $0   $31,280   $1,239,725 
                                         
David Gordon, Executive Vice President -   2020   $324,000   $0   $0   $0   $0   $80,917   $404,917 
Operations and Secretary   2019   $330,231   $0   $680,020   $0   $0   $71,902   $1,082,043 

 

  (1) The figures shown represent amounts earned for the fiscal year, whether or not actually paid during such year.
     
  (2) Stock option awards represent the grant date fair value of the awards pursuant to FASB ASC Topic 718, as described in Note 12 “Stockholders’ Equity” in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended October 31, 2020.
     
  (3) Includes the amount of interest accrued on defined contribution deferred compensation balances at a rate in excess of 120% of the applicable federal mid-term rate under section 1274(d) of the Internal Revenue Code of 1986 (the “Code”) and dividends or dividend equivalents on balances denominated in Coffee Holding common stock in excess of the dividends paid to stockholders generally during the fiscal year.
     
  (4) The Named Executive Officers participate in certain group life, health, disability insurance and medical reimbursement plans, not disclosed in the Summary Compensation Table, that are generally available to salaried employees and do not discriminate in scope, terms and operation. The figures shown for Andrew Gordon include $10,843 and $10,436 in employer contributions to the 401(k) plan for 2020 and 2019, respectively; life insurance premiums of $917 and $1,332 for 2020 and 2019, respectively, business car expenses of $33,138 for 2020 and health insurance premiums of $19,441 and $19,512 for 2020 and 2019, respectively. The figures shown for David Gordon include $11,940 and $6,876 for a business car expenses in 2020 and 2019, respectively; $7,477 and $7,227 in employer contributions to the 401(k) plan for 2020 and 2019, respectively, life insurance premiums of $13,128 and $9,113 for 2020 and 2019, respectively, and health insurance premiums of $48,372 and $48,576 for 2020 and 2019, respectively.

 

Narrative to Summary Compensation Table

 

Overview

 

Our Compensation Committee has responsibility for establishing, implementing and monitoring adherence with our compensation philosophy. In that regard, the Compensation Committee provides advice and makes recommendations to the Board in the areas of employee salaries and benefit programs. The Compensation Committee ensures that the total compensation paid to our executive leadership team is fair and reasonable. Generally, the types of compensation and benefits provided to members of the executive leadership team, including the Named Executive Officers, are similar to those provided to our other officers and employees.

 

Compensation Components

 

Our compensation program for Named Executive Officers consists generally of base salary and annual bonuses. These elements are intended to provide an overall compensation package that is commensurate with our financial resources, that is appropriate to assure the retention of experienced management personnel, and that aligns their financial interests with those of our stockholders. We pay our Named Executive Officers commensurate with their experience and responsibilities.

 

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Base Salary. Each of our Named Executive Officers receives a base salary to compensate him for services performed during the year. The base salaries of our Named Executive Officers are established annually by the Board upon recommendation by the Compensation Committee. When determining the base salary for each of our Named Executive Officers, the Compensation Committee considers the performance of the Named Executive Officer, the duties of the Named Executive Officer, the experience of the Named Executive Officer in his position and salary levels of the companies in our peer group. Salary levels are also intended to reflect our financial performance. We have entered into employment agreements with each of the Named Executive Officers that provide for minimum annual base salaries. The Named Executive Officers are eligible for annual increases in their base salaries as a result of company performance, individual performance and any added responsibility since their last salary increase.

 

Annual Bonus. Our Named Executive Officers are eligible to receive annual cash bonuses. These bonuses are intended to reward the achievement of corporate goals and individual performance objectives. The bonus levels are intended to be competitive with those typically paid by the companies in our peer group and commensurate with the Named Executive Officers’ successful execution of duties and responsibilities.

 

Equity Compensation. At the 2013 Annual Meeting of Stockholders, our stockholders approved the 2013 Equity Compensation Plan. Through the 2013 Equity Compensation Plan, we provide our employees, including our Named Executive Officers, with equity incentives that help align their interests with those of our stockholders by tying the value delivered to our Named Executive Officers to the value of our shares of common stock. We also believe that stock option grants to our Named Executive Officers provide them with long-term incentives that will aid in retaining executive talent by providing opportunities to be compensated through the Company’s performance and rewarding executives for creating shareholder value over the long-term.

 

During the year ended October 31, 2019, we granted stock option awards to the Named Executive Officers to purchase an aggregate of 630,000 shares of common stock at an exercise price of $5.43 per share. The stock options have a ten year expiration date and vest ratably over a three year period commencing one year after the grant date.

 

Implementation for Fiscal Year 2020

 

For the 2020 fiscal year, Andrew Gordon received a base salary of $357,000 and did not receive an annual bonus. David Gordon received a base salary of $324,000 and did not receive an annual bonus.

 

As stated elsewhere, on April 18, 2019, Andrew Gordon was granted a stock option to purchase 349,000 shares of common stock, and David Gordon was granted a stock option to purchase 281,000 shares of common stock. The stock options have an exercise price of $5.43 and will vest in equal installments on each of the one year, two year and three year anniversaries of the date of grant

 

Compensation Decision-Making Policies and Procedures

 

Decision-Making and Policy-Making. As a Nasdaq listed company, we must observe governance standards that require executive officer compensation decisions to be made by the independent director members of our Board or by a committee of independent directors. Consistent with these requirements, our Board has established a Compensation Committee all of whose members are independent directors.

 

The Compensation Committee provides advice and makes recommendations to our Board in the areas of employee salaries and benefit programs. The Compensation Committee has established a formal charter. Compensation may consist of three components: (1) base salary; (2) bonuses; and (3) long-term incentives (e.g., deferred compensation and fringe benefits).

 

The Compensation Committee generally meets at least once each year or acts by written consent. It considers the expectations of the Chief Executive Officer with respect to his own compensation and his recommendations with respect to the compensation of more junior executive officers, as well as empirical data on compensation practices at peer group companies. The Compensation Committee does not delegate its duties to others.

 

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Employment Agreements

 

We have entered into employment agreements with Andrew Gordon to secure his continued service as President, Chief Executive Officer, Chief Financial Officer and Treasurer and with David Gordon to secure his continued service as Executive Vice President - Operations and Secretary. These employment agreements have rolling five-year terms that began on May 6, 2005. These agreements may be converted to a fixed five-year term by the decision of our Board or the executive. These agreements provide for minimum annual salaries, discretionary cash bonuses, and participation on generally applicable terms and conditions in other compensation and fringe benefit plans. The employment agreements also guarantee customary corporate indemnification and errors and omissions insurance coverage throughout the employment term and thereafter for so long as the executives are subject to liability for such service to the extent permissible by the Nevada Revised Statutes.

 

The terms of the employment agreements provide that each executive will be entitled to severance benefits if his employment is terminated without “cause” or if he resigns for “good reason” or following a “change in control” (as such terms will be defined in the employment agreements) equal to the value of the cash compensation and fringe benefits that he would have received if he had continued working for the remaining unexpired term of the agreement. The employment agreements also provide uninsured disability benefits. During the term of the employment agreements and, in case of discharge with “cause” or resignation without “good reason,” for a period of one year thereafter, the executives are subject to (1) restrictions on competition with us; and (2) restrictions on the solicitation of our customers and employees. For all periods during and after the term of the employment agreements, the executives are subject to nondisclosure and restrictions relating to our confidential information and trade secrets.

 

The employment agreements provide that in the event either executive terminates employment in connection with a change in control under circumstances entitling him to severance benefits, and it is determined that the executive would be subject to a 20% excise tax imposed by Section 4999 of the Code which applies to certain “excess parachute payments” (the “Excise Tax”), we will pay the executive a “Tax Indemnity Payment” such that the net amount received by the executive after payment of such Excise Tax, and any federal, Medicare and state and local income taxes and Excise Tax upon the Tax Indemnity Payment, will be equal to the payments the executive would have retained had there been no Excise Tax. The effect of this provision is that we, and not the executives, bear the financial cost of the Excise Tax. In accordance with Section 280G of the Code, we cannot claim a federal income tax deduction for payments subject to the Excise Tax, including the Tax Indemnity Payment.

 

Potential Payments Upon a Change of Control

 

Under the 2013 Equity Compensation Plan, in the event of a change in control (as defined in the 2013 Equity Compensation Plan), the Compensation Committee may, at the time of the grant of an award provide for, among other things, the (i) accelerating or extending the time periods for exercising, vesting in, or realizing gain from any award, (ii) eliminating or modifying the performance or other conditions of an award, or (iii) providing for the cash settlement of an award for an equivalent cash value, as determined by the Compensation Committee. The Compensation Committee may, in its discretion and without the need for the consent of any recipient of an award, also take one or more of the following actions contingent upon the occurrence of a change in control: (a) cause any or all outstanding options and stock appreciation rights to become immediately exercisable, in whole or in part; (b) cause any other awards to become non-forfeitable, in whole or in part; (c) cancel any option or stock appreciation right in exchange for a substitute option; (d) cancel any award of restricted stock, restricted stock units, performance shares or performance units in exchange for a similar award of the capital stock of any successor corporation; (e) redeem any restricted stock, restricted stock unit, performance share or performance unit for cash and/or other substitute consideration with a value equal to the fair market value of an unrestricted share of our common stock on the date of the change in control; (f) cancel any option or stock appreciation right in exchange for cash and/or other substitute consideration based on the value of our common stock on the date of the change in control, and cancel any option or stock appreciation right without any payment if its exercise price exceeds the value of our common stock on the date of the change in control; or (g) make such other modifications, adjustments or amendments to outstanding awards as the Compensation Committee deems necessary or appropriate. To date, there have been 630,000 options granted under the 2013 Equity Compensation Plan to the Named Executive Officers.

 

Other than the severance benefits described under “Employment Agreements” and the potential payments described under “Potential Payments Upon a Change of Control” above, we do not maintain contracts, agreements, plans or arrangements that provide for payments to the Named Executive Officers at, following, or in connection with any termination of employment.

 

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Deferred Compensation Plan for Executive Officers

 

In January 2005, we established the Coffee Holding Co., Inc. Non-Qualified Deferred Compensation Plan for Named Executive Officers. Currently, Andrew Gordon is the only participant in the plan. Each Named Executive Officer who participates in the plan may defer receipt of all or a portion of his annual cash compensation received from Coffee Holding. The deferred amounts are allocated to a deferral account and credited with interest according to the investment classifications made available by the Board. The plan is an unfunded, non-qualified plan that provides for distribution of the amounts deferred to participants or their designated beneficiaries upon the occurrence of certain events. The amounts deferred, and related investment earnings, are held in a corporate account for the benefit of participating Named Executive Officers until such amounts are distributed pursuant to the terms of the plan.

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth information regarding outstanding stock options awarded to each of our Named Executive Officers as of October 31, 2020.

 

   Number of Securities Underlying Unexercised Options   Option exercise    Option expiration
Name 

Exercisable

  

Unexercisable

  

price ($) 

   date
Andrew Gordon   116,333(1)   232,667(1)  $5.43   4/18/2029
David Gordon   93,666(1)   187,334(1)  $5.43   4/18/2029

 

  (1) Vests in three equal annual installments commencing April 18, 2020.

 

Equity Compensation Plan Information

 

The following table sets forth information regarding outstanding stock options and rights and shares reserved for future issuance under our existing equity compensation plans as of October 31, 2020.

 

Plan Category 

 

Number of securities to be issued upon exercise of outstanding options, warrants and rights 

  

 

Weighted-average exercise price of outstanding options, warrants and rights 

  

(Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) 

 
  

(a)

  

(b)

  

(c) 

 
Equity compensation plans approved by stockholders (1)   1,000,000   $5.43    0 
Equity compensation plans not approved by stockholders      $     
                
Total   1,000,000   $5.43    0 

 

  (1) Represents outstanding stock options granted to current or former employees and directors of the Company pursuant to its 2013 Equity Compensation Plan.

 

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DIRECTOR COMPENSATION

 

Non-employee directors receive $800 per Board meeting and committee meeting attended in person and $400 per each Board meeting and committee meeting attended telephonically. Non-employee directors are also reimbursed for travel expenses and other out-of-pocket costs incurred in connection with attendance at Board and committee meetings.

 

Total directors’ meeting and committee fees for the fiscal year ended October 31, 2020 were $7,200. We do not compensate our employee directors for service as directors. Directors are also entitled to the protection of certain indemnification provisions in our Amended and Restated Articles of Incorporation and Bylaws.

 

The following table sets forth information regarding compensation earned by our non-employee directors during the 2020 fiscal year.

 

DIRECTOR COMPENSATION TABLE

 

Name 

 

Fees Earned or

Paid in Cash

($)(1) 

  

 

Stock Options (2)(3) 

  

 

All Other

Compensation

($) 

  

 

Total ($) 

 
Gerard DeCapua  $                 2,400   $0   $0   $2,400 
Daniel Dwyer  $0   $0   $0   $0 
Barry Knepper  $2,400   $0   $0   $2,400 
John Rotelli  $0   $0   $0   $0 
George F. Thomas  $2,400   $0   $0   $2,400 

 

(1) Meeting fees earned during the fiscal year, whether such fees were paid currently or deferred.

(2) Stock option awards represent the grant date fair value of the awards pursuant to FASB ASC Topic 718, as described in Note 12 “Stockholders’ Equity” in the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended October 31, 2019, to which reference is hereby made.

(3) The total number of shares of common stock covered by stock options held by each non-employee director at October 31, 2020 were as follows:

 

  

No. of Shares 

 
Gerard DeCapua   14,000 
Daniel Dwyer   14,000 
Barry Knepper   14,000 
John Rotelli   14,000 
George F. Thomas   3,000 

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table shows the number of shares of Coffee Holding’s common stock, par value $0.001 per share, beneficially owned by (i) each person known to be the owner of 5% or more of our common stock, (ii) each director and nominee, (iii) the Named Executive Officers identified in the Summary Compensation Table included elsewhere in this proxy statement and (iv) all directors and executive officers of Coffee Holding as a group, as of February 25, 2021. The percent of common stock outstanding was based on a total of 5,708,599 shares of Coffee Holding’s common stock outstanding as of February 25, 2021. Except as otherwise indicated, each person shown in the table has sole voting and investment power with respect to the shares of common stock listed next to his or her name. The address for each person shown in the table is c/o Coffee Holding Co., Inc., 3475 Victory Boulevard, Staten Island, New York 10314.

 

Name  Position 

 

Amount and

Nature of

Beneficial

Ownership 

  

Percent of

Common

Stock

Outstanding

(%) (1) 

 
Directors and Executive Officers             
Andrew Gordon  President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director    515,416 (2)    8.7%
David Gordon  Executive Vice President - Operations, Secretary and Director    549,514 (3)    9.3%
Gerard DeCapua  Director    14,100 (4)     *  
Daniel Dwyer  Director    19,900 (5)     *  
Barry Knepper  Director    36,010 (6)     *  
John Rotelli  Director    20,048 (7)     *  
George F. Thomas  Director    5,600 (8)     *  
All directors and executive officers as a group (7 persons)      940,387    15.4%
5% or More Holders             
Ancora Advisors LLC      349,034 (9)    6.1%
Renaissance Technologies LLC      479,139 (10)    8.4%
The Vanguard Group      290,906 (11)    5.1%
All 5% or More Holders      1,119,079    19.6%

 

 

* Less than 1.0%

 

  (1) Beneficial ownership includes shares of common stock as to which a person or group has sole or shared voting power or investment power. Shares of common stock subject to stock options that are exercisable currently or within 60 days of February 25, 2021, are deemed outstanding for purposes of computing the number of shares beneficially owned and percentage ownership of the person or group holding such stock options, warrants or convertible securities, but are not deemed outstanding for computing the percentage of any other person
     
  (2) Includes 9,000 shares owned by Mr. A. Gordon directly, a stock option to purchase 349,000 shares held directly by Mr. A Gordon, of which 232,666 shares are exercisable within sixty days of February 28, 2021, and 273,750 shares owned indirectly by Mr. A. Gordon through A. Gordon Family Ventures LLC.
     
  (3) Includes 362,181 shares owned by Mr. D. Gordon directly, a stock option to purchase 281,000 shares owned directly by Mr. D. Gordon, of which 187,333 shares are exercisable within sixty days of February 28, 2021.

 

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  (4) Includes 100 shares and an option to purchase 14,000 shares owned directly by Mr. DeCapua.
     
  (5) Includes 5,900 shares and an option to purchase 14,000 shares owned directly by Mr. Dwyer.
     
  (6) Includes 22,010 shares and an option to purchase 14,000 shares owned directly by Mr. Knepper.
     
  (7) Includes 1,850 shares and an option to purchase 14,000 shares owned directly by Mr. Rotelli.
     
  (8) Includes 2,000 shares owned by Mr. Thomas directly, an option to purchase 3,000 shares owned by Mr. Thomas directly, and 600 shares owned by Mr. Thomas’ wife.
     
  (9) Includes shares beneficially owned by Ancora Advisors, LLC. The principal business address of Ancora Advisors, LLC is 6060 Parkland Blvd., Suite 200, Cleveland, Ohio 44124. All information regarding Ancora Advisors LLC is based on information disclosed in a statement on Schedule 13G filed with the SEC on February 8, 2021.
     
  (10) Includes shares beneficially owned by Renaissance Technologies Holdings Corporation (“RTHC”) because of RTHC’s majority ownership of Renaissance Technologies LLC (“RTC”). The principal business address of both RTHC and RTC is 800 Third Avenue, New York, New York 10022. All information regarding RTHC is based on information disclosed in a statement on Schedule 13G filed with the SEC on February 11, 2021.
     
  (11) The principal business address of The Vanguard Group is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. All information regarding the Vanguard Group is based on information disclosed in a statement on Schedule 13G filed with he SEC on February 10, 2021.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

The Company has engaged its 40% partner in Generations Coffee Company, LLC, or GCC, with which the Company has a joint venture, as an outside contractor. Coffee Holding is the 60% equity owner of the joint venture and Caruso’s Coffee Company (“Caruso’s”) owns the other 40% equity interest. Payments to Caruso’s during the years ended October 31, 2020, October 31, 2019 and October 31, 2018 amounted to $380,838, $401,227, and $447,140, respectively, for the processing of finished goods.

 

Mr. Dwyer, a member of our Board of Directors, is a senior coffee trader for Rothfos Corporation, a coffee trading company, or Rothfos. Mr. Dwyer is responsible for our account with Rothfos. We paid Rothfos approximately $5.3 million, $8.3 million, and $9.1 million for green coffee purchases in fiscal 2020, 2019, and 2018, respectively. Rothfos accounted for approximately $0, $840,000, and $215,000 of the Company’s accounts payable in fiscal 2020, 2019 and 2018, respectively. All purchases are made on arms’ length terms.

 

We believe that the transactions set forth above were made on terms no less favorable to us than could have been obtained from unaffiliated third parties. All transactions between us and our officers, directors and principal stockholders and their affiliates are subject to approval by an independent committee of our Board of Directors.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Fees Billed to the Company in fiscal years 2020 and 2019

 

The following table summarizes the fees for professional services rendered by Marcum, our independent registered public accounting firm, for each of the last two fiscal years:

 

   Fiscal Year 
   2020   2019 
Audit Fees (1)  $143,787   $138,250 
Audit-Related Fees  $0   $ 
Tax Fees  $0   $ 
All Other Fees  $0   $ 
Total  $143,787   $138,250 

 

 

  (1) Audit fees consisted of work performed in connection with the audit of the consolidated financial statements as well as work generally only the independent auditors can reasonably be expected to provide, such as quarterly reviews and review of our Annual Reports on Form 10-K.

 

Audit Committee Pre-Approval Policy

 

The Audit Committee, or a designated member of the Audit Committee, shall preapprove all auditing services and permitted non-audit services (including the fees and terms) to be performed for Coffee Holding by our registered independent public accountants, subject to the de minimis exceptions for non-audit services that are approved by the Audit Committee prior to completion of the audit, provided that: (1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by Coffee Holding to its registered independent public accountant during the fiscal year in which the services are provided; (2) such services were not recognized by Coffee Holding at the time of the engagement to be non-audit services; and (3) such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the Board to whom authority to grant such approvals has been delegated by the Audit Committee. Of the services set forth in the table above, all were preapproved by the Audit Committee.

 

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PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

(a) List of Documents filed as part of this Report

 

(1) Financial Statements

 

None.

 

(2) Financial Statement Schedules

 

None.

 

(3) List of Exhibits

 

(a) Exhibits

 

The Company has filed with this report or incorporated by reference herein certain exhibits as specified below pursuant to Rule 12b-32 under the Exchange Act.

 

Exhibit No.   Description
     
31.1   Principal Executive Officer and Principal Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
     
32.1   Principal Executive Officer and Principal Financial Officer’s Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

 

* Filed herewith

**Furnished herewith

 

ITEM 16. FORM 10-K SUMMARY

 

None.

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 26, 2021.

 

  COFFEE HOLDING CO., INC.
     
  By: /s/ Andrew Gordon
    Andrew Gordon
    President, Chief Executive Officer

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/Andrew Gordon   President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director   February 26, 2021
Andrew Gordon   (principal executive officer and principal financial and accounting officer)    
         
/s/ David Gordon   Executive Vice President – Operations, Secretary and Director   February 26, 2021
David Gordon        
         
/s/ Gerard DeCapua   Director   February 26, 2021
Gerard DeCapua        
         
/s/ Daniel Dwyer   Director   February 26, 2021
Daniel Dwyer        
         
/s/ Barry Knepper   Director   February 26, 2021
Barry Knepper        
         
/s/ John Rotelli   Director   February 26, 2021
John Rotelli        
         
/s/ George Thomas   Director   February 26, 2021
George Thomas        

 

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