U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 33-960-70-LA
THANKSGIVING COFFEE COMPANY, INC.
(Exact name of small business issuer
as specified in its charter)
California 94-2823626
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
19100 South Harbor Drive
Fort Bragg, California 95437
(Address of principal executive officers) (Zip Code)
Issuer's telephone number, including area code: (707) 964-0118
(Former name, former address and former fiscal year,
if changed since last report.)
Check whether the issuer (1) 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 \ \
As of May 13, 1997, there were issued and outstanding
1,236,744 shares of common stock of the issuer.<PAGE>
THANKSGIVING COFFEE COMPANY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Balance Sheet at March 31, 1997 and
December 31, 1996 . . . . . . . . . . . . 1
Statements of Income for the Three Months
Ended March 31, 1997 and March 31, 1996 . 3
Statements of Cash Flows for the Three
Months Ended March 31, 1997 and March 31,
1996 . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . 9
Item 2. Changes in Securities . . . . . . . . . . 9
Item 3. Defaults Upon Senior Securities . . . . . 9
Item 4. Submission of Matters to a Vote of
Security-Holders . . . . . . . . . . . . 9
Item 5. Other Information . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . 9<PAGE>
THANKSGIVING COFFEE COMPANY, INC.
Balance Sheet (Unaudited)
ASSETS
March 31, 1997 December 31, 1996
CURRENT ASSETS
Cash $253,045 $399,037
Accounts Receivable 459,019 296,006
Employee Receivable 7,311 6,031
Inventory 545,344 486,797
Commodities Options
Account 105,275 0
Other Receivables &
Prepaids 78,523 158,664
_______ _________
Total Current Assets 1,448,517 1,346,636
PROPERTY AND EQUIPMENT
Property Fixtures &
Equipment 1,847,190 1,806,155
Accumulated Depreciation (926,888) (891,205)
_________ _________
Total Property &
Equipment 920,302 914,950
OTHER ASSETS
Deposits And Other Assets 30,175 30,585
Deferred Futures Contract 9,131 0
Intangibles, Net Of
Amortization 284,796 293,111
_______ _______
Total Other Assets 324,102 323,696
_______ _______
Total Assets $2,692,921 $2,585,182
========== ==========
See accompanying notes to financial statements.<PAGE>
THANKSGIVING COFFEE COMPANY, INC.
Balance Sheet (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 1997 December 31, 1996
CURRENT LIABILITIES
Accounts Payable $441,074 $206,417
Notes Payable - Banks 291,767 50,000
Notes Payable - Shareholder 105,552 31,038
Accrued Liabilities 50,512 52,952
_______ __________
Total Current
Liabilities 888,905 431,821
LONG TERM DEBT
Notes Payable 145,580 515,080
_______ __________
Total Long-Term Debt 145,580 515,080
OTHER LIABILITIES
Deferred Options Contract 7,219 0
Deferred Income Taxes 51,429 51,429
_______ __________
Total Other Liabilities 58,648 51,429
_______ __________
Total Liabilities 1,093,133 998,330
STOCKHOLDERS' EQUITY
Common Stock - No Par Value
1,960,000 Shares
Authorized;
1,236,744 Shares Issued
And Outstanding At
March 31, 1997 872,829 874,666
Additional Paid-In Capital 24,600 24,000
Retained Earnings 702,360 687,386
_______ __________
Total Stockholders'
Equity 1,599,789 1,586,852
_________ __________
Total Liabilities And
Equity $2,692,921 $2,585,182
========== ==========
See accompanying notes to financial statements.<PAGE>
THANKSGIVING COFFEE COMPANY, INC.
Statements Of Income (Unaudited)
Three Months Ended
March 31, 1997 March 31, 1996
Net Sales $1,512,618 $1,034,028
Cost Of Sales 771,207 600,483
_______ _________
Gross Profit 741,411 433,545
OPERATING EXPENSES
Selling, General &
Administation 687,394 383,756
Depreciation &
Amortization 27,308 22,084
_______ _________
Total Operating
Expenses 714,702 405,840
_______ _________
Operating Income (Loss) 26,709 27,705
OTHER INCOME (EXPENSE)
Interest Income 1,832 907
Interest Expense (14,059) (19,602)
Miscellaneous Income 293 266
________ _________
Total Other Income
(Expense) (11,935) (18,429)
________ ________
Income Before Taxes 14,774 9,276
_______ ________
Net Income $ 14,774 $ 7,151
======== =======
See accompanying notes to financial statements.<PAGE>
THANKSGIVING COFFEE COMPANY, INC.
Statements Of Cash Flow (Unaudited)
Three Months Ended
March 31, 1997 March 31, 1996
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income $ 14,774 $ 7,151
Non Cash Items Included Net
Loss
Depreciation &
Amortization 44,498 27,539
(Increase) Decrease In:
Short Term
Investments - 4,094
Receivables (164,293) 31,645
Inventory (58,547) 123,617
Commodities Options
Account (105,275) (4,029)
Prepaid Expenses 38,406 (1,570)
Deposits 410 289
Deferred Futures
Contract (9,131) -
Increase (Decrease) In:
Accounts Payable 234,657 (63,483)
Accrued Liabilities (2,440) (37,435)
Deferred Options
Contract 7,219 -
_______ ________
Net Cash Provided By
Operating Activities 278 87,818
_______ ________
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase Of Equipment (41,035) (87,842)
Purchase Of Intangible
Assets (500) -
Increase In Stock Offering
Costs (1,837) (105,196)
_________ _________
Net Cash Used By Investing
Activities (43,372) (193,038)
_________ _________
CASH FLOWS FROM FINANCING
ACTIVITIES
Decrease In Notes Receivable 41,735 6,231
(Repayment) Proceeds Of
Notes Payable (144,633) 58,600
__________ ________
Net Cash (Used) Provided By
Financing Activities (102,898) 64,831
__________ ________
See accompanying notes to financial statements.<PAGE>
THANKSGIVING COFFEE COMPANY, INC.
Statements Of Cash Flow (Unaudited) (continued)
Three Months Ended
March 31, 1997 March 31, 1996
Net Decrease In Cash (145,992) (40,389)
Cash, As Of January 1, 1997
And 1996 399,037 128,259
_________ ________
Cash, As Of March 31, 1997
And 1996
$ 253,045 $ 87,870
========= ========
See accompanying notes to financial statements.<PAGE>
THANKSGIVING COFFEE COMPANY, INC.
Notes to Financial Statements (Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles and reflect all adjustments necessary for a fair
presentation of the information reported (which consist only of
normal recurring adjustments). Historically, fourth quarter
sales have accounted for 28% to 35% of the Company's yearly net
sales and the fourth quarter is the most profitable quarter; in
contrast, the Company historically has experienced net losses
during the first and second quarters of the year. Because of the
seasonality of the Company's business, the results of operations
for the three months ended March 31, 1997 are not necessarily
indicative of the results to be expected for the full year. The
consolidated financial statements should be read in conjunction
with the financial statements, including notes thereto, for the
fiscal years ended December 31, 1996 and 1995, which are included
in the Company's Form 8-K filed immediately prior to this Form
10-QSB.
At March 31, 1997 there were $291,767 outstanding under the
Company's line of credit agreement. The Company was in
compliance with each of the covenants required by the agreement
for the quarter ended March 31, 1997.<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Form 10-QSB contains certain forward looking statements,
which are subject to certain risks and uncertainties, including
but not limited to fluctuations in the availability and costs of
green coffee beans, availability of trade credit and other
financing sources, competition in the Company's businesses, and
other risks identified in the Company's Prospectus dated October
10, 1995.
On October 10, 1996, the Company completed its public offering of
common stock. 235,744 shares were sold for an aggregate of
$1,178,720. The Company currently has 1,236,744 shares issued
and outstanding, and 1,316 shareholders of record.
In the quarter ended March 31, 1997 the Company commenced
operations of its green bean division, which imports green coffee
beans for the Company's use and for resale to other roasters.
RESULTS OF OPERATIONS
Net sales for the quarter ended March 31, 1997 were $1,512,618,
an increase of 46% over net sales of $1,034,028 for the quarter
ended March 31, 1996. This increase in net sales was due to
sales through the green bean division and the Company's bakery
and cafe operations, which did not exist in the comparable period
of 1996.
Gross profit increased 71%, from $433,595 (41.9% of net sales) in
the first quarter of 1996 to $741,411 (49.0% of net sales) in the
first quarter of 1997. This increase was a result of reduced
green bean costs for the Company and gross profit attributable to
the green bean division, offset in part by the Company's retail
operations.
Selling, general and administrative expenses increased 79%, from
$383,756 (37% of net sales) in the first quarter of 1996 to
$687,394 (45% of net sales) for the first quarter of 1997.
Higher selling, general and administration expense reflects
hiring of additional management personnel, overhead attributable
to the Company's new retail operations, higher mail order sales
costs, and new product development expenses.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had working capital of $253,045.
Net cash provided by operating activities was $278 for the three
months ended March 31, 1997, compared to $87,818 for the three
months ended March 31, 1996. The decrease in net cash provided
by operating activities was primarily due to an increase in cash
used in the green bean division and to increased accounts payable
and increased accounts receivable largely as a result of sales
associated with the green bean division and the Company's retail
operations. <PAGE>
Net cash used in investing activities, which primarily consists
of expenditures for equipment, was $43,372 for the three months
ended March 31, 1997 as compared to $193,038 during the same
period last year. This decrease was attributable to the
elimination of stock offering costs.
The Company maintains a revolving line of credit of up to
$650,000. The credit agreement contains restrictive loan
covenants which if violated could be used as a basis for
termination of the agreement. For the quarter ended March 31,
1997, the Company was in compliance with or had received waivers
for each of these covenants. There were borrowings of $291,767
outstanding under the credit agreement at March 31, 1997. The
credit agreement expires June 10, 1997 but the Company expects to
be able to extend the agreement or negotiate a new line of credit
agreement.
The Company expects to be able to fund its working capital
requirements and expansion plans with a combination of cash flows
from operations, normal trade credit, financing arrangements and
continued use of lease financing.
The seasonal availability of green bean coffee in the first
quarter of the year and increased sales in the last quarter
historically creates a high use of cash and a build-up in
inventories in the first quarter, with a corresponding decrease
in inventory and increase in cash in the last quarter.<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No new legal actions were filed by or against the Company in the
quarter ended March 31, 1997.
ITEM 2. CHANGES IN SECURITIES
- Not Applicable -
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- Not Applicable -
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- Not Applicable -
ITEM 5. OTHER INFORMATION
- Not Applicable -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
3.i. Articles of Incorporation of the Company (filed
as Exhibit 3.1 to the Registrant's Registration
Statement on Form SB-2, Reg. No. 33-960-70-LA,
and incorporated herein by reference)
3.ii Bylaws of the Company (filed as Exhibit 3.1 to
the Registrant's Registration Statement on Form
SB-2, Reg. No. 33-960-70-LA, and incorporated
herein by reference)
b. No reports on Form 8-K were filed during the period
from January 1, 1997 through March 31, 1997.<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
THANKSGIVING COFFEE COMPANY, INC.
Name Title Date
/s/ Paul Katzeff Chief Executive Officer May 15, 1997
________________________
Paul Katzeff
/s/ Joan Katzeff President May 15, 1997
________________________
Joan Katzeff<PAGE>
