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<SEC-DOCUMENT>/in/edgar/work/0000891092-00-000969/0000891092-00-000969.txt : 20001030
<SEC-HEADER>0000891092-00-000969.hdr.sgml : 20001030
ACCESSION NUMBER:		0000891092-00-000969
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	19980430
FILED AS OF DATE:		20001027

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			COFFEE HOLDING CO INC
		CENTRAL INDEX KEY:			0001007019
		STANDARD INDUSTRIAL CLASSIFICATION:	 [6770
]		IRS NUMBER:				113860760
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			0930
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		10-Q
			SEC ACT:		
			SEC FILE NUMBER:	333-00588-NY
			FILM NUMBER:		748015
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		4401 FIRST AVENUE
				CITY:			BROOKLYN
				STATE:			NY
				ZIP:			11232
				BUSINESS PHONE:		7188320800
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 1:		4401 FIRST AVENUE
					CITY:			BROOKLYN
					STATE:			NY
					ZIP:			11232
</MAIL-ADDRESS>

					FORMER COMPANY:	
						FORMER CONFORMED NAME:	TRANSPACIFIC INTERNATIONAL GROUP CORP
						DATE OF NAME CHANGE:	19960201
</FORMER-COMPANY>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-Q
<TEXT>


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, DC 20549-1004

                                    FORM 10-Q

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

      For the quarterly period ended April 30, 1998 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. _______

                            COFFEE HOLDING CO., INC.
             (Exact name of registrant as specified in its charter)

         Nevada                                                11-2238111
(state or other jurisdiction of                               (IRS employer
incorporation or organization)                            identification number)

4401 First Avenue, Brooklyn, New York                             11232
(address of principal executive offices)                        (zip code)

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

      Securities registered pursuant to Section 12(b) of the Act:

                                      None
                                      ----
                                (Title of Class)

      Securities registered pursuant to Section 12(g) of the Act:

                                      None
                                      ----
                                (Title of Class)

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 and Exchange Act of 1934
during the preceding 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 No X .

As of September 30, 2000, the Registrant had 3,999,650 shares of common stock,
par value $.001 per share, outstanding.


<PAGE>

                                     PART I

                            COFFEE HOLDING CO., INC.

ITEM 1. FINANCIAL STATEMENTS


<PAGE>

                            COFFEE HOLDING CO., INC.

                     INDEX TO UNAUDITED FINANCIAL STATEMENTS

                                                                     PAGE
                                                                    ------

BALANCE SHEETS
     APRIL 30, 1998 AND OCTOBER 31, 1997                             F-2

STATEMENTS OF OPERATIONS
     SIX AND THREE MONTHS ENDED APRIL 30, 1998 AND 1997              F-3

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
     SIX MONTHS ENDED APRIL 30, 1998                                 F-4

STATEMENTS OF CASH FLOWS
     SIX MONTHS ENDED APRIL 30, 1998 AND 1997                        F-5

NOTES TO FINANCIAL STATEMENTS                                     F-6/17

                                      * * *


                                      F-1
<PAGE>

                            COFFEE HOLDING CO., INC.

                                 BALANCE SHEETS
                       APRIL 30, 1998 AND OCTOBER 31, 1997

<TABLE>
<CAPTION>
                                                                         April      October
                                 ASSETS                                30, 1998    31, 1997
                                 ------                              -----------  ------------
                                                                     (Unaudited)  (See Note 1)
<S>                                                                  <C>          <C>
Current assets:
     Cash                                                            $   70,314   $  198,679
     Due from broker                                                    199,588      423,899
     Accounts receivable, net of allowance for doubtful
        accounts of $215,000 and $254,317                             2,335,113    2,858,201
     Inventories                                                      1,831,898    1,379,383
     Cash and cash equivalents restricted under mortgage note           370,237       66,070
     Prepaid expenses and other current assets                           27,756       27,066
                                                                     ----------   ----------
           Total current assets                                       4,834,906    4,953,298
Property and equipment, at cost, net of accumulated
     depreciation of $1,521,164 and $1,422,651                        2,166,427    1,722,194
Deferred mortgage costs, net of accumulated amortization
     of $46,029 and $43,449                                              59,366       61,946
Deposits and other assets                                               133,826       57,191
                                                                     ----------   ----------

           Totals                                                    $7,194,525   $6,794,629
                                                                     ==========   ==========

                LIABILITIES AND STOCKHOLDERS' EQUITY
                ------------------------------------

Current liabilities:
     Due factor                                                                   $2,503,228
     Mortgage note payable                                           $  625,000      650,000
     Current portion of term loan                                        87,312
     Current portion of obligations under capital leases                235,479      127,524
     Accounts payable and accrued expenses                            1,971,520    2,209,420
                                                                     ----------   ----------
           Total current liabilities                                  2,919,311    5,490,172
Term loan, net of current portion                                       273,498
Line of credit borrowings                                             2,587,095
Obligations under capital leases, net of current portion                367,872      233,810
Loans from related parties                                               75,492      475,215
                                                                     ----------   ----------
           Total liabilities                                          6,223,268    6,199,197
                                                                     ----------   ----------

Commitments and contingencies

Stockholders' equity:
     Preferred stock, par value $.001 per share; 10,000,000 shares
        authorized; none issued                                            --           --
     Common stock, par value $.001 per share; 30,000,000 shares
        authorized, 3,999,650 shares issued and outstanding               4,000
     Common stock, no par value; 200 shares authorized;
        100 shares issued and outstanding                                            460,000
     Additional paid-in capital                                         480,997
     Retained earnings                                                  486,260      135,432
                                                                     ----------   ----------
           Total stockholders' equity                                   971,257      595,432
                                                                     ----------   ----------
           Totals                                                    $7,194,525   $6,794,629
                                                                     ==========   ==========
</TABLE>

See Notes to Financial Statements.


                                      F-2
<PAGE>

                            COFFEE HOLDINGS CO., INC.

                            STATEMENTS OF OPERATIONS
               SIX AND THREE MONTHS ENDED APRIL 30, 1998 AND 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                  Six Months                 Three Months
                                                Ended April 30,             Ended April 30,
                                          -------------------------   --------------------------
                                             1998          1997           1998           1997
                                          -----------   -----------   -----------    -----------
<S>                                       <C>           <C>           <C>            <C>
Net sales                                 $13,181,142   $11,537,024   $ 6,324,247    $ 6,531,390
Cost of sales                              11,329,593     9,166,989     6,181,727      4,826,402
                                          -----------   -----------   -----------    -----------

Gross profit                                1,851,549     2,370,035       142,520      1,704,988
                                          -----------   -----------   -----------    -----------

Operating expenses:
     Selling and administrative               900,919       877,064       407,752        561,844
     Officers' salaries                       163,175       117,802        72,500         56,545
                                          -----------   -----------   -----------    -----------
               Totals                       1,064,094       994,866       480,252        618,389
                                          -----------   -----------   -----------    -----------

Income (loss) from operations                 787,455     1,375,169      (337,732)     1,086,599
                                          -----------   -----------   -----------    -----------

Other expenses:
     Interest expense                         186,403       165,424        89,501         79,890
     Expenses in connection with
        reverse acquisition                   180,000                     180,000
                                          -----------   -----------   -----------    -----------
               Totals                         366,403       165,424       269,501         79,890
                                          -----------   -----------   -----------    -----------

Income (loss) before income taxes             421,052     1,209,745      (607,233)     1,006,709

Provision (credit) for state and local
     income taxes                              46,000       142,534       (67,000)       116,648
                                          -----------   -----------   -----------    -----------

Net income (loss)                         $   375,052   $ 1,067,211   $  (540,233)   $   890,061
                                          ===========   ===========   ===========    ===========

Unaudited:
     Historical income (loss) before
        income taxes                      $   421,052   $ 1,209,745   $  (607,233)   $ 1,006,709
     Pro forma:
        Provision (credit) for income
           taxes                              191,000       544,000      (273,000)       453,000
                                          -----------   -----------   -----------    -----------

        Net income (loss)                 $   230,052   $   665,745   $  (334,233)   $   553,709
                                          ===========   ===========   ===========    ===========

        Basic earnings (loss) per share   $       .06   $       .17   $      (.08)   $       .14
                                          ===========   ===========   ===========    ===========

        Basic weighted average
           common shares outstanding        3,999,650     3,999,650     3,999,650      3,999,650
                                          ===========   ===========   ===========    ===========
</TABLE>

See Notes to Financial Statements.


                                      F-3
<PAGE>

                            COFFEE HOLDING CO., INC.

                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                         SIX MONTHS ENDED APRIL 30, 1998
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Common Stock
                                    --------------------------------------------
                                          No Par Value        $.001 Par Value
                                    --------------------   ---------------------  Additional
                                    Number of               Number of               Paid-in    Retained
                                     Shares     Amount       Shares      Amount     Capital    Earnings     Total
                                    --------  ---------    ----------   --------   --------    --------   --------
<S>                                   <C>      <C>          <C>         <C>        <C>         <C>             <C>
Balance, November 1, 1997,
    as adjusted                        100    $ 460,000                                       $135,432    $595,432

Effect of reverse acquisition         (100)    (460,000)    3,999,650   $  4,000   $480,997    (24,224)        773

Net income                                                                                     375,052     375,052
                                    ------    ---------    ----------   --------   --------   --------    --------

Balance, April 30, 1998               --      $    --       3,999,650   $  4,000   $480,997   $486,260    $971,257
                                    ======    =========    ==========   ========   ========   ========    ========
</TABLE>

See Notes to Financial Statements.


                                      F-4
<PAGE>

                            COFFEE HOLDING CO., INC.

                            STATEMENTS OF CASH FLOWS
                    SIX MONTHS ENDED APRIL 30, 1998 AND 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 1998          1997
                                                              ---------    ----------
<S>                                                           <C>          <C>
Operating activities:
     Net income                                               $ 375,052    $1,067,211
     Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation and amortization                           101,472       106,501
        Changes in operating assets and liabilities:
           Due from broker                                      224,311       (50,533)
           Accounts receivable                                  523,088      (405,397)
           Inventories                                         (452,515)     (405,347)
           Prepaid expenses and other current assets               (690)          691
           Deposits and other assets                            (76,635)
           Accounts payable and accrued expenses               (237,127)      251,762
                                                              ---------    ----------
               Net cash provided by operating activities        456,956       564,888
                                                              ---------    ----------

Investing activities - purchases of property and equipment     (254,625)     (138,855)
                                                              ---------    ----------

Financing activities:
     Net repayments of amounts due factor                                     (99,913)
     Principal payments on mortgage note payable                (25,000)      (25,000)
     Increase in cash and cash equivalents restricted under
        mortgage note                                          (304,167)
     Principal payments on term loan                            (43,656)
     Net advances under bank line of credit                     488,333
     Principal payments of obligations under capital leases     (46,483)
     Repayments of loans from related parties                  (399,723)     (151,612)
                                                              ---------    ----------
               Net cash used in financing activities           (330,696)     (276,525)
                                                              ---------    ----------

Net increase (decrease) in cash                                (128,365)      149,508

Cash, beginning of period                                       198,679        11,090
                                                              ---------    ----------

Cash, end of period                                           $  70,314    $  160,598
                                                              =========    ==========

Supplemental disclosure of cash flow data:
     Interest paid                                            $ 186,403    $  165,424
                                                              =========    ==========

     Income taxes paid                                        $ 104,664
                                                              =========
</TABLE>

Supplemental schedule of noncash investing and financing activities:

      During  the six  months  ended  April  30,  1998,  the  Company  purchased
      equipment at a cost of $288,500 by incurring capital lease obligations.

      During the six months  ended April 30,  1998,  the Company  increased  its
      obligations  under the credit  facility  that provides it with the line of
      credit  and term loan and  decreased  the  balance  payable  to its factor
      through a direct transfer of $2,503,288 from the bank to the factor.

See Notes to Financial Statements.


                                      F-5
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 1 - Business activities and reverse acquisition:

      Coffee Holding Co., Inc. ("Coffee"), which was incorporated in New York on
      January  22,  1971,   conducts  wholesale  coffee  operations,   including
      manufacturing, roasting, packaging, marketing and distributing roasted and
      blended coffees for private labeled accounts and its own brands, and sells
      green  coffees.  The Company's  sales are primarily to customers  that are
      located throughout the United States.

      On February 10, 1998, the holders of all of the shares of Coffee's  common
      stock  consummated an exchange (the "Exchange") of their shares for shares
      of   common   stock   of    Transpacific    International    Group   Corp.
      ("Transpacific").  Transpacific  was  incorporated in Nevada on October 9,
      1995 and organized  originally as a "blind pool" or "blank check"  company
      for the purpose of either merging with or acquiring an operating  company.
      It had been a  development  stage  company with no  significant  operating
      activities or assets and liabilities prior to the Exchange.

      Transpacific, which had, effectively, 999,650 outstanding shares of common
      stock (with a par value of $.001 per share) prior to the Exchange,  issued
      3,000,000 shares of common stock in exchange for all of the 100 issued and
      outstanding shares of common stock (no par value) of Coffee. Concurrently,
      Coffee  was merged  into  Transpacific  (the  "Merger")  and  Transpacific
      changed its name to Coffee Holding Co., Inc.

      Coffee  Holding  Co.,  Inc.  after the  Exchange,  the Merger and the name
      change is referred to below as the  "Company" or the  "Combined  Company."
      The "Company" is also used to refer to Coffee  Holding Co., Inc.  prior to
      the Exchange, the Merger and the name change.

      The  stockholders  of Coffee also owned 540,040  shares of common stock of
      Transpacific prior to the Exchange and, accordingly, they owned a total of
      3,540,400  or 88.5% of the  outstanding  shares  of the  Combined  Company
      immediately  after  the  Exchange.  Therefore,  the  Merger  was  treated,
      effective as of February 10, 1998,  as a "purchase  business  combination"
      and a "reverse  acquisition" for accounting purposes in which Transpacific
      was the "legal  acquirer" and Coffee was the  "accounting  acquirer."  The
      carrying values of the assets and liabilities of Transpacific,  which were
      immaterial,  were  recorded  at their  historical  carrying  values  as of
      February  10,  1998.  Accordingly,  the  historical  financial  statements
      included herein only reflect the operations of Coffee for the period prior
      to February 10, 1998.  All references to numbers of shares of common stock
      as of the dates or for periods prior to the Exchange have been restated to
      reflect  the  ratio  of  the  number  of  common  shares  of  Transpacific
      effectively exchanged for common shares of Coffee.

      Consulting  and  professional  fees and other costs incurred in connection
      with the reverse  acquisition  totaling  $180,000  were charged to expense
      during the six months ended April 30, 1998.

      Information  as to the  unaudited  pro forma  results of operations of the
      Company assuming the Merger had been consummated as of, and the results of
      operations of  Transpacific  had been included from,  November 1, 1996 has
      not been  presented  because  such pro  forma  results  would  not  differ
      materially  from the  historical  results of operations for the six months
      ended April 30, 1998 and 1997  reflected  in the  accompanying  historical
      statements of operations.


                                      F-6
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies:
      Basis of presentation:
            In the opinion of management,  the accompanying  unaudited financial
            statements  reflect all adjustments,  consisting of normal recurring
            accruals,  necessary to present fairly the financial position of the
            Company as of April 30, 1998,  its results of operations for the six
            and three  months  ended  April 30,  1998 and 1997,  its  changes in
            stockholders' equity for the six months ended April 30, 1998 and its
            cash  flows  for the six  months  ended  April  30,  1998 and  1997.
            Information included in the balance sheet as of October 31, 1997 has
            been  derived  from  the  Company's  audited  financial  statements.
            Pursuant to generally accepted  accounting  principles and the rules
            and  regulations  of the  Securities  and  Exchange  Commission  for
            interim financial  statements,  certain  information and disclosures
            normally  included in financial  statements  prepared in  accordance
            with generally accepted accounting principles have been condensed or
            omitted from these financial  statements.  Operating results for the
            six and three  month  periods  ended April 30, 1998 and 1997 are not
            necessarily  indicative  of the results that may be expected for the
            years ending October 31, 1998 and 1997.

      Use of estimates:
            The preparation of financial statements in conformity with generally
            accepted accounting principles requires management to make estimates
            and   assumptions   that  affect   certain   reported   amounts  and
            disclosures.  Accordingly,  actual  results  could differ from those
            estimates.

      Cash equivalents:
            Cash equivalents represent highly liquid investments with maturities
            of three months or less at the date of purchase.

      Inventories:
            Inventories  are  valued at the lower of cost  (first-in,  first-out
            basis) or market.

      Property and equipment:
            Property and  equipment are recorded at cost and  depreciated  using
            the  straight-line  method over the  estimated  useful  lives of the
            assets.

      Hedging:
            The Company uses futures and options  contracts to hedge the effects
            of  fluctuations   in  the  price  of  green  coffee  beans.   These
            transactions meet the requirements for hedge  accounting,  including
            designation and correlation. To obtain a proper matching of revenues
            and expenses,  gains or losses  arising from open and closed hedging
            transactions  are included in  inventory as a cost of the  commodity
            and  reflected in the  statement of  operations  when the product is
            sold. Risks arise from the possible  inability of  counterparties to
            meet the terms of their contracts and from movements in the price of
            green  coffee.  Management  believes  that the  overall  exposure to
            credit risk is minimal.

            At April 30, 1998, the Company held options covering an aggregate of
            2,927,000  pounds of green  coffee  beans which are  exercisable  in
            fiscal  1998 at prices  ranging  from $1.35 to $1.45 per pound.  The
            fair market value of these options,  which was obtained from a major
            financial institution, was approximately $322,000 at April 30, 1998.
            Due from broker includes the effects of unrealized hedging losses of
            $296,789  and  $299,934  at April 30,  1998 and  October  31,  1997,
            respectively.


                                      F-7
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued):
      Deferred mortgage costs:
            Costs incurred in connection with obtaining  mortgage financing have
            been  capitalized  and are  being  amortized  over  the  term of the
            mortgage  using a method  that  approximates  the  interest  method.
            Amortization of deferred mortgage costs was not material for the six
            and three months ended April 30, 1998 and 1997.

      Advertising:
            The Company  expenses  the cost of  advertising  and  promotions  as
            incurred.  Advertising  costs charged to operations  totaled $89,006
            and  $50,116  for the six  months  ended  April  30,  1998 and 1997,
            respectively,  and $61,943 and  $25,320 for the three  months  ended
            April 30, 1998 and 1997, respectively.

      Income taxes:
            Prior to the Merger on February 10, 1998,  Coffee,  with the consent
            of its stockholders, had elected to be treated as an "S" Corporation
            under the Internal Revenue Code.  Accordingly,  the Company's income
            or loss prior to that date was  allocated  to Coffee's  stockholders
            for  inclusion  in  their  personal   Federal  income  tax  returns.
            Therefore,  the  Company was not  required to record any  historical
            provision or credit for Federal income taxes for the period prior to
            February 10, 1998.

            The Company had also elected to be treated as an "S" Corporation for
            New York state income tax purposes.  However, New York imposes a tax
            on "S"  Corporation  income at a reduced rate and New York City does
            not recognize "S" Corporations.  Therefore, the Company was required
            to record  appropriate  historical  provisions and credits for state
            and local income taxes in periods  prior and  subsequent to February
            10, 1998.

            The  Company  accounts  for income  taxes  pursuant to the asset and
            liability  method  which  requires  deferred  income  tax assets and
            liabilities  to  be  computed  annually  for  temporary  differences
            between  the  financial  statement  and  tax  bases  of  assets  and
            liabilities that will result in taxable or deductible amounts in the
            future based on enacted tax laws and rates applicable to the periods
            in which the  differences  are  expected to affect  taxable  income.
            Valuation  allowances  are  established  when  necessary  to  reduce
            deferred  tax  assets to the amount  expected  to be  realized.  The
            income tax provision or credit is the tax payable or refundable  for
            the period  plus or minus the change  during the period in  deferred
            tax assets and liabilities.


                                      F-8
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (continued):
      Stock options:
            In accordance  with the  provisions of Accounting  Principles  Board
            Opinion No. 25,  "Accounting  for Stock  Issued to  Employees,"  the
            Company  will  recognize  compensation  costs  as a  result  of  the
            issuance of stock options to employees based on the excess,  if any,
            of the fair  value of the  underlying  stock at the date of grant or
            award (or at an appropriate  subsequent  measurement  date) over the
            amount the employees must pay to acquire the stock.  Therefore,  the
            Company will not be required to recognize  compensation expense as a
            result of any grants of stock  options to  employees  at an exercise
            price that is equivalent to or greater than fair value.  The Company
            will also make pro forma  disclosures,  as required by  Statement of
            Financial  Accounting Standards No. 123, "Accounting for Stock-Based
            Compensation" ("SFAS 123"), of net income or loss as if a fair value
            based method of accounting  for stock  options had been applied,  if
            such amounts differ materially from the historical amounts.

      Earnings (loss) per share:
            The Company presents "basic" and, if applicable,  "diluted" earnings
            per  common  share  pursuant  to  the  provisions  of  Statement  of
            Financial  Accounting Standards No. 128, "Earnings per Share" ("SFAS
            128") and certain other financial accounting  pronouncements.  Basic
            earnings  (loss) per common  share is  calculated  by  dividing  net
            income or loss by the  weighted  average  number  of  common  shares
            outstanding  during each period. The calculation of diluted earnings
            per common  share is similar  to that of basic  earnings  per common
            share,  except  that the  denominator  is  increased  to include the
            number of additional  common shares that would have been outstanding
            if all potentially  dilutive  common shares,  such as those issuable
            upon the exercise of stock options, were issued during the period.

            Since the Company had elected to be taxed as an "S" Corporation,  it
            was not required to provide for Federal income taxes and it was only
            required to provide for state  income  taxes at a reduced rate prior
            to the date of the Exchange.  SEC rules and regulations prohibit the
            presentation  of  earnings  (loss)  per  common  share  amounts on a
            historical  basis for the periods  during which the "S"  Corporation
            elections were in effect;  instead, they require the presentation of
            basic and,  if  applicable,  diluted  unaudited  pro forma  earnings
            (loss) per common share amounts in the  statements of operations for
            such periods  assuming  that the Company had been subject to Federal
            and  state  income  taxes at  statutory  rates  applicable  to those
            companies that had not made "S" Corporation elections.

            Since the Company had elected to be taxed as an "S"  Corporation for
            part of the six and three months ended April 30, 1998 and all of six
            and three  months  ended  April 30,  1997 and it had no  potentially
            dilutive  securities  outstanding  during the six months ended April
            30, 1998 and 1997,  unaudited pro forma earnings (loss) per share is
            presented in the  accompanying  statements of operations for the six
            and three months ended April 30, 1998 and 1997.


                                      F-9
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 2 - Summary of significant accounting policies (concluded):
      Earnings (loss) per share (concluded):
            The  weighted   average  common  shares   outstanding  used  in  the
            computation of unaudited pro forma basic  earnings  (loss) per share
            for the six and  three  months  ended  April  30,  1998 and 1997 was
            3,999,650,  which reflects the retroactive  adjustment of the number
            of common shares of  Transpacific  actually  outstanding  to include
            only the 999,650  shares  effectively  outstanding as of the date of
            the Exchange and the 3,000,000  shares of common stock issued to the
            stockholders of Coffee in connection with the Exchange (see Note 1).

      Recent accounting pronouncements:
            The  Financial   Accounting   Standards  Board  and  the  Accounting
            Standards Executive Committee of the American Institute of Certified
            Public    Accountants   had   issued   certain   other    accounting
            pronouncements  as of April 30, 1998 that will become  effective  in
            subsequent  periods;  however,  management  of the Company  does not
            believe that any of those  pronouncements  would have  significantly
            affected  the  Company's   financial   accounting   measurements  or
            disclosures  had they been in effect  during  the six  months  ended
            April 30, 1998 and 1997.

Note 3 - Inventories:
            Inventories  at April 30, 1998 and October 31, 1997 consisted of the
            following:

                                                    April             October
                                                  30, 1998            31, 1997
                                                 ----------         -----------

                  Packed coffee                  $  660,115         $  389,796
                  Green coffee                      950,287            805,780
                  Packaging supplies                221,496            183,807
                                                 ----------         ----------
                         Totals                  $1,831,898         $1,379,383
                                                 ==========         ==========

Note 4 - Property and equipment:
            Property  and  equipment  at April 30,  1998 and  October  31,  1997
            consisted of the following:

<TABLE>
<CAPTION>
                                                      Estimated        April       October
                                                     Useful Life     30, 1998     31, 1997
                                                     -----------    ----------    ----------
<S>                                                   <C>           <C>           <C>
                  Building and improvements           30 years      $1,128,182    $1,109,696
                  Machinery and equipment              7 years       1,621,798     1,399,084
                  Machinery and equipment under
                     capital leases                    7 years         694,609       406,109
                  Furniture and fixtures               7 years         102,002        88,956
                                                                    ----------    ----------
                                                                     3,546,591     3,003,845
                  Less accumulated depreciation                      1,521,164     1,422,651
                                                                    ----------    ----------
                                                                     2,025,427     1,581,194
                  Land                                                 141,000       141,000
                                                                    ------------  ----------
                         Totals                                     $2,166,427    $1,722,194
                                                                    ==========    ==========
</TABLE>


                                      F-10
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 4 - Property and equipment (concluded):
            Depreciation  totaled  $98,892 and $103,920 for the six months ended
            April 30, 1998 and 1997,  respectively,  and $50,946 and $51,960 for
            the three months ended April 30, 1998 and 1997, respectively.

Note 5 - Cash and cash equivalents restricted under mortgage note:
            Restricted  cash and cash  equivalents at April 30, 1998 and October
            31, 1997 consisted of investments in the following  interest-bearing
            accounts:


                                                April              October
                                               30, 1998            31, 1997
                                               --------            --------
                  Cash in escrow               $ 20,237            $66,070
                  Certificate of deposit        350,000
                                               --------            -------
                     Totals                    $370,237            $66,070
                                               ========            =======

            Cash in escrow  represents  amounts held in accounts for the payment
            of principal,  interest and various fees in connection  with the New
            York City Industrial  Development  Agency  ("NYCIDA")  mortgage note
            payable (see Note 6).

            The Company did not comply with certain covenants, as defined, under
            the NYCIDA  agreement at April 30, 1998 and October 31,  1997.  As a
            result of its  noncompliance at October 31, 1997, it was required to
            obtain an irrevocable  letter of credit from ABN Amro Bank to secure
            the mortgage note and to pledge a $350,000 certificate of deposit to
            secure the letter of credit  during the six months  ended  April 30,
            1998.

Note 6 - Mortgage note payable:
            On June 1, 1989,  the  Company  financed  the  purchase  of land and
            building  through  the  issuance of a mortgage  note  payable in the
            principal  amount of  $1,050,000 to the NYCIDA.  The mortgage  note,
            which had an  outstanding  balance of $625,000 and $650,000 at April
            30,  1998 and  October  31,  1997,  respectively,  requires  monthly
            payments of $4,167 plus interest based on a variable rate set weekly
            by Bear Stearns & Co. The final payment is due November 1, 2009. The
            payment of the note is secured by a first  mortgage on the Company's
            land and building.

            The NYCIDA agreement contains certain financial covenants.  At April
            30,  1998 and October 31,  1997,  the Company was not in  compliance
            with the covenants.  Accordingly,  the mortgage note payable was due
            on demand and classified as a current liability,  and the restricted
            investments  securing the mortgage note (see Note 5) were classified
            as current assets,  in the  accompanying  April 30, 1998 and October
            31, 1997 balance sheets.


                                      F-11
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 7 - Credit facility borrowings:
            The Company was obligated for borrowings under a factoring agreement
            until  November  21,  1997 when it obtained a credit  facility  from
            Nationscredit  Commercial  Corp.  consisting of a revolving  line of
            credit and a term loan.

            The factoring  agreement provided for borrowings of up to (i) 80% of
            the Company's eligible trade accounts receivable and (ii) 50% of its
            eligible  inventories up to a maximum of $400,000.  The  outstanding
            balance of $2,503,228 at October 31, 1997  approximated  the maximum
            amount that the Company  could borrow  based on its  eligible  trade
            accounts  receivable and  inventories as of that date.  Interest was
            payable  monthly  at the  prime  rate plus 2% and  borrowings  up to
            $200,000,  plus  interest  and other costs and  expenses as defined,
            were guaranteed by a stockholder.

            The Company incurred costs of  approximately  $113,000 in connection
            with the  cancellation of the factoring  agreement that were charged
            to interest expense during the six months ended April 30, 1998.

            The  line of  credit  provides  for  borrowings  of up to 85% of the
            Company's eligible trade accounts receivable and 60% of its eligible
            inventories up to a maximum of $5,000,000  through November 20, 2000
            when the line of credit expires and any outstanding  balance must be
            repaid.  The  outstanding  balance of  $2,587,095  at April 30, 1998
            approximated  the maximum amount that the Company could borrow based
            on its eligible trade accounts receivable and inventories as of that
            date.  Interest  is  payable  monthly  at the prime rate plus 1% (an
            effective rate of 9.5% at April 30, 1998).

            The  term  loan,  which  had  an  outstanding  balance  of  $360,810
            (including a current portion of $87,312) at April 30, 1998, provides
            for  borrowings  of up to the greater of 80% of the cost of eligible
            equipment or $500,000.  Principal is payable in monthly installments
            of $7,276  plus  interest  which is also at the  prime  rate plus 1%
            until November 20, 2000 at which time the  outstanding  balance must
            also be repaid.

            Two of the Company's  stockholders have each guaranteed  outstanding
            borrowings  under  the  credit  facility  of  up to  $100,000,  plus
            interest and other costs and expenses as defined.

Note 8 - Loans from related parties:
            The Company  had loans  payable to its  stockholders  of $75,492 and
            $475,215 at April 30, 1998 and October 31, 1997,  respectively.  The
            loans are due on demand,  bear interest at 10% and are  subordinated
            to the balance outstanding under the mortgage note payable. Interest
            expense was not  material  for the six and three  months ended April
            30, 1998 and 1997.


                                      F-12
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 9 - Income taxes:
            As shown in the accompanying  statements of operations,  the Company
            had  historical  provisions and credits for income taxes for the six
            and  three   months   ended  April  30,  1998  and  1997  that  were
            attributable to state and local income taxes as set forth below:

                                          Six Months             Three Months
                                       Ended April 30,          Ended April 30,
                                    --------------------    --------------------
                                      1998        1997         1998       1997
                                    -------     --------    ---------   --------

             State                  $ 8,000     $ 33,534    $(15,000)   $ 26,048
             Local                   38,000      109,000     (52,000)     90,600
                                    -------     --------    --------   ---------
                 Total historical   $46,000     $142,534    $(67,000)   $116,648
                                    =======     ========    ========    ========

            As explained in Note 2, prior to February 10, 1998,  the date of the
            Exchange,  the Company had elected to be taxed as an "S" Corporation
            and, accordingly, it was not required to record a provision (credit)
            for Federal  income taxes on its  historical  income  before  income
            taxes of approximately $1,028,000, $1,210,000 and $1,007,000 for the
            period from  November  1, 1997 to February  10, 1998 and the six and
            three  months ended April 30, 1997,  respectively;  however,  it was
            required to provide for state income taxes at a reduced rate and New
            York City income taxes at the same rates as  companies  that had not
            made such an election  during  those  periods.  Although the Company
            became  subject to  Federal,  state and local  income  taxes at full
            statutory rates for periods  subsequent to the date of the Exchange,
            it had a  historical  loss  before  income  taxes  of  approximately
            $607,000  for the period from  February  11, 1998 to April 30, 1998,
            and it was not required to record any historical provision or credit
            for Federal  income  taxes  during that period as further  explained
            below.

            As a result of the loss for the period  from  February  11,  1998 to
            April  30,  1998  and  certain  other   elections   related  to  the
            termination  of its "S"  Corporation  election,  the Company had net
            operating loss  carryforwards  as of April 30, 1998 of approximately
            $227,000 available to reduce future Federal, state and local taxable
            income which, if not used, will expire in 2012.  There were no other
            material  temporary  differences  as of April 30,  1998.  Due to the
            uncertainties  related to the  extent  and  timing of the  Company's
            future taxable income, the Company offset the deferred tax assets of
            approximately  $102,000  attributable to the potential benefits from
            the net  operating  loss  carryforwards  as of April 30,  1998 by an
            equivalent  valuation  allowance  and,   accordingly,   it  did  not
            recognize  a credit for  Federal  income  taxes for the period  from
            February  11, 1998 to April 30, 1998.  As a result of recording  the
            valuation  allowance for the period after February 10, 1998, and the
            "S" Corporation  election for the period through  February 10, 1998,
            the Company did not  recognize  any  provision or credit for Federal
            income taxes for the six and three months ended April 30, 1998.

            The  differences  between the tax provision or credit computed based
            on  the  Company's   historical  pre-tax  income  or  loss  and  the
            applicable  statutory  income tax rate and the Company's  historical
            provisions and credits for Federal, state and local income taxes for
            the six and three months ended April 30, 1998 and 1997 are set forth
            below:


                                      F-13
<PAGE>

                            COFFEE HOLDING CO., INC.

                          NOTES TO FINANCIAL STATEMENTS

Note 9 - Income taxes (concluded):

<TABLE>
<CAPTION>
                                                                         Six Months               Three Months
                                                                       Ended April 30,           Ended April 30,
                                                                   ---------------------     ---------------------
                                                                      1998        1997          1998        1997
                                                                   ---------   ---------     ---------   ---------
<S>                                                                <C>         <C>           <C>          <C>
                Tax provision (credit) at statutory rate of 34%    $ 143,000   $ 411,000     $(206,000)   $342,000
                Adjustments for effects of:
                   State income taxes, net of Federal benefit         46,000     142,534       (67,000)    116,648
                   "S" Corporation election and termination
                       of "S" Corporation election                  (245,000)   (411,000)      104,000    (342,000)
                   Change in valuation allowance                     102,000                   102,000
                                                                  ----------   ---------     ---------    --------
                         Historical provision                      $  46,000   $ 142,534     $ (67,000)   $116,648
                                                                  ==========   =========     =========    ========
</TABLE>

            The Company's "S" Corporation election was in effect for part or all
            of the six and three months ended April 30, 1998 and 1997. Unaudited
            pro  forma  historical  provisions  and  credits  for  income  taxes
            assuming  the  Exchange  had  occurred  on  November 1, 1996 and the
            Company was subject to Federal, state and local income taxes at full
            statutory  rates for all of the six and three months ended April 30,
            1998 and 1997 are set forth below:

<TABLE>
<CAPTION>
                                                              Six Months               Three Months
                                                            Ended April 30,           Ended April 30,
                                                         --------------------     ---------------------
                                                           1998         1997         1998        1997
                                                         --------    --------     ---------    --------
<S>                                                      <C>         <C>          <C>          <C>
                  Federal                                $119,000    $336,000     $(168,000)   $280,000
                  State                                    34,000      99,000       (50,000)     82,000
                  Local                                    38,000     109,000       (55,000)     91,000
                                                         --------   ---------     ---------    --------
                           Total pro forma (unaudited)   $191,000    $544,000     $(273,000)   $453,000
                                                         ========    ========     =========    ========
</TABLE>

            The  unaudited  pro forma  provisions  and credits for income  taxes
            reflect  an  effective  rate of  approximately  45% for each  period
            comprised  of an 11% rate for state and local income  taxes,  net of
            the  related  Federal  income tax effect,  and a  statutory  Federal
            income tax rate of 34%.


                                      F-14
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 10- Lease commitments:
      Operating lease:
            The Company occupies  warehouse  facilities under an operating lease
            which expires on August 31, 2002 unless renewed at the option of the
            Company for an additional two years.  The lease requires the Company
            to pay utilities  and other  maintenance  expenses.  Rent charged to
            operations  amounted  to $23,400  and  $11,700 for the six and three
            months  ended  April 30,  1998,  respectively.  The  Company  had no
            obligations  under  noncancelable  operating  leases  during the six
            months ended April 30, 1997.  Future minimum  rental  payments under
            the  noncancelable  operating lease in years subsequent to April 30,
            1998 were as follows:

                       Year Ending
                         April 30,                                   Amount
                       -----------                                 ---------

                           1999                                    $ 46,800
                           2000                                      46,800
                           2001                                      46,800
                           2002                                      46,800
                           2003                                      15,600
                                                                   --------
                               Total                               $202,800
                                                                   ========
            Capital leases:
                  As of April 30, 1998, the Company was obligated  under various
                  capital  leases for  machinery  and  equipment  that expire at
                  various  dates  through  February  2001.  Assets under capital
                  leases are  amortized  over their  estimated  useful  lives of
                  seven years.  Amortization  of $28,388 and $14,194 was charged
                  to  operations  in the six and three  months  ended  April 30,
                  1998,   respectively.   The  Company  had  no  capital   lease
                  obligations  during the six months ended April 30,  1997.  The
                  future minimum lease payments under capital leases and the net
                  present value of the future  minimum  lease  payments at April
                  30, 1998 were as follows:

                     Total minimum lease payments                     $706,363
                     Less amount representing interest                 103,012
                                                                      --------

                     Present value of net minimum lease payments       603,351
                     Less current portion                              235,479
                                                                      --------
                     Long-term portion                                $367,872
                                                                      ========


                                      F-15
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 11- Concentrations of credit risk:
            Financial  instruments  that  potentially  subject  the  Company  to
            concentrations  of credit risk consist  principally of cash and cash
            equivalents,  amounts due from broker and trade accounts receivable.
            The  Company  maintains  its cash and cash  equivalents  in bank and
            brokerage  accounts  the  balances  of which,  at times,  may exceed
            Federal  insurance  limits.  At April 30, 1998, the Company had cash
            balances that exceeded Federal insurance limits by $250,000. The net
            balance  of  the  Company's   investments  in  derivative  financial
            instruments also represents an amount due from a broker. Exposure to
            credit risk is reduced by placing such deposits and investments with
            major financial institutions and monitoring their credit ratings.

            Approximately  19% of the  Company's  sales  were  derived  from one
            customer  during the six months ended April 30, 1998.  That customer
            also accounted for approximately  $282,000 of the Company's accounts
            receivable balance at April 30, 1998.  Concentrations of credit risk
            with respect to other trade receivables are limited due to the short
            payment terms generally  extended by the Company;  by ongoing credit
            evaluations  of  customers;  and by  maintaining  an  allowance  for
            doubtful accounts that management  believes will adequately  provide
            for credit losses.

            Management  does not believe  that credit  risk was  significant  at
            April 30, 1998 and October 31, 1997.

Note 12- Stock option plan:
            On February 10, 1998,  the Company's  stockholders  consented to the
            adoption of the  Company's  stock option plan (the  "Plan")  whereby
            incentive and/or  nonincentive  stock options for the purchase of up
            to 2,000,000  shares of the Company's common stock may be granted to
            the  Company's   directors,   officers,   other  key  employees  and
            consultants.  Under the Plan, the exercise price of all options must
            be at least 100% of the fair market value of the common stock on the
            date of grant (the exercise  price of an incentive  stock option for
            an optionee that holds more than 10% of the combined voting power of
            all  classes  of stock of the  Company  must be at least 110% of the
            fair market value on the date of grant).

            As of April 30, 1998, no options had been granted under the Plan.

Note 13- Major vendors:
            During the six months ended April 30, 1998, substantially all of the
            Company's  purchases  were from nine vendors that also accounted for
            substantially  all of the  Company's  accounts  payable at April 30,
            1998.  Management  does not believe  that the loss of any one vendor
            would have a material adverse effect on the Company's operations due
            to the availability of alternate suppliers.


                                      F-16
<PAGE>

                            COFFEE HOLDING CO., INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

Note 14- Prior period adjustments:
            The Company's  retained  earnings balance as of November 1, 1997 has
            been  retroactively  adjusted to reflect prior period adjustments to
            annual  financial  statements  it had  previously  issued  that were
            attributable to the net effects of the unrecorded  losses and income
            described below:

<TABLE>

<S>           <C>                                                           <C>
              Retained earnings, November 1, 1997, as previously reported   $1,044,786
                                                                            ----------

              Increase (decrease) from prior period adjustments:

                 Write-off of uncollectible accounts receivable               (268,182)
                 Unrecorded unrealized losses on coffee futures               (664,069)
                 Unrecorded interest income on restricted cash                  22,897
                                                                            ----------
                     Total adjustments                                        (909,354)
                                                                            ----------
              Retained earnings, November 1, 1997, as adjusted              $  135,432
                                                                            ==========
</TABLE>

            The accompanying  financial  statements also reflect  adjustments to
            previously  reported  amounts  of net  income  for the six and three
            months ended April 30, 1997. The components of the  adjustments  and
            their effect on net income follow:

<TABLE>
<CAPTION>
                                                                   Six Months     Three Months
                                                                   Ended April    Ended April
                                                                    30, 1997        30, 1997
                                                                  -----------    ------------
              <S>                                                 <C>              <C>
              Unrecorded  unrealized losses on coffee futures     $ (150,809)      $(61,349)
              Net income, as previously reported                   1,218,020        951,410
                                                                  ----------       --------

              Net income, as adjusted                             $1,067,211       $890,061
                                                                  ==========       ========
</TABLE>

                                      * * *


                                      F-17

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Forward-Looking Statements

      The Private Securities Litigation Reform Act of 1995 (the "Act") provides
a safe harbor for forward-looking statements made by or on behalf of Coffee
Holding Co., Inc. (the "Company" or "Coffee"). Coffee and its representatives
may from time to time make written or oral forward-looking statements, including
statements contained in this report and in our other filings with the Securities
and Exchange Commission "SEC." These statements use words such as "believes",
"expects", "intends", "plans", "may", "will", "should", "anticipates" and other
similar expressions. All statements which address operating performance, events
or developments that the Company expects or anticipates will occur in the
future, including statements relating to volume growth, share of sales or
statements expressing general optimism about future operating results, are
forward-looking statements within the meaning of the Act. The forward-looking
statements are and will be based on management's then current views and
assumptions regarding future events and operating performance. We cannot assure
that anticipated results will be achieved since actual results may differ
materially because of risks and uncertainties. We do not undertake to revise
these statements to reflect subsequent developments.

      The following are some of the factors that could cause actual results to
differ materially from in our forward-looking statements:

o     the impact of rapid or persistent fluctuations in the price of coffee
      beans;
o     fluctuations in the supply of coffee beans;
o     general economic conditions and conditions which affect the market for
      coffee;
o     the effects of any loss of major customers;
o     the effects of competition from other coffee manufacturers and other
      beverage alternatives;
o     changes in consumption of coffee; and
o     other risks which we identify in future filings with the SEC.

      You are strongly encouraged to consider these factors when evaluating
forward looking statements in this report. We undertake no responsibility to
update any forward-looking statements contained in this report.

Six Months Ended April 30, 1998 Compared to Six Months Ended April 30, 1997

      Net sales totaled $13,181,142 in the six months ended April 30, 1998, an
increase of $1,644,118 or 14% from $11,537,024 in the six months ended April 30,
1997. Net sales were higher in the six months ended April 30, 1998 due to higher
coffee selling prices in early fiscal 1998.

      Cost of sales in the six months ended April 30, 1998 was $11,329,593, or
86% of net sales, as compared to $9,166,989, or 79% of net sales in the six
months ended April 30, 1997. Cost of sales was higher in the six months ended
April 30, 1998 due to higher green coffee purchase prices.

      The Company's gross profit in the six months ended April 30, 1998 was
$1,851,549, a decrease of $518,486 or 22% from $2,370,035 in the six months
ended April 30, 1997. Gross profit as a percentage of net sales decreased by 7%
to 14% in the six months ended April 30, 1998 from 21% in the six months ended
April 30, 1997. The Company's gross profits were lower for the six months ended
April 30, 1998 due to declining retail prices and higher cost green coffee
inventories as well as due to a management decision to reduce prices further on
certain products to attract larger customers. Retail selling prices, which were
generally higher in the beginning of fiscal 1998, declined in the three months
ended April 30, 1998.

      Selling and administrative expenses were $900,919 in the six months ended
April 30, 1998, an increase of $23,855 or 3% from $877,064 in the six months
ended April 30, 1997.

      The Company's interest expense increased $20,979 or approximately 13% from
$165,424 in the six months ended April 30, 1997 to $186,403 in the six months
ended April 30, 1998. Interest costs increased due to increased borrowings
needed to purchase higher cost green coffee.

      Other expenses in the six months ended April 30, 1998 also included
$180,000 of consulting and professional fees and other costs incurred in
connection with the reverse acquisition (the "Reverse Acquisition") by
Transpacific International Group Corp. that was effectively completed on
February 10, 1998.


                                       1
<PAGE>

      Primarily as a result of the decrease in gross profit, the increase in
operating expenses and the charge for costs incurred in connection with the
Reverse Acquisition, the Company had income of $421,052 before income taxes in
the six months ended April 30, 1998 compared to $1,209,745 in the six months
ended April 30, 1997.

      As further explained in Notes 2 and 9 of the notes to the financial
statements elsewhere herein, the Company was not required to record a provision
for Federal income taxes in the six months ended April 30, 1998 and 1997 because
it had elected to be taxed as an "S" Corporation during the period from November
1, 1997 to February 10, 1998 (the date of the Reverse Acquisition) and the six
months ended April 30, 1997 and it had a pre-tax loss during the period from
February 11, 1998 to April 30, 1998. Although the Company had potential benefits
of approximately $102,000 from net operating loss carryforwards as of April 30,
1998, it did not record a credit for income taxes in the six months ended April
30, 1998 due to the uncertainties related to the extent and timing of its future
taxable income. The Company had a historical provision for state and local
income taxes of $46,000 in the six months ended April 30, 1998 compared to
$142,534 in the six months ended April 30, 1997 primarily as a result of the
decrease in pre-tax income. Accordingly, the Company had historical net income
of $375,052 in the six months ended April 30, 1998 compared to $1,067,211 in the
six months ended April 30, 1997.

      The statement of operations included in the financial statements elsewhere
herein presents unaudited pro forma provisions for income taxes, net income and
related earnings per share information assuming the Company had not elected to
be taxed as an "S" Corporation during any portion of the six months ended April
30, 1998 and 1997. The Company would have had a provision for income taxes of
approximately $191,000 in the six months ended April 30, 1998 compared to
$544,000 in the six months ended April 30, 1997 assuming the "S" Corporation
elections had not been made primarily as a result of the decrease in pro forma
pre-tax income. The unaudited pro forma provisions for income taxes reflect an
effective rate of approximately 45% for each period comprised of an 11% rate for
state and local income taxes, net of the related Federal income tax effect, and
a statutory Federal income tax rate of 34%. On an unaudited pro forma basis, the
Company would have had net income of $230,052, or $.06 per share, in the six
months ended April 30, 1998 compared to $665,745, or $.17 per share, in the six
months ended April 30, 1997.

Three Months Ended April 30, 1998 Compared to Three Months Ended April 30, 1997

      Net sales totaled $6,324,247 in the three months ended April 30, 1998, a
decrease of $207,143 or 3% from $6,531,390 in the three months ended April 30,
1997. Net sales were down in the three months ended April 30, 1998 because some
of the Company's customers were slow in liquidating excess inventory and
therefore bought less product from the Company.

      Cost of sales in the three months ended April 30, 1998 was $6,181,727, or
98% of net sales, as compared to $4,826,402, or 74% of net sales in the three
months ended April 30, 1997. Cost of sales was increased due to the liquidation
of higher cost green coffee inventory.

      The Company's gross profit in the three months ended April 30, 1998 was
$142,520, a decrease of $1,562,468 or 92% from $1,704,988 in the three months
ended April 30, 1997. Gross profit as a percentage of net sales decreased by
approximately 24% to 2% in the three months ended April 30, 1998 from 26% in the
three months ended April 30, 1997 due to relatively high purchase prices for
green coffee as compared to lower retail and wholesale selling prices.

      Selling and administrative expenses were $407,752 in the three months
ended April 30, 1998, a decrease of $154,092 or 27% from $561,844 in the three
months ended April 30, 1997. As a percentage of net sales, this change
represented a 3% decrease from 9% in the three months ended April 30, 1997 to 6%
in the three months ended April 30, 1998.

      Interest expense increased $9,611 or 12% from $79,890 in the three months
ended April 30, 1997 to $89,501 in the three months ended April 30, 1998. The
increase was due to higher average balances which were partially offset by lower
interest rates on the Company's line of credit.

      Other expenses in the three months ended April 30, 1998 also included
$180,000 of expenses consisting of consulting and professional fees and other
costs incurred in connection with the Reverse Acquisition.

      Primarily as a result of the decrease in gross profit, the decrease in
operating expenses and the charge for costs incurred in connection with the
Reverse Acquisition, the Company had a loss of $607,233 before income taxes in
the three months ended April 30, 1998 compared to income of $1,006,709 before
income taxes in the three months ended April 30, 1997.


                                       2
<PAGE>

      The Company was not required to record a provision for Federal income
taxes in the three months ended April 30, 1998 and 1997 primarily because it had
a pre-tax loss during the three months ended April 30, 1998 and it had elected
to be taxed as an "S" Corporation during the three months ended April 30, 1997.
Although the Company had potential benefits of approximately $102,000 from net
operating loss carryforwards as of April 30, 1998, it did not record a credit
for income taxes in the three months ended April 30, 1998 due to the
uncertainties related to the extent and timing of its future taxable income. The
Company had a historical credit for state and local income taxes of $67,000 in
the three months ended April 30, 1998 compared to a historical provision of
$116,648 in the three months ended April 30, 1997 primarily as a result of the
decrease in pre-tax income. Accordingly, the Company had a historical net loss
of $540,233 in the three months ended April 30, 1998 compared to historical net
income of $890,061 in the three months ended April 30, 1997.

      Assuming the "S" Corporation election had not been made and an effective
income tax rate of approximately 45% for each period, as explained above, the
Company would have had a credit for income taxes of approximately $273,000 in
the three months ended April 30, 1998 compared to a provision for income taxes
of $453,000 in the three months ended April 30, 1997. On an unaudited pro forma
basis, the Company would have had a net loss of $334,233 or $.08 per share, in
the three months ended April 30, 1998 compared to net income of $553,709, or
$.14 per share, in the three months ended April 30, 1997.

Liquidity and Capital Resources

      As of April 30, 1998, the Company had working capital of approximately
$1,916,000, an increase of $2,453,000 from its working capital deficiency of
approximately $537,000 as of October 31, 1997. The Company's cash balance
decreased by approximately $129,000 to $70,000 as of April 30, 1998 from
$199,000 as of October 31, 1997. The working capital balance increased primarily
as a result of the replacement of borrowings obtained under a factoring
agreement that were payable on a short-term basis with borrowings obtained under
a credit facility from Nationscredit Commercial Corp. that provides for a
revolving line of credit of up to $5,000,000 based on eligible trade accounts
receivable and inventories and a term loan for equipment purchases of up to
$500,000. The line of credit provides for borrowings of up to 85% of the
Company's eligible trade accounts receivable and 60% of its eligible
inventories. The outstanding balance of approximately $2,587,000 as of April 30,
1998 approximated the maximum amount that the Company could borrow based on its
eligible trade accounts receivable and inventories as of that date. Interest is
payable monthly at the prime rate plus 1% (an effective rate of 9.5% at April
30, 1998). Assuming the Company has sufficient collateral, substantially all of
the balances outstanding under the credit facility will not have to be repaid
until November 20, 2000.

      The Company's current liabilities as of April 30, 1998 included a mortgage
note payable with a balance of $625,000 that was due on demand as a result of a
violation of certain covenants. The note was collateralized by restricted cash
investments with an approximate balance of $370,000. The Company repaid the
mortgage note in full on March 3, 1999, and generated a portion of the funds
required for the payment by liquidating the restricted investments.

      During the six months ended April 30, 1998, net cash provided by operating
activities totaled approximately $457,000 primarily as a result of the net
income generated during that period, adjusted to eliminate the effects of
charges for depreciation and amortization, and decreases in amounts receivable
from the Company's broker and customers that were partially offset by an
increase in inventories and a decrease in accounts payable. In addition to
repaying the outstanding balance under the factoring agreement through
borrowings under the line of credit, the Company also borrowed approximately
$488,000 under the line of credit for working capital purposes.

      During the six months ended April 30, 1998, the Company used approximately
$255,000 of its cash resources to purchase property and equipment and added
property and equipment totaling $288,500 by entering into capital leases. The
capital expenditures were made primarily to refurbish equipment, upgrade
capacity and purchase and install new manufacturing and other equipment
associated with production. Management expects that the Company's capital
expenditures will be made at a reduced rate over at least the next twelve
months. The Company also placed approximately $304,000 in restricted cash
investments to secure the mortgage note, as explained above, and made payments
aggregating approximately $115,000 to reduce its mortgage note, term loan and
capital lease obligations.

      Management believes, but cannot assure, that the Company will be able to
finance its operations, including increases in accounts receivable and
inventories, capital expenditures and debt repayments, over the next twelve
months through its existing cash resources, cash provided by operating
activities and/or borrowings under its credit facility.


                                       3
<PAGE>

Year 2000

      The Year 2000 problem concerns the inability of information systems and
systems with embedded chip technology to properly recognize and process
data-sensitive information beyond December 31, 1999. In the fall of 1997, the
Company and its information technology consultant assessed the Company's
personal computer hardware and its accounting software (which included accounts
receivable and payroll and inventory management) for Year 2000 readiness. The
Company concluded that its then accounting software and computer hardware and
system were not Year 2000 compliant.

      The Company installed software modifications and upgrades to its
accounting software in November 1997 at an approximate cost of $4,300.

      In April and August 1999, the Company replaced its computer hardware and
operating systems including its server and three workstations. The Company also
added an additional workstation. The total cost of the equipment, installation
and follow-up support was approximately $18,800. The Company also paid its
consultant $1,400 to oversee installation of the operating system.

      As of June 30, 2000, with regard to Year 2000, the Company had not
experienced any disruptions in its internal information systems or its business
activities with its suppliers and customers.


                                       4
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

      Market risks relating to the Company's operations result primarily from
changes in interest rates and commodity prices as further described below.

      Interest Rate Risks

      The Company is subject to market risk from exposure to fluctuations in
interest rates. At April 30, 1998, the Company's long-term debt, other than
capitalized leases, consisted of approximately $75,000 of fixed rate debt and
approximately $3,600,000 of variable rate debt under its revolving line of
credit, term loan and mortgage note payable. Interest on the variable rate debt
was payable primarily at 1% above a specified prime rate. The Company does not
expect changes in interest rates to have a material effect on income or cash
flows in fiscal 1998, although there can be no assurance that interest rates
will not significantly change.

      Commodity Price Risks

      See Note 2 to the financial statements, Summary of Significant Accounting
Policies - "Hedging" for additional information regarding the Company's hedging
program.

      The supply and price of coffee beans are subject to volatility and are
influenced by numerous factors which are beyond the Company's control. The
Company uses coffee futures and options contracts for hedging purposes to
minimize the effect of changing green coffee prices and, if needed, to
supplement its supply. At April 30, 1998, the Company held options covering an
aggregate of 2,927,000 pounds of green coffee beans, which are exercisable in
fiscal 1998 at prices ranging from $1.35 to $1.45 per pound. The price per pound
of green coffee on the close of business on April 30, 1998 was $1.34. The
Company generally has been able to pass green coffee price increases through to
its customers, thereby maintaining its gross profits. However, the Company
cannot predict whether it will be able to pass inventory price increases through
to its customers in the future.


                                       5
<PAGE>

                                     PART II

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

      On February 10, 1998, Coffee Holding Co., Inc., a New York corporation,
merged with Transpacific International Group Corp. See Note 1 to Unaudited
Financial Statements.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit
Number        Exhibit Name
- -------       ------------

3.1           Articles of Incorporation of Coffee Holding Co., Inc.

3.2           Certificate of Amendment of Articles of Incorporation of Coffee
              Holding Co., Inc.

3.3           By-Laws of Coffee Holding Co., Inc.

10.1          Lease with T&O Management Corp. dated August 15, 1997.

10.2          1998 Stock Option Plan

27            Financial Data Schedule

(b) There were no reports on Form 8-K filed during the period covered by this
report.


                                       6
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.

COFFEE HOLDING CO., INC.

    Signature                  Title                        Date
    ---------                  -----                        ----

/s/ Andrew Gordon   Chief Executive Officer, President      October 25, 2000
- -----------------   and Treasurer
Andrew Gordon       (principal executive officer
                    and principal financial officer)


                                       7
<PAGE>

                                INDEX TO EXHIBITS

3.1        Articles of Incorporation of Coffee Holding Co., Inc.

3.2        Certificate of Amendment of Articles of Incorporation of Coffee
           Holding Co., Inc.

3.3        By-Laws of Coffee Holding Co., Inc.

10.1       Lease with T&O Management Corp. dated August 15, 1997.

10.2       1998 Stock Option Plan

27         Financial Data Schedule



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>ARTICLES OF INCORPORATION
<TEXT>


                            ARTICLES OF INCORPORATION

                                       OF

                     TRANSPACIFIC INTERNATIONAL GROUP CORP.

             -------------------------------------------------------


      FIRST: The name of this corporation is:

                     TRANSPACIFIC INTERNATIONAL GROUP CORP.

      SECOND: Its principal office in the State of Nevada is located at 502 East
John Street,  Carson City,  Nevada,  89706. The name and address of its resident
agent is CSC Services of Nevada, Inc., at the above address.

      THIRD:  The nature of the business or objects or purposes  proposed may be
organized under the General Corporation Law of the State of Nevada;

      To engage in any  lawful act or  activity  for which  corporations  may be
organized under the General Corporation Law of the State of Nevada.

      FOURTH:  The total  authorized  capital stock of the corporation is Twenty
Million (20,000,000) Shares With A Par Value of $0.0001 Per Share.

      FIFTH: The governing board of this corporation shall be known as directors
and the number of  directors  may from time to time be increased or decreased in
such manner as shall be provided  in the by-laws of this  corporation,  provided
that the number of directors  shall not be reduced less than one unless there is
less than one stockholder.

The name and post office address of the first board of directors, which shall be
three in number, is as follows:

         NAME                                      POST OFFICE ADDRESS

Hong Cao                                  203 Howard St., Waverly, NY 14892
David Chang                               401 Broadway, Ste 1207, NY, NY 10013
Tommy Chio                                Bank of China Bldg., 27/F A D Avenida,
                                          Doutor Mario, Soares, Macao

      SIXTH: The capital stock,  after the amount of the subscription  price, or
par value, has been paid in, shall not be subject to assessment to pay the debts
of the corporation.


<PAGE>

      SEVENTH:  The name and post office address of the incorporator signing the
articles of incorporation is as follows:

         NAME                                    POST OFFICE ADDRESS

Sharon Branscome                                 1013 Centre Road
                                                 Wilmington, DE 19805

      EIGHTH: The corporation is to have perpetual existence.

      NINTH:  In  furtherance  and not in limitation of the powers  conferred by
statue, the board of directors is expressly authorized,  subject to the by-laws,
if any, adopted by the shareholders,  to make, alter or amend the by-laws of the
corporation.

      TENTH: Meetings of stockholders may be held outside of the State of Nevada
at such place or places as may be  designated  from time to time by the board of
directors or in the by-laws of the corporation.

      ELEVENTH:  This corporation  reserves the right to amend, alter, change or
repeal any provision  contained in the articles of incorporation,  in the manner
now or hereafter  prescribed,  and all rights conferred upon stockholders herein
are granted subject to this reservation.

      I, THE UNDERSIGNED,  being the sole  incorporator  herein before named for
the purpose of forming a corporation  pursuant to the General Corporation Law of
the State of Nevada,  do make and file these articles of  incorporation,  hereby
declaring and certifying  that the facts herein stated are true, and accordingly
have hereunto set my hand this sixth day of October, A.D. 1995.

                                                  /s/ Sharon Branscome
                                                  -----------------------------
                                                  Sharon Branscome, Incorporator


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>CERTIFICATE OF AMENDMENT OF ART. OF INCORPORATION
<TEXT>


                            CERTIFICATE OF AMENDMENT
                                       OF
                            ARTICLES OF INCORPORATION
                                       OF
                            COFFEE HOLDING CO., INC.

      Pursuant to the  provisions of Nevada Revised  Statutes,  Title 7, Chapter
78, it is hereby certified that:

      FIRST: The name of the corporation (the  "corporation")  is Coffee Holding
Co., Inc. The corporation's  articles or incorporation  were filed on October 9,
1995. The original name of the corporation was Transpacific  International Group
Corp. The name was changed on May 27, 1998.

      SECOND:  The  Board of  Directors  of the  corporation  duly  adopted  the
following resolutions on February 10, 1998:

            "RESOLVED,  that it is  advisable  in the  judgment  of the Board of
            Directors of the corporation that the number of authorized shares of
            the  corporation  be increased and the  corporation be authorized to
            issue preferred stock with par value of $0.001 per share,  and that,
            in order to accomplish the same, Article "FOURTH" of the Articles of
            Incorporation be amended to read as follows:

            'FOURTH:  (i) The aggregate  number of shares which the  Corporation
            shall have authority to issue is 40,000,000, divided into 30,000,000
            shares  of common  stock of the par  value of  $0.001  per share and
            10,000,000  shares of preferred stock of the par value of $0.001 per
            share.

                  (ii)  The  Board  of  Directors  is  authorized,   subject  to
            limitations  prescribed  by law and the  provisions  of this Article
            "FOURTH,"  to provide for the  issuance  of the shares of  preferred
            stock in series, to establish from time to time the number of shares
            to be  included  in each such  series,  and to fix the  designation,
            powers, preferences and rights of the shares of each such series and
            the qualifications, limitations or restrictions thereof.

                  The  authority of the Board of Directors  with respect to each
            series shall include,  but not be limited to,  determination  of the
            following:

                  (a) The  number of shares  constituting  that  series  and the
            distinctive designation of that series;


<PAGE>

                  (b) The  divided  rate on the shares of that  series,  whether
            dividends shall be cumulative,  and, if so, from which date or date,
            and the relative rights of priority, if any, of payment of dividends
            on shares of that series;

                  (c) Whether that series shall have voting rights,  in addition
            to the voting rights  provided by law, and, if so, the terms of such
            voting rights;

                  (d) Whether that series shall have conversion privileges, and,
            if so,  the  terms  and  conditions  of such  conversion,  including
            provision for  adjustment of the  conversion  rate in such events as
            the Board of Directors shall determine;

                  (e)  Whether  or not  the  shares  of  that  series  shall  be
            redeemable, and, if so, the terms and conditions of such redemption,
            including  the  date or  dates  upon or after  which  they  shall be
            redeemable,  and the amount per share payable in case of redemption,
            which amount may vary under  different  conditions  and at different
            redemption rates;

                  (f)  Whether  that  series  shall have a sinking  fund for the
            redemption  or  purchase of shares of that  series,  and, if so, the
            terms and amount of such sinking fund;

                  (g) The  rights of the  shares of that  series in the event of
            voluntary or involuntary  liquidation,  dissolution or winding up of
            the  corporation,  and the relative  rights or priority,  if any, of
            payment of shares of that series;

                  (h) Any other relative rights,  preferences and limitations of
            that series.

                  Dividends on  outstanding  shares of preferred  stock shall be
            paid or  declared  and set apart for  payment  before any  dividends
            shall be paid or  declared  and set apart for  payment on the common
            shares with respect to the same dividend period.

                  If upon any voluntary or involuntary liquidation,  dissolution
            or  winding  up  of  the  corporation,   the  assets  available  for
            distribution  to holders of shares of preferred  stock of all series
            shall be  insufficient  to pay such  holders  the full  preferential
            amount  to which  they  are  entitled,  then  such  assets  shall be
            distributed  ratably  among the  shares of all  series of  preferred
            stock  in  accordance  with  the  respective   preferential  amounts
            (including unpaid cumulative dividends, if any) payable with respect
            thereto.'

            FURTHER  RESOLVED,  that a special  meeting of  stockholders  having
            voting power be and it is hereby  called and that notice be given in
            the manner  prescribed by the Bylaws of the  corporation  and Nevada
            Revised Statutes,  Title 7, Chapter 78, unless the said stockholders
            shall waive the notice of meetings in writing or unless


                                      -2-
<PAGE>

            all of said  stockholders  shall  dispense  with  the  holding  of a
            meeting  and shall take  action upon the  proposed  amendments  by a
            consent in writing signed by them; and

            FURTHER  RESOLVED,  that,  in the event  that the said  stockholders
            shall adopt for the aforesaid proposed amendments by a vote in favor
            thereof by at least a majority  of the voting  power or by a written
            consent in favor  thereof  signed by all of them  without a meeting,
            the  corporation  is hereby  authorized  to make by the hands of its
            President or a Vice  President  and by its Secretary or an Assistant
            Secretary a  certificate  setting forth the said  amendments  and to
            cause  the same to be filed  pursuant  to the  provisions  of Nevada
            Revised Statutes, Title 7, Chapter 78."

      THIRD:  The total number of outstanding  shares having voting power of the
corporation  is 3,999,650,  and the total number of votes entitled to be cast by
the holders of all of said outstanding shares is 3,999,650.

      FOURTH:  The holders of all of the aforesaid  total number of  outstanding
shares having voting power, to wit, 3,999,650 shares, dispensed with the holding
of a meeting of stockholders  and adopted the amendments  herein  certified by a
consent in writing  signed by all of them in accordance  with the  provisions of
Nevada Revised Statutes, Title 7, Section 78.320.

Signed on August 11, 1998

                                                     /s/ Andrew Gordon
                                                     ------------------------
                                                     Andrew Gordon, President

                                                     /s/ David Gordon
                                                     -----------------------
                                                     David Gordon, Secretary

                                      -3-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.3
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>BY-LAWS
<TEXT>


                                     BY-LAWS
                                     -------

                                       OF
                                       --

                     TRANSPACIFIC INTERNATIONAL GROUP CORP.
                     --------------------------------------

                     --------------------------------------

                               ARTICLE I - OFFICES
                               -------------------

The office of the Corporation  shall be located in the City and State designated
in the Articles of  Incorporation.  The Corporation may also maintain offices at
such other places  within or without the United States as the Board of Directors
may, from time to time, determine.

                      ARTICLE II - MEETING OF SHAREHOLDERS
                      ------------------------------------

Section 1 - Annual Meetings:
- ----------------------------

The annual meeting of the  shareholders of the Corporation  shall be held within
five  months  after the close of the  fiscal  year of the  Corporation,  for the
purpose of  electing  directors,  and  transacting  such other  business  as may
properly come before the meeting.

Section 2 - Special Meetings:
- -----------------------------

Special  meetings of the  shareholders may be called at any time by the Board of
Directors  or by the  President,  and shall be called  by the  President  or the
Secretary  at the written  request of the  holders of ten  percent  (10%) of the
shares then outstanding and entitled to vote thereat,  or as otherwise  required
under the provisions of the Law of the State of Nevada ("Corporation Law").

Section 3 - Place of Meetings:
- ------------------------------

All  meetings  of  shareholders  shall be held at the  principal  office  of the
Corporation,  or at such other places as shall be  designated  in the notices or
waivers of notice of such meetings.

Section 4 - Notice of Meetings:
- -------------------------------

(a) Written notice of each meeting of  shareholders,  whether annual or special,
stating the time when and place where it is to be held,  shall be served  either
personally  or by mail,  not less than ten or more than  fifty  days  before the
meeting,  upon each shareholder of record entitled to vote at such meeting,  and
to any other  shareholder  to whom the giving of notice may be  required by law.
Notice of a special  meeting  shall also state the purpose or purposes for which
the meeting is called,  and shall indicate that it is being issued by, or at the
direction  of, the person or persons  calling the  meeting.  If, at any meeting,
action is proposed to be taken that would,  if taken,  entitle  shareholders  to
receive payment for their shares pursuant to the Business  Corporation  Act, the
notice of such  meeting  shall  include a statement  of that purpose and to that


<PAGE>

effect. If mailed, such notice shall be directed to each such shareholder at his
address,  as it appears on the records of the  shareholders of the  Corporation,
unless he shall have  previously  filed with the Secretary of the  Corporation a
written  request that notices  intended for him be mailed to some other address,
in which case, it shall be mailed to the address designated in such request.

(b)  Notice of any  meeting  need not be given to any  person  who may  become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting.  Notice of any adjourned  meeting of  shareholders
need not be given, unless otherwise required by statute.

Section 5 - Quorum:
- -------------------

(a) Except as otherwise  provided herein,  or by statute,  or in the Articles of
Incorporation  (such  Articles  and any  amendments  thereof  being  hereinafter
collectively referred to as the "Articles of Incorporation"), at all meetings of
shareholders  of the  Corporation,  the  presence  at the  commencement  of such
meetings in person or by proxy of  shareholders  holding of record a majority of
the total number of shares of the  Corporation  then issued and  outstanding and
entitled to vote,  shall be necessary and  sufficient to constitute a quorum for
the  transaction of any business.  The withdrawal of any  shareholder  after the
commencement  of a meeting  shall have no effect on the  existence  of a quorum,
after a quorum has been established at such meeting.

(b)  Despite  the  absence  of a quorum at any  annual  or  special  meeting  of
shareholders,  the shareholders,  by a majority of the votes cast by the holders
of shares  entitled  to vote  thereon,  may  adjourn  the  meeting.  At any such
adjourned  meeting at which a quorum is present,  any business may be transacted
which might have been transacted at the meeting as originally called if a quorum
had been present.

Section 6 - Voting:
- -------------------

(a) Except as otherwise provided by statute or by the Articles of Incorporation,
any corporate  action,  other than the election of directors to be taken by vote
of the  shareholders,  shall be  authorized  by a  majority  of votes  cast at a
meeting of shareholders by the holders of shares entitled to vote thereon.

(b) Except as otherwise provided by statute or by the Articles of Incorporation,
at each  meeting  of  shareholders,  each  holder  of  record  of  shares of the
Corporation  entitled  to vote  thereat,  shall be entitled to one vote for each
share registered in his name on the books of the Corporation.

(c) Each shareholder  entitled to vote or to express consent for dissent without
a  meeting,  may  do  so  by  proxy;  provided,  however,  that  the  instrument
authorizing  such  proxy to act  shall  have been  executed  in  writing  by the
shareholder  himself,  or by his  attorney-in-fact  thereunto duly authorized in
writing.  No proxy shall be valid after the expiration of eleven months from the
date of its  execution,  unless the persons  executing  it shall have  specified
therein the length of


                                       2
<PAGE>

time it is to continue  in force.  Such  instrument  shall be  exhibited  to the
Secretary at the meeting and shall be filed with the records of the Corporation.

(d) Any  resolution in writing,  signed by all of the  shareholders  entitled to
vote thereon,  shall be and constitute action by such shareholders to the effect
therein  expressed,  with the same force and effect as if the same had been duly
passed by  unanimous  vote at a duly  called  meeting of  shareholders  and such
resolution  so signed  shall be inserted  in the Minute Book of the  Corporation
under its proper date.

                        ARTICLE III - BOARD OF DIRECTORS
                        --------------------------------

Section 1 -Number, Election and Term of Office:
- -----------------------------------------------

(a) The number of the directors of the  Corporation  shall be three (3),  unless
and until  otherwise  determined  by vote of a majority  of the entire  Board of
Directors.  The number of Directors shall not be less than three,  unless all of
the outstanding  shares are owned  beneficially and of record by less than three
shareholders,  in which event the number of directors shall not be less than the
number of shareholders.

(b)  Except  as  may  otherwise  be  provided  herein  or  in  the  Articles  of
Incorporation,  the members of the Board of  Directors of the  Corporation,  who
need not be  shareholder,  shall be elected by a majority of the votes cast at a
meeting  of  shareholder,  by the  holders  of  shares  entitled  to vote in the
election.

(c) Each director shall hold office until the annual meeting of the shareholders
next succeeding his election,  and until his successor is elected and qualified,
or until his prior death, resignation or removal.

Section 2 - Duties and Powers:
- ------------------------------

The Board of Directors  shall be  responsible  for the control and management of
the affairs,  property and  interests of the  Corporation,  and may exercise all
powers of the Corporation,  except as are in the Articles of Incorporation or by
statute expressly conferred upon or reserved to the shareholders.

Section 3 - Annual and Regular Meetings:  Notice:
- ----------------------------------------  -------

(a) A regular annual meeting of the Board of Directors shall be held immediately
following  the annual  meeting of the  shareholders  at the place of such annual
meeting of shareholders.

(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other  regular  meetings of the Board of  Directors,  and may fix the
time and place thereof.

(c)  Notice  of any  regular  meeting  of the  Board of  Directors  shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided,  however,  that in case the


                                       3
<PAGE>

Board of Directors shall fix or change the time or place of any regular meeting,
notice of such action  shall be given to each  director  who shall not have been
present at the meeting at which such action was taken  within the time  limited,
and in the manner set forth in  paragraph  (b) of Section 4 of this Article III,
with  respect to special  meetings,  unless such  notice  shall be waived in the
manner set forth in paragraph (c) of such Section 4.

Section 4 - Special Meetings:  Notice:
- -----------------------------  -------

(a) Special  Meetings of the Board of Directors shall be held whenever called by
the  President  or by one of the  directors,  at such  time and  place as may be
specified in the respective notices or waivers of notice thereof.

(b)  Notice of  special  meetings  shall be mailed  directly  to each  director,
addressed to him at his  residence or usual place of business,  at least two (2)
days before the day on which the meeting is to be held,  or shall be sent to him
at such  place by  telegram,  radio or  cable,  or  shall  be  delivered  to him
personally  or given to him  orally,  not later  than the day  before the day on
which the  meeting  is to be held.  A notice,  or  waiver of  notice,  except as
required by Section 8 of this Article  III,  need not specify the purpose of the
meeting.

(c)  Notice of any  special  meeting  shall not be  required  to be given to any
director who shall attend such meeting  without  protesting  prior thereto or at
its  commencement,  the lack of notice to him, or who submits a signed waiver of
notice,  whether  before or after the meeting.  Notice of any adjourned  meeting
shall not be required to be given.

Section 5 - Chairman:
- ---------------------

At all meetings of the Board of Directors the Chairman of the Board,  if any and
if present, shall preside. If there shall be no Chairman, or he shall be absent,
then the President shall preside,  and in his absence,  a Chairman chosen by the
Directors shall preside.

Section 6 - Quorum and Adjournments:
- ------------------------------------

(a) At all meetings of the Board of Directors, the presence of a majority of the
entire Board shall be necessary  and  sufficient  to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Articles of
Incorporation, or by these By-Laws.

(b) A majority of the directors  present at the time and place of any regular or
special meeting,  although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.

Section 7 - Manner of Acting:
- -----------------------------

(a) At all meetings of the Board of Directors,  each director present shall have
one vote,  irrespective  of the number of shares of stock,  if any, which he may
hold.


                                       4
<PAGE>

(b) Except as otherwise  provided by statute,  by the Articles of Incorporation,
or these  By-Laws,  the action of a  majority  of the  directors  present at any
meeting at which a quorum is present shall be the act of the Board of Directors.
Any action  authorized  in  writing,  by all of the  directors  entitled to vote
thereon  and filed with the minutes of the  Corporation  shall be the act of the
Board of Directors with the same force and effect as if the same had been passed
by unanimous vote at a duly called meeting of the Board.

Section 8 - Vacancies:
- ----------------------

Any vacancy in the Board of Directors  occurring by reason of an increase in the
number of directors, or by reason of the death,  resignation,  disqualification,
removal  (unless  a  vacancy  created  by  the  removal  of a  director  by  the
shareholders  shall be filled by the  shareholders  at the  meeting at which the
removal was effected) or inability to act of any director,  or otherwise,  shall
be  filled  for the  unexpired  portion  of the term by a  majority  vote of the
remaining  directors,  though  less than a quorum,  at any  regular  meeting  or
special meeting of the Board of Directors called for that purpose.

Section 9 - Resignation:
- ------------------------

Any  director  may resign at any time by giving  written  notice of the Board of
Directors,  the President or the Secretary of the Corporation.  Unless otherwise
specified  in such  written  notice,  such  resignation  shall take  effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.

Section 10 - Removal:
- ---------------------

Any  director  may  be  removed  with  or  without  cause  at  any  time  by the
shareholders,  at a special meeting of the shareholders called for that purpose,
and may be removed for cause by action of the Board.

Section 11 - Salary:
- --------------------

No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance,  if
any, may be allowed for  attendance  at each  regular or special  meeting of the
Board;  provided,  however,  that nothing herein contained shall be construed to
preclude any director  from serving the  Corporation  in any other  capacity and
receiving compensation therefor.

Section 12 - Contracts:
- -----------------------

(a) No contract or other  transaction  between  this  Corporation  and any other
Corporation shall be impaired, affected or invalidated nor shall any director be
liable in any way by reason of the fact that any one or more of the directors of
this  Corporation is or are  interested in, or is a director or officer,  or are
directors or officers of such other  Corporation,  provided  that such facts are
disclosed or made known to the Board of Directors.


                                       5
<PAGE>

(b) Any  director,  personally  and  individually,  may be a party  to or may be
interested in any contract or transaction of this  Corporation,  and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize,  approve or ratify such contract or
transaction  by the vote  (not  counting  the vote of any  such  director)  of a
majority of a quorum,  notwithstanding  the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting.  This Section shall not
be construed to impair or  invalidate or in any way affect any contract or other
transaction  which would otherwise be valid under the law (common,  statutory or
otherwise) applicable thereto.

Section 13 - Committees:
- ------------------------

The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time  designate  from among its members an executive  committee
and  such  other  committees,  and  alternate  members  thereof,  as  they  deem
desirable,  each  consisting  of three or more  members,  with such  powers  and
authority  (to  the  extent  permitted  by  law)  as may  be  provided  in  such
resolution. Each such committee shall serve at the pleasure of the Board.

                              ARTICLE IV - OFFICERS
                              ---------------------

Section 1 - Number, Qualifications, Election and Term of Office:
- ----------------------------------------------------------------

(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer,  and such  other  officers,  including  a  Chairman  of the  Board of
Directors,  and one or more Vice Presidents,  as the Board of Directors may from
time to time deem advisable. Any officer other than the Chairman of the Board of
Directors may be, but is not required to be, a director of the Corporation.  Any
two or more  offices  may be held by the same  person,  except  the  offices  of
President and Secretary.

(b) The officers of the  Corporation  shall be elected by the Board of Directors
at the  regular  annual  meeting of the Board  following  the annual  meeting of
shareholders.

(c) Each  officer  shall hold  office  until the annual  meeting of the Board of
Directors next succeeding his election,  and until his successor shall have been
elected and qualified, or until his death, resignation or removal.

Section 2 - Resignation:
- ------------------------

Any officer may resign at any time by giving written notice of such  resignation
to  the  Board  of  Directors,  or to the  President  or  the  Secretary  of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take  effect upon  receipt  thereof by the Board of  Directors  or by such
officer,  and the acceptance of such resignation  shall not be necessary to make
it effective.


                                       6
<PAGE>

Section 3 - Removal:
- --------------------

Any  officer  may be  removed,  either  with or without  cause,  and a successor
elected by the Board at any time.

Section 4 - Vacancies:
- ----------------------

A vacancy  in any  office by reason  of death,  resignation,  inability  to act,
disqualification,  or any  other  cause,  may at any  time  be  filled  for  the
unexpired portion of the term by the Board of Directors.

Section 5 - Duties of Officers:
- -------------------------------

Officers of the Corporation  shall,  unless  otherwise  provided by the Board of
Directors,  each have such  powers  and  duties as  generally  pertain  to their
respective  offices  as well as such  powers  and  duties as may be set forth in
these By-laws, or may from time to time be specifically  conferred or imposed by
the Board of Directors.  The President shall be the chief  executive  officer of
the Corporation.

Section 6 - Sureties and Bonds:
- -------------------------------

In case the Board of Directors shall so require, any officer,  employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct,  conditioned  upon
the  faithful   performance  of  his  duties  to  the   Corporation,   including
responsibility for negligence and for the accounting for all property,  funds or
securities of the Corporation which may come into his hands.

Section 7 - Shares of Other Corporation:
- ----------------------------------------

Whenever the Corporation is the holder of shares of any other  corporation,  any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers,  consents,
proxies or other  instruments)  may be exercised on behalf of the Corporation by
the  President,  any  Vice  President,  or such  other  person  as the  Board of
Directors may authorize.

                           ARTICLE V - SHARES OF STOCK
                           ---------------------------

Section 1 - Certificate of Stock:
- ---------------------------------

(a) The  certificates  representing  shares of the Corporation  shall be in such
form as shall be adopted by the Board of  Directors,  and shall be numbered  and
registered in the order issued. They shall bear the holder's name and the number
of shares, and shall be signed by (i) the Chairman of the Board or the President
or a Vice President,  and (ii) the Secretary or any Assistant Secretary, and may
bear the corporate seal.


                                       7
<PAGE>

(b) No certificate  representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.

(c) The Board of  Directors  may  authorize  the  issuance of  certificates  for
fractions of a share which shall entitle the holder to exercise  voting  rights,
receive dividends and participate in liquidating distributions, in proportion to
the  fractional  holdings;  or it may  authorize the payment in cash of the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are  determined;  or it may  authorize  the issuance,  subject to such
conditions  as may be  permitted by law, of scrip in  registered  or bearer form
over the signature of an officer or agent of the  Corporation,  exchangeable  as
therein provided for full shares, but such scrip shall not entitle the holder to
any rights of a shareholder, except as therein provided.

Section 2 - Lost or Destroyed Certificates:
- -------------------------------------------

The  holder of any  certificate  representing  shares of the  Corporation  shall
immediately notify the Corporation of any loss or destruction of the certificate
representing  the same. The Corporation may issue a new certificate in the place
of any  certificate  theretofore  issued  by it,  alleged  to have  been lost or
destroyed. On production of such evidence of loss or destruction as the Board of
Directors  in its  discretion  may require,  the board of Directors  may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives,  to give the  Corporation  a bond in such sum as the  Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims,  loss,  liability or damage it may
suffer on account of the issuance of the new certificate.  A new certificate may
be issued  without  requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper so to do.

Section 3 - Transfers of Shares:
- --------------------------------

(a) Transfers of shares of the Corporation shall be made on the share records of
the Corporation  only by the holder of record thereof,  in person or by his duly
authorized  attorney,  upon  surrender for  cancellation  of the  certificate or
certificates  representing such shares,  with an assignment or power of transfer
endorsed thereon or delivered therewith,  duly executed,  with such proof of the
authenticity  of the  signature  and of  authority to transfer and of payment of
transfer taxes as the Corporation or its agents may require.

(b) The Corporation shall be entitled to treat the holder of record of any share
or shares as the absolute owner thereof for all purposes and, accordingly, shall
not be bound to  recognize  any legal,  equitable or other claim to, or interest
in,  such  share or shares on the part of any other  person,  whether  or not it
shall have  express  or other  notice  thereof,  except as  otherwise  expressly
provided by law.

Section 4 - Record Date:
- ------------------------

In lieu of closing the share records of the Corporation,  the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days, as
the record date for the determination of shareholders entitled to receive notice
of, or to vote at, any meeting of


                                       8
<PAGE>

shareholders,  or to  consent  to any  proposal  without a  meeting,  or for the
purpose  of  determining   shareholders  entitled  to  receive  payment  of  any
dividends,  or allotment of any rights,  or for the purpose of any other action.
If  no  record  date  is  fixed,  the  record  date  for  the  determination  of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day next preceding the day on which notice is
given,  or, if no notice is given,  the day on which the  meeting  is held;  the
record date for determining  shareholders  for any other purpose shall be at the
close of business on the day on which the  resolution of the directors  relating
thereto is adopted.  When a determination  of shareholders or record entitled to
notice of or to vote at any  meeting of  shareholders  has been made as provided
for herein,  such determination shall apply to any adjournment  thereof,  unless
the directors fix a new record date for the adjourned meeting.

                             ARTICLE VI - DIVIDENDS
                             ----------------------

Subject to applicable  law,  dividends may be declared and paid out of any funds
available therefor,  as often, in such amounts, and at such time or times as the
Board of Directors may determine.

                            ARTICLE VII - FISCAL YEAR
                            -------------------------

The fiscal year of the Corporation shall be fixed by the Board of Directors from
time to time, subject to applicable law.

                          ARTICLE VIII - CORPORATE SEAL
                          -----------------------------

The Corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.

                             ARTICLE IX - AMENDMENTS
                             -----------------------

Section 1 - By Shareholders:
- ----------------------------

All by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made, by a majority vote of the shareholders at the time entitled
to vote in the election of directors.

Section 2 - By Directors:
- -------------------------

The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time,  by-laws  of the  Corporation;  provided,  however,  that the
shareholders  entitled  to vote  with  respect  thereto  as in this  Article  IX
above-provided  may  alter,  amend  or  repeal  by-laws  made  by the  Board  of
Directors,  except that the Board of Directors shall have no power to change the
quorum for meetings of shareholders  or of the Board of Directors,  or to change
any  provisions  of the by-laws  with respect to the removal of directors or the
filling  of  vacancies  in  the  Board   resulting   from  the  removal  by  the
shareholders.  If any by-law  regulating  an impending  election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in


                                       9
<PAGE>

the notice of the next meeting of  shareholders  for the election of  directors,
the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.

      The  undersigned  Incorporator  certifies the foregoing  by-laws have been
adopted  as the  first  by-laws  of the  Corporation,  in  accordance  with  the
requirements of the Corporation Law.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>LEASE
<TEXT>


T & O MANAGEMENT CORP.
- ----------------------
215 51st Street                                                   (718) 745-4100
Brooklyn, NY  11220

                                                     RE:  4425A 1st Ave
                                                          Brooklyn, N.Y.

Dear Mr. Gordon,

Please  take this letter as part of the Lease dated  October  1st,  1997 for the
above listed address.

Please note this letter is a Rider of the Lease.

Rider as follows:

      On the first day dated  October  1st,  to the date of  termination  of the
lease,  we relieve  all  responsibilities  to the Tenant for the  balance of the
years except the first twelve months. This Lease holds the Tenant responsible to
remain in building for the first twelve months and shall require  Tenant to give
sixty (60) days notice prior to the completion of the twelfth month.

Building shall not be subleased by any other company other than Coffee Holding.

This rider is in the  interest  of  maintain  Tenants  responsibility  to a time
limitation.

/s/ Sterling Gordon, Pres.                  /s/ A. Gallina
- --------------------------                  ----------------
Coffee Holding                              T & O Management


<PAGE>

      THIS LEASE made the 15 day of August, 1997 between

T&O Management Corp.
215 51st Street, Brooklyn, NY 11220
hereinafter referred to as LANDLORD, and
Coffee Holding Co., Inc.
4401 First Avenue, Brooklyn, NY 11232

hereinafter jointly, severally and collectively referred to as TENANT.

      Witnesseth,  that the Landlord hereby leases to the Tenant, and the Tenant
hereby hires and takes from the Landlord

in the building known as 4425a First Avenue, Brooklyn, NY 11232 (7,500 sq. ft)

to be used and occupied by the Tenant as Warehouse

and for no other purpose, for a term to commence on September 1, 1997 and to end
on August 31, 2002,  unless sooner  terminated as hereinafter  provided,  at the
ANNUAL RENT of ($3,900.00 three thousand nine hundred dollars) per month

all payable in equal monthly instalments in advance on the first day of each and
every calendar month during said term, except the first instalment,  which shall
be paid upon the  execution  hereof,  and the Tenant  shall  give to  Landlord 2
months security deposit of Seven Thousand Eight Hundred Dollars ($7,800.00).

      THE TENANT JOINTLY AND SEVERALLY COVENANTS:

      FIRST: That the Tenant will pay the rent as above provided.

      SECOND:  That,  throughout said term the Tenant will take good care of the
demised premises, fixtures and appurtenances, and all alterations, additions and
improvements  to either:  make all  repairs in and about the same  necessary  to
preserve  them in good order and  condition,  which repairs shall be, in quality
and class, equal to the original work; promptly pay the expense of such repairs;
suffer no waste or injury;  give prompt  notice to the Landlord of any fire that
may occur;  execute  and comply with all laws,  rules,  orders,  ordinances  and
regulations  at any time issued or in force (except those  requiring  structural
alterations),  applicable to the demised premises or to the Tenant's  occupation
thereof,  of the  Federal,  State and Local  Governments,  and of each and every
department,  bureau  and  official  thereof,  and of the New York  Board of Fire
Underwriters;  permit at all times during usual business hours, the Landlord and
representatives of the Landlord to enter the demised premises for the purpose of
inspection,  and to exhibit  them for  purposes  of sale or  rental;  suffer the
Landlord to make repairs and  improvements to all parts of the building,  and to
comply with all orders and requirements of governmental  authority


<PAGE>

applicable to said building or to any occupation thereof; suffer the Landlord to
erect,  use,  maintain,  repair and  replace  pipes and  conduits in the demised
premises and to the floors above and below;  forever indemnify and save harmless
the Landlord for and against any and all liability, penalties, damages, expenses
and judgments  arising from injury during said term to person or property of any
nature,  occasioned wholly or in part by any act or acts,  omission or omissions
of the Tenant, or of the employees,  guests,  agents, assigns or underTenants of
the Tenant and also for any matter or thing growing out of the occupation of the
demised  premises  or of the  streets,  sidewalks  or vaults  adjacent  thereto;
permit, during the six months next prior to the expiration of the term the usual
notice "To Let" to be placed and to remain  unmolested  in a  conspicuous  place
upon the exterior of the demised  premises;  repair, at or before the end of the
term, all injury done by the  installation or removal of furniture and property;
and at the end of the term, to quit and surrender the demised  premises with all
alterations, additions and improvements in good order and condition.

      THIRD:  That the  Tenant  will not  disfigure  or  deface  any part of the
building,  or suffer the same to be done,  except so far as may be  necessary to
affix such trade fixtures as are herein consented to by the Landlord; the Tenant
will not  obstruct,  or permit the  obstruction  of the  street or the  sidewalk
adjacent thereto;  will not do anything,  or suffer anything to be done upon the
demised  premises  which  will  increase  the  rate of fire  insurance  upon the
building or any of its contents, or be liable to cause structural injury to said
building;  will not permit the accumulation of waste or refuse matter,  and will
not,  without the written  consent of the Landlord  first obtained in each case,
either  sell,  assign,  mortgage or transfer  this lease,  underlet  the demised
premises or any part thereof, permit the same or any part thereof to be occupied
by  anybody  other  than  the  Tenant  and  the  Tenant's  employees,  make  any
alterations  in the  demised  premises,  use the  demised  premises  or any part
thereof for any purpose  other than the one first above  stipulated,  or for any
purpose deemed extra  hazardous on account of fire risk, nor in violation of any
law or ordinance. That the Tenant will not obstruct or permit the obstruction of
the light, halls,  stairway or entrances to the building,  and will not erect or
inscribe  any sign,  signals  or  advertisements  unless and until the style and
location  thereof have been approved by the  Landlord;  and if any be erected or
inscribed  without such  approval,  the  Landlord may remove the same.  No water
cooler, air conditioning unit or system or other apparatus shall be installed or
used without the prior written consent of Landlord.

      IT IS MUTUALLY COVENANTED AND AGREED, THAT

      FOURTH:  If the demised  premises  shall be  partially  damaged by fire or
other  cause  without  the  fault  or  neglect  of  Tenant,  Tenant's  servants,
employees,  agents, visitors or licensees,  the damages shall be repaired by and
at the expense of Landlord and the rent until such  repairs  shall be made shall
be apportioned  according to the part of the demised premises which is usable by
Tenant.  But if such  partial  damage is due to the fault or  neglect of Tenant,
Tenant's servants,  employees,  agents, visitors or licensees, without prejudice
to any other rights and remedies of Landlord and without prejudice to the rights
of subrogation of Landlord's insurer,  the damages shall be repaired by Landlord
but there shall be no  apportionment  or  abatement  of rent.  No penalty  shall
accrue for reasonable delay which may arise by reason of adjustment of insurance
on the part of Landlord  and/or  Tenant and for  reasonable  delay on account of
"labor troubles",  or any other cause beyond Landlord's  control. If the demised
premises are totally damaged or are


                                     - 2 -
<PAGE>

rendered  wholly  unTenantable  by fire or other  cause,  and if Landlord  shall
decide not to restore or not to rebuild the same, or if the building shall be so
damaged that  Landlord  shall decide to demolish it or to rebuild it, then or in
any of such  events  Landlord  may,  within  ninety (90) days after such fire or
other  cause,  give Tenant a notice in writing of such  decision,  which  notice
shall be given as in Paragraph Twelve hereof provided, and thereupon the term of
this lease shall expire by lapse of time upon the third day after such notice is
given,  and Tenant shall vacate the demised  premises and  surrender the same to
Landlord.  If Tenant  shall not be in default  under this lease  then,  upon the
termination  of this lease under the  conditions  provided  for in the  sentence
immediately  preceding.  Tenant's  liability  for rent shall cease as of the day
following the casualty. Tenant hereby expressly waives the provisions of Section
227 of the Real  Property Law and agrees that the  foregoing  provisions of this
Article shall govern and control in lieu thereof.  If the damage or  destruction
be due to the fault or neglect of Tenant the debris  shall be removed by, and at
the expense of, Tenant.

      FIFTH:  If the whole or any part of the premises  hereby  demised shall be
taken or condemned by any competent authority for any public use or purpose then
the term hereby granted shall cease from the time when possession of the part so
taken shall be required  for such public  purpose and without  apportionment  of
award,  the Tenant  hereby  assigning to the Landlord all right and claim to any
such award, the current rent, however, in such case to be apportioned.

      SIXTH:  If, before the commencement of the term, the Tenant be adjudicated
a bankrupt, or make a "general assignment," or take the benefit of any insolvent
act, or if a Receiver or Trustee be appointed for the Tenant's  property,  or if
this lease or the estate of the Tenant  hereunder be  transferred  or pass to or
devolve upon any other person or corporation,  or if the Tenant shall default in
the  performance of any agreement by the Tenant  contained in any other lease to
the  Tenant by the  Landlord  or by any  corporation  of which an officer of the
Landlord is a Director, this lease shall thereby, at the option of the Landlord,
be terminated  and in that case,  neither the Tenant nor anybody  claiming under
the Tenant shall be entitled to go into possession of the demised  premises.  If
after the  commencement  of the term, any of the events  mentioned above in this
subdivision  shall occur,  or if Tenant shall make default in fulfilling  any of
the covenants of this lease, other than the covenants for the payment of rent or
"additional  rent" or if the demised  premises  become  vacant or deserted,  the
Landlord may give to the Tenant ten days' notice of intention to end the term of
this lease, and thereupon at the expiration of said ten days' (if said condition
which was the basis of said notice shall  continue to exist) the term under this
lease shall expire as fully and  completely  as if that day were the date herein
definitely  fixed for the  expiration  of the term and the Tenant will then quit
and surrender the demised premises to the Landlord,  but the Tenant shall remain
liable as hereinafter provided.

      If the Tenant  shall  make  default  in the  payment of the rent  reserved
hereunder,  or any item of "additional  rent" herein  mentioned,  or any part of
either or in making any other payment herein provided for, or if the notice last
above  provided  for shall  have been given and if the  condition  which was the
basis of said notice shall exist at the expiration of said ten days' period, the
Landlord  may  immediately,  or at any time  thereafter,  re-enter  the  demised
premises  and remove all persons and all or any  property  therefrom,  either by
summary dispossess proceedings,  or by any suitable action or proceeding at law,
or by force or otherwise,  without being liable to  indictment,  prosecution  or
damages therefor, and re-possess and enjoy said premise together with


                                     - 3 -
<PAGE>

all additions,  alterations and  improvements.  In any such case or in the event
that this lease be  "terminated"  before the  commencement of the term, as above
provided,  the  Landlord may either  re-let the demised  premises or any part or
parts thereof for the Landlord's own account,  or may, at the Landlord's option,
re-let the  demised  premises  or any part or parts  thereof as the agent of the
Tenant,  and receive the rents therefor,  applying the same first to the payment
of such expenses as the Landlord may have incurred,  and then to the fulfillment
of the  covenants  of the  Tenant  herein,  and  the  balance,  if  any,  at the
expiration of the term first above  provided  for,  shall be paid to the Tenant.
Landlord  may rent the  premises  for a term  extending  beyond the term  hereby
granted without releasing Tenant from any liability.  In the event that the term
of this lease shall expire as above in this  subdivision  "Sixth"  provided,  or
terminate by summary  proceedings  or otherwise,  and if the Landlord  shall not
re-let the demised premises for the Landlord's own account, then, whether or not
the  premises be re-let,  the Tenant  shall  remain  liable for,  and the Tenant
hereby agrees to pay to the Landlord,  until the time when this lease would have
expired but for such termination or expiration,  the equivalent of the amount of
all of the rent and  "additional  rent"  reserved  herein,  less the  avails  of
reletting,  if any,  and the same shall be due and  payable by the Tenant to the
Landlord on the several  rent days above  specified,  that is, upon each of such
rent days the Tenant  shall pay to the Landlord  the amount of  deficiency  then
existing.  The Tenant hereby expressly waives any and all right of redemption in
case the Tenant  shall be  dispossessed  by  judgment or warrant of any court or
judge,  and the  Tenant  waives and will waive all right to trial by jury in any
summary proceedings  hereafter  instituted by the Landlord against the Tenant in
respect to the demised premises.  The words "re-enter" and "re-entry" as used in
this lease are not restricted to their technical legal meaning.

      In the event of a breach of threatened  breach by the Tenant of any of the
covenants or provisions  hereof, the Landlord shall have the right of injunction
and the right to invoke any remedy allowed at law or in equity,  as if re-entry,
summary proceedings and other remedies were not herein provided for.

      SEVENTH:  If the Tenant  shall  make  default  in the  performance  of any
covenant  herein  contained,  the  Landlord  may  immediately,  or at  any  time
thereafter, without notice, perform the same for the account of the Tenant. If a
notice of  mechanic's  lien be filed  against  the  demised  premises or against
premises of which the demised  premises are part,  for, or purporting to be for,
labor or material  alleged to have been furnished,  or to be furnished to or for
the Tenant at the demised  premises,  and if the Tenant  shall fail to take such
action as shall cause such lien to be discharged  within  fifteen days after the
filing of such notice, the Landlord may pay the amount of such lien or discharge
the same by deposit or by bonding proceedings,  and in the event of such deposit
or bonding  proceedings,  the  Landlord  may require the lienor to  prosecute an
appropriate action to enforce the lienor's claim. In such case, the Landlord may
pay any judgment recovered on such claim. Any amount paid or expense incurred by
the Landlord as in this subdivision of this lease provided, and any amount as to
which the Tenant shall at any time be in default for or in respect to the use of
water,  electric  current or  sprinkler  supervisory  service,  and any  expense
incurred  or sum of money paid by the  Landlord  by reason of the failure of the
Tenant to comply with any  provision  hereof,  or in defending  any such action,
shall be deemed to be "additional rent" for the demised  premises,  and shall be
due and  payable  by the  Tenant  to the  Landlord  on the first day of the next
following  month,  or, at the  option of the  Landlord,  on the first day of any
succeeding  month.  The receipt by the Landlord of any instalment of the regular
stipulated rent


                                     - 4 -
<PAGE>

hereunder  or any of said  "additional  rent" shall not be a waiver of any other
"additional rent" then due.

      EIGHTH:  the  failure  of the  Landlord  to  insist,  in any  one or  more
instances upon a strict performance of any of the covenants of this lease, or to
exercise any option  herein  contained,  shall not be construed as a waiver or a
relinquishment  for the future of such  covenant  or option,  but the same shall
continue  and remain in full force and effect.  The  receipt by the  Landlord of
rent, with knowledge of the breach of any covenant hereof, shall not be deemed a
waiver of such  breach and no waiver by the  Landlord  of any  provision  hereof
shall be deemed to have been made unless  expressed in writing and signed by the
Landlord.  Even though the Landlord  shall  consent to an  assignment  hereof no
further  assignment  shall be made  without  express  consent  in writing by the
Landlord.

      NINTH: If this lease be assigned,  or if the demised  premises or any part
thereof be underlet or  occupied by anybody  other than the Tenant the  Landlord
may collect rent from the assignee,  under-Tenant or occupant, and apply the net
amount  collected to the rent herein  reserved,  and no such collection shall be
deemed a waiver of the covenant herein against  assignment and underletting,  or
the acceptance of the assignee, under-Tenant or occupant as Tenant, or a release
of the Tenant from the further performance by the Tenant of the covenants herein
contained on the part of the Tenant.

      TENTH:  This lease shall be subject and  subordinate at all times,  to the
lien of the mortgages now on the demised  premises,  and to all advances made or
hereafter to be made upon the security  thereof,  and subject and subordinate to
the lien of any mortgage or mortgages  which at any time may be made a lien upon
the  premises.  The Tenant will execute and deliver such further  instrument  or
instruments  subordinating  this  lease  to the  lien of any  such  mortgage  or
mortgages as shall be desired by any mortgagee or proposed mortgagee. The Tenant
hereby appoints the Landlord the attorney-in-fact of the Tenant, irrevocable, to
execute and deliver any such instrument or instruments for the Tenant.

      ELEVENTH:  All  improvements  made by the  Tenant  to or upon the  demised
premises,  except said trade fixtures,  shall when made, at once be deemed to be
attached to the freehold,  and become the property of the  Landlord,  and at the
end or other  expiration of the term, shall be surrendered to the Landlord in as
good  order  and  condition  as they were when  installed,  reasonable  wear and
damages by the elements excepted.

      TWELFTH: Any notice or demand which under the terms of this lease or under
any  statute  must or may be given  or made by the  parties  hereto  shall be in
writing  and  shall  be  given  or made by  mailing  the  same by  certified  or
registered  mail addressed to the respective  parties at the addresses set forth
in this lease.

      THIRTEENTH:  The  Landlord  shall not be liable  for any  failure of water
supply or electrical current, sprinkler damage, or failure of sprinkler service,
nor for  injury or damage to person or  property  caused by the  elements  or by
other  Tenants  or persons in said  building,  or  resulting  from  steam,  gas,
electricity,  water,  rain or snow, which may leak or flow from any part of said
buildings,  or from the pipes, appliances or plumbing works of the same, or from
the street


                                     - 5 -
<PAGE>

or  sub-surface,  or from any other place,  nor for  interference  with light or
other incorporeal hereditaments by anybody other than the Landlord, or caused by
operations by or for a governmental  authority in  construction of any public or
quasi-public work, neither shall the Landlord be liable for any latent defect in
the building.

      FOURTEENTH:  No  diminution  or abatement of rent,  or other  compensation
shall be claimed or allowed for  inconvenience  or  discomfort  arising from the
making of repairs or improvements to the building or to its appliances,  nor for
any space taken to comply  with any law,  ordinance  or order of a  governmental
authority.  In respect to the various  "services," if any,  herein  expressly or
impliedly  agreed to be furnished  by the  Landlord to the Tenant,  it is agreed
that  there  shall be no  diminution  or  abatement  of the  rent,  or any other
compensation,  for  interruption  or  curtailment  of such  "service"  when such
interruption  or  curtailment  shall be due to accident,  alterations or repairs
desirable or necessary  to be made or to  inability  or  difficulty  in securing
supplies or labor for the  maintenance of such "service" or to some other cause,
not  gross  negligence  on the  pat of the  Landlord.  No such  interruption  or
curtailment of any such "service" shall be deemed a constructive  eviction.  The
Landlord shall not be required to furnish,  and the Tenant shall not be entitled
to receive, any of such "services" during any period wherein the Tenant shall be
in  default  in  respect to the  payment  of rent.  Neither  shall  there be any
abatement or  diminution of rent because of making of repairs,  improvements  or
decorations  to the  demised  premises  after  the  date  above  fixed  for  the
commencement  of the term, it being  understood  that rent shall,  in any event,
commence to run at such date so above fixed.

      FIFTEENTH:  The Landlord may  prescribe and regulate the placing of safes,
machinery,  quantities of  merchandise  and other things.  The Landlord may also
prescribe  and  regulate  which  elevator  and  entrances  shall  be used by the
Tenant's  employees,  and for the Tenant's shipping.  The Landlord may make such
other and further rules and regulations as, in the Landlord's judgment, may from
time to time be needful for the safety, care or cleanliness of the building, and
for the  preservation  of good order  therein.  The Tenant and the employees and
agents of the Tenant will observe and conform to all such rules and regulations.

      SIXTEENTH:  In the event that an excavation  shall be made for building or
other  purposes  upon  land  adjacent  to  the  demised  premises  or  shall  be
contemplated  to be made,  the  Tenant  shall  afford to the  person or  persons
causing or to cause such excavation,  license to enter upon the demised premises
for the  purpose of doing such work as said  person or persons  shall deem to be
necessary  to  preserve  the wall or walls,  structure  or  structures  upon the
demised premises from injury and to support the same by proper foundations.

      SEVENTEENTH:  No vaults  or space  not  within  the  property  line of the
building  are  leased  hereunder.  Landlord  makes no  representation  as to the
location of the property  line of the  building.  Such vaults or space as Tenant
may be permitted  to use or occupy are to be used or occupied  under a revocable
license and if such  license be revoked by the Landlord as to the use of part or
all of the  vaults or space  Landlord  shall not be  subject  to any  liability;
Tenant shall not be entitled to any  compensation or reduction in rent nor shall
this be  deemed  constructive  or  actual  eviction.  Any tax,  fee or charge of
municipal  or other  authorities  for such  vaults or space shall be paid by the
Tenant for the period of the Tenant's use or occupancy thereof.


                                     - 6 -
<PAGE>

      EIGHTEENTH:  That during seven months prior to the  expiration of the term
hereby granted,  applicants shall be admitted at all reasonable hours of the day
to view the premises until rented;  and the Landlord and the  Landlord's  agents
shall be  permitted at any time during the term to visit and examine them at any
reasonable  hour of the day, and workmen may enter at any time,  when authorized
by the Landlord or the Landlord's  agents, to make or facilitate  repairs in any
part of the building;  and if the said Tenant shall not be personally present to
open and permit an entry into said premises, at any time, when for any reason an
entry therein shall be necessary or permissible  hereunder,  the Landlord or the
Landlord's  agents may forcibly enter the same without rendering the Landlord or
such agents liable to any claim or cause of action for damages by reason thereof
(if during such entry the Landlord shall accord  reasonable care to the Tenant's
property) and without in any manner  affecting the  obligations and covenants of
this lease;  it is, however,  expressly  understood that the right and authority
hereby  reserved,  does not  impose,  nor does the  Landlord  assume,  by reason
thereof,  any responsibility or liability whatsoever for the care or supervision
of said premises,  or any of the pipes,  fixtures,  appliances or  appurtenances
therein contained or therewith in any manner connected.

      NINETEENTH:  The  Landlord  has made no  representations  or  promises  in
respect to said  building  or to the demised  premises  except  those  contained
herein,  and those,  if any,  contained  in some  written  communication  to the
Tenant,  signed by the Landlord.  This instrument may not be changed,  modified,
discharged or terminated orally.

      TWENTIETH: If the Tenant shall at any time be in default hereunder, and if
the Landlord shall institute an action or summary  proceeding against the Tenant
based upon such  default,  then the Tenant will  reimburse  the Landlord for the
expense of attorneys' fees and  disbursements  thereby incurred by the Landlord,
so far as the same are reasonable in amount. Also so long as the Tenant shall be
a Tenant hereunder the amount of such expenses shall be deemed to be "additional
rent"  hereunder  and shall be due from the Tenant to the  Landlord on the first
day of the month following the incurring of such respective expenses.

      TWENTY-FIRST:  Landlord shall not be liable for failure to give possession
of the premises upon  commencement  date by reason of the fact that premises are
not ready for occupancy, or due to a prior Tenant wrongfully holding over or any
other person wrongfully in possession or for any other reason: in such event the
rent shall not commence until possession is given or is available,  but the term
herein shall not be extended.

      THE TENANT FURTHER COVENANTS:

      TWENTY-SECOND:  If the demised premises or any part thereof,  consist of a
store,  or of a first floor,  or of any part  thereof,  the Tenant will keep the
sidewalk  and curb in front  thereof  clean at all  times and free from snow and
ice, and will keep insured in favor of the Landlord, all plate glass therein and
furnish the Landlord with policies of insurance covering the same.

      TWENTY-THIRD:  If by reason of the conduct upon the demised  premises of a
business  not herein  permitted,  or if by reason of the  improper  or  careless
conduct of any business upon or use of the demised premises,  the fire insurance
rate shall at any time be higher  than it  otherwise  would be,  then the Tenant
will reimburse the Landlord, as additional rent hereunder, for that part


                                     - 7 -
<PAGE>

of all fire  insurance  premiums  hereafter paid out by the Landlord which shall
have been charged  because of the conduct of such business not so permitted,  or
because of the improper or careless  conduct of any business  upon or use of the
demised  premises,  and will make such  reimbursement  upon the first day of the
month  following such outlay by the Landlord;  but this covenant shall not apply
to a premium for any period  beyond the  expiration  date of this  lease,  first
above specified. In any action or proceeding wherein the Landlord and Tenant are
parties,  a  schedule  or "make  up" of rate  for the  building  on the  demised
premises, purporting to have been issued by New York Fire Insurance Exchange, or
other body making fire insurance rates for the demised premises,  shall be prima
facie  evidence of the facts therein stated and of the several items and charges
included in the fire insurance rate then applicable to the demised premises.

      TWENTY-FOURTH:  If a separate  water  meter be  installed  for the demised
premises,  or any part thereof,  the Tenant will keep the same in repair and pay
the charges made by the  municipality  or water supply company for or in respect
to the  consumption of water,  as and when bills  therefor are rendered.  If the
demised  premises,  or any part thereof,  be supplied with water through a meter
which supplies other premises,  the Tenant will pay to the Landlord, as and when
bills are  rendered  therefor,  the Tenant's  proportionate  part of all charges
which the municipality or water supply company shall make for all water consumed
through said meter, as indicated by said meter. Such proportionate part shall be
fixed  by  apportioning  the  respective  charge  according  to said  meter,  as
indicated by said meter. Such  proportionate part shall be fixed by apportioning
the respective  charge according to floor area against all of the rentable floor
area in the building  (exclusive of the basement) which shall have been occupied
during the period of the respective charges, taking into account the period that
each part of such area was occupied. Tenant agrees to pay as additional rent the
Tenant's  proportionate  part,  determined  as  aforesaid,  of the sewer rent or
charge imposed or assessed upon the building of which the premises are a part.

      TWENTY-FIFTH:  That the Tenant will  purchase  from the  Landlord,  if the
Landlord shall so desire,  all electric  current that the Tenant requires at the
demised  premises,  and will pay the  Landlord  for the same,  as the  amount of
consumption  shall be indicated by the meter  furnished  therefor.  The price of
said current shall be the same as that charged for  consumption  similar to that
of the  Tenant  by the  company  supplying  electricity  in the same  community.
Payments  shall be due as and when bills  shall be  rendered.  The Tenant  shall
comply with like rules,  regulations and contract provisions as those prescribed
by said company for a consumption similar to that of the Tenant.

      TWENTY-SIXTH:  If there now is or shall be  installed  in said  building a
"sprinkler  system"  the  Tenant  agrees to keep the  appliances  thereto in the
demised premises in repair and good working condition, and if the New York Board
of Fire  Underwriters  or the New York Fire  Insurance  Exchange  or any bureau,
department or official of the State or local  government  requires or recommends
that any changes,  modifications,  alterations or additional  sprinkler heads or
other equipment be made or supplied by reason of the Tenant's  business,  or the
location  of  partitions,  trade  fixtures,  or other  contents  of the  demised
premises, or if such changes, modifications,  alterations,  additional sprinkler
heads or other  equipment in the demised  premises are  necessary to prevent the
imposition  of a penalty or charge  against the full  allowance  for a sprinkler
system  in the fire  insurance  rate as fixed by said  Exchange,  or by any Fire
Insurance


                                     - 8 -
<PAGE>

      Company,  the Tenant will at the Tenant's own expense,  promptly  make and
supply such changes, modifications,  alterations,  additional sprinkler heads or
other  equipment.  As  additional  rent  hereunder  the  Tenant  will pay to the
Landlord,  annually in advance,  throughout the term $       toward the contract
price for sprinkler supervisory service.

      TWENTY-SEVENTH:  The sum of Dollars is deposited by the Tenant herein with
the  Landlord  herein  as  security  for  the  faithful  performance  of all the
covenants  and  conditions  of the  lease  by the  said  Tenant.  If the  Tenant
faithfully  performs  all  the  covenants  and  conditions  on  his  part  to be
performed, then the sum deposited shall be returned to said Tenant.

      TWENTY-EIGHTH:  This  lease is  granted  and  accepted  on the  especially
understood  and agreed  condition  that the Tenant will  conduct his business in
such a manner,  both as regards noise and kindred nuisances,  as will in no wise
interfere  with,  annoy,  or disturb any other Tenants,  in the conduct of their
several  businesses,  or the Landlord in the  management of the building;  under
penalty of forfeiture of this lease and consequential damages.

      TWENTY-NINTH:  The Landlord hereby recognizes as the broker who negotiated
and consummated  this lease with the Tenant herein,  and agrees that if, as, and
when the Tenant  exercises the option,  if any,  contained  herein to renew this
lease, or fails to exercise the option, if any, contained therein to cancel this
lease,  the Landlord will pay to said broker a further  commission in accordance
with the rules and commission rates of the Real Estate Board in the community. A
sale,  transfer,  or other disposition of the Landlord's  interest in said lease
shall not operate to defeat the Landlord's obligation to pay the said commission
to the said broker. The Tenant herein hereby represents to the Landlord that the
said  broker is the sole and only broker who  negotiated  and  consummated  this
lease with the Tenant.

      THIRTIETH: The Tenant agrees that it will not require, permit, suffer, nor
allow the cleaning of any window,  or windows,  in the demised premises from the
outside  (within  the  meaning  of  Section  202 of the Labor  Law)  unless  the
equipment and safety  devices  required by law,  ordinance,  regulation or rule,
including,  without  limitation,  Section  202 of the New York  Labor  Law,  are
provided  and used,  and  unless  the rules,  or any  supplemental  rules of the
Industrial  Board of the  State of New York are  fully  complied  with;  and the
Tenant hereby agrees to indemnify the Landlord,  Owner,  Agent,  Manager  and/or
Superintendent, as a result of the Tenant's requiring, permitting, suffering, or
allowing any window,  or windows in the demised  premises to be cleaned from the
outside in violation of the  requirements  of the  aforesaid  laws,  ordinances,
regulations and/or rules.

      THIRTY-FIRST:  The invalidity or unenforceability of any provision of this
lease  shall in no way  affect  the  validity  or  enforceability  of any  other
provision hereof.

      THIRTY-SECOND:  In order to avoid delay,  this lease has been prepared and
submitted to the Tenant for signature with the  understanding  that it shall not
bind the Landlord unless and until it is executed and delivered by the Landlord.


                                     - 9 -
<PAGE>

      THIRTY-THIRD:  The Tenant will keep clean and  polished  all metal,  trim,
marble and  stonework  which are a part of the exterior of the  premises,  using
such  materials and methods as the Landlord may direct,  and if the Tenant shall
fail to comply with the  provisions  of this  paragraph,  the Landlord may cause
such work to be done at the expense of the Tenant.

      THIRTY-FOURTH: The Landlord shall replace at the expense of the Tenant any
and all broken glass in the skylights,  doors and walls in and about the demised
premises.  The  Landlord  may insure  and keep  insured  all plate  glass in the
skylights,  doors and walls in the demised premises,  for and in the name of the
Landlord and bills for the premiums  therefor  shall be rendered by the Landlord
to the Tenant at such times as the Landlord may elect, and shall be due from and
payable by the Tenant when  rendered,  and the amount thereof shall be deemed to
be, and shall be paid as, additional rent.

      THIRTY-FIFTH:  This  lease  and  the  obligation  of  Tenant  to pay  rent
hereunder  and perform all of the other  covenants and  agreements  hereunder on
part of Tenant to be performed shall in nowise be affected,  impaired or excused
because  Landlord  is unable to supply or is delayed in  supplying  any  service
expressly  or  impliedly  to be supplied or is unable to make,  or is delayed in
making any repairs, additions, alterations or decorations or is unable to supply
or is delayed in supplying any equipment or fixtures if Landlord is prevented or
delayed from so doing by reason of governmental  preemption in connection with a
National  Emergency  declared  by the  President  of  the  United  States  or in
connection  with any rule,  order or regulation of any department or subdivision
thereof of any  government  agency or by reason of the  conditions of supply and
demand which have been or are affected by war or other emergency.

THE LANDLORD COVENANTS

      FIRST:  That if and so long as the  Tenant  pays the rent and  "additional
rent"  reserved  hereby,  and performs and observes the covenants and provisions
hereof, the Tenant shall quietly enjoy the demised premises,  subject,  however,
to the terms of this  lease,  and to the  mortgages  above  mentioned,  provided
however,  that this covenant shall be conditioned upon the retention of title to
the premises by Landlord.

      SECOND:  Subject to the  provisions  of Paragraph  "Fourteenth"  above the
Landlord will furnish the following  respective serves: (a) Elevator service, if
the building shall contain an elevator or elevators,  on all days except Sundays
and  holidays,  from       A.M. to       P.M.;  (b) Heat,  during the same hours
on the same days in the cold season in each year.

      And it is mutually understood and agreed that the covenants and agreements
contained in the within lease shall be binding upon the parties  hereto and upon
their respective successors, heirs, executors and administrators.


                                     - 10 -
<PAGE>

      IN WITNESS WHEREOF,  the Landlord and Tenant have respectively  signed and
sealed these presents the day and year first above written.

                                  /s/ Anthony Gallina                   [L.S.]
                                  --------------------------------------------
                                  T&O Management Corp.
                                  Anthony Gallina, Pres.

IN PRESENCE OF:

                                  /s/  Sterling Gordon                  [L.S.]
                                  --------------------------------------------
                                  Coffee Holding Co., Inc.      Tenant
                                  Sterling Gordon, Pres.


                                     - 11 -
<PAGE>

                      RIDER TO LEASE FOR 4425a First Avenue
                      -------------------------------------

THIRTY-SIXTH:  The Tenant  shall  neither  encumber nor obstruct the sidewalk in
front of,  entrance to, or halls and stairs of said premise,  nor allow the same
to be obstructed  or  encumbered  in any manner.  The Tenant shall not place any
vehicles,  trucks,  equipment  etc.  on the  sidewalk  premise  or any  adjacent
sidewalk or facade of adjacent premises.

THIRTY-SEVENTH:  The Tenant shall keep the sidewalk free and clear of ice, snow,
debris, garbage,  automotive parts, oil, lubricants,  etc. The Tenant shall keep
the sidewalk broom swept.

THIRTY-EIGHTH: The Tenant shall be solely responsible and liable for all tickets
and violations from all City, State and Federal agencies.

THIRTY-NINTH:  The Tenant's sign for the outside of the building shall be at the
Landlord's  discretion  with  regards to size and color and must be  approved by
Landlord prior to installation.

FORTIETH:  The Tenant shall provide gas and  electricity for the leased premises
at his own cost and expense.  Water usage will be metered and Landlord  will pay
for "normal" usage only (toilets,  sinks),  Tenant is responsible  for any other
usage. Tenant will notify Landlord immediately if any leaks are discovered.

FORTY-FIRST:  Should  there be an  increase in the New York City Real Estate tax
after the  inception  date  within  the lease,  then the  Tenant  shall pay such
increase to the Landlord after due notice and demand.

FORTY-SECOND:  The Tenant shall provide  public  liability  and property  damage
insurance for the leased  premises with minimum limits of Five Hundred  Thousand
Dollars  ($500,000.00)  CSL with the  Landlord  named as an insured and with the
premium paid by the Tenant.

FORTY-THIRD:  It is understood that the Tenant became aware of the  availability
of the leased  premises  through  direct  contact  with the Landlord and that no
broker was involved.

FORTY-FIFTH:  The Tenant shall be  responsible  for all overhead  doors,  doors,
hardware,  glass,  & plumbing  fixtures.  Any damage shall be  replaced/repaired
immediately or owner will make necessary repairs and bill Tenant.

FORTY-SIXTH: The Tenant shall be responsible for any/all costs for architectural
fees,  permits,  inspections,   city/state  agencies  fees,  etc.  to  obtain  a
Certificate  of  Occupancy  to conduct  business for the lease and rider for the
above listed premise.

FORTY-SEVENTH:  It is understood that the Tenant is leasing the premise "as is."
If there are any Governmental  Agencies'  requirements  such as: Oil Separators,
Freon collectors, Fire extinguishing systems, Back flow preventors, etc. It will
be the Tenants sole responsibility to file, approve,  and at Tenants own cost to
include into the building known as 4425a First Avenue.


<PAGE>

FORTY-EIGHTH:  Tenant  understands  that  building  will be leased  "as is" upon
commencement  of  lease.  There  are no  additional  work  orders  to be done by
Landlord in conjunction with the premise 4425a First Avenue, Brooklyn, NY 11232.

FORTY-NINTH:  Tenant shall have the right to extend this lease for an additional
two year renewal term through  September 1, 2002,  upon written notice given not
less than ninety  days prior to the  expiration  of the term of this lease.  The
annual  rent for each  year of the  renewal  term  shall be  subject  to a seven
percent (7%) increase over the prior year.

/s/ Sterling Gordon                               /s/ Anthony Gallina
- ---------------------------------                 ------------------------------
Tenant - Coffee Holding Co., Inc.                 T&O Management Corp., Landlord
                                                  Anthony Gallina, Pres.

                                     - 2 -

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>STOCK OPTION PLAN
<TEXT>


                            COFFEE HOLDING CO., INC.

                             1998 STOCK OPTION PLAN

      The purpose of the 1998 Stock Option Plan (the "Plan") is to assist COFFEE
HOLDING CO., INC.  (the  "Company")  to attract and retain  qualified  officers,
employees,  directors and consultants of the Company, a Subsidiary,  or a Parent
of the Company, by enabling them to acquire common stock of the Company and thus
providing  incentive  for them to expend  maximum  effort for the success of the
Company's  business.  The Plan  provides  for the  issuance of  incentive  stock
options   ("Incentive   Stock   Options')   pursuant  to  Section  5(a)  and  of
non-qualified  options  ("Non-Qualified  Options") pursuant to Section 5(b). The
Incentive  Stock  Options  granted under Section 5(a) are intended to qualify as
incentive stock options under Section 422 of the Internal  Revenue Code of 1986,
as amended (the "Code").  Non-Qualified Options granted pursuant to Section 5(b)
are intended to be options which do not satisfy the  requirements of Section 422
of the Code.  All  references to "options" in the Plan shall  include  Incentive
Stock Options and Non-Qualified Options.

      The  options  offered  pursuant  to the  Plan  are a  matter  of  separate
inducement  to the persons who receive them and are not in lieu of any salary or
other compensation for the services of such persons.

      The  Company by means of the Plan seeks to retain the  services of persons
now serving the Company or any Subsidiary or Parent of the Company and to secure
the services of additional  persons capable of providing  services  important to
the welfare of the Company or any Subsidiary or Parent of the Company.

      To assist in meeting the objectives  described  above,  the Company hereby
adopts the Plan.

      1. Amount and Source of Stock.  The  aggregate  number and class of shares
which may be the subject of options  granted  pursuant to the Plan is  2,000,000
shares of common  stock of the Company,  par value $.0001 per share,  subject to
adjustment  as provided in Section 9 of the Plan.  Such shares may be authorized
but  unissued  shares of common stock of the Company or may be shares held in or
acquired for the treasury of the  Company.  Any shares of common stock  reserved
for  issuance  or  transfer  under an option  which for any  reason  terminates,
expires or is  canceled  unexercised  as to such  shares,  may be  reserved  for
issuance or transfer  under another option granted under the Plan. The aggregate
fair market value  (determined  at the time the option is granted) of the shares
as to  which  Incentive  Stock  Options  may be  granted  to any  option  holder
("Optionee")  under this Plan or any other plan of the Company or any Subsidiary
or  Parent  of the  Company  which are  exercisable  for the first  time by such
Optionee during any calendar year shall not exceed $100,000.

      2. Administration of the Plan.

            (a) The Plan shall be  administered by the Board of Directors of the
Company,  which, to the extent it shall determine,  may delegate its powers with
respect  to  administration  of  the  Plan  to  a  committee  (the  "Committee")
consisting  of not  less  than  three  members.  The  Board


<PAGE>

of Directors shall determine, within the limits of the express provisions of the
Plan, those directors,  employees, and officers who are to receive options under
the Plan and the number of shares of common stock to be subject to such options.
Options granted under the Plan shall, subject to the provisions of Section 5 and
11 hereof and the following sentence, be in such form as determined and approved
by the Board of  Directors.  The Board of Directors  shall  interpret  the Plan,
prescribe,  amend  and  rescind  rules  and  regulations,   forms,  notices  and
agreements relating to it and make all determinations necessary or advisable for
its administration, all such actions as approved by the Board of Directors to be
final and conclusive.

            (b) The Board of Directors may from time to time appoint  members of
the Committee in addition to or in substitution for members previously appointed
and may fill any vacancies in the  Committee.  The Committee  shall elect one of
its members as Chairman,  and may appoint a secretary,  who need not be a member
of the Committee or a director of the Company,  to keep minutes of its meetings.
Meetings  of the  Committee  shall be held at such  times and places as it shall
deem advisable.  A majority of the members of the Committee  shall  constitute a
quorum.  All action of the Committee shall be by a majority of its members.  Any
action may be taken by unanimous written consent setting forth the action taken,
signed by all of the  members of the  Committee,  and action so taken shall have
the same effect as if it had been taken by unanimous vote at a meeting duly held
and called.  The  Committee  shall report its action at meetings or by unanimous
written consent to the Board of Directors.

            (c) At any time prior to the appointment of the Committee and at any
time thereafter when the Committee shall not be duly  constituted and subject to
all eligibility  limitations  which would otherwise apply to the Plan, the Board
of Directors shall exercise all the functions of the Committee under the Plan.

      3. Effective  Date and Term of Plan. The Plan as originally  adopted shall
become  effective when adopted by the Board of Directors of the Company,  except
that unless the Plan is authorized by the  affirmative  vote of the holders of a
majority of the  outstanding  shares of common  stock of the  Company  within 12
months  after its adoption by the Board of  Directors,  the Plan and all options
outstanding  under the Plan shall  terminate at the  expiration of such 12 month
period.  The  solicitation of such approval shall be in accordance with the laws
of the State of Nevada and, if applicable,  in accordance  with Section 14(a) of
the  Securities  Exchange  Act of 1934.  Options  may be granted  under the Plan
within 10 years from the date of its adoption by the Board of Directors, but not
thereafter.

      4.  Eligible  Participants.   Only  officers,  directors,   employees  and
consultants  of the Company or a Subsidiary  or a Parent of the Company  shall b
eligible to receive  options  under the Plan. An employee who is also a director
of the Company or a Subsidiary  or a Parent of the Company  shall be eligible to
participate  under the Plan.  Except as provided in Section  5(a)(v)  below,  no
Incentive Stock Option shall be granted to a non-employee director,  consultant,
or an individual who, immediately before the granting of the option, owns (or is
deemed to own) stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or a Parent or Subsidiary of the Company.


                                     - 2 -
<PAGE>

      5. Grant and Terms of Options. The Board of Directors may grant options at
any time for from time to time prior to the  termination of the Plan, and except
as hereinafter  provided,  such options shall be subject to the following  terms
and conditions:

            (a) Incentive Stock Options.

                  (i) Purchase  Price.  The purchase  price provided for in each
Incentive  Stock Option granted  pursuant to this Section 5(a) of the Plan shall
be determined by the Board of Directors, provided that in no instance shall such
price be less than the fair market value of the shares subject to such option on
the date on which the Incentive Stock Option is granted.

                  (ii) Duration of Option.  Each Incentive  Stock Option granted
pursuant  to the Plan will  terminate  no later  than 10 years  from the date on
which it is granted, unless it is terminated earlier under Section 7 or 8.

                  (iii)  Transferability  of Option.  No Incentive  Stock Option
shall be  transferable by the employee in whole or in part other than by will or
the laws of descent and distribution, and each such option shall be exercisable,
during the lifetime of the employee, only by him or her.

                  (iv)  Exercise of Option.  Subject to the  provisions  of this
Section  5(a),  the  Board  of  Directors  shall  have  absolute  discretion  in
determining  whether any  Incentive  Stock  Option  granted  hereunder  shall be
exercisable  in whole at one time or in part from  time to time and,  if in part
from time to time,  the rate at which  such  option  shall be  exercisable  on a
cumulative or  non-cumulative  basis.  Except as provided in Section 7 and 8, no
Incentive  Stock  Option may be  exercised at a time when the Optionee is not an
employee of the Company or a Subsidiary or a Parent of the Company.

                  (v) Special Ten Percent  Shareholder Rule. Sections 4, 5(a)(i)
and 5(a)(ii)  notwithstanding,  an  Incentive  Stock Option may be granted to an
individual who immediately before the granting of such option owns (or is deemed
to own) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a Subsidiary  or a Parent of the Company,  if
at the time such  option is granted,  (i) such option  price is at least 110% of
the fair market value of the stock subject to such option,  and (ii) such option
by its terms may not be exercised  after the expiration of 5 years from the date
on which it was granted.

            (b) Non-Qualified Stock Options.

                  (i)  Purchase   Price.   The  purchase   price   provided  for
Non-Qualified  Option granted pursuant to this Section 5(b) of the Plan shall be
determined by the Board of Directors.

                  (ii) Duration of Option.  Each  Non-Qualified  Option  granted
pursuant  to the Plan will  terminate  no later  than 10 years  from the date on
which it is  granted,  unless  it is  terminated  earlier  under  Section 7 or 8
hereof.


                                     - 3 -
<PAGE>

                  (iii) Transferability of Option. No Non-Qualified Option shall
be  transferable  by the  employee,  director or  consultant in whole or in part
other than by will or the laws of descent or distribution,  and each such option
shall  be  exercisable,  during  the  lifetime  of  the  employee,  director  or
consultant, only by him or her.

                  (iv)  Exercise of Option.  Subject to the  provisions  of this
Section  5(b),  the  Board  of  Directors  shall  have  absolute  discretion  in
determining  whether  any  Non-Qualified   Option  granted  hereunder  shall  be
exercisable  in whole at one time or in part from  time to time and,  if in part
from time to time,  the rate at which  such  option  shall be  exercisable  on a
cumulative or  non-cumulative  basis.  Except as provided in Section 7 and 8, no
Non-Qualified  Option may be  exercised  at a time when the  Optionee  is not an
employee  or a  director  of the  Company  or a  Subsidiary  or a Parent  of the
Company. A Non-Qualified  Option granted to a consultant may be exercised as the
Board of Directors determines in its sole discretion.

      6. Manner of Exercise of Options.

            (a) Unless the Board of  Directors  shall  otherwise  determine,  an
option,  to the extent  exercisable under the Plan, may be exercised by delivery
to the Secretary of the Company,  at its principal  office, of a written notice,
signed by the person  entitled to exercise the option,  specifying the number of
shares  purchasable under the option which the Optionee then wishes to purchase,
together  with a certified or bank  cashier's  check payable to the order of the
Company,  in the amount of the aggregate  option price for such number of shares
and  any  withholding  tax due or  such  other  consideration  as the  Board  of
Directors agrees to accept.

            (b) Unless the shares to be acquired upon exercise of an option may,
at the time of such  acquisition,  be lawfully  resold in accordance with a then
currently effective registration statement or post-effective amendment under the
Securities  Act of 1933, as amended,  the Board of Directors  may provide,  as a
condition  to the delivery of any shares to be  purchased  upon  exercise of the
option,  that the Company  receive  appropriate  evidence  that the  Optionee is
acquiring the shares for investment and not with a view to the  distribution  or
public  offering  of  the  shares,  or  any  interest  in  the  shares,   and  a
representation  to the  effect  that the  Optionee  shall  make no sale or other
disposition  of the shares unless (a) the Company shall have received an opinion
of  counsel  satisfactory  to it in form  and  substance  that the sale or other
disposition  may  be  made  without   registration  under  the  then  applicable
provisions of the Securities Act of 1933, as amended,  and the related rules and
regulations of the Securities and Exchange Commissions,  or (b) the shares shall
be included in a currently  effective  registration  statement or post-effective
amendment under the Securities Act of 1933, as amended.  In no event shall stock
be issued or  certificates  be  delivered  until full payment as required by the
Plan shall have been  received by the Company,  nor shall the Optionee  have any
right or status as a  shareholder  prior to such  payment.  In no event  shall a
fraction of a share be purchased or issued under the Plan.

            (c) If at any time the Board of  Directors  shall  determine  in its
discretion that the listing, registration or qualification of the shares covered
by the Plan upon any national  securities exchange or under any state or federal
law, or the consent or approval of any


                                     - 4 -
<PAGE>

governmental regulatory body, is necessary or desirable as a condition of, or in
connection  with,  the sale or purchase of shares  subject to the Plan,  no such
shares  shall  be  delivered  unless  and  until  such  listing,   registration,
qualification,  consent or approval  shall have been  effected or  obtained,  or
otherwise  provided for, free of any  conditions  not acceptable to the Board of
Directors.

      7.  Termination  of  Employment.  In the event that the  employment of any
employee  or  tenure  as a  director  of  an  Optionee  shall  be  involuntarily
terminated  other  than  for  cause  or by  reason  of the  death  or  permanent
disability of the  Optionee,  the option may be exercised by the Optionee to the
extent  that he or she was  entitled to do so at the  termination  of his or her
employment  or tenure,  at any time within three months after such  termination,
but in no event  may an  option  be  exercised  after the date on which it would
otherwise  terminate.  In the event that the  employment  of any employee or the
tenure of a director  shall be  voluntarily  terminated or terminated for cause,
any option held by the employee or a director  under the Plan, to the extent not
previously  exercised,  shall forthwith  terminate.  Normal  retirement or early
retirement  with the consent of the Company or a  Subsidiary  or a Parent of the
Company  pursuant  to any  retirement  plan  shall not  constitute  a  voluntary
termination of employment or a termination of employment for cause, but shall be
considered  for this  purpose to be an  involuntary  termination  other than for
cause. The Board of Directors shall determine, in its sole discretion, the terms
of the  exercise  of an option  granted  to a  consultant  with  respect  to the
termination  of the  consultant.  Nothing in the Plan or in any  option  granted
pursuant to the Plan shall confer on any individual any right to continue in the
employ or as a  director,  or as a  consultant  of the  Company or a Parent or a
Subsidiary of the Company, or interfere in any way with the right of the Company
or a Parent or a Subsidiary of the Company to terminate  his or her  employment,
tenure as a director or engagement as a consultant.

      8. Death or Disability of an Optionee.

            (a) If an  Optionee  shall die while  employed  by or  serving  as a
director of the Company or a Subsidiary  or a Parent of the Company,  the option
may be exercised (i) to the extent that the employee or director was entitled to
do so at the date of his or her death,  and (ii) to the  additional  extent that
the employee or director  would have been  entitled to do so had the option been
exercisable   with  respect  to  the  number  of  shares  covered  by  the  next
installment,  if any,  of the option,  by a legatee or legatees of the  Optionee
under  his or her  last  will  or by his  or  her  personal  representatives  or
distributees  at any time  within  one year  after the date of death,  but in no
event may the  option be  exercised  after the date on which it would  otherwise
terminate.

            (b)  If  an  Optionee  shall  die  within  three  months  after  the
involuntary termination, other than for cause, of his or her employment by or of
his or her service as a director of the Company or a  Subsidiary  or a Parent of
the  Company,  the option may be  exercised,  to the extent that the employee or
director was entitled to do so at the date of his or her death,  by a legatee or
legatees of the  Optionee  under his or her last will or by his or her  personal
representative  or  distributees  at any time  within one year after the date of
death,  but in no event may the option be  exercised  after the date on which it
would otherwise expire.


                                     - 5 -
<PAGE>

            (c) If an  Optionee  is a  consultant  and he or she shall die,  the
option may be exercised (i) to the extent that the consultant was entitled to do
so at the date of his or her death,  and (ii) to the additional  extent that the
consultant  would have been  entitled to do so had the option  been  exercisable
with respect to the number of shares covered by the next installment, if any, of
the option,  by a legatee or legatees of the Optionee under his or her last will
or by his or her personal representatives or distributees at any time within one
year after the date of death,  but in no event may the option be exercised after
the date on which it would otherwise terminate.

            (d) If an Optionee  shall become  permanently  disabled  (within the
meaning of  Section  22(e)(3)  of the Code)  while  employed  by or serving as a
director of the Company or a Subsidiary  or a Parent of the Company,  the option
may be exercised by the Optionee to the extent that he or she was entitled to do
so at the  termination of his or her employment or tenure as a director,  at any
time  within one year after such  termination,  but in no event may an option be
exercised after the date on which it would otherwise expire.

            (e) If an  Optionee  is a  consultant  and he or  she  shall  become
permanently  disabled  (within the meaning of 22(e)(3) of the Code),  the option
may be exercised by the Optionee to the extent that he or she was entitled to do
so upon the  termination of his or her  engagement,  at any time within one year
after such  termination,  but in no event may an option be  exercised  after the
date on which it would otherwise expire.

      9. Adjustment of Number and Price of Shares Subject to Options.

            (a) If the outstanding shares of the common stock of the Company are
subdivided, consolidated,  increased, decreased, changed into or exchanged for a
different  number  or  kind of  shares  or  securities  of the  Company  through
reorganization, merger, recapitalization,  reclassification,  capital adjustment
or otherwise, or if the Company shall issue common stock as a dividend or upon a
stock split,  then the number and kind of shares  available  for purposes of the
Plan and all shares subject to the unexercised portion of any options previously
granted and the exercise price of those options shall be appropriately adjusted.
However,  no such adjustment shall change the total exercise price applicable to
the unexercised portion of any outstanding option.

            (b)  Adjustments  under this Section 9 shall be made by the Board of
Directors,  whose  determination as to what  adjustments  shall be made shall be
final and  binding.  In  computing  any  adjustment  under  this  Section 9, any
fractional  share which might  otherwise  become  subject to an option  shall be
eliminated.

      10. Change of Control.

            (a) In no event of a Change of Control (as herein  defined),  unless
otherwise  determined  by the Board of Directors or the Committee at the time of
grant or by amendment (with the holder's consent) of such grant, all outstanding
options awarded under the Plan shall become fully exercisable and vested.


                                     - 6 -
<PAGE>

            (b) A "Change of Control"  shall be deemed to occur on the date that
any of the following events occur:

                  (i)  any  person  or  persons  acting   together  which  would
constitute a "group" for purposes of Section  13(d) of the  Securities  Exchange
Act of 1934,  as  amended  ("Exchange  Act"),  other  than the  Company  and any
subsidiary,  shall  beneficially  own (as defined in Rule 13d-3 of the  Exchange
Act),  directly or  indirectly,  at least 20% of the total  voting  power of all
classes  of capital  stock of the  Company  entitled  to vote  generally  in the
election of the Board;

                  (ii) either (A) Current  Directors (as herein  defined)  shall
cease for any reason to  constitute  at least a majority  of the  members of the
Board (for these  purposes,  a "Current  Director"  shall mean any member of the
Board as of the  effective  date of the  Plan,  and any  successor  of a Current
Director   whose   election,   or  nomination  for  election  by  the  Company's
shareholders,  was approved by at least two-thirds of the Current Directors then
on the Board) or (B) at any meeting of the  shareholders  of the company  called
for the purpose of electing  directors,  a majority of the persons  nominated by
the Board for election as directors shall fail to be elected;

                  (iii) the  shareholders  of the Company  approve (A) a plan of
complete  liquidation  of the  Company,  or (B) an agreement  providing  for the
merger or  consolidation  of the  Company  (i) in which the  Company  is not the
continuing or surviving corporation (other than a consolidation or merger with a
wholly  owned  subsidiary  of the Company in which all shares of common stock of
the  Company  outstanding  immediately  prior to the  effectiveness  thereof are
changed into or exchanged for the same  consideration) or (ii) pursuant to which
the shares of common stock of the Company are converted into cash, securities or
other property,  except as  consolidation  or merger of the Company in which the
holders  of  the  common  stock  of  the  Company   immediately   prior  to  the
consolidation or merger have, directly or indirectly, at least a majority of the
common stock of the continuing or surviving  corporation  immediately after such
consolidation or merger or in which the Board immediately prior to the merger or
consolidation would, immediately after the merger or consolidation, constitute a
majority of the board of directors of the continuing or surviving  corporations;
or

                  (iv) the  shareholders of the Company approve an agreement (or
agreements) providing for the sale or other disposition (in one transaction or a
series  of  transactions)  of all or  substantially  all  of the  assets  of the
Company.

      11. Liquidation,  Merger or Consolidation. In the event of the dissolution
or liquidation of the Company,  or in the event of a merger or  consolidation in
which (i) the Company is a party and (ii) the  agreements  governing such merger
or  consolidation  do not provide for the issuance of substitute  options or the
assumption of the options issued  hereunder (as issuing and assuming are defined
in Code Section 424(a)),  with  substantially  equivalent terms as determined by
the Board of Directors in lieu of the options  granted under the Plan or for the
express assumption of such outstanding options by the surviving corporation, the
Board of Directors  shall declare that each option  granted under the Plan shall
terminate as of a date to be fixed by the Board of Directors  (the  "Termination
Date"), provided that the Board of Directors


                                     - 7 -
<PAGE>

shall cause to be mailed  thirty (30) days before the  Termination  Date written
notice of the  Termination  Date to each Optionee,  and each Optionee shall have
the right,  during the period  between the receipt of the written notice and the
Termination Date to exercise his option, in whole or in part, whether or not all
or any part of such option  would not  otherwise be  exercisable.  The notice of
exercise  must be received by the Company on or prior to the  Termination  Date.
Any then  outstanding  option not  exercised  in its entirety on or prior to the
Termination  Date  specified  by the Board of  Directors  and any and all rights
thereunder shall terminate as of said date.

      12. Amendment or Discontinuance of Plan. The Board of Directors may alter,
suspend or discontinue the Plan at any time,  except that no action of the Board
may, without appropriate  shareholder  action,  materially increase the benefits
accruing to the  participants  under the Plan,  materially  increase the maximum
number  of shares  subject  to the Plan  (except  as  provided  in  Section  9),
materially modify the requirements for eligibility under the Plan, implement any
change requiring shareholder approval under the Code or any other applicable law
and,  without the consent of the Optionee,  no such action shall alter the terms
of, or impair the rights of the  Optionee  under any option  previously  granted
pursuant to the Plan.  Unless  sooner  terminated,  the Plan shall  terminate as
provided in Section 3. An option may not be granted  while the Plan is suspended
or after it is terminated.  The rights and obligations  under any option granted
while the Plan is in effect may not be  altered or  impaired  by  suspension  or
termination  of the Plan,  except  upon the  consent  of the  person to whom the
option  was  granted.  The  power of the  Board of  Directors  to  construe  and
administer  any options  granted prior to the  termination  or suspension of the
Plan shall nevertheless continue after and survive such termination and continue
during such suspension.

      13. Miscellaneous Provisions.

            (a)  Subsidiary.  As used herein,  the term  "subsidiary"  means any
"subsidiary corporation" within the meaning of Section 424(f) of the Code.

            (b) Parent.  As used  herein,  the term  "parent"  means any "parent
corporation" within the meaning of Section 424(e) of the Code.

            (c)  Permanently  Disabled.  As used herein,  the term  "permanently
disabled" means "permanently disabled" within the meaning of Section 22(e)(3) of
the Code.

            (d)  Governing  Law.  The Plan shall be  governed by the laws of the
State of Nevada.

                                     - 8 -

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>FDS --
<TEXT>

<TABLE> <S> <C>


<ARTICLE>                     5

<S>                                            <C>
<PERIOD-TYPE>                                  6-MOS
<FISCAL-YEAR-END>                              OCT-31-1998
<PERIOD-START>                                 NOV-01-1997
<PERIOD-END>                                   APR-30-1998
<CASH>                                              70,314
<SECURITIES>                                             0
<RECEIVABLES>                                    2,550,113
<ALLOWANCES>                                       215,000
<INVENTORY>                                      1,831,898
<CURRENT-ASSETS>                                 4,834,906
<PP&E>                                           3,687,591
<DEPRECIATION>                                   1,521,164
<TOTAL-ASSETS>                                   7,194,525
<CURRENT-LIABILITIES>                            2,919,311
<BONDS>                                          4,251,748
<PREFERRED-MANDATORY>                                    0
<PREFERRED>                                              0
<COMMON>                                             4,000
<OTHER-SE>                                         967,257
<TOTAL-LIABILITY-AND-EQUITY>                     7,194,525
<SALES>                                         13,181,142
<TOTAL-REVENUES>                                13,181,142
<CGS>                                           11,329,593
<TOTAL-COSTS>                                   11,329,593
<OTHER-EXPENSES>                                 1,244,094
<LOSS-PROVISION>                                         0
<INTEREST-EXPENSE>                                 186,403
<INCOME-PRETAX>                                    421,052
<INCOME-TAX>                                        46,000
<INCOME-CONTINUING>                                375,052
<DISCONTINUED>                                           0
<EXTRAORDINARY>                                          0
<CHANGES>                                                0
<NET-INCOME>                                       375,052
<EPS-BASIC>                                            .06
<EPS-DILUTED>                                            0



</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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