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<SEC-DOCUMENT>0000891092-04-001291.txt : 20040316
<SEC-HEADER>0000891092-04-001291.hdr.sgml : 20040316
<ACCEPTANCE-DATETIME>20040316094013
ACCESSION NUMBER:		0000891092-04-001291
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20040131
FILED AS OF DATE:		20040316

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			COFFEE HOLDING CO INC
		CENTRAL INDEX KEY:			0001007019
		STANDARD INDUSTRIAL CLASSIFICATION:	BEVERAGES [2080]
		IRS NUMBER:				113860760
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	333-00588-NY
		FILM NUMBER:		04671277

	BUSINESS ADDRESS:	
		STREET 1:		4401 FIRST AVENUE
		STREET 2:		STE 1507
		CITY:			BROOKLYN
		STATE:			NY
		ZIP:			11232
		BUSINESS PHONE:		7188320800

	MAIL ADDRESS:	
		STREET 1:		4401 FIRST AVENUE
		STREET 2:		STE 1507
		CITY:			BROOKLYN
		STATE:			NY
		ZIP:			11232

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	TRANSPACIFIC INTERNATIONAL GROUP CORP
		DATE OF NAME CHANGE:	19960201
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>e17220_10qsb.txt
<DESCRIPTION>FORM 10QSB
<TEXT>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                   FORM 10-QSB

(Mark One)

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

            For the quarterly period ended January 31, 2004

                                       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 number 333-00588-NY

                            Coffee Holding Co., Inc.
             (Exact name of registrant as specified in its charter)

- --------------------------------------------------------------------------------
            Nevada                                             11-2238111
- --------------------------------------------------------------------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)
- --------------------------------------------------------------------------------

                4401 First Avenue, Brooklyn, New York 11232-0005
                    (Address of principal executive offices)
                                   (Zip Code)

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

                                       N/A
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed from last Report)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.

                                                         Outstanding at
                   Class                                January 31, 2004
        --------------------------              --------------------------------
               Common Stock,
               par value $.01                               3,999,650


<PAGE>

                                     PART I

                                                                            PAGE
                                                                            ----

ITEM 1.   FINANCIAL STATEMENTS...............................................  1

Condensed Balance Sheets
   January 31, 2004 (unaudited) and October 31, 2003.........................  1

Condensed Statements of Income
   Three Months Ended January 31, 2004 and 2003 (unaudited)..................  2

Condensed Statements of Cash Flows
   Three Months Ended January 31, 2004 and 2003 (unaudited)..................  3

Notes To Condensed Financial Statements......................................  4

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS...............................   7

ITEM 3.   CONTROLS AND PROCEDURES...........................................  14

                                     PART II

ITEM 1.   LEGAL PROCEEDINGS ................................................  15

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS ........................  15

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES ..................................  15

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..............  15

ITEM 5.   OTHER INFORMATION ................................................  15

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K .................................  15

SIGNATURES..................................................................  16


                                       i
<PAGE>

Part I
Item I. Financial Statements


                                       1
<PAGE>

                            COFFEE HOLDING CO., INC.
                            CONDENSED BALANCE SHEETS
                      JANUARY 31, 2004 AND OCTOBER 31, 2003

<TABLE>
<CAPTION>
                                                                                                      January 31,
                                                                                                         2004            October 31,
                                                                                                      (unaudited)           2003
                                                                                                      -----------        -----------

                                                               - ASSETS -
<S>                                                                                                    <C>                <C>
CURRENT ASSETS:
     Cash                                                                                              $  111,278         $   73,832
     Due from broker                                                                                    1,547,200            894,123
     Accounts receivable, net of allowance for doubtful accounts of $119,435                            2,140,502          2,154,683
     Inventories                                                                                        1,708,034          1,781,424
     Prepaid expenses and other current assets                                                            205,781            431,432
     Deferred tax asset                                                                                   104,300            103,700
                                                                                                       ----------         ----------
         TOTAL CURRENT ASSETS                                                                           5,817,095          5,439,194

Property and equipment, at cost, net of accumulated depreciation of
  $3,068,515 and $2,991,206                                                                             1,526,286          1,579,294
Deposits and other assets                                                                                  16,796             16,796
                                                                                                       ----------         ----------
                                                                                                       $7,360,177         $7,035,284
                                                                                                       ==========         ==========

                                                - LIABILITIES AND STOCKHOLDERS' EQUITY -

CURRENT LIABILITIES:
     Current portion of term loan                                                                      $   84,000         $   84,000
     Current portion of obligations under capital lease                                                   132,700            130,551
     Line of credit borrowings                                                                          2,046,531               --
     Accounts payable and accrued expenses                                                              1,846,919          1,861,447
     Income taxes payable - current                                                                       199,705               --
                                                                                                       ----------         ----------
         TOTAL CURRENT LIABILITIES                                                                      4,309,855          2,075,998

Term loan, net of current portion                                                                         231,000            252,000
Obligations under capital lease, net of current portion                                                    57,903             91,895
Line of credit borrowings                                                                                    --            2,376,066
Loans from related parties                                                                                 80,841             79,646
Income taxes payable - deferred                                                                            41,300             39,200
                                                                                                       ----------         ----------
         TOTAL LIABILITIES                                                                              4,720,899          4,914,805
                                                                                                       ----------         ----------

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              4,000
     Additional paid-in capital                                                                           867,887            867,887
     Retained earnings                                                                                  1,767,391          1,248,592
                                                                                                       ----------         ----------
         TOTAL STOCKHOLDERS' EQUITY                                                                     2,639,278          2,120,479
                                                                                                       ----------         ----------
                                                                                                       $7,360,177         $7,035,284
                                                                                                       ==========         ==========
</TABLE>

                  See notes to Condensed Financial Statements.


                                      F-1
<PAGE>

                            COFFEE HOLDING CO., INC.
                         CONDENSED STATEMENTS OF INCOME
                  THREE MONTHS ENDED JANUARY 31, 2004 AND 2003
                                   (Unaudited)

                                                       2004             2003
                                                   -----------      -----------
NET SALES                                          $ 5,847,948      $ 4,359,943

COST OF SALES                                        3,833,586        3,065,444
                                                   -----------      -----------

GROSS PROFIT                                         2,014,362        1,294,499
                                                   -----------      -----------

OPERATING EXPENSES:
     Selling and administrative                        925,764          712,483
     Officers' salaries                                123,474           88,111
                                                   -----------      -----------
         TOTALS                                      1,049,238          800,594
                                                   -----------      -----------

INCOME FROM OPERATIONS                                 965,124          493,905
                                                   -----------      -----------

OTHER INCOME (EXPENSE)

   Interest income                                       2,556            2,454
   Interest expense                                    (40,381)         (35,038)
                                                   -----------      -----------
                                                       (37,825)         (32,584)
                                                   -----------      -----------

INCOME BEFORE INCOME TAXES                             927,299          461,321

   Provision for income taxes                          408,500          204,400
                                                   -----------      -----------

NET INCOME                                         $   518,799      $   256,921
                                                   ===========      ===========

Basic earnings per share                           $       .13      $       .06
                                                   ===========      ===========

Basic weighted average
  common shares outstanding                          3,999,650        3,999,650
                                                   ===========      ===========

                  See notes to Condensed Financial Statements.


                                      F-2
<PAGE>

                            COFFEE HOLDING CO., INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                  THREE MONTHS ENDED JANUARY 31, 2004 AND 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                      2004                  2003
                                                                                                  -----------           -----------
<S>                                                                                               <C>                   <C>
OPERATING ACTIVITIES:
     Net income                                                                                   $   518,799           $   256,921
     Adjustments to reconcile net income to net cash
       provided by (used in) operating activities:
            Depreciation                                                                               77,309                76,460
            Bad debts (recovery)                                                                         --                 (12,154)
            Deferred taxes                                                                              1,500                   800
         Changes in operating assets and liabilities:
           Due from broker                                                                           (653,077)             (161,138)
           Accounts receivable                                                                         14,181               274,834
           Inventories                                                                                 73,390              (182,492)
           Prepaid expenses and other current assets                                                  225,651               (52,175)
           Accounts payable and accrued expenses                                                      (14,528)             (408,768)
           Income taxes payable                                                                       199,705                (6,031)
                                                                                                  -----------           -----------
              Net cash provided by (used in) operating activities                                     442,930              (213,743)
                                                                                                  -----------           -----------

INVESTING ACTIVITIES:
     Purchases of property and equipment                                                              (24,301)              (62,597)
                                                                                                  -----------           -----------

FINANCING ACTIVITIES:
     Principal payments on term loan                                                                  (21,000)              (21,000)
     Advances under bank line of credit                                                             5,879,837             5,071,621
     Principal payments under bank line of credit                                                  (6,209,372)           (4,764,686)
     Principal payments of obligations under capital leases                                           (31,843)              (28,055)
     Advances from related parties                                                                      1,195                 1,388
                                                                                                  -----------           -----------
              Net cash (used in) provided by financing activities                                    (381,183)              259,268
                                                                                                  -----------           -----------

NET INCREASE (DECREASE) IN CASH                                                                        37,446               (17,072)

    Cash, beginning of year                                                                            73,832                43,568
                                                                                                  -----------           -----------

CASH, END OF PERIOD                                                                               $   111,278           $    26,496
                                                                                                  ===========           ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
    Interest paid                                                                                 $    40,381           $    35,038
                                                                                                  ===========           ===========
    Income taxes paid                                                                             $     7,449           $   209,630
                                                                                                  ===========           ===========
</TABLE>

                  See notes to Condensed Financial Statements.


                                      F-3
<PAGE>

                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            JANUARY 31, 2004 AND 2003
                                   (Unaudited)

NOTE 1 - BUSINESS ACTIVITIES:

         Coffee Holding Co., Inc. (the "Company"), 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.

NOTE 2 - BASIS OF PRESENTATION:

         In the opinion of management, the accompanying unaudited condensed
         financial statements reflect all adjustments, consisting of normal
         recurring accruals, necessary to present fairly the financial position
         of the Company as of January 31, 2004, its results of operations and
         its cash flows for the three months ended January 31, 2004 and 2003.
         Information included in the balance sheet as of October 31, 2003 has
         been derived from the Company's audited balance sheet included in the
         Company's Annual Report on Form 10-KSB for the year ended October 31,
         2003 (the "Form 10-KSB") previously filed with the Securities and
         Exchange Commission (the "SEC"). Pursuant to the rules and regulations
         of the SEC for interim financial statements, certain information and
         disclosures normally included in financial statements prepared in
         accordance with accounting principles generally accepted in the United
         States of America have been condensed or omitted from these financial
         statements unless significant changes have taken place since the end of
         the most recent fiscal year. Accordingly, these unaudited condensed
         financial statements should be read in conjunction with the audited
         financial statements and the other information in the Form 10-KSB.

         Operating results for the three months ended January 31, 2004 are not
         necessarily indicative of the results that may be expected for the year
         ending October 31, 2004.

NOTE 3 - INVENTORIES:

         Inventories at January 31, 2004 and October 31, 2003 consisted of the
         following:

                                             January 31,      October 31,
                                                2004             2003
                                             ----------      ----------
         Packed coffee                       $  390,604      $  213,062
         Green coffee                           928,810         999,137
         Packaging supplies                     388,620         569,225
                                             ----------      ----------
         Totals                              $1,708,034      $1,781,424
                                             ==========      ==========

NOTE 4 - HEDGING:

         The Company uses options and futures contracts to partially hedge the
         effects of fluctuations in the price of green coffee beans. Options and
         futures contracts are marked to market with current recognition of
         gains and losses on such positions. The Company does not defer such
         gains and losses since its positions are not considered hedges for
         financial reporting purposes. The Company's accounting for options and
         futures contracts may increase earnings volatility in any particular
         period.


                                      F-4
<PAGE>

                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            JANUARY 31, 2004 AND 2003
                                   (Unaudited)

NOTE 4 - HEDGING (Continued):

         At January 31, 2004, the Company held 100 options (generally with terms
         of two months or less) covering an aggregate of 3,750,000 pounds of
         green coffee beans at a price of $.70 per pound. The fair market value
         of these options, which was obtained from a major financial
         institution, was $217,875 at January 31, 2004.

         At January 31, 2003, the Company held 50 options (generally with terms
         of two months or less) covering an aggregate of 1,875,000 pounds of
         green coffee beans at a price of $0.65 per pound. The fair market value
         of these options, which was obtained from a major financial
         institution, was $32,438 at January 31, 2003.

         The Company acquires futures contracts with longer terms (generally
         three to four months) primarily for the purpose of guaranteeing an
         adequate supply of green coffee. At January 31, 2004, the Company did
         not hold any long futures contracts.

         At January 31, 2003, the Company held 80 futures contracts for the
         purchase of 3,000,000 pounds of coffee at an average price of $.69 per
         pound for various May 2003 contracts. The market price of coffee
         applicable to such contracts was $.68 per pound at that date.

         Included in cost of sales and due from broker for the quarters ended
         January 31, 2004 and 2003, the Company recorded realized and unrealized
         gains and losses respectively, on these contracts as follows:

                                                      Quarters Ended January 31,
                                                         2004           2003
                                                      ---------       --------
                  Realized gains and (losses)         $ 838,150       $336,851
                  Unrealized gains and (losses)       $(240,493)      $ 23,663

NOTE 5 - LINE OF CREDIT:

         The outstanding balance under a line of credit agreement with a bank
         was $2,046,531 at January 31, 2004. This amount is being reflected as
         short term at the balance sheet date, since the principal loan balance
         is due in November of 2004.

NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASES:

         The Company is a lessee of machinery and equipment under a capital
         lease, which expires in June 2005. The asset and liability under the
         capital lease is recorded at the lower of the present value of the
         minimum lease payments or the fair value of the asset. The asset is
         being depreciated over the lease term.

         Depreciation expense of assets under capital lease are included in
         depreciation expense and amounted to $15,228 for each of the three
         months ended January 31, 2004 and 2003.


                                      F-5
<PAGE>

                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            JANUARY 31, 2004 AND 2003
                                   (Unaudited)

NOTE 6 - OBLIGATIONS UNDER CAPITAL LEASES (Continued):

         The interest rate on the capital lease is 8 1/3% per annum, which
         approximates the Company's incremental rate of borrowing at the time
         the lease was entered into.

NOTE 7 - EARNINGS 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". Diluted earnings
         per share have not been presented because the Company had no
         potentially dilutive securities outstanding during the three months and
         ended January 31, 2004 and 2003.

NOTE 8 - ECONOMIC DEPENDENCY:

         For the three months ended January 31, 2004, sales to two customers
         were each in excess of 10% of the Company's total sales. Sales to these
         customers were approximately $1,307,000 and $654,000 and the
         corresponding accounts receivable at January 31, 2004 from these
         customers were approximately $345,000 and $93,000, respectively.

         For the three months ended January 31, 2003, sales to two customers
         were each in excess of 10% of the Company's total sales. Sales to these
         customers were approximately $932,000 and $664,000 and the
         corresponding accounts receivable at January 31, 2003 from these
         customers were approximately $208,000 and $112,000, respectively.

         For the three months ended January 31, 2004, purchases from two
         suppliers, were in excess of 10% of the Company's total purchases.
         Purchases from these suppliers were approximately $823,000 and $739,000
         and the corresponding accounts payable to these suppliers at January
         31, 2004 were approximately $80,000 and $91,000, respectively.

         For the three months ended January 31, 2003, purchases from one
         supplier, was in excess of 10% of the Company's total purchases.
         Purchases from this supplier were approximately $919,000 and the
         corresponding accounts payable to this supplier at January 31, 2003 was
         approximately $84,000.

NOTE 9 - SUBSEQUENT EVENT:

         On February 4, 2004, subsequent to the balance sheet date, the Company
         entered into an agreement to purchase certain assets of an unrelated
         third party. The Company purchased coffee roasting and blending
         equipment located in a facility in Colorado, labels for private coffee
         products produced at this facility and certain other assets. The
         purchase price for these assets was $825,000, based upon an independent
         appraisal. The Company has also reached an agreement with the city of
         La Junta, Colorado to lease the facility formerly operated by the
         seller.

         The Company also entered into a 10 year (renewable for an additional 10
         years) licensing agreement with Del Monte Corp, for the exclusive right
         to use the "S&W" and "Il Classico" trademarks in the United States in
         connection with the production, manufacture and sale of roasted whole
         bean and ground coffee for distribution at the retail distribution
         level. The Company will pay Del Monte Corp., 2% of net revenues
         generated by the sale of these products.


                                      F-6
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

Cautionary Note on Forward Looking Statements

      Some of the matters discussed under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations," in this
quarterly report include forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. We
have based these forward-looking statements on our current expectations and
projections about future events, including, among other things:

      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     our success in implementing our business strategy or introducing new
            products;

      o     our ability to attract and retain customers;

      o     our success in expanding our market presence in new geographic
            regions;

      o     the effects of competition from other coffee manufacturers and other
            beverage alternatives;

      o     changes in tastes and preferences for, or the consumption of,
            coffee;

      o     our ability to obtain additional financing; and

      o     other risks which we identify in future filings with the SEC.

      In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "could," "predict," "potential," "continue,"
"expect," "anticipate," "future," "intend," "plan," "believe," "estimate" and
similar expressions (or the negative of such expressions). Any or all of our
forward looking statements in this quarterly report and in any other public
statements we make may turn out to be wrong. They can be affected by inaccurate
assumptions we might make or by known or unknown risks and uncertainties.
Consequently, no forward looking statement can be guaranteed. In addition, we
undertake no responsibility to update any forward-looking statement to reflect
events or circumstances which occur after the date of this quarterly report.


                                       7
<PAGE>

Overview

      Operating Strategy. We believe that significant growth opportunities exist
for us by expanding into new geographical markets, increasing penetration with
existing customers by adding new products, brands and distribution channels and
pursuing selective acquisition, licensing and other strategic alliances. We
intend to accomplish our strategy by:

      o     Expanding our geographical presence;

      o     Selectively pursuing strategic opportunities;

      o     Developing our food service business;

      o     Adding niche products; and

      o     Enhancing and developing customer relationships.

      Operating Results. You should read our financial results for the three
months ended January 31, 2004 in the context of our operating strategy.

      o     Net income increased $261,878, or 101.9%, to $518,799 or $.13 per
            share for the three months ended January 31, 2004 compared to
            $256,921 or $.06 per share for the three months ended January 31,
            2003. The increase in net income primarily reflects increased net
            sales and increased margins on our branded coffee and private label
            coffee products.

      o     Net sales totaled $5,847,948 for the three months ended January 31,
            2004, an increase of $1,488,005 or 34.1% from $4,359,943 for the
            three months ended January 31, 2003. The increase in net sales
            reflects an increase in pounds sold in both private label coffee and
            branded coffees, increased sales to our specialty green coffee
            customers and the higher price of the underlying commodity (coffee).

      o     Cost of sales for the three months ended January 31, 2004 was
            $3,833,586 or 65.6% of net sales, as compared to $3,065,444 or 70.3%
            of net sales for the three months ended January 31, 2003. Cost of
            sales consists primarily of the cost of green coffee and packaging
            materials and realized and unrealized gains or losses on hedging
            activity. The increase in cost of sales primarily was attributable
            to increased sales and the increase in green coffee purchase prices,
            but was partially offset by $838,150 in realized gains on futures
            contracts. The use of derivative financial instruments has enabled
            us to mitigate the effect of changing prices and to increase our
            margins as coffee prices have increased.

      o     Our gross profit for the three months ended January 31, 2004 was
            $2,014,362, an increase of $719,863 or 55.6%, from $1,294,499 for
            the three months ended January 31, 2003. Gross profit as a
            percentage of net sales increased by 4.7% to 34.4% for the three
            months ended January 31, 2004 from 29.7% for the same period in
            2003. Our hedging activities, reduced pricing pressure from national
            brands and new business at favorable pricing allowed us to increase
            our margins while the price of green coffee has continued to
            increase. We believe that our favorable inventory position and the
            increase in green coffee prices will allow us to increase our sales
            and ultimately our margins as coffee prices continue to rise.


                                       8
<PAGE>

      o     Total operating expenses increased $248,644 or 31.1% to $1,049,238
            for the three months ended January 31, 2004 from $800,594 for the
            same period in 2003 primarily due to increases in selling, general
            and administrative expenses. Although selling and administrative
            expenses increased $213,281 or 29.9% to $925,764 for the three
            months ended January 31, 2004 from $712,483 for the same period in
            2003, as a percentage of net sales, selling, general and
            administrative expenses, decreased 0.5% from 16.3% for the three
            months ended January 31, 2003 to 15.8% for the three months ended
            January 31, 2004. These changes reflect our strategic decision to
            invest in measures that will increase net sales on a present and
            future basis.

      Recent Developments. On February 4, 2004, we acquired certain assets of
Premier Roasters LLC for $825,000. The assets purchased by us include all of the
equipment, furniture and fixtures, owned or used by Premier Roasters, located at
Premier Roaster's La Junta and Rocky Ford locations and all labels, finished and
unfinished, for all coffee products. In connection with the acquisition of these
assets, we reached an agreement with the City of La Junta, Colorado on a 20 year
lease of a 50,000 square foot facility for $8,341 per month. We intend to use
the assets that we purchased to expand our integrated wholesale coffee roaster
and dealer operations to the western United States. As a condition to the asset
purchase agreement, we also entered into a licensing agreement with Del Monte
for the exclusive right to use the S&W and IL CLASSICO trademarks in the United
States in connection with the production, manufacture and sale of roasted whole
bean and ground coffee for distribution at the retail distribution level.

      We believe that the asset purchase will help us to meet each of our
strategic objectives discussed above. We believe that our new La Junta, Colorado
facility will allow us to grow our business and increase sales to new and
existing customers in the western U.S. By operating out of two facilities, we
will now be able to compete aggressively throughout the U.S. as we have gained
new economies of scale in both manufacturing and logistical efficiencies which
were unavailable in the past while operating solely out of our New York
facility. In addition, we plan to broaden our customer base and increase
penetration with existing customers by expanding the S&W label from a well-known
brand on the west coast to a well-known brand throughout the entire continental
U.S.

Critical Accounting Policies and Estimates

      The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Estimates are used
for, but not limited to, the accounting for the allowance for doubtful accounts,
inventories, income taxes and loss contingencies. Management bases its estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances. Actual results could differ from these
estimates under different assumptions or conditions.

      We believe the following critical accounting policies, among others, may
be impacted significantly by judgment, assumptions and estimates used in the
preparation of the financial statements:

            o     We recognize revenue in accordance with Securities and
                  Exchange Commission Staff Accounting Bulletin No. 101,
                  "Revenue Recognition in Financial Statements" ("SAB 101").
                  Under SAB 101, revenue is recognized at the point of passage
                  to the customer of title and risk of loss, when there is
                  persuasive evidence of an arrangement, the sales price is
                  determinable, and collection of the resulting receivable is
                  reasonably assured. We generally recognize revenue at the time
                  of shipment. Sales are reflected net of discounts and returns.


                                       9
<PAGE>

            o     The allowance for doubtful accounts is maintained to provide
                  for losses arising from customers' inability to make required
                  payments. If there is deterioration of our customers' credit
                  worthiness and/or there is an increase in the length of time
                  that the receivables are past due greater than the historical
                  assumptions used, additional allowances may be required.

            o     Inventories are stated at cost (determined on an average cost
                  basis). Based on our assumptions about future demand and
                  market conditions, inventories are written-down to market
                  value. If our assumptions about future demand change and/or
                  actual market conditions are less favorable than those
                  projected, additional write-downs of inventories may be
                  required.

            o     We account for income taxes in accordance with Statement of
                  Financial Accounting Standards No. 109, "Accounting for Income
                  Taxes." Under SFAS No. 109, deferred tax assets and
                  liabilities are determined based on the liabilities, using
                  enacted tax rates in effect for the year in which the
                  differences are expected to reverse. Deferred tax assets are
                  reflected on the balance sheet when it is determined that it
                  is more likely than not that the asset will be realized.

Comparison of Results of Operations

Three Months Ended January 31, 2004 Compared to the Three Months Ended
January 31, 2003

      Net income increased $261,878, or 101.9%, to $518,799 or $.13 per share
for the three months ended January 31, 2004 compared to $256,921 or $.06 per
share for the three months ended January 31, 2003. The increase in net income
primarily reflects increased net sales and increased margins on our branded
coffee and private label coffee products.

      Net sales totaled $5,847,948 for the three months ended January 31, 2004,
an increase of $1,488,005 or 34.1% from $4,359,943 for the three months ended
January 31, 2003. The increase in net sales reflects an increase in pounds sold
in both private label coffee and branded coffees, increased sales to our
specialty green coffee customers due in part to the efforts of our 3rd party
marketing specialist through label redesigns and new distribution, and the
higher price of the underlying commodity (coffee). The number of Coffee
Holding's customers in the gourmet green coffee area grew approximately 7.2% to
253 customers, including twenty customers using our new facility in New Orleans,
during the three months ended January 31, 2004. These customers are
predominately independent gourmet/specialty roasters, some of whom own their own
retail outlets. Sales to new customers in this area historically start slowly
because many of these companies are start up ventures. Because the gourmet green
coffee area is the fastest growing segment of the coffee market, Coffee Holding
believes that its customer base and sales will grow in this area. Coffee Holding
also believes that historically low coffee prices will continue to encourage
consumers to purchase higher quality gourmet coffee relative to supermarket
brands.

      Beginning at the end of 1998, the purchase price of green coffee began a
decline that, with the exception of brief price surges, continued through the
middle of the fourth quarter of fiscal 2002. Declines in green coffee purchase
prices eventually led to declines in selling prices. Selling prices of products
which use commodity coffee react fairly quickly to changes in green coffee
purchase prices. Gourmet green coffee selling prices tend to react more slowly
to changes in purchase prices because demand for gourmet coffee is less price
sensitive. However, beginning in the first quarter of fiscal 2003, the price of
green coffee began to increase and national brands have recently increased their
prices in response. Based on this trend, we believe that pricing pressure will
continue to decrease for the remainder of fiscal 2004.


                                       10
<PAGE>

      Cost of sales for the three months ended January 31, 2004 was $3,833,586
or 65.6% of net sales, as compared to $3,065,444 or 70.3% of net sales for the
three months ended January 31, 2003. Cost of sales consists primarily of the
cost of green coffee and packaging materials and realized and unrealized gains
or losses on hedging activity. The increase in cost of sales primarily was
attributable to increased sales and the increase in green coffee purchase
prices, but was partially offset by $838,150 in realized gains on futures
contracts. As the price of coffee is cyclical and volatile and subject to many
factors, including weather, politics and economics, we are unable to predict the
purchase price of green coffee for fiscal 2004. Although our agreements with
wholesale customers generally contain only pricing terms, our contract with a
major customer also contains minimum and maximum purchase obligations at fixed
prices. Because our profits on a fixed-price contract could decline if coffee
prices increased, we began to acquire futures contracts with longer terms
(generally three to four months) primarily for the purpose of guaranteeing an
adequate supply of green coffee at favorable prices beginning in the latter half
of fiscal 2000 and continuing through fiscal 2004. The use of these derivative
financial instruments has enabled us to mitigate the effect of changing prices
and to increase our margins as coffee prices have increased.

      Coffee Holding's gross profit for the three months ended January 31, 2004
was $2,014,362, an increase of $719,863 or 55.6%, from $1,294,499 for the three
months ended January 31, 2003. Gross profit as a percentage of net sales
increased by 4.7% to 34.4% for the three months ended January 31, 2004 from
29.7% for the same period in 2003. Our hedging activities, reduced pricing
pressure form national brands and new business of favorable prices allowed us to
increase our margins as the price of green coffee has increased. As discussed
above, we believe that our favorable inventory position will allow us to
increase our sales and ultimately our margins as coffee prices continue to rise.

      Total operating expenses increased $248,644 or 31.1% to $1,049,238 for the
three months ended January 31, 2004 from $800,594 for the same period in 2003
due to increases in selling, general and administrative expenses and officers'
salaries. Selling and administrative expenses increased $213,281 or 29.9% to
$925,764 for the three months ended January 31, 2004 from $712,483 for the same
period in 2003. The increase in selling expenses includes increases in sales
commissions, travel expenses and shipping charges. The increase in commissions
and travel expenses reflect the retention of a commission-based marketing team
to market our branded product lines and hiring of additional sales personnel to
market our food service coffee products. The increase in shipping expenses
reflects the increase in pounds of coffee sold and the addition of new customers
during the period. We believe that these changes reflect our strategic decision
to invest in measures that will increase net sales on a present and future
basis. As a result of our strategy, selling and administrative expenses, as a
percentage of net sales, decreased 0.5% from 16.3% for the three months ended
January 31, 2003 to 15.8% for the three months ended January 31, 2004.

      Officers' salaries increased $35,363 to $123,474 for the three months
ended January 31, 2004 from $88,111 for the three months ended January 31, 2003.
The increase was due to salary increases for senior officers.

      Interest expense increased $5,343 or 15.2%, from $35,038 for the three
months ended January 31, 2003 to $40,381 for the three months ended January 31,
2004. The increase is attributable to the higher balance in outstanding
borrowings for the three months ended January 31, 2004 compared to 2003
partially offset by lower interest rates on outstanding borrowings. Rates of
interest on our outstanding borrowings are tied to the prime rate. As the prime
rate declined from the prior period, the rate of interest payable on our
outstanding borrowings also declined. See "--Liquidity and Capital Resources."

      We had income of $927,299 before income taxes for the three months ended
January 31, 2004 compared to income of $461,321 before income taxes for the
three months ended January 31, 2003. The increase was attributable primarily to
improved margins on the sale of our private label and branded


                                       11
<PAGE>

coffee products. Our provision for income taxes for the three months ended
January 31, 2004 totaled $408,500 compared to $204,400 for the three months
ended January 31, 2003 as a result of increased income before taxes.

Liquidity and Capital Resources

      As of January 31, 2004, we had working capital of $1,507,240 which
represented a $1,855,956 decrease from our working capital of $3,363,196 as of
October 31, 2003, and total stockholders' equity of $2,639,278, which increased
by $518,799 from our total stockholders' equity of $2,120,479 as of October 31,
2003. Our working capital decreased primarily due to the recategorization of the
outstanding balance under the line of credit to short-term liabilities
(liabilities due and payable in less than one year). The outstanding balance
under the line of credit was classified as short-term debt in our January 31,
2004 balance sheet since the agreement is to expire in November 2004, but was
classified as long-term debt in our January 31, 2003 balance sheet. At January
31, 2004, the outstanding balance on our line of credit was $2,046,531 compared
to $2,376,066 at October 31, 2003. This decrease in working capital was
partially offset by a $653,077 increase in amounts due from broker at January
31, 2004 compared to October 31, 2003.

      We have a credit facility with Wells Fargo Business Credit. The credit
facility 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 of up to
$750,000 based on eligible equipment. The line of credit provides for borrowings
of up to 85% of our eligible trade accounts receivable and 60% of eligible
inventories. On October 1, 2002, we extended our credit facility for an
additional two years to November 20, 2004 at lower interest rates. Interest on
the line of credit is payable monthly at the prime rate plus .25% (an effective
rate of 4.25 at January 31, 2004) and interest on the term loan is payable
monthly at the prime rate plus .50% (an effective rate of 4.50% at January 31,
2004). Principal payments on the term loan are payable monthly at $7,000. Andrew
Gordon and David Gordon, two of our directors and officers, each have guaranteed
borrowings under the credit facility up to $500,000.

      As indicated above, as of January 31, 2004, the line of credit had an
outstanding balance of $2,046,531 as compared to an outstanding balance of
$2,376,066 at October 31, 2003. The outstanding balance under the term loan was
$315,000 as of January 31, 2004, and was $336,000 at October 31, 2003. We were
in compliance with all required financial covenants at January 31, 2004.

      We had loans payable to our stockholders, all of whom are members of the
Gordon family, of $80,841 at January 31, 2004. The loans are due on demand and
currently bear interest at a rate of 6% per year. We borrow from our
stockholders from time-to-time to supplement short-term working capital needs.
The stockholders are under no obligation to make such loans. The loans are shown
as long-term liabilities since they will not be repaid during the next year.

      For the three months ended January 31, 2004, our operating activities
provided net cash of $442,930 as compared to the three months ended January 31,
2003 when net cash used by operating activities was $213,743. The increased cash
flow from operations for the three months ended January 31, 2004 was primarily
due to increased net income, and decreased inventory levels and prepaid
expenses, offset in part by increases in amounts due from broker, and decreases
in accounts receivable, and accounts payable.

      During the three months ended January 31, 2004, we used $24,301 of our
cash resources to purchase property and equipment. The additional equipment will
improve our production efficiencies and allow us to better utilize the brick
pack machine purchased in 2002. In addition, we lease machinery and equipment
under a capital lease which expires in July 2005. The interest rate on the
capital lease is 8-1/3% per annum.


                                       12
<PAGE>

Management does not expect to incur other significant capital expenditures in
fiscal 2004.

      We also used $381,183 of net cash in financing activities for the three
months ended January 31, 2004, including a net reduction of $329,535 in our bank
line of credit.

      We expect to fund our operations, including paying our liabilities,
funding capital expenditures and making required payments on our debts, in
fiscal 2004 through cash provided by operating activities and by drawing on our
credit facilities. We expect that we will generate sufficient cash to continue
our business for the next twelve months. In addition, an increase in eligible
accounts receivable and inventory would permit us to make additional borrowings
under our line of credit. We also believe we could, if necessary, obtain
additional loans by mortgaging our headquarters.

      On February 4, 2004, we acquired certain assets of Premier Roasters LLC
for $825,000. In addition, we entered into an agreement with the City of La
Junta, Colorado to lease a 50,000 square foot facility for $8,341 per month. We
do not believe that the purchase price or costs associated with operating a
second facility will have a material effect on our future cash flow of liquidity
position. We believe that the costs associated with operating the second
facility will be more than offset by the new economies of scale in both
manufacturing and logistical efficiencies which were unavailable in the past
while operating solely out of our New York facility and increased sales to new
and existing customers in the western U.S.

Market Risks

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

Interest Rate Risks

      We are subject to market risk from exposure to fluctuations in interest
rates. At January 31, 2004, our debt consisted of $271,444 of fixed rate debt
and $2,361,531 of variable rate debt under our revolving line of credit and term
loan. Interest on the variable rate debt was payable primarily at 4.25% (or .25%
above the prime rate) above the prime rate, with a portion of the variable rate
debt payable at 4.50% (or .50% above the prime rate) above the prime rate at
January 31, 2004. We do not expect changes in interest rates to have a material
effect on results of operations or cash flows in fiscal 2004, although there can
be no assurance that interest rates will not significantly change.

Commodity Price Risks

      The supply and price of coffee beans are subject to volatility and are
influenced by numerous factors which are beyond our control. Historically, we
have used short-term coffee futures and options contracts primarily for the
purpose of partially hedging and minimizing the effects of changing green coffee
prices, as further explained in Note 4 of the notes to financial statements in
this quarterly report. In addition, during the latter half of fiscal 2000, we
began to acquire futures contracts with longer terms (generally three to four
months) primarily for the purpose of guaranteeing an adequate supply of green
coffee. The use of these derivative financial instruments has enabled us to
mitigate the effect of changing prices although we generally remain exposed to
loss when prices decline significantly in a short period of time and remain at
higher levels, preventing us from obtaining inventory at favorable prices. We
generally have been able to pass green coffee price increases through to
customers, thereby maintaining our gross profits. However, we cannot predict
whether we will be able to pass inventory price increases through to our
customers in the future.


                                       13
<PAGE>

      At January 31, 2004, the Company held 100 options (generally with terms of
two months or less) covering an aggregate of 3,750,000 pounds of green coffee
beans at a price of $.70 per pound. The fair market value of these options,
which was obtained from a major financial institution, was $217,875 at January
31, 2004.

      We acquire futures contracts with longer terms (generally three to four
months) primarily for the purpose of guaranteeing an adequate supply of green
coffee. At January 31, 2004, we did not hold any long futures contracts.

Off-Balance Sheet Arrangements

      Coffee Holding does not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on its financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.

Item 3. Controls and Procedures

      Management, including the Company's President and Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(f)
and 15d-15(e)) as of the end of the period covered by this report. Based upon
that evaluation, the President and Chief Executive Officer concluded that the
disclosure controls and procedures were effective, in all material respects, to
ensure that information required to be disclosed in the reports the Company
files and submits under the Exchange Act is recorded, processed, summarized and
reported as and when required.

      There have been no changes in the Company's internal control over
financial reporting identified in connection with the evaluation that occurred
during the Company's last fiscal quarter that has materially affected, or that
is reasonably likely to materially affect, the Company's internal control over
financial reporting.


                                       14
<PAGE>

Part II-- OTHER INFORMATION

Item 1.       Legal Proceedings

         None

Item 2.       Changes in Securities and Use of Proceeds

         None

Item 3.       Defaults upon Senior Securities

         None

Item 4.       Submission of Matters to a Vote of Security Holders

         None

Item 5.       Other Information

         None

Item 6.       Exhibits and Reports on Form 8-K

         (a)      Exhibits

         2.1      Asset Purchase Agreement, dated February 4, 2004, by and
                  between Coffee Holding Co., Inc. and Premier Roasters LLC
                  (incorporated by reference to the Current Report on Form 8-K
                  dated February 4, 2004 as filed with the SEC on February 20,
                  2004).

         10.12    Lease dated February 4, 2004 by and between Coffee Holding
                  Co., Inc. and the City of La Junta, Colorado

         31.1     Rule 13a - 14(a)/15d - 14a Certification.

         32.1     Section 1350 Certification.

         (b)      Reports on Form 8-K

                  None


                                       15
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                  Coffee Holding Co., Inc.
                                  ------------------------------------------
                                  (Registrant)

                                  By: /s/ Andrew Gordon
                                      --------------------------------------
                                       Andrew Gordon
                                       President and Chief Executive Officer
                                       (Principal Executive Officer and
                                       Principal Accounting Officer)

March 12, 2004


                                       16

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>3
<FILENAME>e17220ex10_12.txt
<DESCRIPTION>LEASE
<TEXT>

                                                                   Exhibit 10.12

                                    L E A S E

      THIS INDENTURE OF LEASE WITNESSETH, That

      l. GRANT. THE CITY OF LA JUNTA, COLORADO, a municipal corporation,
hereinafter called "CITY", does hereby demise and lease unto COFFEE HOLDING CO.,
INC. a Nevada Corporation, hereinafter called "COMPANY", the premises located at
27700 Frontage Road, in the City of La Junta, State of Colorado, as shown on the
plat, Exhibit "A" attached herein, under the following conditions:

      2. TERM: Beginning on the 1st day of February, 2004, and ending on the
31st day of January, 2024, unless the term hereof shall be sooner terminated as
hereafter provided.

      3. DEMISE.

      A.    For and in consideration of the rent, covenants and agreements
            hereinafter provided and contained, the CITY hereby leases unto the
            COMPANY that real estate together with improvements thereon, more
            particularly described on Exhibit "A", attached and incorporated
            herein by reference.

      4. INSTALLATION OF TRADE FIXTURES. In order to facilitate the occupancy
and commercial use of the building by the COMPANY, the COMPANY shall have the
right to install its trade fixtures during the course of the construction of the
building, so long as such installation does not unreasonably interfere with the
progress of the construction work. During the course of the installation of such
trade fixtures, the COMPANY shall be liable for all loss, damage or other
liability arising from the installation of such trade fixtures.

      5. RENT.

      A.    The monthly base rent is determined to be $8,341.12 per month,
            payable in advance on the first day of each month during the term of
            the lease beginning February 1, 2004.

      B.    Monthly Rental. In consideration of said demise, the COMPANY agrees
            to pay to the CITY as rent for said premise for the full term
            aforesaid the sum calculated per Section (A) beginning on February
            1, 2004 and a similar amount per month (except as provided in
            Section (C) below), which said sums shall be due and payable in


<PAGE>

            advance on the 1st day of the month and on each and every calendar
            month thereafter during said term at the office of CITY. Any payment
            that is made after the 10th day of any month in which said payment
            is due will bear interest at l2% per annum from its due date.

      C.    Rent Abatement. As an inducement to execute this Lease, for the time
            period of February 1, 2004 through December 31, 2004 inclusive, the
            CITY shall forgive the corresponding rent payment for those
            respective months.

      5. PERSONAL PROPERTY TAXES. COMPANY agrees to pay all taxes levied upon
personal property including trade fixtures and supplies kept upon the Leased
Premises and if such taxes on COMPANY'S personal property, fixtures or property
placed in the Leased Premises of COMPANY are levied against CITY or CITY'S
property and if CITY pays the same (which CITY shall have the right to do
regardless of the validity of such levy), COMPANY, upon demand, shall pay to
CITY the taxes so levied against CITY. CITY shall have the right to file a
memorandum of this Lease with the Colorado State Department of Revenue to obtain
the benefits of C.R.S. l973, 39-26-ll7 (l)(b) or any like Statute. COMPANY shall
provide CITY with a Colorado Department of Revenue Sales Tax number within
thirty days after execution of this Lease.

      6. REAL PROPERTY TAXES. The COMPANY shall pay all real property taxes
incurred after February 1, 2004, on the Leased Premises and the COMPANY hold the
CITY harmless therefrom. The CITY shall pay all unpaid real property taxes for
2003. The CITY shall pay a pro-rated 1/12 of the 2004 real property taxes
representing the month of January 2004.

      7. CONDITION PRECEDENT.

      A.    COMPANY'S Duties. That the CITY'S obligation to perform any covenant
            of this agreement is expressly predicated upon the following:

            1.    Evidence (satisfactory to the CITY) that all financing
                  releases CHAFA financing, Otero Partner's, Inc. (Otero County
                  Revolving Loan Fund), BFI and La Junta Capital, Inc. have been
                  obtained by the date of execution thereof; and

            2.    Except as may otherwise be provided herein, in the event that
                  any of the said CONDITION PRECEDENT are not fulfilled, each of
                  the parties (upon written notice to the other party) shall be
                  released from the terms and provisions of this contract,
                  without further recourse to either of the parties, except as
                  may otherwise be provided herein.


<PAGE>

      8. PURCHASE OF ELECTRICITY.

      1.    During the term of the lease, the COMPANY agrees that it shall
            purchase all electrical services from the City of La Junta. The
            rates shall be at a reasonable commercial rate, customarily charged
            to other users within the City of La Junta, and shall be at terms of
            payment as set forth in the published policies of the Board of
            Utility Commissioners of the City of La Junta.

      2.    The parties acknowledge and agree that the terms and provisions of
            this subparagraph are a specific inducement to the CITY'S covenants
            and agreements of other portions of this lease, and the COMPANY'S
            obligation to purchase electricity under the terms as set forth
            herein are as a fundamental part of the consideration realized by
            the CITY.

      3.    COMPANY acknowledges that CITY has policies concerning the tendering
            of advance deposits for utility services provided by the CITY. To
            the extent that those deposits will be required prior to a "turn on"
            of utility services to the COMPANY by the CITY provider, the COMPANY
            shall make provisions of payment of deposits, as required by the
            published policies of the Utility Board of Commissioners of the City
            of La Junta.

      9. CHARACTER OF OCCUPANCY. It is understood and agreed that the premises
herein demised are to be used for manufacturing, and/or for any other legal
purpose whatsoever, and except as otherwise provided herein, that the COMPANY
will (at its own expense) construct any necessary improvements and/or additional
alterations upon the existing building for such operations and that except as
otherwise provided herein, that the COMPANY will (at its own expense) maintain
and repair all of said improvements, to include any maintenance of the parking
lot or such other use of occupancy as may be agreed upon by the CITY and
COMPANY, in writing.

      10. QUIET POSSESSION. The Landlord shall warrant and defend the Tenant in
the quiet enjoyment and peaceful possession of the Leased Premises during the
term aforesaid and all terms, conditions and covenants to be observed and
performed by the parties hereto shall be applicable to and binding upon their
administrators, executors, successors or assigns.

      11. COMPANY COVENANTS. The COMPANY further covenants and agrees as
follows:

      A.    To pay the rental as provided for at the time and in the manner
            aforesaid.

      B.    To pay all water, electricity and other utility bills incurred by it
            in the use and occupancy of said premises at the time the same
            become due and payable.

      C.    COMPANY agrees that said premises will not be used for


<PAGE>

            any unlawful purpose to include any unreasonable environmental
            hazard for the term of this lease, and COMPANY will not allow or
            create on said premises any condition that will cause an unsanitary
            condition.

      D.    COMPANY agrees to keep the outside surrounding area premises free of
            all trash and debris, and all weeds shall be mowed on a regular
            basis, and the entire area shall provide an acceptable appearance.

      E.    The parties acknowledge and agree that there are certain restrictive
            covenants, agreements, and other matters related to the use of the
            parking lot, and the use of ingress and egress to the property. This
            contract is subject to all of those provisions and covenants, which
            appear of record on the records of Otero County, Colorado. Further,
            the parties acknowledge and agree that COMPANY has satisfied itself
            as to provisions of those covenants and the sufficiency of ingress
            and egress to this property. COMPANY agrees to be bound by those
            agreements and COMPANY shall assume all responsibilities of the CITY
            that may be associated therewith.

      F.    COMPANY agrees to maintain the entire subject premises (to include
            the heating, electricity and plumbing) as is set forth below, normal
            wear and tear excepted.

      G.    That the COMPANY will not use or permit the demised premises to be
            used for any purposes prohibited by the laws of the United States or
            the State of Colorado, or the ordinances of the City of La Junta or
            County of Otero.

      H.    That the COMPANY will not permit any nuisance in the demised
            premises.

      I.    That the COMPANY will not use or keep any substance of material in
            or about the demised premises which may vitiate the validity of the
            insurance on said building or increase the hazard of the risk.

      J.    COMPANY shall not discriminate on the basis of race, color,
            religion, sex or national origin. The CITY reserves the right to
            take such action as the United States Government may direct to
            enforce this covenant.

      K.    Signs, notices, advertisements, or other inscriptions shall be
            approved as to style and content by CITY prior to erection.


<PAGE>

      12. CITY COVENANTS. As a material inducement to the COMPANY to effectuate
the transactions herein contemplated, the CITY represents and warrants to and
covenants and agrees with the COMPANY that:

      A.    The CITY is a municipal corporation, duly organized, validly
            existing and in good standing under the laws of the State of
            Colorado.

      B.    The CITY is the sole owner of fee simple absolute title to the
            Property, and the Property is not subject to any liens, restrictions
            or encumbrances except as set forth on the records of Otero County.

      C.    The City has all requisite power and authority to execute and
            deliver this Agreement.

      D.    The officers of the CITY who will execute the same for and on behalf
            of the CITY have the power and authority to do so and to bind the
            CITY.

      E.    The execution, delivery and performance of this Agreement by the
            CITY will not violate any provision of law, any order of any court
            or any administrative body with jurisdiction over the CITY or the
            Property, binding on the CITY of the Property, any provision of any
            indenture, agreement, or other instrument to which it is a party or
            by which Property is affected, or be in conflict with, result in a
            breach of or constitute a default under any such indenture,
            agreement or other instrument or result in the creation or
            imposition of any lien, charge or encumbrance of any nature
            whatsoever upon the Property.

      F.    No written or oral notice has been received by the CITY or its
            agents or employees of the violation of any federal, state, local or
            other governmental building, zoning, health, safety, platting, land
            use, environmental, subdivision or other law, ordinance or
            regulations, or any applicable private restriction, and the intended
            use is not a pre-existing, non-conforming use.

      G.    All of the Property is presently zoned for its present and intended
            use and the CITY knows of no actions or proceedings pending or
            contemplated which would affect such zoning.

      H.    There exists no judgment, lien, suit, action or legal,
            administrative, arbitration or other proceeding pending, or, to the
            CITY'S knowledge, threatened against the CITY which could result in
            a judgment or lien against the Property or any portion thereof
            between the date hereof and the date of occupancy by the COMPANY.
            There is no litigation or proceeding


<PAGE>

            pending or known to the CITY to be threatened against the Property,
            or the operation of the property or any facts which, to the
            knowledge of the CITY, adversely affect or in the future may
            adversely affect the operation of the Property for the COMPANY'S
            intended use thereof. There are no applications, ordinances,
            petitions, resolutions or other matters pending before any
            governmental agency which would affect in any manner the COMPANY'S
            intended use of the Property or any portion thereof. To the best of
            the CITY'S knowledge, after due investigation, there are no
            environmental proceedings, applications, ordinances, petitions,
            court pleadings, resolutions, investigations by public or private
            agencies, or other matters pending which could prohibit, impede,
            delay or adversely affect the COMPANY'S intended use of the Property
            or any portion thereof. No condemnation proceedings are pending or,
            to the CITY'S knowledge, threatened against the Property, and to the
            CITY'S knowledge there are no applications, ordinances, petitions,
            resolutions or other matters pending before any governmental agency
            in regard to access routes, curb cuts, median strips or other
            contemplated actions of public agencies which might tend to diminish
            or curtail the full flow of traffic by the Property and access
            thereto.

      I.    The Property is not presently subject to obligations for any unpaid
            or deferred taxes, assessments, construction costs or utility
            charges, and all real property taxes are current and paid to date.

      J.    Except as to parking restrictions of record and except for the
            parking agreement (attached hereto as Exhibit "A"), there are no
            private restrictions of which the COMPANY has not been notified and
            which affect the uses which may be made of the Property.

      K.    An environmental impact study is attached hereto as Exhibit "B".
            Except as to matters contained therein, CITY has not placed or
            caused to be placed on, and has not knowledge of or reason to
            believe that there exists, any infectious, hazardous or toxic waste
            substance, however defined, anywhere in, on or near the Property.

      L.    Except for the Parking Agreement set forth in Exhibit "A", no
            portion of the Property is the subject of any leasehold interest nor
            are there any existing service contracts or agreements affecting the
            Property.

      M.    The CITY shall not do anything to adversely affect the structural
            integrity of the improvements and the CITY shall, at its own costs
            and expenses, keep all parts or


<PAGE>

            portions of the Property in working order and good repair until
            occupancy by the COMPANY.

      N.    To the best of the CITY'S knowledge, there are no soil or subsoil
            conditions at the Property which would restrict, impair or prohibit
            use of the Property or any portion thereof for COMPANY'S intended
            use thereof.

      O.    To the best of the CITY'S knowledge, no portion of the Land is
            within an identified flood plain or other designated flood hazard
            area as established pursuant to the Flood Disaster Protection Act,
            as amended, or regulations promulgated thereto by HUD, FDIC, the
            Federal Reserve Board or any other governmental or
            quasi-governmental agency or authority having jurisdiction over all
            or any portion of the Property.

      P.    The Property has direct legal access to, abuts, and is served by a
            drive way over private property, which drive way provides a valid
            means of ingress and egress to and from the Property, without
            additional cost or expense to the COMPANY.

      Q.    All utilities, including water, gas, telephone, electricity, sewer,
            and sanitary services are currently available to the Property at
            normal and customary rates, and are adequate to serve the Property
            for the COMPANY'S intended use thereof.

      R.    The buildings, structures and improvements included, and to be
            included within the Property are and shall be structurally sound, in
            good repair and in acceptable condition, and all mechanical,
            electrical, heating, air-conditioning, drainage, sewer, water and
            plumbing systems are in property working order.

      S.    To the best of the CITY'S knowledge, the Property is not on any
            state or federal "superfund" list or any similar list maintained by
            a government agency with respect to sites requiring cleanup due to
            contamination by Hazardous Substances.

      T.    To the best of the CITY'S knowledge, the Property has not been used
            to generate, manufacture, refine, transport, treat, store, handle,
            dispose, transfer, produce or process any regulatory quantities of
            Hazardous Substances. For purposes thereof, "Hazardous Substances"
            means any substance, waste, contaminant, pollutant or material that
            has been determined now or before closing by any local, state or
            federal government authority to be capable of posing a risk of
            injury or damage to health, safety property, or the


<PAGE>

            environment, and includes, without limitation, all substances,
            wastes, contaminants, pollutants and materials defined or designated
            as hazardous, extremely or imminently hazardous, dangerous or toxic
            pursuant to (i) any applicable statute, code, ordinance, rule,
            regulations, or policy of any local or state governmental authority
            within the State of Colorado; (ii) Section 307 and 3ll of the Clean
            Water Act, as amended, 33 U.S.C. Sections l3l7, l32l; (iii) Section
            l004 of the Resource Conservation and Recovery Act, as amended, 42
            U.S.C. Section 6903; (iv) Section l0l of the Comprehensive
            Environmental Response and Liability Act, as amended, 42 U.S.C.
            Section 960l (v) Section ll2 of the Clean Air Act, as amended, 42
            U.S.C. Section 74l2; (vi) Section 7 of the Toxic Substances Control
            Act, as amended, l5 U.S.C. Section 2606; (vii) Sections l03 and l04
            of the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
            Sections l802, l803; or (viii) regulations promulgated pursuant to
            any of the foregoing, and includes all substances, wastes,
            contaminants, pollutants and materials defined, designated or
            identified as, or containing, polychlorinated biphenyls ("PCBs"),
            asbestos, or petroleum.

      13. CORPORATE GOOD STANDING. COMPANY shall ensure that the COMPANY shall
within thirty days after execution of this lease, and then thereafter at all
times during the term of this lease, be a corporation in good standing under the
laws of the State of Colorado, maintaining an appropriate registered agent and a
registered office, and otherwise complying with all laws of the State of
Colorado.

      14. ASSIGNMENT, SUBLETTING OR PLEDGE.

      A.    It is agreed that neither the Leased Premises nor any part thereof
            shall be sublet, nor shall this lease be assigned by COMPANY without
            the written consent of CITY having been first obtained, which shall
            not be unreasonably withheld or delayed by the CITY. No assignment
            for the benefit of creditors, or by operation of law, shall be
            effective to transfer any right to an assignee without the written
            consent of CITY first having been obtained.

      B.    It is agreed that if this lease be assigned, or if the Leased
            Premises or any part thereof be sublet or occupied by anyone other
            than COMPANY, CITY may collect rent from the assignee, undertenant
            or occupant, and apply the net amount collected to the rent herein
            reserved.

<PAGE>

      15. MAINTENANCE AND REPAIRS.

      A.    The CITY shall make such repairs as are necessitated by the CITY's
            negligence or by the CITY's breach of the Lease.

      B.    If the change in any laws during the term of the Lease requires
            structural repairs, replacements or improvements to the building,
            such repairs, replacements or improvements shall be made at the
            CITY's expense. Such additional costs shall be added to any sums
            allocated in paragraph 5(A) above and shall be amortized over the
            remaining useful life of the building; the computation of "remaining
            useful life" shall not be less than 20 years, and of which the
            additional rent shall be assessed from the date of completion of the
            structural repairs, replacements or improvements.

      C.    Except as herein provided, the CITY shall not be obligated to make
            repairs, replacements or improvements of any kind upon the Lease
            Premises, or repair any equipment, facilities or fixtures therein
            contained, including the parking lot, air conditioning equipment,
            heating equipment, or other equipment serving the Leased Premises.

      D.    The Lease Premises shall at all times be kept in good order,
            condition and repair by the COMPANY and in a clean, sanitary and
            safe condition and in accordance with all applicable laws,
            ordinances and regulations of any governmental authority having
            jurisdiction, normal wear and tear excepted.

      5.    The COMPANY shall maintain the parking lot in a condition equal to
            the lot as it exists upon execution of this Lease.

      6.    The COMPANY shall maintain the roof and accepts the roof in its
            current condition in exchange for a portion of the abatement of rent
            allocated in Paragraph 4(C) above.

      7.    During the last year of the term of the Lease, the COMPANY shall not
            be required to expend in excess of $100,000.00 on maintenance
            expense; but only if COMPANY demonstrates a continuing maintenance
            program throughout the entire term of the Lease.

      16. ACCEPTANCE OF PREMISES BY COMPANY. The taking possession of the Leased
Premises by the COMPANY shall be conclusive evidence as against the COMPANY that
the Leased Premises is acceptable to COMPANY.


<PAGE>

      17. PREMISES VACATED DURING TERM OF LEASE. Unless the COMPANY continues to
pay rent, if the COMPANY shall completely abandon or vacate the Leased Premises
before the end of the Term, the CITY may, at its option and with thirty (30)
days written notice to the COMPANY, enter Leased Premises, remove any signs of
the COMPANY therefrom, and re-let the same, or any part thereof, as CITY may see
fit, without thereby voiding or terminating the Lease, and, for the purpose of
such re-letting, the CITY is authorized to make any repairs, changes,
alterations or additions in or to said Leased Premises, as may be reasonably
required, necessary or desirable for the purpose of such re-letting and the
COMPANY shall be liable for the balance of the rent herein reserved until the
expiration of the Lease. The CITY shall take reasonable efforts to mitigate its
damages. Any subsequent damages or repairs resulting from the actions of the
subtenant, shall not be imputable to the COMPANY.

      18. HOLDING AFTER TERMINATION. It is agreed that if, after the expiration
of the Term, the COMPANY shall remain in possession of the Leased Premises,
without giving timely notice as required herein, then such holding over shall be
deemed and taken to be a holding upon a tenancy from month to month at a monthly
rental equivalent to the last monthly payment hereinbefore provided for, payable
in advance on the same day of each month as above provided with all other terms
and conditions of the Lease remaining the same.

      19. NO IMPLIED SURRENDER OR WAIVER. No act or thing done by the CITY or
its agents during any term hereby granted, shall be deemed an acceptance or a
surrender of the Leased Premises, and no agreement to accept a surrender of the
Leased Premises shall be valid, unless the same shall be made in writing and
signed by the CITY. The mention in this Agreement of any particular remedy shall
not preclude the CITY or the COMPANY from any other remedy the CITY or the
COMPANY might have, whether in law or in equity, nor shall the waiver of any
violations of any covenant or condition in this Agreement prevent a subsequent
act, which would have originally constituted a violation, from having all of the
force and effect of any original violation. The receipt by the CITY of rent with
knowledge of the breach of any covenant in the Lease shall not be deemed a
waiver of such breach. The failure of the CITY or the COMPANY to enforce any of
the conditions set forth herein shall not be deemed a waiver of such conditions.
The receipt by the CITY of rent from any assignee, subtenant or occupant of the
Leased Premises shall not be deemed a waiver of the covenant Paragraph 18
against assignment and subletting without written consent of the CITY, or an
acceptance of the assignee, subtenant or occupant as the COMPANY, or a release
of the COMPANY from the further observance of performance by the COMPANY of the
covenants in the Lease contained on the part of the COMPANY to be observed and
performed. No provision of the Agreement shall be deemed to have been waived by
the CITY or the COMPANY unless such waiver be in writing signed by the CITY or
the COMPANY.


<PAGE>

      20. ALTERATIONS.

      A.    After reasonable notice to the COMPANY, the CITY shall have the
            right at any time to enter the Leased Premises to examine and
            inspect the same, or to make such repairs, additions, or alterations
            as it may deem necessary or proper for the safety, improvement or
            preservation thereof. Said alterations (completed at the insistence
            of the CITY) shall be at the expense of the CITY provided that the
            same do not materially interfere with the COMPANY's operations.

      B.    In exercise of its rights pursuant to this Paragraph, except in the
            event of emergency, the CITY shall not use force to enter the Leased
            Premises. In all events, the CITY shall use its best efforts not to
            disturb the tenancy therein.

      C.    The COMPANY shall make no alterations in excess of $50,000.00 or
            additions to the Leased Premises in excess of $50,000.00 without
            first obtaining the written consent of the CITY, and all additions
            or improvements made by the COMPANY (except only movable equipment
            and furniture) shall be deemed a part of the Real Estate and shall
            remain upon and be surrendered with the Leased Premises as a part
            thereof, at the end of the term, by lapse of time or otherwise.

      D.    All alterations and additions shall be made in a reasonable and good
            workman-like manner.

      21. INSURANCE.

      A.    During the term of the Lease, the COMPANY, at its own cost and
            expense, shall be responsible for insuring the building and
            fixtures, personal property improvements and equipment therein. The
            building shall be insured for an amount not less than the fair
            market value of the building, which is initially agreed upon as
            $1,125,000.00. The CITY and the COMPANY hereby waive their right of
            recovery against each other for any loss or damage and shall cause
            their respective insurer(s) to waive their subrogation right for any
            payments made for such loss or damage.

      B.    During the term of the Lease, the COMPANY shall maintain, at its own
            cost and expense, commercial general liability insurance in an
            amount of not less than One Million Dollars ($1,000,000.00) covering
            bodily injury and property damage liability per occurrence and
            Worker's Compensation and Employer's


<PAGE>

            Liability insurance in an amount not less than the statutory limit.
            The commercial general liability insurance shall name the CITY as an
            additional insured. Prior to the Commencement Date of the Lease, the
            COMPANY shall provide the CITY with a certificate from its
            insurer(s) evidencing the insurance coverage herein stated.

      C.    The CITY shall be named as an additional insured on any policy
            required of COMPANY pursuant to the preceding subparagraph.

      22. INDEMNITY.

      A.    City's Protection. Except for the CITY's negligence or breach of the
            Lease, the COMPANY indemnifies and saves harmless the CITY of and
            from all liability for damages or claims against the CITY on account
            of injuries to the person or property of any other person rightfully
            in the building for any purpose whatsoever, where the injuries are
            caused by the negligence or misconduct of the COMPANY, its agents,
            servants or employees, or where such injuries are the result of the
            violation of law or ordinances, governmental orders of any kind, and
            the COMPANY agrees neither to hold nor attempt to hold the CITY
            liable for any injury or damage, either proximate or remote
            occurring through or caused by the COMPANY's repairs or alterations
            to the Leased Premises. The CITY shall not have any liability
            hereunder with respect to damage to property or personal injury
            occurring outside the building, except to the extent same is in any
            manner due or attributable to the negligent or willful acts of the
            CITY, its agents, employees or contractors.

      B.    Company's Protection. Except for the COMPANY's negligence or breach
            of this Agreement, the CITY indemnifies and saves harmless the
            COMPANY of and from all liability for damages or claims against the
            COMPANY on account of injuries to the person or property of any
            other person rightfully in said building for any purpose whatsoever,
            where the injuries are caused by the negligence or misconduct of the
            CITY, its agents, servants or employees, and the CITY agrees neither
            to hold nor attempt to hold the COMPANY liable for any injury or
            damage, either proximate or remote occurring through or caused by
            the CITY's repairs or alterations to the Leased Premises. The
            COMPANY shall not have any liability hereunder with respect to
            damage to property or personal injury occurring outside the
            building, except to the extent the same is in any manner due or
            attributable to the negligent or willful acts of the COMPANY, its
            agents, employees or contractors.


<PAGE>

      23. EMINENT DOMAIN.

      1.    If the Leased Premises shall be taken by right of eminent domain, in
            whole or substantially in part, for public purposes, then this
            lease, at the option of either party, shall forthwith terminate, and
            the current rent shall be properly apportioned to the date of such
            taking and in such event Landlord shall receive the entire award for
            the lands and improvements so taken.

      2.    Thereafter, both the CITY and the COMPANY shall be discharged from
            all further obligations under this Lease. Although the award in the
            event of any condemnation shall belong to the CITY, the COMPANY
            shall have the right to claim and recover from the condemning
            authority such compensation, if any, as may be separately awarded to
            the COMPANY in the COMPANY'S own right:

            1.    In a separate proceeding on account of any and all damage to
                  the COMPANY'S business by reason of the condemnation to
                  include any relocation expenses; and

            2.    For or on account of any cost or loss which the COMPANY shall
                  incur in removing the COMPANY'S furniture, fixtures and
                  equipment from the Leased Premises.

      24. BREACH OR DEFAULT.

      A.    COMPANY BREACH. The COMPANY agrees to observe and perform the
            conditions and agreements herein set forth to be observed and
            performed by the COMPANY, and further agrees that if default be made
            by the COMPANY in the payment of said rent, or any part thereof, or
            if the COMPANY shall fail to materially observe or materially
            perform any of said conditions or agreements and such default shall
            continue beyond the notice periods provided below, then and in the
            event, and as often as the same may happen, it shall be lawful for
            the CITY, at its election, with previous notice, to re-enter and
            repossess itself of the Leased Premises, with legal proceedings. The
            COMPANY shall receive thirty (30) days written notice of any alleged
            failure to make a payment before the same shall be considered a
            default of the terms of this Lease. The ninety (90) day notice
            provision for failure to perform any covenant (other than the
            failure to make payment) shall be reasonably extended if the cure
            requires a period of time longer than ninety (90) days, and if the
            COMPANY is diligently pursuing the cure of said default.

      B. CITY BREACH. The CITY acknowledges that:

            1.    The COMPANY has committed and shall commit substantial
                  resources in planning for this Project, purchasing fixtures
                  for the building and


<PAGE>

                  relocating a portion of its business to the CITY of La Junta;
                  and

            2.    The CITY shall receive ninety (90) days written notice of any
                  alleged breach before the same shall be considered a default
                  of the terms of the Lease. In the event the default is not
                  cured within the aforesaid ninety (90) days, the COMPANY shall
                  be entitled to relief as allowable by law. The ninety (90) day
                  notice period shall be reasonably extended if the cure
                  requires a period of time longer than ninety (90) days, and if
                  the CITY is diligently pursuing such cure.

      25. INSOLVENCY. It is further agreed between the parties hereto that if
the COMPANY shall be declared insolvent or bankrupt, or if any assignment of the
COMPANY's property shall be made for the benefit of creditors or otherwise, or
if the COMPANY's leasehold interest herein shall be levied upon under execution,
or seized by virtue of any court of law, or a Trustee in Bankruptcy or a
Receiver be appointed for the property of the COMPANY, whether under the
operation of a State or Federal statute, then and in any such case after a
ninety (90) day notice to the COMPANY to remedy the situation, the CITY may, at
its option, with thirty (30) days written notice terminate the Lease,
immediately retake possession of said Leased Premises, using such force as may
be necessary, without being guilty of any manner of trespass or forcible entry
or detainer, and without the same working any forfeiture of the obligations of
the COMPANY hereunder.

      In the event an Order for Relief is entered by a Bankruptcy Court for the
COMPANY, the COMPANY agrees that the provisions of 11 U.S.C. 365 shall apply and
that the COMPANY, as Debtor-in-Possession, or a Trustee shall promptly cure any
and all defaults, of any kind or type, in the terms of the Lease by payment
within ten (10) days of any such Lease payments then due and owing or by
remedying any defect in the occupancy of the leased space. Further, in the event
that the COMPANY, as a Debtor-in-Possession, or a Trustee should elect to assign
the Lease, it is agreed that the Lease may be assigned or subleased to a light
industry business operation suitable to the CITY or, to any other user suitable
to the CITY, which consent by the CITY shall not be unreasonably withheld. Since
the building has been retrofitted to use as a light manufacturing building, any
other type of tenant shall not be deemed acceptable without express consent of
the CITY.

      26. REMOVAL OF COMPANY'S PROPERTY.

      A.    If the COMPANY shall fail to remove all effects from the Leased
            Premises within thirty (30) days after the abandonment thereof, or
            within thirty (30) days after


<PAGE>

            the termination of the Lease for any cause whatsoever, the CITY, at
            its option, may remove the same in any manner that it shall choose,
            and store said effects without liability to the COMPANY for a period
            not to exceed thirty (30) additional days. After that period of
            time, the CITY shall dispose of the same without any further
            liability to the CITY.

      B.    The COMPANY agrees to pay the CITY on demand, any and all reasonable
            expenses incurred, in such removal, including Court costs and
            attorney's fees and storage charges on such effects for the length
            of time the same shall be in the CITY's possession.

      C.    As to any equipment or fixtures purchased by COMPANY which are
            thereafter attached to the building, the COMPANY shall be entitled
            to remove said equipment and fixtures, but only if COMPANY restores
            the area affected by the equipment or fixtures in the building and
            Leased Premises to its original condition, ordinary wear and tear
            excepted.

      27. LOSS OR DAMAGE TO COMPANY'S PROPERTY. All personal property of any
kind or description whatsoever in the Leased Premises shall be at the COMPANY's
sole risk, and the CITY shall not be held liable for any damage done to or loss
of such personal property, or for damage or loss suffered by the business of the
COMPANY arising from any act or neglect of the employees of the COMPANY, or from
bursting, overflowing or leaking of water, sewer pipes, or from heating or
plumbing fixtures, or from electric wires, or from gases, or odors, caused in
any other manner whatever, except in the case of willful neglect or breach of
the Lease on the part of the CITY.

      28. SURRENDER OF POSSESSION. The COMPANY agrees to deliver and surrender
to the CITY possession of the Leased Premises at the expiration or termination
of the Lease, by lapse of time or otherwise, in as good repair as when the
COMPANY obtained the same at the commencement of said term, excepting only
ordinary wear and decay, and insured damages, or damage by the elements or by
act of God or by insurrection, riot, invasion or commotion, or of military or
usurped power.

      29. SEVERABILITY CLAUSE. If any clause or provision of this Agreement is
illegal, invalid and unenforceable under present or future law effective during
any term of the Lease, then and in that event, it is the intention of the
parties hereto that the remainder of the Agreement shall not be affected
thereby. The caption of each Paragraph hereof is added as a matter of
convenience only and shall be considered to be of no effect in the construction
of any provision or provisions of this Agreement.


<PAGE>

      30. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Colorado, and the COMPANY agrees that Otero County, Colorado shall be
the appropriate jurisdiction for any actions arising under the terms of the
Lease.

      31. BINDING TERMS. All terms, conditions and covenants to be observed and
performed by the parties hereto shall be applicable to and binding upon their
heirs, administrators, successors and assigns, as permitted.

      32. AUTHORITIES FOR ACTION, NOTICE. The CITY may act in any matter
provided for in this Agreement by the City Manager, and any notice to be given
to the CITY as provided for in this Agreement shall be delivered in person to
its City Manager or sent to the CITY by certified mail return receipt requested,
overnight delivery service, or by facsimile with confirmation, addressed to its
principal office at P. O. Box 489, 601 Colorado Avenue, La Junta, Colorado
81050. Notice to the COMPANY shall be sent by the CITY to the COMPANY by
certified mail, return receipt requested, by overnight delivery service, or by
facsimile with confirmation to: COFFEE HOLDING CO., INC., 4401 First Avenue,
Brooklyn, New York 11232-0005, Attn: Andrew Gordon.

      33. COSTS AND ATTORNEY'S FEES. In the event either party retains the
services of an attorney to enforce its rights under this Agreement, then the
prevailing party as determined by a court of competent jurisdiction shall be
entitled to recover, in addition to its other damages, its reasonable attorney's
fees and other legal costs.

      34. AMENDMENT OR MODIFICATION. The parties acknowledge and agree that
neither has relied upon any statements, representations, agreements or
warranties, except such as are expressed herein, and that no amendment or
modification of this Agreement shall be valid or binding unless expressed in
writing and executed by the parties hereto in the same manner as the execution
of this Agreement.

      35. MEMORANDUM. Upon execution of this Lease, the parties shall execute a
memorandum of this Lease in the form of Exhibit "B", attached and incorporated
herein, or such other form as the parties may agree upon and upon which may be
necessary for filing among the real property records of Otero County, Colorado,
which shall be recorded against the subject property described in paragraph four
above. When the lease term has expired or on an earlier termination, the parties
shall execute an agreement


<PAGE>

terminating the lease in a form appropriate for recording on the records of
Otero County.

      IN WITNESS WHEREOF, the CITY and the COMPANY have executed this Agreement.

COFFEE HOLDING CO., INC.                          THE CITY OF LA JUNTA, COLORADO
                                                  A Municipal Corporation

- -----------------------------                     ------------------------------
By: _________________________                     By: Richard G. Klein,
                                                       City Manager


<PAGE>

                                    Exhibit B

                               MEMORANDUM OF LEASE

      THIS MEMORANDUM OF LEASE AGREEMENT("Memorandum of Lease") is dated
February ____, 2004, and is entered into by the City of La Junta, Colorado, a
Municipal Corporation ("City"), and COFFEE HOLDING CO., INC., ("Company").

      WITNESSETH THAT, WHEREAS:

      A. CITY and COMPANY made and entered into a lease ("Lease") pertaining to
certain real estate owned by the CITY, located in La Junta, Colorado:

            See Attached Exhibit A

      B. It is the desire of the parties hereto that without filing the Lease in
the Office of the Otero County Clerk & Recorder, constructive notice of the
provisions thereof should be accomplished through the execution and delivery of
this "Memorandum of Lease" and the filing thereof in the office of such County
Recorder.

      NOW, THEREFORE, in consideration of the foregoing premises, it is hereby
agreed by and between the parties hereto as follows:

      1. All of the provisions of the Lease are hereby incorporated herein by
reference, including without limitation, the following:

            a.    The date of occupancy of the premises by the COMPANY is
                  February 1, 2004.

            b.    The obligations on the part of the CITY to lease the land and
                  building to the COMPANY and the obligation on the part of the
                  COMPANY to lease said land and building from the CITY for an
                  initial term of twenty years;

            c.    The obligation on the part of the COMPANY to pay to the CITY
                  an annual rent as the term "Rent" is defined in the lease.

            d.    The remedies on the part of the CITY and the COMPANY in the
                  event of a default by the other party in its respective
                  obligations under the lease; and

            e.    The rights and responsibilities of each of the parties in case
                  of fire or other casualty which damages or destroys the
                  building.


<PAGE>

      2. None of the provisions of this Memorandum of Lease are intended in any
way to alter the terms of this Lease; this Memorandum of Lease is intended to
serve only constructive notice, through the proper recording of the same, of the
terms, covenants and conditions set forth in the Lease.

      IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed as of the day and year first above written.

COFFEE HOLDING CO., INC.                          THE CITY OF LA JUNTA, COLORADO
                                                  A Municipal Corporation

- -----------------------------                     ------------------------------
By: _________________________                     By: Richard G. Klein,
                                                       City Manager

STATE OF COLORADO    )
                     ) SS.
COUNTY OF OTERO      )

      Subscribed and sworn to before me in the County of Otero, State of
Colorado, this _____ day of February, 2004 by __________________________,
President of Coffee Holding Co., Inc.

      My commission expires:

                                                        ------------------------
                                                        Notary Public

STATE OF COLORADO    )
                     ) SS.
COUNTY OF OTERO      )

      Subscribed and sworn to before me in the County of Otero, State of
Colorado, this _____ day of February, 2004 by Richard G. Klein, City Manager,
City of La Junta, Colorado.

      My commission expires:

                                                        ------------------------
                                                        Notary Public

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>e17220ex31_1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>

                                                                    Exhibit 31.1

                                  CERTIFICATION

      I, Andrew Gordon, certify that:

1.    I have reviewed this quarterly report on Form 10-QSB of Coffee Holding
      Co., Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement
      of a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the company as of, and for, the periods presented in this report;

4.    I am responsible for establishing and maintaining disclosure controls and
      procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
      the company and have:

      (a)   Designed such disclosure controls and procedures, or caused such
            disclosure controls and procedures to be designed under my
            supervision, to ensure that material information relating to the
            company, including its consolidated subsidiaries, is made known to
            me by others within those entities, particularly during the period
            in which this report is being prepared;

      (b)   Evaluated the effectiveness of the company's disclosure controls and
            procedures and presented in this report my conclusions about the
            effectiveness of the disclosure controls and procedures, as of the
            end of the period covered by this report based on such evaluation;
            and

      (c)   Disclosed in this report any change in the issuer's internal control
            over financial reporting that occurred during the company's most
            recent fiscal quarter (the company's fourth fiscal quarter in the
            case of an annual report) that has materially affected, or is
            reasonably likely to materially affect, the issuer's internal
            control over financial reporting; and

5.    I have disclosed, based on my most recent evaluation of internal control
      over financial reporting, to the company's auditors and the audit
      committee of the company's board of directors (or persons performing the
      equivalent functions):

      (a)   All significant deficiencies and material weaknesses in the design
            or operation of internal control over financial reporting which are
            reasonably likely to adversely affect the company's ability to
            record, process, summarize and report financial information; and


<PAGE>

      (b)   Any fraud, whether or not material, that involves management or
            other employees who have a significant role in the company's
            internal control over financial reporting.

Date: March 12, 2004                       /s/ Andrew Gordon
                                           -------------------------------------
                                           Andrew Gordon
                                           President and Chief Executive Officer
                                           (Principal Executive Officer and
                                           Principal Accounting Officer)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>e17220ex32_1.txt
<DESCRIPTION>STATEMENT PURSUANT TO SECTION 906
<TEXT>

                                                                    Exhibit 32.1

               STATEMENT FURNISHED PURSUANT TO SECTION 906 OF THE
               SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

      The undersigned, Andrew Gordon, is the President and Chief Executive
Officer of Coffee Holding Co., Inc. (the "Company").

      This statement is being furnished in connection with the filing by the
Company of the Company's Quarterly Report on Form 10-QSB for the period ended
January 31, 2004 (the "Report").

      By execution of this statement, I certify that:

      A)    the Report fully complies with the requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
            78o(d)) and

      B)    the information contained in the Report fairly presents, in all
            material respects, the financial condition and results of operations
            of the Company as of the dates and for the periods covered by the
            Report.

This statement is authorized to be attached as an exhibit to the Report so that
this statement will accompany the Report at such time as the Report is filed
with the Securities and Exchange Commission, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. It is not intended that this
statement be deemed to be filed for purposes of the Securities Exchange Act of
1934, as amended.

A signed original of this written statement required by Section 906 has been
provided to Coffee Holding Co., Inc. and will be retained by Coffee Holding Co.,
Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.

March 12, 2004                                     /s/ Andrew Gordon
- -------------------------                          -----------------------------
Dated                                              Andrew Gordon

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