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<SEC-DOCUMENT>0001125282-05-000577.txt : 20050210
<SEC-HEADER>0001125282-05-000577.hdr.sgml : 20050210
<ACCEPTANCE-DATETIME>20050210161212
ACCESSION NUMBER:		0001125282-05-000577
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20041031
FILED AS OF DATE:		20050210
DATE AS OF CHANGE:		20050210

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:		10KSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	333-00588-NY
		FILM NUMBER:		05593151

	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>10KSB
<SEQUENCE>1
<FILENAME>b404559_10ksb.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>

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

                                  FORM 10-KSB

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

     For the fiscal year ended October 31, 2004

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

     For the transition period from ____________ to _______________.

                        Commission file No. 333-00588-NY

                            COFFEE HOLDING CO., INC.
              (Exact name of small business issuer 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)


                   Issuer's telephone number: (718) 832-0800

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

                                      NONE
                                (Title of Class)

         Securities registered under Section 12(g) of the Exchange Act:

                                      NONE
                                (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

The issuer's revenues for the year ended October 31, 2004 were $28,030,389.

The aggregate market value of the voting common equity held by non-affiliates of
the registrant cannot be determined as the common stock is not quoted or listed
on any quotation system or market.

As of December 31, 2004, the registrant had 3,999,650 shares of common stock,
par value $.001 per share, outstanding.

Transitional Small Business Disclosure Format: Yes |_| No |X|


<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              PAGE

<S>          <C>       <C>                                                                               <C>
PART I

             ITEM 1.    DESCRIPTION OF BUSINESS..................................................................1

             ITEM 2.    DESCRIPTION OF PROPERTY.................................................................11

             ITEM 3.    LEGAL PROCEEDINGS.......................................................................11

             ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................12

PART II

             ITEM 5.    MARKET FOR COMMON EQUITY and RELATED STOCKHOLDER MATTERS................................12

             ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS..............................12

             ITEM 7.    FINANCIAL STATEMENTS....................................................................20

             ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE....20

             ITEM 8A.   CONTROLS AND PROCEDURES.................................................................20

             ITEM 8B.   OTHER INFORMATION.......................................................................20

PART III

             ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.......................................21

             ITEM 10.   EXECUTIVE COMPENSATION..................................................................22

             ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                        AND RELATED STOCKHOLDER MATTERS.........................................................23

             ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................................25

             ITEM 13.   EXHIBITS................................................................................25

             ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES..................................................28

SIGNATURES......................................................................................................29

</TABLE>

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL OVERVIEW

         PRODUCTS AND OPERATIONS. We are an integrated wholesale coffee roaster
and dealer in the United States. Our core products can be divided into three
categories:

         o  WHOLESALE GREEN COFFEE: unroasted raw beans imported from around the
            world and sold to large and small roasters and coffee shop
            operators;

         o  PRIVATE LABEL COFFEE: coffee roasted, blended, packaged and sold
            under the specifications and names of others, including supermarkets
            that want to have their own brand name on coffee to compete with
            national brands; and

         o  BRANDED COFFEE: coffee roasted and blended to our own specifications
            and packaged and sold under our seven brand names in different
            segments of the market.

         Our private label and branded coffee products are sold throughout the
United States and Canada to supermarkets, wholesalers, and individually owned
and multi-unit retail customers. Our unprocessed green coffee, which includes
over 70 types of coffee from all over the world, is sold to specialty gourmet
roasters.

         We conduct our operations in accordance with strict freshness and
quality standards. All of our private label and branded coffee is produced from
high quality coffee beans that are deep roasted for full flavor using a slow
roasting process that has been perfected utilizing our more than thirty years of
experience in the coffee industry. In order to ensure freshness, our products
are delivered to our customers within 72 hours of roasting. We believe that our
long history has enabled us to develop a loyal customer base.

         GEOGRAPHIC EXPANSION. In February 2004, we acquired certain assets of
Premier Roasters, a roaster-dealer located in La Junta, Colorado, for $825,000.
The assets purchased by us include all of the operating equipment located at
Premier Roasters' La Junta and Rocky Ford, Colorado locations, as well as all
labels for all of Premier Roasters' 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 for a 50,000 square foot facility in La Junta. We
are using the assets that we purchased to expand our integrated wholesale coffee
roaster and dealer operations in the Western United States. In connection with
this transaction, we also entered into a licensing agreement with Del Monte
Corporation for the exclusive right to use the S&W and IL CLASSICO trademarks in
connection with the production, manufacture and sale of ground coffee for
distribution to retail customers in the United States and certain other
countries approved by Del Monte Corporation.




                                       1
<PAGE>

OUR INDUSTRIES

         The United States coffee market consists of two distinct product
categories:

         o  Commercial ground roast, mass-merchandised coffee; and

         o  Specialty coffees, which include:

            o  Gourmet coffees (premium grade Arabica coffees sold in whole bean
               and ground form);

            o  Espresso-based beverages; and

            o  Premium coffees (upscale coffees mass-marketed by the leading
               coffee companies).

         SPECIALTY GREEN COFFEE. Specialty green coffee, or what is sometimes
called gourmet coffee, is high quality Arabica bean coffee. The Arabica bean is
widely considered in the industry to be superior to its counterpart, the Robusta
bean, which is used mainly in non-specialty coffee. High quality Arabica beans
usually grow at high elevations, absorb little moisture and mature slowly. These
factors result in beans with a mild aroma and a bright, pleasing flavor that is
suitable for specialty coffee. Although the overall coffee industry is mature,
the specialty green coffee market continues to be a fast growing segment.

         We have observed several industry trends that have contributed to the
increase in demand for specialty coffee, including:

         o  According to the Specialty Coffee Association, the estimated number
            of specialty coffee retail outlets grew from 585 units in 1989 to
            17,400 units by the end of 2003;

         o  Increasing demand for all premium food products, including specialty
            coffee, where the difference in price from the commercial brands is
            small compared to the perceived improvement in product quality and
            taste;

         o  Greater consumer awareness of specialty coffee as a result of its
            increasing availability;

         o  Ease of preparation of specialty coffees resulting from the
            increased use of automatic drip coffee makers and home espresso
            machines; and

         o  The overall low price of Arabica coffee beans, which has allowed
            consumers to afford higher end specialty 100% Arabica coffees.

         HISPANIC COFFEE MARKET IN THE UNITED STATES. Hispanics are now the
fastest growing and largest minority demographic in the United States. Some
attractive features about the Hispanic coffee market in the United States are:

         o  According to Information Resources Inc., Spanish espresso beverages'
            total volume sales increased by 12% from April 2003 to April 2004.



                                       2
<PAGE>

         o  According to the United States Census Bureau, Hispanic Americans are
            the largest minority group in the United States as of January 2003
            with 37 million people residing throughout the United States.

         o  According to a May 2004 report by the Selig Center for Economic
            Growth, the purchasing power of Hispanic consumers will reach $992
            billion by 2009.

         COFFEE COMMODITY MARKET. Due to oversupply, in 2002 and 2003 coffee
prices plummeted to 30-year lows. The price decrease was an 82 percent drop from
four years earlier. In 2003, coffee-producing nations received approximately
$5.5 billion for their beans, less than half what they made in the late 1980s.
The oversupply has gone largely unnoticed in the United States, the world's
largest coffee consumer because Americans have not seen equally steep price
declines for coffee products. Changes in prices have been obscured by the
dramatic expansion in the variety of upscale coffees available to ordinary
consumers. Selling for over $2.00 per cup in many gourmet shops, coffee has
become an affordable luxury.

OUR COMPETITIVE STRENGTHS

         To achieve our growth objectives described below, we intend to leverage
the following competitive strengths:

         NATIONAL DISTRIBUTION WITH CAPACITY FOR GROWTH. Since 1991, we have
been able to expand our distribution to a national platform while operating from
only our East Coast location. We have recently made capital investments to
improve our roasting, packaging and fulfillment infrastructure to support the
production and distribution of large quantities of fresh coffee products
throughout the United States. We believe that our new La Junta, Colorado
facility will allow us to continue to grow our business by further increasing
our presence in the Western United States. By operating out of two facilities,
we have gained new economies of scale in both manufacturing and logistical
efficiencies and are confident that we can compete aggressively throughout the
United States. These two facilities allow us to reduce our freight and shipping
costs to the Western United States, thereby enabling us to be more competitive
in bidding for new business. In addition, our presence in Colorado has increased
the number of potential customers we have because of our proximity to the West
Coast.

         POSITIONED TO PROFITABLY GROW THROUGH VARYING CYCLES OF THE COFFEE
MARKET. We believe that we are one of the few coffee companies to offer a broad
array of branded and private label roasted ground coffees and wholesale green
coffee across the spectrum of consumer tastes, preferences and price points.
While many of our competitors engage in distinct segments of the coffee
business, we sell products in each of the following areas:

         o  Retail branded coffee;

         o  Retail private label coffee;

         o  Wholesale specialty green and gourmet whole bean coffees;



                                       3
<PAGE>

         o  Food service;

         o  Instant coffees; and

         o  Niche products.

         Our branded and private label roasted ground coffees are sold
predominantly at competitive and value price levels while some of our other
branded and specialty coffees are sold predominantly at the premium price
levels. Premium price level coffee is high-quality gourmet coffee, such as AA
Arabica coffee, which sells at a substantial premium over traditional retail
canned coffee, while competitive and value price level coffee is mainstream or
traditional canned coffee. Because of this diversification, we believe that our
profitability is not dependent on any one area of the coffee industry and,
therefore, is less sensitive than our competition to potential coffee commodity
price and overall economic volatility.

         WHOLESALE GREEN COFFEE MARKET PRESENCE. As a large roaster/dealer of
green coffee, we believe that we are favorably positioned to increase our
specialty coffee sales. Since 1998, we increased the number of our wholesale
green coffee customers, including coffee houses, single store operators, mall
coffee stores and mail order sellers, by 75% from 150 to 262. We are a charter
member of the Specialty Coffee Association of America and one of the largest
distributors of Swiss Water Processed Decaffeinated Coffees along the East
Coast. In addition, although we do not have any formalized, material agreements
or long-term contracts with it, we have a 14-year relationship with our largest
wholesale green coffee customer, Green Mountain Coffee Roasters. Our 30-plus
years of experience as a roaster and a dealer of green coffee allows us to
provide our roasting experience as a value added service to our gourmet roaster
customers. The assistance we provide to our customers includes training, coffee
blending and market identification. We believe that our relationships with
wholesale green coffee customers and our focus on selling green coffee as a
wholesaler has enabled us to participate in the growth of the specialty coffee
market while mitigating the risks associated with the competitive retail
specialty coffee environment.

         DIVERSE PORTFOLIO OF DIFFERENTIATED BRANDED COFFEES. Currently, our
highest net profit margin is on our branded coffees. We have amassed a portfolio
of five proprietary name brands sold to supermarkets, wholesalers and
individually-owned stores in the United States, including brands for specialty
espresso, Latin espresso, Italian espresso, 100% Colombian coffee and blended
coffee. In addition, we have entered into a licensing agreement with Del Monte
Corporation for the exclusive right to use the S&W and IL CLASSICO trademarks in
the United States and other countries approved by Del Monte Corporation in
connection with the production, manufacture and sale of roasted whole bean and
ground coffee for distribution to retail customers. 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 United States. Our existing portfolio of differentiated brands
combined with our management expertise serve as a platform to add additional
name brands through acquisition or licensing agreements which target product
niches and segments that do not compete with our existing brands. In addition,
we have added a group of third-party marketing specialists to help grow our
branded coffee sales. These specialists have redesigned our packaging and labels
and have assisted in extending our product lines to include instant cappuccinos,
large can coffees and trial-sized mini-brick packages.

         MANAGEMENT HAS EXTENSIVE EXPERIENCE IN THE COFFEE INDUSTRY. We have
been a family operated business for three generations. Throughout this time, we
have remained profitable through varying cycles in the coffee industry and the
economy. Andrew Gordon, our President and Chief Executive Officer, and David
Gordon, our Executive Vice President - Operations, have worked with Coffee
Holding for 22 and 24 years, respectively. David Gordon is an original member of
the Specialty Coffee Association of America. Andrew Gordon publishes a weekly
report on the coffee commodity industry. We believe that our employees and
management are dedicated to our vision and mission, which is to produce high
quality products, as well as to provide quality and responsive service to our
customers.


                                       4
<PAGE>

OUR GROWTH STRATEGY

         We believe that significant growth opportunities exist by selectively
pursuing strategic acquisitions and alliances, targeting the rapidly growing
Hispanic market, increasing penetration with existing customers by adding new
products, and developing our food service business. By capitalizing on this
strategy, we hope to continue to grow our business with our commitment to
quality and personalized service to our customers. We do not intend to compete
on price alone nor do we intend to expand sales at the expense of profitability.

         SELECTIVELY PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES. We intend to
expand our operations by acquiring coffee companies, seeking strategic alliances
and acquiring or licensing brands which complement our business objectives.
Consistent with this strategy, in February 2004, we acquired certain assets of
Premier Roasters and we have entered into a licensing agreement with Del Monte
Corporation for the exclusive right to use the S&W and IL CLASSICO trademarks in
the United States and other countries approved by Del Monte Corporation in
connection with the production, manufacture and sale of roasted whole bean and
ground coffee for distribution at the retail level. We are using the assets we
purchased from Premier Roasters and our new facility in La Junta, Colorado to
expand our private label coffee and branded coffee operations in the Western
United States. We believe that our Western United States presence recently
enabled us to win a competitive bidding process to be the supplier of ground
roast private label coffee for four West Coast divisions of Albertson's, Inc.,
the second largest food and drug retailer in the United States according to
Hoover's Online. We intend to further expand the market presence of our branded
products outside our primary Northeastern United States market through other
acquisitions and strategic alliances.

         GROW OUR CAFE CARIBE PRODUCT. The Hispanic population in the United
States is growing at nine times the average rate and now represents the largest
minority demographic in the United States, according to 2000 census data. We
believe there is significant opportunity for our Cafe Caribe brand to gain
market share among Hispanic consumers in the United States. Cafe Caribe is a
specialty espresso coffee that targets espresso coffee drinkers and, in
particular, Hispanic consumers. Although Cafe Caribe has historically been our
leading brand by revenue, we have not implemented a comprehensive marketing
program that targets Hispanic consumers.

         FURTHER MARKET PENETRATION OF OUR NICHE PRODUCTS. We intend to capture
additional market share through our existing distribution channels by
selectively adding or introducing new brand names and products across multiple
price points, including:

         o  Specialty blends;

         o  Private label "value" blends and trial-sized mini-brick packages;

         o  Specialty instant coffees;

         o  Instant cappuccinos and hot chocolates; and

         o  Tea line products.

We recently established relationships with additional independent sales brokers
to market our products on a national scale.

                                       5
<PAGE>

         DEVELOP OUR FOOD SERVICE BUSINESS. We plan to expand further into the
food service business by developing new distribution channels for our products.
Currently, we have a limited presence in the food service market. We have
commenced marketing our upscale restaurant and Colombian coffee brands to
hotels, restaurants, office coffee services companies and other food service
retailers. In addition, we have expanded our food service offerings to include
instant cappuccinos, tea products and an equipment program for our customers. We
attend at least ten annual trade shows held by various buying groups which
provide us a national audience to market our food service products.

OUR CORE PRODUCTS

         Our core products can be divided into three categories:

         o  WHOLESALE GREEN COFFEE: unroasted raw beans imported from around the
            world and sold to large and small roasters and coffee shop
            operators;

         o  PRIVATE LABEL COFFEE: coffee roasted, blended, packaged and sold
            under the specifications and names of others, including supermarkets
            that want to have their own brand name on coffee to compete with
            national brands; and

         o  BRANDED COFFEE: coffee roasted and blended to our own specifications
            and sold under our seven brand names in different segments of the
            market.

         WHOLESALE GREEN COFFEE. The specialty green coffee market represents
the fastest growing area of our industry. The number of gourmet coffee houses
have been increasing in all areas of the United States. The growth in specialty
coffee sales has created a marketplace for higher quality and differentiated
products which can be priced at a premium in the marketplace. As a large
roaster/dealer of green coffee, we are favorably positioned to increase our
specialty coffee sales. We sell green coffee beans to small roasters and coffee
shop operators located throughout the United States and carry over 70 different
varieties. Specialty green coffee beans are sold unroasted, direct from
warehouses to small roasters and gourmet coffee shop operators which then roast
the beans themselves. We sell from as little as one bag (132 pounds) to a full
truckload (44,000 pounds) depending on the size and need of the customer. We
believe that we can increase sales of wholesale green coffee without venturing
into the highly competitive retail specialty coffee environment and that we can
be as profitable or more profitable than our competition in this segment by
selling "one bag at a time" rather than "one cup at a time."

         PRIVATE LABEL COFFEE. We roast, blend, package and sell coffee under
private labels for companies throughout the United States and Canada. Our
private label coffee is sold in cans, brick packages and instants in a variety
of sizes. As of October 31, 2004, we supplied coffee under approximately 42
different labels to wholesalers and retailers, including Supervalu, C&S
Wholesale and Nash Finch, three of the largest grocery wholesalers in North
America according to Private Label Magazine. We produce private label coffee for
customers who desire to sell coffee under their own name but do not want to
engage in the manufacturing process. Our private label customers seek a quality
similar to the national brands at a lower cost, which represents a better value
for the consumer.

         BRANDED COFFEE. We roast and blend our branded coffee according to our
own recipes and package the coffee at our facilities in Brooklyn, New York and
La Junta, Colorado. We then sell the packaged coffee under our brand labels to
supermarkets, wholesalers and individually owned stores throughout the United
States.

         We hold trademarks for each of our proprietary name brands and have 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 level. For further information
regarding our trademark rights, see "Business--Trademarks."


                                       6
<PAGE>

         Each of our name brands is directed at a particular segment of the
coffee market. Our branded coffees are:

         o  CAFE CARIBE is a specialty espresso coffee that targets espresso
            coffee drinkers and, in particular, the Hispanic consumer market;

         o  S&W is an upscale canned coffee established in 1921 and includes
            Premium, Premium Decaf, French Roast, Colombian, Colombian Decaf,
            Swiss Water Decaf, Kona, Mellow'd Roast and IL CLASSICO lines;

         o  CAFE SUPREMO is a specialty espresso that targets espresso drinkers
            of all backgrounds and tastes. It is designed to introduce coffee
            drinkers to the tastes of dark roasted coffee;

         o  DON MANUEL is produced from the finest 100% Colombian coffee beans.
            Don Manuel is an upscale quality product which commands a
            substantial premium compared to the more traditional brown coffee
            blends. We also use this known trademark in our food service
            business because of the high brand quality;

         o  FIFTH AVENUE is a blended coffee that has become popular as an
            alternative for consumers who purchase private label or national
            branded coffee. We also market this brand to wholesalers who do not
            wish to undertake the expense of developing a private label coffee
            program under their own name;

         o  VIA ROMA is an Italian espresso targeted at the more traditional
            espresso drinker; and

         o  IL CLASSICO is an S&W brand espresso product.

OTHER PRODUCTS

         We also offer several niche products, including:

         o  trial-sized mini-brick coffee packages;

         o  specialty instant coffees;

         o  instant cappuccinos and hot chocolates; and

         o  tea line products.

RAW MATERIALS

         Coffee is a commodity traded on the Commodities and Futures Exchange
subject to price fluctuations. Over the past five years, the average price per
pound of coffee beans ranged from approximately $.41 to $1.45. The price for
coffee beans on the commodities market as of October 31, 2004 was $.745 per
pound. Specialty green coffee, unlike most coffee, is not tied directly to the
commodities cash markets. Instead, it tends to trade on a negotiated basis at a
substantial premium over commodity coffee pricing, depending on the origin,
supply and demand at the time of purchase. We are a licensed Fair Trade dealer
of Fair Trade certified coffee. Fair Trade certified coffee helps small coffee
farmers to increase their incomes and improve the prospects of their communities
and families by guaranteeing farmers a minimum price of five cents above the
current market price. Although we may purchase Fair Trade certified coffee from
time to time, we are not obligated to do so and we do not have any commitments
to purchase Fair Trade certified coffee. All of our specialty green coffees, as
well as all of the other coffees we import for roasting, are subject to multiple
levels of quality control.


                                       7
<PAGE>

         We purchase our green coffee from dealers located primarily within the
United States. The dealers supply us with coffee beans from many countries,
including Colombia, Mexico, Kenya, Indonesia, Brazil and Uganda. In fiscal 2004,
substantially all of our green coffee purchases were from approximately ten
suppliers, which accounted for approximately $14.3 million, or 81% of our total
product purchases. One of these suppliers, Rothfos Corporation, accounted for
$6.1 million, or 34% of our total product purchases. An employee of Rothfos
Corporation is one of our directors. We do not have any formalized, material
agreements or long-term contracts with any of these suppliers. Rather, our
purchases are typically made pursuant to individual purchase orders. We do not
believe that the loss of any one supplier, including Rothfos, would have a
material adverse effect on our operations due to the availability of alternate
suppliers.

         The supply and price of coffee beans are subject to volatility and are
influenced by numerous factors which are beyond our control. Supply and price
can be affected by factors such as weather, politics and economics in the coffee
exporting countries. Increases in the cost of coffee beans can, to a certain
extent, be passed on to our customers in the form of higher prices for coffee
beans and processed coffee. Drastic or prolonged increases in coffee prices
could also adversely impact our business as it could lead to a decline in
overall consumption of coffee. Similarly, rapid decreases in the cost of coffee
beans could force us to lower our sale prices before realizing cost reductions
in our purchases.

         We subject all of our private unroasted green coffee to both a
pre-shipment sample approval and an additional sample approval upon arrival into
the United States. Once the arrival sample is approved, we then bring the coffee
to one of our facilities to roast and blend according to our own strict
specifications. During the roasting and blending process, samples are pulled off
the production line and tested on an hourly basis to ensure that each batch
roasted is consistent with the others and meets the strict quality standards
demanded by our customers and us.

OUR USE OF DERIVATIVES

         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 2 of the
notes to financial statements in this report. We 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 or 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. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Commodity Price Risks."

TRADEMARKS

         We hold trademarks, registered with the United States Office of Patent
and Trademark, for all five of our proprietary coffee brands and an exclusive
license for S&W and IL CLASSICO brands for sale in the United States. Trademark
registrations are subject to periodic renewal and we anticipate maintaining our
registrations. We believe that our brands are recognizable in the marketplace
and that brand recognition is important to the success of our branded coffee
business.



                                       8
<PAGE>

CUSTOMERS

         We sell our private label and our branded coffee to three of the
largest wholesalers in the United States (according to Supermarket News) and are
the exclusive coffee supplier for Supervalu and Nash Finch Co., the largest and
fourth largest wholesalers in the United States. We sell wholesale green coffee
to Green Mountain Coffee Roasters. Sales to Supervalu, Topco/Shurfine and Green
Mountain Coffee Roasters accounted for approximately 16.1%, 7.5% and 15.6% of
our net sales for the fiscal year ended October 31, 2003 and 11.0%, 6.0% and
22.0% for the fiscal year ended October 31, 2004, respectively.

         Although our agreements with wholesale customers generally contain only
pricing terms, our contract with Supervalu 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 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. Although
the use of these derivative financial instruments has enabled us to mitigate the
effect of changing prices, no strategy is effective to eliminate the pricing
risks and we generally remain exposed to loss when prices change significantly
in a short period of time, and we generally remain exposed to supply risk in the
event of non-performance by the counter-parties to any futures contracts.

MARKETING

         We market our private label and wholesale coffee through trade shows,
industry publications, face-to-face contact and through the use of our internal
sales force and non-exclusive independent food and beverage sales brokers. We
also use our web site (www.coffeeholding.com) as a method of marketing our
coffee products and ourselves.

         For our private label and branded coffees, we will, from time to time
in conjunction with retailers and with wholesalers, conduct in-store promotions,
such as product demonstrations, coupons, price reductions, two-for-one sales and
new product launches to capture changing consumer taste preference for upscale
canned coffees.

         We evaluate opportunities for growth consistent with our business
objectives. We recently established relationships with additional independent
sales brokers to market our products in the Western United States, an area of
the country where we have not had a high penetration of sales. We have hired
third-party marketing specialists to act as brand managers that will focus
exclusively on developing sales of our ethnic espresso brands. In addition, we
have hired a West Coast Brand Manager to market our S&W and IL CLASSICO brands,
as well as our other branded and private label coffee products. We intend to
capture additional market share in our existing distribution channels by
selectively adding or introducing new brand names and products across multiple
price points, including niche specialty blends, private label "value" blends and
mini-brick, filter packages, instant cappuccinos and tea line products. We also
intend to add specialty instant coffees to our extensive line of instant coffee
products.

CHARITABLE ACTIVITIES

         Coffee Holding is also a supporter of several coffee oriented
charitable organizations.

         o  For over 10 years, we have been members of Coffee Kids, an
            international non-profit organization that helps to improve the
            quality of life of children and their families in coffee-growing
            communities in Mexico, Guatemala, Nicaragua and Costa Rica.

                                       9
<PAGE>

         o  We are members of Grounds for Health, an organization that educates,
            screens, and arranges treatment for women who have cancer and live
            in the rural coffee growing communities of Mexico.

         o  We are a licensed Fair Trade dealer of Fair Trade certified coffee.
            Fair Trade helps small coffee farmers to increase their incomes and
            improve the prospects of their communities and families. It
            guarantees farmers a minimum price of $1.26 per pound or five cents
            above the current market price.

         o  Most recently, we are the administrative benefactors to a new
            non-profit organization called Cup for Education. After discovering
            the lack of schools, teachers, and basic fundamental learning
            supplies in the poor coffee growing communities of Central and Latin
            America, "Cup" was established by our employee, Karen Gordon, to
            help build schools, sponsor teachers, and purchase basic supplies
            such as books, chalk and other necessities for a proper education.

COMPETITION

         The coffee market is highly competitive. We compete in the following
areas:

         WHOLESALE GREEN COFFEE. There are many green coffee dealers throughout
the United States. Many of these dealers have greater financial resources than
we do. However, we believe that we have both the knowledge and the capability to
assist small specialty gourmet coffee roasters with developing and growing their
business. Our 30-plus years of experience as a roaster and a dealer of green
coffee allows us to provide our roasting experience as a value added service to
our gourmet roaster customers. While other coffee merchants may be able to offer
lower prices for coffee beans, we market ourselves as a value-added supplier to
small roasters, with the ability to help them market their specialty coffee
products and develop a customer base. The assistance we provide our customers
includes training, coffee blending and market identification. Because specialty
green coffee beans are sold unroasted to small coffee shops and roasters that
market their products to local gourmet customers, we do not believe that our
specialty green coffee customers compete with our private label or branded
coffee lines of business.

         PRIVATE LABEL COMPETITION. There are several major producers of coffee
for private label sale in the United States. Many other companies produce coffee
for sale on a regional basis. Our main competitors are The Kroger Co. and the
coffee division of Sara Lee Corporation. Both The Kroger Co. and Sara Lee
Corporation are larger and have more financial and other resources than we do
and therefore are able to devote more resources to product development and
marketing. We believe that we remain competitive by providing a high level of
quality and customer service. This service includes ensuring that the coffee
produced for each label maintains a consistent taste and is delivered on time
and in the proper quantities. In addition, we provide our private label
customers with information on the coffee market on a regular basis.

         BRANDED COMPETITION. Our proprietary brand coffees compete with many
other brands that are sold in supermarkets and specialty stores, primarily in
the Northeastern United States. The branded coffee market in both the Northeast
and elsewhere is dominated by three large companies: Kraft General Foods, Inc.,
The Procter & Gamble Company and Sara Lee Corporation, who also market specialty
coffee in addition to non-specialty coffee. Our large competitors have greater
access to capital and a greater ability to conduct marketing and promotions. We
believe that, while our competitors' brands may be more nationally recognizable,
our proprietary and licensed brands are just as competitive in the Northeastern
United States and have the potential to be competitive throughout the United
States.



                                       10
<PAGE>

GOVERNMENT REGULATION

         Our coffee roasting operations are subject to various governmental laws
and regulations, which require us to obtain licenses, relating to customs,
health and safety, building and land use, and environmental protection. Our
roasting facility is subject to state and local air-quality and emissions
regulation. If we encounter difficulties in obtaining any necessary licenses or
if we have difficulty complying with these laws and regulations, then we could
be subject to fines and penalties which could have a material adverse effect on
our profitability. In addition, our product offerings could be limited, thereby
reducing our revenues.

         We believe that we are in compliance in all material respects with all
such laws and regulations and that we have obtained all material licenses and
permits that are required for the operation of our business. We are not aware of
any environmental regulations that have or that we believe will have a material
adverse effect on our operations.

EMPLOYEES

         We have 62 full-time employees, 50 of whom are employed in the areas of
coffee roasting, blending and packaging and 12 of whom are in administration and
sales. None of our employees are represented by unions or collective bargaining
agreements. Our management believes that we maintain a good working relationship
with our employees. To supplement our internal sales staff, we sometimes use
independent national and regional sales brokers who work on a commission basis.

ITEM 2.  DESCRIPTION OF PROPERTY

         We are headquartered at 4401 First Avenue, Brooklyn, New York, where we
own the land and an approximately 15,000 square foot building. The building
houses our executive offices, as well as our plant where we roast, blend and
package our coffee.

         We lease a 50,000 square foot facility located at 27700 Frontage Road
in La Junta, Colorado from the City of La Junta. We pay annual rent of $100,092,
beginning in January of 2005 through January of 2024.

         We also lease a 7,500 square foot warehouse located at 4425A First
Avenue in Brooklyn from T & O Management. T & O Management is not affiliated
with us or any of our officers, directors or stockholders. We pay annual rent of
$90,000 for the latest one year extension of the lease through August 31, 2005.

         We also use a variety of independent, bonded commercial warehouses to
store our green coffee beans. Our management believes that our facilities are
adequate for our current operations and for our contemplated operations in the
foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

         We are not a party to, and none of our property is the subject of, any
pending legal proceedings other than routine litigation that is incidental to
our business. To our knowledge, no governmental authority is contemplating
initiating any such proceedings.



                                       11
<PAGE>

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

         During the fourth quarter of the fiscal year covered by this report on
Form 10-KSB, no matters were submitted to a vote of security holders.


                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Our common stock is not quoted or listed on any quotation system or
market. No firm makes a market for the common stock. The number of registered
holders of our common stock at October 31, 2004 was 473.

         In January 1998, prior to the date of the merger with Transpacific,
while we were a privately held "S" corporation, we paid a distribution in the
amount of $422,258 to our stockholders to pay personal income taxes. Since the
January 1998 payment, we have never paid any cash dividends on our common stock
and have no intention of doing so in the foreseeable future. In addition, under
the terms of our credit facility with Wells Fargo Business Credit, we are
prohibited from paying cash dividends without the lender's written consent.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS


CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS

         Some of the matters discussed under the caption "Management's
Discussion or plan of Operations, "Business" and elsewhere in this annual 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;



                                       12
<PAGE>

         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 annual 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 annual
report.

OVERVIEW

         We are an integrated wholesale coffee roaster and dealer in the United
States and one of the few coffee companies that offers a broad array of coffee
products across the entire spectrum of consumer tastes, preferences and price
points. As a result, we believe that we are well positioned to increase our
profitability and endure potential coffee price volatility throughout varying
cycles of the coffee market and economic conditions.

         Our operations have primarily focused on the following areas of the
coffee industry:

         o  the sale of wholesale specialty green coffee;

         o  the roasting, blending, packaging and sale of private label coffee;
            and

         o  the roasting, blending, packaging and sale of our seven brands of
            coffee.

         Our operating results are affected by a number of factors including:

         o  the level of marketing and pricing competition from existing or new
            competitors in the coffee industry;

         o  our ability to retain existing customers and attract new customers;

         o  fluctuations in purchase prices and supply of green coffee and in
            the selling prices of our products; and

         o  our ability to manage inventory and fulfillment operations and
            maintain gross margins.

         Our net sales are driven primarily by the success of our sales and
marketing efforts and our ability to retain existing customers and attract new
customers. For this reason, we have made the strategic decision to invest in
measures that will increase net sales. In February 2004, we acquired certain
assets of Premier Roasters. We also hired a West Coast Brand Manager to market
our S&W brand and to increase sales of S&W coffee to new customers and increased
attendance at trade shows to promote our food service and private label coffee
business. In the last twelve months, we also hired third party marketing
specialists to increase the sale of our branded coffee through label redesigns
and new distribution. As a result of these efforts, net sales increased in our
specialty green coffee, private label and branded coffee business lines in both
dollars and pounds sold since the date of the acquisition. In addition, we
increased the number of our customers in all three areas.

                                       13
<PAGE>

         Our net sales are also affected by the price of green coffee. We import
green coffee from Colombia, Mexico, Kenya, Brazil and Uganda. The supply and
price of coffee beans are subject to volatility and are influenced by numerous
factors which are beyond our control. For example, coffee crops in Brazil, which
produces one-third of the world's green coffee, are susceptible to frost in June
and July and drought in September, October and November. However, because we
purchase coffee from a number of countries and are able to freely substitute one
country's coffee for another in our products, price fluctuations in one country
generally have not had a material impact on the price we pay for coffee.
Accordingly, price fluctuations in one country generally have not had a material
effect on our results of operations, liquidity and capital resources. Because we
generally have been able to pass green coffee price increases through to
customers, increased prices of green coffee generally result in increased net
sales. However, increased green coffee prices also generally result in increased
cost of sales. Cost of sales consists primarily of the cost of green coffee and
packaging materials and realized and unrealized gains or losses on hedging
activity.

         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 and to reduce our cost of sales. In
addition, during the latter half of fiscal 2000, we began to acquire futures
contracts with longer terms, generally three to six months, primarily for the
purpose of guaranteeing an adequate supply of green coffee at favorable prices.
Although the use of these derivative financial instruments has enabled us to
mitigate the effect of changing prices, no strategy can entirely eliminate
pricing risks and we generally remain exposed to loss when prices decline
significantly in a short period of time, and we generally remain exposed to
supply risk in the event of non-performance by the counter-parties to any
futures contracts. If the hedges that we enter do not adequately offset the
risks of coffee bean price volatility or our hedges result in losses, our cost
of sales may increase, resulting in a decrease in profitability.

         In February 2004, we acquired certain assets of Premier Roasters, a
roaster-dealer located in La Junta, Colorado, for $825,000. The assets purchased
by us include all of the operating equipment located at Premier Roasters' La
Junta and Rocky Ford, Colorado locations, as well as all labels for all of
Premier Roasters' 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 for a 50,000 square foot facility in La Junta. We are using the assets
that we purchased to expand our integrated wholesale coffee roaster and dealer
operations to the Western United States. In connection with this transaction, we
also entered into a licensing agreement with Del Monte Corporation for the
exclusive right to use the S&W and IL CLASSICO trademarks, including Premium,
Premium Decaf, French Roast, Colombian, Colombian Decaf, Swiss Water Decaf,
Kona, and Mellow'd Roast lines, in connection with the production, manufacture
and sale of ground coffee for distribution to retail customers in the United
States and certain other countries approved by Del Monte Corporation.

         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 United States. By operating out of two facilities, we will now be able
to compete aggressively throughout the United States 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 intend 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 United
States.



                                       14
<PAGE>

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. 104, "Revenue Recognition"
            ("SAB 104"). Under SAB 104, 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.

         o  Our 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. For example, every additional one
            percent of our accounts receivable that becomes uncollectible, would
            reduce our operating income by approximately $40,000.

         o  Inventories are stated at cost (determined on a first-in, first-out
            basis). Based on our assumptions about future demand and market
            conditions, inventories are subject to be 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" ("SFAS No. 109"). 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. Accordingly, our net deferred tax
            asset of $91,700 could need to be written off if we do not remain
            profitable.

YEAR ENDED OCTOBER 31, 2004 (FISCAL 2004) COMPARED TO THE YEAR ENDED OCTOBER 31,
2003 (FISCAL 2003)

         Net Income. Net income increased $253,260, or 40.7%, to $875,342 or
$.22 per share for the year ended October 31, 2004 compared to $622,082 or $.16
per share for the year ended October 31, 2003. The increase in net income
primarily reflects increased net sales, increased margins on our branded coffee
and private label coffee products and increased margins on specialty green
coffee sales.

         Net Sales. Net sales totaled $28,030,389 for the year ended October 31,
2004, an increase of $7,790,522 or 38.5% from $20,239,867 for the year ended
October 31, 2003. The increase in net sales reflects a 50.6% increase in coffee
pounds sold from 17.4 million pounds in 2003 to 26.2 million pounds in 2004. The
increase in pounds of coffee sold is the result of increased sales of our
private label, branded and specialty green coffees. The increase in net sales
also reflects sales of $1,631,000 under our license of the S&W brand which we
signed in February 2004. Sales of our Cafe Caribe brand, as measured by
Information Resources Incorporated data, increased approximately 32% over fiscal
2003 due in part to the efforts of our third party marketing specialists through
label redesigns and new distribution. The number of our customers in the
specialty green coffee area grew approximately 6.9% to 262 customers. 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
specialty green coffee area is the fastest growing segment of the coffee market,
we believe that our customer base and sales will grow in this area. The increase
in the price of the underlying commodity (coffee) also contributed to the
increase in net sales.


                                       15
<PAGE>

         Cost of Sales. Cost of sales for the year ended October 31, 2004 was
$20,927,506 or 74.7% of net sales, as compared to $15,373,127 or 76.0% of net
sales for the year ended October 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 reflects
increased purchases of green coffee in the amount of approximately $3,500,000,
an increase in packaging costs associated with the increase in net sales of
approximately $700,000 and approximately $1,400,000 from higher green coffee
prices during the period as prices increased $.16 per pound year to year,
partially offset by net gains on future 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 2005. We began to acquire futures contracts with longer terms (generally
three to six 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. As the price of specialty green
coffee beans continued to increase, we used our favorable inventory position to
increase our margins. We had net gains on futures contracts of $1,622,038 for
the year ended October 31, 2004 compared to $868,669 for the year ended October
31, 2003. The use of these derivative financial instruments has enabled us to
mitigate the effect of changing prices, to increase our margins as coffee prices
have increased and to be more competitive with our pricing.

         Gross Profit. Gross profit for the year ended October 31, 2004 was
$7,102,883, an increase of $2,236,143 or 45.9%, from $4,866,740 for the year
ended October 31, 2003. Gross profit as a percentage of net sales increased by
1.3% to 25.3% for the year ended October 31, 2004 from 24.0% for the year ended
October 31, 2003. Gains on futures contracts, reduced pricing pressure from
national brands and new business with favorable pricing terms allowed us to
increase our margins as the price of green coffee has increased. As previously
discussed, we believe that our favorable inventory position will allow us to
increase our sales and ultimately our margins if coffee prices continue to rise.

         Operating Expenses. Total operating expenses increased $1,408,057 or
35.3% to $5,400,382 for the year ended October 31, 2004 from $3,992,325 for 2003
due to increases in selling and administrative expenses and officers' salaries.
Selling and administrative expenses increased $1,276,344 or 36.4% to $4,777,809
for the year ended October 31, 2004 from $3,501,465 for 2003. The increase in
selling and administrative expenses reflects several factors, including
increases of approximately $320,000 in shipping expenses, $322,000 in office
salaries, $140,000 in sales commissions, $60,000 in maintenance, $71,000 in
utilities, $51,000 in travel and $64,000 in depreciation.

         We acquired certain assets of Premier Roasters and entered into a lease
to operate from our new La Junta facility in February 2004. Prior to commencing
operations in La Junta, we incurred expenses associated with repairing and
maintaining equipment located at the facility so that such equipment could meet
our need and our roasting and blending requirements. We also incurred expenses
associated with the hiring of 25 new employees at the facility. In addition,
because many S&W brand customers had previously placed orders with Premier
Roasters, they initially did not require additional inventory to be shipped. As
a result, sales out of our La Junta facility were initially slower than
expected. However, in April 2004, these customers began to replace their
existing inventories of S&W brand products, resulting in increased sales.
Although we will continue to incur increased operating expenses from operating
out of two facilities, we expect to gain 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. We believe that this will
allow us to compete aggressively throughout the United States.



                                       16
<PAGE>

         The increase in shipping expenses reflects the increase in pounds of
coffee sold, higher rates caused by increased fuel surcharges and gasoline
prices, and the addition of new customers during the period. The increase in
commissions reflects the hiring of a West Coast Brand Manager to market our S&W
brand as well as increases in sales of S&W coffee to new customers. We believe
that these changes reflect our strategic decision to invest in measures that
will increase net sales on a present and future basis. The increase in office
salaries reflects normal salary increases to non-officer employees in our New
York facility and the addition of new personnel in our Colorado facility. The
increases in maintenance, utilities, travel and depreciation reflect the
increased costs of operating two facilities.

         Officers' salaries increased $131,713 to $622,573 for the year ended
October 31, 2004 from $490,860 for the year ended October 31, 2003. The increase
was due to salary increases for senior officers and the hiring of a Chief
Financial Officer.

         Other Expense. Other expense decreased $2,003 or 1.4% from $135,967 for
the year ended October 31, 2003 to $133,964 for the year ended October 31, 2004.

         Income Before Taxes. We had income of $1,568,537 before income taxes
for the year ended October 31, 2004 compared to income of $738,448 before income
taxes for the year ended October 31, 2003. The increase was attributable
primarily to improved margins on the sale of our private label, branded and
specialty green coffee products due to a favorable inventory position as coffee
prices increased.

         Income Taxes. Our provision for income taxes for the year ended October
31, 2004 totaled $693,195 compared to $116,366 for the year ended October 31,
2003 as a result of increased income before taxes.

LIQUIDITY AND CAPITAL RESOURCES

         As of October 31, 2004, we had working capital of $726,444 which
represented a $2,636,752 decrease from our working capital of $3,363,196 as of
October 31, 2003, and total stockholders' equity of $2,995,821, which increased
by $875,342 from our total stockholders' equity of $2,120,479 as of October 31,
2003. Our working capital decreased primarily due to an increase in our accounts
payable of $2,797,389 and the recategorization of the outstanding balance under
our 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 October 31, 2004 balance sheet since the
agreement expires in November 2004, but was classified as long-term debt in our
October 31, 2003 balance sheet. At October 31, 2004, the outstanding balance on
our line of credit was $2,685,045 compared to $2,376,066 at October 31, 2003.
This decrease in working capital was partially offset by a $1,881,986 increase
in accounts receivable and a $476,865 increase in inventories at October 31,
2004 compared to October 31, 2003.



                                       17
<PAGE>

         As of October 31, 2004, we had a credit facility with Wells Fargo
Business Credit that provided 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 provided for
borrowings of up to 85% of our eligible trade accounts receivable and 60% of
eligible inventories.

         As indicated above, as of October 31, 2004, the line of credit with
Wells Fargo Business Credit had an outstanding balance of $2,685,045 as compared
to an outstanding balance of $2,376,066 at October 31, 2003. The outstanding
balance under the term loan was $252,000 as of October 31, 2004, and was
$336,000 at October 31, 2003. We were in compliance with all required financial
covenants at October 31, 2004.

         In November 2004, we refinanced our credit facility by entering into a
new financing arrangement with Merrill Lynch Business Financial Services Inc.
and terminating our prior agreement with Wells Fargo Business Credit. This new
line of credit is for a maximum $4,000,000, expires on October 31, 2005 and
requires monthly interest payments at a rate of LIBOR plus 2.4%. This loan is
secured by a blanket lien on all of our assets and the personal guarantees of
Andrew Gordon and David Gordon, two of our officers and directors.

         The new credit facility contains covenants that place restrictions on
our operations. Among other things, these covenants: require that a portion of
our cash flow from operations be dedicated to servicing our debt; limit our
ability to obtain additional capital through financings without the consent of
the lender; limit our ability to pay dividends or make other distributions to
our stockholders and acquire or retire our common stock without the consent of
the lender; and prohibit us from forming or acquiring subsidiaries, merging with
or into other companies or selling all or substantially all of our assets
without the consent of the lender. These restrictions could adversely impact our
ability to implement our business plan, or raise additional capital, if needed.
In addition, if we default under our existing credit facility or if our lender
demands payment of a portion or all of our indebtedness, we may not have
sufficient funds to make such payments. As of the date of this report, we are in
compliance with all covenants contained in the credit facility.

         We also lease machinery and equipment under capital leases which expire
in July 2006. The interest rate on the capital leases vary from 6.75% to 7.6%
per annum. The outstanding balance on the capital leases aggregated $116,915 at
October 31, 2004 compared to $222,446 at October 31, 2003.

         We had loans payable to our stockholders, all of whom are members of
the Gordon family, of $79,646 at October 31, 2003. The loans were repaid during
the quarter ended July 31, 2004. We do not intend to borrow additional amounts
from our stockholders.

         For the year ended October 31, 2004, our operating activities provided
net cash of $1,616,465 as compared to the year ended October 31, 2003 when net
cash used in operating activities was $744,226. The increased cash flow from
operations for the year ended October 31, 2004 was primarily due to $875,342 in
net income, $2,797,389 in increased accounts payable, offset in part by $467,865
in increased inventory levels and a $1,881,986 increase in accounts receivable.

         For the year ended October 31, 2004, our investing activities used net
cash of $1,056,179 as compared to the year October 31, 2003 when net cash used
by investing activities was $62,758. The decreased cash flow from investing
activities for year was primarily due to the purchase of property and equipment
from Premier Roasters in February 2004.

         For the year ended October 31, 2004, our financing activities provided
net cash of $8,027 as compared to the year ended October 31, 2003 when net cash
provided by financing activities was $837,248. The decreased cash flow from
financing activities was primarily due to decreased net cash borrowings under
our line of credit, principal payments on our capital lease and payments to
related parties. Net cash used on our line of credit decreased $745,714 to net
cash used of $308,079 for the year ended October 31, 2004 compared to net cash
used of $1,054,693 for the year ended October 31, 2003. In addition, we repaid
$79,646 in loans to our stockholders during the year ended October 31, 2004. We
also lease machinery and equipment under capital leases which expires in July
2006. The interest rate on the capital leases vary from 6.75% to 7.6% per annum.
Principal payments on our capital lease increased $100,785 to $221,306 for the
year ended October 31, 2004 from $120,521 for the year ended October 31, 2003.



                                       18
<PAGE>

         In February, 2004, we acquired certain assets of Premier Roasters 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 or liquidity
position. We believe that the costs associated with operating the second
facility will be mitigated 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 United States.

         We expect to fund our operations, including paying our liabilities,
funding capital expenditures and making required payments on our debts, through
October 31, 2005 with cash provided by operating activities and the use of our
credit facility. 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.

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 October 31, 2004, our debt consisted of $116,915 of fixed rate debt on
capital leases and $2,937,045 of variable rate debt under our revolving line of
credit and term loan. At October 31, 2004, interest on the variable rate debt
was payable primarily at 5.00% (or .25% above the prime rate) for the revolving
line of credit and at 5.25% (or .50% above the prime rate) for the term loan.

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 2 of the notes to financial statements in
this report. In addition, during the latter half of fiscal 2000, we began to
acquire futures contracts with longer terms (generally three to six 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.



                                       19
<PAGE>

         At October 31, 2004, we held 101 options (generally with terms of two
months or less) covering an aggregate of 3,787,500 pounds of green coffee beans
at a price of $.75 per pound. The fair market value of these options, which was
obtained from a major financial institution, was $49,200 at October 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 October 31, 2004, we held 90 futures contracts for the purchase of
3,375,000 pounds of coffee at an average price of $.80 per pound for March 2005
contracts. The market price of coffee applicable to such contracts was $.77 per
pound at that date.

OFF-BALANCE SHEET ARRANGEMENTS

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

ITEM 7.  FINANCIAL STATEMENTS

         See pages F-1 through F-18 following the signature pages of this Annual
Report.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.


ITEM 8A. CONTROLS AND PROCEDURES

         Management, including the Company's President, Treasurer and Chief
Executive Officer (who is the Company's principal executive officer and
principal accounting officer), has evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of the end of the period covered by this report. Based upon
that evaluation, the Company's President, Chief Executive Officer and Treasurer
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.


ITEM 8B. OTHER INFORMATION

         On December 1, 2004, Richard E. Pino was released from his position as
our Chief Financial Officer by mutual agreement of the parties. Mr. Pino's
departure did not result from any disagreement between Mr. Pino and management
or between Mr. Pino and our independent auditors.


                                       20
<PAGE>

                                    PART III


ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

         Set forth below is information concerning our directors and executive
officers. Our board of directors currently consists of six directors. Directors
are elected by a plurality of the votes cast at our annual meeting of
stockholders. Once elected, each director serves until the next annual meeting
of stockholders and until his or her successor is duly elected and qualified, or
until his or her earlier death, resignation or removal. Officers are appointed
by the directors, and, once appointed, each officer serves until his or her
successor is duly appointed, or until his or her earlier death, resignation or
removal.

<TABLE>
<CAPTION>
                                                    DIRECTOR
               NAME                    AGE(1)       SINCE                       POSITION
- -------------------------------------- ------    ---------   --------------------------------------------------
<S>                                     <C>        <C>       <C>
Andrew Gordon.........................  43         1981      Chief Executive Officer, President, Treasurer and
                                                             Director
David Gordon..........................  40         1983      Executive Vice President, Secretary and Director
Gerard DeCapua........................  43         1997      Director
Daniel Dwyer..........................  48         1998      Director
</TABLE>
- --------------
(1) At December 31, 2004.

         Andrew Gordon has been our Chief Executive Officer, President,
Treasurer and one of our directors since 1997. He is responsible for managing
our overall business and has worked for Coffee Holding for over 21 years,
previously as a Vice President from 1993 to 1997. Mr. Gordon has worked in all
capacities of our business and serves as the direct contact with our major
private label accounts. In addition, Mr. Gordon publishes a weekly report that
is distributed to our customers and is perceived by many of his peers and
customers as a coffee market expert. Mr. Gordon received his Bachelor of
Business Administration degree from Emory University. He is the brother of David
Gordon.

         David Gordon has been our Executive Vice President - Operations,
Secretary and one of our directors since 1995. He is responsible for managing
all aspects of our roasting and blending operations, including quality control,
and, has worked for Coffee Holding for over 23 years, previously as an Operating
Manager from 1989 to 1995. He is a charter member of the Specialty Coffee
Association of America. Mr. Gordon attended Baruch College in New York City. He
is the brother of Andrew Gordon.

         Gerard DeCapua has served as a director of Coffee Holding since 1997.
Mr. DeCapua has had his own law practice in Rockville Centre, New York since
1986. Mr. DeCapua received his law degree from Pace University.

         Daniel Dwyer has served as a director of Coffee Holding since 1998. Mr
Dwyer has been a senior coffee trader at Rothfos Corporation, a green coffee
bean supplier, since 1995. Mr. Dwyer is responsible for our account with
Rothfos. We paid Rothfos approximately $6.1 million for green coffee purchases
in fiscal 2004. All purchases are made on arms' length terms.





                                       21
<PAGE>

CODE OF ETHICS

         The Company has not yet adopted a "code of ethics" as defined by Item
406 of Regulation S-B, as our securities are not currently quoted or listed on
any quotation system or market.

ITEM 10.  EXECUTIVE COMPENSATION

         The following table sets forth certain compensation information for our
chief executive officer and each other executive officer whose salary and bonus
compensation exceeded $100,000 for the fiscal year ended October 31, 2004.

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                  ANNUAL COMPENSATION
                                                                      ---------------------------------------
                                                                                                ALL OTHER
NAME AND                                                FISCAL        SALARY        BONUS      COMPENSATION
PRINCIPAL POSITION                                        YEAR         ($)         ($) (1)       ($) (2)
- -------------------------------------                   --------      ---------   ----------   -------------
<S>                                                     <C>           <C>          <C>         <C>
Andrew Gordon                                             2004         $269,500      $39,000     28,719
Chief Executive Officer and President                     2003          245,000       33,000     28,719
                                                          2002          190,254       49,500          -

David Gordon                                              2004         $224,400      $39,000      9,887
Executive Vice President - Operations                     2003          204,000       33,000      9,887
                                                          2002          153,467       49,500          -
</TABLE>
- ----------------------
(1) Amounts shown as bonuses were earned in the fiscal year shown.
(2) The amounts set forth consist of amounts paid by Coffee Holding
    for the use of an automobile and automobile insurance.

         Our Board of Directors did not have a compensation committee in fiscal
2004. During that year, salaries and bonuses were determined by the Board of
Directors. Once established, the compensation committee will determine the
salaries and bonuses of Andrew Gordon and David Gordon.

STOCK OPTION PLAN

         We have a stock option plan, Coffee Holding Co., Inc. 1998 Stock Option
Plan, under which non-qualified and incentive stock options to purchase shares
of common stock may be granted to our directors, officers and other key
employees and consultants. The plan was adopted by our Board of Directors and
approved by our stockholders on February 10, 1998. On June 21, 2004, the plan
was amended by our Board of Directors to reduce the number of shares of common
stock reserved for issuance under the plan from 2,000,000 to 800,000, subject to
adjustment for stock splits, stock dividends, reorganizations, mergers,
recapitalizations or other capital adjustments. The plan is administered by our
Board of Directors which may delegate our powers to a committee of the Board. No
options may be granted after February 10, 2008. The board or committee will
determine, at the time of grant, the purchase price of shares issuable pursuant
to exercise of stock options; provided that the purchase price of a share of
common stock under incentive stock options shall not be less than the fair
market value of a share on the date the option is granted. Unless earlier
terminated due to termination of employment or death or disability of the
optionee, each stock option shall terminate no later than ten years from the
date on which it is granted. Options are transferable only by will or the laws
of descent and distribution. No options have been granted under the plan.



                                       22
<PAGE>

COMPENSATION OF DIRECTORS

         Directors do not receive any compensation for their services. They are,
however, reimbursed for travel expenses and other out-of-pocket costs incurred
in connection with attendance at board of directors and committee meetings.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

         The following table sets forth information regarding ownership of
shares of our common stock, as of October 31, 2004, by each person known to be
the owner of 5% or more of our common stock, by each person who is a director or
executive officer and by all directors and executive officers as a group. Except
as otherwise indicated, each person and each group shown in the table has sole
voting and investment power with respect to the shares of common stock
indicated. For purposes of the table below, in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended, a person is deemed to be the
beneficial owner, for purposes of any shares of common stock: (1) over which he
or she has or shares, directly or indirectly, voting or investment power; or (2)
of which he or she has the right to acquire beneficial ownership at any time
within 60 days after October 31, 2004. As used in this annual report, "voting
power" is the power to vote or direct the voting of shares and "investment
power" includes the power to dispose or direct the disposition of shares. Common
stock beneficially owned and percentage ownership were based on 3,999,650 shares
outstanding. The address of each beneficial owner is c/o Coffee Holding Co.,
Inc., 4401 First Avenue, Brooklyn, New York 11232-0005.

<TABLE>
<CAPTION>
              NAME OF BENEFICIAL OWNERS,                 AMOUNT AND NATURE OF
                OFFICERS AND DIRECTORS                   BENEFICIAL OWNERSHIP       PERCENTAGE
             ----------------------------                ---------------------      -----------
<S>                                                              <C>                 <C>
           Andrew Gordon.......................                  619,500             15.5%
           David Gordon........................                  619,500             15.5%
           Gerard DeCapua......................                      100                 *
           Daniel Dwyer........................                      100                 *
           Rachelle L. Gordon(1)...............                 1,343,202             33.5%
           Sterling A. Gordon(2)...............                 1,343,202             33.5%
           All directors and executive
           officers as a group (4 persons).....                 1,239,200             31.0%
</TABLE>
- ---------------------------
* Less than 1%.

(1)  Includes 273,602 shares owned by Ms. Gordon directly, 596,398 shares owned
     by the Rachelle L. Gordon 2002 Grantor Retained Annuity Trust of which
     Rachelle L. Gordon is the grantor, beneficiary and trustee, with sole power
     to vote and dispose of the shares and 473,202 shares owned by Rachelle L.
     Gordon's husband, Sterling A. Gordon. Pursuant to the terms of the Rachelle
     L. Gordon 2002 Grantor Retained Annuity Trust, Ms. Gordon will receive
     annual distributions of common stock based on the appraised value of our
     common stock through 2004. Any shares remaining in the trust after such
     distribution will be distributed in equal amounts to Andrew Gordon and
     David Gordon. Ms. Gordon is the mother of Andrew Gordon and David Gordon.

(2)  Includes 473,202 shares owned by Mr. Gordon directly, 596,398 shares owned
     by the Sterling A. Gordon 2002 Grantor Retained Annuity Trust of which
     Sterling A. Gordon is the grantor, beneficiary and trustee, with sole power
     to vote and dispose of the shares and 273,602 shares owned by Sterling A.
     Gordon's wife, Rachelle L. Gordon. Pursuant to the terms of the Sterling A.
     Gordon 2002 Grantor Retained Annuity Trust, Mr. Gordon will receive annual
     distributions of common stock based on the appraised value of our common
     stock through 2004. Any shares remaining in the trust after such
     distribution will be distributed in equal amounts to Andrew Gordon and
     David Gordon. Mr. Gordon is the father of Andrew Gordon and David Gordon.

                                       23
<PAGE>

         The following table sets forth the aggregate information of our equity
compensation plans in effect as of October 31, 2004.

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                                                            Number of securities
                                  Number of securities                                     remaining available for
                                      to be issued          Weighted-average exercise   future issuance under equity
                                    upon exercise of          price of outstanding           compensation plans
                                  outstanding options,        options, warrants and         (excluding securities
        Plan category             warrants and rights                rights               reflected in column (a))
- -----------------------------     -------------------       -------------------------     ------------------------
                                          (a)                          (b)                           (c)
<S>                               <C>                       <C>                           <C>
Equity compensation plans
   approved by security
   holders.................                    --                        --                            800,000

Equity compensation plans
   not approved by security
   holders.................                    --                        --                                --
     Total.................                    --                        --                            800,000
</TABLE>




                                       24
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         From time to time, certain of our stockholders, directors and officers
have made loans to us for working capital purposes.

         At October 31, 2003, we had loans payable to certain of our
stockholders, directors and officers, in the aggregate principal amount of
$79,646. The loans, which were unsecured, due on demand and bore interest at a
rate of 6% per year, were repaid prior to October 31, 2004.

         In November 2004, we refinanced our credit facility by entering into a
new financing arrangement with Merrill Lynch Business Financial Services Inc.
This line of credit is for a maximum $4,000,000, expires on October 31, 2005 and
requires monthly interest payments at a rate of LIBOR plus 2.4%. This loan is
secured by a blanket lien on all of our assets and the personal guarantees of
Andrew Gordon and David Gordon, two of our officers and directors.

         Daniel Dwyer, a director, is a senior coffee trader for Rothfos
Corporation, a coffee trading company. Mr. Dwyer is responsible for our account.
We paid Rothfos approximately $6.1 million for green coffee purchases in fiscal
2004. All purchases are made on arms' length terms.

ITEM 13. EXHIBITS

         The financial statements listed below are filed as a part of this
report. See Index to Financial Statements beginning on Page F-1.

                  Financial Statements:

                  -  Index to Financial Statements

                  -  Report of Independent Public Accountants.

                  -  Balance sheet as of October 31, 2004 and October 31, 2003.

                  -  Statements of Operations for the Years Ended
                     October 31, 2004 and 2003.

                  -  Statements of Changes in Stockholders' Equity for the
                     Years Ended October 31, 2004 and 2003.

                  -  Statements of Cash Flows for the Years Ended
                     October 31, 2004 and 2003.

                  -  Notes to Financial Statements.




                                       25
<PAGE>



     EXHIBIT NO.  DESCRIPTION
     -----------  -----------


         2.1      Agreement and Plan of Merger by and Among Transpacific
                  International Group Corp. and Coffee Holding Co., Inc.
                  (incorporated herein by reference to Exhibit 2 to
                  Post-Effective Amendment No. 1 to the Registration Statement
                  on Form SB-2 (file No. 333-00588-NY) as filed with the
                  Securities and Exchange Commission on November 10, 1997).

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

         3.1      Articles of Incorporation of Coffee Holding Co., Inc., as
                  amended (incorporated herein by reference to Exhibit 3.1 to
                  the Coffee Holding Co., Inc. Annual Report on Form 10-KSB for
                  the fiscal year ended October 31, 2002, filed with the
                  Securities and Exchange Commission on February 13, 2003).

         3.2      Certificate of Amendment of Articles of Incorporation of
                  Coffee Holding Co., Inc. (incorporated herein by reference to
                  Exhibit 3.2 to the Coffee Holding Co., Inc. Quarterly Report
                  on Form 10-Q for the quarter ended April 30, 1998, filed with
                  the Securities and Exchange Commission on October 27, 2000).

         3.3      By-Laws of Coffee Holding Co., Inc., as amended (incorporated
                  herein by reference to Exhibit 3.3 to the Coffee Holding Co.,
                  Inc. Quarterly Report on Form 10-Q for the quarter ended April
                  30, 1998, filed with the Securities and Exchange Commission on
                  October 27, 2000).

         3.5      Certificate of Amendment of Articles of Incorporation of
                  Coffee Holding Co., Inc. (incorporated herein by reference to
                  Exhibit 3.5 to the Coffee Holding Co., Inc. Quarterly Report
                  on Form 10-QSB for the quarter ended April 30, 2001, filed
                  with the Securities and Exchange Commission on June 14, 2001).

         4.1      Form of Stock Certificate of Coffee Holding Co., Inc.
                  (incorporated herein by reference to the initial filing of
                  this Registration Statement, filed with the Securities and
                  Exchange Commission on June 24, 2004).

         10.1     Lease with T&O Management Corp. dated August 15, 1997
                  (incorporated herein by reference to Exhibit 10.1 to the
                  Coffee Holding Co., Inc. Quarterly Report on Form 10-Q for the
                  quarter ended April 30, 1998, filed with the Securities and
                  Exchange Commission on October 27, 2000).

         10.2     1998 Stock Option Plan (incorporated herein by reference to
                  Exhibit 10.2 to the Coffee Holding Co., Inc. Quarterly Report
                  on Form 10-Q for the quarter ended April 30, 1998, filed with
                  the Securities and Exchange Commission on October 27, 2000).

         10.3     Working Capital Management Account Loan and Security Agreement
                  with Merrill Lynch Business Financial Services Inc.


         10.9     Capital Lease Agreement with HSBC Business Credit (USA), Inc.
                  (incorporated herein by reference to Exhibit 10.9 to Amendment
                  No. 1 to the Coffee Holding Co., Inc. Registration Statement
                  on Form SB-2/A, filed with the Securities and Exchange
                  Commission on August 12, 2004).

                                       26
<PAGE>

         10.10    Sales contract with Supervalu and Cub Foods (incorporated
                  herein by reference to Exhibit 10.10 to Amendment No. 1 to the
                  Coffee Holding Co., Inc. Annual Report on Form 10-KSB/A for
                  the year ended October 31, 2002, filed with the Securities and
                  Exchange Commission on August 26, 2004) (confidential portions
                  have been redacted pursuant to a request for confidential
                  treatment and filed separately with the Securities and
                  Exchange Commission).

         10.11    Sales contract with Shurfine Central (incorporated herein by
                  reference to Exhibit 10.11 to Amendment No. 1 to the Coffee
                  Holding Co., Inc. Annual Report on Form 10-KSB/A for the year
                  ended October 31, 2002, filed with the Securities and Exchange
                  Commission on August 26, 2004) (confidential portions have
                  been redacted pursuant to a request for confidential treatment
                  and filed separately with the Securities and Exchange
                  Commission).

         10.12    Lease dated February 4, 2004 by and between Coffee Holding
                  Co., Inc. and the City of La Junta, Colorado (incorporated
                  herein by reference to Exhibit 10.12 to Amendment No. 1 to the
                  Coffee Holding Co., Inc. Registration Statement on Form
                  SB-2/A, filed with the Securities and Exchange Commission on
                  August 12, 2004).

         10.13    Trademark License Agreement dated February 4, 2004 between Del
                  Monte Corporation and Coffee Holding Co, Inc. (incorporated
                  herein by reference to Exhibit 10.13 to the Coffee Holding
                  Co., Inc. Quarterly Report on Form 10-QSB/A for the quarter
                  ended April 30, 2004, filed with the Securities and Exchange
                  Commission on August 26, 2004).

         10.14    Proposed employment agreement by and among Coffee Holding Co.,
                  Inc. and Andrew Gordon (incorporated herein by reference to
                  the Coffee Holding Co., Inc. Registration Statement on Form
                  SB-2, filed with the Securities and Exchange Commission on
                  June 24, 2004).

         10.15    Proposed employment agreement by and among Coffee Holding Co.,
                  Inc. and David Gordon (incorporated herein by reference to the
                  Coffee Holding Co., Inc. Registration Statement on Form SB-2,
                  filed with the Securities and Exchange Commission on June 24,
                  2004).

         10.17    Corporate Brands Agreement dated as of March 30, 2004 by and
                  between Albertson's, Inc. and Coffee Holding Co., Inc.
                  (incorporated herein by reference to Amendment No. 2 to the
                  Coffee Holding Co., Inc. Registration Statement on Form
                  SB-2/A, filed with the Securities and Exchange Commission on
                  October 25, 2004) (confidential portions have been redacted
                  pursuant to a request for confidential treatment and filed
                  separately with the Securities and Exchange Commission).

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

         32.1     Section 1350 Certification.




                                       27
<PAGE>


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT AND NON-AUDIT FEES

         Aggregate fees for professional services rendered for us by Lazar
Levine & Felix LLP for the fiscal years ended October 31, 2003 and October 31,
2004 are set forth below.

                                   AUDIT FEES

                                             2004         2003
                                          ------------ ------------
           AUDIT                              $65,000      $58,500
           --------------------------------------------------------
           AUDIT RELATED FEES                  38,515        4,744
           --------------------------------------------------------
           TAX FEES                           --           --
           --------------------------------------------------------
           ALL OTHER FEES                     --           --
           --------------------------------------------------------
           TOTAL                             $103,515      $63,244


         Audit Fees were for professional services rendered for the audits of
our consolidated financial statements, quarterly review of the financial
statements included in Quarterly Reports on Form 10-QSB, consents, and other
assistance required to complete the year end audit of the consolidated financial
statements.

         Audit-Related Fees were for assurance and related services reasonably
related to the performance of the audit or review of financial statements and
not reported under the caption Audit Fees.

         Tax Fees were for professional services related to tax compliance, tax
authority audit support and tax planning.

         There were no fees that were classified as All Other Fees for each of
our last two fiscal years.

         At its regularly scheduled and special meetings, the Board of
Directors, in lieu of an established audit committee, considers and pre-approves
any audit and non-audit services to be performed by our independent accountants.
The Board of Directors has the authority to grant pre-approvals of non-audit
services.


                                       28
<PAGE>

ITEM 15.  SIGNATURES

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

                                        COFFEE HOLDING CO., INC.



                                        By:   /s/ Andrew Gordon
                                              ---------------------------
                                              Andrew Gordon

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

                 SIGNATURE                      TITLE
- ---------------------------------    ------------------------------------

     /s/ Andrew Gordon               Chief Executive Officer, President,
- ---------------------------------    Treasurer and Director (principal
     Andrew Gordon                   executive officer and principal
     Date: February 10, 2005         financial and accounting officer)


     /s/ David Gordon                Executive Vice President -- Operations,
- ---------------------------------    Secretary and Director
     David Gordon
     Date: February 10, 2005


     /s/ Gerard DeCapua              Director
- ---------------------------------
     Gerard DeCapua
     Date: February 10, 2005


     /s/ Dan Dwyer                   Director
- ---------------------------------
     Dan Dwyer
     Date: February 10, 2005





                                       29
<PAGE>

                                  EXHIBIT INDEX


     EXHIBIT NO.                   DESCRIPTION
     -----------                   -----------

         2.1      Agreement and Plan of Merger by and Among Transpacific
                  International Group Corp. and Coffee Holding Co., Inc.
                  (incorporated herein by reference to Exhibit 2 to
                  Post-Effective Amendment No. 1 to the Registration Statement
                  on Form SB-2 (file No. 333-00588-NY) as filed with the
                  Securities and Exchange Commission on November 10, 1997).

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

         3.1      Articles of Incorporation of Coffee Holding Co., Inc., as
                  amended (incorporated herein by reference to Exhibit 3.1 to
                  the Coffee Holding Co., Inc. Annual Report on Form 10-KSB for
                  the fiscal year ended October 31, 2002, filed with the
                  Securities and Exchange Commission on February 13, 2003).

         3.2      Certificate of Amendment of Articles of Incorporation of
                  Coffee Holding Co., Inc. (incorporated herein by reference to
                  Exhibit 3.2 to the Coffee Holding Co., Inc. Quarterly Report
                  on Form 10-Q for the quarter ended April 30, 1998, filed with
                  the Securities and Exchange Commission on October 27, 2000).

         3.3      By-Laws of Coffee Holding Co., Inc., as amended (incorporated
                  herein by reference to Exhibit 3.3 to the Coffee Holding Co.,
                  Inc. Quarterly Report on Form 10-Q for the quarter ended April
                  30, 1998, filed with the Securities and Exchange Commission on
                  October 27, 2000).

         3.5      Certificate of Amendment of Articles of Incorporation of
                  Coffee Holding Co., Inc. (incorporated herein by reference to
                  Exhibit 3.5 to the Coffee Holding Co., Inc. Quarterly Report
                  on Form 10-QSB for the quarter ended April 30, 2001, filed
                  with the Securities and Exchange Commission on June 14, 2001).

         4.1      Form of Stock Certificate of Coffee Holding Co., Inc.
                  (incorporated herein by reference to the initial filing of
                  this Registration Statement, filed with the Securities and
                  Exchange Commission on June 24, 2004).

         10.1     Lease with T&O Management Corp. dated August 15, 1997
                  (incorporated herein by reference to Exhibit 10.1 to the
                  Coffee Holding Co., Inc. Quarterly Report on Form 10-Q for the
                  quarter ended April 30, 1998, filed with the Securities and
                  Exchange Commission on October 27, 2000).

         10.2     1998 Stock Option Plan (incorporated herein by reference to
                  Exhibit 10.2 to the Coffee Holding Co., Inc. Quarterly Report
                  on Form 10-Q for the quarter ended April 30, 1998, filed with
                  the Securities and Exchange Commission on October 27, 2000).

         10.3     Working Capital Management Account Loan and Security Agreement
                  with Merrill Lynch Business Financial Services Inc.

         10.9     Capital Lease Agreement with HSBC Business Credit (USA), Inc.
                  (incorporated herein by reference to Exhibit 10.9 to Amendment
                  No. 1 to the Coffee Holding Co., Inc. Registration Statement
                  on Form SB-2/A, filed with the Securities and Exchange
                  Commission on August 12, 2004).

                                       30
<PAGE>

         10.10    Sales contract with Supervalu and Cub Foods (incorporated
                  herein by reference to Exhibit 10.10 to Amendment No. 1 to the
                  Coffee Holding Co., Inc. Annual Report on Form 10-KSB/A for
                  the year ended October 31, 2002, filed with the Securities and
                  Exchange Commission on August 26, 2004) (confidential portions
                  have been redacted pursuant to a request for confidential
                  treatment and filed separately with the Securities and
                  Exchange Commission).

         10.11    Sales contract with Shurfine Central (incorporated herein by
                  reference to Exhibit 10.11 to Amendment No. 1 to the Coffee
                  Holding Co., Inc. Annual Report on Form 10-KSB/A for the year
                  ended October 31, 2002, filed with the Securities and Exchange
                  Commission on August 26, 2004) (confidential portions have
                  been redacted pursuant to a request for confidential treatment
                  and filed separately with the Securities and Exchange
                  Commission).

         10.12    Lease dated February 4, 2004 by and between Coffee Holding
                  Co., Inc. and the City of La Junta, Colorado (incorporated
                  herein by reference to Exhibit 10.12 to Amendment No. 1 to the
                  Coffee Holding Co., Inc. Registration Statement on Form
                  SB-2/A, filed with the Securities and Exchange Commission on
                  August 12, 2004).

         10.13    Trademark License Agreement dated February 4, 2004 between Del
                  Monte Corporation and Coffee Holding Co, Inc. (incorporated
                  herein by reference to Exhibit 10.13 to the Coffee Holding
                  Co., Inc. Quarterly Report on Form 10-QSB/A for the quarter
                  ended April 30, 2004, filed with the Securities and Exchange
                  Commission on August 26, 2004).

         10.14    Proposed employment agreement by and among Coffee Holding Co.,
                  Inc. and Andrew Gordon (incorporated herein by reference to
                  the Coffee Holding Co., Inc. Registration Statement on Form
                  SB-2, filed with the Securities and Exchange Commission on
                  June 24, 2004).

         10.15    Proposed employment agreement by and among Coffee Holding Co.,
                  Inc. and David Gordon (incorporated herein by reference to the
                  Coffee Holding Co., Inc. Registration Statement on Form SB-2,
                  filed with the Securities and Exchange Commission on June 24,
                  2004).

         10.17    Corporate Brands Agreement dated as of March 30, 2004 by and
                  between Albertson's, Inc. and Coffee Holding Co., Inc.
                  (incorporated herein by reference to Amendment No. 2 to the
                  Coffee Holding Co., Inc. Registration Statement on Form
                  SB-2/A, filed with the Securities and Exchange Commission on
                  October 25, 2004) (confidential portions have been redacted
                  pursuant to a request for confidential treatment and filed
                  separately with the Securities and Exchange Commission).

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

         32.1     Section 1350 Certification.



                                       31
<PAGE>

                            COFFEE HOLDING CO., INC.

                          INDEX TO FINANCIAL STATEMENTS



                                                                        PAGE

FINANCIAL STATEMENTS:

         REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS              F-2

         BALANCE SHEETS AS OF OCTOBER 31, 2004 AND 2003                   F-3

         STATEMENTS OF OPERATIONS - YEARS ENDED
              OCTOBER 31, 2004 AND 2003                                   F-4

         STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY -
              YEARS ENDED OCTOBER 31, 2004 AND 2003                       F-5

         STATEMENTS OF CASH FLOWS - YEARS ENDED
              OCTOBER 31, 2004 AND 2003                                   F-6

         NOTES TO FINANCIAL STATEMENTS                                  F-7/18


                                      * * *





                                      F-1
<PAGE>

               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

To the Board of Directors
Coffee Holding Co., Inc.

We have audited the accompanying balance sheets of Coffee Holding Co., Inc. as
of October 31, 2004 and 2003 and the related statements of operations, changes
in stockholders' equity and cash flows for each of the two years in the period
ended October 31, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Coffee Holding Co., Inc. as of
October 31, 2004 and 2003 and the results of its operations and cash flows for
each of the two years in the period ended October 31, 2004, in conformity with
accounting principles generally accepted in the United States of America.



                                              /s/ Lazar Levine & Felix, LLP
                                              ------------------------------
                                              LAZAR LEVINE & FELIX, LLP


New York, New York
December 10, 2004




                                      F-2
<PAGE>


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



<TABLE>
<CAPTION>
                                   - ASSETS -
Current assets:                                                        2004             2003
                                                                   -----------      -----------
<S>                                                                <C>              <C>
     Cash                                                          $   642,145      $    73,832
     Due from broker                                                   873,901          894,123
     Accounts receivable, net of allowance for
       doubtful accounts of $150,349 and $119,435 for
       2004 and 2003, respectively                                   4,005,755        2,154,683
     Inventories                                                     2,258,289        1,781,424
     Prepaid expenses and other current assets                         676,395          431,432
     Deferred tax asset                                                136,900          103,700
                                                                   -----------      -----------
         Total current assets                                        8,593,385        5,439,194
Property and equipment, at cost, net of
   accumulated depreciation of $3,354,418 and $2,991,206
   for 2004 and 2003, respectively                                   2,286,936        1,579,294
Deposits and other assets                                               33,496           16,796
                                                                   -----------      -----------
                                                                   $10,913,817      $ 7,035,284
                                                                   ===========      ===========

                    - LIABILITIES AND STOCKHOLDERS' EQUITY -
Current liabilities:
     Current portion of term loan                                  $   252,000      $    84,000
     Current portion of obligations under capital lease                111,060          130,551
     Line of credit borrowings                                       2,685,045               --
     Accounts payable and accrued expenses                           4,658,836        1,861,447
     Income taxes payable - current                                    160,000               --
                                                                   -----------      -----------
         Total current liabilities                                   7,866,941        2,075,998
Term loan, net of current portion                                           --          252,000
Obligations under capital lease, net of current portion                  5,855           91,895
Line of credit borrowings                                                   --        2,376,066
Loans from related parties                                                  --           79,646
Income taxes payable-deferred                                           45,200           39,200
                                                                   -----------      -----------
         Total liabilities                                           7,917,996        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 for 2004 and 2003, respectively            4,000            4,000
     Additional paid-in capital                                        867,887          867,887
     Retained earnings                                               2,123,934        1,248,592
                                                                   -----------      -----------
         Total stockholders' equity                                  2,995,821        2,120,479
                                                                   -----------      -----------
                                                                   $10,913,817      $ 7,035,284
                                                                   ===========      ===========
</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>



                            COFFEE HOLDING CO., INC.
                            STATEMENTS OF OPERATIONS
                      YEARS ENDED OCTOBER 31, 2004 AND 2003


<TABLE>
<CAPTION>
                                                    2004               2003
                                                ------------       ------------

<S>                                             <C>                <C>
Net sales                                       $ 28,030,389       $ 20,239,867

Cost of sales                                     20,927,506         15,373,127
                                                ------------       ------------

Gross profit                                       7,102,833          4,866,740
                                                ------------       ------------

Operating expenses:
     Selling, general and administrative           4,777,809          3,501,465
     Officers' salaries                              622,573            490,860
                                                ------------       ------------
         Totals                                    5,400,382          3,992,325
                                                ------------       ------------

Income from operations                             1,702,501            874,415
                                                ------------       ------------

Other income (expense):
     Interest income                                  11,966              9,000
     Other income                                         --              1,640
     Interest expense                               (145,930)          (146,607)
                                                ------------       ------------
         Totals                                     (133,964)          (135,967)
                                                ------------       ------------

Income before income taxes                         1,568,537            738,448

Provision for income taxes                           693,195            116,366
                                                ------------       ------------

Net income                                      $    875,342       $    622,082
                                                ============       ============

Basic and diluted earnings per share            $        .22       $        .16
                                                ============       ============

Weighted average common shares outstanding         3,999,650          3,999,650
                                                ============       ============

</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>



                            COFFEE HOLDING CO., INC.
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                     YEARS ENDED OCTOBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                              Common Stock
                                        -------------------------
                                             $.001 Par Value
                                        -------------------------       Additional
                                         Number of                      Paid - in       Retained
                                          Shares         Amount          Capital        Earnings          Total
                                        ----------      ----------      ----------      ----------      ----------

<S>                                      <C>            <C>             <C>             <C>             <C>
Balance, October 31, 2002                3,999,650      $    4,000      $  867,887      $  626,510      $1,498,397

Net income                                      --              --              --         622,082         622,082
                                        ----------      ----------      ----------      ----------      ----------

Balance, October 31, 2003                3,999,650           4,000         867,887       1,248,592       2,120,479

NET INCOME                                      --              --              --         875,342         875,342
                                        ----------      ----------      ----------      ----------      ----------

BALANCE, OCTOBER 31, 2004                3,999,650      $    4,000      $  867,887      $2,123,934      $2,995,821
                                        ==========      ==========      ==========      ==========      ==========
</TABLE>




   The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>



                            COFFEE HOLDING CO., INC.
                            STATEMENTS OF CASH FLOWS
                      YEARS ENDED OCTOBER 31, 2004 AND 2003


<TABLE>
<CAPTION>
                                                                                          2004               2003
                                                                                       ------------       ------------
<S>                                                                                    <C>                <C>
Operating activities:
     Net income                                                                        $    875,342       $    622,082
     Adjustments to reconcile net income to net cash (used) provided by operating
         activities:
           Depreciation and amortization                                                    363,612            299,774
           Bad debts                                                                         30,914                 --
           Deferred taxes                                                                   (27,200)           (38,300)
         Changes in operating assets and liabilities:
           Decrease (increase) in due from broker                                            20,222           (125,521)
           (Increase) in accounts receivable                                             (1,881,986)          (371,261)
           (Increase) in inventories                                                       (476,865)          (363,280)
           (Increase) in prepaid expenses and other current assets                         (244,963)          (348,165)
           Increase (decrease) in accounts payable and accrued expenses                   2,797,389           (190,015)
           Increase (decrease) in income taxes payable                                      160,000           (229,540)
                                                                                       ------------       ------------
              Net cash provided (used) by operating activities                            1,616,465           (744,226)
                                                                                       ------------       ------------

Investing activities:
  Security deposits                                                                         (16,700)                --
  Purchases of property and equipment                                                    (1,039,479)           (62,758)
                                                                                       ------------       ------------
              Net cash (used) by investing activities                                    (1,056,179)           (62,758)
                                                                                       ------------       ------------

Financing activities:
   Principal payments on term loan                                                          (84,000)           (84,000)
   Advances under bank line of credit                                                    28,108,814         21,358,723
   Principal payments under bank line of credit                                         (27,799,835)       (20,304,030)
   Principal payments of obligations under capital leases                                  (221,306)          (120,521)
   Repayments of advances from related parties                                              (79,646)           (12,924)
                                                                                       ------------       ------------
              Net cash provided (used) in financing activities                                8,027            837,248
                                                                                       ------------       ------------

Net increase in cash                                                                        568,313             30,264
   Cash, beginning of year                                                                   73,832             43,568
                                                                                       ------------       ------------
Cash, end of year                                                                      $    642,145       $     73,832
                                                                                       ============       ============



Supplemental disclosure of cash flow data:
    Interest paid                                                                      $    145,930       $    143,682
                                                                                       ============       ============
    Income taxes paid                                                                  $    370,850       $    396,295
                                                                                       ============       ============
</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>

                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 1 -   BUSINESS ACTIVITIES:

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


NOTE 2 -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

           USE OF ESTIMATES:

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

           CASH EQUIVALENTS:

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

           INVENTORIES:

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

           PROPERTY AND EQUIPMENT:

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

           HEDGING:

           The Company uses 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 have the effect of increasing
           earnings volatility in any particular period.

           At October 31, 2004, the Company held 101 options covering an
           aggregate of 3,787,500 pounds of green coffee beans at $.75 per
           pound. The fair market value of these options, which was obtained
           from a major financial institution, was approximately $49,200 at
           October 31, 2004.

           At October 31, 2003, the Company held 150 options covering an
           aggregate of 5,625,000 pounds of green coffee beans at $.60 per
           pound. The fair market value of these options, which was obtained
           from a major financial institution, was approximately $95,813 at
           October 31, 2003.


                                      F-7
<PAGE>



                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 2 -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

           HEDGING (CONTINUED):

           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 October 31, 2004 and 2003, the
           Company held 90 and 183 longer-term futures contracts for the
           purchase of 3,375,000 and 6,862,500 pounds of coffee at an average
           price of $.80 and $.65 per pound, respectively. The market price of
           coffee applicable to such contracts was $.77 per pound at October 31,
           2004 and $.62 per pound at October 31, 2003.

           The Company historically has had short term contracts with some of
           its customers (generally one to two years in duration). The Company
           currently has agreements with two of its wholesale customers in which
           it is the supplier at fixed prices for lines of private label ground
           coffee. The Company is the exclusive supplier of one of these
           customers. The agreements generally contain only pricing terms.

           The Company classifies its options and future contracts as trading
           securities and accordingly, unrealized holding gains and losses are
           included in earnings and not reflected as a net amount in a separate
           component of shareholders' equity until realized.

           Included in cost of sales and due from broker for the years ended
           October 31, 2004 and 2003, the Company recorded realized and
           unrealized gain and losses respectively, on these hedging contracts
           (using the specific identification method) as follows:

                                                  YEARS ENDED OCTOBER, 31
                                             ------------------------------
                                                 2004              2003
                                             -----------       ------------
           Gross realized gain               $ 3,129,479       $ 2,063,349
           Gross realized loss               $(1,415,205)      $  (946,655)
           Unrealized gain and (losses)      $   (92,236)      $  (248,025)

           ADVERTISING:

           The Company expenses the cost of advertising and promotions as
           incurred. Advertising costs charged to operations totaled $163,007
           and $143,130 in 2004 and 2003, respectively.

           INCOME TAXES:

           The Company accounts for income taxes pursuant to the asset and
           liability method which requires deferred income tax assets and
           liabilities to be computed for temporary differences between the
           financial statement and tax bases of assets and liabilities that will
           result in taxable or deductible amounts in the future based on
           enacted tax laws and rates applicable to the periods in which the
           differences are expected to affect taxable income. Valuation
           allowances are established when necessary to reduce deferred tax
           assets to the amount expected to be realized. The income tax
           provision or credit is the tax payable or refundable for the period
           plus or minus the change during the period in deferred tax assets and
           liabilities (see also Note 7).



                                      F-8
<PAGE>



                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 2 -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

           STOCK OPTIONS:

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

           EARNINGS (LOSS) PER SHARE:

           The Company presents "basic" and, if applicable, "diluted" earnings
           per common share pursuant to the provisions of Statement of Financial
           Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") and
           certain other financial accounting pronouncements. Basic earnings per
           common share are calculated by dividing net income by the weighted
           average number of common shares outstanding during each period. The
           calculation of diluted earnings per common share is similar to that
           of basic earnings per common share, except that the denominator is
           increased to include the number of additional common shares that
           would have been outstanding if all potentially dilutive common
           shares, such as those issuable upon the exercise of stock options,
           were issued during the period. Since the Company had no potentially
           dilutive securities outstanding in 2004 and 2003, only historical
           basic earnings per share amounts are presented in the accompanying
           statement of operations for those years.

           The weighted average common shares outstanding used in the
           computation of basic earnings per share in 2004 and 2003 was the
           3,999,650 shares of common stock actually outstanding during those
           years.

           FAIR VALUE OF FINANCIAL INSTRUMENTS:

           The carrying amounts of cash and cash equivalents, accounts
           receivable and accounts payable approximate fair value because of the
           short-term nature of these instruments. Fair value estimates are made
           at a specific point in time, based on relevant market information
           about the financial instrument when available. These estimates are
           subjective in nature and involve uncertainties and matters of
           significant judgment and therefore, cannot be determined with
           precision. Changes in assumptions could significantly affect the
           estimates.

           REVENUE RECOGNITION:

           The Company recognizes revenue in accordance with Securities and
           Exchange Commission Staff Accounting Bulletin No. 104, "Revenue
           Recognition" ("SAB 104"). Under SAB 104, 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. The Company generally recognizes revenue at the
           time of shipment.

           The Company sells its products without the right of return. Returns
           and allowances are recorded when a customer claims receipt of damaged
           goods. The Company in turn seeks reimbursement from the shipper.

                                      F-9
<PAGE>

                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 2 -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

           REVENUE RECOGNITION (CONTINUED):

           Slotting fees: Certain retailers require the payment of slotting fees
           in order to obtain space for the Company's products on the retailer's
           store shelves. The cost of these fees is recognized at the earlier of
           the date cash is paid or a liability to the retailer is created.
           These amounts are included in the determination of net sales.

           Discounts and rebates: The cost of these incentives, are recognized
           at the later of the date at which the related sale is recognized or
           the date at which the incentive is offered. These amounts are
           included in the determination of net sales. Incentives in the form of
           free product are included in the determination of cost of sales.

           Volume-based incentives: These incentives typically involve rebates
           or refunds of a specific amount of cash consideration that are
           redeemable only if the reseller completes a specified cumulative
           level of sales transactions. Under incentive programs of this nature,
           the Company estimates the anticipated cost of the rebate to each
           underlying sales transaction with the customer.

           Cooperative advertising: Under these arrangements, the Company will
           agree to reimburse the reseller for a portion of the costs incurred
           by the reseller to advertise and promote certain of the Company's
           products. The Company will recognize the cost of cooperative
           advertising programs in the period in which the advertising and
           promotional activity first takes place. The costs of these incentives
           are included in the determination of net sales.

           MERCHANDISE COSTS:

           In addition to product costs, net of discounts; inbound freight
           charges; warehousing costs and certain production and operational
           costs are included in the cost of sales line item of the statements
           of income.

           SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:

           Included in the selling and administrative line item of the
           statements of income are office salaries; commissions; freight out;
           promotion; insurance; professional fees; other selling expenses and
           other administrative expenses.

           SHIPPING AND HANDLING FEES AND COSTS:

           In accordance with EITF No. 00-10 "Accounting for Shipping and
           Handling Fees and Costs", revenue received from shipping and handling
           fees is reflected in net sales. Costs associated with shipping
           product to customers aggregating approximately $1,197,000 and
           $877,000 for the years ended October 31, 2004 and 2003, respectively
           is included in selling and administrative expenses.


                                      F-10
<PAGE>


                            COFFEE HOLDING CO., INC.
                         NOTES TO FINANCIAL STATEMENTS
                           OCTOBER 31, 2004 AND 2003

NOTE 2 -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

           RECENT ACCOUNTING PRONOUNCEMENTS:

           In March 2004, the FASB reached a consensus on Emerging Issues Task
           Force (EITF) Issue No. 03-1, "The Meaning of Other-Than-Temporary
           Impairment and Its Application to Certain Investments," which
           provides guidance to determine the meaning of other-than-temporary
           impairment and its application to investments classified as either
           available-for-sale or held-to-maturity (including individual
           securities and investments in mutual funds), and investments
           accounted for under the cost method or the equity method. The
           guidance for evaluating whether an investment is other-than-
           temporarily impaired should be applied in other-than-temporary
           impairment evaluations made in reporting periods beginning after June
           15, 2004. The adoption of Issue No. 03-1 has not had any impact on
           the Company's financial statements and results of operations.

           In April 2004, the EITF reached consensus on EITF Issue No. 03-6,
           "Participating Securities and the Two Class Method under FASB
           Statement No. 128" ("EITF 03-6"). EITF 03-06 addresses a number of
           questions regarding the computation of earnings per share by
           companies that have issued securities other than common stock that
           contractually entitle the holder to participate in the dividends and
           earnings o f the company when, and if, it declares dividends on its
           common stock. EITF 03-6 also provides further guidance in applying
           the two-class method of calculating earnings per share, clarifying
           what constitutes a participating security and how to apply the
           two-class method of computing earnings per share once it is
           determined that a security is participating, including how to
           allocate undistributed earnings to such a security. EITF 03-6 is
           effective for fiscal periods beginning after March 31, 2004 and
           requires retroactive restatement of prior earnings per share amounts.
           The adoption of EITF No. 03-6 has not had a material impact on the
           Company's financial statements and results of operations.

           In August 2004, Section 409 of the Sarbanes-Oxley Act required
           changes and enhancements to Form 8-K to provide "real time"
           disclosure of current events for investors on a timelier basis. Under
           Sec. 409, issuers now have only 4 business days to file Form 8-K's
           and new reporting sections have been added.

           In December 2004, the FASB issued a revision of SFAS No. 123
           "Share-Based Payment" (No. 123R). The statement establishes standards
           for the accounting for transactions in which an entity exchanges its
           equity investments for goods and services. It also addresses
           transactions in which an entity incurs liabilities in exchange for
           goods or services that are based on the fair value of the entity's
           equity instruments or that may be settled by the issuance of those
           equity instruments. The statement does not change the accounting
           guidance for share-based payments with parties other than employees.
           The statement requires a public entity to measure the cost of
           employee service received in exchange for an award of equity
           instruments based on the grant-date fair value of the award (with
           limited exception). That cost will be recognized over the period
           during which an employee is required to provide service in exchange
           for the award (usually the vesting period). A public entity will
           initially measure the cost of employee services received in exchange
           for an award of a liability instrument based on its current fair
           value; the fair value of that award will be remeasured subsequently
           at each reporting date through the settlement date. Changes in fair
           value during the requisite service period will be recognized as
           compensation over that period. The grant-date for fair value of
           employee share options and similar instruments will be estimated
           using option-pricing models adjusted for the unique characteristics
           of these instruments. The Company will be required to comply with
           this pronouncement for periods beginning after December 15, 2005.


                                      F-11
<PAGE>



                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 2 -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

           RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED):

           In November 2004, the FASB issued Statement No. 151, "Inventory
           Costs". This statement amends the guidance in ARB 43 (Chapter 4 -
           Inventory Pricing) to clarify the accounting for abnormal amounts of
           idle facility expense, freight, handling costs and wasted material
           (spoilage). SFAS No. 151 requires that such items be recognized as
           current period charges. SFAS 151 is effective for fiscal years
           beginning after June 15, 2005 and is not expected to have a material
           impact on the Company's financial statements and results of
           operations.

           In December 2004, the FASB issued Statement No. 152, "Accounting for
           Real Estate Time-Sharing Transactions". This statement amends SFAS
           No. 66 (Accounting for Sales of Real Estate) and SFAS No. 67
           (Accounting for Costs and Initial Rental Operations of Real Estate
           Projects). This standard, which is effective for financial statements
           for fiscal years beginning after June 15, 2005, is not applicable to
           the Company's current operations.

           In December 2004, the FASB issued SFAS No. 153 "Exchange of
           Non-monetary Assets - an amendment of APB Opinion No. 29". Statement
           153 eliminates the exception to fair value for exchanges of similar
           productive assets and replaces it with a general exception for
           exchange transactions that do not have commercial substance, defined
           as transactions that are not expected to result in significant
           changes in the cash flows of the reporting entity. This statement is
           effective for exchanges of non-monetary assets occurring after June
           15, 2005. The application of this statement is not expected to have
           an impact on the Company's financial statements considering the
           Company's intermittent participation in exchanges of non-monetary
           assets.

           RECLASSIFICATIONS:

           Certain accounts in the 2003 financial statements may have been
           reclassified to conform to the 2004 presentation.


NOTE 3 -   INVENTORIES:

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

                                                  2004              2003
                                          ---------------   ---------------
           Packed coffee                  $       668,413   $       213,062
           Green coffee                         1,051,223           999,137
           Packaging supplies                     538,653           569,225
                                          ---------------   ---------------
           Totals                         $     2,258,289   $     1,781,424
                                          ===============   ===============



                                      F-12

<PAGE>



                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 4 -   PROPERTY AND EQUIPMENT:

           Property and equipment at October 31, 2004 and 2003 consisted of the
           following:

<TABLE>
<CAPTION>
                                                                             Estimated
                                                                              Useful
                                                                                Life              2004            2003
                                                                            ------------     -------------   -------------
<S>                                                                           <C>            <C>             <C>
           Building and improvements                                          30 years       $   1,358,506   $   1,252,448
           Machinery and equipment                                             7 years           3,444,305       2,606,859
           Machinery and equipment under capital leases                        7 years             458,179         426,404
           Automobile                                                          3 years              43,617              -
           Furniture and fixtures                                              7 years             195,747         143,789
                                                                                             -------------   -------------
                                                                                                 5,500,354       4,429,500
           Less accumulated depreciation (including $172,757 arising
             from capital leases)                                                                3,354,418       2,991,206
                                                                                             -------------   -------------
                                                                                                 2,145,936       1,438,294
           Land                                                                                    141,000         141,000
                                                                                             -------------   -------------
           Totals                                                                            $   2,286,936   $   1,579,294
                                                                                             =============   =============
</TABLE>

           Depreciation expense totaled $ 363,612 and $ 299,774 in 2004 and
           2003, respectively.


NOTE 5 -   CREDIT FACILITY AND OTHER BORROWINGS:

           As of October 31, 2004, the Company had a $5,750,000 credit facility
           provided by Wells Fargo Business Credit. The credit facility
           consisted of a $5,000,000 revolving line of credit and a $750,000
           term loan secured by all the assets of the Company.

           The line of credit provides for borrowing of up to 85% of the
           Company's eligible trade accounts receivable and 60% of its eligible
           inventories up to a maximum of $5,000,000. The term loan provides for
           borrowings of up to the greater of 80% of the cost of eligible
           equipment or $750,000.

           As a result of amendments to prior agreements with Wells Fargo
           Business Credit, that became effective on October 1, 2002, interest
           on borrowings under the line of credit and the term loan are payable
           monthly at the prime rate plus .25% and .50%, respectively (an
           effective rate of 5% and 5.25% respectively, at October 31, 2004). In
           addition, the credit facility will not expire until November 20,
           2004; the maximum amount of borrowings under the term loan increased
           form $600,000 to $750,000; term loan principal payments decreased
           from $10,000 to $7,000 per month commencing November 1, 2002; the
           amount of borrowings guaranteed by each of the two stockholders is
           $500,000; a restricted cash collateral deposit aggregating
           approximately $290,000 was used to reduced the outstanding line of
           credit balance; and the Company's ability to continue to use the
           credit facility will become subject to its ability to meet specified
           financial covenants and ratios. The term loan, has an outstanding
           balance of $ 252,000 at October 31, 2004 and aggregate borrowing of
           $2,685,045 were outstanding under its credit line facility at October
           31, 2004. The line of credit can be withdrawn at Wells Fargo Business
           Credit's option. The Company was in compliance with the required
           financial covenants at October 31, 2004 and 2003.


                                      F-13
<PAGE>



                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 5 -   CREDIT FACILITY AND OTHER BORROWINGS (CONTINUED):

           The credit facility contains covenants that place restrictions on the
           Company's operations. Among other things, these covenants: require
           that the Company maintain a certain minimum cumulative net income;
           require that a portion of the Company's cash flow from operations be
           dedicated to servicing its debt; limit the Company's ability to
           obtain additional capital through financings without the consent of
           the lender; limit the Company's ability to pay dividends to
           stockholders and acquire or retire common stock without the consent
           of the lender; and prohibit the Company from forming or acquiring
           subsidiaries, merging with or into other companies or selling all or
           substantially all of its assets without the consent of the lender. A
           breach of the Company of any financial or negative covenant
           constitutes an event of default under the credit facility. The credit
           facility and the Company's capital lease contain cross-default
           provisions.

           NEW FINANCING AGREEMENT:

           In November 2004, subsequent to the balance sheet date, the Company
           agreed to a new financing arrangement with "Merrill Lynch Business
           Financial Services Inc." and terminated its prior agreement with
           `Wells Fargo Business Credit". This new line of credit will be for a
           maximum $4,000,000, expire on October 31, 2005 and require monthly
           interest payments at a rate of LIBOR plus 2.4%. This loan will be
           secured by a blanket lien on all the assets of the Company and the
           personal guarantees of two of the Company's officer/shareholders and
           will also require the Company to comply with various financial
           covenants. As of October 31, 2004, the Company was not yet obligated
           under this credit agreement.


NOTE 6 -   LOANS FROM RELATED PARTIES:

           The Company had loans payable to certain of its stockholders
           aggregating $79,646 at October 31, 2003. The loans were due on demand
           but payments were not expected to be required in 2004 and accordingly
           were reflected as long term. These loans which bear interest at 6%
           per annum were repaid prior to October 31, 2004. Interest expense
           totaled approximately $ -0- and $5,400 in 2004 and 2003 respectively.


NOTE 7 -   INCOME TAXES:

           The tax effects of the temporary differences that give rise to
           the deferred tax assets and liabilities as of October 31, 2004
           and 2003 are as follows:

                                                    2004            2003
                                               -------------   -------------
           Deferred tax assets:
              Accounts receivable              $      61,300   $      49,100
              Inventory                               75,600          54,600
                                               -------------   -------------
                                               $     136,900   $     103,700
                                               =============   =============
           Deferred tax liability:
              Fixed assets                     $      45,200   $      39,200
                                               =============   =============


                                      F-14
<PAGE>



                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 7 -   INCOME TAXES (CONTINUED):

           The Company's provision for income taxes in 2004 and 2003 consisted
           of the following:

                                               2004               2003
                                          -----------         -----------
           Federal                        $   468,349         $   150,004
           State and local                    224,846             (33,638)*
                                          -----------         -----------
           Total                          $   693,195         $   116,366
                                          ===========         ===========

               * Includes prior year over accrual of state franchise taxes.

           A reconciliation of the difference between the expected income tax
           rate using the statutory federal tax rate and the Company's effective
           tax rate is as follows:

                                                      2004             2003
                                                  ----------       ----------
           US Federal income tax
             statutory rate                              34%              34%
           State income taxes, net of
             federal tax benefit                          8%               8%
           Other - benefit of tax refunds                 2%             (26%)
                                                  ----------       ----------
           Effective tax rate                            44%              16%
                                                  ==========       ==========


NOTE 8 -  COMMITMENTS AND CONTINGENCIES:

          OPERATING LEASES:

           a)   The Company occupies warehouse facilities under an
                operating lease, which expired on August 31, 2002 and was
                originally renewed for an additional two years. In August
                2004, the company renewed this lease for another year
                expiring on August 31, 2005, at a monthly rental of
                $7,500. The lease requires the Company to pay utilities
                and other maintenance expenses. Rent charged to operations
                amounted to $59,030 and $50,076 in 2004 and 2003,
                respectively. Future minimum rental payments under this
                the non-cancelable operating lease in years subsequent to
                October 31, 2004 are $75,000 in 2005.

                The Company also uses a variety of independent, bonded
                commercial warehouses to store its green coffee beans.

           b)   In February 2004, the Company entered into a lease for
                office and warehouse space in La Junta City, Colorado,
                with an unrelated third party. This lease, which is at a
                monthly rental of $8,341 beginning January 2005, expires
                on January 31, 2024.

                The aggregate minimum future lease payments for the
                Colorado location as of October 31, 2004 for each of the
                next five years and thereafter are as follows:

                  October 31
                  ----------
                      2005                      $    83,411
                      2006                          100,093
                      2007                          100,093
                      2008                          100,093
                      2009                          100,093
                  Thereafter                      1,426,325
                                            ---------------
                                                $ 1,910,108
                                            ===============

                                      F-15
<PAGE>



                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 8 -   COMMITMENTS AND CONTINGENCIES:

           OBLIGATION UNDER CAPITAL LEASES:

           The Company has leased machinery and equipment under capital
           leases, which expire through July 2006. The assets and
           liabilities under the capital leases are recorded at the lower
           of the present value of the minimum lease payments or the fair
           value of the asset. The assets are being depreciated over the
           lease term. Depreciation expense of assets under capital
           leases are included in depreciation expense and amounted to
           $62,712 and $60,915 for the years ended October 31, 2004 and
           2003, respectively.

           Assets held under capital leases are as follows:

                                                   2004            2003
                                                ---------       ---------
           Machinery and equipment              $ 458,179       $ 426,404
           Less:  accumulated depreciation       (172,757)        (91,372)
                                                ---------       ---------
                                                $ 285,422       $ 335,032
                                                =========       =========

           Minimum annual future lease payments under the capital leases
           for each of the next two years and in the aggregate are:

           Year ended October 31,
                          2005                                    $   128,448
                          2006                                          6,035
                                                                  -----------
                Total minimum lease payments                          134,483
                Less:  amount representing interest                   (17,568)
                                                                  -----------
                Present value of minimum lease payments               116,915
                Less:  current portion                               (111,060)
                                                                  -----------
                Long-term portion                                 $     5,855
                                                                  ===========

           The interest rates on the capital leases vary from 6.75% to
           7.6% per annum, which approximates the Company's incremental
           rate of borrowing at the time the leases were entered into.

           401 (K) RETIREMENT PLAN:

           In 2004, the Company began a 401(k) Retirement Plan, which
           covers all full time employees who have completed one year of
           service and have reached their 21st birthday. The Company will
           match 100% of the aggregate salary reduction contribution up
           to the first 3% of compensation and 50% of aggregate
           contribution of the next 2% of compensation. Contributions to
           the plan aggregated approximately $13,000 for 2004.

           LEGAL PROCEEDINGS:

           The Company is a party to various legal proceedings. In the
           opinion of management, these actions are routine in nature and
           will not have a material adverse effect on the Company's
           financial statements in subsequent years.


                                      F-16
<PAGE>



                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 9 -   CONCENTRATIONS OF CREDIT RISK:

           Financial instruments that potentially subject the Company to
           concentrations of credit risk consist principally of cash and cash
           equivalents, amounts due from broker and trade accounts receivable.
           The Company maintains its cash and cash equivalents in bank and
           brokerage accounts the balances of which, at times, may exceed
           Federal insurance limits. At October 31, 2003, the Company did not
           have cash balances that exceeded Federal insurance limits. Although
           at October 31, 2004 the Company did have cash balances that exceeded
           Federal insurance limits, they have not experienced any losses in
           such accounts and monitor the soundness of the financial institutions
           on a periodic basis. The net balance of the Company's investments in
           derivative financial instruments also represents an amount due from a
           broker. Exposure to credit risk is reduced by placing such deposits
           and investments with major financial institutions and monitoring
           their credit ratings.

           Approximately 22% and 11% of the Company's sales were derived from
           two customers in 2004. Those customers also accounted for
           approximately $400,000 and $458,000 of the Company's account
           receivable balance as of October 31, 2004. Approximately 16% of the
           Company's sales were derived from each of two customers during 2003.
           Those customers also accounted for approximately $ 266,000 and $
           61,700 of the Company's accounts receivable balance at October 31,
           2003. Concentrations of credit risk with respect to other trade
           receivables are limited due to the short payment terms generally
           extended by the Company; by ongoing credit evaluations of customers;
           and by maintaining an allowance for doubtful accounts that management
           believes will adequately provide for credit losses.

           Management does not believe that credit risk was significant at
           October 31, 2004 or 2003.


NOTE 10 -  STOCK OPTION PLAN:

           On February 10, 1998, the Company's stockholders consented to the
           adoption of the Company's stock option plan (the "Plan") whereby
           incentive and/or non-incentive stock options for the purchase of up
           to 2,000,000 shares of the Company's common stock may be granted to
           the Company's directors, officers, other key employees and
           consultants. Under the Plan, the exercise price of all options must
           be at least 100% of the fair market value of the common stock on the
           date of grant (the exercise price of an incentive stock option for an
           optionee that holds more than 10% of the combined voting power of all
           classes of stock of the Company must be at least 110% of the fair
           market value on the date of grant). On June 21, 2004, the plan was
           amended to reduce the number of shares of common stock reserved for
           issuance under the plan from 2,000,000 to 800,000, subject to
           adjustment for stock splits, stock dividends, reorganizations,
           mergers, recapitalizations or other capital adjustments.

           As of October 31, 2004, no options had been granted under the Plan.



                                      F-17
<PAGE>

                            COFFEE HOLDING CO., INC.
                          NOTES TO FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003

NOTE 11 -  MAJOR VENDORS/RELATED PARTY:

           During fiscal 2004, substantially all of the Company's purchases were
           from ten vendors. The ten vendors accounted for 81% of total product
           purchases. Two of these vendors accounted for 34% and 11% of total
           purchases, respectively. These two vendors accounted for
           approximately $1,028,000 and $246,000 of the Company's accounts
           payable at October 31, 2004, respectively.

           During fiscal 2003, substantially all of the Company's purchases were
           also from ten vendors. The ten vendors accounted for 84% of total
           product purchases. Two of these vendors accounted for 31% and 11% of
           total purchases, respectively. These two vendors accounted for
           approximately $66,700 and $124,400 of the Company's accounts payable
           at October 31, 2003, respectively.

           In addition, an employee of one of these vendors is a director of the
           Company. Purchases from that vendor totaled approximately $6,075,000
           and $4,110,900 in 2004 and 2003, respectively. Management believes
           that all transactions are made at arms length and does not believe
           that the loss of any one vendor would have a material adverse effect
           on the Company's operations due to the availability of alternate
           suppliers.


NOTE 12 -  PURCHASE OF ASSETS:

           On February 4, 2004, 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
           the 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.


NOTE 13 -  UNDERWRITERS AGREEMENT:

           The Company has entered into an agreement with Maxim Group LLC
           ("Maxim") for Maxim to serve as the Company's financial advisors and
           lead managing underwriters for a proposed public offering of the
           Company's common stock which would raise approximately $10 million.
           Maxim will have the right to purchase, for a period of forty-five
           days following the public offering, up to an additional fifteen
           percent of the number of shares of common stock offered to the public
           by the Company, at the public offering price less the underwriting
           discount (ten percent) to cover over-allotments, if any. The Company
           paid $25,000 to Maxim upon execution of the agreement and paid an
           additional $25,000 upon the filing of a registration statement for
           the proposed offering with the United States Securities and Exchange
           Commission. If the public offering is successfully completed, the
           Company shall pay to Maxim a non- accountable expense allowance equal
           to three percent of the gross proceeds derived from the public
           offering including any proceeds derived from the over-allotment. The
           Company has also agreed to sell to Maxim for an aggregate of $100,
           warrants to purchase up to ten percent of the shares being offered at
           110% of the offering price. The warrant shall be exercisable for a
           period of five years and contain provisions for cashless exercise,
           anti-dilution and piggyback registration rights. To date, no funds
           have been raised under this agreement.


                                      F-18
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>2
<FILENAME>b404559_ex10-3.txt
<DESCRIPTION>WCMA LOAN AND SECURITY AGREEMENT
<TEXT>
<PAGE>

                                                                    Exhibit 10.3


                                  MERRILL LYNCH
                        WCMA LOAN AND SECURITY AGREEMENT

WCMA LOAN AND SECUR1TY AGREEMENT NO. 208-07517 ("Loan Agreement") dated as of
October 22, 2004, between COFFEE HOLDING CO, INC. a corporation organized and
existing under the laws of the state of New York having its principal office at
4401 First Ave., Brooklyn, NY 11232 ("Customer"), and MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC., a corporation organized and existing under the laws of
the State of Delaware having its principal office at 222 North LaSalle Street,
Chicago, IL 60601 ("MLBFS").

Pursuant to that certain WORKING CAPITAL MANAGEMENTS ACCOUNT AGREEMENT NO.
208-07517 and the accompanying Program Description (as the same may be, or have
been, amended, modified or supplemented, the "WCMA Agreement") between Customer
and MLBFS' affiliate, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
("MLPF&S"), Customer opened, or shall prior to the Activation Date open, a
Working Capital Management Account pursuant to the "WCMA Service" and the "WCMA
Program" described in the WCMA Agreement and any documents incorporated therein.
The WCMA Agreement is by this reference incorporated as a part hereof. In
conjunction therewith and as part of the WCMA Program, Customer has requested
that MLBFS provide and subject to the terms and conditions herein set forth
MLBFS has agreed to provide, a commercial line of credit for Customer.

Accordingly, and in consideration of the premises and of the mutual covenants of
the parties hereto, Customer and MLBFS hereby agree as follows:

                             ARTICLE I. DEFINITIONS

1.1 SPECIFIC TERMS. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings:

"Activation Date" shall mean the date upon which MLBFS shall cause the WCMA Line
of Credit to be fully activated under MLPF&S' computer system as part of the
WCMA Program.

"Bankruptcy Event" shall mean any of the following: (i) a proceeding under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
liquidation, winding up or receivership law or statute shall be commenced, filed
or consented to by any Credit Party; or (ii) any such proceeding shall be filed
against any Credit Party and shall not be dismissed or withdrawn within sixty
(60) days after filing; or (iii) any Credit Party shall make a general
assignment for the benefit of creditors; or (iv) any Credit Party shall
generally fail to pay or admit in writing its inability to pay its debts as they
become due; or (v) any Credit Party shall be adjudicated a bankrupt or
insolvent; or (vi) any Credit Party shall take advantage of any other law or
procedure for the relief of debtors or shall take any action for the purpose of
or with a view towards effecting any of the foregoing; or (vii) a receiver,
trustee, custodian, fiscal agent or similar official for any Credit Party or for
any substantial part of any of their respective property or assets shall be
sought by such Credit Party or appointed.

<PAGE>

"Business Day" shall mean any day other than a Saturday, Sunday, federal holiday
or other day on which the New York Stock Exchange is regularly closed.

"Business Guarantor" shall mean every Guarantor that is not a natural person.

"Certificate of Compliance" shall mean, as applicable, that duty executed
certificate, substantially the same form as Exhibit B attached hereto to the
extent such certificate shall be applicable, of the president, chief financial
officer or chief executive officer of Customer, certifying as to the matters set
forth in such certificate.

"Collateral" shall mean the WCMA Account, all Accounts, Chattel Paper, Contract
Rights, Inventory, Equipment, Fixtures, General intangibles, Deposit Accounts,
Documents, Instruments, Investment Property and Financial Assets of Customer,
howsoever arising, whether now owned or existing or hereafter acquired or
arising, and wherever located; together with all parts thereof (including spare
parts), all accessories and accessions thereto, all books and records (including
computer records) directly related thereto, all proceeds thereof (including,
without limitation, proceeds in the form of Accounts and insurance proceeds),
and the additional collateral described in Section 3.6 (b) hereof.

"Commitment Expiration Date" shall mean November 5, 2004.

"Credit Party" and "Credit Parties" shall mean, individually or collectively,
the Customer, all Guarantors and all Pledgors.

"Default" shall mean either an "Event of Default" as defined in Section 3.5
hereof, or an event which with the giving of notice, passage of time, or both,
would constitute such an Event of Default.

"Default Rate" shall mean an annual interest rate equal to the lesser of: (i)
two percentage points over the Interest Rate; or (ii) the highest interest rate
allowed by applicable law.

"Event of Loss" shall mean the occurrence whereby any tangible Collateral is
damaged beyond repair, lost, totally destroyed or confiscated.

"Excess Interest" shall mean any amount or rate of interest (including the
Default Rate and, to the extent that they may be deemed to constitute interest,
any prepayment fees, late charges and other fees and charges) payable, charged
or received in connection with any of the Loan Documents which exceeds the
maximum amount or rate of interest permitted under applicable law.

"GAAP" shall mean the generally accepted accounting principles in effect in the
United States of America from time to time.
<PAGE>

"General Funding Conditions" shall mean each of the following conditions to any
WCMA Loan by MLBFS hereunder (i) Customer shall have validly subscribed to and
continued to maintain the WCMA Account with MLPF&S, and the WCMA Account shall
then be reflected as an active "commercial" WCMA Account (i.e., one with line of
credit capabilities) on MLPF&S' WCMA computer system; (ii) no Default or Event
of Default shall have occurred and be continuing or would result from the making
of any WCMA Loan hereunder by MLBFS; (iii) there shall not have occurred and be
continuing any material adverse change in the business or financial condition of
any Credit Party; (iv) all representations and warranties of all of the Credit
Parties herein or in any of the Loan Documents shall then be true and correct in
all material respects; (v) MLBFS shall have received this Loan Agreement and all
of the other Loan Documents duty executed and filed or recorded where
applicable, all of which shall be in form and substance satisfactory to MLBFS;
(vi) MLBFS shall have received evidence satisfactory to it as to the ownership
of the Collateral and the perfection and priority of MLBFS' liens and security
interests thereon, as well as the ownership of and the perfection and priority
of MLBFS' liens and security interests on any other collateral for the
Obligations furnished pursuant to any of the Loan Documents; (vii) MLBFS shall
have received evidence satisfactory to it of the insurance required hereby or by
any of the Loan Documents; and (viii) any additional conditions specified in the
"WCMA Line of Credit Approval" letter executed by MLBFS with respect to the
transactions contemplated hereby shall have been met to the satisfaction of
MLBFS.

"Guarantor" shall mean each Person obligated under a guaranty, endorsement or
other undertaking by which such Person guarantees or assumes responsibility in
any capacity for the payment or performance of any of the Obligations.

"Initial Maturity Date" shall mean the first date upon which the WCMA Line of
Credit will expire (subject to renewal in accordance with the terms hereof); to
wit: October 31, 2005,

"Individual Guarantor" shall mean each Guarantor who is a natural person.

"Interest Due Date" shall mean the first Business Day of each calendar month
during the term hereof.

"Interest Rate" shall mean a variable per annum rate of interest equal to the
sum of 2.40% plus the One-Month LIBOR. "One-Month LIBOR" shall mean, as of the
date of any determination, the interest rate then most recently published in the
"Money Rates" sedan of The Wall Street Journal as the one-month London Interbank
Offered Rate. The Interest Rate will change as of the date of publication in The
Wall Street Journal of a One-Month LIBOR that is different from that published
on the preceding Business Day, if more than one rate is published, then the
highest of such rates. In the event that The Wall Street Journal shall, for any
reason, fail or cease to publish the One-Month LIBOR, MLBFS will choose a
reasonably comparable index or source to use as the basis for the Interest Rate.

"Line Fee" shall mean a tee of $30,000.00 payable periodically by Customer to
MLBFS in accordance with the provisions of Section 2.2 hereof.
<PAGE>

"Loan Documents" shall mean this Loan Agreement, any indenture, any guaranty of
any of the Obligations and all other security and other instruments,
assignments, certificates, certifications and agreements of any kind relating to
any of the Obligations, whether obtained, authorized, authenticated, executed,
sent or received concurrently with or subsequent to this Loan Agreement, or
which evidence the creation, guaranty or collateralization of any of the
Obligations or the granting or perfection of liens or security interests upon
any Collateral or any other collateral for the Obligations, including any
modifications, amendments or restatements of the foregoing.

"Location of Tangible Collateral" shall mean the address of Customer set forth
at the beginning of this Loan Agreement, together with any other address or
addresses set forth on an exhibit hereto as being a Location of Tangible
Collateral.

"Maturity Date" shall mean the date of expiration of the WCMA Line of Credit.

"Maximum WCMA Line of Credit" shall mean $4,000,000.00.

"Obligations" shall mean all liabilities, indebtedness and other obligations of
Customer to MLBFS, howsoever created, arising or evidenced, whether now existing
or hereafter arising, whether direct or indirect, absolute or contingent, due or
to become due, primary or secondary or joint or several, and, without limiting
the generality of the foregoing, shall include principal, accrued interest
(including without limitation interest accruing after the filing of any petition
in bankruptcy), all advances made by or on behalf of MLBFS under the Loan
Documents, collection and other costs and expenses incurred by or on behalf of
MLBFS, whether incurred before or after judgment and all present and future
liabilities, indebtedness and obligations of Customer under this Loan Agreement.

"Permitted Liens" shall mean with respect to the Collateral: (i) liens for
current taxes not yet due and payable, other non-consensual liens arising in the
ordinary course of business for sums not due, and, if MLBFS' rights to and
interest in the Collateral are not materially and adversely affected thereby,
any such liens for taxes or other non-consensual liens arising in the ordinary
course of business being contested in good faith by appropriate proceedings;
(ii) liens in favor of MLBFS; (iii) liens which will be discharged with the
proceeds of the initial WCMA Loan; and (iv) any other liens expressly permitted
in writing by MLBFS.

"Person" shall mean any natural person and any corporation, partnership
(general, limited or otherwise), limited liability company, trust, association,
joint venture, governmental body or agency or other entity having legal status
of any kind.

"Pledgor" shall mean each Person who at any time provides collateral, or
otherwise now or hereinafter agrees to grant MLBFS a security interest in any
assets as security for Customer's Obligations.

"Renewal Year" shall mean and refer to the 12-month period immediately following
the Initial Maturity Date and each 12-month period thereafter.
<PAGE>

"WCMA Account" shall mean and refer to the Working Capital Management Account of
Customer with MLPF&S identified as Account No. 208-07517 and any successor
Working Capital Management Account of Customer with MLPF&S.

"WCMA Line of Credit" shall mean a line of credit funded by MLBFS through the
WCMA Account.

"WCMA Loan" shall mean each advance made by MLBFS pursuant to this Loan
Agreement.

"WCMA Loan Balance" shall mean an amount equal to the aggregate unpaid principal
amount of all WCMA Loans.

"UCC" shall mean the Uniform Commercial Code of Illinois as in effect in
Illinois from time to time.

1.2 OTHER TERMS. Except as otherwise defined herein: (i) all terms used in this
Loan Agreement which are defined in the UCC shall have the meanings set forth in
the UCC, and (ii) capitalized terms used herein which are defined in the WCMA
Agreement (including, without limitation, "Money Accounts", "Minimum Money
Accounts Balance", and "WCMA Directed Reserve Program") shall have the meanings
set forth in the WCMA Agreement, and (iii) accounting terms not defined herein
shall have the meaning ascribed to them in GAAP.

1.3 UCC FILING. Customer hereby authorizes MLBFS to tile a record or records (as
defined or otherwise specified under the UCC), including, without limitation,
financing statements, in all jurisdictions and with all filing offices as MLBFS
may determine, in its sole discretion, are necessary or advisable to perfect the
security interest granted to MLBFS herein. Such financing statements may
describe the Collateral in the same manner as described herein or may contain an
indication or description of collateral that describes such property in any
other manner as MLBFS may determine, in its sole discretion, is necessary,
advisable or prudent to ensure the perfection of the security interest in the
Collateral granted to the MLBFS herein.

                       ARTICLE II. THE WCMA LINE OF CREDIT

2.1 WCMA PROMISSORY NOTE. FOR VALUE RECEIVED, Customer hereby promises to pay to
the order of MLBFS, at the times and in the manner set forth in this Loan
Agreement, or in such other manner and at such place as MLBFS may hereafter
designate in writing, the following: (a) on the Maturity Date, or if earlier, on
the date of termination of the WCMA Line of Credit, the WCMA Loan Balance; (b)
interest at the Interest Rate (or, if applicable, at the Default Rate) on the
outstanding WCMA Loan Balance, from and including the date on which the initial
WCMA Loan is made until the date of payment of all WCMA Loans in full; and (c)
on demand, all other sums payable pursuant to this Loan Agreement, including,
but not limited to, the periodic Line Fee. Except as otherwise expressly set
forth herein, Customer hereby waives presentment, demand for payment, protest
and notice of protest, notice of dishonor, notice of acceleration, notice of
intent to accelerate and all other notices and formalities in connection with
this WCMA Promissory Note and this Loan Agreement.
<PAGE>

2.2 WCMA LOANS.

(a) ACTIVATION DATE. Provided that: (i) the Commitment Expiration Date shall not
then have occurred, and (ii) Customer shall have subscribed to the WCMA Program
and its subscription to the WCMA Program shall then be in effect, the Activation
Date shall occur on or promptly after the date, following the acceptance of this
Loan Agreement by MLBFS at its office in Chicago, Illinois, upon which each of
the General Funding Conditions shall have been met or satisfied to the
reasonable satisfaction of MLBFS. No activation by MLBFS of the WCMA Line of
Credit for a nominal amount shall be deemed evidence of the satisfaction of any
of the conditions herein set forth, or a waiver of any of the terms or
conditions hereof. Customer hereby authorizes MLBFS to pay out of and charge to
Customers WCMA Account on the Activation Date any and all amounts necessary to
fully pay off any bank or other financial institution having a lien upon any of
the Collateral other than a Permitted Lien.

(b) WCMA LOANS. Subject to the terms and conditions hereof, during the period
from and after the Activation Date to the first to occur of the Maturity Date or
the date of termination of the WCMA Line of Credit pursuant to the terms hereof,
and in addition to WCMA Loans automatically made to pay accrued interest, as
hereafter provided: (i) MLBFS will make WCMA Loans to Customer in such amounts
as Customer may from time to time request in accordance with the terms hereof,
up to an aggregate outstanding amount not to exceed the Maximum WCMA Line of
Credit, and (ii) Customer may repay any WCMA Loans in whole or in part at any
time, and request a re-borrowing of amounts repaid on a revolving basis.
Customer may request such WCMA Loans by use of WCMA Checks, FTS, Visa charges,
wire transfers, or such other means of access to the WCMA Line of Credit as may
be permitted by MLBFS from time to time; it being understood that so long as the
WCMA Line of Credit shall be in effect, any charge or debit to the WCMA Account
which but for the WCMA Line of Credit would under the terms of the WCMA
Agreement result in an overdraft, shall be deemed a request by Customer for a
WCMA Loan.

(c) CONDITIONS OF WCMA LOANS. Notwithstanding the foregoing, MLBFS shall not be
obligated to make any WCMA Loan, and may without notice refuse to honor any such
request by Customer, if at the time of receipt by MLBFS of Customer's request:
(i) the making of such WCMA Loan would cause the Maximum WCMA Line of Credit to
be exceeded; or (ii) the Maturity Date shall have occurred, or the WCMA Line of
Credit shall have otherwise been terminated in accordance with the terms hereof;
or (iii) Customer's Subscription to the WCMA Program shall have been terminated;
or (iv) an event shall have occurred and be continuing which shall have caused
any of the General Funding Conditions to not then be met or satisfied to the
reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a time
when any one or more of said conditions shall not have been met shall not in any
event be construed as a waiver of said condition or conditions or of any
Default, and shall not prevent MLBFS at any time thereafter while any condition
shall not have been met from refusing to honor any request by Customer for a
WCMA Loan.

(d) LIMITATION OF LIABILITY. MLBFS shall not be responsible, and shall have no
liability to Customer or any other party, for any delay or failure of MLBFS to
honor any request of Customer for a WCMA Loan or any other act or omission of
MLBFS, MLPF&S or any of their affiliates due to or resulting from any system
failure, error or delay in posting or other clerical error, loss of power, fire,
Act of God or other cause beyond the reasonable control of MLBFS, MLPF&S or any
of their affiliates unless directly arising out of the willful wrongful act or
active gross negligence of MLBFS. In no event shall MLBFS be liable to Customer
or any other party for any incidental or consequential damages arising from any
act or omission by MLBFS, MLPF&S or any of their affiliates in connection with
the WCMA Line of Credit or this Loan Agreement.
<PAGE>

(e) INTEREST. (i) An amount equal to accrued interest on the daily WCMA Loan
Balance shall be payable by Customer monthly on each Interest Due Date,
commencing with the first Interest Due Date after the Activation Date. Unless
otherwise hereafter directed in writing by MLBFS on or after the first to occur
of the Maturity Date or the date of termination of the WCMA Line of Credit
pursuant to the terms hereof, such interest will be automatically charged to the
WCMA Account on the applicable Interest Due Date, and, to the extent not paid
with free credit balances or the proceeds of sales of any Money Accounts then in
the WCMA Account, as hereafter provided, paid by a WCMA Loan and added to the
WCMA Loan Balance. All interest shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days.

(ii) Upon the occurrence and during the continuance of any Default, but without
limiting the rights and remedies otherwise available to MLBFS hereunder or
waiving such Default, the interest payable by Customer hereunder shall at the
option of MLBFS accrue and be payable at the Default Rate. The Default Rate,
once implemented, shall continue to apply to the Obligations under this Loan
Agreement and be payable by Customer until the date MLBFS gives written notice
that such Default has been cured to the satisfaction of MLBFS.

(iii) Notwithstanding any provision to the contrary in any of the Loan
Documents, no provision of any of the Loan Documents shall require the payment
or permit the collection of Excess Interest. If any Excess Interest is provided
for, or adjudicated as being provided for, in any of the Loan Documents, then:
(A) Customer shall not be obligated to pay any Excess Interest; and (B) any
Excess Interest that MLBFS may have received hereunder or under any of the Loan
Documents shall, at the option of MLBFS, be either applied as a credit against
the then unpaid WCMA Loan Balance or refunded to the payor thereof.

(f) PAYMENTS. All payments required or permitted to be made pursuant to this
Loan Agreement shall be made in lawful money of the United States. Unless
otherwise directed by MLBFS, payments on account of the WCMA Loan Balance may be
made by the delivery of checks (other than WCMA Checks), or by means of FTS or
wire transfer of funds (other than funds from the WCMA Line of Credit) to MLPF&S
for credit to Customers WCMA Account. Notwithstanding anything in the WCMA
Agreement to the contrary, Customer hereby irrevocably authorizes and directs
MLPF&S to apply available free credit balances in the WCMA Account to the
repayment of the WCMA Loan Balance prior to application for any other purpose.
Payments to MLBFS from funds in the WCMA Account shall be deemed to be made by
Customer upon the same basis and schedule as funds are made available for
investment in the Money Accounts in accordance with the terms of the WCMA
Agreement. All funds received by MLBFS from MLPF&S pursuant to the aforesaid
authorization shall be applied by MLBFS to repayment of the WCMA Loan Balance.
The acceptance by or on behalf of MLBFS of a check or other payment for a lesser
amount than shall be due from Customer, regardless of any endorsement or
statement thereon or transmitted therewith, shall not be deemed an accord and
satisfaction or anything other than a payment on account, and MLBFS or anyone
acting on behalf of MLBFS may accept such check or other payment without
prejudice to the rights of MLBFS to recover the balance actually due or to
pursue any other remedy under this Loan Agreement or applicable law for such
balance. All checks accepted by or on behalf of MLBFS in connection with the
WCMA Line of Credit are subject to final collection.
<PAGE>

(g) IRREVOCABLE INSTRUCTIONS TO MLPF&S. In order to minimize the WCMA Loan
Balance, Customer hereby irrevocably authorizes and directs MLPF&S, effective on
the Activation Date and continuing thereafter so long as this Loan Agreement
shall be in effect (i) to immediately and prior to application for any other
purpose pay to MLBFS to the extent of any WCMA Loan Balance or other amounts
payable by Customer hereunder all available free credit balances from time to
time in the WCMA Account and (ii) if such available free credit balances are
insufficient to pay the WCMA Loan Balance and such other amounts, and there are
in the WCMA Account at any time any investments in Money Accounts (other than
any investments constituting any Minimum Money Accounts Balance under the WCMA
Directed Reserve Program), to immediately liquidate such investments and pay to
MLBFS to the extent of any WCMA Loan Balance and such other amounts the
available proceeds from the liquidation of any such Money Accounts.

(h) LATE CHARGE. Any payment or deposit required to be made by Customer pursuant
to the Loan Documents not paid or made within ten (10) days of the applicable
due date shall be subject to a late charge in an amount equal to the lesser of:
(a) 5% of the overdue amount, or (b) the maximum amount permitted by applicable
law. Such late charge shall be payable on demand, or, without demand, may in the
sole discretion of MLBFS be paid by a Subsequent WCMA Loan and added to the WCMA
Loan Balance in the same manner as provided herein for accrued interest with
respect to the WCMA Line of Credit.

(i) STATEMENTS. MLPF&S will include in each monthly statement it issues under
the WCMA Program information with respect to WCMA Loans and the WCMA Loan
Balance. Any questions that Customer may have with respect to such information
should be directed to MLBFS; and any questions with respect to any other matter
in such statements or about or affecting the WCMA Program should be directed to
MLPF&S.

(j) USE OF WCMA LOAN PROCEEDS. The proceeds of each WCMA Loan initiated by
Customer shall be used by Customer solely for working capital in the ordinary
course of its business, or, with the prior written consent of MLBFS, for other
lawful business purposes of Customer not prohibited hereby. CUSTOMER AGREES THAT
UNDER NO CIRCUMSTANCES WILL THE PROCEEDS OF ANY WCMA LOAN BE USED: (I) FOR
PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OF ANY PERSON WHATSOEVER, OR (II) TO
PURCHASE, CARRY OR TRADE IN SECURITIES, OR REPAY DEBT INCURRED TO PURCHASE,
CARRY OR TRADE IN SECURITIES, WHETHER IN OR IN CONNECTION WITH THE WCMA ACCOUNT,
ANOTHER ACCOUNT OF CUSTOMER WITH MLPF&S OR AN ACCOUNT OF CUSTOMER AT ANY OTHER
BROKER OR DEALER IN SECURITIES, OR (III) UNLESS OTHERWISE CONSENTED TO IN
WRITING BY MLBFS, TO PAY ANY AMOUNT TO MERRILL LYNCH AND CO., INC. OR ANY OF ITS
SUBSIDIARIES, OTHER THAN MERRILL LYNCH BANK USA, MERRILL LYNCH BANK & TRUST CO.
OR ANY SUBSIDIARY OF EITHER OF THEM (INCLUDING MLBFS AND MERRILL LYNCH CREDIT
CORPORATION).
<PAGE>

(k) RENEWAL AT OPTION OF MLBFS; RIGHT OF CUSTOMER TO TERMINATE. MLBFS may at any
time, in its sole discretion and at its sole option, renew the WCMA Line of
Credit for one or more Renewal Years or extend the Maturity Date; it being
understood, however, that no such renewal or extension shall be effective unless
set forth in a writing executed by a duly authorized representative of MLBFS and
delivered to Customer. Unless any such renewal or extension is accompanied by a
proposed change in the terms of the WCMA Line of Credit (other than the
extension of the Maturity Date), no Customer approval shall be required.
Customer shall, however, have the right to terminate the WCMA Line of Credit at
any time upon written notice to MLBFS. Concurrently with any such termination,
Customer shall pay to MLBFS the entire WCMA Loan Balance and all other
Obligations.

(l) LINE FEES. (i) In consideration of the extension of the WCMA Line of Credit
by MLBFS to Customer during the period from the Activation Date to the Initial
Maturity Date, Customer has paid or shall pay the Line Fee to MLBFS. If the Line
Fee has not heretofore been paid by Customer, Customer hereby authorizes MLBFS,
at its option, to either cause the Line Fee to be paid on the Activation Date
with a WCMA Loan, or invoice Customer for such Line Fee (in which event Customer
shall pay said fee within 5 Business Days after receipt of such invoice). No
delay in the Activation Date, howsoever caused, shall entitle Customer to any
rebate or reduction in the Line Fee or to any extension of the Initial Maturity
Date.

(ii) Customer shall pay to MLBFS an additional Line Fee for each Renewal Year,
or an extension fee for any extension of the Maturity Date (each extension fee
shall be equal to the pro rata amount of the Line Fee corresponding to the
length of the extension period). In connection therewith, Customer hereby
authorizes MLBFS, at its option, to either cause each such fee to be paid with a
WCMA Loan on or at any time after the first Business Day of such Renewal Year or
extension period, as applicable, or invoiced to Customer at such time (in which
event Customer shall pay such Line Fee within 5 Business Days after receipt of
such invoice). Each Line Fee and extension fee shall be deemed fully earned by
MLBFS on the date payable by Customer, and no termination of the WCMA Line of
Credit, howsoever caused, shall entitle Customer to any rebate or refund of any
portion of such fee; provided, however, that if Customer shall terminate the
WCMA Line of Credit not later than 5 Business Days after the receipt by Customer
of notice from MLBFS of a renewal of the WCMA Line of Credit, Customer shall be
entitled to a refund of any Line Fee charged by MLBFS for the ensuing Renewal
Year.

                         ARTICLE III. GENERAL PROVISIONS

3.1 REPRESENTATIONS AND WARRANTIES

Customer represents and warrants to MLBFS that:

(a) ORGANIZATION AND EXISTENCE. Customer is a corporation on, duly organized and
validly existing in good standing under the laws of the state of New York and is
qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary.
<PAGE>

(b) EXECUTION, DELIVERY AND PERFORMANCE. Each Credit Party has the requisite
power and authority to enter into and perform the Loan Documents. The Customer
holds all necessary permits, licenses, certificates of occupancy and other
governmental authorizations and approvals required in order to own and operate
the Customer's business. The execution, delivery and performance by Customer of
this Loan Agreement and by each of the other Credit Parties of such of the other
Loan Documents to which it is a party: (i) have been duly authorized by all
requisite action, (ii) do not and will not violate or conflict with any law,
order or other governmental requirement, or any of the agreements, instruments
or documents which formed or govern any of the Credit Parties, and (iii) do not
and will not breach or violate any of the provisions of, and will not result in
a default by any of the Credit Parties under, any other agreement, instrument or
document to which it is a party or is subject.

(c) NOTICES AND APPROVALS. Except as may have been given or obtained, no notice
to or consent or approval of any governmental body or authority or other third
party whatsoever (including, without limitation, any other creditor) is required
in connection with the execution, delivery or performance by any Credit Party of
such of this Loan Agreement and the Loan Documents to which it is a party.

(d) ENFORCEABILITY. The Loan Documents to which any Credit Party is a party are
the respective legal, valid and binding obligations of such Credit Party,
enforceable against it or them, as the case may be, in accordance with their
respective terms, except as enforceability may be limited by bankruptcy and
other similar laws affecting the rights of creditors generally or by general
principles of equity.

(e) COLLATERAL. Except for priorities afforded to any Permitted Liens: (i)
Customer has good and marketable title to the Collateral, (ii) none of the
Collateral is subject to any lien, encumbrance or security interest, and (iii)
upon the filing of all Uniform Commercial Code financing statements
authenticated or otherwise authorized by Customer with respect to the Collateral
in the appropriate jurisdiction(s) and/or the completion of any other action
required by applicable law to perfect its liens and security interests, MLBFS
will have valid and perfected first liens and security interests upon all of the
Collateral.

(f) FINANCIAL STATEMENTS. Except as expressly set forth in Customer's financial
statements, all financial statements of Customer furnished to MLBFS have been
prepared in conformity with generally accepted accounting principles,
consistently applied, are true and correct in all material respects, and fairly
present the financial condition of it as at such dates and the results of its
operations for the periods then ended (subject, in the case of interim unaudited
financial statements, to normal yearend adjustments); and since the most recent
date covered by such financial statements, there has been no material adverse
change in any such financial condition or operation. All financial statements
furnished to MLBFS of any Guarantor are true and correct in all material
respects and fairly represent such Guarantor's financial condition as of the
date of such financial statements, and since the most recent date of such
financial statements, there has been no material adverse change in such
financial condition.
<PAGE>

(g) LITIGATION; COMPLIANCE WITH ALL LAWS. No litigation, arbitration,
administrative or governmental proceedings are pending or, to the knowledge of
Customer, threatened against any Credit Party, which would, if adversely
determined, materially and adversely affect (i) such Credit Party's interest in
the Collateral or the liens and security interests of MLBFS hereunder or under
any of the Loan Documents, or (ii) the financial condition of any Credit Party
or its continued operations. Each Credit Party is in compliance in all material
respects with all laws, regulations, requirements and approvals applicable to
such Credit Party.

(h) TAX RETURNS. All federal, state and local tax returns, reports and
statements required to be filed by any Credit Party have been filed with the
appropriate governmental agencies and all taxes due and payable by any Credit
Party have been timely paid (except to the extent that any such failure to file
or pay will not materially and adversely affect (i) either the liens and
security interests of MLBFS hereunder or under any of the Loan Documents, (ii)
the financial condition of any Credit Party, or (iii) its continued operations).

(i) COLLATERAL LOCATION. All of the tangible Collateral is located at a Location
of Tangible Collateral.

(j) NO DEFAULT. No "Default or Event of Default" (each as defined in this Loan
Agreement or any of the other Loan Documents) has occurred and is continuing.

(k) NO OUTSIDE BROKER. Except for employees of MLBFS, MLPF&S or one of their
affiliates, Customer has not in connection with the transactions contemplated
hereby directly or indirectly engaged or dealt with, and was not introduced or
referred to MLBFS by, any broker or other loan arranger.

Each of the foregoing representations and warranties: (i) has been and will be
relied upon as an inducement to MLBFS to provide the WCMA Line of Credit, and
(ii) is continuing and shall be deemed remade by Customer concurrently with each
request for a WCMA Loan.

3.2 FINANCIAL AND OTHER INFORMATION

(a) Customer shall furnish or cause to be furnished to MLBFS during the term of
this Loan Agreement all of the following:

(i) ANNUAL FINANCIAL STATEMENTS. Within 120 days after the close of each fiscal
year of Customer, a copy of the annual audited financial statements of Customer,
including in reasonable detail, a balance sheet and statement of retained
earnings as at the close of such fiscal year and statements of profit and loss
and cash flow for such fiscal year;

(ii) CERTIFICATE OF COMPLIANCE. Within 45 days after the close of each fiscal
quarter of Customer, a Certificate of Compliance, duly executed by an authorized
officer of Customer, in the form of Exhibit B attached hereto, or such other
form as reasonably required by MLBFS from time to time;

(iii) A/R AGINGS. Within 45 days after the close of each fiscal quarter of
Customer, a copy of the Accounts Receivable Aging of Customer as of the end of
such fiscal quarter;
<PAGE>

(iv) PERSONAL FINANCIAL STATEMENTS. Not later than 120 days after the close of
each fiscal year of Customer, a current signed financial statement of each
Individual Guarantor;

(v) SEC REPORTS. Customer shall furnish or cause to be furnished to MLBFS not
later than 45 days after the date of filing with the Securities and Exchange
Commission ("SEC"), a copy of each 10-K, 10-Q and other report required to be
filed with the SEC during the term hereof by Customer; and

(vi) OTHER INFORMATION. Such other information as MLBFS may from time to time
reasonably request relating to Customer, any Credit Party or the Collateral.

(b) GENERAL AGREEMENTS WITH RESPECT TO FINANCIAL INFORMATION. Customer agrees
that except as otherwise specified herein or otherwise agreed to in writing by
MLBFS: (i) all annual financial statements required to be furnished by Customer
to MLBFS hereunder will be prepared by either the current independent
accountants for Customer or other independent accountants reasonably acceptable
to MLBFS, and (ii) all other financial information required to be furnished by
Customer to MLBFS hereunder will be certified as correct in all material
respects by the party who has prepared such information, and, in the case of
internally prepared information with respect to Customer, certified as correct
by its chief financial officer.

3.3 OTHER COVENANTS

Customer further covenants and agrees during the term of this Loan Agreement
that:

(a) FINANCIAL RECORDS; INSPECTION. Each Credit Party (other then any Individual
Guarantor) will: (i) maintain at its principal place of business complete and
accurate books and records, and maintain all of its financial records in a
manner consistent with the financial statements heretofore furnished to MLBFS,
or prepared on such other basis as may be approved in writing by MLBFS; and (ii)
permit MLBFS or its duly authorized representatives, upon reasonable notice and
at reasonable times, to inspect its properties (both real and personal),
operations, books and records.

(b) TAXES. Each Credit Party will pay when due all of its respective taxes,
assessments and other governmental charges, howsoever designated, and all other
liabilities and obligations, except to the extent that any such failure to file
or pay will not materially and adversely affect either the liens and security
interests of MLBFS hereunder or under any of the Loan Documents, the financial
condition of any Credit Party or its continued operations.

(c) COMPLIANCE WITH LAWS AND AGREEMENTS. No Credit Party will violate (i) any
law, regulation or other governmental requirement, any judgment or order of any
court or governmental agency or authority; (ii) any agreement, instrument or
document which is materiel to its operations or to the operation or use of any
Collateral, in each case as contemplated by the Loan Documents; or (iii) any
agreement, instrument or document to which it is a party or by which it is
bound, if any such violation will materially and adversely affect either the
liens and security interests of MLBFS hereunder or under any of the Loan
Documents, the financial condition of any Credit Party, or its continued
operations.
<PAGE>

(d) NO USE OF MERRILL LYNCH NAME. No Credit Party will directly or indirectly
publish, disclose or otherwise use in any advertising or promotional material,
or press release or interview, the name, logo or any trademark of MLBFS, MLPF&S,
Merrill Lynch and Co., Incorporated or any of their affiliates.

(e) NOTIFICATION BY CUSTOMER. Customer shall provide MLBFS with prompt written
notification of: (i) any Default; (ii) any material adverse change in the
business, financial condition or operations of any Credit Party; (iii) any
information which indicates that any financial statements of any Credit Party
fail in any material respect to present fairly the financial condition and
results of operations purported to be presented in such statements; (iv) any
threatened or pending litigation involving any Credit Party; (v) any casualty
loss, attachment, lien, judicial process, encumbrance or claim affecting or
involving $25,000 or more of any Collateral; and (vi) any change in Customer's
outside accountants. Each notification by Customer pursuant hereto shall specify
the event or information causing such notification, and to the extent
applicable, shall specify the steps being taken to rectify or remedy such event
or information.

(f) ENTITY ORGANIZATION. Each Credit Party which is an entity will (i) remain
(A) validly existing and in good standing in the state of its organization and
(B) qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary, and (ii) maintain all governmental permits, licenses and
authorizations. Customer shall give MLBFS not less than 30 days prior written
notice of any change in name (including any fictitious name) or chief executive
office, place of business, or as applicable, the principal residence of any
Credit Party.

(g) MERGER, CHANGE IN BUSINESS. Except upon the prior written consent of MLBFS
Customer shall not cause or permit any Credit Party to: (i) be a party to any
merger or consolidation with, or purchase or otherwise acquire all or
substantially all of the assets of, or any material stock, partnership, joint
venture or other equity interest in, any Person, or sell, transfer or lease all
or any substantial part of its assets (ii) engage in any material business
substantially different from its business in effect as of the date of
application by Customer for credit from MLBFS, or cease operating any such
material business; or (iii) cause or permit any other Person to assume or
succeed to any material business or operations of such Credit Party.

(h) FIXED CHARGE COVERAGE. Customer's "Fixed Charge Coverage Ratio" shall at all
times exceed 1.25 to 1.00. For purposes hereof, "Fixed Charge Coverage Ratio"
shall mean the ratio of: (a) income before interest (including payments in the
nature of interest under capital leases), taxes, depreciation, amortization, and
other similar non-cash charges, minus any internally financed capital
expenditures, to (b) the sum of (i) any dividends and other distributions paid
or payable to shareholders, any taxes paid in cash, and interest expense, as
determined on a trailing I2-month basis, plus (ii) the aggregate principal
scheduled to be paid or accrued over the next 12 month period and the aggregate
rental under capital leases scheduled to be paid or accrued over the next 12
month period; all asset forth in Customer's regular quarterly financial
statements prepared in accordance with GAAP.
<PAGE>

(i) TOTAL DEBT TO EBITDA. Customer's "Total Debt to EBITDA Ratio" shall not at
any time exceed 3.75 to 1.00. For purposes hereof, "Total Debt to EBITDA Ratio"
shall mean the ratio of (a) all debt for borrowed money including all
outstanding and unused availability under any revolving credit facility, and
including debt to MLBFS, to (b) income before interest (including payments in
the nature of interest under capital leases), taxes, depreciation, amortization,
and other non-cash charges; all as determined on a trailing 12-month basis as
set forth in Customers regular quarterly financial statements prepared in
accordance with GAAP.

(j) STEP UP MINIMUM TANGIBLE NET WORTH. Commencing on the Activation Date and
continuing through December 30, 2004, Customer's Tangible Net Worth shall exceed
$2,250,000.00. Commencing on December 31, 2004 and continuing through December
30, 2005, Customer's Tangible Net Worth shall exceed $2,750,000.00. Commencing
on December 31, 2005 and continuing at all times thereafter, Customer's Tangible
Net Worth shall exceed $3,000,000.00. For the purposes hereof, the term
"Tangible Net Worth" shall mean Customer's net worth as shown on Customer's
regular financial statements prepared in accordance with GAAP, but excluding an
amount equal to: (i) any Intangible Assets, and (ii) any amounts now or
hereafter directly or indirectly owing to Customer by officers, shareholders or
affiliates of Customer. Intangible Assets" shall mean the total amount of
goodwill, patents, trade names, trade or service marks, copyrights, experimental
expense, organization expense, unamortized debt discount and expense, the excess
of cost of shares acquired over book value of related assets, and such other
assets as are properly classified as "intangible assets" of the Customer
determined in accordance with GAAP.

3.4 COLLATERAL

(a) PLEDGE OF COLLATERAL. To secure payment and performance of the Obligations,
Customer hereby pledges, assigns, transfers and sets over to MLBFS, and grants
to MLBFS first liens and security interests in and upon all of the Collateral,
subject only to priorities afforded to Permitted Liens.

(b) LIENS. Except upon the prior written consent of MLBFS, Customer shall not
create or permit to exist any lien, encumbrance or security interest upon or
with respect to any Collateral now owned or hereafter acquired other than
Permitted Liens.

(c) PERFORMANCE OF OBLIGATIONS. Customer shall perform all of its obligations
owing on account of or with respect to the Collateral; it being understood that
nothing herein, and no action or inaction by MLBFS, under this Loan Agreement or
otherwise, shall be deemed an assumption by MLBFS of any of Customer's said
obligations.

(d) SALES AND COLLECTIONS. Customer shall not sell, transfer or otherwise
dispose of any Collateral, except that so long as no Event of Default shall have
occurred and be continuing, Customer may in the ordinary course of its business:
(i) sell any Inventory normally held by Customer for sale, (ii) use or consume
any materials and supplies normally held by Customer for use or consumption, and
(iii) collect all of its Accounts.

(e) ACCOUNT SCHEDULES. Upon the request of MLBFS, which may be made from time to
time, Customer shall deliver to MLBFS, in addition to the other information
required hereunder, a schedule identifying, for each Account and all Chattel
Paper subject to MLBFS security interests hereunder, each account debtor by name
and address and amount, invoice or contract number and date of each invoice or
contract. Customer shall furnish to MLBFS such additional information with
respect to the Collateral, and amounts received by Customer as proceeds of any
of the Collateral, as MLBFS may from time to time reasonably request.
<PAGE>

(f) ALTERATIONS AND MAINTENANCE. Except upon the prior written consent of MLBFS,
Customer shall not make or permit any material alterations to any tangible
Collateral which might materially reduce or impair its market value or utility.
Customer shall at all times (i) keep the tangible Collateral in good condition
and repair, reasonable wear and tear excepted, (ii) protect the Collateral
against loss, damage or destruction and (iii) pay or cause to be paid all
obligations arising from the repair and maintenance of such Collateral, as well
as all obligations with respect to any Location of Tangible Collateral (e.g.,
all obligations under any lease, mortgage or bailment agreement), except for any
such obligations being contested by Customer in good faith by appropriate
proceedings.

(g) LOCATION. Except for movements required in the ordinary course of Customers
business, Customer shall give MLBFS 30 days' prior written notice of the placing
at or movement of any tangible Collateral to any location other than a Location
of Tangible Collateral. In no event shall Customer cause or permit any material
tangible Collateral to be removed from the United States without the express
prior written consent of MLBFS. Customer will keep its books and records at its
principal office address specified in the first paragraph of this Loan
Agreement. Customer will not change the address where books and records are
kept, or change its name or taxpayer identification number. Customer will place
a legend acceptable to MLBFS on all Chattel Paper that is Collateral in the
possession or control of Customer from time to time indicating that MLBFS has a
security interest therein.

(h) INSURANCE. Customer shall insure all of the tangible Collateral under a
policy or policies of physical damage insurance for the full replacement value
thereof against such perils as MLBFS shall reasonably require and also providing
that losses will be payable to MLBFS as its interests may appear pursuant to a
lender's or mortgagee's long form loss payable endorsement and containing such
other provisions as may be reasonably required by MLBFS. Customer shall further
provide and maintain a policy or policies of commercial general liability
insurance naming MLBFS as an additional party insured. Customer shall maintain
such other insurance as may be required by law or is customarily maintained by
companies in a similar business or otherwise reasonably required by MLBFS. All
such insurance policies shall provide that MLBFS will receive not less than 10
days prior written notice of any cancellation, and shall otherwise be in form
and amount and with an insurer or insurers reasonably acceptable to MLBFS.
Customer shall furnish MLBFS with a copy or certificate of each such policy or
policies and, prior to any expiration or cancellation, each renewal or
replacement thereof.
<PAGE>

(i) EVENT OF LOSS. Customer shall at its expense promptly repair all repairable
damage to any tangible Collateral. In the event that there is an Event of Loss
and the affected Collateral had a value prior to such Event of Loss of
$25,000.00 or more, then, on or before the first to occur of (i) 90 days after
the occurrence of such Event of Loss, or (ii) 10 Business Days after the date on
which either Customer or MLBFS shall receive any proceeds of insurance on
account of such Event of Loss, or any underwriter of insurance on such
Collateral shall advise either Customer or MLBFS that it disclaims liability in
respect of such Event of Loss, Customer shall, at Customers option, either
replace the Collateral subject to such Event of Loss with comparable Collateral
free of all liens other than Permitted Liens (in which event Customer shall be
entitled to utilize the proceeds of insurance on account of such Event of Loss
for such purpose, and may retain any excess proceeds of such insurance), or
permanently prepay the Obligations by an amount equal to the actual cash value
of such Collateral as determined by either the insurance company's payment (plus
any applicable deductible) or, in absence of insurance company payment, as
reasonably determined by MLBFS; it being further understood that any such
permanent prepayment shall cause an immediate permanent reduction in the Maximum
WCMA Line of Credit in the amount of such prepayment and shall not reduce the
amount of any future reductions in the Maximum WCMA Line of Credit that may be
required hereunder. Notwithstanding the foregoing, if at the time of occurrence
of such Event of Loss or any time thereafter prior to replacement or line
reduction, as aforesaid, an Event of Default shall have occurred and be
continuing hereunder, then MLBFS may at its sole option, exercisable at any time
while such Event of Default shall be continuing, require Customer to either
replace such Collateral or prepay the Obligations and reduce the Maximum WCMA
Line of Credit, as aforesaid.

(j) NOTICE OF CERTAIN EVENTS. Customer shall give MLBFS immediate notice of any
attachment, lien, judicial process, encumbrance or claim affecting or involving
$25,000.00 or more of the Collateral.

(k) INDEMNIFICATION. Customer shall indemnify, defend and save MLBFS harmless
from and against any and all claims, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) of any
nature whatsoever which may be asserted against or incurred by MLBFS arising out
of or in any manner occasioned by (i) the ownership, collection, possession, use
or operation of any Collateral, or (ii) any failure by Customer to perform any
of its obligations hereunder; excluding, however, from said indemnity any such
claims, liabilities, etc. arising directly out of the willful wrongful act or
active gross negligence of MLBFS. This indemnity shall survive the expiration or
termination of this Loan Agreement as to all matters arising or accruing prior
to such expiration or termination.

3.5 EVENTS OF DEFAULT

The occurrence of any of the following events shall constitute an "Event of
Default" under this Loan Agreement:

(a) EXCEEDING THE MAXIMUM WCMA LINE OF CREDIT. If the WCMA Loan Balance shall at
any time exceed the Maximum WCMA Line of Credit and Customer shall fail to
deposit sufficient funds into the WCMA Account to reduce the WCMA Loan Balance
below the Maximum WCMA Line of Credit within five (5) Business Days after
written notice thereof shall have been given by MLBFS to Customer.

(b) OTHER FAILURE TO PAY. Customer shall fail to pay to MLBFS or deposit into
the WCMA Account when due any other amount owing or required to be paid or
deposited by Customer under this Loan Agreement or any of the Loan Documents, or
shall fail to pay when due any other Obligations, and any such failure shall
continue for more than five (5) Business Days after written notice thereof shall
have been given by MLBFS to Customer.
<PAGE>

(c) FAILURE TO PERFORM. Any Credit Party shall default in the performance or
observance of any covenant or agreement on its part to be performed or observed
under any of the Loan Documents (not constituting an Event of Default under any
other clause of this Section), and such default shall continue unremedied for
ten (10) Business Days (i) after written notice thereof shall have been given by
MLBFS to Customer, or (ii) from Customer's receipt of any notice or knowledge of
such default from any other source.

(d) BREACH OF WARRANTY. Any representation or warranty made by any Credit Party
contained in this Loan Agreement or any of the Loan Documents shall at any time
prove to have been incorrect in any material respect when made.

(e) DEFAULT UNDER OTHER ML AGREEMENT. A default or event of default by any
Credit Party shall occur under the terms of any other agreement, instrument or
document with or intended for the benefit of MLBFS, MLPF&S or any of their
affiliates, and any required notice shall have been given and required passage
of time shall have elapsed, OR the WCMA Agreement shall be terminated for any
reason.

(f) BANKRUPTCY EVENT. Any Bankruptcy Event shall occur.

(g) MATERIAL IMPAIRMENT. Any event shall occur which shall reasonably cause
MLBFS to in good faith believe that the prospect of full payment or performance
by the Credit Parties of any of their respective liabilities or obligations
under any of the Loan Documents has been materially impaired. The existence of
such a material impairment shall be determined in a manner consistent with the
intent of Section 1-208 of the UCC.

(h) DEFAULT UNDER OTHER AGREEMENTS. Any event shall occur which results in any
default of any material agreement involving any Credit Party or any agreement
evidencing any indebtedness of any Credit Party of $100,000.00 or more.

(i) COLLATERAL IMPAIRMENT. The loss, theft or destruction of any Collateral, the
occurrence of any material deterioration or impairment of any Collateral or any
material decline or depreciation in the value or market price thereof (whether
actual or reasonably anticipated), which causes any Collateral, in the sole
opinion of MLBFS, to become unsatisfactory as to value or character, or any
levy, attachment, seizure or confiscation of the Collateral which is not
released within ten (10) Business Days.

(i) CONTESTED OBLIGATION. (i) Any of the Loan Documents shall for any reason
cease to be, or are asserted by any Credit Party not to be a legal, valid and
binding obligations of any Credit Party, enforceable in accordance with their
terms; or (ii) the validity, perfection or priority of MLBFS' first lien and
security interest on any of the Collateral is contested by any Person; or (iii)
any Credit Party shall or shall attempt to repudiate, revoke, contest or
dispute, in whole or in part, such Credit Party's obligations under any Loan
Document.
<PAGE>

(k) JUDGMENTS. A judgment shall be entered against any Credit Party in excess of
$25,000 and the judgment is not paid in full and discharged, or stayed and
bonded to the satisfaction of MLBFS.

(l) CHANGE IN CONTROL; CHANGE IN MANAGEMENT. (i) Any direct or indirect sale,
conveyance, assignment or other transfer of or grant of a security interest in
any ownership interest of any Credit Party which results, or if any rights
related thereto were exercised would result, in any change in the identity of
the individuals or entities in control of any Credit Party; or (ii) the owner(s)
of the controlling equity interest of any Credit Party on the date hereof shall
cease to own and control such Credit Party; or (iii) the Person (or a
replacement who is satisfactory to MLBFS in its sole discretion) who is the
chief executive officer or holds such similar position, or any senior manager of
such Credit Party on the date hereof shall for any reason cease to be the chief
executive officer or senior manager of such Credit Party.

(m) WITHDRAWAL, DEATH, ETC. The incapacity, death, withdrawal, dissolution, or
the filing for dissolution of: (i) any Credit Party; or (ii) any controlling
shareholder, partner, or member of any Credit Party.

3.6  REMEDIES

(a) REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of any
Event of Default, MLBFS may at its sole option do any one or more or all of the
following, at such time and in such order as MLBFS may in its sole discretion
choose:

(i) TERMINATION. MLBFS may without notice terminate the WCMA Line of Credit and
all obligations to extend any credit to or for the benefit of Customer (it being
understood, however, that upon the occurrence of any Bankruptcy Event all such
obligations shall automatically terminate without any action on the part of
MLBFS).

(ii) ACCELERATION. MLBFS may declare the principal of and interest on the WCMA
Loan Balance, and all other Obligations to be forthwith due and payable,
whereupon all such amounts shall be immediately due and payable, without
presentment, demand for payment, protest and notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate or other notice
or formality of any kind, all of which are hereby expressly waived; provided,
however, that upon the occurrence of any Bankruptcy Event all such principal,
interest and other Obligations shall automatically become due and payable
without any action on the part of MLBFS.

(iii) EXERCISE OTHER RIGHTS. MLBFS may exercise any or all of the remedies of a
secured party under applicable law and in equity, including. but not limited to,
the UCC, and any or all of its other rights and remedies under the Loan
Documents.

(iv) POSSESSION. MLBFS may require Customer to make the Collateral and the
records pertaining to the Collateral available to MLBFS at a place designated by
MLBFS which is reasonably convenient to Customer, or may take possession of the
Collateral and the records pertaining to the Collateral without the use of any
judicial process and without any prior notice to Customer.
<PAGE>

(v) SALE. MLBFS may sell any or all of the Collateral at public or private sale
upon such terms and conditions as MLBFS may reasonably deem proper, whether for
cash, on credit, or for future delivery, in bulk or in lots. MLBFS may purchase
any Collateral at any such sale free of Customer's right of redemption, if any,
which Customer expressly waives to the extent not prohibited by applicable law.
The net proceeds of any such public or private sale and all other amounts
actually collected or received by MLBFS pursuant hereto, after deducting all
costs and expenses incurred at any time in the collection of the Obligations and
in the protection, collection and sale of the Collateral, will be applied to the
payment of the Obligations, with any remaining proceeds paid to Customer or
whoever else may be entitled thereto, and with Customer and each Guarantor
remaining jointly and severally liable for any amount remaining unpaid after
such application.

(vi) DELIVERY OF CASH, CHECKS, ETC. MLBFS may require Customer to forthwith upon
receipt, transmit and deliver to MLBFS in the form received, all cash, checks,
drafts and other instruments for the payment of money (property endorsed, where
required, so that such items may be collected by MLBFS) which may be received by
Customer at any time in full or partial payment of any Collateral, and require
that Customer not commingle any such items which may be so received by Customer
with any other of its funds or property but instead hold them separate and apart
and in trust for MLBFS until delivery is made to MLBFS.

(vii) NOTIFICATION OF ACCOUNT DEBTORS. MLBFS may notify any account debtor that
its Account or Chattel Paper has been assigned to MLBFS and direct such account
debtor to make payment directly to MLBFS of all amounts due or becoming due with
respect to such Account or Chattel Paper; and MLBFS may enforce payment and
collect, by legal proceedings or otherwise, such Account or Chattel Paper.

(viii) CONTROL OF COLLATERAL. MLBFS may otherwise take control in any lawful
manner of any cash or non-cash items of payment or proceeds of Collateral and of
any rejected, returned, stopped in transit or repossessed goods included in the
Collateral and endorse Customer's name on any item of payment on or proceeds of
the Collateral.

(b) SET OFF. MLBFS shall have the further right upon the occurrence and dung the
continuance of an Event of Default to set-off, appropriate and apply toward
payment of any of the Obligations, in such order of application as MLBFS may
from time to time and at any time elect, any cash, credit, deposits, accounts,
financial assets, investment property, securities and any other property of
Customer which is in transit to or in the possession, custody or control of
MLBFS, MLPF&S or any agent, bailee, or affiliate of MLBFS or MLPF&S. Customer
hereby collaterally assigns and grants to MLBFS a continuing security interest
in all such property as Collateral and as additional security for the
Obligations. Upon the occurrence and during the continuance of an Event of
Default, MLBFS shall have all rights in such property available to collateral
assignees and secured parties under all applicable laws, including, without
limitation, the UCC.

(c) POWER OF ATTORNEY. Effective upon the occurrence and during the continuance
of an Event of Default, Customer hereby irrevocably appoints MLBFS as its
attorney-in-fact, with full power of substitution, in its place and stead and in
its name or in the name of MLBFS, to from time to time in MLBFS' sole discretion
take any action and to execute any instrument which MLBFS may deem necessary or
advisable to accomplish the purposes of this Loan Agreement and the other Loan
Documents, including, but not limited to, to receive, endorse and collect all
checks, drafts and other instruments for the payment of money made payable to
Customer included in the Collateral. The powers of attorney granted to MLBFS in
this Loan Agreement are coupled with an interest and are irrevocable until the
Obligations have been indefeasibly paid in full and fully satisfied and all
obligations of MLBFS under this Loan Agreement have been terminated.
<PAGE>

(d) REMEDIES ARE SEVERABLE AND CUMULATIVE. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Loan Documents, at law or in equity, and any one or
more of such rights and remedies may be exercised simultaneously or
successively.

(e) NO MARSHALLING. MLBFS shall be under no duty or obligation to (i) preserve,
protect or marshall the Collateral; (ii) preserve or protect the rights of any
Credit Party or any other Person claiming an interest in the Collateral; (iii)
realize upon the Collateral in any particular order or manner, (iv) seek
repayment of any Obligations from any particular source; (v) proceed or not
proceed against any Credit Party pursuant to any guaranty or security agreement
or against any Credit Party under the Loan Documents, with or without also
realizing on the Collateral; (vi) permit any substitution or exchange of all or
any part of the Collateral; or (vii) release any part of the Collateral from the
Loan Agreement or any of the other Loan Documents, whether or not such
substitution or release would leave MLBFS adequately secured.

(f) NOTICES. To the fullest extent permitted by applicable law, Customer hereby
irrevocably waives and releases MLBFS of and from any and all liabilities and
penalties for failure of MLBFS to comply with any statutory or other requirement
imposed upon MLBFS relating to notices of sale, holding of sale or reporting of
any sale, and Customer waives all rights of redemption or reinstatement from any
such sale. Any notices required under applicable law shall be reasonably and
properly given to Customer if given by any of the methods provided herein at
least 5 Business Days prior to taking action. MLBFS shall have the right to
postpone or adjourn any sale or other disposition of Collateral at any time
without giving notice of any such postponed or adjourned date. In the event
MLBFS seeks to take possession of any or all of the Collateral by court process,
Customer further irrevocably waives to the fullest extent permitted by law any
bonds and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession, and any demand for
possession prior to the commencement of any suit or action.

3.7 MISCELLANEOUS

(a) NON-WAIVER. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement or any of the other Loan
Documents shall operate as a waiver thereof, and no single or partial exercise
of any such right, power or remedy shall preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. Neither any waiver
of any provision of any of the Loan Documents, nor any consent to any departure
by Customer therefrom, shall be effective unless the same shall be in writing
and signed by MLBFS. Any waiver of any provision of this Loan Agreement or any
of the other Loan Documents and any consent to any departure by Customer from
the terms of this Loan Agreement or any of the other Loan Documents shall be
effective only in the specific instance and for the specific purpose for which
given. Except as otherwise expressly provided herein, no notice to or demand on
Customer shall in any case entitle Customer to any other or further notice or
demand in similar or other circumstances.
<PAGE>

(b) DISCLOSURE. Customer hereby irrevocably authorizes MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or not
an Event of Default shall have occurred) obtain from and disclose to each other,
and to any third party in connection with Section 3.7 (g) herein, any and all
financial and other information about Customer. In connection with said
authorization, the parties recognize that in order to provide a WCMA Line of
Credit certain information about Customer is required to be made available on a
computer network accessible by certain affiliates of MLBFS, including MLPF&S.
Customer further irrevocably authorizes MLBFS to contact, investigate, inquire
and obtain consumer reports, references and other information on Customer from
consumer reporting agencies and other credit reporting services, former or
current creditors, and other persons and sources (including, without limitation,
any Affiliate of MLBFS) and to provide to any references, consumer reporting
agencies, credit reporting services, creditors and other persons and sources
(including, without limitation, affiliates of MLBFS) all financial, credit and
other information obtained by MLBFS relating to the Customer.

(c) COMMUNICATIONS. Delivery of an agreement, instrument or other document may,
at the discretion of MLBFS, be by electronic transmission. Except as required by
law or otherwise provided herein or in a writing executed by the party to be
bound, all notices demands, requests, accountings, listings, statements, advices
or other communications to be given under the Loan Documents shall be in writing
and shall be served either personally, by deposit with a reputable overnight
courier with charges prepaid, or by deposit in the United States mail by
certified mail, return receipt required. Notices may be addressed to Customer as
set forth at its address shown in the preamble hereto, or to any office to which
billing or account statements are sent; to MLBFS at its address shown in the
preamble hereto, or at such other address designated in writing by MLBFS. Any
such communication shall be deemed to have been given upon, in the case of
personal delivery the date of delivery, one Business Day after deposit with an
overnight courier, two (2) Business Days after deposit in the United States by
certified mail (return receipt required), or receipt of electronic transmission
(which shall be presumed to be three hours after the time of transmission unless
an error message is received by the sender), except that any notice of change of
address shall not be effective until actually received.

(d) FEES, EXPENSES AND TAXES. Customer shall pay or reimburse MLBFS for: (i) all
UCC, real property or other filing, recording, and search fees and expenses
incurred by MLBFS in connection with the verification, perfection or
preservation of MLBFS' rights hereunder or in any Collateral or any other
collateral for the Obligations; (ii) any and all stamp transfer, mortgage,
intangible, document, filing, recording and other taxes and fees payable or
determined to be payable in connection with the borrowings hereunder or the
execution, delivery, filing and/or recording of the Loan Documents and any other
instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith; and (iii) all fees and out-of-pocket
expenses (including, attorneys' fees and legal expenses) incurred by MLBFS in
connection with the preparation, execution, administration, collection,
enforcement, protection, waiver or amendment of this Loan Agreement, the other
Loan Documents and such other instruments or documents, and the rights and
remedies of MLBFS thereunder and all other matters in connection therewith.
Customer hereby authorizes MLBFS, at its option, to either cause any and all
such fees, expenses and taxes to be paid with a WCMA Loan, or invoice Customer
therefore (in which event Customer shall pay all such fees, expenses and taxes
within 5 Business Days after receipt of such invoice). The obligations of
Customer under this paragraph shall survive the expiration or termination of
this Loan Agreement and the discharge of the other Obligations.
<PAGE>

(e) RIGHT TO PERFORM OBLIGATIONS. If Customer shall fail to do any act or thing
which it has covenanted to do under any of the Loan Documents or any
representation or warranty on the part of Customer contained in the Loan
Documents shall be breached, MLBFS may, in its sole discretion, after 5 Business
Days written notice is sent to Customer (or such lesser notice, including no
notice, as is reasonable under the circumstances), do the same or cause it to be
done or remedy any such breach, and may expend its funds for such purpose. Any
and all reasonable amounts so expended by MLBFS shall be repayable to MLBFS by
Customer upon demand, with interest at the Interest Rate during the period from
and including the date funds are so expended by MLBFS to the date of repayment,
and alt such amounts shall be additional Obligations. The payment or performance
by MLBFS of any of Customer's obligations hereunder shall not relieve Customer
of said obligations or of the consequences of having failed to pay or perform
the same, and shall not waive or be deemed a cure of any Default.

(f) FURTHER ASSURANCES. Customer agrees lode such further acts and things and to
execute and deliver to MLBFS such additional agreements, instruments and
documents as MLBFS may reasonably require or deem advisable to effectuate the
purposes of the Loan Documents, to confirm the WCMA Loan Balance, or to
establish, perfect and maintain MLBFS' security interests and liens upon the
Collateral, including, but not limited to: (i) executing financing statements or
amendments thereto when and as reasonably requested by MLBFS; and (ii) if in the
reasonable judgment of MLBFS it is required by local law, causing the owners
and/or mortgagees of the real property on which any Collateral may be located to
execute and deliver to MLBFS waivers or subordinations reasonably satisfactory
to MLBFS with respect to any rights in such Collateral.

(g) BINDING EFFECT. This Loan Agreement and the Loan Documents shall be binding
upon, and shall inure to the benefit of MLBFS, Customer and their respective
successors and assigns. MLBFS reserves the right, at any time while the
Obligations remain outstanding, to sell, assign, syndicate or otherwise transfer
or dispose of any or all of MLBFS' rights and interests under the Loan
Documents. MLBFS also reserves the right at any time to pool the WCMA Loan with
one or more other loans originated by MLBFS or any other Person, and to
securitize or offer interests in such pool on whatever terms and conditions
MLBFS shall determine. Customer consents to MLBFS releasing financial and other
information regarding Credit Parties, the Collateral and the WCMA Loan in
connection with any such sale, pooling, securitization or other offering.
Customer shall not assign any of its rights or delegate any of its obligations
under this Loan Agreement or any of the Loan Documents without the prior written
consent of MLBFS. Unless otherwise expressly agreed to in a writing signed by
MLBFS, no such consent shall in any event relieve Customer of any of its
obligations under this Loan Agreement or the Loan Documents.
<PAGE>

(h) INTERPRETATION; CONSTRUCTION. (i) Captions and section and paragraph
headings in this Loan Agreement are inserted only as a matter of convenience,
and shall not affect the interpretation hereof; (ii) no provision of this Loan
Agreement shall be construed against a particular Person or in favor of another
Person merely because of which Person (or its representative) drafted or
supplied the wording for such provision; and (iii) where the context requires:
(a) use of the singular or plural incorporates the other, and (b) pronouns and
modifiers in the masculine, feminine or neuter gender shall be deemed to refer
to or include the other genders.

(i) GOVERNING LAW. This Loan Agreement, and, unless otherwise expressly provided
therein, each of the Loan Documents, shall be governed in all respects by the
laws of the State of Illinois, not including its conflict of law provisions.

(j) SEVERABILITY OF PROVISIONS. Whenever possible, each provision of this Loan
Agreement and the other Loan Documents shall be interpreted in such manner as to
be effective and valid under applicable law. Any provision of this Loan
Agreement or any of the Loan Documents which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Loan Agreement and the Loan Documents or affecting
the validity or enforceability of such provision in any other jurisdiction.

 (k) TERM. This Loan Agreement shall become effective on the date accepted by
MLBFS at its office in Chicago, Illinois, and, subject to the terms hereof,
shall continue in effect so long thereafter as the WCMA Line of Credit shall be
in effect or there shall be any Obligations outstanding. Customer hereby waives
notice of acceptance of this Loan Agreement by MLBFS.

(l) EXHIBITS. The exhibits to this Loan Agreement are hereby incorporated and
made a part hereof and are an integral part of this Loan Agreement

(m) COUNTERPARTS. This Loan Agreement may be executed in one or more
counterparts which, when taken together, constitute one and the same agreement.

(n) JURISDICTION; WAIVER. Customer acknowledges that this Loan Agreement is
being accepted by MLBFS in partial consideration of MLBFS' right and option, in
its sole discretion, to enforce this Loan Agreement and all of the Loan
Documents in either the State of Illinois or in any other jurisdiction where
Customer or any Collateral may be located. Customer irrevocably submits itself
to jurisdiction in the State of Illinois and venue in any state or federal court
in the County of Cook for such purposes, and Customer waives any and all rights
to contest said jurisdiction and venue and the convenience of any such forum,
and any and all rights to remove such action from state to federal court.
Customer further waives any rights to commence any action against MLBFS in any
jurisdiction except in the County of Cook and State of Illinois. Customer agrees
that all such service of process shall be made by mail or messenger directed to
It in the same manner as provided for notices to Customer in this Loan Agreement
and that service so made shall be deemed to be completed upon the earlier of
actual receipt or three (3) days after the same shall have been posted to
Customer or Customer's agent. Nothing contained herein shall affect the right of
MLBFS to serve legal process In any other manner permitted by law or affect the
right of MLBFS to bring any action or proceeding against Customer or its
property in the courts of any other jurisdiction. Customer waives, to the extent
permitted by law, any bond or surety or security upon such bond which might, but
for this waiver, be required of MLBFS. Customer further waives the right to
bring any non-compulsory counterclaims.
<PAGE>

(o) JURY WAIVER. MLBFS and Customer hereby each expressly waive any and all
rights to a trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other party with respect to any matter
relating to, arising out of or in any way connected with the WCMA Line of
Credit, the Obligations, this Loan Agreement, any of the Loan Documents and/or
any of the transactions which are the subject matter of this Loan Agreement.

(p) INTEGRATION. This Loan Agreement, together with the other Loan Documents,
constitutes the entire understanding and represents the full and final agreement
between the parties with respect to the subject matter hereof, and may not be
contradicted by evidence of prior written agreements or prior, contemporaneous
or subsequent oral agreements of the parties. There are no unwritten oral
agreements of the parties. Without limiting the foregoing, Customer acknowledges
that: (i) no promise or commitment has been made to it by MLBFS, MLPF&S or any
of their respective employees, agents or representatives to extend the
availability of the WCMA Line of Credit or the Maturity Date, or to Increase the
Maximum WCMA Line of Credit, or to make any WCMA Loan on any terms other than as
expressly set forth herein or to otherwise extend any other credit to Customer
or any other party; (ii) no purported extension of the Maturity Date, increase
in the Maximum WCMA Line of Credit or other extension or agreement to extend
credit shall be valid or binding unless expressly set forth in a written
instrument signed by MLBFS; and (iii) this Loan Agreement supersedes and
replaces any and all proposals, letters of intent and approval and commitment
letters from MLBFS to Customer, none of which shall be considered a Loan
Document. No amendment or modification of any of the Loan Documents to which
Customer is a party shall be effective unless In a writing signed by both MLBFS
and Customer.

(q) SURVIVAL. All representations, warranties, agreements and covenants
contained in the Loan Documents shall survive the signing and delivery of the
Loan Documents, and all of the waivers made and indemnification obligations
undertaken by Customer shall survive the termination, discharge or cancellation
of the Loan Documents.

(r) CUSTOMER'S ACKNOWLEDGMENTS. The Customer acknowledges that the Customer: (i)
has had ample opportunity to consult with counsel and such other parties as
deemed advisable prior to signing and delivering this Loan Agreement and the
other Loan Documents; (ii) understands the provisions of this Loan Agreement and
the other Loan Documents, including all waivers contained therein; and (iii)
signs and delivers this Loan Agreement and the other Loan Documents freely and
voluntarily, without duress or coercion.

This Loan Agreement and the other Loan Documents are executed under seal and are
intended to take effect as sealed instruments.

<PAGE>

IN WITNESS WHEREOF, this Loan Agreement has been as of the day and year first
above written.

COFFEE HOLDING CO., INC.



By:      /s/ Andrew Gordon                           /s/ David Gordon
   -----------------------------------------------------------------------------
         Signature (1)                               Signature (2)

         Andrew Gordon                               David Gordon
   -----------------------------------------------------------------------------
         Printed Name                                Printed Name

         President                                   Vice President
   -----------------------------------------------------------------------------
         Title                                       Title





Accepted at Chicago, Illinois:

MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.

By:   /s/ Roberta Linderman
    -------------------------

<PAGE>

                                                        MERRILL LYNCH BUSINESS
                                                       FINANCIAL SERVICES INC.
                                                      222 North LaSalle Street
                                                                    17th Floor
                                                       Chicago, Illinios 60601
                                                                (312) 269-4443
                                                           FAX: (312) 499-3254

                                                              November 2, 2004



Coffee Holding Co., Inc.
4401 First Ave.
Brooklyn, NY 11232

         RE: AMENDMENT TO LOAN DOCUMENTS

Ladies and Gentlemen:

This Letter Agreement will serve to confirm certain agreements of Merrill Lynch
Business Financial Services Inc. ("MLBFS") and Coffee Holding Co., Inc.
("Customer") with respect to: (i) that certain WCMA LOAN AND SECURITY AGREEMENT
NO. 208-07517 between MLBFS and Customer (including any previous amendments and
extensions thereof), and (ii) all other agreements between MLBFS and Customer or
any party who has guaranteed or provided collateral for Customer's obligations
to MLBFS (a "Guarantor") in connection therewith (collectively, the "Loan
Documents"). Capitalized terms used herein and not defined herein shall have the
meaning set forth in the Loan Documents.

Subject to the terms hereof, effective as of the "Effective Date" (as defined
below), the Loan Documents are hereby amended as follows:

For all purposes of the Loan Documents, Customer's state of incorporation shall
be known and referred to as Nevada, as of the effective date.

Except as expressly amended hereby, the Loan Documents shall continue in full
force and effect upon all of their terms and conditions.

By their execution of this Letter Agreement, the below-named Guarantors hereby
consent to the foregoing modifications to the Loan Documents, and hereby agree
that the "Obligations" under their respective Unconditional Guaranty and/or
agreements providing collateral shall extend to and include the Obligations of
Customer under the Loan Documents, as amended hereby.

Customer and said Guarantors acknowledge, warrant and agree, as a primary
inducement to MLBFS to enter into this Agreement, that (a) no Default or Event
of Default has occurred and is continuing under the Loan Documents; (b) each of
the warranties of Customer in the Loan Documents are true and correct as of the
date hereof and shall be deemed remade as of the date hereof; (c) neither
Customer nor any of said Guarantors have any claim against MLBFS or any of its
affiliates arising out of or in connection with the Loan Documents or any other
matter whatsoever; and (d) neither Customer nor any of said Guarantors have any
defense to payment of any amounts owing, or any right of counterclaim for any
reason under, the Loan Documents.
<PAGE>

Provided that no Event of Default, or event in which with the giving of notice,
passage of time, or both, would constitute an Event of Default, shall then have
occurred and be continuing under the terms of the Loan Documents, the amendments
and agreements in this Letter Agreement will become effective on the date (the
"Effective Date") upon which: (a) Customer and the Guarantors shall have
executed the returned the duplicate copy of this Letter Agreement enclosed
herewith; and (b) an officer of MLBFS shall have reviewed and approved this
Letter Agreement as being consistent in all respects with the original internal
authorization hereof.

Notwithstanding the foregoing, if Customer and the Guarantors do not execute and
return the duplicate copy of this Letter Agreement within 14 days from the date
hereof, or if for any other reason (other than the sole fault of MLBFS) the
Effective Date shall not occur within said 14-day period, then all of said
amendments and agreements will, at the sole opinion of MLBFS, be void.

Very truly yours,

MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.

By:      /s/ David Smaller
    -------------------------------
         David Smaller
         Senior Credit Manager

Accepted:

Coffee Holding Co., Inc

By:  /s/ David Gordon
    ------------------------------

Printed Name:      David Gordon
             -------------------------

Title:   Vice President
       -----------------------------

Approved:

   /s/ David Gordon
- ----------------------------------
David Gordon


  /s/ Andrew Gordon
- ----------------------------------
Andrew Gordon
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>b404559_ex31-1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>

                                                                    EXHIBIT 31.1

                                  CERTIFICATION

         I, Andrew Gordon, certify that:

1.   I have reviewed this annual report on Form 10-KSB 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 annual
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant 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 registrant and I 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 registrant, including its
     consolidated subsidiaries, is made known to us by others within those
     entities, particularly during the period in which this annual report is
     being prepared;

     (b) Evaluated the effectiveness of the registrant'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 registrant's internal
     controls over financial reporting that occurred during the registrant's
     most recent fiscal quarter (the registrant's fourth quarter in the case of
     an annual report) that has materially affected, or is reasonably likely to
     materially affect, the registrant'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 registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent function):

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

     (b) Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls.


Date:  February 10, 2005              /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>4
<FILENAME>b404559_ex32-1.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
<PAGE>


                                                                    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 and Principal Executive and Accounting 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-KSB for the year ended
October 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.



         Dated:   February 10, 2005                  /s/ Andrew Gordon
                                                     --------------------------
                                                     Andrew Gordon


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

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
