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BASIS OF PRESENTATION, RESTATEMENT AND SIGNIFICANT ACCOUNTING POLICIES (Policies)
 3 Months Ended
Jan. 31, 2021
Accounting Policies [Abstract]  
RESTATEMENT

RESTATEMENT:

 

The Company is restating its condensed consolidated statement of operations for the quarter ended January 31, 2020 to correct its accounting for certain intercompany transactions that should have been eliminated in consolidation. The restatement is being made in accordance with ASC 250, “Accounting Changes and Error Corrections.” The disclosure provision of ASC 250 requires a company that corrects an error to disclose that its previously issued financial statements have been restated, a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings in the statement of financial position as of the beginning of each period presented.

 

The effects of the adjustment on the Company’s previously issued January 31, 2020 condensed consolidated statement is summarized as follows:

 

Selected Condensed Consolidated Statement of Operations for the quarter ended January 31, 2020

 

 SCHEDULE OF ERROR CORRECTIONS AND PRIOR PERIOD ADJUSTMENTS

  

Previously

Reported

  

Increase

(Decrease)

  

 

As Restated

 
Net Sales  $19,285,501   $(2,158,458)  $17,127,043 
Cost of Sales  $(16,170,747)  $2,158,458   $(14,012,289)
Gross Profit  $3,114,754   $-   $3,114,754 

 

Significant Accounting Policies

 
Revenue Recognition

Revenue Recognition

 

The Company recognizes revenue in accordance with the five-step model as prescribed by ASU 606 in which the Company evaluates the transfer of promised goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASU 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 9 for revenue disaggregated by product line.

 

 

COFFEE HOLDING CO., INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2021

(UNAUDITED)

 

NOTE 2 - BASIS OF PRESENTATION, RESTATEMENT AND SIGNIFICANT ACCOUNTING POLICIES (cont’d):

 
Share-Based Payment

Share-Based Payment

 

The Company accounts for share-based payments using the fair value method. For employees and directors, the fair value of the award is measured, as discussed below, on the grant date. The Company has granted stock options at an exercise price equal to the closing price of the Company’s common stock as reported by Nasdaq. Upon exercise of an option, the Company issues new shares of common stock out of its authorized shares.

 

The fair value of options has been estimated on the grant date using the Black-Scholes pricing model. The fair value of each instrument is estimated on the grant date utilizing certain assumptions for a risk-free interest rate, volatility and expected remaining lives of the awards. The risk-free interest rate used is the United States Treasury rate for the day of the grant having a term equal to the life of the equity instrument. Beginning with the current year quarter, the fair value of stock-based payment awards issued was estimated using a volatility derived from comparable companies share price. The assumptions used in calculating the fair value of share-based payment awards represents management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgement. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future.

 

The Black Scholes assumptions are as follows:

 

Expected Life  10 years 
Risk free interest rate  2.42% ˗ 2.57%
Expected volatility  43.0% ˗ 64.2%
Expected dividend yield  0%
Forfeiture rate  0%

 

 

COFFEE HOLDING CO., INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2021

(UNAUDITED)