The United States coffee market consists of two distinct product categories Commercial ground roast, mass-merchandised coffee; and Specialty coffees, which include Gourmet coffees (premium grade Arabica coffees sold in whole bean and ground form), Espresso-based beverages, and Premium coffees.

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.

Several industry trends have contributed to the increase in demand for specialty coffee including, according to the National Coffee Association, the number of specialty coffee retail outlets grew from 500 units in 1991 to over 10,000 units in 2003; 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; greater consumer awareness of specialty coffee as a result of its increasing availability; ease of preparation of specialty coffees resulting from the increased use of automatic drip coffee makers and home espresso machines; and the overall low price of Arabica coffee beans, which has allowed consumers to afford higher end specialty 100% Arabica coffees.

The Company sells 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. The Company sells from as little as one bag (132 pounds) to a full truckload (44,000 pounds) depending on the size and need of the customer.

The Company roasts, blends, packages and sells coffee under private labels for companies throughout the United States and Canada. The Company’s private label coffee is sold in cans, brick packages and instants in a variety of sizes.

The Company roasts and blends its branded coffee according to the Company’s own recipes and package the coffee at its facilities in Brooklyn, New York and La Junta, Colorado. The Company then sells the packaged coffee under its brand labels to supermarkets, wholesalers and individually owned stores throughout the United States.

The Company holds trademarks for each of its proprietary name brands and has 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. The Company’s branded coffees are Café Caribe, a specialty espresso coffee that targets espresso coffee drinkers and, in particular, the Hispanic consumer market; S&W, 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; Café Supremo, a specialty espresso that targets espresso drinkers of all backgrounds and tastes; Don Manuel, produced from the finest 100% Colombian coffee beans; Fifth Avenue, a blended coffee that has become popular as an alternative for consumers who purchase private label or national branded coffee; Via Roma, an Italian espresso targeted at the more traditional espresso drinker; and Il CLASSICO, an S&W brand espresso product.

The Company also offers several niche products, including trial-sized mini-brick coffee packages, specialty instant coffees, instant cappuccinos and hot chocolates, and tea line products.

Net sales totaled $8,060,820 for the three months ended January 31, 2005, an increase of $2,212,332 or 37.8% from $5,847,948 for the three months ended January 31, 2004.

Cost of sales for the three months ended January 31, 2005 was $5,988,013 or 74.3% of net sales, as compared to $3,833,586 or 65.6% of net sales for the three months ended January 31, 2004.

Gross profit for the three months ended January 31, 2005 was $2,072,267, an increase of $57,905, or 2.9%, from $2,014,362 for the three months ended January 31, 2004.

Total operating expenses increased $346,148 or 33.0% to $1,395,386 for the three months ended January 31, 2005 from $1,049,238 for the same period in 2004.