U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2008


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

For the transition period from to

Commission File No. 333-101702

GROWERS DIRECT COFFEE COMPANY, INC.

(Exact name of registrant as specified in its charter)

Nevada

46-0466417

(State or other jurisdiction

of incorporation or organization)

(IRS Employer

Identification Number)


2813 7^th Street, Berkeley, California		94710-2702
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (510) 204 9424

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

[ ]

Accelerated filer

[]

Non-accelerated filer

[ ] (Do not check if a smaller reporting company) Smaller reporting company

[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes x No X

There were 37,413,992 shares outstanding of common stock of the registrant at September 30, 2008.

GROWERS DIRECT COFFEE COMPANY, INC

INDEX


PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements and Condensed Notes to the Financial Statements


Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Condensed Notes to the Financial Statements


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

Item 4.		Controls and Procedures

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.		Defaults Upon Senior Securities

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

Item 5.		Other Information

Item 6.		Exhibits

ITEM 1 Financial Statements and Condensed Notes to the Financial Statements

GROWERS DIRECT COMPANY, INC.

Consolidated Financial Statements

(Expressed in U.S. Dollars)

September 30, 2008

Index

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Condensed Notes to the Consolidated Financial Statements

GROWERS DIRECT COMPANY, INC.

CONSOLIDATED BALANCE SHEETS


		September 30, 2008 (Unaudited)		December 31, 2007 (Audited)
ASSETS

Current Assets
Cash and cash equivalents	$	14,125	$	78,703
Deposits		386,829		753,088
Receivables		64,248		217,674
Receivable from related party		73,803
Inventory		90,029		104,489
Prepaid expenses		-		232,331
Total Current Assets		629,034		1,386,285

Property and equipment, net		248,528		297,139
Trademark, net		41,539		49,327

TOTAL ASSETS	$	919,101	$	1,732,751

LIABILITIES & STOCKHOLDERS’ DEFICIT

Current liabilities
Bank overdraft	$	17,476	$	-
Accounts payable and accrued expenses		357,606		214,899
Accounts payable and accrued expenses related party		688,319		-
Notes payable		62,500		16,250
Notes payable related party		207,498		200,000
Total Current Liabilities		1,333,399		431,149

Long Term Liabilities
Convertible debt, net of discounts		2,533,530		1,582,657
Liquidated liability		-		187,573
Total Long Term Liabilities		2,533,530		1,770,230

Commitments and Contingencies		-		-
Stockholders’ Deficit
Preferred stock, authorized 100,000,000 shares at $0.001 par value, 0 issued
Common stock, authorized 75,000,000 shares at $0.001 par value,
37,413,992 and 33,184,328 shares, respectively, issued and outstanding		33,352		29,122
Additional paid-in capital		23,946,444		22,647,391
Accumulated deficit		(26,927,624)		(23,145,141)

Total Stockholders’ Deficit		(2,947,828)		(468,628)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	919,101	$	1,732,751

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

GROWERS DIRECT COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATION


				Three Months		Three Months		Nine Months		Nine Months
				Ended		Ended		Ended		Ended
				September 30,		September 30,		September 30,		September 30,
				2008		2007		2008		2007
				(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

	REVENUE		$	250,271	$	754,568	$	1,299,270	$	1,398,757
	Cost of Sales			118,527		541,214		865,260		861,331
GROSS PROFIT				131,744		213,354		434,010		537,426

EXPENSES
	Compensation expenses			-		-		304,869		820,400
	Marketing			-		885,500		304,000		2,039,015
	General and administrative expenses			630,794		1,588,505		2,602,610		4,618,759
TOTAL EXPENSES				630,794		2,474,005		3,211,479		7,478,174

LOSS FROM OPERATIONS				(499,050)		(2,260,651)		(2,777,469)		(6,940,748)

NON-OPERATION EXPENSES
Amortization of derivatives and original discount				288,163		82,992		950,873		507,343
Financing expense				-		-		-		435,855
Interest expense				2,500		-		7,500		-
Liquidated penalty				-		120,537		45,841		241,074
LOSS BEFORE TAXES				(789,713)		(2,464,180)		(3,781,683)		(8,125,020)

INCOME TAX EXPENSE				-		-		800		800
NET LOSS			$	(789,713	$	(2,464,180)	$	(3,782,483)	$	(8,125,820)

BASIC & DILUTED NET LOSS PER COMMON SHARE			$	(0.02)	$	(0.08)	$	(0.11)	$	(0.27)

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC &
		DILUTED		36,780,659		30,256,499		35,589,196		29,544,016

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

GROWERS DIRECT COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


					Nine Months Ended September 30, 2008 (Unaudited)		Nine Months Ended September 30, 2007 (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss				$	(3,782,483)	$	(8,125,820)
Non-cash items not involving cash:
	Common stock issued for services,liquidated damage & financing expenses				765,000		4,733,494
	Amortization of convertible notes				950,873		507,343
	Compensation expenses- non cash				304,869		820,400
	Liquidated penalty				45,841		241,074
	Bad debt				42,625		1,397
	Amortization and depreciation				60,682		58,230
Changes in other assets and liabilities:
	Deposits decrease/(increase)				366,259		(106,560)
	Receivables decrease/(increase)				110,801		(170,344)
	Receivable from related party (increase)				(73,803)
	Prepaid expense decrease/(increase)				232,331		153,466
	Accrued interest				7,500		-
	Inventory decrease/ (increase)				14,460		(405,954)
	Accounts payable increase (decrease)				831,026		355,463

		NET CASH USED IN OPERATING ACTIVITIES			(124,019)		(1,937,817)


CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of equipment				(4,285)		(38,569)

		NET CASH USED IN INVESTING ACTIVITIES			(4,285)		(38,569)

CASH FLOWS FROM FINANCING ACTIVITIES
	Proceeds Note Payable				50,000		17,500
	Increase in bank indebtedness				17,476		-
	Net proceeds from convertible notes				-		2,250,000
	Payments of note payable				3,750		-
	Payment of note payable, related party				-		(100,000)
		NET CASH PROVIDED BY FINANCING ACTIVITIES			(63,726)		2,167,500

		NET INCREASE (DECREASE) IN CASH			(64,578)		(191,114)

CASH AT BEGINNING OF PERIOD					78,703		77,993

		CASH AT END OF PERIOD	$		14,125	$	269,107

SUPPLEMENTAL INFORMATION:

	Interest paid		$		0	$	$1,278
	Income taxes paid		$		800	$	-
NON CASH FINANCING & FINANCING ACTIVITIES
	Warrants issued Advance applied to note payable, related party		$		-	$	2,106,635
	Shares issued for liquidated damage		$		187,573	$	246,025

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

GROWERS DIRECT COFFEE COMPANY, INC

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-K as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements for the period ended December 31, 2007. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.

The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company's financial position and results of operations.

Certain amounts from prior periods have been reclassified to conform to the current period presentation. This reclassification has resulted in no changes to the Company’s accumulated deficit or net losses presented.

Operating results for the nine month period ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

NOTE 2 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Growers Direct Coffee Company, Inc (previously Coffee Pacifica, Inc.) (Hereinafter "Company" “We” “Our” or "Growers Direct”) was incorporated on December 21, 2001, under the laws of the State of Nevada. The shareholders at the Annual General Meeting held on September 5, 2007, approved the change of our name to Growers Direct Coffee Company, Inc. from Coffee Pacifica, Inc. The name change became effective November 6, 2007 Growers Direct is a world-wide marketer and distributor of Papua New Guinea, “Penlyne Castle” “Jamaican Blue Mountain” and Ethiopian Fair Trade and Organic green bean coffee to coffee vendors in the United States and Europe. In addition, the Company through its subsidiary, Uncommon Grounds, Inc., operates a coffee roasting facility in Berkeley, California that supplies freshly roasted coffee beans to its retail and wholesale customers throughout the United States. The Company conducts its business activities in Berkeley, California.

The Company acquired one hundred percent of the issued and outstanding shares of Uncommon Grounds, Inc. on October 10, 2005. Uncommon Grounds, Inc. is a coffee roasting company established in 1984 and is located in Berkeley, California. It sells certified organic, fair-trade and sustainable-produced roasted coffee under the Uncommon Grounds label. Uncommon Grounds, Inc. also sells tea, cafe supplies and equipment to customers.

We incorporated, under the laws of Papua New Guinea, our wholly owned subsidiary Coffee Pacifica PNG Ltd in June 2002. We did not conduct any of our operations in Papua New Guinea through this company during the period ended September 30, 2008. We liquidated the company effective June 30, 2008. Growers Direct also owns a wholly owned subsidiary, New Guinea Peaberry Coffee, Inc., incorporated January 26, 2006 under the laws of the state of Nevada. We did not conduct any operations during the period ended September 30, 2008. We liquidated the Company effective June 30, 2008.

NOTE 3 - GOING CONCERN UNCERTAINTY

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred

material recurring losses from operations. At September 30, 2008, the Company had accumulated deficits of $26,927,624, in addition to limited cash and unprofitable operations. For the period ended September 30, 2008 and for the year ended December 31, 2007, the Company sustained net losses of $3,782,483 and $10,255,375 respectively. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is contingent upon its ability to obtain additional financing and to generate revenue and cash flow to meet its obligations on a timely basis. Management's plans in this regard are to raise equity financing as required. If successful, this will mitigate these factors, which raise substantial doubt about the Company's ability to continue as a going concern.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the U.S. and have been consistently applied in the preparation of the financial statements. The Company’s financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Recent Accounting Pronouncement

In February 2008, the FASB issued FSP 157-2 “Partial Deferral of the Effective Date of Statement 157” (FSP 157-2). FSP 157-2 delays the effective date of SFAS No. 157, for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The Company is currently assessing the impact of SFAS No. 157-2 on the Company’s consolidated statement of financial condition and results of operations.

On March 19, 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS No. 161”). SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We have not determined the impact, if any SFAS No. 161 will have on our consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position ("FSP") No. FAS 142-3, "Determination of the Useful Life of Intangible Assets," ("FSP No. 142-3"). The intent of this FSP is to improve consistency between the useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), and the period of expected cash flows used to measure the fair value of the intangible asset under SFAS No. 141R. FSP No. 142-3 will require that the determination of the useful life of intangible assets acquired after the effective date of this FSP shall include assumptions regarding renewal or extension, regardless of whether such arrangements have explicit renewal or extension provisions, based on an entity's historical experience in renewing or extending such arrangements. In addition, FSP No. 142-3 requires expanded disclosures regarding intangible assets existing as of each reporting period. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Early adoption is prohibited. The Company is currently evaluating the impact that FSP No. 142-3 will have on our financial statements.

In May 2008, the FASB issued Financial Accounting Standard (FAS) No. 162, "The Hierarchy of Generally Accepted Accounting Principles." The statement is intended to improve financial reporting by identifying a consistent hierarchy for selecting accounting principles to be used in preparing financial statements that are prepared in conformance with generally accepted accounting principles. Unlike Statement on Auditing Standards (SAS) No. 69, "The Meaning of Present in Conformity With GAAP," FAS No. 162 is directed to the entity rather than the auditor. The statement is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, "The Meaning of Present

Fairly in Conformity with GAAP," and is not expected to have any impact on the Company's results of operations, financial condition or liquidity.

In June 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Emerging Issues Task Force (EITF) No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." Under the FSP, unvested share-based payment awards that contain rights to receive nonforfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. The FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and is not expected to have a significant impact on the Company's results of operations, financial condition or liquidity.

Restatements

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108 to address diversity in practice in quantifying financial statement misstatements. SAB 108 requires that registrants quantify the impact on the current year’s financial statements of correcting all misstatements, including the carryover and reversing effects of prior years’ misstatements, as well as the effects of errors arising in the current year. SAB 108 is effective as of the first fiscal year ending after November 15, 2006, allowing a one-time transitional cumulative effect adjustment to retained earnings as of January 1, 2006, for errors that were not previously deemed material, but are material under the guidance in SAB No. 108.

We restated the previously issued quarterly unaudited financial statements for the periods ended March 31, 2007 June 30, 2007 and September 30, 2007 to properly reflect the accounting for convertible notes, the related beneficial conversion feature and warrants pursuant to EITF No. 00-19, 05-02, 05-04 and SFAS No. 133 and the related income tax effects.

The loss from operations for the three months ending March 31, 2007 was originally $1,581,828, a decrease in loss by $175,122 to $1,406,706 consisted of adjustments to the amortization of warrants and original discount of 16%, reversal of gain on derivate liability, the beneficial conversion feature of the convertible debt being accounted for as a derivative $273,402. The restated balance sheet at March 31, 2007 had a decrease in liabilities of $475,534 due to an increase to the convertible debt net of discounts to $794,021 and a decrease in the derivative liability of $273,402. The restated loss per share for March 31, 2007 decreased from $0.06 to $0.05.

The loss from operations for the six months ending June 30, 2007 was originally $5,888,875, a decrease in loss by $427,541 to $5,461,334 consisted of adjustments to the amortization of warrants and original discount of 16%, reversal of loss on derivate liability, the beneficial conversion feature of the convertible debt being accounted for as a derivative $405,702. The restated balance sheet at June 30, 2007 had a decrease in liabilities of $223,114 due to an increase to the convertible debt net of discounts of $1,018,066 and a decrease in the derivative liability of $405,702 and decrease in amortization portion of discount $389,249. The restated loss per share for June 30, 2007 decreased from $0.20 to $0.19.

The loss from operations for the nine months ending September 30, 2007 was originally $8,353,055, a decrease in loss by $227,235 to $8,125,820 consisted of adjustments to the amortization of warrants and original discount of 16%, reversal of loss on derivate liability, the beneficial conversion feature of the convertible debt being accounted for as a derivative $405,702. The restated balance sheet at September 30, 2007 had a decrease in liabilities of $423,421 due to an increase to the convertible debt net of discounts of $1,301,364 and a decrease in the derivative liability of $405,702. The restated loss per share for September 30, 2007 decreased from $0.28 to $0.27.

Accounting Methods

The Company's financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred. During the periods ended September 30, 2008 and 2007, the Company incurred $22,425 and $325,957 of advertising and promotion costs, respectively.

Cash and Cash Equivalents

Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased. As at September 30, 2008 and December 31, 2007, cash and cash equivalents consist of cash only.

Comprehensive Income

The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which requires inclusion of foreign currency translation adjustments, reported separately in its statement of stockholders' equity, in other comprehensive income. The Company had no comprehensive income for the periods ended September 30, 2008 and 2007.

Concentration of Credit Risk

The Company maintains the majority of its cash in commercial accounts at a major financial institution. Although the financial institution is considered creditworthy and has not experienced any losses on its deposits, at September 30, 2008 and December 31, 2007, the Company's cash balance did not exceed Federal Deposit Insurance Corporation (FDIC) limits.

Earnings (Loss) Per Share

The Company adopted Statement of Financial Accounting Standards No. 128, which provides for calculation of "basic" and "diluted" earnings (losses) per share. Basic earnings (losses) per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to diluted earnings per share. Although there were common stock equivalents outstanding at September 30, 2008, they were not included in the calculation of earnings per share because they would have been considered anti-dilutive. At September 30, 2008, 6,278,695 (3,678,695 warrants and 2,600,000 stock options) common stock equivalents were outstanding.

Foreign Currency Translation

The financial statements are presented in United States dollars. The parent company maintains United States dollars as the functional currency, while its subsidiary maintains Papua New Guinea Kina as the functional currency. Foreign monetary assets and liabilities are translated into United States dollars at the rates of exchange in effect at the balance sheet dates. Non-monetary items are translated at historical rates. Revenue and expense items are translated using the rate in effect on the date of the transactions. No operations were conducted through this subsidiary during the period ended September 30, 2008.

Inventory

Inventories are stated at the lower of cost or market. The cost for inventories is determined using the first-in, first-out method. Inventories principally consist of green beans, roasted coffee and related products.

Fair Value of Financial Instruments

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot always be determined with precision. Changes in assumptions can significantly affect estimated fair values.

The Company's financial instruments consist of cash, deposits, accounts receivables, accounts payable, and note payables. The carrying amounts of these financial instruments approximate fair value due to the short-term nature of these items. Management is of the opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Principals of Consolidation

The consolidated financial statements include financial statements of Growers Direct Coffee Company, Inc (previously Coffee Pacifica, Inc.) and its wholly owned subsidiaries: Coffee Pacifica PNG Ltd., New Guinea Peaberry Coffee, Inc. and Uncommon Grounds, Inc. All significant inter-company transactions are eliminated.

Property and Equipment

Property and equipment are recorded at cost. Depreciation for property and equipment is calculated using the straight-line method over estimated useful lives of five to seven years. Leasehold improvements are generally amortized over the shorter of seven years or the term of the related leases. Major remodels and improvements are capitalized. Maintenance and repairs that do not improve or extend the life of the respective assets are charged to expense as incurred.

Provision for Income Taxes

Income taxes are provided based upon the liability method of accounting pursuant to Statement of Financial Accounting Standards No. 109 (hereinafter "SFAS No. 109"), "Accounting for Income Taxes." Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by SFAS No. 109 to allow recognition of such an asset.

Receivables

Trade accounts receivable are recorded at net realizable value and do not bear interest. No allowance for doubtful accounts was made during the period ended September 30, 2008 based on management's best estimate of the amount of probable credit losses in existing accounts receivable. The Company evaluates its allowance for doubtful accounts based upon knowledge of its customers and their compliance with credit terms. The evaluation process includes a review of customers' accounts on a regular basis. The review process evaluates all account balances with amounts outstanding 60 days and other specific amounts for which information obtained indicates that the balance may be uncollectible. As at September 30, 2008 and December 31, 2007, there was no allowance for doubtful accounts. The Company recorded $42,465 as bad debt expense during the quarter ended September 30, 2008. The Company does not have any off-balance-sheet credit exposure related to its customers.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery occurs, the sales price is fixed or determinable and collectability is reasonably assured. Product is considered delivered when title and risk have been transferred to the customer. Retail and wholesale sales are recorded when payment is tendered at point of sale for retail, and upon shipment of product for wholesale.

Stock Issued for Services

Transactions in which common stock is issued for services are recorded at the fair value of the services received or the fair value of the stock issued, whichever is more reliably measurable.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses and the accompanying notes during the reporting period. Accordingly, actual results could differ from those estimates.

Derivative Instruments

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (hereinafter "SFAS No. 133"), as amended by

SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", and SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". These statements establish accounting and reporting standards for derivative instruments embedded in other contracts, and for hedging activities. They require that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.

Historically, the Company has not entered into derivatives contracts to hedge existing risks or for speculative purposes.

At September 30, 2008 and December 31, 2007, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.

Employee Benefits

Growers Direct has a Simple IRA Plan that covers most of its employees with over two years of service. It provides matching funds up to 3% of an employees' gross income and follows the policy of funding the retirement plan contributions as accrued. The amount of pension costs recognized for the period ending September 30, 2008 and September 30, 2007 was $3,600 and $5,400 respectively.

Segment Information

The Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information, "(hereinafter "SFAS No. 131") during the year ended December 31, 2005. SFAS No. 131 established standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about product and services and geographic areas. Operating segments are defined as components of an enterprise about which separate financial information is available, evaluated regularly by the chief operating decision makers, or a decision making group, in deciding how to allocate resources and in assessing performance. The separate management of each segment is required because each business unit is subject to different marketing, production, and technology strategies.

Stock Option

At September 30, 2008, the Company has one stock-based employee compensation plan. The stock option plan is for its directors, officers, employees and consultants. Under the terms of the plan, options become exercisable immediately upon grant. All stock options granted to date have been pursuant to separate agreements. The Company has adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based Payment”. Under the fair value method, compensation cost is measured at fair value using the Black-Scholes option-pricing model, at the date of grant and is expensed over the award’s vesting period. Expected volatility is based on the historical volatility of the company’s common stock. SFAS No. 123(R) requires that stock-based compensation expense be based on awards that are ultimately expected to vest, and that forfeitures are estimated when recognizing compensation cost. Accordingly, the Company estimated a forfeiture rate of 0% when originally recognizing compensation cost. When estimating forfeitures, voluntary termination behaviour is considered as well as trends of actual option forfeitures. For the cumulative period from January 1, 2008 to September 30, 2008, there have been zero options forfeitures and cancellations.

NOTE 5 - INVENTORY

Inventories consist of the following:


	September 30, 2008	December 31, 2007
Green beans	$57,512	$57,371
Roasted coffee	$2,417	$16,977
Allied products	$30,100	$30,141
Total	$90,029	$104,489

NOTE 6 - TRADEMARK

On October 10, 2005, our purchase of Uncommon Grounds, Inc., a coffee roasting company, included a registered trademark. The trademark valuation was based upon management’s evaluation of the previous annual Uncommon Grounds Inc. sales data. Accordingly, management estimated $72,691 trademark value, as of the date of acquisition, to be approximately seven (7) percent of the expected Uncommon Grounds Inc. annual sales. The trademark will be amortized for book and tax purposes over 7 years unless the Company deems it impaired. The Company did not incur any trademark impairment adjustment for the years ended December 31, 2007 and 2006. It is possible that the assumptions used by management related to the evaluation of the trademark may change or that actual results may vary significantly from management's estimates. As a result, impairment charges may occur. The trademark amortization expenses for periods ended September 30, 2008 and 2007 were $7,788 and $7,788 respectively.

NOTE 7 - PLANT, PROPERTY AND EQUIPMENT

The following is a summary of plant property and equipment and accumulated depreciation:


		September 30, 2008		December 31, 2007
Machinery and equipment	$	346,250	$	341,965
Vehicles		44,800		44,800
Office equipment		49,931		49,931
Less accumulated amortization		(192,453)		(139,557)
	$	248,528	$	297,139

Depreciation expense was $52,894 and $50,442 in each of the periods ended September 30, 2008 and 2007, respectively.

NOTE 8 - RELATED PARTY TRANSACTIONS

In December 2007, two stockholders and former directors of the Company advanced the Company $200,000 under two demand promissory notes, at an interest rate of 5% per annum. Interest of $7,500 was accrued on these notes during the period ended September 30, 2008.

During the period ended September 30, 2008 a former director of the Company charged $73,803 of personal expenses on the Company’s credit card. This amount was recorded as a receivable from a related party. The Company is pursuing collection of this amount from the former director.

At September 30, 2008, the Company has accounts payables and accrued fees of $688,319 resulting from the employment agreements with former officers and directors of the Company.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

In May 2007, the Company entered into supply and licence agreements with Blue Mountain Coffee Co-Operative Society Ltd. whereby the Company was granted exclusive right to use the “Penlyne Castle” trademark to sell the coffee for the crop years commencing September 1, 2007 to August 31, 2012. Under the agreements,

the Company is required to pay an annual license fee of $25,000 annually for each crop year. No provision for the possible future payments has been included in these financial statements. As of the September 30 2008, the Company has advanced $299,411 against the future supply of the coffee.

The Company leases its Berkeley, California roasting facility under an operating lease that expires July 30, 2009. The lease contains a renewal option for additional three years, and provides for periodic adjustments to the minimum lease payments based on changes in the Consumer Price Index. Lease expense was $31,890 and $32,850 for the period ended September 30, 2008 and 2007 respectively.

Future lease payments required subsequent to September 30, 2008 are as follows:


Years		Amount
2008	$	11,327
2009	$	26,215

NOTE 10 – CONVERTIBLE NOTES

The Company may give a thirty day business days notice of its intent to redeem the convertible notes, in whole or in part, by paying to the note holders a sum of money equal to one hundred and twenty percent of the principal amount of the convertible notes being redeemed, together with any accrued interest and penalties to the note holders arising under the convertible notes. The convertible notes also have a contingent put option that allows the holders to demand payment if the Company completes another offering or is in default. The convertible notes are convertible into shares of common stock of the Company, at the option of the note holders at any time during the period the registration statement is effective. The maximum number of shares to be converted, based on the principal amount of $2,678,571 is as follows:


						Closing	Closing	Share
Issue	Maturity		Gross	16%	Warrants	VWAP	85% of	Maximum
Date	Date	Principal	Proceeds	Discount	Issued	10 Day	VWAP	Conversion
March 19, 2007	March 19, 2009	$2,678,571	$2,250,000	$428,571	3,438,033	$0.7791	$0.6622	4,044,958

The Company issued warrants with a fair value of $137,817 in consideration for transaction costs to a broker. These transaction costs were allocated between the convertible debt and the warrants based on their relative fair value.

In accordance with EITF Issue 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the Company recognized the value of the embedded beneficial conversion feature of $368,000 as additional paid-in capital and an equivalent discount which will be expensed over the term of the convertible notes. In addition, in accordance with EITF Issue 00-27 "Application of Issue No.98-5 to Certain Convertible Instruments", the Company has allocated the proceeds of issuance between the convertible notes and the detachable warrants based on their relative fair value. Accordingly, the Company recognized the fair value of the detachable warrants of $1,087,979 as additional paid-in capital and an equivalent discount against the convertible notes. The difference between the face amount of the convertible notes and their carrying value is amortized over the life of the convertible notes. As long as any portion of the convertible notes remains outstanding, the Company shall not pay any cash dividends or distributions on any equity securities of the Company without prior written consent from the holders of the convertible note.

The Black-Scholes Model was used to calculate the fair value of the warrants. The underlying assumptions included in the Black-Scholes Model were as follows:


	Expected volatility	134%
	Contractual life	3 years
	Risk-free interest rate	4.39%
	Dividend yield	Nil

The Company incurred cash financing expense of $435,855 in connection with the issuance of the convertible notes and warrants. The discount on the convertible notes is amortized using the effective interest method. For the period ended September 30, 2008, the Company amortized $177,269 related to original discount of 16% on debt and $773,604 related to warrants and beneficial conversion feature of convertible debt.

Liquidated Damages

For the period ended September 30 2008, the Company issued 604,664 shares of common stock as payment in full of the liquidated penalty of $233,414. Recognized as expense during the period ended September 30, 2008 was $45,841 and $187,573 was expensed for the year ended December 31, 2007. The liquidation penalty fees relate to the Company’s failure to have the SB-2 registration statement declared effective before July 19, 2007. The SB-2 registration was declared effective December 7, 2007 and resulting fee was calculated pursuant to the subscription agreement, penalty rate of 1.5% of the principal amount or $40,179 per month.

NOTE 11 - COMMON STOCK

During the period ended September 30, 2008, the Company issued 4,229,664 shares of common stock, valued at fair market value, for the payment of $998,414, valued at fair market value, of expenses including marketing $295,000, management fees $172,000, consulting $216,000, investor relations $42,000, legal settlement $40,000 and liquidation damages $233,414.

Stock Options

In January 2006, the Company registered with the Securities and Exchange Commission, on Form S-8, the “2006 Directors and Key Employee Stock Option Plan” (the “Stock Option Plan"), which allows the Company to issue, to its directors, employees and employees of the subsidiaries and to individuals providing services, options to purchase up to 5,000,000 shares of the Company’s common stock. The Stock Option Plan provides that the options are to be awarded by the Board of Directors based on a recommendation of the Board or Compensation Committee assembled by the Board for administration of the 2006 Plan. On April 16, 2008, the Company issued 1,000,000 stock options to the Company’s former President and 500,000 stock options to the Company’s former Chief Financial Officer pursuant to their respective management contracts dated April 16, 2008. These 1,500,000 stock options vested on April 16, 2008 with an exercise price of $0.50. In addition, pursuant to the April 2007 agreement with the former Chief Executive Officer, the company agreed to issue to the former Chief Executive Officer 200,000 stock options which vested on April 2, 2008. As of September 30, 2008, the 200,000 stock options were not formalized under an option agreement between the Company and the former Chief Executive Officer. The compensation expense to September 30, 2008 recognized for the issuance of 1,700,000 stock options was $268,621.

The Company pursuant to a legal settlement agreement issued 900,000 stock options to Brian Inouye. These stock options were not issued under the “2006 Directors and Key Employee Stock Option Plan” The compensation expense recognized for the issuance of 900,000 stock options was $36,248 at September 30, 2008.

Stock Options

The following summarizes the stock options transactions for the nine months ended September 30, 2008:


	Number of Stock Options		Weighted average exercise price
Outstanding, January 1, 2008		-		-
Options issued		2,600,000	$	0.133
Options exercised		-		-


Options forfeited/expired/cancelled	-		-
Outstanding, September 30, 2008	2,600,000	$	0.133

The fair value of the stock options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:


	September 30, 2008
Risk free interest rate	1.94%
Expected life	1.73 years
Expected volatility	170.72%
Dividend per share	$0.

The fair value of the 2,600,000 options vested and recognized as expense during the period ended September 30, 2008 was $304,869.

NOTE 12 - CONTRACTS AND AGREEMENTS

In May 2007, the Company entered into an agreement with the Company's attorney to provide legal services to the Company in exchange for 200,000 shares of the Company's common stock. The services were valued at $302,000, the fair market value of the shares. The Company recognized $69,669 as legal fees during the year ended December 31, 2007. The balance of $210,651 was recognized as legal services fees during the period ended September 30, 2008.

In May 2007, the Company entered into a supply and licence agreements with Blue Mountain Coffee Co-Operative Society Ltd. wherein we were granted exclusive right to use the “Penlyne Castle” trademark for the marketing and sale of Jamaican coffee for the crop years commencing September 1, 2007 to August 31, 2012. Under the agreements, the Company is required to pay an annual license fee of $25,000 in September of each crop year. As of the September 30 2008, the Company has advanced $299,411 against the future supply of the coffee.

On May 1, 2008 the Company entered into a twelve month consulting agreement with Viriathus Holdings, LLC and Viriathus Consulting, LLC (collectively “Viriathus”) to provide investor relations related services to the Company for monthly fee payments of ten thousand dollars ($10,000). No services were rendered as of September 30, 2008, effectively terminating the contract dated May 1, 2008.

Employment Contracts

In January of 2006, the Company entered into an agreement with Shailen Singh whereby the Company agreed to pay monthly management fees of $8,500 per month. The monthly management fees were increased in January 2007 to $10,000 per month and upon assuming the additional responsibilities of Chief Financial Officer a total monthly management fees, effective February 2007, was agreed at $15,000 per month. In January and July 2006 the Company issued 250,000 and 300,000 S-8 registered free trading shares of common stock. Pursuant to the contract, the Company also issued 500,000 stock options in April 2007 which vested immediately, valued at date of issue at $354,706 (fair market price $0.71, exercise price $1.10) and were formalized under a separate stock option agreement. In November 2007, the 500,000 stock options, valued at $354,706, were voluntarily forfeited and cancelled. Shailen Singh resigned as a director and Chief Financial Officer effective April 16, 2008 effectively terminating the management agreement dated January 2006.

In April 2007, the Company entered into an agreement for thirty six months expiring April 1, 2010 with Terry Klassen, its Chief Executive Officer, whereby the Company agreed to pay monthly management fees of $10,000 and a $100,000 contract execution bonus. Pursuant to the previous employment contract dated July 2006, the Company issued 500,000 stock options to the Chief Executive Officer in April 2007 which vested immediately, valued at date of issue at $354,706 (fair market price $0.71, exercise price $1.10) and were formalized under a separate stock option agreement. The Company issued under the April 2007 agreement to the Chief Executive Officer 100,000 stock options in April 2007 which immediately vested, valued at date of issue at $110,988 (fair market price $1.11, exercise price $1.72) and were formalized under a separate stock option agreement. The 600,000 stock options, valued at $465,694, were voluntarily forfeited and cancelled in November 2007. Pursuant to the April 2007 agreement, the company agreed to issue to the Chief Executive Officer 200,000 stock

options which vested on April 2, 2008. As of September 30, 2008, these stock options were not formalized under an option agreement between the Company and the Chief Executive Officer. Terry Klassen resigned as a director and Chief Executive Officer effective July 28, 2008, effectively terminating the employment agreement dated April 16, 2007.

In September 2007, the Company entered into two agreements with two of its officers of Uncommon Grounds, Inc. whereby the Company has agreed to pay annual salaries of $53,000 each on a biweekly basis in return for services to Uncommon Grounds, Inc.

On April 16, 2008, the Company entered into an employment agreement with Vincent Cafici (“Cafici”) to act as its Chief Financial Officer. The term of Cafici’s engagement was for thirty-six (36) months and expires on April 16, 2011, unless terminated sooner in accordance with the provisions of the agreement. The Company agreed to pay monthly management fee of ten thousand dollars ($10,000) to Cafici, in arrears, on the 25th day of each month. In addition, the Company was to issue one million five hundred thousand, (1,500,000) S-8 registered shares of the common stock of the company on April 16, 2008. These shares were not issued as of September 30, 2008. In further consideration of services to be rendered under the agreement, Cafici was granted stock options to purchase five hundred thousand (500,000) shares of the Company prior to January 1, 2010 at an exercise price of $0.50 per share. These stock options fully vested and granted on April 16, 2008. Vincent Cafici resigned as a director and Chief Financial Officer effective August 6, 2008, effectively terminating the employment agreement dated April 16, 2008.

The Company entered into a management agreement dated April 16, 2008, with Paul Khakshouri (“Khakshouri”). The term of Khakshouri’s engagement was for thirty six (36) months and expires on April 16, 2011, unless terminated sooner in accordance with the provisions of the agreement. The Company agreed to pay monthly management fee of ten thousand dollars ($10,000) to Khakshouri, in arrears, on the 25th day of each month. In the sole and absolute discretion of the Board of Directors, the management fee may be accrued, without interest, until the Board determines that there is sufficient cash to make the payments. In further consideration of services to be rendered under the agreement, the Company was to issue five hundred thousand (500,000) restricted Rule 144 shares of the Company common stock. These shares were not issued as of September 30, 2008. In addition, Khakshouri was granted stock options to purchase one million (1,000,000) shares of the Company prior to January 1, 2010, at an exercise price of $0.50 per share. These stock options fully vested and were granted on April 16, 2008. Paul Khakshouri resigned as a director and President and Chief Operating Officer effective August 7, 2008 effectively terminating the management agreement dated April 16, 2008.

On August 15, 2008, the Board of Directors appointed Mick Rynning as the President and Chief Executive Officer. The Company entered into a definitive management agreement (the “Agreement”) dated August 15, 2008, with Mick Rynning to act as its Chief Executive Officer and President. The term of Rynning’s Agreement shall continue on a year-to-year basis until terminated by either party upon sixty days prior written notice to the other party. The Company shall make monthly management fee payments of ten thousand dollars ($10,000) to Rynning, in arrears, on the 25th day of each month. Rynning was issued five hundred thousand (500,000) restricted common shares as a non-refundable contract execution bonus. The Company has also granted Rynning a Stock Option. Rynning shall have an option to purchase, prior to January 1, 2010, up to one million (1,000,000) shares of Company’s Common Stock at an exercise price per share to be established by the Board. The Stock Option shall be formalized in a separate Option Agreement between Company and Rynning and the Stock Option shall be fully vested January 5, 2009. Effective October 31, 2008, Rynning resigned as the President and Chief Executive Officer of the Company. The management contract dated August 15, 2008 with Rynning was terminated.

NOTE 13 – CONCENTRATION RISK

The Company purchases green bean coffee from Papua New Guinea, Ethiopia and Jamaica. Consequently, any political, economic and social unrest and/or instability in Papua New Guinea, Ethiopia and Jamaica may adversely affect the Company’s business operations. In particular, instability in the coffee growing regions of Papua New Guinea, Jamaica and Ethiopia could result in a decrease in the availability of quality green coffee beans needed for the continued operation and growth of the Company’s business. It could also lead to an

increase in the purchasing costs and increased operating costs. This may adversely affect the Company’s business. For the period ended September 30, 2008 and year ended December 31, 2007 the Company derived green bean revenue from the following coffee supply countries:


	Country		September 30, 2008		December 31, 2007
Papua New Guinea		45%		64%
Ethiopia		0%		36%
Jamaica		55%		0%
Total		100%		100%

NOTE 14 – SUBSEQUENT EVENTS

Effective October 31, 2008, Mick Rynning resigned as the President and Chief Executive Officer of the Company. The management contract dated August 15, 2008 with Rynning was terminated and cancelled. The board of directors appointed Nepal Muhuri as the interim Chief Executive Officer.

A lawsuit was filed on October 9, 2008 by Dow Jones & Company, Inc. at the Superior Court, in Alameda County, California, seeking $13,904, payment for advertisement. The Company expects to enter into a payment settlement arrangement with Dow Jones & Company.

FORWARD LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A(k)(1) of the Securities Act of 1933 as amended and Section 21E(i)(1) of the Securities Exchange Act of 1934 as amended.

Growers Direct Coffee Company, Inc. previously known as Coffee Pacifica, Inc. (the “Company” or “Growers Direct”) uses forward-looking statements that you can identify by words or terminology such as "may", "should", "could", "predict", "potential", "continue", "expect", "anticipate", "future", "intend", "plan", "believe", "estimate" and similar expressions (or the negative of these expressions). Actual results, levels of activity, performance, achievements and events are most likely to vary materially from those implied by the forward-looking statements. These statements are based on current beliefs, expectations and assumptions of the Company. Any such statements should be considered in light of various risks and uncertainties that could cause results to differ materially from expectations, estimates or forecasts expressed. The various risks and uncertainties include, but are not limited to: changes in general economic conditions, changes in business conditions in the coffee industry, fluctuations in consumer demand for coffee products, the availability and costs of green beans, increased competition within the green bean and roasted coffee businesses, our lack of successful operating history, our history of continued losses, our inability to successfully implement our business plan, fluctuations in the price of the green coffee, concentration of single product and sales, lack of significant experience in the coffee industry of our employees, inability to hire, train and retain qualified personnel, inability to get customers, natural disasters, adverse weather conditions, diseases, political and social instability in Jamaica, Ethiopia and Papua New Guinea our source for green coffee beans, our historical losses may continue which negatively impacts our common stock, weak consumer demand for our roasted coffee, we own only one roasting plant, interruption to our only roasting plant may cause significant disruption to our roasting operations, issuance of shares upon conversion of the convertible note and exercise of the outstaying warrants may cause immediate and substantial dilution to our existing shareholders. Most of these factors are difficult to predict accurately and are generally beyond the control of Growers Direct Coffee Company, Inc. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this quarterly report on Form 10-Q. Readers should carefully review this quarterly report in its entirety, including but not limited to our financial statements and the notes thereto. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. For any forward-looking statements contained in any document, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

ITEM 2 Managements Discussion and Analysis of Financial Condition and Results of Operations

For the past three months, the new management has devoted its time and resources to assessing the current state of affairs in the Company, including efforts to solidify our, “Tree to Cup,” vertical integrated strategy, reorganization plans and attempts to secure new funding. On October 31, 2008, Mick Rynning resigned as President and Chief Executive Officer of the Company and the management contract dated August 15, 2008, was terminated. The board of directors intends to appoint a new Chief Executive Officer soon. As of the date of this report, the Company has limited funds to continue its operations. Therefore, our ability to continue as a going concern is an issue as a result of our limited ability to generate sufficient cash to meet our ongoing operational expenses. There are no assurances that we will be successful in generating any additional revenue. To fund the ongoing operations, the Company may be forced to find alternate sources of financing, which at this time cannot be assured. If we are unsuccessful in securing such financing on acceptable terms, our potential as a going concern is affected and our ability to continue with our business would be harmed. In such event, we may curtail or cease our operations.

Our revenue for nine months ended September 30, 2008 was $1,299,270 compared to $1,398,757 for 2007. For the three month period ended September 30, 2008 our revenue decreased by $504,297 to $250,271 compared to $754,568 for three months ended September 30, 2007. For the balance of 2008, we anticipate to continue generating revenue from the sale of roasted coffees only. We will focus to sale of roasted coffee online via the website wwww.uncommongrounds.net of Uncommon Grounds Inc. Our gross profit on sales for nine months in 2008 was approximately 33% compared to 38% in 2007. Our gross profits increased to 53% (three month ended

September 2008) from 28% for the three months ended September 30 2007. Our revenue for the period ended September 30, 2008 was $ 1,299,270 consisted of $565,780 from green bean coffee and $733,490 from roasted coffee and operating expenses were $3,194,899. For the balance of 2008, we anticipate generating higher gross margins as we attempt to increase our sale of wholesale roasted coffees. Our operating expenses for the nine months to September 30, 2008 were $3,211,479 compared to $7,478,174 in 2007; a decline in expenses of $4,266,695. The general and administration expenses declined to $2,602,610 in 2008 compared to $4,618,759, marketing expenses decreased by $1,735,015 to $304,000 in 2008 compared to $2,039,015 in 2007. The net loss for the nine months ended September 30, 2008 was $3,782,483 compared to $8,125,820 in 2007. For the three month ended September 2008 our expenses were $789,713 compared to $2,464,180 for three month ended September 2007; a decline in expenses of $1,674,467. The general and administration expenses declined by $957,711 to $630,794 in 2008 compared to $1,588,505, marketing expenses decreased by $885,500 to zero in 2008 compared to $885,500 in 2007. The net loss for the three months ended September 30, 2008 was $789,713 compared to $2,464,180 in 2007. At September 30, 2008, we had $629,034 in current assets and $1,333,399 in current liabilities. The current liabilities include trade payable of $355,234, payables and accrued expense of $688,319 to former directors and officers resulting from the employment agreements, notes payables of $207,498 for cash loaned by two stockholders and secured note of $62,500. Our long term liabilities, September 30, 2008, resulting from the convertible notes funding was $2,533,530. At September 30, 2008, the Company had $386,829 in deposits for coffees to be supplied in future. As of September 30, 2008, the Company had a bank indebtedness of $17,476 and credit card payable of $2,372. The Company does not have adequate cash to meet its current operational expenses. The Company requires immediate funding to continue its operations. As of the date of this report, the Company does not have any access to funding. All revenues generated by the Company are used to pay Company expenses incurred.

As of the date of this Report, Growers Direct has not incurred any coffee related research and development expenses and does not plan to incur any research or development expenses in the future.

As of the date of this Report, Growers Direct did not have any off-balance sheet arrangements.

Critical Accounting Policies & Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and (2) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements.

Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operation and/or financial condition. We have identified certain accounting policies that we believe are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 3 to the Consolidated Financial Statements included in this Quarterly Report on Form 10-QSB.

Revenue Recognition

The Company derives its revenue from sale of green beans and roasted coffees and allied coffee products. Our revenue is recognized in the period when persuasive evidence of an arrangement exists, delivery occurs, the sales price is fixed or determinable and collectibility is reasonably assured. Coffee is considered delivered when title and risk have been transferred to the customer. Retail and wholesale sales are recorded when payment is tendered at point of sale for retail, and upon shipment of product for wholesale.

Stock Option

Company has adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based Payment”. Under the fair value method, compensation cost is measured at fair value using the Black-Scholes option-pricing model, at the date of grant and is expensed over the award’s vesting period. Expected volatility is based on the historical volatility of the company’s common stock. SFAS No. 123(R) requires that stock-based compensation expense be based on awards that are ultimately expected to vest, and that forfeitures are estimated when recognizing compensation cost. Accordingly, the Company estimated a forfeiture rate of 0% when originally recognizing compensation cost. When estimating forfeitures, voluntary termination behaviour is considered as well as trends of actual option forfeitures. For the cumulative period from January 1, 2008 to September 30, 2008, there have been zero options forfeitures and cancellations. At September 30, 2008, 200,000 stock options for future grant - common stock equivalents were outstanding.

Convertible Note

On March 2007, the Company entered into convertible note agreements with certain institutional and accredited investors for amounts totalling $2,678,571 with an original discount of 16% ($428,571). The convertible notes are repayable on March 19, 2009. The notes are convertible into common stock of the Company, at the option of the holders, at a rate of $0.66 per share. The Company also issued to the holders 3,438,033 stock purchase warrants exercisable at $0.66 per share before March 18, 2010. The warrants may be exercised on either a cash or cashless basis, at the option of the warrant holders. In accordance with EITF Issue 98-5 "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios", the Company recognized the value of the embedded beneficial conversion feature of $368,000 as additional paid-in capital and an equivalent discount which will be expensed over the term of the convertible notes. In addition, in accordance with EITF Issue 00-27 "Application of Issue No.98-5 to Certain Convertible Instruments", the Company has allocated the proceeds of issuance between the convertible notes and the detachable warrants based on their relative fair value. Accordingly, the Company recognized the fair value of the detachable warrants of $1,087,979 as additional paid-in capital and an equivalent discount against the convertible notes. The difference between the face amount of the convertible notes and their carrying value is amortized over the life of the convertible notes. As long as any portion of the convertible notes remains outstanding, the Company shall not pay any cash dividends or distributions on any equity securities of the Company without prior written consent from the holders of the convertible note.

Fair Value of Financial Instruments

The Company's financial instruments, as defined by Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," include cash and cash equivalents, marketable securities, receivables, advances to employees, accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at September 30, 2008 and December 31, 2007.

Receivables

Trade accounts receivable are recorded at the net realizable value and do not bear interest. No allowance for doubtful accounts was made during the nine months ended September 30, 2008 and 2007 based on management's best estimate of the amount of probable credit losses in existing accounts receivable. Growers Direct evaluates its allowance for doubtful accounts based upon knowledge of its customers and their compliance with credit terms. The evaluation process includes a review of customers' accounts on a regular basis. The review process evaluates all account balances with amounts outstanding 60 days and other specific amounts for which information obtained indicates that the balance may be uncollectable. As at September 30, 2008, Company recorded $42,465 as bad debt expenses and there was no allowance for doubtful accounts. Growers Direct does not have any off-balance-sheet credit exposure related to its customers.

Seasonality and Other Factors That May Affect Our Future Results

(a)

Our business is seasonal in nature because coffee harvest season is from May to August in Papua New Guinea and August to November in Jamaica. The seasonal availability of green bean coffee in the second quarter of the year may result in increased sales in the last two quarters. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Furthermore, past seasonal patterns are not necessarily indicative of future results.

(b)

Our business strategy is centered on a single product; green bean coffee. If the demand for green bean coffee decreases, our business could suffer. Additionally, if we fail to continue developing and maintaining the quality of the green bean coffee we sell or the farmers allow the quality of the green bean coffee to diminish, our business revenue and profitability could be adversely affected.

(c)

We have only one coffee roasting facility. A significant interruption in the operation of this facility due to natural disaster or other causes could significantly impair our ability to operate our coffee roasting business on a day-to-day basis.

(d)

Our roasted coffees compete directly against gourmet specialty coffees sold at specialty retailers, discount stores, and a growing number of specialty coffee stores. Many specialty coffee companies, including Starbucks and Peets Coffee sell whole bean coffees through these channels. The gourmet specialty market contains competitors with substantially greater financial, marketing and operating resources than we have.

(e)

Our ability to continue with our business plan is subject to our ability to continue generating additional revenue. Our ability to continue as a going concern is an issue raised by our auditors in their audit report as a result of our limited revenue and accumulated losses of $26,927,624 as of September 30, 2008. There are no assurances that we may be successful in generating any additional revenue. To fund the ongoing operations, Growers Direct may be forced to find alternate sources of financing, which at this time cannot be assured. If we are unsuccessful in securing such financing on acceptable terms, our potential as a going concern could be affected and our ability to continue with our business would be harmed. In such event, we may curtail or cease our operations.

(f)

Our ability to implement the marketing and sales strategy is partially dependent on our ability to increase awareness and recognition of Papua New Guinea and Jamaican grown green bean coffee in United States, Canada and Europe. We may have difficulty selling the Papua New Guinea grown green bean coffee to roaster retailers, commercial roasters, gourmet roasters and retailers, and coffee brokers. Consequently, if we fail to implement our marketing and sales strategy, or if our resources on a marketing and sales strategy ultimately proves unsuccessful, our revenue and operating results may be adversely affected and we may have to curtail or cease our operations. As a result, investors could lose their entire investment.

(g)

We need to manage growth in our operations. Our ability to successfully offer our products and services and implement our business plan in an evolving coffee market requires an effective planning and management process. We will need to continue to improve our financial and managerial controls and reporting systems and procedures. We expect growth in our business; however, this growth will continue to place a significant strain on our management systems and resources. There are no assurances we will effectively achieve or manage future growth, and the failure to do so could delay product development cycles or otherwise have a materially adverse effect on the Company’s financial condition and results of operation.

(h)

Our business depends upon attracting and retaining highly capable management and operations personnel. In order to achieve its objectives, the Company must add key people to its management team. We also require highly skilled technical, sales, management and marketing employees who are in high demand and are often subject to competing offers. As we grow, we will continue to need an increased number of management and support personnel. It is possible that we will be unable to recruit the people we need in a timely fashion.

(i)

Intense competition may affect our profitability. The markets for our products are highly competitive and rapidly changing. We face several large competitors that have been in business longer than we have. These competitors have the advantage of having entered the market earlier than us. Our competitors and their products are more fully established and accepted in the market place. There are a number of other companies offering green bean coffee currently existing in the market place. These competing companies are already accepted in the market place. We may therefore be unable to gain adequate market share that will allow us to meet our financial projections. We cannot assure you that our competitors will not develop services or products that are equal or superior to ours or that achieve greater market acceptance.

(j)

We may need additional capital. We require substantial working capital to fund our business. If we do not generate enough cash from operations to finance our business in the future, we will need to raise additional funds through public or private financing. Selling additional stock could dilute the equity interests of our stockholders. If we borrow money, we will have to pay interest and may have to agree to restrictions on our

operating flexibility. The borrowing of additional monies may put a strain on the Company’s cash flow and ability to develop and or expand its products and business. There are no guarantees that we will be able to obtain additional financing or that if such financing is available that it will be on terms satisfactory to the Company. See “Management’s Discussion and Analysis of Financial Condition and Operations".

Our Industry Related Factors That May Affect Our Future Results

(a)

Competition may adversely affect our ability to implement our business plan. There are other companies conducting similar activities, and the demand for green bean coffee is affected by consumer taste and preferences. With little operating capital in a rapidly evolving and highly competitive coffee industry, we will encounter financial difficulties. The whole green bean coffee market is highly fragmented and coffee brands are being established across multiple distribution markets. Several competitors are aggressive in obtaining distribution in specialty grocery and gourmet food stores. We have only begun to penetrate these markets, which gives some competitors advantages over us based on their earlier entry into these distribution markets. Competition in the green bean coffee market is intense as relatively low barriers to entry encourage new competitors to enter the green bean coffee market. The new market entrants may have substantially greater financial, marketing and operating resources than we may, which may adversely affect our ability to implement our business plan. We may have to curtail or cease our business and our investors may lose their entire investment.

(b)

Adverse weather conditions and diseases may negatively affect the cost of and our supply of green coffee beans. Decreased availability of quality green bean coffee would have an adverse affect on our purchasing costs, revenue and profitability and would jeopardize our ability to grow our business. A significant portion of our anticipated revenue will be realized during the Papua New Guinea coffee harvest season, which is from May to August. Any coffee tree and/or coffee bean diseases and/or severe adverse weather conditions such as a prolonged period of drought, would have an adverse effect upon the supply of quality green bean coffee at a reasonable price, which, in turn, would directly affect our ability to market and distribute green bean coffee in the United States, Europe and Canada. As a result, our business would be impaired, we may have to curtail or cease our operations, and the investors could lose their entire investment.

(c)

Political and social instability in Papua New Guinea, Jamaica and Ethiopia may also negatively affect our supply of green coffee beans and our purchasing costs. We purchase unprocessed green bean coffee from Papua New Guinea, Jamaica and Ethiopia. Consequently, any political, economic and social unrest and/or instability in Papua New Guinea, Jamaica and Ethiopia may adversely affect our business operations. In particular, instability in coffee growing regions of Papua New Guinea, Jamaica and Ethiopia could result in a decrease in the availability of quality green coffee beans needed for the continued operation and growth of our business. It could also lead to an increase in our purchasing costs and increased operating costs. This may impair our business, we may have to cease or curtail our operations, and investors could lose their entire investment.

(d)

Fluctuations in the price of green bean coffee may impede our marketing ability Green bean coffee is traded on the commodities market. The supply and price of green bean coffee is affected by multiple factors in the various producing countries including; weather, political, and economic conditions. We plan to sell our green bean coffee on a negotiated basis based upon the supply and demand at the time of purchase/sale. The benchmark (beginning) price will be directly tied to the then current prevailing price of New York "C" futures coffee contracts trading on the New York Coffee, Sugar & Cocoa Exchange. If the cost of green bean coffee increases, we may not be able to pass along those costs to our customers because of the competitive nature of the coffee industry. If we are unable to pass along increased coffee costs, our margins will decrease and profitability will suffer accordingly. As a result, our business will be adversely affected and we may have to curtail or cease our operations and the investors could lose their entire investment.

Factors That May Affect Owning Growers Direct Common Stock

(a)

There are a large number of shares underlying the Notes. As of September 30, 2008, we had 37,413,992 shares of common stock issued and outstanding. There are currently Notes outstanding that may be converted into an estimated 6,350,584 shares of common stock at current market prices and outstanding warrants to purchase 3,678,695 shares of common stock. All of the shares, including all of the shares issuable upon conversion of the notes and upon exercise of our warrants, may be sold without restriction. The sale of these shares may adversely affect the market price of our common stock.

(b)

The issuance of shares upon conversion of the Convertible Notes and exercise of outstanding Warrants may cause immediate and substantial dilution to our existing stockholders. The issuance of shares upon conversion of the Notes and exercise of warrants may result in substantial dilution to the interests of other stockholders since the selling stockholders may ultimately convert and sell the full amount issuable on conversion. Although the selling stockholders may not convert their Notes and/or exercise their Warrants if such conversion or exercise would cause them to own more, than 4.99% of our outstanding common stock, this restriction does not prevent the selling stockholders from converting and/or exercising some of their holdings and then converting the rest of their holdings. In this way, the selling stockholders could sell more than this limit while never holding more than this limit.

(c)

Repayment of the Notes could negatively affect our supply of working capital. On March 19, 2007, we entered into agreements to issue the Notes. The Notes are due and payable March 18, 2009, unless sooner converted into shares of our common stock. The Company could not have voluntarily pre-paid the Notes until March 18, 2008. In addition, any event of default such as our failure to repay the principal or interest when due, our failure to issue shares of common stock upon conversion by the holder, our failure to timely file a registration statement or have such registration statement declared effective, breach of any covenant, representation or warranty in the Subscription Agreement or related convertible note, the assignment or appointment of a receiver to control a substantial part of our property or business, the filing of a money judgment, writ or similar process against our company in excess of $50,000, the commencement of a bankruptcy, insolvency, reorganization or liquidation proceeding against our company and the delisting of our common stock could require the early repayment of the Notes, including a default interest rate of 15% on the outstanding principal balance of the Notes if the default is not cured within the specified grace period. The intent of the Company is to make all payments that may become due under the Notes. Furthermore, we have a reasonable basis to believe that the Company has the financial ability to make all such payments as they may become due. We anticipate that the full amount of the Notes will be converted into shares of our common stock, in accordance with the terms of the Notes. If we were required to repay the Notes, we would be required to use our limited working capital and raise additional funds. If we were unable to repay the Notes when required, the notes and stockholders could commence legal action against us and foreclose on all of our assets to recover the amounts due. Any such action would require us to curtail or cease operations.

(d)

There is currently a limited trading market for our shares of common stock, there can be no assurance that a more substantial market will ever develop or be maintained. Any market price for shares of common stock of Growers Direct is likely to be very volatile, and numerous factors beyond our control may have a significant adverse effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many companies, and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may also adversely affect the market price of our common stock. Further, there is no correlation between the present limited market price of our common stock and our revenues, book value, assets or other established criteria of value. The present limited quotations of our common stock should not be considered indicative of the actual value of Growers Direct Coffee Company, Inc. or our common stock.

(e)

Growers Direct common stock (OTC:BB “GWDC.OB”) is deemed to be a "penny stock" as that term is defined in Rule 3a51-1 of the Securities and Exchange Commission. Penny stocks are stocks (1) with a price of less than $5.00 per share; (2) that are not traded on a "recognized" national exchange; (3) whose prices are not quoted on the NASDAQ automated quotation system until recently, there had been no "established public market" for our common stock during the last five years. While our stock has traded between $0.01 and $1.04 per share over the past twelve months, there is no assurance that this price level will continue, as there has thus far been low volume. Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2 of the Securities and Exchange Commission require broker/dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed a "penny stock." Moreover, Rule 15g-9 of the Securities and Exchange Commission requires broker/dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stocks to that investor. This procedure requires the broker/dealer to (1) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (2) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has

sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (3) provide the investor with a written statement setting forth the basis on which the broker/dealer made the determination in (2) above; and (4) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of them.

ITEM 4 CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2008. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based on his evaluation of our disclosure controls and procedures as of September 30, 2008 we concluded that such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Management’s Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed, under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2008, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of September 30, 2008 was not effective, as during the quarter ended September 30, 2008, a former director and chief executive officer was able to charge expenses of personal nature on the company credit cards. .

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States; (2) receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) unauthorized acquisitions, use, or disposition of the Company’s assets that could have a material affect on the Company’s financial statements are prevented or timely detected.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparations and presentations. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control Over Financial Reporting

During our most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Auditor Attestation

Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this quarterly report.

Part II—OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

As of September 30, 2008, we are unaware of any other litigation pending or threatened by or against the Company.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

In August 2008, we issued 1,900,000 Restricted Rule 144 shares of common stock for consulting and management fees. Total value of the services was valued at the fair market price was $228,000. The payment was to an accredited investors, as that term is defined in Regulation D promulgated under the Securities Act of 1933 (“Act”) and the shares are exempt from registration as contained in Section 4(2) of said Act based upon the fact that the shares were issued in a private transaction without the use of general solicitation or advertising to the claimant who we believe is capable of evaluating the merits and risks of an investment in our common stock.

Stock Repurchase

As of the date of this Report, Growers Direct does not have any stock repurchase plan.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

– None –

ITEM 4 SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the quarter ended September 30, 2008, covered by this report, to a vote of security holders, through solicitation of proxies or otherwise.

ITEM 5 OTHER INFORMATION

No material changes were made to the procedures by which security holders may recommend nominees to the Growers Direct Coffee Company’s board of directors.

ITEM 6 EXHIBITS


Exhibit No.	Document	Location
3.1	Articles of Incorporation	Previously Filed
3.2	Bylaws	Previously Filed
14.1	Code of Business Conduct and Ethics	Previously Filed
33.1	Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Included
33.2	Certification of the Chief Executive Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Included
99.2	SB-2 Registration Statement	Previously


Filed

SIGNATURES

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

GROWERS DIRECT COFFEE COMPANY, INC.


Name	Title	Date

/s/ Nepal Muhuri	President and Chief Executive Officer (On behalf of the registrant as its Principal Executive Officer )	November 19, 2008
Nepal Muhuri

/S/ Nepal Muhuri

Nepal Muhuri

Chief Financial Officer (On behalf of the registrant as its Principal Financial Officer)

November 19 , 2008

GROWERS DIRECT COFFEE COMPANY, INC. 10-Q