<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                  FORM 10-KSB

                                   (Mark One)

              /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                      THE SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended December 31, 2000

                                       OR

            / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                      THE SECURITIES EXCHANGE ACT OF 1934

              For the transition period from ________ to ________

                        Commission File No. 33-960-70-LA


                       THANKSGIVING COFFEE COMPANY, INC.
                 (Name of small business issuer in its charter)


        California                                              94-2823626
(State or other jurisdiction of                               (IRS Employer
incorporation or organization)                            Identification Number)

                           19100 South Harbor Drive
                         Fort Bragg, California  95437
              (Address of principal executive officers)(Zip Code)


                  Issuer's telephone number:  (707) 964-0118

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


Title of each class                    Name of each exchange on which registered

----------------------------------     ----------------------------------------

----------------------------------     ----------------------------------------


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

--------------------------------------------------------------------------------
                                                                (Title of class)

--------------------------------------------------------------------------------
                                                                (Title of class)


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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.  \X\

State issuer's revenues for its most recent fiscal year: $5,391,482

The aggregate market value of the voting and non-voting common equity held by
nonaffiliates was $1,210,331.   See Part II, Item 5, Market for Common Equity
and Related Stockholder Matters.

As of March 15, 2001, there were 1,234,544 shares outstanding of common stock of
the issuer.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the documents if incorporated by reference and the Part of this
Form 10-KSB into which the document is incorporated:  None.
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                                     INDEX
<TABLE>
<CAPTION>
                                                                                                 Page No.
PART I.
<S>                                                                                              <C>
Item 1.  Description of Business................................................................    3

Item 2.  Description of Property................................................................    8

Item 3.  Legal Proceedings......................................................................    8

Item 4.  Submission of Matters to a Vote of Security Holders....................................    8

PART II.

Item 5.  Market for Common Equity and Related Stockholder Matters...............................    9

Item 6.  Management's Discussion and Analysis or Plan of Operation..............................    9

Item 7.  Financial Statements...................................................................   12

Item 8.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...   12

PART III.

Item 9.  Directors and Executive Officers of the Registrant.....................................  12

Item 10.  Executive Compensation................................................................. 13

Item 11. Security Ownership of Management and Certain Others....................................  14

Item 12. Certain Relationships and Related Transactions.........................................  14

Item 12. Exhibits and Reports on Form 8-K.......................................................  15

Item 13. Financial Statements................................................................... F-1
</TABLE>
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                                    PART I

ITEM 1  BUSINESS

FORWARD LOOKING INFORMATION

In addition to historical information, this Annual Report on Form 10-KSB
contains forward-looking statements within the meaning of Section 27A of The
Securities Act and Section 21E of The Securities Exchange Act of 1934.  Forward-
looking statements are identified by words such as "believe,,"  "anticipate,"
"expect,"  "intend," "plan," "will,"  "may," and other similar expressions.  In
addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements.   These statements relate to, among other things, planned expansions
into new and existing markets and trends in the operations of Thanksgiving
Coffee Company, Inc. (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 and in the availability and
costs of green coffee beans, continuing competition within the Company's
businesses, variances from budgeted sales mix and growth rate, consumer
acceptance of the Company's products, inability to secure adequate capital to
fund its operating expenses and working capital requirements, inability to hire,
train and retain qualified personnel, concentration of production and sales in
Northern California, the loss of one or more major customers, inability to
successfully implement its business plan, natural disasters, civil unrest in
countries which produce coffee and tea, weather and other risks identified
herein.  Readers are cautioned not to place undue reliance on these forward-
looking statements which speak only as of the date of this 10-KSB.

GENERAL

For more than twenty-five years, the Company has purchased and roasted high
quality coffee beans and marketed them to the specialty coffee market.  The
Company buys green coffee beans through six main importers, including
Sustainable Harvest, Inc. (a former subsidiary of the Company).  At the end of
fiscal 1997, the Company sold Sustainable Harvest and entered into an agreement
to purchase beans from Sustainable Harvest for five years commencing December
1997.  See "Green Bean Coffee Supply and Availability."

The Company was incorporated as a California corporation on May 10, 1982.  Prior
to that time, the Company was operated as a partnership.

The Company retails over 100 varieties of its coffee and tea through its own
distribution system in the Northern California market.  In other parts of the
nation the Company distributes its products either direct to retailers or
through brokers and distributors.  The Company also markets directly to
consumers through both the print and electronic media.  It publishes a mail
order catalogue that features most of the Company's coffee and tea products, in
addition to complementary products and accessories of third parties.  The same
product offerings are made on the Company's web site on the internet.   The
Company also markets its coffee and tea products in its retail bakery (the
"Bakery"), located in Mendocino, California.

In October 1996, the Company completed its offering of shares of Common Stock.
As of December 31, 2000, 1,305 non-affiliated shareholders held shares of the
Company's Common Stock that represents approximately 20.7% of the outstanding
shares.

                                       3
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PRODUCTS

COFFEE.  The Company roasts a wide variety of whole bean caffeinated,
decaffeinated, flavored, blended and unblended coffees.  With the exception of
its high-caffeinated coffees, the Company roasts only high quality arabica beans
with a focus on organic and shade grown beans.  Arabica beans are grown at high
altitudes where the cooler climate results in slow growth and usually higher
quality.  In addition to its full line of classic specialty and estate coffees
from over 20 countries currently, the Company is producing custom products for
the American Birding Association under an exclusive ten-year contract and
private-label products for over 100 retail and serving accounts in an effort to
meet customers needs.  The Company has the ability to have products custom
packaged for retailers.

TEA.  The Company's Royal Gardens Tea Company ("Royal Gardens") division
currently offers eleven traditional teas from China, India, Sri Lanka and Japan.

COMPLEMENTARY PRODUCTS.  The Company sells a wide variety of complementary
coffee and tea products and accessories, such as coffee and espresso makers,
grinders, thermal carafes, books, T- shirts, mugs, CD's and chocolate covered
espresso beans.

The Company sells its coffees and teas through a multi-channel distribution
network consisting of wholesale distribution operations, a Company-owned Bakery
and direct marketing operations.  The Company offers its complementary products
through all of these channels of distribution.  Products are purchased from
third party vendors without contract and resold to its customers.  The Company
generally provides its wholesale customers with brewing, grinding and related
equipment (leased from manufacturers) and product displays (designed and
manufactured by the Company) at no charge if predetermined sales volumes are
reached.

Of the total fiscal 2000 revenues of $5,391,482, 83% were from roasting coffee,
13% were from the bakery, 3% were from resale items, and 1% were from tea
products.

COFFEE INDUSTRY

According to the Specialty Coffee Association, the United States specialty
coffee retail sales exceed $2.1 billion and specialty coffee beverage sales
exceed $3.3 billion annually in a $17 billion coffee market in 2000.  Specialty
coffee beverage retailers have been the fastest growing distribution channel in
the specialty coffee business.  There are over 12,000 locations at the end of
2000 as compared to 6,000 just five years ago.  Cross outlet competition is
sharpening as away-from-home consumption is growing through new or existing
locations to gain market share at the expense of at-home consumption,
represented by supermarkets and mass merchandisers.

Although total coffee consumption is flat, consumers are purchasing more value-
added coffee products (i.e. specialty coffee drinks); and such purchases are
driving the market.  Coffee consumers have been moving away from price-based
drinks to beverages with a focus on product variety and quality.  This quality
conscious purchasing trend has evolved coffee from a beverage with commodity
characteristics to one with cultural and sensory ties.

In the 1970's, when Thanksgiving Coffee began to roast, there were less than 100
roasters in the country, with the large roasters accounting for nearly all of
the coffees consumed.  Today, there are 1,200 specialty coffee roasters, each
segmenting and fragmenting the market, adapting to a wide variety of niche
markets.  They are focusing on their ability to provide a wide range of coffee
origins, freshly roasted in the appropriate style to meet the specific needs of
local marketers.

There has been a trend of increased public awareness of the environmental issues
associated with clear cutting of rain forests to provide land for sun-grown
coffee.  Recent changes in the coffee industry have included:

1.   The Specialty Coffee Association of America ("SCAA") has changed its 14-
year old mission statement to include the   words:   "social responsibility",
"environmental sensitivity", and "sustainability".

2.   The country of Nicaragua has embraced the policy of shade in its coffee
plantations as public policy.

3.   A Third National Conference on Coffee and the Environment, which is co-
sponsored by the SCAA and the Smithsonian Migratory Bird Center, was held in San
Francisco, California in April 2000.

4.   Shade grown coffee and Fair Trade coffee now appears on the "offer" lists
of most coffee brokers and importers and is offered by a majority of small to
mid-size coffee roasters of specialty coffee.

5.   Coffee producing countries, such as Costa Rica, have begun shade
replantings on their sun coffee farms to improve the quality of their coffee
beans and to benefit from premium prices paid for shade coffee.

                                       4
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MARKETING STRATEGY

The Company's sales and marketing efforts are currently organized in four
different segments:

1.   Wholesale, direct delivery  - This segment includes customers in northern
California counties contiguous to the Company plant in Fort Bragg, California,
and is serviced by Company trucks.  The Company owns or leases trucks and
delivers coffee within a 200 mile radius of Fort Bragg.

2.   Wholesale, delivery by other means  - This segment includes accounts that
are serviced by UPS or other common carriers.  Delivery is made to over 500
accounts that span all 50 states of the United States.  This segment is either
handled direct, via broker or a distributor.

3.   Direct Marketing  - This segment includes accounts serviced through
catalogue or online programs.

4.   Retail  - This segment consists of sales through the Company's Bakery.
However, the Company is currently pursuing the sale of the Bakery with a real
estate agent (see Item 2 Property).

During fiscal 2000, the Company continued shifting its blend of product sales to
focus on sales to niche markets.  The Company's plan for fiscal 2000 was based
on the continued growth of Song Bird Coffee(TM) sales to the marketplace.  Sales
for the year 2000 were up five percent to $600,000 compared to sales of $570,000
for 1999.

The Company is engaged in a campaign to market coffees to bird lovers under an
exclusive ten-year agreement with the American Birding Association, which
expires in June, 2007,to produce and market Song Bird Coffee worldwide.  Song
Bird Coffee is a registered trademark of the American Birding Association, one
of America's most active and prestigious birding membership associations with
over 20,000 members.

The Company's strategy of "repositioning" its coffee products by targeting bird
lovers instead of coffee lovers is predicated on the fact that migratory birds
are in population decline due to loss of habitat, which results from the
clearing of shade tree canopy to allow coffee to grow in the sun.  The
Smithsonian Migratory Bird Center's landmark 1996 study reported that as much as
60% of the migratory bird population of North America has disappeared since
1972, and traced this disappearance to the reduction of forest habitat in
Central and South America caused by the "technification" of coffee agriculture.
The Company's environmental concerns have meshed perfectly with the birding
community, and the Company's marketing efforts have been extremely successful to
date.  In 2000, the Company opened 101 new bird store accounts which retail Song
Bird Coffee for a total of 436 accounts.

In fiscal 1997, the Company pioneered the sale of the Song Bird Coffee in bird
stores, home and garden centers and drug stores.  It also began to offer Song
Bird Coffee through more traditional retail venues such as supermarkets,
restaurants and cafes, and in its direct marketing catalogue.  This effort is
intended to increase the awareness of the coffee drinking public and the birding
community that production of sun grown coffee on previously forested lands was a
major factor in the deterioration of the world's rain forests and habitat of
migratory song birds. By educating consumers through packaging and special venue
sales, such as bird stores, the Company's aim is the creation of a strong market
for shade grown coffees which preserves bird habitats. Support by consumers
could influence coffee farms to replant limited or natural shade, and thus help
stop the destruction of the environment before additional losses occur in the
songbird population.

The Company believes that its relationship with the American Birding Association
and its marketing of Song Bird Coffee have distinguished the Company's role and
image in the marketplace.  The dedication of more of the Company's resources to
the production of Song Bird Coffee and an increased public awareness of the
environmental effects of coffee growing has resulted in a corresponding increase
in the sales of the Company's packaged and bulk roasted shade grown and organic
coffee varieties, from approximately 30% of sales in fiscal 1996, to just over
33% of sales in 1997, to 40% in 1998, to 46% in 1999 and 60% in 2000.  Song Bird
Coffee sales have grown to represent 6% of the Company's packaged and bulk
roasted coffee sales in fiscal 1997, 10% in 1998, 12% in fiscal 1999 and 13.5%
in 2000.  Song Bird Coffee was not sold in fiscal 1996.

SOCIAL RESPONSIBILITY

It has been the philosophy of the Company to not only provide an excellent cup
of quality coffee but also procure, roast, package and market its products in a
manner that is fair to all its customers and suppliers.  The Company's motto,
"Not Just a Cup, but a Just Cup,"(TM) reflects the Company's commitment to local
coffee growers in developing nations

The clear cutting of the rain forests to provide land for sun-grown coffee has
destroyed the habitat of neo-tropical songbirds.  The Company provides a $0.15
rebate for every Song Bird coffee package and every pound of bulk Song Bird
coffee sold to the American Birding Association (the "ABA") which supports the
promotion of public awareness of this destruction.

During fiscal 2000, the Company embarked on a new social program that
complements and enhances its environmental vision.

                                       5
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Working in partnership with TransFair USA, the company has adopted a fair trade
label that distinguishes the product from its other offerings.  The fair trade
certification program was born in Europe in recognition of the need for the
small farmers to receive a fair price for their crop to enhance their economic
viability.  The green coffee market generally takes into consideration only the
supply and demand in establishing price.  It does not recognize the farmers cost
factors and the need for a return for the small farmer to survive.

In addition to providing a floor price, currently at $1.26 per pound for the
cost of coffee, the program works only with democratically-run coops which are
the recipients and disbursers of the additional funds.  With this program the
layers of middlemen are cut, so that the coop is generally dealing directly with
a green coffee broker or the roaster itself.  It also provides a source of low
cost credit for farmers that could not generally get bank credit because of the
risks in their business.   In addition, most of these farmers grow their coffee
in the shade of taller forest canopies providing habitat for songbirds.

The Company sells the fair trade product under a number of different labels and
a new Fair trade coffee label, which was introduced in the last quarter of 2000.
The higher price of the coffee is generally passed on to the consumer.  The
benefit to the consumer is a reliable source of quality coffee and the ability
to favorably impact the economic welfare of the farmer.  Although sales are not
material at this time, the Company feels that this is a new niche for its
business.  The Company believes that fair trade coffee, like the Song Bird line,
provides a potential opportunity for growth.  The Company has begun to provide
educational programs, tastings and brochures to familiarize the public with the
fair trade theme.

In addition to fair trade, the Company also contributes coffee, money and
employee time to a number of causes aligned with its commitment to social and
environmental responsibility.

COMPETITION

The specialty coffee market is highly competitive, and the Company competes
against all sellers of specialty coffee.  At the wholesale level, the Company
competes with several nationally known premium coffee brands, such as Procter &
Gamble's Millstone label and Nestle's Nescafe label, as well as other lesser
known brands and store brands.  The Company also competes regionally in Northern
California with small regional specialty roasters for retail shelf space and
with large regional roasters for food service trade.  In the direct mail area,
the Company competes with established suppliers such as Gevalia, a division of
General Foods Corporation, as well as with other direct mail companies,
including Starbuck's, a leading independent specialty coffee retailer and
wholesaler.

The Company competes with other eco friendly coffee companies such as Equal
Exchange, Counter Culture, Cafe Mam, and other coffee companies that have
environmental coffees in their lines such as Green Mountain and Boyd's.

The Company competes primarily on the basis of the quality of its products, its
graphics, and its social and environmental philosophies.  Many of the Company's
competitors are larger than the Company and have significantly greater
financial, marketing and other resources than the Company, and there can be no
assurance that it will be able to compete or maintain or expand sales
successfully in the future.

The Company attempts to cooperate with retailers in introducing what it believes
are novel products which face little or no competition and to place its products
in markets where such products have not previously been sold.  For example, Song
Bird Coffee is marketed in stores where bird lovers purchase birdseed and bird
houses. In addition we have similar programs with Wyland, ECOBOOM(TM) which
creates awareness for the protection of the seas, and Fair Traded coffees which
provide a floor price to the small coffee farmer. The Company calls this
strategy "repositioning".  See "Marketing Strategy."

Similarly, the Company sells organic and shade grown coffee to organizations
focused on social and environmental issues.  In fiscal 2000, the Company's
coffee products were served and sold by prestigious environmental organizations
such as The National Aquarium, Monterey Bay Aquarium, the Cape May Bird
Observatory and by several other national institutions.

The Company cannot guarantee successful competition against other coffee
companies.  The Company believes its focus on repositioning and partnering has
enabled it to find a niche in the coffee market, however there can be no
assurance that the Company's marketing efforts will be successful.

The Company also experiences competition in connection with its sales of tea.
The Company's product generally is sold in specialty retailers and gift shops
where there is competition from a variety of companies such as Tazo, Republic of
Tea, Stash and Bigelow.  The Company competes primarily on the basis of the
quality of the tea, and the packaging. While the Company believes it competes
favorably with respect to these factors, many of the Company's competitors are
larger than the Company and have significantly greater financial, marketing and
other resources than the Company, and there can be no assurance that it will be
able to compete or maintain or expand sales successfully in the future.

                                       6
<PAGE>

The Company also provides complimentary products primarily to its wholesale
serving accounts that are ancillary to the coffee business but are necessary to
serve coffee.  These items include chocolate, syrups, coffee cups, equipment
cleaner and the like.  These items are provided as a convenience for those
accounts and assist in increasing revenue per stop for the Company's
distribution system.  The Company also sells these items in their direct
marketing division.  The Company experiences competition in the sale of these
ancillary items from manufacturers or other distributors such as foodservice
distributors.  There can be no assurance that the Company will be able to
compete or maintain or expand sales of these products successfully in the
future.

GREEN BEAN COFFEE SUPPLY AND AVAILABILITY

The Company purchases green beans from a number of importers as well as from
farmer representatives and small producer cooperatives.  Although most coffee
trades in the worldwide commodities markets, coffee of the quality sought by the
Company tends to trade on a negotiated basis at a substantial premium or
"differential" above commodity coffee pricing, depending upon the supply and
demand at the time of purchase. Supply and price can be affected by multiple
factors, such as weather, politics and economics in the producing countries.

In addition, in its attempt to reduce the cost risk resulting from market
fluctuations in the cost of coffee beans, the Company, or its brokers on its
behalf, does purchase coffee contracts when it is not able to enter into coffee
purchase commitments.  Changes in the market value of option contracts are
reported by the Company in the period in which the change occurs and are
included as part of cost of sales.

The Company has a long term contract to purchase green beans from one of its
importers, Sustainable Harvest.   See Item 11, Certain Relationships and Related
Transactions.

The Company believes its long-term relationships with coffee bean brokers,
including Sustainable Harvest, provide adequate sources of supply of high-
quality green beans to meet its needs for the foreseeable future.  However, a
worldwide supply shortage of the high quality arabica coffees the Company
purchases, the loss of one or more of these brokers, or a shortage of organic
and shade grown beans in particular, could have an adverse impact on the
Company.

Supplies of tea are secured from traditional sources that are readily available
in the marketplace.

SUMMARY OF RECENT DEVELOPMENTS

The Company renegotiated its balloon payment of $464,000 with Wells Fargo Bank
in December 2000 to a five year note payable monthly in equal installments of
principle and interest at 3% above prime on the remaining balance.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations  - Liquidity and Capital Resources."    This loan is due January 15,
2006.   It is secured by the Company's inventory, receivables and fixed assets.
The Company is also negotiating with Wells Fargo to establish a capital
equipment line and develop a working capital line.  The Company currently has no
working capital line and is using cash and operating revenues to fund its
business.  See "Management's Discussion and Analysis of Financial Conditions -
Results of Operations Liquidity and Capital Resources."

The company has been pursuing the sale of its bakery operations in Mendocino
because the Company does not deem it a fit with its wholesale operations.  It
has listed the bakery with a real estate agent.  However, the bakery is a major
retailer of the Company's coffee in the town and the Company intends to continue
to operate the business including the renewing of the 10 year extension of the
lease until it can find a buyer who will continue to use the Company's coffee
products exclusively after the sale.  There is no guarantee that the Company
will be able to sell the bakery.

CUSTOMERS

In fiscal 2000, there are no customers accounting for more than 10% of the
Company's revenue from coffee sales. However, a significant reduction in sales
to any of the Company's principal customers, or the loss of one or more major
customers, may have an adverse impact on the Company.   See "Management's
Discussion and Analysis of Financial Conditions - 2000 compared to 1999."

INTELLECTUAL PROPERTY

The Company holds various federal registrations in the United States for the
following trademarks and service marks: Thanksgiving Coffee Company, Royal
Gardens Tea Company, Pony Express, Time Bandits, Grand Slam Coffee, "Not Just a

                                       7
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Cup...But a Just Cup," "Many Beans are Picked, Few are Chosen," Mayan Harvest,
and Inca Harvest.  From time to time, federal trademark and service mark
registrations must be renewed.  The Company also has several applications
pending for registration of additional trademarks and service marks including
the Zapotec Powerline mark. The Company does not hold any patents.

GOVERNMENT REGULATION

The Company's roasting plant has been certified wholly organic by the Organic
Crop Improvement Association (OCIA).  The OCIA has also certified the organic
practices of several farms from which the Company receives green beans.  The
certification criteria of the OCIA, an independent organization, meet the
standards promulgated under the Organic Foods Production Act of 1990 (OFPA).

The Company believes that new federal regulations strengthening the definitions,
the treatment and the labeling of organic and natural products will not
adversely affect the Company because it already adheres to OCIA standards that
are as stringent as the new regulations, but it cannot be sure that the final
regulations will be the same as the OCIA standards.

EMPLOYEES

As of December 31, 2000, the Company had forty-six full-time employees and
nineteen part-time employees. None of the Company's employees are covered by a
collective bargaining agreement.  The Company has never suffered a work stoppage
due to adverse labor conditions with its employees.  The Company believes that
it maintains good relations with its employees.

ITEM 2  PROPERTY

The executive offices of the Company occupy approximately 14,500 square feet at
19100 South Noyo Harbor Drive, Fort Bragg, California 95437, which also includes
a warehouse and the capacity for manufacturing operations.  The Company leases
an additional 1,626 square feet of storage space on the Fort Bragg waterfront.
These facilities are currently being leased for a five-year term expiring March
31, 2001, at a rate of approximately $8,600 per month from affiliates of the
Company, Joan and Paul Katzeff, who are founders, principal shareholders,
officers and directors of the Company.  The Company has exercised an option to
extend the lease for one five-year period at the rate of $8,600 per month.  The
Company believes this lease represents an arms-length rate and arms-length terms
for comparable space in the Fort Bragg area and intends to extend the lease. See
Item 12, "Certain Relationships and Related Transactions."

The Company's Bakery in Mendocino is approximately 1,617 square feet and is
leased from an unaffiliated third party.  The Company currently pays rent of
approximately $3,2000 per month for the Bakery pursuant to a ten-year lease that
commenced on October 1, 1990.   Although the Company plans to sell the bakery,
it has exercised its option to extend its lease through September 30, 2010, as
it is a major customer of the Company in Mendocino.

The Company believes that its current facilities are adequate for its current
and expected operations, and that suitable additional space will be available in
the Fort Bragg area when and if additional space is required.  The Company owns
no real property.

ITEM 3  LEGAL PROCEEDINGS

The Company has fully resolved its lawsuit with a former employee.  The Company
agreed to settle and received a full dismissal with each party responsible for
their own litigation costs. The expense was accounted for in the Company's
operations for the year 2000.

The Company is engaged in a dispute with regards to a pending trademark
application for the term Royal Gold.  It is not possible to predict the outcome
of this case which is pending at the United States Trademark Trial and Appeal
Board, and Administrative Law Court.

ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter ending December 31, 2000.

                                       8
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                                    PART II

ITEM 5  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

Trades in the Company's Common Stock are made through Mutual Securities, Inc.,
("Mutual Securities") in Ukiah, California, an order matching service.  No
established trading market exists for the Company's Common Stock.  The Company's
Common Stock is not listed on any exchange nor the NASDAQ system.

During fiscal 1999, the Company was aware of only four trades of the Company's
Common Stock totaling 2,350 shares of Common Stock.  All transactions were
individually negotiated between the buyer and seller through Mutual Securities
as intermediary.  The average price of these transactions per Mutual Securities
was $4.74 for all of fiscal 1999.   The first three trades were for 2,200 shares
at $5.00 per share and took place in the first three quarters.  The final trade
for 150 shares took place in the last quarter and was for $1.00 per share.  No
trades have taken place in 2000.

The Company has not declared nor paid any cash dividend since its inception.
The Company intends to retain all earnings for use in its business and therefore
does not anticipate paying any cash dividends in the near future.  The Company's
bank credit agreement prohibits the payment of cash dividends without the bank's
consent.

As of December 31, 2000, there were 1,308 holders of record of the Common Stock.

ITEM 6  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of financial condition and results of operations should
be read in conjunction with the Company's audited financial statements and notes
thereto appearing elsewhere in this Form 10-KSB.

RESULTS OF OPERATIONS


2000 COMPARED TO 1999

          Consolidated                     Increase/(Decrease)
          ------------                     -------------------
          Net Sales                        $(144,613)
          Cost of sales                    $(168,144)
          Gross Margin                          1.63%
          Selling, G&A Expense             $ 143,803
          Depreciation & Amortization      $  22,024
          Interest Expense                 $ (19,555)
          Net Loss                         $(190,097)


REVENUES.  Consolidated net sales for the year ended December 31, 2000 were
$5,391, 482, down 2.6% or approximately $145,000 when compared to net sales of
$5,536,095 for December 31, 1999.

Distribution revenues (e.g., revenues generated on our own truck distribution)
were flat for the year.  New customers offset the  declines in the smoothie
drink business in Sonoma county, a loss of business do to attrition in a
territory where a sales person was not replaced and partial loss of business
from a customer who was doing his own roasting.  National revenues (e. g.,
revenues not derived by mail order and direct truck distribution) declined by
$75,000 because of a loss of two customers who transferred their business to
local roasters.

Mail order revenues (e.g., revenues generated from product sold directly to the
consumer either through print media or the internet) declined by $50,000 or 11 %
for the year when compared to last fiscal year.  The decrease in mail order
revenue reflects a lack of spending on new mailings to grow the mailing list and
attrition of the current list, offset by an increase of $50,000 (representing a
nearly doubling of sales over last year ) through the internet.  The Company has
shifted its emphasis to internet sales and increased its expenditures for
development of its internet site and store.

COST OF SALES.  Consolidated cost of sales decreased to $2,897,929 in fiscal
2000 or 5.5% when compared to cost of sales for the same period in  1999 of
$3,066,073.  This decline is a result of lower green bean costs and a price
increase of nearly 15 % on decaffeinated coffees in midyear, which represent
about 20% of the Company's volume.

GROSS MARGIN.  Consolidated gross margin (gross profit as a percentage of net
sales) increased to 46.3% in fiscal 2000

                                       9
<PAGE>

compared to a gross margin of 44.6% for the same period in fiscal 1999, or a
3.8% improvement from last year. This again was a result of favorable green bean
prices and the price increase on the decaf line. However, there have been
dramatic increases in energy, labor and packaging costs during the last half of
the year, and management expects these increased costs to erode the gross margin
in 2001.

SELLING, GENERAL & ADMINISTRATIVE.  Consolidated selling, general and
administrative expenses were $2,200,577 for fiscal 2000, compared to $2,056,774,
compared to the same period for 1999, or a 7% increase.  Of the increase,
$100,000 is for salaries and wages increased during the year, including those
for a sales manager, route supervisor, a new salesperson, a maintenance person
for its brewers and grinders and a manager for social and environmental policy.
The remainder of the increase was a result of higher legal fees to defend the
Company's position against its former employee of $30,000 and higher audit fees
of $25,000 because of quarterly reviews.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expenses increased
to $204,989 in fiscal 2000, compared to $182,965 for the same period in 1999, or
12% increase.  This was due to capital expenditures for the year, including an
upgrade of the web site and store, moving the compressors and the addition of
new computer equipment and programs.

INTEREST EXPENSE.  Interest expense was $97,650 for fiscal 2000, compared to
$117,205 for the same period in 1999, or a nearly 17% drop from last year.  This
is a result of lower borrowings for the year of nearly $150,000, to $764,533
(including capitalized leases) in fiscal 2000 compared to $903,401 for the same
period in 1999.

NET LOSS.  Because of the foregoing factors, the Company had a net loss of
$85,733 in fiscal 2000 compared to a profit of $104, 364 in 1999, or a negative
turnaround of $190,097 compared to the same period in 1999.  The Company was
required to make a provision of approximately  $30,000 to its deferred tax
account because of the loss for the year which may cause the company not to be
able to avail itself of its loss carryforward.  The tax provision, the
settlement and the costs of defending the Company resulted in the loss for the
year.  However, management cannot be sure that other unexpected expenses would
not affect profits in a similar manner as they have this year.

1999 COMPARED TO 1998

          Consolidated                     Increase/(Decrease)
          ------------                     -------------------
          Net sales                        $(117,262)
          Cost of Sales                    $(260,674)
          Gross Margin                          3.47%
          Selling, G&A Expense             $(134,524)
          Depreciation & Amortization      $   8,055
          Interest Expense                 $     116
          Net Income                       $ 187,071


REVENUES  Total revenues decreased $117,262 or 2.1% to $5,536,095 for fiscal
1999 compared to $5,653,357 for fiscal 1998.  This decrease was a result of a
customer in Michigan changing his espresso bean purchases to a local supplier
and a distributor in California changing coffee companies.  This decline of
$175,000 was offset by increases in the Song Bird program as over 157 new
accounts were added.  In addition, the Company has created a new position,
national sales manager, which it feels will stem the flow of losing accounts to
other companies.   Bakery sales also increased by $13,900.

GROSS MARGIN.  Gross margin (gross profit as a percentage of net sales)
increased to 44.6% in fiscal 1999 from 41.29% in fiscal 1998.  Gross margins
increased mainly due to lower bean costs in the core coffee company and improved
efficiency. The Bakery margins improved due to increased sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses decreased by $134,500 or 6.1% from $2,191,298 in fiscal
1998 to $2,056,774 in fiscal 1999.  As a percentage of total sales, selling,
general and administrative expenses decreased from 38.8% in 1998 to 37.2% in
fiscal 1999.  Of the $134,500 decrease, approximately $39,100 reflects the
reduction of bad debt expense,  $35,700 decrease in payroll related expenses,
$31,900 decrease in mail order brochures expense, $26,800 reflects the decrease
of expenses related to legal, accounting and $13,200 reduction in shows expense.
The Company expects selling, general and administrative expenses to increase
next year as it has added management in route sales, a delivery supervisor and a
brewer and grinder repair position.

DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expenses as a
percentage of total sales increased to 3.3% in fiscal 1999 from 3.1% in fiscal
1998, due primarily to depreciation for additional equipment and to lower sales
in fiscal 1999.

OTHER INCOME.  Miscellaneous income of $1,459 in fiscal 1999 is flat compared to
$1,452 in fiscal 1998.

                                       10
<PAGE>

INTEREST EXPENSE.  Interest expense was slightly higher in fiscal 1999 at
$117,205 compared to $117,089 in fiscal  1998. Interest expense as a percentage
of total sales remained the same at 2.1% for fiscal 1999 and 2.1% for the same
time period in fiscal 1998.

INCOME TAX EXPENSE.   As a result of 1999 net income before taxes of $119,273,
the Company paid $800 in current state minimum taxes.  Additionally, the Company
paid $800 for an adjustment to prior year state minimum taxes.  Due to temporary
differences between the financial and tax basis of the Company's assets and
liabilities, the Company also recognized deferred income tax expense of $6,531
related to federal differences and $6,778 for state.  The  total income tax
expense for the period ending December 31, 1999 was $14,909.

NET INCOME.  As a result of the foregoing, the net income for fiscal 1999
amounted to $104,364 or 1.9% of total sales compared to a net loss of $82,707 or
-1.5% of total sales in fiscal 1998.

LIQUIDITY AND CAPITAL RESOURCES

Working capital as of December 31, 2000 was $225,249 as compared to working
capital of  $301,341 as of December 31, 1999.   This decrease in working capital
in 2000 is primarily a result of receiving a truckload of green beans on the
last day of December 2000 while not having the same situation at the end of
1999.  It also was a result of deferred taxes changing from an asset to a
liability because of the timing differences of the loss carryforward.

Cash provided by operating activities was $250,066 in fiscal 2000 compared to
$268,227 in fiscal 1999.  In fiscal 2000, all of the funds generated by
operating activities was derived from depreciation and amortization ($228,919)
and higher liabilities in accounts payable ($85,000) and deferred taxes
($30,000) because the Company had a net loss in Fiscal 2000.  In fiscal 1999,
the cash provided by operating activities was primarily a result of earnings
($104,364) and depreciation and amortization ($204,702) offset by changes in the
liabilities.

Cash used in investing activities in 2000 was $117,979 and consisted of
approximately $28,500 for a new room for the compressors, $35,000 for web page
and e-commerce store expenditures, $50,000 for brewers, grinders and fixtures
for retail and food service customers, and $10,000 in computer hardware and
software.

Net cash used by financing activities in fiscal 2000 was $128,848 as compared to
$190,898 in fiscal 1999.  Repayments of debt to Wells Fargo of $102,000 and
$36,000 to Laoma Yaski were the largest portion of the debt repayment, offset by
a note issued to the Company by a majority stockholder to pay for the labor
settlement. See Auditors Report, Notes to Financial Statements, Note 6 and 12
and Management Discussion and Analysis.

Cash for the year remained relatively flat in fiscal 2000 compared to 1999 at
$41,000 because of the aforementioned activities.

In December 2000 the Company refinanced its balloon payment due January 2001 to
Wells Fargo for $464,000.  It was refinanced for five years with principal
payments of $7,733 plus interest due monthly and a final payment due on January
15, 2005.  The interest rate is at 3% over the prime rate (3% over prime rate at
December 31, 2000 was 12.5%).

The Company's debt at December 31, 2000 was $764,553 for all term debt and
obligations under capital leases, down by nearly  $139,000 from $903,401 due at
December 31, 1999.  Of the total, $231,619 is due in fiscal 2001.

The Company is dependent on successfully executing its business plan to achieve
profitable operations, obtaining additional sources of borrowings (including
normal trade credit), and securing favorable financing arrangements (including
lease financing) to become profitable.  There can be no assurance that the
Company will be successful in this regard.  If the Company is not able to meet
its credit obligations, the Company's business could be adversely affected.

The Company anticipates that its existing capital resources and cash generated
from operations will be sufficient to meet its cash requirement for the next 12
months at approximately the same level of operations.

SEASONALITY AND OTHER FACTORS AFFECTING PERFORMANCE

The Company's business is seasonal in nature.  The seasonal availability of
green bean coffee in the first two quarters of the year and increased sales in
the last quarter historically creates a high use of cash and a build up in
inventories in the first two quarters, with a corresponding decrease in
inventory and increase in cash in the last quarter. Because of the seasonality
of the Company's 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.  The Company's future results of operations and earnings could also be
significantly affected by other factors, such as changes in general economic
conditions, changes in business conditions in the coffee industry, fluctuations
in consumer demand for coffee products and in the availability and costs of
green coffee beans, increased competition within the Company's businesses,
variances from budgeted sales mix and growth rate, consumer acceptance of the
Company's new products, inability to secure adequate capital to fund its
operating losses and

                                       11
<PAGE>

working capital requirements, inability to hire, train and retain qualified
personnel, concentration of production and sales in Northern California, the
loss of one or more major customers, inability to successfully implement its
business plan, civil unrest in countries that produce coffee and tea, weather
and other natural disasters. There can be no assurance that sales will increase
in future quarters.

INDEMNIFICATION MATTERS

The Company's Bylaws provide that the Company may indemnify its directors,
officers, employees and other agents to the fullest extent permitted by
California law.  The Company believes that indemnification under its Bylaws also
permits the Company to secure insurance on behalf of any officer, director,
employee or other agent for any liability arising out of his or her actions in
such capacity, regardless of whether California law would permit
indemnification.  The Company maintains such liability insurance for its
directors and certain officers and employees.

At present, there is no pending litigation or proceeding involving any director,
office, employee or agent of the Company where indemnification would be required
or permitted.  The Company is not aware of any pending or threatened litigation
or proceeding that might result in a claim for such indemnification.

ITEM 7  FINANCIAL STATEMENTS

Information in response to this item is set forth in the Financial statements
beginning on page F-1 of this filing.

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

None.

                                   PART III

ITEM 9  DIRECTORS AND EXECUTIVE OFFICERS

The directors, nominees, key employees and executive officers of the Company and
their ages as of the date of this Form 10-KSB are as follows:

Name               Age   Position with the Company
----               ---   -------------------------
Paul Katzeff       63    Chief Executive Officer & Director
Joan Katzeff       52    President and Director
Roy Doughty        51    Director
Larry Leigon       53    Director


Paul Katzeff, a co-founder of the Company, has served as Roastmaster, Chief
Executive Officer and a Director since its incorporation on May 10, 1982.  Mr.
Katzeff is a co-founder of the Specialty Coffee Association of America
(S.C.A.A.) and served as its Chairman in 1985.  He has served as an elected
Board member of the S.C.A.A. since 1994, and served as Chairman of the
Environmental Committee of the Board in 1994.  Mr. Katzeff  co-chaired the
Second Annual Sustainable Coffee Conference held in  April of 1998 and is an
advisory Board member of Coffee Kids, a non-profit organization concerned with
social and environmental issues as they relate to the coffee industry.   Mr.
Katzeff has served as  S.C.A.A. President in the year 2000.  Mr. Katzeff and
Joan Katzeff are husband and wife.  Mr. Katzeff holds a Bachelors degree in
Agriculture from Cornell University and a Masters degree in Social Work from
Adelphi University.

Joan Katzeff, a co-founder of the Company, has served as President, Chief
Financial Officer and a Director of the Company since its incorporation on May
10, 1982.  Her experience in the Company's early years included production,
delivery and bookkeeping.  Mrs. Katzeff now has planning and administrative
responsibilities in operations, marketing and public relations.  In addition,
Mrs. Katzeff has responsibility for managing the Mendocino Bakery.

Roy Doughty has served as a Director of the Company since September 1997, and as
an outside consultant to the Company since

                                       12
<PAGE>

February 1994. Since 1992, Mr. Doughty has served as a Principal of Global
Insights, a consulting firm devoted to assisting value- centered businesses. He
was the co-founder of the Spirituality and Worklife Project and has created and
delivered programs for the Center for Ethics and Social Policy, the Center for
Eco-literacy, the California School of Integral Studies, the California School
of Professional Psychology and the Social Investment Forum.

Larry Leigon has served as a Director of the Company since September 1997, and
as an outside consultant to the Company since February 1994.  Since November
1993, he has served as a Principal of Global Insights.  From 1985 to 1993, Mr.
Leigon was the president of Ariel Winery, the world's first exclusive non-
alcoholic winery.  His experience at Ariel included creating a whole new
category of product, taking it from research and development to worldwide
distribution in 20 countries.  He is listed in Who's Who in Leading American
Executives and is also cited in The Successful Business Plan: Secrets and
Strategies of the PSI's Business Library.

The authorized number of directors is five.  Currently there are four directors
and one vacancy.  All directors will hold office until the next annual meeting
of shareholders and until their successors have been elected and qualified,
unless they earlier resign or are removed from office.  Committees of the Board
may be appointed by resolution passed by a majority of the directors.  The
Company does not presently have any standing audit, nominating or compensation
committee, or any committee performing similar functions.  The executive
officers of the Company are elected annually by the Board of Directors and serve
at the discretion of the Board.

ITEM 10  EXECUTIVE COMPENSATION

The following table provides certain information concerning the compensation
paid to the Company's Chief Executive for fiscal 1998, 1999 and 2000.  All other
Executive Officers received less than $100,000 in fiscal 2000.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Principal            Year    Salary     Bonus   Underlying
Position                                ($)       ($)      Options   Securities
--------                      ----    ------     -----     -------   ----------
<S>                           <C>     <C>        <C>     <C>         <C>
Paul Katzeff                  2000   $100,000      -         -           -
  Chief Executive             1999   $ 75,000      -         -           -
  and Director                1998   $ 75,000      -         -           -

Joan Katzeff                  2000   $100,000      -         -           -
  President                   1999   $ 75,000      -         -           -
  and Director                1998   $ 75,000      -         -           -
</TABLE>


STOCK OPTION GRANTS

The Company did not grant stock options to any of the Named Executive Officers
during fiscal 2000.

COMPENSATION OF DIRECTORS

Members of the Board of Directors do not receive compensation for service on the
Board.

                                       13
<PAGE>

ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 2000, (i) by each
person (or group of affiliated persons) who is known by the Company to own
beneficially more than five per cent of the Company's Common Stock, (ii) by each
of the named executive officers, (iii) by each of the Company's directors and
nominees, and (iv) by all directors and executive officers as a group.  The
Company believes that the person and entities named in the table have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws, where
applicable.

<TABLE>
<CAPTION>
                                           Shares
Name and Address of                    Beneficially
Beneficial Owner                           Owned               Percentage
----------------                           -----               ----------
<S>                                        <C>                 <C>
Joan and Paul Katzeff(1)                 979,000(1)                  79.3%
  (Joan Katzeff, President)
  (Paul Katzeff, CEO)
  c/o Thanksgiving Coffee Co., Inc.
  POB 1918
  Fort Bragg, CA 95437

Roy Doughty                                  200                     0.02%
  Director
  c/o Thanksgiving Coffee Co., Inc.
  POB 1918
  Fort Bragg, CA 95437

Larry Leigon                                   0                     0.00%
  Director
  c/o Thanksgiving Coffee Co., Inc.
  POB 1918
  Fort Bragg, CA 95437

All directors and executive officers
  as a group (4 persons)                 979,200(1)                  79.5%
</TABLE>

(1)  Shares are originally issued, restricted and jointly owned by Joan Katzeff
     and Paul Katzeff.


ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In December 1997, the Company sold all outstanding shares of its wholly-owned
subsidiary, Sustainable Harvest, to Mr. David Griswold, a former employee of the
division.  Under the terms of the agreement, the Company is required to purchase
a certain quantity of green coffee beans per year for a five-year period
commencing December 31, 1997, at a fixed mark-up over "landed coffee costs."

The Company leases its corporate headquarters, warehouse and waterfront
facilities from Joan and Paul Katzeff, who are affiliates of the Company (the
"Katzeffs").  The lease provides for monthly payments of $8,600 in fiscal 2001,
and the Company is responsible for all real estate taxes, insurance and
maintenance costs related to the facilities.  See Note 6 and Note 12 of "Notes
to Financial Statements".

Global Insights, of which Mr. Doughty, a director of the Company, is a
principal, is party to a one-year consulting agreement that commenced January
1, 2001 for the provision of specific business functions including a provision
of shareholder relation services for $18,000 per year.  Global Insights received
an aggregate of $18,000 during fiscal 2000 for similar services.  In 1999,
Global Insights received an aggregate of $72,000 for more extensive consulting
services.

The Company carries insurance indemnifying its directors and certain officers
and certain employees against certain liabilities by reason of their status or
service as directors or officers or employees of the Company.

The Company has two notes payable to its major shareholders, Paul Katzeff, CEO
and Joan Katzeff, President.  At December 31, 1999, there was only one and the
balance was $24,919.  During the year payments of interest were made on the note
and at December 31, 2000, the balance on that note was $24,919.  The other note
was executed on November 15, 2000 and has a balance as of December 31, 2000 of
$48,830.  The Katzeff's have subordinated the note to all notes payable
including the note payable to Wells Fargo.  See Auditors Report, Notes to
Financial Statements, Note 6 and Note 12.

                                       14
<PAGE>

ITEM 13  EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits

3.1     Restated Articles of Incorporation of the Company.+
3.2     By laws of the Company.+
3.2.1   Amendment No. 1 to Bylaws of the Company, dated June 3, 1996.++
10.1    Business Loan Agreement dated as of September 5, 1995 by and between the
        Company and Wells Fargo Bank, N.A., as amended on August 11,1997.++
10.2    Lease agreements for the Company's Fort Bragg facilities.++++
10.2.1  Extension of Term and Further Amendment to Lease Agreement dated April
        1, 1992.+++++
10.2.2  Further Amendment to Lease Agreement dated July 1, 1992.+
10.2.3  Third Amendment to Lease Agreement dated July 1, 1994.+
10.2.4  Exercise Option to Extend Lease Agreement April 1, 1995.+
10.3    Lease Agreement for the Company's Bakery in Mendocino.++++
10.4    Sample Coffee Purchase Agreement.+
10.5    Promissory Note issued by the Company to Joan and Paul Katzeff dated as
        of April 17, 1996.++++
10.6    Promissory Note issued by the Company to Joan and Paul Katzeff dated as
        of December 30, 1990.++++
10.7    Stock Purchase Agreement between the Company, Sustainable Harvest, Inc.
        and David Griswold as of December 31, 1997.!!!
10.8    Summary Plan Description of the Company's Profit Sharing Plan.!+++++
10.9    Business Loan Agreement dated as of August 13, 1997 by and between the
        Company and Wells Fargo Bank, N.A.+++++
10.10   Business Loan Agreement dated as of January 6, 1999 by and between the
        Company and Wells Fargo Bank, N.A.!!!
10.11   Non-exclusive License Agreement dated as of July 14, 1998 by and between
        the Company and Wyland International, LLC.!!!
10.12   Business Loan Agreement dated as of November 30, 2000 by and between the
        Company and Wells Fargo Bank, N.A.

----------------------
+     Incorporated by reference to the exhibits to the Company's Registration
Statement on Form S-1 (File No 33-96070-LA).

++    Incorporated by reference to the exhibits to the Company's Form 10-QSB for
the quarter ended March 31, 1998.

+++   Incorporated by reference to the exhibits to the Company's Form 10-QSB for
the quarter ended June 30,1998.

++++  Incorporated  by reference to the exhibits to the Company's Form 10-QSB
for the quarter ended September 30, 1998.

+++++ Incorporated by reference to the exhibits to the Company's Form 10-KSB for
the year ended December 31, 1998.

!    Incorporated by reference to the exhibits to the Company's Form 10-KSB for
the year ended December 31, 1998.

!!   Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Securities and Exchange Commission pursuant to a
Confidential Treatment Request under Rule 24-b2 of the Securities Exchange Act
of 1934, as amended, filed on March 31, 1998 which was subsequently granted.

!!!  Portions of this Exhibit were omitted and have been filed separately with
the Secretary of the Securities and Exchange Commission pursuant to a
Confidential Treatment Request under Rule 24-b2 of the Securities Exchange Act
of 1934, as amended, filed on March 31, 1999.


(b) Reports on 8-K

None.

                                       15
<PAGE>

                                  SIGNATURES

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

                       THANKSGIVING COFFEE COMPANY, INC.
<TABLE>
<CAPTION>
Name                                  Title                             Date
----                                  -----                             ----
<S>                           <C>                                  <C>
/s/ Paul Katzeff              Chief Executive Officer              March 28, 2000
------------------            (Principal Executive Officer)
Paul Katzeff                  and Director

 /s/ Joan Katzeff             President, Chief Financial Officer   March 28, 2000
------------------            (Principal Financial and Accounting
Joan Katzeff                  Officer) and Director

/s/ Roy Doughty               Director                             March 28, 2000
------------------
Roy Doughty

/s/ Larry Leigon              Director                             March 28, 2000
------------------
Larry Leigon
</TABLE>

                                       16
<PAGE>

ITEM 13  FINANCIAL STATEMENTS

To The Board of Directors
Thanksgiving Coffee Company, Inc.
Fort Bragg, California

We have audited the accompanying balance sheets of Thanksgiving Coffee Company,
Inc. (a California Corporation) as of December 31, 2000 and 1999 and the related
statements of income, accumulated deficit and cash flows for each of the three
years ended December 31, 2000, 1999, and 1998.  These financial statements are
the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements present fairly, in all material
respects, the financial position of Thanksgiving Coffee Company, Inc. at
December 31, 2000 and 1999, and the results of its operations and its cash flows
for each of the three years then ended December 31, 2000, 1999 and 1998, in
conformity with generally accepted accounting principles.

SALLMANN, YANG & ALAMEDA

An Accountancy Corporation

Kathleen M. Alameda
Certified Public Accountant


March 5, 2001


                                     F-1
<PAGE>

                       THANKSGIVING COFFEE COMPANY, INC.
                                BALANCE SHEETS

<TABLE>
<CAPTION>
                                                          DECEMBER 31
                                                 ----------------------------
                                                     2000            1999
                                                 -----------      -----------
<S>                                              <C>              <C>
ASSETS
 CURRENT ASSETS
   CASH                                          $    41,895      $    41,156
   ACCOUNTS RECEIVABLE                               380,874          394,983
   NOTE RECEIVABLE - GRISWOLD                         10,000           10,000
   EMPLOYEE RECEIVABLE                                   872            1,046
   INVENTORY                                         503,868          487,279
   PREPAID EXPENSES                                   68,491           57,150
                                                 -----------      -----------
 TOTAL CURRENT ASSETS                              1,006,000          991,614
   PROPERTY AND EQUIPMENT                          2,336,055        2,218,076
   ACCUMULATED DEPRECIATION                       (1,609,761)      (1,397,723)
                                                 -----------      -----------
   TOTAL PROPERTY AND EQUIPMENT                      726,294          820,353

 OTHER ASSETS
   DEPOSITS AND OTHER ASSETS                          42,055           42,340
   NOTE RECEIVABLE - GRISWOLD                          2,028           12,028
   INTANGIBLES LESS AMORTIZATION                     236,530          250,913
   DEFERRED TAX ASSET                                  7,836           28,001
                                                 -----------      -----------
 TOTAL OTHER ASSETS                                  288,449          333,282
                                                 -----------      -----------
 TOTAL ASSETS                                    $ 2,020,743      $ 2,145,249
                                                 ===========      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
 CURRENT LIABILITIES
   ACCOUNTS PAYABLE                              $   492,538      $   406,923
   NOTES PAYABLE - BANKS, CURRENT                    112,800          116,930
   NOTES PAYABLE - OTHER, CURRENT                     45,200           38,821
   NOTES PAYABLE - SHAREHOLDERS, CURRENT              39,859           24,918
   CAPITAL LEASE OBLIGATIONS, CURRENT                 33,760           60,546
   ACCRUED LIABILITIES                                46,306           41,765
   DEFERRED INCOME TAXES                              10,288              370
                                                 -----------      -----------
 TOTAL CURRENT LIABILITIES                           780,751          690,273

 LONG TERM DEBT
   NOTES PAYABLE - BANKS                             384,534          482,889
   NOTES PAYABLE - OTHER                             110,174          141,202
   NOTES PAYABLE - SHAREHOLDERS                       33,890                -
 CAPITAL LEASE OBLIGATIONS                             4,336           38,094
                                                 -----------      -----------
 TOTAL LONG TERM DEBT                                532,934          662,185

 TOTAL LIABILITIES                                 1,313,685        1,352,458

 STOCKHOLDERS' EQUITY
   COMMON STOCK, NO PAR VALUE,
     1,960,000 SHARES AUTHORIZED,
     1,237,384 SHARES OUTSTANDING,
     1,234,544 SHARES OUTSTANDING                    861,816          861,816
   ADDITIONAL PAID IN CAPITAL                         24,600           24,600
   RETAINED EARNINGS                                (179,358)         (93,625)
                                                 -----------      -----------
 TOTAL STOCKHOLDERS' EQUITY                          707,058          792,791
                                                 -----------      -----------
 TOTAL LIABILITIES AND EQUITY                    $ 2,020,743      $ 2,145,249
                                                 ===========      ===========
</TABLE>
                                     F-2
<PAGE>

                       THANKSGIVING COFFEE COMPANY, INC.
                             STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                              YEARS ENDED DECEMBER 31,
                                       --------------------------------------
                                          2000          1999          1998
                                       ----------    ----------    ----------
<S>                                    <C>           <C>           <C>
INCOME
  NET SALES                            $5,391,482    $5,536,095    $5,653,357
  COST OF SALES                         2,897,929     3,066,073     3,326,747
                                       ----------    ----------    ----------
GROSS PROFIT                           2,493,553     2,470,022     2,326,610

OPERATING EXPENSES
  SELLING, GENERAL AND
   ADMINISTRATIVE EXPENSES              2,200,577     2,056,774     2,191,298
  DEPRECIATION AND AMORTIZATION           204,989       182,965       174,910
                                       ----------    ----------    ----------
TOTAL OPERATING EXPENSES                2,405,566     2,239,739     2,366,208

OPERATING INCOME (LOSS)                    73,108       230,283       (39,598)

OTHER INCOME (EXPENSE)
  INTEREST INCOME                           2,575         5,550         1,172
  INTEREST EXPENSE                        (97,650)     (117,205)     (117,089)
  GAIN (LOSS) ON SALE OF ASSET                  -          (814)          (83)
  LABOR SETTLEMENT EXPENSE                (60,000)            -             -
  MISCELLANEOUS INCOME (EXPENSE)           12,238         1,459         1,452
                                       ----------    ----------    ----------
TOTAL OTHER INCOME (EXPENSE)             (142,837)     (111,010)     (114,548)

INCOME (LOSS) BEFORE INCOME TAXES         (54,850)      119,273      (154,146)

INCOME TAX EXPENSE (BENEFIT)              (30,833)       14,909       (71,439)
                                       ----------    ----------    ----------

NET INCOME (LOSS)                      $  (85,733)   $  104,364    $  (82,707)
                                       ==========    ==========    ==========

EPS (BASIC)                            $    (0.07)   $     0.08    $    (0.07)
                                       ==========    ==========    ==========

EPS (Dilutive)                         $     (0.7)   $     0.08    $    (0.07)
                                       ==========    ==========    ==========
</TABLE>
                                     F-3
<PAGE>

                       THANKSGIVING COFFEE COMPANY, INC.
                       STATEMENTS OF ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                        -----------------------------------
                                           2000         1999         1998
                                        ---------    ---------    ---------
<S>                                    <C>          <C>          <C>
ACCUMULATED DEFICIT, BEGINNING          $ (93,625)   $(197,989)   $(115,282)
NET INCOME (LOSS)                         (30,560)     104,364      (82,707)
                                        ---------    ---------    ---------
ACCUMULATED DEFICIT, ENDING             $(124,185)   $( 93,625)   $(197,989)
                                        =========    =========    =========
</TABLE>
                                     F-4
<PAGE>

                       THANKSGIVING COFFEE COMPANY, INC.
                           STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                               YEARS ENDED DECEMBER 31,
                                          ----------------------------------
                                             2000       1999         1998
                                          ---------   ---------    ---------
<S>                                       <C>         <C>         <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:

 NET (LOSS) INCOME                        $ (85,733)  $ 104,364    $( 82,707)
 NONCASH ITEMS INCLUDED IN NET
   INCOME (LOSS)
    DEPRECIATION AND AMORTIZATION           228,919     204,702      194,295
    GAIN (LOSS) ON SALE OF ASSETS                 -         814           83
    (INCREASE) DECREASE IN:
     SHORT TERM INVESTMENTS                       -           -       31,519
     RECEIVABLES                             14,283      20,677        6,555
     INVENTORY                              (16,589)    (13,561)      39,585
     PREPAID EXPENSES                       (11,341)    (18,134)     105,969
     DEPOSITS AND OTHER ASSETS                  285      (1,049)      (5,962)
     ACCOUNTS PAYABLE                        85,615     (47,324)      27,436
     ACCRUED LIABILITIES                      4,544       4,429      (37,388)
     DEFERRED INCOME TAXES                   30,083      13,309      (72,077)
                                          ---------   ---------    ---------
 NET CASH PROVIDED BY
  OPERATING ACTIVITIES                      250,066     268,227      207,308

 CASH FLOWS FROM INVESTING ACTIVITIES:
  PURCHASE OF EQUIPMENT                    (117,979)   (123,448)     (73,993)
  PROCEEDS FROM SALE OF EQUIPMENT                 0         800        5,514
  PURCHASE OF INTANGIBLE ASSETS              (2,500)     (3,250)           -
   INVESTMENTS                                                         (3,656)
                                          ---------   ---------    ---------
 NET CASH USED BY
    INVESTING ACTIVITIES                   (120,479)   (125,898)     (72,135)

 CASH FLOWS FROM FINANCING ACTIVITIES:
  PAYMENTS FROM NOTES RECEIVABLE             10,000      10,000       56,972
  PROCEEDS FROM NOTES PAYABLE                64,302      15,753        5,512
  REPAYMENT OF NOTES PAYABLE               (203,150)   (205,651)    (154,804)
  REPURCHASE OF COMMON STOCK                      0     (11,000)           -
                                          ---------   ---------    ---------
 NET CASH USED BY
    FINANCING ACTIVITIES                   (128,848)   (190,898)     (92,320)

NET (DECREASE) INCREASE IN CASH                 739     (48,569)      42,853

CASH AT BEGINNING OF YEAR                    41,156      89,725       46,872

CASH AT END OF YEAR                       $  41,895   $  41,156    $  89,725
</TABLE>
                                     F-5
<PAGE>

                       Thanksgiving Coffee Company, Inc.

Notes to Financial Statements


1.  Summary of Significant Accounting Policies

Description of Business

Thanksgiving Coffee Company, Inc. (The Company), is a corporation that
purchases  and roasts high-quality whole bean  coffees  and sells  them  to
restaurants, grocery  stores  and  other  retail outlets.   These  products  are
sold primarily  through  its  own distribution   network   in   the   Northern
California   area. Distributors  and  retailers do not  have  the  right  to
return products.  Additionally, the Company produces and sells a line of high-
quality  tea products under the trademark of  Royal  Gardens Tea  Company.   The
Company also sells coffee,  tea  and  related specialty  products through mail
order on a national basis.   The Company  sells  sandwiches, pastries, coffee
and  tea  through  a bakery located in Mendocino, California.  During 1998 the
company subleased a cafe located in Fort Bragg, California.

Basis of Presentation

The  Company has prepared the financial statements on the accrual basis   of
accounting  in  accordance  with  generally  accepted accounting principles.

Concentration of Credit Risk

The Company grants credit to customers in the retail and food service industries
throughout the country.  Consequently, the Company's ability to collect the
amounts due from customers are affected by economic fluctuations in the retail
and food service industries.

Inventories

Inventory is stated at the lower of cost or market  (first-in, first-out).

Property and Equipment

Property  and  equipment  are carried at  cost  less  accumulated depreciation.
Depreciation is provided on the straight-line  and 150%  declining  balance
methods  over  estimated  useful  lives generally ranging from five to twelve
years.

Leasehold improvements are carried at cost and are amortized over the shorter of
their estimated useful lives or the related lease term  (including options),
generally ranging from five to thirty-nine years.

The portion of depreciation and amortization expenses related  to production
facilities is included in cost of sales.

Expenditures for major renewals that extend useful lives of property, fixtures
and improvements are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred.

For income tax purposes, depreciation is computed using the accelerated cost
recovery system and the modified cost recovery system.

Trademarks and Tradenames

Trademarks and tradenames are being amortized on a straight-line basis over
forty  (40) years.  Total amortization expense for the years ended December 31,
2000, 1999 and 1998 was $128, $105 and $0 respectively.

                                     F-6
<PAGE>

Investments in Unconsolidated Companies

On January 1, 1997, the Company acquired the assets and liabilities of
Sustainable Harvest, Inc., in a business combination accounted for as a
purchase. The Company subsequently sold the subsidiary at a loss of $29,471 on
November 1, 1997. The Company has a note receivable reflected on the books as a
result of the sale, with a balance of $12,028 as of December 31, 2000.

On October 31, 1996, the Company acquired the assets of Mendocino Bakery, Inc.
in a business combination  accounted  for  as  a purchase.

Profit Sharing Plan

The Company has a profit sharing plan covering substantially all of its
employees. Benefits are based upon years of service and the employee's
compensation during the employment period. No contributions to the profit
sharing plan were made for the years ended December 31, 2000, 1999 and 1998.

Futures and Options Contracts

The Company occasionally enters into exchange traded coffee futures and options
contracts with the objective of minimizing cost risk due to market fluctuations.
The Company does not define contracts as a hedge as it applies to accounting
principles and practices designated in Statement of Financial Accounting
Standards No. 80, Accounting for Futures Contracts. Accordingly, changes in the
market value of futures contracts (unrealized gains and losses) are reported by
the Company in the period in which the change occurs and are included as a
component of stockholders' equity. Realized gains and losses are a component of
costs of goods sold.

Compensated Absences

Employees of the Company are entitled to paid vacation, paid sick days and
personal days off, depending on job classification, length of service, and other
factors.

Advertising

The Company expenses costs of advertising the first time the advertising takes
place, except direct-response advertising, which is capitalized and amortized
over its expected period of future benefits. Direct-response advertising
consists primarily of mail order catalog costs, typically mailed to customers
who have specifically responded to this type of advertising. The mail order
department documents whether orders come from catalogs or other sources when
processing orders. Catalog costs are amortized over the period from the catalog
mailing until the next catalog is issued.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

2.  Accounts Receivable

Accounts receivable consist of the following:
<TABLE>
<CAPTION>
                                                   2000         1999
                                                ---------     ---------
<S>                                             <C>           <C>
   Accounts receivable                           $385,914    $410,919
   Less: Allowance for doubtful accounts           (5,040)    (15,936)
                                                 --------    --------
   Accounts receivable, net                      $380,874    $394,983
                                                 ========    ========
</TABLE>

The Company uses the allowance method for uncollectible accounts. Bad debt
expense for the years ended December 31, 2000,  1999, and 1998  was $
5,506,$11,221 and $37,412 respectively.   Bad debt recovery for the year ended
December 31, 2000 was zero.   The adjustments to the allowance account for the
year ended December 31, 2000 equaled $10,896.

                                     F-7
<PAGE>

3.  Inventory

Inventory consists of the following:
<TABLE>
<CAPTION>
                                                                 2000       1999
                                                               --------   --------
<S>                                                           <C>         <C>
   Coffee
      Unroasted                                                $157,993   $169,958
      Roasted                                                   105,920    114,414
   Tea                                                           23,860     19,502
   Packaging, supplies and other merchandise held for sale      216,095    183,405
                                                               --------   --------
      Total inventory                                          $503,868   $487,279
                                                               ========   ========
</TABLE>

4.  Property and Equipment

Property and equipment consists of the following:
<TABLE>
<CAPTION>
                                                                 2000       1999
                                                            -----------   -----------
<S>                                                         <C>           <C>
   Equipment and fixtures                                   $ 1,212,082   $ 1,189,910
   Furniture and equipment                                      279,018       268,601
   Leasehold improvements                                       389,095       366,351
   Transportation equipment                                      86,613        67,147
   Marketing equipment                                           66,180        23,000
   Property held under capital leases                           303,067       303,067
                                                            -----------   -----------
   Total property and equipment                               2,336,055     2,218,076
   Accumulated depreciation                                  (1,609,761)   (1,397,723)
                                                            -----------   -----------
   Property and equipment, net                              $   726,294   $   820,353
                                                            ===========   ===========
</TABLE>

Marketing equipment includes costs to develop a website for on-line sales and
promotion.  The costs related to the website are being depreciated on the
straight-line method over three years.

Depreciation expense as of December 31, 2000, 1999 and 1998 was $212,037,
187,885 and $177,593, respectively.

5.  Intangible Assets

Intangible assets represent the costs associated with the acquired divisions
over the fair value of their net assets at date of acquisition.  Details of the
intangible assets are as follows:
<TABLE>
<CAPTION>
                                                                2000          1999
                                                            -----------   -----------
<S>                                                         <C>           <C>
   Goodwill                                                    $198,000      $198,000
   Leasehold value                                               67,000        67,000
   Start-up costs                                                34,882        34,882
   Organizational costs                                          28,565        28,565
   Refinance cost                                                 2,500             0
   Trademark                                                       5127         5,127
                                                            -----------   -----------
   Total intangible assets                                      336,574       333,574
   Accumulated amortization - goodwill                          (21,151)      (16,075)
   Accumulated amortization - other intangible assets           (78,393)      (66,586)
                                                            -----------   -----------
  Intangible assets, net                                       $236,530      $250,913
                                                            ===========   ===========
</TABLE>

Goodwill, which represents the excess of the cost of purchased companies over
the fair value of the net assets at dates of acquisition, is being amortized on
the straight-line method over thirty-nine years.

Amortization expense as of December 31, 2000, 1999 and 1998 was $16,882, $16,817
and $16,712 respectively.

                                     F-8
<PAGE>

6.  Long-Term Debt

<TABLE>
<CAPTION>
                                                                                        2000                     1999
                                                                                     -----------             ----------
<S>                                                                                  <C>                     <C>
Notes Payable

Note payable to Wells Fargo Bank                                                     $         -             $  546,485
Monthly installments of $5,014 plus interest at 2.75% over prime
rate beginning February 15, 1999, (12.25% at December 15, 2000), final
payment is due on January 15, 2001.   The note payable is collateralized
by a security interest of first priority in all accounts receivable, inventory,
equipment, fixtures and improvements.

Note payable to Wells Fargo Bank, payable in monthly installments of                     464,000                      -
$7,733 plus interest at 3.00% over prime rate beginning December 15,
2000 (12.50% at December 31, 2000), final payment due on January 15,
2005.  The note payable is collateralized by a security interest of first
priority in all accounts receivable, inventory, equipment, instruments,
general intangibles and contract rights.

Note payable to Wells Fargo Bank                                                          33,334                 53,334
Payable in monthly installments of $1,667 plus interest at 1% over prime
rate (9.50% at December 31, 1999), final payment is due on August 15, 2002.
The note is secured by all accounts receivable, inventory, equipment, fixtures
and improvements.

Note payable to majority shareholders, Paul and Joan Katzeff                              24,919                 24,919
Payable in monthly installments of interest only at 12%, with balance due
on demand after June 30, 1996. The shareholders have subordinated this
note to all notes payable including Wells Fargo Bank as described above.

Note payable to majority shareholders, Paul and Joan Katzeff                              48,830                      -
Payable in monthly installments of $1,649 including interest at 11.50%, with
Final payment due on November 17, 2003, unsecured.

Note payable to Laoma Yaski                                                              128,543                164,693
For the purchase of Mendocino Bakery, payable in monthly installments
of $4,249, including interest at 10%, secured by property and equipment
at the bakery, final payment due in November 14, 2003.

Note payable to Chase Manhattan Bank                                                      12,659                 15,330
Payable in monthly installments of $324, including interest at 8.637%,
Secured by a vehicle, final payment is due in October 26, 2004.

Note payable to Chase Manhattan Bank                                                      14,174                      -
Payable in monthly installments of $304, including interest at 17.263%
secured by a vehicle, final payment due on November 16,  2005.
</TABLE>
                                      F-9
<PAGE>

<TABLE>
<CAPTION>
                                                                                        2000                     1999
                                                                                     -----------             ----------
<S>                                                                                  <C>                     <C>
Obligations Under Capital Lease

Note payable to Textron Leasing                                                      $         -             $    1,716
Payable in monthly installments of $832, including interest at 16.17%,
secured by equipment, final payment due on February 15, 2000.

Note payable to Manifest Group                                                             1,017                 12,266
Payable in monthly installments of $1,030, including interest at 15.315%,
secured by equipment, final payment due on January 5, 2001.

Note payable to Imperial Capital                                                             828                  9,895
Payable in monthly installments of $840, including interest at 17.263%,
secured by equipment, final payment due in January 15, 2001.

Note payable to Granite Financial                                                          6,495                 17,899
Payable in monthly installments of $1,139, including interest at 17.607%,
secured by equipment, final payment due on June 30, 2001.

Note payable to First Sierra Computer Equipment                                           16,668                 28,952
Payable in monthly installments of $1,297, including interest at 14.00%,
secured by equipment, final payment due on February 26, 2002.

Note payable to Security Financial                                                        11,584                 19,982
Payable in monthly installments of $910, including interest at 15.529%,
secured by equipment, final payment due on February 22, 2002.

Note payable to Centerpoint                                                                1,503                  6,842
Payable in monthly installments of $517, including interest at 19.225%,
secured by equipment, final payment due on March 22, 2001.

Note payable to Hansel Leasing                                                                 -                  1,088
Payable in monthly installments of $380, including interest at 28.510%,
secured by a vehicle, final payment due in March 2000.
                                                                                     -----------             ----------
                                                                                     $   764,553             $  903,401
Less Current Portion                                                                    (231,619)              (241,216)
                                                                                     -----------             ----------
Long term portion of notes payable and capital leases                                $   532,934             $  662,185
                                                                                     ===========             ==========
</TABLE>
                                     F-10
<PAGE>

All of the above notes payable and capital leases with the exception of the
First Sierra Computer Equipment capital lease and Manifest Group lease, are
personally guaranteed by the Company's majority shareholders.

Interest paid for the years ended December 31, 2000, 1999 and 1998 was $97,650,
$117,205, and $122,479 respectively.

Maturities of notes payable and capital leases are as follows:

<TABLE>
<S>                           <C>
     2001                     $231,619
     2002                      177,110
     2003                      160,749
     2004                       99,081
     Thereafter                 95,994
                              --------
                              $764,553
                              ========
</TABLE>

Based on current borrowing rates, the fair value of the notes payable and
capital leases approximate their carrying amounts.

7.  Income Taxes

The components of the provision for income taxes for the years ended December
31, 2000, 1999 and 1998 are as follows:

<TABLE>
                                 2000     1999       1998
                                -------  -------   --------
<S>                             <C>      <C>      <C>
     Federal-current            $     -  $     -   $      -
     Federal-deferred            17,594    6,531    (55,954)
     State-current                  800      800        800
     State-prior                      -      800          -
     State-deferred              12,489    6,778    (16,285)
                                -------  -------   --------
     Total income taxes         $30,838  $14,909   $(71,439)
                                =======  =======   ========
</TABLE>

The Company computes income taxes using the asset and liability method under
which deferred income taxes are provided for temporary differences between the
financial bases of the Company's assets and liabilities. As of December 31, 2000
and 1999, deferred tax assets recognized for deductible temporary differences
and loss carryforwards total $7,836 and $28,001, respectively. Deferred tax
liabilities recognized for taxable temporary differences total $10,288 and $370,
respectively. The Company has a California manufacturer's credit carryforward of
$25,125 which may be used to offset California income taxes in the future.

                                     F-11
<PAGE>

The Company has net operating loss and contribution carryovers to offset future
income tax.  If not used, these credits will expire as follows:

<TABLE>
<CAPTION>
Federal

      Years ending         Capital                    Net Operating
       December 31          Loss     Contributions        Loss           Total
----------------------    -------    -------------    -------------     --------
<S>                       <C>        <C>              <C>               <C>
        2001              $     -          $ 9,029         $      -     $  9,209
        2002               29,471           11,419                -       40,890
        2003                    -           11,289                -       11,289
        2005                    -            6,898                -        6,898
        2012                    -                -          548,204      548,204
        2013                    -                -          128,576      128,526
                          -------          -------         --------     --------
                          $29,471          $38,635         $676,780     $744,886
                          =======          =======         ========     ========

California

      Years ending         Capital                    Net Operating
       December 31          Loss     Contributions        Loss           Total
----------------------    -------    -------------    -------------     --------
<S>                       <C>        <C>              <C>               <C>
        2002              $29,471         $  1,091         $204,716     $235,278
        2003                    -           11,289           64,341       75,630
        2004                    -           14,863                -       14,863
        2005                    -            6,966                -            -
                          -------          -------         --------     --------
                          $29,471          $34,209         $269,057     $332,737
                          =======          =======         ========     ========
</TABLE>

Income taxes paid for the years ended December 31, 1999, 1998 and 1997 were
$800, $1,600 and $800, respectively.

8. Operating Leases

The Company leases its delivery fleet, other vehicles and some office equipment
under non-cancelable operating leases with terms ranging from three to five
years.

Minimum annual lease payments due under these agreements are as follows:
<TABLE>
<S>                        <C>
   2001                    $60,258
   2002                     20,634
   2003                      7,251
   2004 and thereafter           0
                           -------
                           $88,143
                           =======
</TABLE>

Total annual operating lease payments were $93,319, $102,018 and $69,400 for the
years ended December 31, 2000, 1999, and 1998, respectively.

9.  Common Stock
<TABLE>
<CAPTION>
                                 Number of    No Par
                                   Shares     Value
                                 ----------  --------
<S>                              <C>         <C>

   Balance, December 31, 1997    1,236,744   872,816
   No activity                           -         -
                                 ---------   -------
   Balance, December 31, 1998    1,236,744   872,816
   Repurchase of stock              (2,200)  (11,000)
                                 ---------   -------
   Balance, December 31, 1999    1,234,544   861,816
   No activity                           -         -
                                 ---------   -------
   Balance, December 31, 2000    1,234,544   861,816
                                 =========   =======
</TABLE>

981,000 shares originally issued are restricted.

                                     F-12
<PAGE>

10. Stock Option Purchase Plan

Under the terms of  the Company's stock option purchase plan (see note 13),
options to purchase shares of the its common stock are granted at a price of $5
per share.  Options may be exercised until January 2001.  Following is a summary
of transactions:

<TABLE>
<CAPTION>
                                      Shares Under Option
                                      -------------------
                                       2000         1999
                                      -------------------
<S>                                   <C>            <C>
Outstanding, beginning of year        20,000       20,000
Shares expired during the year        (4,000)           -
Shares exercised during the year           -            -
                                      ------       ------
Outstanding, end of year              16,000       20,000
                                      ======       ======
</TABLE>

The related compensation expense for the years ended December 31, 2000, 1999 and
1998 is $13,250, $0 and $6,750, respectively.

The above referenced exercised options, did not result in the issuance of shares
of the Company's common stock; but rather, pursuant to the terms of an agreement
with the Company and one of its former officers, resulted in the Company's
payment to such officer of $9.750 and an accrued payable of $3,500 as of
December 31, 2000.

11. Long-Term Leases

The Company leases its corporate headquarters, warehouse and waterfront
facilities from Paul and Joan Katzeff (the Company's majority shareholders).
The lease provides for monthly rental payments of $8,600 and the Company is
responsible for all real estate taxes, insurance and maintenance costs related
to the facilities. The lease provides for periodic cost of living increases
during the term of the lease, including the option periods. The Company
exercised the first of four five-year options on March 31, 1995. The lease was
extended to March 31, 2001, under a one-year extension.

Any deferred amounts are due based upon available cash flow as determined by the
Company's management or upon demand of the Company's majority shareholders.
Rental expense under the above lease was $103,200, $103,200 and $103,000 for the
years ended December 31, 2000, 1999 and 1998 respectively.  The Company has made
substantial leasehold improvements (Note 4) and intends to exercise all options
under the terms of this lease.

The Company leases a bakery establishment in Mendocino, California.  The lease
provides for monthly rental payments of $3,000 (as of December 31, 2000) and the
lease term expires in September 30, 2010.

The Company leased retail space in Fort Bragg, California to house an espresso
bar/cafe business. The lease provided for monthly rental payments of $730, and
expires in January 31, 2001. The lease also provided for periodic cost of living
increases during the term of the lease, including the option periods. In
February 1998, the cafe business was closed and subleased at its full rental
cost. The option to renew was not exercised, and the lease terminated.

Minimum future rental payments for all leases are as follows:

<TABLE>
<S>                        <C>
   2001                    $ 62,565
   2002                      36,000
   2003                      36,000
   2004                      36,000
   2005                      36,000
   Thereafter               171,000
                           --------
                           $377,565
                           ========
</TABLE>
                                     F-13
<PAGE>

12. Related-Party Transactions

The Company has an interest only note payable (i) due on demand and a principal
and interest note payable (ii) in each case due to Paul and Joan Katzeff (the
Company's majority shareholders)  (See Note 6, above).  The Company also leases
properties from its majority shareholders (See Note 11, above).

The summary of these related-party transactions for the years ended December 31,
2000, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                            2000       1999       1998
                         ---------   --------   --------
                         <S>         <C>        <C>
   Interest expense          1,600      4,529      7,899

   Rent expense           $103,200   $103,200   $103,000
</TABLE>

13.  Commitments

Under the terms of an agreement with Sustainable Harvest, a former subsidiary
sold in 1997, the Company is required to purchase coffee beans each year for the
next five years ending December 31, 2002 at a predetermined price per pound over
landed coffee costs.

The Company purchased a bakery from Laoma Yaski in 1996 for $350,000. The
Company agreed to pay an additional $25,000 to Laoma Yaski upon the seven year
anniversary of the purchase provided she does not own, manage or operate a
bakery within 250 miles of Mendocino, California.

A total of 16,000 stock options may be exercised or sold at any time at the
discretion of a past officer subject to the Company's first right of refusal.

14.  Contingent Liabilities

The Company is engaged in a complaint regarding the pending trademark with the
U.S. Trademark Trial and Appeal Board and the Administrative Law Court.  The
ultimate outcome of this matter and the effect of an adverse result cannot be
determined at this time.

15. Subsequent Events

The Company is pursuing the sale of the Bakery and has listed the business with
a real estate agent.

                                     F-14