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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

|x                                                                 |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|----------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------
|                                                                 
|For the quarterly period ended June 30, 2003                     
|                                                                 
|OR                                                               
|                                                                 
|o                                                                 |  | 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.                                
|(Exact name of small business issuer as specified in its charter)

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

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

Issuer's telephone number, including area
code:                    (707): 964-0118

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
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 o
|----- | ----

As of
August 12, 2003 there were 1,234,544 shares outstanding of common stock of the issuer.

Transitional Small Business Disclosure Format (check one):

|Yes o | No x
|----- | ----

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##### Table of Contents

THANKSGIVING COFFEE COMPANY, INC.

INDEX

|PART I.  FINANCIAL INFORMATION                                                        |                                                                                      
|------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------
|                                                                                      |                                                                                      
|Item 1.                                                                               | Financial Statements and Notes to Financial Statements                               
|                                                                                      |                                                                                      
|Balance Sheets as of June 30, 2003 and 2002                                           | 45                                                                                  
|                                                                                      |                                                                                      
|Statements of Income for the Three Months and Six Months Ended June 30, 2003 and 2002 | 6                                                                                    
|                                                                                      |                                                                                      
|Statements of Retained Earnings for the Six Months Ended June 30, 2003 and 2002       | 7                                                                                    
|                                                                                      |                                                                                      
|Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002              | 8                                                                                    
|                                                                                      |                                                                                      
|Notes to Financial Statements                                                         | 9-19                                                                                 
|                                                                                      |                                                                                      
|Item 2.                                                                               | Management's Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                      |                                                                                      
|Item 3.                                                                               | Controls and Procedures                                                              
|                                                                                      |                                                                                      
|PART II.  OTHER INFORMATION                                                           |                                                                                      
|                                                                                      |                                                                                      
|Item 1.                                                                               | Legal Proceedings                                                                    
|                                                                                      |                                                                                      
|Item 2.                                                                               | Changes in Securities                                                                
|                                                                                      |                                                                                      
|Item 3.                                                                               | Defaults Upon Senior Securities                                                      
|                                                                                      |                                                                                      
|Item 4.                                                                               | Submission of Matters to a Vote of Security-Holders                                  
|                                                                                      |                                                                                      
|Item 5.                                                                               | Other Information                                                                    
|                                                                                      |                                                                                      
|Item 6.                                                                               | Exhibits and Reports on Form 8-K                                                     



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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Unaudited Financial Statements

For the Six Months Ended June 30, 2003 and 2002

|Financial Statements                      |    
|----------------------------------------- | ---
|                                          |    
|Balance Sheets                            | 4-5
|Statements of Income                      | 6  
|Statements of Retained Earnings (Deficit) | 7  
|Statements of Cash Flows                  | 8  
|Notes to Financial Statements             | 9  



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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Balance Sheets Unaudited

|                                       |  | June 30, |           
|-------------------------------------- |  | -------- | ----------
|                                       |  |          |           
|                                       |  | 2003     |           
|                                       |  |          |           
|Assets                                 |  |          |           
|Current assets                         |  |          |           
|Cash                                   |  | $        | 86,582    
|Accounts receivable                    |  |          | 289,043   
|Employee receivable                    |  |          | 1,603     
|Inventory                              |  |          | 440,883   
|Prepaid expenses                       |  |          | 27,737    
|Deferred tax assets                    |  |          | 25,074    
|                                       |  |          |           
|Total current assets                   |  |          | 870,922   
|Property and equipment                 |  |          |           
|Property and equipment                 |  |          | 2,680,980 
|Accumulated depreciation               |  |          | (2,079,232
|                                       |  |          |           
|Total property and equipment           |  |          | 601,748   
|Other assets                           |  |          |           
|Deposits and other assets              |  |          | 43,415    
|Goodwill                               |  |          | 171,773   
|Other intangibles, net of amortization |  |          | 41,154    
|Deferred tax assets                    |  |          | 46,333    
|                                       |  |          |           
|Total other assets                     |  |          | 302,645   
|                                       |  |          |           
|Total assets                           |  | $        | 1,775,345 
|                                       |  |          |           

|See accompanying notes | 4
|---------------------- | -



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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Balance Sheets Unaudited

|                                            |  | June 30, |          
|------------------------------------------- |  | -------- | ---------
|                                            |  |          |          
|                                            |  | 2003     |          
|                                            |  |          |          
|Liabilities and shareholders' equity        |  |          |          
|Current liabilities                         |  |          |          
|Accounts payable                            |  | $        | 371,336  
|Notes payable-bank, current portion         |  |          | 165,925  
|Notes payable-other, current portion        |  |          | 30,535   
|Notes payable-shareholders, current portion |  |          | 32,931   
|Capital lease obligations, current portion  |  |          | 19,713   
|Accrued liabilities                         |  |          | 46,070   
|Deferred income taxes                       |  |          |         
|                                            |  |          |          
|Total current liabilities                   |  |          | 699,509  
|Long term debt                              |  |          |          
|Notes payable-bank                          |  |          | 168,750  
|Notes payable-other                         |  |          | 18,207   
|Capitalized lease obligations               |  |          | 52,043   
|Notes payable-shareholders                  |  |          |         
|                                            |  |          |          
|Total long term debt                        |  |          | 239,000  
|                                            |  |          |          
|Total liabilities                           |  |          | 905,509  
|Shareholders' equity                        |  |          |          
|Common stock, no par value,                 |  |          |          
|1,960,000 shares authorized,                |  |          |          
|1,234,544 shares issued and outstanding     |  |          | 861,816  
|Additional paid in capital                  |  |          | 24,600   
|Retained Earnings (Deficit)                 |  |          | (16,580  
|                                            |  |          |          
|Total shareholders' equity                  |  |          | 869,836  
|                                            |  |          |          
|Total liabilities and shareholders' equity  |  | $        | 1,775,345
|                                            |  |          |          

|See accompanying notes | 5
|---------------------- | -



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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Statements of Income Unaudited

|                                             |  | Three Months Period Ended June 30,2003 |           | Three Months Period Ended June
30,2002 |   | Six Months Period Ended June 30,
2003 |   | Six Months Period Ended June 30, 2002 |          
|-------------------------------------------- |  | -------------------------------------- | --------- | -------------------------------------- | - | ------------------------------------- | - | ------------------------------------- | ---------
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Income                                       |  |                                        |           |                                        |   |                                       |   |                                       |          
|Net sales                                    |  | $                                      | 1,160,735 |                                        | $ | 1,230,714                             |   | $                                     | 2,273,049
|Cost of sales                                |  |                                        | 591,123   |                                        |   | 637,044                               |   |                                       | 1,144,405
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Gross profit                                 |  |                                        | 569,612   |                                        |   | 593,670                               |   |                                       | 1,128,644
|Operating expenses                           |  |                                        |           |                                        |   |                                       |   |                                       |          
|Selling, general and administrative expenses |  |                                        | 543,694   |                                        |   | 526,703                               |   |                                       | 1,087,203
|Depreciation and amortization                |  |                                        | 42,209    |                                        |   | 39,575                                |   |                                       | 82,337   
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Total operating expenses                     |  |                                        | 585,903   |                                        |   | 566,278                               |   |                                       | 1,169,540
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Operating income (Loss)                      |  |                                        | (16,291   | )                                      |   | 27,392                                |   |                                       | (40,896  
|Other income (expense)                       |  |                                        |           |                                        |   |                                       |   |                                       |          
|Interest income                              |  |                                        |          |                                        |   | 55                                    |   |                                       | 21       
|Miscellaneous expense                        |  |                                        | 1,277     |                                        |   | (6,656                                | ) |                                       | 844      
|Interest expense                             |  |                                        | (12,028   | )                                      |   | (16,199                               | ) |                                       | (18,870  
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Total other income (expense)                 |  |                                        | (10,751   | )                                      |   | (22,800                               | ) |                                       | (18,005  
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Income (loss) before income taxes            |  |                                        | (27,042   | )                                      |   | 4,592                                 |   |                                       | (58,901  
|Income tax expense                           |  |                                        |          |                                        |   |                                      |   |                                       | (800     
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Net income (loss)                            |  | $                                      | (27,042   | )                                      | $ | 4,592                                 |   | $                                     | (59,701  
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Earnings (loss) per share (basic)            |  | $                                      | (0.022    | )                                      | $ | 0.004                                 |   | $                                     | (0.048   
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          
|Earnings (loss) per share (dilutive)         |  | $                                      | (0.022    | )                                      | $ | 0.004                                 |   | $                                     | (0.048   
|                                             |  |                                        |           |                                        |   |                                       |   |                                       |          

|See accompanying notes | 6
|---------------------- | -



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Thanksgiving Coffee Company, Inc.

Statements of Accumulated Deficit Unaudited

|                                                   |  | June 30, |        
|-------------------------------------------------- |  | -------- | -------
|                                                   |  |          |        
|                                                   |  | 2003     |        
|                                                   |  |          |        
|Retained earnings (accumulated deficit), beginning |  | $        | 43,121 
|Net income (loss)                                  |  |          | (59,701
|                                                   |  |          |        
|Accumulated deficit, ending                        |  | $        | (16,580
|                                                   |  |          |        

|See accompanying notes | 7
|---------------------- | -



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Thanksgiving Coffee Company, Inc.

Statements of Cash Flows Unaudited

|                                                                            |  | Six Month Periods Ended June 30, |         
|--------------------------------------------------------------------------- |  | -------------------------------- | --------
|                                                                            |  |                                  |         
|                                                                            |  | 2003                             |         
|                                                                            |  |                                  |         
|Operating activities                                                        |  |                                  |         
|Net income (loss)                                                           |  | $                                | (59,701 
|Adjustments to reconcile net income to cash flows from operating activities |  |                                  |         
|Depreciation and amortization                                               |  |                                  | 90,974  
|(Increase) decrease in:                                                     |  |                                  |         
|Receivables                                                                 |  |                                  | 22,287  
|Inventory                                                                   |  |                                  | (62,005 
|Prepaid expenses                                                            |  |                                  | 1,215   
|Deposits and other assets                                                   |  |                                  | (5,843  
|Increase (decrease) in:                                                     |  |                                  |         
|Accounts payable                                                            |  |                                  | 68,432  
|Accrued liabilities                                                         |  |                                  | (8,728  
|                                                                            |  |                                  |         
|Net cash provided by operating activities                                   |  |                                  | 46,631  
|Investing activities                                                        |  |                                  |         
|Purchase of property and equipment                                          |  |                                  | (52,544 
|                                                                            |  |                                  |         
|Net cash used by investing activities                                       |  |                                  | (52,544 
|Financing activities                                                        |  |                                  |         
|Advances on notes payable and capital leases                                |  |                                  | 351,319 
|Repayments of notes payable and capital leases                              |  |                                  | (323,998
|                                                                            |  |                                  |         
|Net cash used by financing activities                                       |  |                                  | 27,321  
|Net increase (decrease) in cash                                             |  |                                  | 21,408  
|Cash at December 31, 2003 and 2002                                          |  |                                  | 65,174  
|                                                                            |  |                                  |         
|Cash at June 30, 2003 and 2002                                              |  | $                                | 86,582  
|                                                                            |  |                                  |         

|See accompanying notes | 8
|---------------------- | -



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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

June 30, 2003

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.  Outside of Northern California, the Company ships nationally throughout the fifty states by common carriers selling direct or through brokers and distributors.
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 and Internet sales on a nationwide basis.  The Company sells sandwiches, pastries, coffee and tea through a bakery located in Mendocino, California.

Basis of Presentation

The Company has prepared the financial statements on the accrual basis of accounting in accordance with generally accepted accounting
principles.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

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 is affected by economic
fluctuations in the retail and food service industries.

Inventory

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.

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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

1.     Summary of Significant Accounting Policies (continued)

Property and
Equipment (continued)

The portion of depreciation and amortization expense 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.

Goodwill and Other Intangible Assets
 Adoption of FASB No.142

Effective January 1, 2002, the Company adopted FASB No. 142, Goodwill and Other Intangible Assets (the Statement).  The Statement makes significant changes
to the methods and criteria used to amortize goodwill and intangible assets.  Under the Statement, goodwill is no longer amortized, but, on an annual basis, must be tested for impairment and possibly written down to reflect an impairment
loss.  The Statement also requires that certain intangible assets other than goodwill that have indefinite lives, not be amortized until the lives become finite.  Intangible assets that do not have indefinite lives are amortized over their
useful economic lives.

Intangible assets are amortized over the following estimated useful lives using primarily straight-line basis.

|                |  | Life in Years |   
|--------------- |  | ------------- | --
|                |  |               |   
|Leasehold value |  |               | 14
|Trademark       |  |               | 17
|Refinance Cost  |  |               | 5 

Goodwill will not be amortized unless events or circumstances occur indicating that impairment exists
within a particular reporting unit.  Impairment losses, if any, are recorded in the statement of income as part of operating income.

Investments in Consolidated Companies

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

10



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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

1.     Summary of Significant Accounting Policies (continued)

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 six months period ended June 30, 2003.  No contributions have been made over the last five years.

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 these contracts as hedge instruments pursuant 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 shareholders equity.  Realized gains and losses are a component of cost of
sales.  The Company did not have any futures or options contracts in effect as of June 30, 2003.

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 solicitation 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.

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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

2.     Accounts Receivable

Accounts receivable consist of the following:

|Accounts receivable                    |  | $ | 294,389 |  
|-------------------------------------- |  | - | ------- | -
|Less:  Allowance for doubtful accounts |  |   | (5,346  | )
|                                       |  |   |         |  
|Accounts receivable, net               |  | $ | 289,043 |  
|                                       |  |   |         |  

The Company uses the percentage method for uncollectible accounts.  The allowance for doubtful
accounts is estimated from 1% to 10% of total outstanding receivables as of June 30,2003.  Bad debt expense for the six months ended June 30, 2003 was $8,743.  The adjustment to the allowance account for the six months ended June 30, 2003
was a net $3,686 reduction.

3.     Inventory

Inventory consists of the following:

|Coffee                                                  |  |   |         | 
|------------------------------------------------------- |  | - | ------- | 
|Unroasted                                               |  | $ | 162,968 | 
|Roasted                                                 |  |   | 84,994  | 
|Tea                                                     |  |   | 15,377  | 
|Packaging, supplies and other merchandise held for sale |  |   | 177,544 | 
|                                                        |  |   |         | 
|Total inventory                                         |  | $ | 440,883 | 
|                                                        |  |   |         | 

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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

4.     Property and Equipment

Property and equipment consists of the following:

|Equipment and fixtures             |  | $ | 1,567,620  |  
|---------------------------------- |  | - | ---------- | -
|Furniture and equipment            |  |   | 293,698    |  
|Leasehold improvements             |  |   | 434,409    |  
|Transportation equipment           |  |   | 112,977    |  
|Marketing equipment                |  |   | 166,933    |  
|Property held under capital leases |  |   | 105,343    |  
|                                   |  |   |            |  
|Total property and equipment       |  |   | 2,680,980  |  
|Accumulated depreciation           |  |   | (2,079,232 | )
|                                   |  |   |            |  
|Property and equipment, net        |  | $ | 601,748    |  
|                                   |  |   |            |  

Marketing equipment includes costs to develop and periodically update a website for on-line sales and
promotion.  Costs related to the Companys website are depreciated on the straight-line method over three years.

Depreciation expense for the six months ended June 30,
2003 was $ 88,878.

5.     Goodwill and Other Intangible Assets

As part of the adoption of FASB Statement No.
142 as of January 1, 2002, the Company no longer amortizes goodwill.  The Company performed a test of impairment on goodwill, which resulted in no impairment loss as of June 30, 2003.

The
change in the carrying value of goodwill during the six months ended June 30, 2003 follows:

|Carrying value - beginning of year |  | $ | 171,773 | 
|---------------------------------- |  | - | ------- | 
|Goodwill acquired                  |  |   |        | 
|Goodwill impairment losses         |  |   |        | 
|                                   |  |   |         | 
|Carrying value  June 30, 2003     |  | $ | 171,773 | 
|                                   |  |   |         | 

Intangible assets subject to amortization consist of the following:

|Leasehold value          |  | $ | 67,000  |  
|------------------------ |  | - | ------- | -
|Trademark                |  |   | 5,127   |  
|Refinance cost           |  |   | 4,500   |  
|                         |  |   |         |  
|Total intangible assets  |  |   | 76,627  |  
|Accumulated amortization |  |   | (35,473 | )
|                         |  |   |         |  
|Intangible assets, net   |  | $ | 41,154  |  
|                         |  |   |         |  

Amortization expense for the six month period ended June 30, 2003 was $4,096.

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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

6.     Long Term Debt

| | Notes Payable as of June 30, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |   |         | 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   |         | 
| | Note payable to Merrill Lynch, monthly payable in  installments of $4,687 plus interest at 3.3% over the one month London Inter Bank Offer
Rate (LIBOR) beginning August 1, 2003 (4.3% at June 30, 2003), final payment is due on July 1, 2007.  The note payable is collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments,
general intangibles and contract rights along with a personal guarantee of up to $150,000 by Paul and Joan Katzeff. |  | $ | 225,000 | 
| | Note payable to majority shareholders, Paul and Joan Katzeff, 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.                                                                                                                                                                                                                                                                      |  |   | 24,919  | 
| | Note payable to majority shareholders, Paul and Joan Katzeff, payable in monthly installments of $1,649 including interest at 11.50%, with final
payment due on November 17, 2003, unsecured.                                                                                                                                                                                                                                                                                                                   |  |   | 8,022   | 
| | Note payable to Laoma Yaski 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 on November 14, 2003.                                                                                                                                                                                                                                                                                |  |   | 20,726  | 
| | Note payable to Chase Manhattan Bank, payable in monthly installments of $324, including interest at 8.637%, secured by a vehicle, final payment
due on October 26, 2004.  This note is personally guaranteed by the Companys majority shareholders.                                                                                                                                                                                                                                                           |  |   | 4,884   | 
| | Working capital line of credit from Merrill Lynch interest only renewed annually with interest at 3.3% over the one month London Inter Bank Offer
Rate (LIBOR) (4.3% at June 30, 2003). The credit line is collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments, general intangibles and contract rights along with a personal guarantee
of up to $150,000 by Paul and Joan Katzeff.                                                           |  |   | 109,675 | 

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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

6.     Long Term Debt (continued)

| | Note payable to Chase Manhattan Bank, payable in monthly installments of $304, including interest at 9.90%,secured by vehicle,
final payment due on November 16, 2005.  This note is personally guaranteed by the Companys majority shareholders. |  | $ | 7,825    |  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -------- | -
| | Capital Lease Obligations as of June 30, 2003                                                                                                                                                                                                      |  |   |          |  
| | Note payable to Chrysler financing, payable in monthly installments of $335, including interest at 6.00%, secured by vehicle, final payment due
on October 30, 2007                                                                                |  |   | 15,307   |  
| | Note payable to Avaya Financial Services, payable in monthly installments of $372, including interest at 12.00%, secured by equipment, final
payment due on June 12, 2007.                                                                         |  |   | 14,089   |  
| | Note payable to US Bancorp Manifest Funding Services, payable in monthly installments of $444, including interest at 12.91%, secured by
equipment, final payment due March 2007.                                                                   |  |   | 15,985   |  
| | Note payable to Nationwide Financial Services, payable in monthly installments of $1,414, including interest at 10.512%, secured by equipment,
final payment due on May 10, 2006.                                                                  |  |   | 41,682   |  
| |                                                                                                                                                                                                                                                    |  |   |          |  
| |                                                                                                                                                                                                                                                    |  |   | 488,048  |  
| |                                                                                                                                                                                                                                                    |  |   |          |  
| | Less current portion                                                                                                                                                                                                                               |  |   | (249,104 | )
| |                                                                                                                                                                                                                                                    |  |   |          |  
| | Long term portion of notes payable and capital lease obligations                                                                                                                                                                                   |  | $ | 239,000  |  
| |                                                                                                                                                                                                                                                    |  |   |          |  

Interest paid for the six months ended June 30, 2003 was $15,245.

As of June 30, 2003, maturities of notes payable are as follows:

|2003                |  | $ | 212,971 | 
|------------------- |  | - | ------- | 
|2004                |  |   | 101,448 | 
|2005                |  |   | 100,983 | 
|2006 and thereafter |  |   | 72,646  | 
|                    |  |   |         | 
|                    |  | $ | 488,048 | 
|                    |  |   |         | 

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

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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

7.     Income Taxes

The Company computes income taxes using the asset and liability method
under which deferred income taxes are provided for temporary differences between the financial and tax bases of the Companys assets and liabilities.  As of December 31, 2002,  deferred tax assets recognized for deductible temporary
differences and loss carryforwards were $71,407.  Deferred tax benefits are not adjusted at June 30, 2003. In addition, the Company  has a California manufacturers credit carryforward of $13,271, which may be used to offset
California income taxes in the future.

The components of income tax expense for the six months ended June 30, 2003 are as follows:

|State  current |  | $ | 800 | 
|--------------- |  | - | --- | 

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

Federal

|Years ending December 31, |  | Capital Loss |   | Contributions |   | Net Operating Loss |  | Total |        
|------------------------- |  | ------------ | - | ------------- | - | ------------------ |  | ----- | -------
|                          |  |              |   |               |   |                    |  |       |        
|2003                      |  | $            |  |               | $ | 11,289             |  | $     |       
|2005                      |  |              |  |               |   | 12,067             |  |       |       
|2006                      |  |              |  |               |   | 758                |  |       |       
|2017                      |  |              |  |               |   |                   |  |       | 290,210
|2018                      |  |              |  |               |   |                   |  |       | 128,576
|                          |  |              |   |               |   |                    |  |       |        
|                          |  | $            |  |               | $ | 24,114             |  | $     | 418,786
|                          |  |              |   |               |   |                    |  |       |        

California

|Years ending December 31, |  | Capital Loss |   | Contributions |   | Net Operating Loss |  | Total |       
|------------------------- |  | ------------ | - | ------------- | - | ------------------ |  | ----- | ------
|                          |  |              |   |               |   |                    |  |       |       
|2003                      |  | $            |  |               | $ |                   |  | $     |      
|2004                      |  |              |  |               |   | 4,177              |  |       | 28,950
|2005                      |  |              |  |               |   | 12,299             |  |       | 64,092
|2006                      |  |              |  |               |   | 5,396              |  |       |      
|                          |  |              |   |               |   |                    |  |       |       
|                          |  | $            |  |               | $ | 21,872             |  | $     | 93,042
|                          |  |              |   |               |   |                    |  |       |       

Income taxes paid for the six months ended June 30, 2003 were $800.

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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

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.

As of June 30, 2003, minimum annual lease payments due under these agreements for each of the next five
years and in the aggregate are as follows:

|2003                |  | $ | 63,118  | 
|------------------- |  | - | ------- | 
|2004                |  |   | 55,416  | 
|2005                |  |   | 52,010  | 
|2006                |  |   | 39,319  | 
|2007 and thereafter |  |   | 13,628  | 
|                    |  |   |         | 
|                    |  | $ | 223,491 | 
|                    |  |   |         | 

Total operating lease payments were $38,478 for the six months ended June 30, 2003.

9.     Common Stock

|                                   |  | Number of Shares |           | No Par Value |  
|---------------------------------- |  | ---------------- | --------- | ------------ | -
|                                   |  |                  |           |              |  
|Beginning balance, January 1, 2003 |  |                  | 1,234,544 |              | $
|No activity                        |  |                  |          |              |  
|                                   |  |                  |           |              |  
|Ending balance, June 30, 2003      |  |                  | 1,234,544 |              | $
|                                   |  |                  |           |              |  

981,000 shares are restricted.

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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

10.    Stock Option Purchase Plan

Under the terms of the Companys stock option purchase plan
(see Note 13), options to purchase shares of its common stock are granted at a price of $5 per share.  Options expire at various dates through 2003.  Following is a summary of transactions:

|Beginning balance, January 1, 2002           |  |  | 16,000 | 
|-------------------------------------------- |  |  | ------ | 
|Shares expired during the six month period   |  |  |       | 
|Shares exercised during the six month period |  |  |       | 
|                                             |  |  |        | 
|Ending balance, June 30, 2003                |  |  | 16,000 | 
|                                             |  |  |        | 

The related compensation expense for the six months ended June 30, 2003 was $0.

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 an option to renew for one five-year term on March 31, 1995, and the lease was extended for successive one year terms on March
31, 2000,March 31, 2001, March 31, 2002 and March 31, 2003.  The Company has options to renew the lease for three successive five year renewal periods when the current one-year term expires on March 31, 2004.

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 $51,600 for the
six  months ended June 30, 2003.  The Company has made substantial leasehold improvements (see Note 4) and intends, along with its major shareholders, to exercise all options under the terms of this lease.

The Company leases a bakery establishment in Mendocino, California.  The lease currently provides for monthly rental payments of $3,307 as of June 30, 2003.  The lease term expires on September 30, 2011.

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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

11.    Long Term Leases (continued)

The Company leased warehouse premises in Santa Rosa, California
from an unrelated third party for a one-year period commencing February 1, 2000 at a base rent of $928 per month.  The Company has exercised options to renew the lease for two successive two year renewal periods after the one year term expired
on February 1, 2001 and February 1, 2003.    Pursuant to the terms of the renewal, the base rent was reduced to $907 per month effective as of February 1,2003.

As of
June 30, 2003, minimum future rental payments for all leases are as follows:

|2003                |  | $ | 77,377  | 
|------------------- |  | - | ------- | 
|2004                |  |   | 156,265 | 
|2005                |  |   | 148,411 | 
|2006                |  |   | 149,730 | 
|2007 and thereafter |  |   | 383,340 | 
|                    |  |   |         | 
|                    |  | $ | 915,123 | 
|                    |  |   |         | 

12.   Related Party Transactions

As of June 30, 2003, the Company has (i) one interest only note payable due on demand and (ii) a principal and interest note, in each case payable to Paul and Joan Katzeff (the Companys majority shareholders), (see Note
6).  The Company also leases properties from its majority shareholders (see Note 11).

The summary of payments made to Paul and Joan Katzeff in connection with these related party transactions
for the six months ended June 30, 2003 are as follows:

|Principal on notes |  | $ | 9,114  | 
|------------------ |  | - | ------ | 
|Interest expense   |  | $ | 769    | 
|Rent expense       |  | $ | 51,600 | 

13.      Commitments

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.  Options expire at December 31, 2003.

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##### Table of Contents

THANKSGIVING COFFEE COMPANY, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING
STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as
amended and Section 21E of the Securities Exchange Act of 1934 as amended.  Words such as believe, anticipate, expect, intend, plan, will, may, and other
similar expressions identify forward-looking statements.  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, sources of liquidity and capital (see Liquidity and Capital Resources).  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 beans, increased competition within the Companys businesses, variances from budgeted sales mix and growth rate, 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 that speak only as of the date of this Quarterly Report on Form 10-QSB.

Three Months Ended June 30, 2003 Compared With Three Months Ended June 30, 2002

|Consolidated         |  | Increase (Decrease) |         | Percent Change | 
|-------------------- |  | ------------------- | ------- | -------------- | 
|                     |  |                     |         |                | 
|Net Sales            |  | $                   | (69,979 | )              | 
|Cost of Sales        |  | $                   | (45,921 | )              | 
|Gross Margin         |  |                     | .83     | %              | 
|Selling, G&A Expense |  | $                   | 16,991  |                | 
|Deprec. And Amort.   |  | $                   | 2,634   |                | 
|Interest Expense     |  | $                   | (4,171  | )              | 
|Net Income           |  | $                   | (31,634 | )              | 

Consolidated net sales for the three months ended June 30, 2003 were $1,160,735 down 5.7% or nearly
$70,000 when compared with net sales of $1,230,714 for the same period in fiscal 2002.

Distribution revenues (e.g., revenues generated on our own truck distribution) declined by $59,000 or 9% for
the three month period ended June 30, 2003 when compared to the same period in fiscal 2002.  The decline was a result of a general slowdown in all the territories of the Company, as no customers were lost during this quarter.  Foodservice
customers had a larger decline than the retail customers.

National revenues (e.g., revenues not derived by mail order and direct truck distribution) decreased by $23,000 or 8% for the three month
period ended June 30, 2003, when compared to the same period in fiscal 2002, because of slow sales at a distributor in the southeast and at a national account.

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##### Table of Contents

Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) increased nearly $7,000 or 8%, for the
three months ended June 30, 2003 when compared to the same period in fiscal 2002.   The increase in revenue for mail order reflects the addition of the Companys Cornucopia program, an extension of the mail order business
that is designed to provide an avenue for non-profit organizations to raise money by selling the Companys coffee to their constituency.  This program was established during the third quarter of 2002. The traditional mail order catalog
business was up nearly $1,000 while Internet sales were up $9,000 or 23% for the quarter when compared to the same period last year.  Some of the increase in the Internet sales reflects the migration of traditional mail order customers to the
Companys website and Internet store.

Sales attributable to operations of the Companys bakery were down $4,000 for the three months ended June 30, 2003, or 3%, when compared to
the same period in fiscal 2002.  A lower customer count when compared to last year resulted in the lower volume.

Consolidated cost of sales for the three months ended June 30, 2003 were
$591,123, down 7% or nearly $46,000 when compared with the cost of sales of $637,044 for the same period in fiscal 2002.  This decrease was a result of lower sales and a drop in per pound green bean costs of 3.5% over last year offset by a rise
in workers compensation and medical insurance costs.

Consolidated gross margin (gross profit as a percentage of net sales) for the three months ended June 30, 2003 was 49.1%, up 1.7 percent
when compared with gross margin of 48.24% for the same period in fiscal 2002.  The increase was due to lower per pound green bean cost offset by higher insurance costs resulted in improved gross margins.  There are no assurances that the
Company will be able to sustain lower raw material costs or that insurance costs will continue to erode margins in the future.

Consolidated selling, general and administrative expenses were
$543,694 for the three months ended June 30, 2003, a 3.2% increase or nearly $17,000 when compared with the selling, general and administrative expenses of $526,703 for the same period in fiscal 2002.  The increase was a result of  $6,000
cost to retain a public relations firm, and a bad debt writeoff of $12,000 for a customer who declared Chapter 7 bankruptcy.

Depreciation and amortization expenses for the three months
ended June 30, 2003 were $42,209, an increase of 6.7% or $2,634 when compared with depreciation and amortization expenses of  $39,575 for the same period in fiscal 2002.  This increase was a result of new capital equipment
purchases.

Interest expense for the three months ended June 30, 2003 was $12,028, a 25% decline from interest of $16,199 for the same period in fiscal 2002.  The decrease in interest was a
result of a decline in total borrowings by over $100,000 from $479,651 at June 30, 2002 to $378,373 at June 30, 2003.  The Company acquired a line of credit in June 2003 and borrowed $109,675 on the line at the end of the month.  Interest
on the line will appear in future periods (See Liquidity and Capital Resources section for details).

As a result of the foregoing factors, the Company had a consolidated net loss of
$27,042 for the three months ended June 30, 2003, compared to a $4,592 consolidated net profit for the same period in 2002.   Because of the decline in sales and an increase in selling, general and administrative expenses as well as other
factors noted herein there can be no assurances that the Company will be profitable in any future period.

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##### Table of Contents

Six Months Ended June 30, 2003 Compared With Six Months Ended June 30,2002

|Consolidated         |  | Increase |          | Percent Change | 
|-------------------- |  | -------- | -------- | -------------- | 
|                     |  |          |          |                | 
|Net Sales            |  | $        | (138,292 | )              | 
|Cost of Sales        |  | $        | (106,746 | )              | 
|Gross Margin         |  |          | 1.6      | %              | 
|Selling, G&A Expense |  | $        | 42,204   |                | 
|                     |  |          |          |                | 
|Deprec. And Amort.   |  | $        | 83       |                | 
|Interest Expense     |  | $        | (11,570  | )              | 

Consolidated net sales for the six months ended June 30, 2003 were $2,273,049 down 5.7% or over $138,000
when compared to sales of $2,411,341 for the same period in fiscal 2002.

Distribution revenues (e.g., revenues generated on our own truck distribution) declined by $100,000 or 7%.  The
decline continued because of a general slowdown in all the territories of the Company as no customers were lost during the first half of the year.  Foodservice was more susceptible to the decline than retail customers.

National revenues (e.g., revenues not derived by mail order and direct truck distribution) declined by $36,000 or 6%.  The decline was caused by a slowdown in a national chain experiencing slower volume in their
retail locations, lower sales volume to a distributor in the southeast and reduced sales at a large foodservice customer in southern California.

Mail order revenues (e.g., revenues generated from
product sold directly to the consumer either through print media or the Internet) increased nearly  $16,000 or 9% for the six months ended June 30, 2003 when compared to the same period in fiscal 2002.  The rise in revenue for mail order
reflects the addition of the companys Cornucopia program, and extension of the mail order business that is designed to provide an avenue for non-profit organizations to raise money by sell in the Companys coffee to the
non-profit s constituency.  This program was established during the third quarter of 2002.  The traditional mail order catalog business was flat for the period while Internet sales were up $17,000 for the six months compared to the
same period last year.  Some of the increase in Internet sales reflects the migration of traditional mail order customers to the Companys website and Internet store.

Sales attributable
to the companys Bakery were down $17,000 for the six months ended June 30, 2003 or 5% when compared to the same period in fiscal 2002.  A lower customer count when compared to last year resulted in the lower volume.

Consolidated cost of sales for the six months ended June 30, 2003 were $1,144,405 down 8.5% or $106,746 when compared to cost of sales of $1,251,151 for the same period in fiscal 2002.  The decrease was a result
of lower sales and a drop in per pound bean costs of 3.5% over the same period last year offset by a rise in workers compensation and medical insurance costs.

Consolidated gross margin
(gross profit as a percentage of net sales) for the six months ended June 30, 2003 was 49.7%, an increase of 3.3% when compared with gross margin of 48.1% for the same period in fiscal 2002.  Improvement in per pound bean cost of 3% offset
somewhat by higher insurance costs resulted in improved gross margins.  There can be no assurances that the Company can maintain the lower raw material costs or that insurance cost will continue to erode margins.

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##### Table of Contents

Consolidated selling, general and administrative expense were $1,087,203 for the six months ended June 30, 2003, a 4 % increase or $42,204 when compared with selling, general
and administrative expenses of $1,044,999 for the same period in fiscal 2002.  The increase is a result of $10,000 cost to retain a public relations firm, a write off of a bad debt of $12,000, a $10,000 increase in workers compensation
insurance and a $10,000 increase in medical insurance.

Depreciation and amortization expenses for the six months ended June 30, 2003 were $82,337 or virtually flat when compared to $82,254 for
depreciation and amortization for the same period last year.

Interest expense for the six months ended June 30, 2003 was $18,870, a 38% decrease or $11,570 when compared to interest expense
of  $30,440 for the same period last year.  This drop was a result of lower borrowings of over $100,000, from $479,651 at June 30, 2002 to $378,373 at June 30, 2003.  The Company acquired a line of credit in June 2003 and borrowed
$109,675 on the line at the end of the month.  Interest on the line will appear in future periods (See Liquidity and Capital Resources section for details).

As a result of the
foregoing factors, the Company had a net loss of $57,147 for the six months ended June 30, 2003 as compared to a consolidated net loss of $11,351 for the same period in 2002.  Because of the decline in sales and an increase in selling, general
and administrative expenses, as well as other factors noted herein, there can be no assurances that the Company will be profitable in any future period.

LIQUIDITY AND CAPITAL
RESOURCES

As of June 30, 2003, the Company has working capital of $171,413 versus working capital of  $181,757 as of June 30, 2002.  The decrease in working capital is due to an
increase in debt initiated in June 2003 by the addition of a working capital line of credit.

Net cash provided by operating activities was $46,631 for the six months ended June 30, 2003 compared
to $123,570 provided by operating activities for the six months ended June 30, 2002.  The decline in net cash provided by operating activities in the first six months of 2003 was the result of a larger loss this year compared to the same period
in fiscal 2002 of $45,000 and higher inventory purchases of $60,000 as the Company was able to buy coffee slightly ahead of previous years during the new crop cycle.

Cash used by investing
activities was  $52,544 for the six months ended June 30, 2003 compared to $59,127 for the same period in 2002. Capital additions for the first six months of 2003 include $10,000 for the Companys website and web store, $20,000 for brewers
and grinders, $10,000 for replacing and upgrading the exterior of the building, $10,000 for decals for trucks and  $3,000 for packaging printing plates.

Net cash earned in financing
activities for the six months ended June 30, 2003 was $27,321 compared to net cash used of $115,167 in financing activities during the same period in 2002. The cash earned during the year was a result of refinancing the Wells Fargo note and the
acquisition of a line of credit during June 2003 and not making any payments on the line of credit (See below and Note 6 of Notes to Financial Statements).

Because of positive cash earned
in financing activities offset by lower cash generated by operating activities and a lower cash balance as of January 1, 2003, cash at June 30, 2003 was $86,582 compared to cash at June 30, 2002 of $48,152.

During June 2003, the Company refinanced its debt with Wells Fargo by securing a term note with Merrill Lynch for $225,000.  This note is payable over four years at 3.3% over the LIBOR (London Interbank Offering Rate)
rate.  At June 30, 2003 the rate was 4.3%.  The new note extended the period of repayment of the Wells Fargo note by two years and reduced the interest rate from 7.25% (3% over the prime rate) to 4.3%.

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##### Table of Contents

The cost of the loan facility was $2,000 that will be amortized over the four year term.  In addition to the term loan, the Company negotiated a line of credit of
$200,000.  This line is renewable annuall, with an interest rate of 3.3% above the LIBOR rate at a cost of $2,000.  At June 30, 2003 the credit line had an outstanding balance of $109,675.  The Companys accounts receivable,
inventory, equipment, fixtures and agreements secure the borrowings.  The Companys majority shareholders have guaranteed $150,000 of the Merrill Lynch debt and the two notes from Chase Manhattan (See Note 6 of Notes to the Financial
Statements and Note 15 Related Party Transactions).

In December of 2000, the majority shareholders loaned the Company $50,000, on an unsecured basis, payable in monthly installments of $1,649, due
in November 2003.  As of June 30, 2003, the principal amount of $8,022 remained outstanding on such loan.  The Company has a loan outstanding for $24,919 at June 30, 2003 payable to the majority shareholders with interest only payments
made monthly.

As of June 30, 2003, the Company had total borrowings of $488,048 including $334,675 owing to Merrill Lynch .  This compares to borrowings of $479,651 as of June 30, 2002
including $328,134 outstanding to Wells fargo at that time.

For long term debt, see Note 6 and Note 12 of the Notes to Financial Statements.  For operating leases, see Note 8 of the Notes to
Financial Statements.   For real estate leases, see Note 11 and Note 12 of the Notes to Financial Statements.

|                        |  |           |           |                    |   |         |  | Payments Due By Period |         |  |   |        
|----------------------- |  | --------- | --------- | ------------------ | - | ------- |  | ---------------------- | ------- |  | - | -------
|Contractual Obligations |  | Total     |           | Less than One year |   |         |  | After 5 years          |        
|1-3 years               |  | 4-5 years |          
|                        |  |           |           |                    |   |         |  |                        |         |  |   |        
|Long Term Debt          |  | $         | 488,048   |                    | $ | 212,971 |  | $                      | 202,431 |  | $ | 72,646 
|Operating Leases        |  |           | 223,491   |                    |   | 63,118  |  |                        | 107,426 |  |   | 39,319 
|Real Estate Leases      |  |           | 915,123   |                    |   | 77,377  |  |                        | 304,676 |  |   | 149,730
|Total Cash Obligations  |  | $         | 1,626,662 |                    | $ | 353,466 |  | $                      | 614,533 |  | $ | 261,695

The Company believes that its existing capital resources and revenues that it anticipates will be
generated from operations will be sufficient to meet its cash requirements for the next 12 months at its current level of operations.

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 finance its working capital needs.  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 materially and adversely affected.

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##### Table of Contents

RELATED PARTY TRANSACTIONS

From time to time, the Company enters into various transactions with its majority
shareholders, Paul and Joan Katzeff.  See note 12  Related Party Transactions in the Notes to the Financial Statements.

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.

Equity Compensation Plan

The only equity compensation plan maintained by the Company is an option granted to a past officer of the Company in fiscal 1997.  This
option expires on December 31, 2003.

Equity Compensation Plan Information

|                                                           |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights |        | Exercise price of outstanding options, warrants and rights |   | Number of securities Remaining available for future issuance under equity compensation Plans | 
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | ------ | ---------------------------------------------------------- | - | -------------------------------------------------------------------------------------------- | 
|                                                           |  |                                                                                             |        |                                                            |   |                                                                                              | 
|Equity compensation Plans approved by Security holders     |  |                                                                                             | 0      |                                                            |   | 0                                                                                            | 
|Equity compensation Plans not approved by Security holders |  |                                                                                             | 16,000 |                                                            | $ | 5                                                                                            | 
|Total                                                      |  |                                                                                             | 16,000 |                                                            | $ | 5                                                                                            | 

See Note 10 and Note 12 of the Notes to Financial Statements.

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##### Table of Contents

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, officer, 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.

CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Companys
management, including the Chief Executive Officer and the President and Chief Financial Officer, of the effectiveness of the design, maintenance, and operation of the Companys disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Companys management, including the Chief Executive Officer and the President and Chief Financial Officer, concluded that the Companys disclosure controls and procedures were
effective. There have been no significant changes in the Companys internal controls or in other factors that could significantly affect internal controls subsequent to their evaluation.

Part II  Other Information

ITEM 1. LEGAL PROCEEDINGS

-None-

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

- None 

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##### Table of Contents

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

- None 

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

At the Companys annual meeting held in Fort Bragg
at 10:00 a.m. on June 23, 2003, the Company submitted for a vote of security holders the reelection of all three members of the board of directors and ratification of Sallman, Yang and Alameda as independent public accountants.  Below is a
summary of the results.

Proposal No.  1: Election of three directors.

|Name         |  | Shares for |         | Against/Withheld |  | Abstain | 
|------------ |  | ---------- | ------- | ---------------- |  | ------- | 
|             |  |            |         |                  |  |         | 
|Paul Katzeff |  |            | 983,900 |                  |  | 0       | 
|Joan Katzeff |  |            | 983,900 |                  |  | 0       | 
|Roy Doughty  |  |            | 983,900 |                  |  | 0       | 

Proposal No. 2:  Ratification of Sallman, Yang and Alameda An Accountancy Corporation, as
Independent Public Accountants for the Company.

|Shares for |  | Against/Withheld |   | Abstain | 
|---------- |  | ---------------- | - | ------- | 
|           |  |                  |   |         | 
|983,600    |  |                  | 0 |         | 

ITEM 5. OTHER INFORMATION

- None 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

| | a. | Exhibits
| | -- | --------
| |    |         
| |    | 10.16   
| |    |         
| |    | 10.17   
| |    |         
| |    | 31.1    
| |    |         
| |    | 31.2    
| |    |         
| |    | 32.1    
| |    |         
| |    | 32.2    

27



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##### Table of Contents

| | b. | Form 8-K
| | -- | --------

No reports on Form 8-K were filed during the period through June 30,
2003

28



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##### Table of Contents

SIGNATURES

In accordance with the requirements 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.

|Name             |  | Title                   |  | Date           
|---------------- |  | ----------------------- |  | ---------------
|                 |  |                         |  |                
|                 |  |                         |  |                
|                 |  |                         |  |                
|/s/ PAUL KATZEFF |  | Chief Executive Officer |  | August 13, 2003
|                 |  |                         |  |                
|Paul Katzeff     |  |                         |  |                
|                 |  |                         |  |                
|/s/ JOAN KATZEFF |  | President               |  | August 13, 2003
|                 |  |                         |  |                
|Joan Katzeff     |  |                         |  |                

29