##### Table of Contents

---

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 September 30, 2002

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(State or other jurisdiction of incorporation or organization)                                  |  | 94-2823626(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 November 8, 2002, there were 1,234,544 shares outstanding of common stock of the issuer.

Transitional Small Business Disclosure Format (check one):

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

---



---

##### 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 September 30, 2002 and 2001                                               | 5  6
|                             |                                                                                                |      
|                             | Statements of Income for the Three and Nine Month Periods Ended September 30, 2002 and 2001    | 7    
|                             |                                                                                                |      
|                             | Statements of Accumulated Deficit for the Nine Month Periods Ended September 30, 2002 and 2001 | 8    
|                             |                                                                                                |      
|                             | Statements of Cash Flows for the Nine Month Periods Ended September 30, 2002 and 2001          | 9    
|                             |                                                                                                |      
|                             | Notes to Financial Statements                                                                  | 10-20
|                             |                                                                                                |      
|Item 2.                      | Managements Discussion and Analysis of Financial Condition and Results of Operations          | 21   
|                             |                                                                                                |      
|                             |                                                                                                |      
|PART II.   OTHER INFORMATION
|                             |                                                                                                |      
|Item 1.                      | Legal Proceedings                                                                              | 25   
|                             |                                                                                                |      
|Item 2.                      | Changes in Securities                                                                          | 25   
|                             |                                                                                                |      
|Item 3.                      | Defaults Upon Senior Securities                                                                | 25   
|                             |                                                                                                |      
|Item 4.                      | Submission of Matters to a Vote of Security-Holders                                            | 25   
|                             |                                                                                                |      
|Item 5.                      | Other Information                                                                              | 25   
|                             |                                                                                                |      
|Item 6.                      | Exhibits and Reports on Form 8-K                                                               | 26   
|                             |                                                                                                |      
|Signatures                   | 27                                                                                            
|                             |                                                                                                |      
|Certifications               | 28-29                                                                                         

2



---

##### Table of Contents



Financial Statements

Thanksgiving Coffee Company, Inc.

For the Three and Nine Month Periods Ended September 30, 2002 and 2001

3



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Unaudited Financial Statements

For the Three and Nine Month Periods Ended September 30, 2002 and 2001

|Reviewed Financial Statements     |   
|--------------------------------- | --
|                                  |   
|Balance Sheets                    | 5 
|Statements of Income              | 7 
|Statements of Accumulated Deficit | 8 
|Statements of Cash Flows          | 9 
|Notes to Financial Statements     | 10

4



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Balance Sheets Unaudited

|                             |                                        | September 30, |          
|---------------------------- | -------------------------------------- | ------------- | ---------
|                             |                                        |               |          
|                             |                                        | 2002          |          
|                             |                                        |               |          
|Assets                       |                                        |               |          
|Current assets               |                                        |               |          
|                             | Cash                                   |               | $        
|                             | Accounts receivable                    |               |          
|                             | Note receivable-Griswold               |               |          
|                             | Employee receivable                    |               |          
|                             | Inventory                              |               |          
|                             | Prepaid expenses                       |               |          
|                             |                                        |               |          
|Total current assets         |                                        |               | 895,255  
|Property and equipment       |                                        |               |          
|                             | Property and equipment                 |               |          
|                             | Accumulated depreciation               |               |          
|                             |                                        |               |          
|Total property and equipment |                                        |               | 548,934  
|Other assets                 |                                        |               |          
|                             | Deposits and other assets              |               |          
|                             | Note receivable-Griswold               |               |          
|                             | Goodwill                               |               |          
|                             | Other intangibles, net of amortization |               |          
|                             | Deferred tax asset                     |               |          
|                             |                                        |               |          
|Total other assets           |                                        |               | 315,011  
|                             |                                        |               |          
|Total assets                 |                                        | $             | 1,759,200
|                             |                                        |               |          

See accompanying notes

5



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Balance Sheets Unaudited

|                                           |                                                                                                  | September 30, |          
|------------------------------------------ | ------------------------------------------------------------------------------------------------ | ------------- | ---------
|                                           |                                                                                                  |               |          
|                                           |                                                                                                  | 2002          |          
|                                           |                                                                                                  |               |          
|Liabilities and shareholders equity       |                                                                                                  |               |          
|Current liabilities                        |                                                                                                  |               |          
|                                           | Accounts payable                                                                                 |               | $        
|                                           | Notes payable-bank, current portion                                                              |               |          
|                                           | Notes payable-other, current portion                                                             |               |          
|                                           | Notes payable-shareholders, current portion                                                      |               |          
|                                           | Capital lease obligations, current portion                                                       |               |          
|                                           | Accrued liabilities                                                                              |               |          
|                                           | Deferred income taxes                                                                            |               |          
|                                           |                                                                                                  |               |          
|Total current liabilities                  |                                                                                                  |               | 645,456  
|Long term debt                             |                                                                                                  |               |          
|                                           | Notes payable-bank                                                                               |               |          
|                                           | Notes payable-other                                                                              |               |          
|                                           | Notes payable-shareholders                                                                       |               |          
|                                           |                                                                                                  |               |          
|Total long term debt                       |                                                                                                  |               | 231,554  
|                                           |                                                                                                  |               |          
|Total liabilities                          |                                                                                                  |               | 877,010  
|Shareholders equity                       |                                                                                                  |               |          
|                                           | Common stock, no par value, 1,960,000 shares authorized, 1,234,544 shares issued and outstanding |               |          
|                                           | Additional paid in capital                                                                       |               |          
|                                           | Accumulated deficit                                                                              |               |          
|                                           |                                                                                                  |               |          
|Total shareholders equity                 |                                                                                                  |               | 882,190  
|                                           |                                                                                                  |               |          
|Total liabilities and shareholders equity |                                                                                                  | $             | 1,759,200
|                                           |                                                                                                  |               |          

See accompanying notes

6



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Statements of Income Unaudited

|                                       |                                              | Three Month Period Ended Sept 30, 2002 |         | Nine Month Period Ended Sept 30, 2002 |   | Three Month Period Ended Sept 30, 2001 |           | Nine Month Period Ended Sept 30, 2001 |        
|-------------------------------------- | -------------------------------------------- | -------------------------------------- | ------- | ------------------------------------- | - | -------------------------------------- | --------- | ------------------------------------- | -------
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Income                                 |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|                                       | Net sales                                    |                                        | $       | 1,269,856                             |   | $                                      | 3,681,219 |                                       | $      
|                                       | Cost of sales                                |                                        |         | 620,802                               |   |                                        | 1,871,953 |                                       |        
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Gross profit                           |                                              |                                        | 649,054 |                                       |   | 1,809,266                              |           |                                       | 632,157
|Operating expenses                     |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|                                       | Selling, general and administrative expenses |                                        |         | 520,194                               |   |                                        | 1,565,193 |                                       |        
|                                       | Depreciation and amortization                |                                        |         | 39,800                                |   |                                        | 122,054   |                                       |        
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Total operating expenses               |                                              |                                        | 559,994 |                                       |   | 1,687,247                              |           |                                       | 536,003
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Operating income                       |                                              |                                        | 89,060  |                                       |   | 122,019                                |           |                                       | 96,154 
|Other income (expense)                 |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|                                       | Interest income                              |                                        |         | 59                                    |   |                                        | 254       |                                       |        
|                                       | Miscellaneous expense                        |                                        |         | 783                                   |   |                                        | (12,482   | )                                     |        
|                                       | (Gain) loss on sale of equipment             |                                        |         | 628                                   |   |                                        | 628       |                                       |        
|                                       | Interest expense                             |                                        |         | (12,898                               | ) |                                        | (43,338   | )                                     |        
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Total other income (expense)           |                                              |                                        | (11,428 | )                                     |   | (54,938                                | )         |                                       | (51,860
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Income (loss) before income taxes      |                                              |                                        | 77,632  |                                       |   | 67,081                                 |           |                                       | 44,294 
|Income tax expense                     |                                              |                                        |        |                                       |   | (800                                   | )         |                                       |       
|Cumulative effect of accounting change |                                              |                                        |        |                                       |   |                                       |           |                                       | (2,013 
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Net income (loss)                      |                                              | $                                      | 77,632  |                                       | $ | 66,281                                 |           | $                                     | 42,281 
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Earnings (loss) per share (basic)      |                                              | $                                      | 0.063   |                                       | $ | 0.054                                  |           | $                                     | 0.034  
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        
|Earnings (loss) per share (dilutive)   |                                              | $                                      | 0.063   |                                       | $ | 0.054                                  |           | $                                     | 0.034  
|                                       |                                              |                                        |         |                                       |   |                                        |           |                                       |        

See accompanying notes

7



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Statements of Accumulated Deficit Unaudited

|                               |  | September 30, |        
|------------------------------ |  | ------------- | -------
|                               |  |               |        
|                               |  | 2002          |        
|                               |  |               |        
|Accumulated deficit, beginning |  | $             | (70,507
|Net income (loss)              |  |               | 66,281 
|                               |  |               |        
|Accumulated deficit, ending    |  | $             | (4,226 
|                               |  |               |        

See accompanying notes

8



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Statements of Cash Flows Unaudited

|                                            |                                                | Nine Month Periods Ended Sept 30, |         
|------------------------------------------- | ---------------------------------------------- | --------------------------------- | --------
|                                            |                                                |                                   |         
|                                            |                                                | 2002                              |         
|                                            |                                                |                                   |         
|Operating activities                        |                                                |                                   |         
|Net income (loss)                           |                                                | $                                 | 66,281  
|Noncash items included in net income (loss) |                                                |                                   |         
|                                            | Depreciation and amortization                  |                                   |         
|                                            | (Gain) loss on disposal of equipment           |                                   |         
|                                            | Cumulative effect of accounting change         |                                   |         
|Changes in operating assets and liabilities |                                                |                                   |         
|                                            | Receivables                                    |                                   |         
|                                            | Employee receivable                            |                                   |         
|                                            | Inventory                                      |                                   |         
|                                            | Prepaid expenses                               |                                   |         
|                                            | Deposits and other assets                      |                                   |         
|                                            | Accounts payable                               |                                   |         
|                                            | Accrued liabilities                            |                                   |         
|                                            |                                                |                                   |         
|Net cash provided by operating activities   |                                                |                                   | 258,961 
|Investing activities                        |                                                |                                   |         
|                                            | Proceeds from sale of equipment                |                                   |         
|                                            | Purchases of property and equipment            |                                   |         
|                                            |                                                |                                   |         
|Net cash used by investing activities       |                                                |                                   | (74,057 
|Financing activities                        |                                                |                                   |         
|                                            | Proceeds from note payable                     |                                   |         
|                                            | Repayments of notes payable and capital leases |                                   |         
|                                            |                                                |                                   |         
|Net cash used by financing activities       |                                                |                                   | (158,570
|Net increase in cash                        |                                                |                                   | 26,334  
|Cash at January 1, 2002 and 2001            |                                                |                                   | 98,876  
|                                            |                                                |                                   |         
|Cash at September 30, 2002 and 2001         |                                                | $                                 | 125,210 
|                                            |                                                |                                   |         

Supplemental disclosure of cash flow information:

Interest paid for the nine month periods ended September 30, 2002 and 2001 was $43,338 and $66,840, respectively.

See accompanying notes

9



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

September 30, 2002

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.

10



---

##### Table of Contents

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 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.

11



---

##### Table of Contents

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 nine month period ended September 30, 2002.

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 September 30, 2002.

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.

12



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

1.          Summary of Significant Accounting Policies (continued)

Reclassifications

Certain amounts in the prior periods financial statements have been reclassified to conform to the current periods presentation.  Such
reclassification had no effect on the reported net income.

2.          Accounts Receivable

Accounts receivable consist of the following:

|Accounts receivable                    |  | $ | 296,185 |  
|-------------------------------------- |  | - | ------- | -
|Less:  Allowance for doubtful accounts |  |   | (6,452  | )
|                                       |  |   |         |  
|Accounts receivable, net               |  | $ | 289,733 |  
|                                       |  |   |         |  

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 September 30, 2002.  Bad debt expense for the nine month period ended September 30, 2002 was $642.  The adjustment to the allowance account for the nine month
period ended September 30, 2002 was $1,607.

3.          Inventory

Inventory consists of the
following:

|Coffee                                                  |           |   |         |        
|------------------------------------------------------- | --------- | - | ------- | -------
|                                                        | Unroasted |   | $       | 134,395
|                                                        | Roasted   |   |         | 107,181
|Tea                                                     |           |   | 14,644  |        
|Packaging, supplies and other merchandise held for sale |           |   | 191,634 |        
|                                                        |           |   |         |        
|Total inventory                                         |           | $ | 447,854 |        
|                                                        |           |   |         |        

13



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

4.          Property and Equipment

Property and equipment consists of the
following:

|Equipment and fixtures       |  | $ | 1,551,693  |  
|---------------------------- |  | - | ---------- | -
|Furniture and equipment      |  |   | 282,166    |  
|Leasehold improvements       |  |   | 410,107    |  
|Transportation equipment     |  |   | 99,921     |  
|Marketing equipment          |  |   | 143,674    |  
|                             |  |   |            |  
|Total property and equipment |  |   | 2,487,561  |  
|Accumulated depreciation     |  |   | (1,938,627 | )
|                             |  |   |            |  
|Property and equipment, net  |  | $ | 548,934    |  
|                             |  |   |            |  

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 nine month period ended September 30, 2002 was
$133,901.

5.          Goodwill and Other Intangible Assets

As part of the adoption of FASB
Statement 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 September 30, 2002.

The change in the carrying value of goodwill during the nine month period ended September 30, 2002 follows:

|Carrying value - beginning of year  |  | $ | 171,773 | 
|----------------------------------- |  | - | ------- | 
|Goodwill acquired                   |  |   |        | 
|Goodwill impairment losses          |  |   |        | 
|                                    |  |   |         | 
|Carrying value  September 30, 2002 |  | $ | 171,773 | 
|                                    |  |   |         | 

Intangible assets subject to amortization consist of the following:

|Leasehold value          |  | $ | 67,000  |  
|------------------------ |  | - | ------- | -
|Trademark                |  |   | 5,127   |  
|Refinance cost           |  |   | 2,500   |  
|                         |  |   |         |  
|Total intangible assets  |  |   | 74,627  |  
|Accumulated amortization |  |   | (29,955 | )
|                         |  |   |         |  
|Intangible assets, net   |  | $ | 44,672  |  
|                         |  |   |         |  

Amortization expense for the nine month period ended September 30, 2002 was $4,135.

14



---

##### Table of Contents

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements
(continued)

|6. | Long Term Debt                                                                                                                                                                                                                                                                                                                                                                                 |  |   |         | 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | 
|   |                                                                                                                                                                                                                                                                                                                                                                                                |  |   |         | 
|   | Notes Payable as of September 30, 2002                                                                                                                                                                                                                                                                                                                                                         |  |   |         | 
|   |                                                                                                                                                                                                                                                                                                                                                                                                |  |   |         | 
|   | Note payable to Wells Fargo Bank, monthly installments of $7,733 plus interest at 3% over prime rate beginning December 15, 2000 (7.75% at September 30, 2002),
final payment is 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. |  | $ | 301,600 | 
|   | 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 including Wells Fargo Bank as described above.                                                                                                       |  |   | 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.                                                                                                                                                                                                  |  |   | 21,505  | 
|   | 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.                                                                                                                                                               |  |   | 55,933  | 
|   | 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.                                                                                                                                                                                                                      |  |   | 7,394   | 

15



---

##### Table of Contents

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.              |  | $ | 9,897    |  
|   | Note payable to majority shareholders, Paul and Joan Katzeff, payable in monthly installments of interest only at 10%, with balance due in lump sum on October 1, 2002,
unsecured. |  |   | 15,000   |  
|   |                                                                                                                                                                                    |  |   |          |  
|   |                                                                                                                                                                                    |  |   | 436,248  |  
|   | Less current portion                                                                                                                                                               |  |   | (204,694 | )
|   |                                                                                                                                                                                    |  |   |          |  
|   | Long term portion of notes payable                                                                                                                                                 |  | $ | 231,554  |  
|   |                                                                                                                                                                                    |  |   |          |  

Interest paid for the nine month period ended September 30, 2002 was $36,617.

As of September 30, 2002, maturities of notes payable are as follows:

|2002                |  | $ | 80,426  | 
|------------------- |  | - | ------- | 
|2003                |  |   | 160,748 | 
|2004                |  |   | 99,081  | 
|2005 and thereafter |  |   | 95,993  | 
|                    |  |   |         | 
|                    |  | $ | 436,248 | 
|                    |  |   |         | 

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

16



---

##### 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 bases of the Companys assets and liabilities.  Deferred tax assets recognized for deductible temporary differences and
loss carryforwards are immaterial for the nine  month period ended September 30, 2002.  Deferred tax liabilities recognized for taxable temporary differences are not material for the nine month period ended September 30, 2002.  The
Company has a federal general business credit carryforward of $14,354 which may be used to offset federal income taxes in the future.  The Company also has a California manufacturers credit carryforward of $27,017, which may be used to
offset California income taxes in the future.

The components of income tax expense for the nine month period ended September 30, 2002 is 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 |        
|------------------------- |  | ------------ | ------ | ------------- | - | ------------------ |  | ----- | -------
|                          |  |              |        |               |   |                    |  |       |        
|2002                      |  | $            | 29,471 |               | $ | 11,419             |  | $     |       
|2003                      |  |              |       |               |   | 11,289             |  |       |       
|2005                      |  |              |       |               |   | 12,067             |  |       |       
|2006                      |  |              |       |               |   | 1,063              |  |       |       
|2012                      |  |              |       |               |   |                   |  |       | 394,334
|2018                      |  |              |       |               |   |                   |  |       | 128,576
|                          |  |              |        |               |   |                    |  |       |        
|                          |  | $            | 29,471 |               | $ | 35,838             |  | $     | 522,910
|                          |  |              |        |               |   |                    |  |       |        

California

|Years ending December 31, |  | Capital Loss |        | Contributions |   | Net Operating Loss |  | Total |       
|------------------------- |  | ------------ | ------ | ------------- | - | ------------------ |  | ----- | ------
|                          |  |              |        |               |   |                    |  |       |       
|2002                      |  | $            | 29,471 |               | $ |                   |  | $     | 28,950
|2003                      |  |              |       |               |   | 10,728             |  |       | 64,341
|2004                      |  |              |       |               |   | 14,863             |  |       |      
|2005                      |  |              |       |               |   | 12,299             |  |       |      
|                          |  |              |        |               |   |                    |  |       |       
|                          |  | $            | 29,471 |               | $ | 37,890             |  | $     | 93,291
|                          |  |              |        |               |   |                    |  |       |       

Income taxes paid for the nine month period ended September 30, 2002 were $800.

17



---

##### 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 noncancellable operating leases with terms ranging from three to five years.

As of September 30, 2002, minimum annual lease payments due under these
agreements are as follows:

|2002                |  | $ | 20,827  | 
|------------------- |  | - | ------- | 
|2003                |  |   | 60,670  | 
|2004                |  |   | 56,689  | 
|2005                |  |   | 55,061  | 
|2006 and thereafter |  |   | 37,622  | 
|                    |  |   |         | 
|                    |  | $ | 230,869 | 
|                    |  |   |         | 

Total operating lease payments were $53,500 for the nine month period ended September 30, 2002.

9.Common Stock

|                                   |  | Number of Shares |           | No Par Value |  
|---------------------------------- |  | ---------------- | --------- | ------------ | -
|                                   |  |                  |           |              |  
|Beginning balance, January 1, 2001 |  |                  | 1,234,544 |              | $
|No activity                        |  |                  |          |              |  
|                                   |  |                  |           |              |  
|Balance, December 31, 2001         |  |                  | 1,234,544 |              |  
|No activity                        |  |                  |          |              |  
|                                   |  |                  |           |              |  
|Ending balance, September 30, 2002 |  |                  | 1,234,544 |              | $
|                                   |  |                  |           |              |  

981,000 shares originally issued are restricted.

18



---

##### 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, 2001            |  |  | 16,000 | 
|--------------------------------------------- |  |  | ------ | 
|Shares expired during the year                |  |  |       | 
|Shares exercised during the year              |  |  |       | 
|                                              |  |  |        | 
|Balance, December 31, 2001                    |  |  | 16,000 | 
|Shares expired during the nine month period   |  |  |       | 
|Shares exercised during the nine month period |  |  |       | 
|                                              |  |  |        | 
|Ending balance, September 30, 2002            |  |  | 16,000 | 
|                                              |  |  |        | 

The related compensation expense for the nine month period ended September 30, 2002 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 and March 31, 2002.  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,
2003.

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 $77,400 for the nine month period ended September 30, 2002.  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 $3,150 as of September 30, 2002.  The lease
term expires on September 30, 2010.

19



---

##### 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 for a one-year period commencing February 1, 2000 at a base rent of $928 per month.  The Company has options to renew the lease for two successive two year renewal periods after the one year term
expires.  The Company exercised an option to renew for a two year term on February 1, 2001.  Pursuant to the terms of the renewal, the base rent was reduced to $907 per month effective as of February 1,2002.

As of September 30, 2002, minimum future rental payments for all leases are as follows:

|2002       |  | $ | 37,970  | 
|---------- |  | - | ------- | 
|2003       |  |   | 141,907 | 
|2004       |  |   | 141,000 | 
|2005       |  |   | 141,000 | 
|2006       |  |   | 141,000 | 
|Thereafter |  |   | 270,750 | 
|           |  |   |         | 
|           |  | $ | 873,627 | 
|           |  |   |         | 

12.          Related Party
Transactions

As of September 30, 2002, the Company has (i) two interest only notes 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 nine month period ended September 30, 2002 are as follows:

|Principal on notes |  | $ | 61,424 | 
|------------------ |  | - | ------ | 
|Interest expense   |  | $ | 7,194  | 
|Rent expense       |  | $ | 77,400 | 

13.          Commitments

In 1996, the Company purchased a bakery from Laoma Yaski for $350,000.  Under the terms
of the purchase agreement, 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 during such
seven year period.

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 various times through December 31, 2003.

20



---

##### 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 September 30, 2002 Compared With Three Months Ended September 30, 2001

|Consolidated                |  | Increase (Decrease) |         | Percent Change | 
|--------------------------- |  | ------------------- | ------- | -------------- | 
|                            |  |                     |         |                | 
|Net Sales                   |  | $                   | (37,516 | )              | 
|Cost of Sales               |  | $                   | (54,413 | )              | 
|Gross Margin                |  |                     | 2.8     | %              | 
|Selling, G&A Expense        |  | $                   | 33,590  |                | 
|Depreciation & Amortization |  | $                   | (9,599  | )              | 
|Interest Expense            |  | $                   | (7,303  | )              | 
|Net Income                  |  | $                   | 33,338  |                | 

Consolidated net sales for the three months ended September 30, 2002 were $1,269,856,
down 2.9% when compared with net sales of $1,307,372 for the same period in fiscal 2001.

Distribution revenues (e.g., revenues generated on our own truck distribution) declined by $58,000 or 7.8% in
the three month period ended September 30, 2002 when compared to the same period in fiscal 2001.  Nearly 75% of the decline was a result of the loss of a customer in one of the territories who began roasting coffee for its own use in the last
quarter of 2001.  The remaining difference is a result of the loss of a second customer in two different territories that changed coffee vendors.

National revenues (e.g., revenues not derived by
mail order and direct truck distribution) increased by $16,000 or 3.2% in the three month period ended September 30, 2002, when compared to same period in fiscal 2001, because of increased business with a large national account.

Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) increased nearly $5,000 or 5.7% in the three month period ending September 30, 2002
when compared to the same period in fiscal 2001.   The increase in revenue for mail order reflects the addition of the Companys grounds for sharing program, an extension of the mail order business which is designed to
provide an avenue for non-profit organizations to raise money by selling the Companys coffee to their constituency.  This business was established during the third quarter of 2002. The traditional mail order catalogue business was down
nearly $12,000 while Internet sales were up $15,000 for the quarter.  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 flat in the three month period ended September 30, 2002 when compared to the same period in fiscal 2001.  A price increase in May 2002 was
offset by slightly lower customer purchases during the summer season.

Consolidated cost of sales for the three months ended September 30, 2002 were $620,802, down 8.1% when compared with the cost of
sales of $675,215 for the same period in fiscal 2001.  This decrease was a result of lower per pound green bean costs and slightly lower overhead costs.

Consolidated gross margin (gross profit
as a percentage of net sales) for the three months ended September 30, 2002 was 51.1%, up 2.8 percentage points when compared with gross margin of 48.4% for the same period in fiscal 2001.  This was a result of lower per pound green bean costs
having dropped from an average of $1.64 per pound during the third quarter of 2001 to an average of $1.44 per pound during the third quarter of 2002 and slightly lower manufacturing burden overhead costs per unit.

21



---

##### Table of Contents

Consolidated selling, general and administrative expenses were $520,194 for the three months ending September 30, 2002, a 6.9% increase when compared with the selling,
general and administrative expenses of $486,604 for the same period in fiscal 2001.  The increase was a result of a $10,000 increase in workers compensation insurance costs, higher health insurance costs of $5,000, lease costs for the new
computer system of $4,000 and the $12,000 cost of the annual meeting and annual reports which were held in the fourth quarter last year versus the third quarter of this year.

Depreciation and amortization expenses for the three months ended September 30, 2002 were $39,800, a decrease of 19.4% when compared with depreciation and amortization expenses of  $49,399 for the same period in fiscal
2001.  This decrease was a result of a reduction in purchases of fixed assets and a change in accounting method for startup and other organization costs that were written off at December 31, 2001, and a change in accounting method for
amortizing goodwill effected January 1, 2002.

Interest expense for the three months ended September 30, 2002 was $12,898 a 36.2% decline from interest of $20,201 for the same period in fiscal
2001.  The decrease in interest was primarily a result of a decline in total borrowings at September 30, 2002 by nearly $232,000 compared to September 30, 2001.

As a result of the foregoing
factors, the Company had a consolidated net profit of  $77,632 for the three months ended September 30, 2002, compared to a $42,281 consolidated net profit for the same period in 2001.   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.

Nine
Months Ended September 30, 2002 Compared With Nine Months Ended September 30, 2001

|Consolidated                |  | Increase (Decrease) |          | Percent Change | 
|--------------------------- |  | ------------------- | -------- | -------------- | 
|                            |  |                     |          |                | 
|Net Sales                   |  | $                   | (131928  | )              | 
|Cost of Sales               |  | $                   | (194,128 | )              | 
|Gross Margin                |  |                     | 3.3      | %              | 
|Selling, G&A Expense        |  | $                   | (2,271   | )              | 
|Depreciation & Amortization |  | $                   | (30,934  | )              | 
|Interest Expense            |  | $                   | (23,502  | )              | 
|Net Income                  |  | $                   | 108,848  |                | 

Consolidated net sales for the nine months ended September 30, 2002 were
$3,681,219, a 3% decline from net sales of $3,813,147 for the same period in fiscal 2001.

Distribution revenues (e.g., revenues generated on our own truck distribution) declined by $133,000, or 6.8%
in the nine months ended September 30, 2002 when compared to the same period in 2001.  Nearly 60% of the decline was a result of a loss of a customer in one of the territories who began roasting coffee for their own use during the fourth
quarter of 2001.  The remaining difference is a result of the loss of a second customer in two different territories that changed coffee vendors.

National revenues (e.g. revenues not derived by
mail order and direct truck distribution) was flat for the nine months ended September 30, 2002 compared to the same period in 2001.

Mail order revenues (e.g., revenues generated from product
sold directly to the consumer either through print media or the Internet) were flat for the nine months ended September 30, 2002 when compared to the same period in 2001.  In the third quarter of 2002, the Company established its grounds
for sharing program through its mail order division to have non-profit organizations raise funds by selling the Companys coffee to their constituency.  The Company generated over $7,000 in new business.  Traditional mail order
catalogue sales were down about $35,000 for the nine months ended while Internet sales were up $45,000 during the same period.  Some of the increase in the Internet sales reflects the migration of traditional customers to the companys
website and Internet store.

Sales attributable to operation of the Companys bakery were up by $10,000 or 2.1% for the first nine months of fiscal 2002 compared to the same period in 2001. 
Half of the increase is due to an acquisition of a new wholesale account in the first quarter of 2002and the remainder is attributable to a price increase of approximately 5% implemented in May 2002, offset by a slight decline in customer purchases
during the summer season.

Consolidated cost of sales for the nine months ended September 30, 2002 were $1,871,953, a 9.4% decline from cost of sales of  $2,066,081 for the same period in fiscal
2001.  This decline was a result of lower per pound green bean costs and slightly lower overhead costs.  Per pound green bean costs dropped to an average of $1.44 in the first nine months of this year from an average of $1.64 for the same
period in 2001 and slightly lower manufacturing burden overhead costs per unit.

22



---

##### Table of Contents

Consolidated gross margin (gross profit as a percentage of net sales) for the nine months ended September 30, 2002 was 49.2% a 3.3 percentage point improvement when compared
with gross margin of 45.8% for the same period in fiscal 2001.  This increase was a result of lower average per pound green bean costs and slightly lower overhead costs.

Consolidated selling,
general and administrative expenses for the nine months ended September 30, 2002 were $1,565,193, a .2% decline from selling, general and administrative expense of $1,567,464 for the same period in 2001.  Lower wages earlier in the year were
offset by health and workers compensation insurance increases, lease costs for the new computer system and the cost of the annual meeting and annual reports recorded in the fourth quarter last year versus the third quarter this year.

Depreciation and amortization expenses for the nine months ended September 30, 2002 were $122,054, a 20.2% decrease from depreciation and amortization expenses of $152,988 for the same period in fiscal
2001.  This decline was a result of fewer capital expenditures, the change of accounting method for startup and other organization costs that were written off at December 31, 2001and a change in accounting method for amortizing goodwill
effected January 1, 2002.

Interest expenses for the nine months ended September 30,2002 were $43,338 a decrease of 35.2% from interest expenses of $66,840 for the same period in fiscal 2001. 
This was primarily a result of a decrease in total borrowings at September 30, 2002 by $232,000 compared to June 30, 2001.

As a consequence of the foregoing factors, the Company incurred a
consolidated net profit of  $67,391 for the nine months ended September 30, 2002, compared with a consolidated net loss of $42,567 for the nine months ended September 30, 2001.  There can be no assurances that the Company will be
profitable in any future period.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2002, the Company has working capital of $249,799 versus
a working capital of  $147,862 as of June 30, 2001.  This increase in working capital is due to a reduction in bank debt and lease obligations offset in part by lower receivables.

Net cash
provided by operating activities was $258,961 for the nine months ended September 30, 2002 compared to $254,406 provided by operating activities for the nine months ended September 30, 2001.  The slight improvement in net cash provided by
operating activities in the first nine months of 2002 was the result of a profit for the nine months of 2002 versus a loss for the same period in 2001 offset by an increase in inventory, as well as lower depreciation and amortization.

Cash used by investing activities was  $74,057 for the nine months ending September 30, 2002 compared to $72,869 for the same period in 2001. Capital additions for the first nine months of 2002 include
$30,000 for the Companys website and webstore, $10,000 for new equipment for the bakery, $15,000 for graphics for the trucks and vans, $15,000 for replacement of equipment in the coffee company and $5,000 for new computer programs.

Net cash used in financing activities for the nine months ended September 30, 2002 was $158,570 compared to $96,575 during the same period in 2001. The increase in cash used in financing activities in the nine
months ended September 30, 2002 was the result of slightly higher repayments of debt including repayment of most of the new debt provided by the majority shareholders in fiscal 2001.

Because of
higher debt repayment and the fact that no additional sources of capital were obtained, the net change in cash at September 30, 2002 was $26,334 compared to an increase in cash in 2001 of $84,692.  Cash at September 30 of both years was
basically flat.

At September 30, 2002, the Company had total borrowings of $436,238, including $301,600 owing to Wells Fargo Bank.  This compares to total borrowings of $667,980 as of September
30, 2001, including $412,734 outstanding to Wells Fargo at that time.  The Companys accounts receivable, inventory, equipment, fixtures and improvements secure the borrowings.  These borrowings are guaranteed by the Companys
majority shareholders.

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
September 30, 2002, the principal amount of $21,505 remained outstanding on such loan.  In April 2001, the majority shareholders loaned the Company $60,000, due October 1, 2001 in a lump sum.  Subsequent to September 30, 2001, the Company
made a payment to the majority shareholders of $30,000 on the $60,000 note including accrued interest thereon and refinanced the remaining $30,000 such that it became due on April 1, 2002 in a lump sum.  On April 1, 2002, the Company paid
$15,000 of the $30,000 note including accrued interest thereon and refinanced the remaining $15,000 such that it becomes due on October 1, 2002, in a lump sum.  Subsequent to the September 30, 2002 balance sheet date, the Company paid the
remaining $15,000 on the note in a lump sum including accrued interest thereon.

23



---

##### Table of Contents

A summary of the Companys principal contractual obligations and other commitments as of September 30, 2002 is shown in the following table:

|                        |  | Payments Due By Period |          
|----------------------- |  | ---------------------- | ---------
|                        |  |                        |          
|Contractual Obligations |  | Total                  |          
|                        |  |                        |          
|Long Term Debt          |  | $                      | 461,188  
|Operating Leases        |  |                        | 230,869  
|Real Estate Leases      |  |                        | 873,627  
|Total Cash Obligations  |  | $                      | 1,565,684

For long term debt, see Note 6 and Note 13 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 of the Notes to Financial Statements.

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.

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.

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.

24



---

##### Table of Contents

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 within 90 days before the filing date of
this quarterly 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

-Not Applicable-

ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS

- Not Applicable 

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

- Not Applicable 

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

- Not Applicable 

ITEM 5.
OTHER INFORMATION

- Not Applicable 

25



---

##### Table of Contents

ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K

| | a. | Exhibits
| | -- | --------
| |    |         
| |    | 99.1.   
| |    |         
| |    | 99.2.   
| |    |         
| | b. | Form 8-K

No reports on Form 8-K were filed during the period from March 31, 2002 to September 30,
2002

26



---

##### 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 |  | November 12, 2002 | 
|                 |  |                         |  |                   | 
|Paul Katzeff     |  |                         |  |                   | 
|                 |  |                         |  |                   | 
|/s/ JOAN KATZEFF |  | President               |  | November 12, 2002 | 
|                 |  |                         |  |                   | 
|Joan Katzeff     |  |                         |  |                   | 

27



---

##### Table of Contents

CERTIFICATIONS

I, Paul Katzeff, certify that:1. I have reviewed this quarterly report on Form 10-QSB of Thanksgiving Coffee Company,
Inc.;2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly report is being prepared;b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date
within 90 days prior to the filing date of this quarterly report (the Evaluation Date); andc) presented in this quarterly report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; andb) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and6. The
registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

|Date: | November 12, 2002                     | 
|----- | ------------------------------------- | 
|      |                                       | 
|      |                                       | 
|By:   | /s/ PAUL KATZEFF                      | 
|      |                                       | 
|      | Paul Katzeff, Chief Executive Officer | 

28



---

##### Table of Contents

CERTIFICATIONS

I, Joan Katzeff, certify that:1. I have
reviewed this quarterly report on Form 10-QSB of Thanksgiving Coffee Company, Inc.;2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:a) designed such disclosure controls and procedures to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;b)
evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); andc) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;5. The
registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent
functions):a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial
data and have identified for the registrants auditors any material weaknesses in internal controls; andb) any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrants internal controls; and6. The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.

|Date: | November 12, 2002                                   | 
|----- | --------------------------------------------------- | 
|      |                                                     | 
|      |                                                     | 
|By:   | /s/ JOAN KATZEFF                                    | 
|      |                                                     | 
|      | Joan Katzeff, President and Chief Financial Officer | 

29