<PAGE>

                    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 March 31, 2001

                                      OR

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

                      THE SECURITIES EXCHANGE ACT OF 1934


           For the transition period from ___________ to ___________

                       Commission File No. 33-960-70-LA


                       THANKSGIVING COFFEE COMPANY, INC.

                     (Exact name of small business issuer
                         as specified in its charter)


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

                                                    19100 South Harbor Drive
                                                    Fort Bragg, California 95437

                                        (Address of principal executive 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 \ \


     As of May 8, 2001, there were 1,234,544 shares outstanding of common stock
     of the issuer.

     Transitional Small Business Disclosure Format (check one):

                     Yes \ \                        No \X\

                                                                               1
<PAGE>

                       THANKSGIVING COFFEE COMPANY, INC.


                                     INDEX

<TABLE>
<S>                                                                                                           <C>
PART I.   FINANCIAL INFORMATION


Item 1. Financial Statements, Notes and Report of Independent Accountants................................         5

Balance Sheet at March 31, 2001 and March 31, 2000.......................................................       6-7


   Statements of Income for the Three Months Ended March 31, 2001 and
   March 31, 2000........................................................................................         8


   Statements of Cash Flows for the Three Months Ended March 31, 2001 &
   March 31, 2000........................................................................................        10


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................................................        22


PART II.  OTHER INFORMATION


Item 1. Legal Proceedings................................................................................        24

Item 2. Changes in Securities............................................................................        24

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.................................................................        25
</TABLE>

                                                                               2
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                          For the Three Month Periods
                         Ended March 31, 2001 and 2000
                    With Report of Independent Accountants

                                                                               3
<PAGE>

                       Thanksgiving Coffee Company, Inc.



                                    Report

Report of Independent Accountants.............................      5

                         Reviewed Financial Statements

Thanksgiving Coffee Company, Inc.
Balance Sheet.................................................    6-7
Statement of Income...........................................      8
Statement of Accumulated Deficit..............................      9
Statement of Cash Flows.......................................     10
Notes to Financial Statements.................................     11

                                                                               4
<PAGE>

                       Report of Independent Accountants


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


We have reviewed the accompanying balance sheet of Thanksgiving Coffee Company,
Inc., as of March 31, 2001 and March 31, 2000, and the related statements of
income, accumulated deficit and cash flows for the three month periods then
ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants.  All
information included in these financial statements is the representation of the
management of Thanksgiving Coffee Company, Inc.

A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data.  It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole.  Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.


SALLMANN, YANG & ALAMEDA
An Accountancy Corporation



Kathleen M. Alameda
Certified Public Accountant



May 6, 2001

                                                                               5
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                                 Balance Sheet


                                                   March 31
                                             2001          2000
                                             ------------------
Assets
Current assets
 Cash and cash equivalents               $    76,266        67,493
 Accounts Receivable (2)                     341,895       363,776
 Note receivable-Griswold                     10,000        10,000
 Employee Receivable                             648           921
 Inventory (3)                               462,061       511,068
 Prepaid expenses                             68,516        70,601
                                         -------------------------
Total current assets                         959,386     1,023,859

Property and equipment
 Property and equipment (4)                2,358,741     2,248,457
 Accumulated depreciation                 (1,663,747)   (1,450,059)
                                         -------------------------
Total property and equipment                 694,994       798,398

Other assets
 Deposits and other assets                    48,236        45,000
 Note receivable-Griswold (12)                 2,001        12,028
 Intangibles, net of amortization (5)        232,195       246,692
 Deferred tax asset                            7,836        28,001
                                         -------------------------
Total other assets                           290,268       331,721
                                         -------------------------

Total assets                             $ 1,944,648   $ 2,153,978
                                         =========================

See accompanying notes and accountants' report.

                                                                               6
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                                 Balance Sheet

<TABLE>
<CAPTION>
                                                                      March 31
                                                                 2001         2000
                                                                 -----------------
<S>                                                          <C>           <C>
Liabilities and stockholders' equity

Current liabilities
  Accounts payable                                           $  501,046     426,697
  Accrued liabilities                                            76,082      66,254
  Notes payable-banks, current portion                          112,800      80,163
  Notes payable-other, current portion                           46,329      37,063
  Notes payable-shareholder, current portion                     40,298      24,919
  Deferred income taxes                                          10,288         370
  Capital lease obligations, current portion                     25,914      59,075
                                                             ----------------------
    Total current liabilities                                   812,757     694,541

Long term debt
  Notes payable-banks (6)                                       356,334     499,615
  Notes payable-other (6)                                        98,160     118,928
  Notes payable-shareholder (6)                                  29,876           0
  Capital lease obligations                                           0      37,868
                                                             ----------------------
    Total long term liabilities                                 484,370     656,411

Total liabilities                                             1,297,127   1,350,952

Stockholders' equity
 Common stock, no par value, 1,960,000 shares authorized,
 1,237,384 shares issued, 1,234,544 shares outstanding          861,816     861,816
 Additional paid in capital                                      24,600      24,600
 Accumulated deficit                                           (238,895)    (83,390)
                                                             ----------------------
Total stockholders' equity                                      647,521     803,026

Total liabilities and stockholders' equity                   $1,944,648   2,153,978
                                                             ======================
</TABLE>

See accompanying notes and accountants' report.

                                                                               7
<PAGE>

                       Thanksgiving Coffee Company, Inc.
                              Statement of Income

<TABLE>
<CAPTION>
                                                      Three months         Three months
                                                      ended                ended
                                                      March 31, 2001       March 31, 2000
                                                      --------------       --------------
<S>                                                   <C>                  <C>
Net Sales                                               $1,221,434           $1,294,702

Cost of sales                                              700,222              670,482
                                                        ----------           ----------

Gross Profit                                               521,212              624,220

Operating expenses
     Selling, general, and administrative expenses         532,937              534,136
     Depreciation and amortization                          52,178               50,925
                                                        ----------           ----------
Total operating expenses                                   585,115              585,061

Operating income (Loss)                                    (63,903)              39,159

Other income (expense)
     Interest income                                           728                  690
     Interest (expense)                                    (27,445)             (28,985)
     Miscellaneous income (expense)                         31,883                  171
Total other income (expense)                                 5,166              (28,124)

Profit (Loss) before income taxes                          (58,737)              11,035

Income tax expense                                            (800)                (800)
                                                        ----------           ----------

Net income (loss)                                       $  (59,537)          $   10,235
                                                        ==========           ==========

Earnings per common share - basic                       $   (0.048)          $    0.008

Earnings per common share -  dilutive                   $   (0.048)          $    0.008
</TABLE>


See accompanying notes and accountants' reports.

                                                                               8
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                       Statement of Accumulated Deficit

                                                            March 31
                                                        2001       2000

Accumulated deficit, beginning, December 31, 2000    $(179,358)  (93,625)
Net income, three months ended March 31, 2001          (59,537)   10,235
                                                     ---------   -------
Accumulated deficit, March 31, 2001                  $(238,895)  (83,390)
                                                     ===================


See accompanying notes and accountants' report.

                                                                               9
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                            Statement of Cash Flows



                For the Three Month Period Ended March 31, 2001


Operating activities                                       2001       2000

Net income (loss)                                       $(59,537)    10,235
     Depreciation and amortization                        58,351     56,557
     Receivables                                          39,230     31,332
     Inventories                                          41,807    (23,789)
     Prepaid expenses                                        (25)   (13,451)
     Deposits and other assets                            (6,181)    (2,660)
     Accounts payable                                      8,508     19,774
     Accrued liabilities                                  29,776     24,489
                                                        --------   --------
    Net cash provided by operating activities            111,929    102,487

Investing activities
     Purchases of equipment                              (22,716)   (30,381)
     Purchase of intangibles assets                            0          0
                                                        --------   --------

Net cash used by investing activities                    (22,716)   (30,381)

Financing activities
     Repayments of notes payable and capital leases      (54,842)   (45,769)
                                                        --------   --------
Net cash used by financing activities                   $(54,842)   (45,769)

Net increase in cash                                    $ 34,371     26,337
Cash at December 31, 2000                                 41,895     41,156
                                                        --------   --------
Cash at March 31, 2001                                  $ 76,266   $ 67,493
                                                        ========   ========



See accompanying notes and accountants' report.

                                                                              10
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                         Notes to Financial Statements



                                March 31, 2001


1. Summary of Significant Accounting Policies

Description of Business

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

Concentration of Credit Risk

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

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.

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

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

                                                                              11
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                   Notes to Financial Statements (continued)


1. Summary of Significant Accounting Policies (continued)

Property and Equipment (continued)

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

Trademarks and Tradenames

Trademarks and tradenames are being amortized on a straight-line basis over
forty (40) years. Total amortization expense for the three month period ended
March 31, 2001 is $32.

Investments in Consolidated Companies

On November 1, 1997, the Company sold its subsidiary Sustainable Harvest, Inc.
The Company has a note receivable from the purchaser of Sustainable Harvest
reflected on the books as a result of the sale, with a principal balance of
$12,001 as of March 31, 2001.

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

Profit Sharing Plan

The Company has a profit sharing plan covering substantially all of its
employees. Benefits are based upon years of service and the employee's
compensation during the employment period. No contributions to the profit
sharing plan were made for the three month period ended March 31, 2001.

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 stockholders' equity. Realized gains and losses are a
component of costs of goods sold. The Company does not have any futures or
options contracts in effect at this time.

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.

                                                                              12
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                   Notes to Financial Statements (continued)



1. Summary of Significant Accounting Policies (continued)

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.


2. Accounts Receivable

Accounts receivable consist of the following:

   Accounts receivable                        $   350,133
   Less: Allowance for doubtful accounts           (8,238)
                                              -----------
   Accounts receivable, net                   $   341,895
                                              ===========

The Company uses the allowance method for uncollectible accounts. The allowance
for doubtful accounts is estimated at approximately 1% of total non-cash sales.
Bad debt expense for the three months ended March 31, 2001 was $1,000. The
adjustments to the allowance account for the three months ended March 31, 2001
was $3,198.


3. Inventory

Inventory consists of the following:

   Coffee
    Unroasted                                               $146,989
    Roasted                                                   96,623
   Tea                                                        19,651
   Packaging, supplies and other merchandise held for sale   198,798
                                                            --------
   Total inventory                                          $462,061
                                                            ========

                                                                              13
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                   Notes to Financial Statements (continued)




4. Property and Equipment

Property and equipment consists of the following:


   Equipment and fixtures                $ 1,215,811
   Furniture and equipment                   279,562
   Leasehold improvements                    394,570
   Transportation equipment                   89,302
   Marketing equipment                        76,429
   Property held under capital leases        303,067
                                         -----------
   Total property and equipment            2,358,741
   Accumulated depreciation               (1,663,747)
                                         -----------
   Property and equipment, net           $   694,994
                                         ===========


Marketing equipment includes costs to develop 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 three months ended March 31, 2001 was $54,015.


5. Intangible Assets

Intangible assets represent the costs associated with the acquired divisions
over the fair value of their net assets at date of acquisition.  The detail of
the intangible assets are as follows:



   Goodwill                                               $198,000
   Leasehold value                                          67,000
   Start-up costs                                           34,882
   Organizational costs                                     28,565
   Refinancing                                               2,500
   Trademark                                                 5,127
                                                          --------
   Total intangible assets                                 336,074
   Accumulated amortization - goodwill                     (22,420)
   Accumulated amortization - other intangible assets      (81,459)
                                                          --------
   Intangible assets, net                                 $232,195
                                                          ========


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

Amortization expense for the three months ended March 31, 2001 was $4,336.

                                                                              14
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                   Notes to Financial Statements (continued)



6. Long Term Debt

Notes Payable as of March 31, 2001

<TABLE>
<S>                                                                                                     <C>
Note payable to Wells Fargo Bank, monthly installments of $7,733 plus interest
at 3.00% over prime rate beginning December 15, 2000, (12.50% at December 31,
2000), final payment is due on January 15, 2005.  The note is collateralized by
a security interest of first priority in all accounts receivable, inventory,
equipment, instruments, general intangibles and contract rights.                                        $440,800

Note payable to Wells Fargo Bank, payable in monthly installments of $1,667 plus
interest at 1% over prime rate (10.50% at December 31, 2000) final payment is
due on August 15, 2002.  The note is secured by all accounts receivable,
inventory, equipment, fixtures and improvements.                                                          28,334

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.  Deferred interest is $3,780 at
March 31, 2001.                                                                                           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.                                                                             45,254

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 in November 14, 2003.                                     118,928

Note payable to Chase Manhattan Bank, payable in monthly installments of $324,
including interest at 8.637%, secured by a vehicle, final payment due in October
2004.                                                                                                     11,954

Note payable to Chase Manhattan Bank, payable in monthly installments of $304,
including interest at 8.637% secured by a vehicle, final payment due on November
16, 2005.                                                                                                 13,607
</TABLE>

                                                                              15
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                   Notes to Financial Statements (continued)


6. Long Term Debt (continued)


Obligations Under Capital Lease as of March 31,2001

<TABLE>
<S>                                                                                              <C>
Note payable to Granite Financial, payable in monthly installments of $1,139,
including interest at 17.607%, secured by equipment, final payment due in June
2001.                                                                                           $    3,319

Note payable to First Sierra Computer Equipment, payable in monthly installments
of $1,297, including interest at 14.00%, secured by equipment, final payment due
in February 26, 2002.                                                                               13,323

Note payable to Security Financial, payable in monthly installments of $910,
including interest at 15.529%, secured by equipment, final payment due in
February 22, 2002.                                                                                   9,273


Note payable to Centerpoint, payable in monthly installments of $517, including
interest at 19.225%, secured by equipment, final payment due in March 2001.                              0

                                                                                                ----------

Subtotal                                                                                           709,711

Less current portion                                                                              (225,341)
                                                                                                ----------
Long term portion of notes payable and capital leases                                           $  484,370
                                                                                                ==========
</TABLE>


                                                                              16
<PAGE>

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

Interest paid for the three months ended March 31, 2001 is $24,935.

Maturities of notes payable and capital leases are as follows:

<TABLE>
<S>                                                   <C>
   2001                                               $     181,777
   2002                                                     172,110
   2003                                                     160,749
   2004                                                      99,081
   2005                                                      95,994
   Thereafter                                                     -
                                                      $     709,711
                                                      =============
</TABLE>

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

                                                                              17
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                   Notes to Financial Statements (continued)




7. Income Taxes

The current provision for income taxes the the three months ended March 31, 2001
was $800 due to for current state 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 carryforward are
immaterial for the three months ended March 31, 2001.  Deferred tax liabilities
recognized for taxable temporary differences are not material for the three
month period ended March 31, 2001.  The company has a federal general business
credit carryforward of $2,400 which may be used to offset federal income taxes
in the future.  The Company also has a California manufacturer's credit
carryforward of $25,125 which may be used to offset California income taxes in
the future.

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

<TABLE>
<CAPTION>
Federal
     Years ending                  Capital                                              Net Operating
     December 31                    Loss                 Contributions                           Loss            Total
     -----------                    ----                 -------------                  -------------        ---------
     <S>                          <C>                    <C>                            <C>                  <C>
       2001                                                      9,029                              -            9,029
       2002                       29,471                        11,419                              -           40,890
       2003                                                     11,289                              -           11,289
       2005                                                      6,898                                           6,898
       2012                                                          -                        548,204          548,204
       2013                                                          -                        128,576          128,576

                                 $29,471                      $ 38,635                       $676,780        $ 744,886
                                 =======                      ========                       ========        =========

California
      Years ending               Capital
      December 31                Loss                    Contributions             Net Operating Loss            Total
     ---------------             ----                         --------             ------------------            -----
       2002                      $29,471                      $  1,091                       $204,716         $235,278
       2003                            0                        11,289                         64,341           75,630
       2004                            0                        14,863                              0           14,863
       2005                            0                         6,966                              0            6,996

                                 $29,471                      $ 34,209                       $269,057         $332,737
                                 =======                      ========                       ========         ========
</TABLE>

Income taxes paid for the three months ended March 31, 2001 was $0.

                                                                              18
<PAGE>

                       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.

Minimum annual lease payments due under these agreements are as follows:


   2001                                                            $ 62,336
   2002                                                              22,989
   2003                                                               9,605
   2004 and thereafter                                                4,710

                                                                   $ 88,143
                                                                   ========

Total operating lease payments were $24,152 for the three months ended March 31,
2001.


9. Common Stock

<TABLE>
<CAPTION>
                                                              Number of
                                                                Shares           Value
                                                              ---------      ---------
   <S>                                                       <C>            <C>
   Balance, December 31, 1997                                1,236,744      $  872,816
   No activity                                                       0               0
   Balance, December 31, 1998                                1,236,744         872,816
   Repurchase of stock                                          (2,200)        (11,000)
   Balance, December 31, 1999                                1,234,544         861,816
   No activity                                                       0               0
   Balance, December 31, 2000                                1,234,544         861,816
   No activity                                                       0               0
   Balance, March 31, 2001                                   1,234,544      $  861,816
                                                             =========      ==========
 </TABLE>

981,000 shares originally issued are restricted.

                                                                              19
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                   Notes to Financial Statements (continued)



10.  Long Term Lease

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 and March 31,
2001.  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, 2002.

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 is $25,800 for the three month period ended
March 31, 2001.  The Company has made substantial leasehold improvements (Note
4, above) 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
provides for monthly rental payments of $3,000 (beginning July 1, 1999) and the
lease term expires in September 30, 2010.

Minimum future rental payments for all leases are as follows:

     2001                                                    $ 27,000
     2002                                                      36,000
     2003                                                      36,000
     2004                                                      36,000
     2005                                                      36,000
     Thereafter                                               171,000
                                                             $306,000

11.  Related Party Transactions

At March 31, 2001, the Company has an interest only note payable due on demand
and a principal and interest note payable to Paul and Joan Katzeff (the
Company's majority shareholders) (See Note 6, above).  The Company also leases
properties from its majority shareholders (See Note 10, above).  The cost of
these related party transactions for the three months ended March 31, 2001 was
$810 in interest expense and $25,800 for rent expense.


12.  Commitments

Under the terms of an agreement with a former subsidiary sold in 1997 (see Note
1), the Company is required to purchase  a minimum amount of coffee beans each
year for five years (ending December 31, 2002) at a predetermined price per
pound over landed coffee costs.  If the coffee beans are not purchased, the
former subsidiary can defer its notes receivable payments to the Company into
subsequent years pursuant to the agreement.

In 1996, the Company purchased a bakery from Laoma Yaski for $350,000.  Under
the terms of the purchase, 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.

                                                                              20
<PAGE>

                       Thanksgiving Coffee Company, Inc.

                   Notes to Financial Statements (continued)



13.  Contingent Liabilities

The Company is engaged in a proceeding regarding its pending trademark
application for the mark Royal Gold.  The matter is currently before the U. S.
Trademark Trial and Appeal Board and the Administrative Law Court. The ultimate
outcome of this matter and the effect of an adverse result cannot be determined
at this time.


15.  Other Matters

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

                                                                              21
<PAGE>

                       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, trends in the
operations of the Company.  Any such statements should be considered in light of
various risks and uncertainties that could cause results to differ materially
from expectations, estimates or forecasts expressed.  The various risks and
uncertainties include, but are not limited to: changes in general economic
conditions, changes in business conditions in the coffee industry, fluctuations
in consumer demand for coffee products and in the availability and costs of
green beans, increased competition within the Company's businesses, variances
from budgeted sales mix and growth rate, consumer acceptance of the Company's
new products, inability to secure adequate capital to fund its operating
expenses and working capital requirements, inability to hire, train and retain
qualified personnel, concentration of production and sales in Northern
California, the loss of one or more major customers, inability to successfully
implement its business plan, natural disasters, civil unrest in countries which
produce coffee and tea, weather and other risks identified herein.  Readers are
cautioned not to place undue reliance on these forward-looking statements which
speak only as of the date of this 10-QSB.


Three Months Ended March 31, 2001 Compared With Three Months Ended March 31,
2000

        Consolidated                      Increase (Decrease)  Percent Change
        ------------                      -------------------  ---------------

        Net Sales                             $(73,268)              (6)%
        Cost of Sales                         $ 29,740                4
        Gross Margin                              (5.5)%            (11)
        Selling, G&A Expense                  $( 1,199)               -
        Depreciation & Amortization           $  1,253                3
        Interest Expense                      $ (1,540)               5
        Net Income                            $(69,772)               -

Consolidated net sales for the three months ended March 31, 2001 were
$1,221,434, down 6% when compared with net sales of $1,294,702 for the same
period in fiscal 2000.

Distribution revenues (e.g., revenues generated on our own truck distribution)
declined by $45,000 or 6% in the three month period ended March 31, 2001 when
compared to the same period in fiscal 2000.  Nearly half of this loss is a
result of a loss in business due to attrition in a territory where a salesman
had not been replaced and the remainder of this decline is due to a loss of the
Marriott Food Service business in several accounts in the San Francisco Bay
Area.  In an effort to reverse this trend, during April 2001, the company added
a driver/salesperson in the territory where the salesperson was not replaced.
There can be no assurance that this new hire will be able to improve revenues in
the territory.  National revenues (e.g., revenues not derived by mail order and
direct truck distribution) declined by approximately $17,000 or 5.6% in the
three month period ended March 31, 2001 when compared to same period fiscal 2000
because of a loss of two customers who transferred their business to local
roasters partially offset by increased sales of the Song Bird line.

Mail order revenues (e.g., revenues generated from product sold directly to the
consumer either through print media or the internet) declined nearly $6,000 or
5.6% in the three month period ending March 31, 2001 when compared to the same
period in fiscal 2000.  The decrease in revenue for mail order reflects the
lack of spending on new mailings to grow the mailing list and attrition of the
current list, offset by increased Internet sales of $8,000 (representing nearly
a 40% increase over the same period in Fiscal 2000).  With respect to its mail
order business, the Company has shifted its emphasis to Internet sales and
increased its expenditures for development of its Internet site and store.

Sales attributable to operations of the Company's bakery dropped by 4%, or
nearly $6,000, in the three months ended March 31, 2001 over the same period in
2000, reflecting a one week closing to perform needed repairs and painting of
the building not performed in fiscal 2000.

                                                                              22
<PAGE>

Consolidated cost of sales increased to $700,222 for the three months ended
March 31, 2001 up nearly 4% over the same period in 2000 from $670,482.  This
increase was a result of higher labor and benefit costs in the production
department, utility costs (primarily the cost of propane used in the roasting
process) and depreciation and discounts.

Consolidated gross margin (gross profit as a percentage of net sales) decreased
to 42.7% for the three months ending March 31, 2001, from 48.2% for the same
period in 2000. This decline was a result of higher labor and benefit costs
coupled with higher packaging and utility costs and discounts. In an effort to
recover some of these higher costs, the Company implemented a price increase in
April, 2001 of $.10 per package and $.15 per pound for bulk sales. However, the
Company cannot be sure that the price increase will result in improved gross
margins or that the higher prices will not decrease volume further.

Consolidated selling, general and administrative expenses were $532,937 for the
three months ending March 31, 2001, a .2% decrease over the $534,136 for the
same three months in 2000. This decrease in selling, general and administrative
expenses was due primarily to lower staffing expenses because of a reduction in
delivery and administrative positions.

Depreciation and amortization expenses were $52,178 for the three months ended
March 31, 2000 a $1,253 increase or 2.5% over expenses of $50,925 for the same
period in 2000.  Increases in depreciation accounted for the entire increase
because of additions capitalized during last year.

Interest expense decreased to $27,445 for the three months ended March 31, 2001
a 5.3% decline from the $28,985 for the same period in fiscal 2000.  This was a
result of a decline in total borrowings at March 31, 2001 of nearly $100,000
compared to the same period in 2000.

As a result of the foregoing factors, the Company had a consolidated net loss of
$59,537 for the three months ended March 31, 2001, compared to a $10,235 profit
for the same period in 2000.  Because of the decline in sales and the increased
cost of utilities, labor and packaging, there can be no assurances that the
Company will be profitable in any future period.


LIQUIDITY AND CAPITAL RESOURCES


As of March 31, 2001, the Company has working capital of $146,629 versus working
capital of $329,318 for the same period last year.  This decrease in working
capital is a result of an increase in accounts payable and higher current
portion of notes payable to banks compared to last year.  These increases were
somewhat offset by lower inventories, and receivables.  The refinancing of the
Wells Fargo balloon note in December 2000 resulted in a higher current portion
of debt than last year.

Net cash provided by operating activities was $111,929 for the three months
ended March 31, 2001 compared to $102,487 provided by operating activities for
the three months ended March 31, 2000.  The increase in net cash provided by
operating activities in the quarter was primarily due to a decrease in
receivables and inventory.  A load of green beans scheduled to arrive did not
arrive until after March 31, 2001 resulting in an increase in cash for the
quarter.

Cash used by investing activities was down by approximately $8,000.  Lower
capital additions compared to last year resulted in this decline.  Capital
additions for this year are $10,000 for the company's web site, $5,000 for
fixtures and brewing equipment, $3,500 for a recycle station and $3,500 for a
new transmission for a delivery vehicle.

Net cash used in financing activities for the three months ended March 31, 2001
was $54,842 compared to a net repayment of debt of $45,769 during the same
period in 2000.  This increase was a result of refinancing the note payable to
Wells Fargo in December of 2000.  The debt was originally amortized over eight
years while the new amortization schedule is over five years.

The Company maintained a revolving line of credit of up to $650,000 with Wells
Fargo in fiscal 1998.  In January, 1999, this agreement was renegotiated and
replaced with a two year note payable in the principal amount of $601,636 and a
final balloon payment of $484,651 due and payable January 15, 2001.  The balloon
payment was refinanced in December 2000 with a five year term note with interest
at 3% over prime rate (12% at December 31, 2000).  The loan terms contain
certain limitations and covenant restrictions, including limits on the
incurrence of additional indebtedness.

At March 31, 2001, the Company had total borrowings of $709,711, including
$469,134 outstanding to Wells Fargo Bank.  This compares to total borrowings of
$857,631 as of March 31, 2000, including $579,779 outstanding to Wells Fargo at
that time.  The Company's accounts receivable, inventory, equipment, fixtures
and improvements secure the borrowings.

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.

                                                                              23
<PAGE>

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 immediate 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.



SEASONALITY AND OTHER FACTORS AFFECTING PERFORMANCE


The Company's business is seasonal in nature.  The seasonal availability of
green bean coffee in the first two quarters of the year and increased sales in
the last quarter historically creates a high use of cash and a build up in
inventories in the first two quarters, with a corresponding decrease in
inventory and increase in cash in the last quarter.  Because of the seasonality
of the Company's business, results for any quarter are not necessarily
indicative of the results that may be achieved for the full fiscal year.
Furthermore, past seasonal patterns are not necessarily indicative of future
results. The Company's future results of operations and earnings could be
significantly affected by other factors, such as changes in general economic
conditions, changes in business conditions in the coffee industry, fluctuations
in consumer demand for coffee products and in the availability and costs of
green coffee beans, increased competition with the Company's businesses,
variances from budgeted sales mix and growth rate, consumer acceptance of the
Company's new products, inability to secure adequate capital to fund its
operations and working capital requirements, inability to hire, train and retain
qualified personnel, concentration of production and sales in Northern
California, the loss of one or more major customers, inability to produce coffee
and tea, weather and other natural disasters. There can be no assurance that
sales will increase in future quarters.

INDEMNIFICATION MATTERS


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

At present, there is no pending litigation or proceeding involving any director,
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.



        PART II - OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS


See Note 13 to the Financial statements.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS


- Not Applicable -

                                                                              24
<PAGE>

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 -


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        a.  Exhibits

-  Not Applicable -


        b.  Form 8-K

No reports on Form 8-K were filed during the period from January 1, 2001 to
March 31, 2001

                                                                              25
<PAGE>

               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           May 11, 2001
----------------
    Paul Katzeff


/s/ Joan Katzeff         President                         May 11, 2001
----------------
    Joan Katzeff

                                                                              26