##### Table of Contents

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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB



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

For the quarterly period ended March 31, 2006

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 ofincorporation or organization) |  | (IRS EmployerIdentification 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 12, 2006, there were 1,236,744 shares outstanding of common stock of the issuer.

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

Transitional Small Business Disclosure Format
(check one):

Yes ̈No   x



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##### Table of Contents

THANKSGIVING COFFEE COMPANY, INC.

INDEX



|                              |  |                                                                                       |  |      
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | -----
|PART I. FINANCIAL INFORMATION
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements and Notes to Financial Statements                                |  |      
|                              |  |                                                                                      
|                              |  | Balance Sheets as of March 31, 2006 and 2005                                          |  | 4  5
|                              |  |                                                                                      
|                              |  | Statements of Income for the Three Months Ended March 31, 2006 and 2005               |  | 6    
|                              |  |                                                                                      
|                              |  | Statements of Accumulated Deficits for the Three Months Ended March 31, 2006 and 2005 |  | 7    
|                              |  |                                                                                      
|                              |  | Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005           |  | 8    
|                              |  |                                                                                      
|                              |  | Notes to Financial Statements                                                         |  | 9 20
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 21   
|                              |  |                                                                                      
|Item 3.                       |  | Controls and Procedures                                                               |  | 26   
|                             
|PART II. OTHER INFORMATION   
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 26   
|                              |  |                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 27   
|                              |  |                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 27   
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 27   
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 27   
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 27   



2



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##### Table of Contents

Financial Statements

and Other Financial Information

Thanksgiving Coffee Company, Inc.

For the Three Months Ended March 31, 2006 and 2005



3



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##### Table of Contents

Thanksgiving Coffee Company, Inc.

Balance Sheets

Unaudited



|                                       |  |           |            |   |      |   |            |  
|-------------------------------------- |  | --------- | ---------- | - | ---- | - | ---------- | -
|                                       |  | March 31, |           
|                                       |  | 2006      |            |   | 2005 |  
|Assets                                 |  |           |            |   |      |   |            |  
|Current assets                         |  |           |            |   |      |   |            |  
|Cash                                   |  | $         | 20,229     |   |      | $ | 65,933     |  
|Accounts receivable, net of allowance  |  |           | 243,059    |   |      |   | 223,554    |  
|Inventories                            |  |           | 418,177    |   |      |   | 405,540    |  
|Prepaid expenses                       |  |           | 15,364     |   |      |   | 28,684     |  
|Deferred tax asset                     |  |           | 5,851      |   |      |   | 3,400      |  
|                                       |  |           |            |   |      |   |            |  
|Total current assets                   |  |           | 702,680    |   |      |   | 727,111    |  
|Property and equipment                 |  |           |            |   |      |   |            |  
|Property and equipment                 |  |           | 2,782,986  |   |      |   | 2,735,444  |  
|Accumulated depreciation               |  |           | (2,262,791 | ) |      |   | (2,152,194 | )
|                                       |  |           |            |   |      |   |            |  
|Total property and equipment           |  |           | 520,195    |   |      |   | 583,250    |  
|Other assets                           |  |           |            |   |      |   |            |  
|Deposits and other assets              |  |           | 59,932     |   |      |   | 60,332     |  
|Goodwill                               |  |           | 171,773    |   |      |   | 171,773    |  
|Other intangibles, net of amortization |  |           | 29,200     |   |      |   | 33,876     |  
|Deferred tax asset                     |  |           | 95,061     |   |      |   | 78,700     |  
|                                       |  |           |            |   |      |   |            |  
|Total other assets                     |  |           | 355,966    |   |      |   | 344,681    |  
|                                       |  |           |            |   |      |   |            |  
|Total assets                           |  | $         | 1,578,841  |   |      | $ | 1,655,042  |  
|                                       |  |           |            |   |      |   |            |  

See accompanying notes to financial statements



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Thanksgiving Coffee Company, Inc.

Balance Sheets

Unaudited



|                                                                                                 |  |           |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------ |  | --------- | --------- | - | ---- | - | --------- | -
|                                                                                                 |  | March 31, |          
|                                                                                                 |  | 2006      |           |   | 2005 |  
|Liabilities and shareholders equity                                                             |  |           |           |   |      |   |           |  
|Current liabilities                                                                              |  |           |           |   |      |   |           |  
|Accounts payable                                                                                 |  | $         | 448,363   |   |      | $ | 346,945   |  
|Notes payable - bank                                                                             |  |           | 48,067    |   |      |   | 25,214    |  
|Notes payable - other                                                                            |  |           | 8,820     |   |      |   | 20,004    |  
|Capital lease obligations                                                                        |  |           | 37,882    |   |      |   | 37,269    |  
|Accrued liabilities                                                                              |  |           | 49,712    |   |      |   | 52,071    |  
|                                                                                                 |  |           |           |   |      |   |           |  
|Total current liabilities                                                                        |  |           | 592,844   |   |      |   | 481,503   |  
|Long term debt                                                                                   |  |           |           |   |      |   |           |  
|Notes payable - bank                                                                             |  |           | 300,345   |   |      |   | 327,431   |  
|Notes payable - other                                                                            |  |           | 29,524    |   |      |   | 62,317    |  
|Notes payable - shareholders                                                                     |  |           | 19,918    |   |      |   | 19,919    |  
|Capital lease obligations                                                                        |  |           | 90,756    |   |      |   | 81,107    |  
|                                                                                                 |  |           |           |   |      |   |           |  
|Total long term debt                                                                             |  |           | 440,543   |   |      |   | 490,774   |  
|                                                                                                 |  |           |           |   |      |   |           |  
|Total liabilities                                                                                |  |           | 1,033,387 |   |      |   | 972,277   |  
|Shareholders equity                                                                             |  |           |           |   |      |   |           |  
|Common stock, no par value, 1,960,000 shares authorized, 1,236,744 shares issued and outstanding |  |           | 861,816   |   |      |   | 861,816   |  
|Additional paid in capital                                                                       |  |           | 24,600    |   |      |   | 24,600    |  
|Accumulated deficit                                                                              |  |           | (340,962  | ) |      |   | (203,651  | )
|                                                                                                 |  |           |           |   |      |   |           |  
|Total shareholders equity                                                                       |  |           | 545,454   |   |      |   | 682,765   |  
|                                                                                                 |  |           |           |   |      |   |           |  
|Total liabilities and shareholders equity                                                       |  | $         | 1,578,841 |   |      | $ | 1,655,042 |  
|                                                                                                 |  |           |           |   |      |   |           |  

See accompanying notes to financial statements



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Thanksgiving Coffee Company, Inc.

Statements of Operations

Unaudited



|                                             |  |                                     |           |   |      |   |           |  
|-------------------------------------------- |  | ----------------------------------- | --------- | - | ---- | - | --------- | -
|                                             |  | For the Three MonthsEnded March 31, |          
|                                             |  | 2006                                |           |   | 2005 |  
|Income                                       |  |                                     |           |   |      |   |           |  
|Net sales                                    |  | $                                   | 1,103,564 |   |      | $ | 1,133,766 |  
|Cost of sales                                |  |                                     | 676,423   |   |      |   | 639,152   |  
|                                             |  |                                     |           |   |      |   |           |  
|Gross profit                                 |  |                                     | 427,141   |   |      |   | 494,614   |  
|Operating expenses                           |  |                                     |           |   |      |   |           |  
|Selling, general and administrative expenses |  |                                     | 535,937   |   |      |   | 519,302   |  
|Depreciation and amortization                |  |                                     | 30,722    |   |      |   | 37,995    |  
|                                             |  |                                     |           |   |      |   |           |  
|Total operating expenses                     |  |                                     | 566,659   |   |      |   | 557,297   |  
|                                             |  |                                     |           |   |      |   |           |  
|Operating loss                               |  |                                     | (139,518  | ) |      |   | (62,683   | )
|Other income (expense)                       |  |                                     |           |   |      |   |           |  
|Miscellaneous income (expense)               |  |                                     | (2,111    | ) |      |   | (1,087    | )
|Gain (loss) on sale of equipment             |  |                                     |          |   |      |   | (1,758    | )
|Interest expense                             |  |                                     | (12,333   | ) |      |   | (13,172   | )
|                                             |  |                                     |           |   |      |   |           |  
|Total other income (expense)                 |  |                                     | (14,444   | ) |      |   | (16,017   | )
|                                             |  |                                     |           |   |      |   |           |  
|Loss before income taxes                     |  |                                     | (153,962  | ) |      |   | (78,700   | )
|Income tax expense                           |  |                                     | (800      | ) |      |   | (800      | )
|                                             |  |                                     |           |   |      |   |           |  
|Net loss                                     |  | $                                   | (154,762  | ) |      | $ | (79,500   | )
|                                             |  |                                     |           |   |      |   |           |  
|Loss per share (basic)                       |  | $                                   | (0.125    | ) |      | $ | (0.377    | )
|                                             |  |                                     |           |   |      |   |           |  
|Loss per share (dilutive)                    |  | $                                   | (0.125    | ) |      | $ | (0.377    | )
|                                             |  |                                     |           |   |      |   |           |  

See accompanying notes to financial statements



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Thanksgiving Coffee Company, Inc.

Statements of Accumulated Deficit

Unaudited



|                                         |  |                                     |          |   |      |   |          |  
|---------------------------------------- |  | ----------------------------------- | -------- | - | ---- | - | -------- | -
|                                         |  | For the Three Months EndedMarch 31, |         
|                                         |  | 2006                                |          |   | 2005 |  
|Accumulated deficit, beginning of period |  | $                                   | (186,200 | ) |      | $ | (124,151 | )
|Net loss                                 |  |                                     | (154,762 | ) |      |   | (79,500  | )
|                                         |  |                                     |          |   |      |   |          |  
|Accumulated deficit, end of period       |  | $                                   | (340,962 | ) |      | $ | (203,651 | )
|                                         |  |                                     |          |   |      |   |          |  

See accompanying notes to financial statements



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Thanksgiving Coffee Company, Inc.

Statements of Cash Flows

Unaudited



|                                                                           |  |                                     |          |   |      |   |         |  
|-------------------------------------------------------------------------- |  | ----------------------------------- | -------- | - | ---- | - | ------- | -
|                                                                           |  | For the Three Months EndedMarch 31, |         
|                                                                           |  | 2006                                |          |   | 2005 |  
|Operating activities                                                       |  |                                     |          |   |      |   |         |  
|Net loss                                                                   |  | $                                   | (154,762 | ) |      | $ | (79,500 | )
|Adjustments to reconcile net loss to cash flows from operating activities: |  |                                     |          |   |      |   |         |  
|Depreciation and amortization                                              |  |                                     | 35,019   |   |      |   | 41,256  |  
|Allowance for bad debts                                                    |  |                                     | (2,102   | ) |      |   | (2,202  | )
|(Increase) decrease in:                                                    |  |                                     |          |   |      |   |         |  
|Accounts receivable                                                        |  |                                     | 47,154   |   |      |   | 56,501  |  
|Inventories                                                                |  |                                     | 25,733   |   |      |   | 46,997  |  
|Prepaid expenses                                                           |  |                                     | 16,374   |   |      |   | 11,068  |  
|Deposits and other assets                                                  |  |                                     |         |   |      |   | (151    | )
|Increase (decrease) in:                                                    |  |                                     |          |   |      |   |         |  
|Accounts payable                                                           |  |                                     | 16,039   |   |      |   | (75,049 | )
|Accrued liabilities                                                        |  |                                     | (37,501  | ) |      |   | (17,677 | )
|                                                                           |  |                                     |          |   |      |   |         |  
|Net cash used in operating activities                                      |  |                                     | (54,046  | ) |      |   | (18,757 | )
|Investing activities                                                       |  |                                     |          |   |      |   |         |  
|Purchases of property and equipment                                        |  |                                     | (48,828  | ) |      |   | (9,711  | )
|Proceeds from sale of equipment/disposal                                   |  |                                     |         |   |      |   | 1,865   |  
|                                                                           |  |                                     |          |   |      |   |         |  
|Net cash used in investing activities                                      |  |                                     | (48,828  | ) |      |   | (7,846  | )
|Financing activities                                                       |  |                                     |          |   |      |   |         |  
|Proceeds from notes payable and capital leases                             |  |                                     | 31,732   |   |      |   |        |  
|Repayments of notes payable and capital leases                             |  |                                     | (22,014  | ) |      |   | (19,020 | )
|                                                                           |  |                                     |          |   |      |   |         |  
|Net cash provided by (used in) financing activities                        |  |                                     | 9,718    |   |      |   | (19,020 | )
|Decrease in cash                                                           |  |                                     | (93,156  | ) |      |   | (45,623 | )
|Cash at beginning of period                                                |  |                                     | 113,385  |   |      |   | 111,556 |  
|                                                                           |  |                                     |          |   |      |   |         |  
|Cash at end of period                                                      |  | $                                   | 20,229   |   |      | $ | 65,933  |  
|                                                                           |  |                                     |          |   |      |   |         |  

See accompanying notes to financial statements



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Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

March 31, 2006 and 2005



|1. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

Nature of Operations

Thanksgiving Coffee Company, Inc. (the Company), was incorporated in California in 1985. The Company purchases and roasts high-quality whole bean
coffees and sells them to restaurants, grocery stores and other retail outlets. Additionally, the Company produces and sells a line of high-quality tea products under the trademark of Royal Gardens Tea Company. Products are sold through the
Companys distribution network in Northern California, nationally through common carriers selling direct, or through brokers and distributors. Distributors and retailers do not have the right to return products. The Company also sells coffee,
tea and related specialty products through mail order and Internet sales on a nationwide basis. Additionally, the Company operates a sandwich and baked goods store 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 United States of America. 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.

Inventories

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

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 of the assets. The following useful lives are used:



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|1. | Summary of Significant Accounting Policies (continued)
|-- | ------------------------------------------------------

Property and Equipment (continued)



|                                      |  |              
|------------------------------------- |  | -------------
|Equipment                             |  | 7 to 12 years
|Furniture and fixtures                |  | 5 to 7 years 
|Leasehold improvements                |  | 7 to 39 years
|Transportation equipment              |  | 5 years      
|Marketing equipment                   |  | 5 to 7 years 
|Capitalized website development costs |  | 3 years      

Leasehold improvements are carried at cost and are amortized over the shorter of their estimated useful lives or
the related lease term. Expenditures for major renewals that extend the useful lives of property, fixtures and improvements are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation and amortization
expense related to production facilities is included in cost of sales.

The Company adopted Emerging Issues Tax Force (EITF) No. 00-2, Accounting for
Web Site DevelopmentCosts, in 2001. This accounting rule provides guidance regarding capitalization or expense of certain website development costs. Accordingly, website development costs incurred in the operation phase that will result in
future added functionality are capitalized and expenditures for training, administration and maintenance of an existing website are expensed as incurred.

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

Stock
Based Compensation

The Company accounts for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and its related interpretations. As such, compensation expense is recorded on the date of the grant only if the current market price of the underlying
stock exceeds the exercise price. The Company adopted the disclosure-only provisions of Statement of Financial Accounting Standards (FASB) No. 123, Accounting for Stock-Based Compensation, which establishes a fair value
method of accounting for stock options and similar equity instruments. At present there are no outstanding stock options that were granted to employees and the Company has no plans to offer stock based compensation to its employers or others.



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|1. | Summary of Significant Accounting Policies (continued)
|-- | ------------------------------------------------------

Goodwill and Other Intangible Assets

As of January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting
Standards (FASB) No. 142, Goodwill and Other Intangibles. Goodwill is assigned to a specific reporting unit and is reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when
circumstances indicate that the reporting units carrying amount is greater than its fair value. Intangible assets with definite lives are amortized over their useful economic lives. Financial condition and results of operations in accordance
with FASB Statement No. 142 are reflected in accompanying 2006 and 2005 financial statements.

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



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

Income Taxes

The Company accounts for income taxes under the asset and liability method as prescribed by Statement of Financial Accounting Standards (FASB) No. 109, Accounting for Income Taxes. As such, deferred income tax assets
and liabilities are recognized for the future tax consequences of the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Retirement Plan

In 2003 the Company converted its existing profit sharing plan into a 401(k) savings plan. The plan covers substantially
all Company employees and allows pre-tax contributions through a salary deferral program. Employer contributions are on a discretionary basis with substantially all employees eligible for allocation of employer contributions. Employees are 100%
vested in amounts they contribute and vest over years of service in employer contributions. No employer contributions to the 401(k) plan have ever been made.



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|1. | Summary of Significant Accounting Policies (continued)
|-- | ------------------------------------------------------

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. The Companys policy is that fully vested vacation is accrued at each quarter end. The accrued liability for vacation pay was $18,200 as of March 31, 2006, and such amount is included
in accrued liabilities. Carryover paid sick days are not available, or ever considered vested.

Advertising

Advertising costs are expensed as incurred, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits.
Direct-response advertising consists primarily of mail order solicitation and catalog costs. For the three months ended March 31, 2006 the Company did not engage in any direct response advertising that would require capitalization. Advertising
costs charged to expense was $15,250 for the three months ended March 31, 2006.

Use of Estimates

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

Revenue Recognition

The Company adopted Securities and Exchange Commission Staff Accounting Bulletins No. 101 (SAB101).
Revenue Recognition in Financial Statements in 2002, retroactive to November 1, 2000. No restatement of the financials was necessary since the financials were already in conformity with the revenue recognition principles and no material
transactions were effected by this adoption.

Revenue is recognized when persuasive evidence of an arrangement exists, delivery occurs, the sales price is
fixed or determinable and collectibility is reasonably assured. Product is considered delivered and revenue is recognized when title and risk of loss have been transferred to the customer. Under the terms and conditions of the sale, the transfer of
title may occur either at the time of shipment or when product is delivered to the customer.



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|2. | Accounts Receivable
|-- | -------------------

Accounts
receivable consist of the following:



|                                      |  |   |         |  
|------------------------------------- |  | - | ------- | -
|Accounts receivable                   |  | $ | 248,989 |  
|Due from employees                    |  |   | 512     |  
|                                      |  |   |         |  
|                                      |  |   | 249,501 |  
|Less: allowance for doubtful accounts |  |   | (6,442  | )
|                                      |  |   |         |  
|Net accounts receivable               |  | $ | 243,059 |  
|                                      |  |   |         |  

The Company utilizes a percentage method to establish the allowance for doubtful accounts. The estimated allowance
ranges from 1% to 10% of outstanding receivables. Bad debt expense (recovery) for the three months ended March 31, 2006, was $0.



|3. | Inventories
|-- | -----------

Inventories consist
of the following:



|                                                        |  |   |        
|------------------------------------------------------- |  | - | -------
|Coffee                                                  |  |   |        
|Unroasted                                               |  | $ | 121,144
|Roasted                                                 |  |   | 84,664 
|Tea                                                     |  |   | 12,506 
|Packaging, supplies and other merchandise held for sale |  |   | 199,863
|                                                        |  |   |        
|Total inventories                                       |  | $ | 418,177
|                                                        |  |   |        



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|4. | Property and Equipment
|-- | ----------------------

Property and equipment consist of the
following:



|                                      |  |   |            |  
|------------------------------------- |  | - | ---------- | -
|Equipment                             |  | $ | 1,419,164  |  
|Furniture and fixtures                |  |   | 336,533    |  
|Leasehold improvements                |  |   | 424,553    |  
|Transportation equipment              |  |   | 164,045    |  
|Marketing equipment                   |  |   | 166,162    |  
|Capitalized website development costs |  |   | 14,077     |  
|Property held under capital leases    |  |   | 258,452    |  
|                                      |  |   |            |  
|Total property and equipment          |  |   | 2,782,986  |  
|Accumulated depreciation              |  |   | (2,262,791 | )
|                                      |  |   |            |  
|Property and equipment, net           |  | $ | 520,195    |  
|                                      |  |   |            |  

Depreciation expense for the three months ended March 31, 2006, was $34,771.



|5. | Goodwill and Other Intangible Assets
|-- | ------------------------------------

As part of the adoption of
Statement of Financial Accounting Standards (FASB) No. 142, Goodwill and Other Tangible Assetsas of January 1, 2002, the Company no longer amortizes goodwill. The Company performed a test of impairment on goodwill that resulted in
no impairment loss as of March 31, 2006. Consequently, there was no change in the carrying value of goodwill as of March 31, 2006.

Intangible
assets subject to amortization consist of the following:



|                                       |  |   |         |  
|-------------------------------------- |  | - | ------- | -
|Leasehold value                        |  | $ | 67,000  |  
|Trademarks                             |  |   | 5,127   |  
|                                       |  |   |         |  
|Total intangible assets                |  |   | 72,127  |  
|Accumulated amortization               |  |   | (42,927 | )
|                                       |  |   |         |  
|Other intangibles, net of amortization |  | $ | 29,200  |  
|                                       |  |   |         |  

Amortization expense for the three months ended March 31, 2006, was $248.



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##### Table of Contents

|6. | Long Term Debt
|-- | --------------



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | - | -------
|Notes Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   |        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|Note payable to Savings Bank of Mendocino, payable in monthly installments of $4,307 plus interest at 3% over prime rate beginning January 1, 2005 (10.5% at March 31, 2006), final
payment is due on December 1, 2009. The note payable is collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments, general intangibles and contract rights along with a personal
guarantee from the Companys majority shareholders. |  | $ | 327,412
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|Line of credit to Savings Bank of Mendocino, payable in monthly installments of interest only at 3% over prime rate beginning December 1, 2005 (10.5% at March 31, 2006). The note payable is
collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments, general intangibles and contract rights along with a personal guarantee from the Companys majority shareholders.                                               |  |   | 21,000 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|Note payable to majority shareholders, Paul and Joan Katzeff, payable in monthly installments of interest only at 12%, with balance due on demand after June 30, 1996. Shareholders note is
subordinated to all other notes payable.                                                                                                                                                                                                                                                 |  |   | 19,918 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|Note payable to Mercedes-Benz, payable in monthly installments of $691, including interest at 6.99%, secured by a vehicle, final payment due on September 24, 2009.                                                                                                                                                                                                                                                                                                                  |  |   | 25,696 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 
|Note payable to Chrysler Financing, payable in monthly installments of $329, including interest at 15.492%, secured by a vehicle, final payment due on January 24, 2011.                                                                                                                                                                                                                                                                                                             |  |   | 12,648 



15



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##### Table of Contents

|6. | Long Term Debt (continued)
|-- | --------------------------



|                                                                                                                                                                                         |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | -
|Capital Lease Obligations                                                                                                                                                                |  |   |         |  
|                                                                                                                                                                                         | 
|Note payable to National Financial Services, payable in monthly installments of $1,414, including interest at 10.512%, secured by equipment, final payment due on May 10, 2006.          |  |   | 1,711   |  
|                                                                                                                                                                                         | 
|Note payable to Manifest Leasing, payable in monthly installments of $444, including interest at 12.203%, secured by equipment, final payment due on March 1, 2007.                      |  |   | 4,753   |  
|                                                                                                                                                                                         | 
|Note payable to Nationwide Funding, LLC, payable in monthly installments of $1,355, including interest at 16.78%, secured by equipment, final payment due on March 1, 2009.              |  |   | 38,107  |  
|                                                                                                                                                                                         | 
|Note payable to Nationwide Funding, LLC payable in monthly installments of $462, including interest at 14.237%, secured by equipment, final payment due on May 22, 2009.                 |  |   | 14,061  |  
|                                                                                                                                                                                         | 
|Note payable to Avaya Financial Services, payable in monthly installments of $824, including interest at 5.855%, secured by equipment, final payment due on August 1, 2009.              |  |   | 30,561  |  
|                                                                                                                                                                                         | 
|Note payable to Axis Capital, payable in monthly installments of $709, including interest at 15.473% secured by store fixtures, final payment due September 14, 2009.                    |  |   | 22,474  |  
|                                                                                                                                                                                         | 
|Note payable to US Bancorp Manifest Funding Services payable in monthly installments of $533, including interest at 22.239%, secured by equipment, final payment due on January 1,
2010. |  |   | 16,970  |  
|                                                                                                                                                                                         |  |   |         |  
|                                                                                                                                                                                         |  |   | 535,312 |  
|Less current portion                                                                                                                                                                     |  |   | (94,769 | )
|                                                                                                                                                                                         |  |   |         |  
|Long term portion of notes payable                                                                                                                                                       |  | $ | 440,543 |  
|                                                                                                                                                                                         |  |   |         |  



16



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##### Table of Contents

|6. | Long Term Debt (continued)
|-- | --------------------------

Interest paid for the three months
ended March 31, 2006, was $12,333.

As of March 31, 2006, maturities of notes payable and capital lease obligations for each of the next five
years and in the aggregate were as follows:



|                          |  |   |        
|------------------------- |  | - | -------
|Years Ending December 31, |  |  
|2006                      |  | $ | 73,845 
|2007                      |  |   | 96,373 
|2008                      |  |   | 81,500 
|2009                      |  |   | 64,004 
|2010                      |  |   | 34,803 
|Thereafter                |  |   | 184,787
|                          |  |   |        
|                          |  | $ | 535,312
|                          |  |   |        

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



|7. | Income Taxes
|-- | ------------

The components of
the provision for income tax (expense) benefit are as follows:



|                              |  |   |      |  
|----------------------------- |  | - | ---- | -
|Current tax (expense) - state |  | $ | (800 | )
|                              |  |   |      |  

The primary components of temporary differences that give rise to the Companys net deferred tax assets are
as follows:



|                                                |  |   |         |  
|----------------------------------------------- |  | - | ------- | -
|Net operating loss and tax credit carryforwards |  | $ | 112,260 |  
|Depreciation and amortization                   |  |   | (19,909 | )
|Other                                           |  |   | 8,561   |  
|                                                |  |   |         |  
|Net deferred tax asset                          |  | $ | 100,912 |  
|                                                |  |   |         |  



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##### Table of Contents

|7. | Income Taxes (continued)
|-- | ------------------------

At March 31, 2006 the Company had
available unused contributions, manufacturers investment credit, and net operating loss carryforwards that may provide future tax benefits and that expire as follows:



|                                     |  |                                 |        |               |   |                   |  |       |         |  |   |        
|------------------------------------ |  | ------------------------------- | ------ | ------------- | - | ----------------- |  | ----- | ------- |  | - | -------
|Federal  Years EndingDecember 31,    |  |                                 |        | Contributions |   | Net OperatingLoss |  | Total
|2006                                 |  |                                 |        |               | $ | 758               |  | $     |        |  | $ | 758    
|2008                                 |  |                                 |        |               |   | 3,767             |  |       |        |  |   | 3,767  
|2009                                 |  |                                 |        |               |   | 5,295             |  |       |        |  |   | 5,295  
|2017                                 |  |                                 |        |               |   |                  |  |       | 290,210 |  |   | 290,210
|2018                                 |  |                                 |        |               |   |                  |  |       | 128,576 |  |   | 128,576
|2023                                 |  |                                 |        |               |   |                  |  |       | 96,867  |  |   | 96,867 
|2024                                 |  |                                 |        |               |   |                  |  |       | 49,714  |  |   | 49,714 
|2025                                 |  |                                 |        |               |   |                  |  |       | 17,613  |  |   | 17,613 
|                                     |  |                                 |        |               |   |                   |  |       |         |  |   |        
|                                     |  |                                 |        |               | $ | 9,820             |  | $     | 582,980 |  | $ | 592,800
|                                     |  |                                 |        |               |   |                   |  |       |         |  |   |        
|California  Years EndingDecember 31, |  | ManufacturersInvestment Credit |        | Contributions |   | Net OperatingLoss |  | Total
|2006                                 |  | $                               | 5,609  |               | $ |                  |  | $     |        |  | $ | 5,609  
|2008                                 |  |                                 | 4,382  |               |   | 3,767             |  |       |        |  |   | 8,149  
|2009                                 |  |                                 | 306    |               |   | 4,539             |  |       |        |  |   | 4,845  
|2010                                 |  |                                 | 1,082  |               |   |                  |  |       |        |  |   | 1,082  
|2011                                 |  |                                 | 1,892  |               |   |                  |  |       |        |  |   | 1,892  
|2012                                 |  |                                 | 59     |               |   |                  |  |       |        |  |   | 59     
|2013                                 |  |                                 |       |               |   |                  |  |       | 49,041  |  |   | 49,041 
|2014                                 |  |                                 |       |               |   |                  |  |       | 69,544  |  |   | 69,544 
|                                     |  |                                 |        |               |   |                   |  |       |         |  |   |        
|                                     |  | $                               | 13,330 |               | $ | 8,306             |  | $     | 118,585 |  | $ | 140,221
|                                     |  |                                 |        |               |   |                   |  |       |         |  |   |        

Income taxes paid for the three months ended March 31, 2006, was $800.



18



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##### Table of Contents

|8. | Operating Leases
|-- | ----------------

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

As of March 31, 2006, minimum
annual lease payments due under these agreements for each of the next five years and in the aggregate were:



|           |  |   |       
|---------- |  | - | ------
|2006       |  |   | 29,618
|2007       |  |   | 18,238
|2008       |  |   | 5,104 
|2009       |  |   | 705   
|Thereafter |  |   |      
|           |  |   |       
|           |  | $ | 53,665
|           |  |   |       

Total operating lease payments for the three months ended March 31, 2006, was $14,286.



|9. | 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 is classified as an operating lease and provides for monthly rental payments of $8,600. The Company is responsible for all real
estate taxes, insurance and maintenance costs related to the facilities. The renegotiated lease is a ten-year term commencing May 31, 2005 and ending May 31, 2015. Rental expense under the lease was $17,200 for the three months ended
March 31, 2006.

The Company also leases a bakery establishment in Mendocino, California and warehouse premises in Santa Rosa, California under
operating leases expiring September 30, 2011 and January 31, 2007, respectively. Rental expense under these operating leases was $13,782 for the three months ended March 31, 2006.



19



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##### Table of Contents

|9. | Long Term Leases (continued)
|-- | ----------------------------

As of March 31, 2006, minimum
future rental payments under noncancelable facilities operating leases for each of the next five years and in the aggregate are as follows:



|           |  |   |          
|---------- |  | - | ---------
|2006       |  | $ | 122,021  
|2007       |  |   | 155,491  
|2008       |  |   | 157,110  
|2009       |  |   | 160,065  
|2010       |  |   | 162,450  
|Thereafter |  |   | 500,755  
|           |  |   |          
|           |  | $ | 1,257,892
|           |  |   |          



|10. | Related Party Transactions
|--- | --------------------------

As of March 31, 2006, the Company
has (i) one interest only note payable due on demand and (ii) a principal and interest note, in each case payable to Paul and Joan Katzeff (the Companys majority shareholders). The Company also leases properties from its majority
shareholders.

The summary of payments made to Paul and Joan Katzeff in connection with these related party transactions for the three months ended
March 31, 2006, is as follows:



|                 |  |   |       
|---------------- |  | - | ------
|Interest expense |  | $ | 658   
|Rent expense     |  | $ | 17,200

The Companys majority shareholders also guarantee certain notes payable for the Company (See Note 6).



20



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##### Table of Contents

THANKSGIVING COFFEE COMPANY, INC.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act of 1934. In some cases, forward-looking statements may be identified by words such as believe, anticipate, expect, intend,
plan, will, may, and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.
These statements relate to, among other things, possible expansions into new and existing markets and trends in the operations of Thanksgiving Coffee Company, Inc. (the Company). Any forward-looking statements should be considered in
light of various risks and uncertainties that could cause results to differ materially from expectations, estimates or forecasts expressed. These 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, continuing competition within the Companys businesses, variances from
budgeted sales mix and growth rate, consumer acceptance of the Companys products, inability to secure adequate capital to fund its operating expenses and working capital requirements, inability to hire, train and retain qualified personnel,
concentration of production and sales in Northern California, the loss of one or more major customers, inability to successfully implement the Companys sales goals, 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. The Companys forward-looking statements
should also be considered in light of its reviewed financial statements, related notes and the other financial information appearing elsewhere in this report and in its other filings with the Securities and Exchange Commission. As a result of these
risks and uncertainties, the Companys actual results may differ materially and adversely from those expressed in any forward-looking statements. The Company assumes no obligation to update any forward-looking statements.

SUMMARY

Sales of the Company have eroded over the last five years
due to increased competition, customer attrition and customers roasting green beans for their own use. The Company made several changes in 2004 in an effort to reverse this negative trend, including reducing distribution routes serviced by its own
trucks and increasing its use of outside distributors and direct shipment to customers (via UPS or other common carriers). It has also added a northern California chain as a customer serviced by a distributor. Nonetheless, the effect of these
changes on the Companys business in the first three months of 2006 was extremely limited. Because of the limited impact of these changes, as well as the increase in cost of sales and other factors noted herein, there can be no assurances that
the Company will be profitable in any future period, and, as a consequence, the Company is considering various strategic alternatives.



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##### Table of Contents

The Company has enjoyed favorable margins through the middle of 2004, because of the low price of green beans. Although
the Company pays substantially more for its product than the market price, because of quality, organic nature of many of its lines and the fact that it uses fair-traded coffees, it still was able to purchase green beans at low prices. During the
last six months of 2004, the world price of coffee more than doubled, eroding margins. The price has continued to rise in 2006, but not as dramatically as previously. If green bean prices do not decline or continue to rise, whether as a consequence
of inclement weather in a major producing area or any other event that affects coffee pricing, it would have a negative impact on the Company and its margins.

The Company has a revolving line of credit for $30,000 of which $21,000 is currently outstanding and a term debt facility of $327, 412 with the Savings Bank of Mendocino. The term debt is a five-year note due December 1, 2009 and the
line of credit is renewed annually. If the credit line should not be renewed, the stability of the Companys business would be in question. See Liquidity and Capital Resources.

Results of Operations

Three months
ended March 31, 2006 versus March 31, 2005



|                              |  |                     |         |    |                |       |   
|----------------------------- |  | ------------------- | ------- | -- | -------------- | ----- | --
|Consolidated                  |  | Increase (Decrease) |         |    | Percent Change |      
|Net Sales                     |  | $                   | (30,202 | )  |                | (2.7  | )%
|Cost of Sales                 |  |                     | 37,271  |    |                | 4.5   | % 
|Gross Margin                  |  |                     | (4.9    | )% |                | (11.3 | )%
|Selling, G&A Expense          |  |                     | 16,635  |    |                | 3.2   | % 
|Depreciation And Amortization |  |                     | (7,273  | )  |                | (19.1 | )%
|Interest Expense              |  |                     | (839    | )  |                | (6.4  | )%
|Net Income (Loss)             |  |                     | (75,262 | )  |                |      | % 

Consolidated net sales for the three months ended March 31, 2006 were $1,103,564, down 2.7%, or over $30,000
when compared with net sales of $1,133,766 for the same period in fiscal 2005.

Distribution revenues (e.g., revenues generated on our own truck
distribution) were up $20,000 for the three month period ended March 31, 2006, or a 4% increase when compared with distribution sales for the same period in fiscal 2005. Management believes that the sales increase was influenced by the extended
winter weather in northern California as no new accounts of a large size were added during the period. The Company continues to test the concept of direct delivery and the use of distributors on its existing truck distribution. An additional route
was switched to a distributor late in the fourth quarter of 2005.

National revenues (e.g., revenues not derived by mail order and direct truck
distribution) were up $30,000, or 5.4% for the three months ended March 31, 2006 when compared to national sales for the same period



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##### Table of Contents

in 2005. The increase was a result of an increase in existing accounts as no new accounts of a large size were added during the period.

Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) increased over $3,000, or 2.5% for
the three months ended March 31, 2006 when compared to mail order sales for the same period in 2005.

Sales of the Company bakery were down over
$83,000 for the three months ended March 31, 2006 when compared to bakery sales for the same period in 2005. The bakery was closed over three weeks in late February and early March of 2006 to repair and replace the floor of the facility.

Although sales for the quarter have improved in the coffee company over the previous year, there can be no assurances that sales will increase in any
other period in the future

Consolidated cost of sales for the three months ended March 31, 2006 were $676,423, up 4.5%, or over $37,000 when compared
with the cost of sales of $639,152 for the same period in 2005. This increase was a result of an increase in green bean costs of $48,000 offset somewhat by lower workers compensation and general insurance costs.

Consolidated gross margin (gross profit as a percentage of net sales) for the three months ended March 31, 2006 was 38.7%, down 11.3 % when compared with gross
margin of 43.6% for the same period in 2005. The drop in gross margin was a result of higher costs of green beans for the quarter as noted above.

Consolidated selling, general and administrative expenses were $535,937 for the three months ended March 31, 2006, an increase of 3.2% or more than $16,000 when compared with the selling, general and administrative expenses of $519,302
for the same period in 2005. The increase was due to a $12,000 increase in meeting, travel and promotional costs and higher medical insurance premiums of $5,000 to Blue Shield.

Depreciation and amortization expenses for the three months ended March 31, 2006 were $30,722, a 19.1% decrease, or over $7,000, when compared to depreciation and amortization expenses of $37,995 for the same
period in fiscal 2005. The drop in depreciation expenses was a result of the reduction in depreciable assets compared to last year.

Interest expense for
the three months ended March 31, 2006 was $12,333, a 6.4% decrease from interest of $13,172 for the same period in 2005. The decrease in interest expense is a result of lower debt during the quarter in 2006 compared to the same period in 2005.
Total debt is $535,312 in 2006 versus $573,261 for the same period in 2005.

As a result of the foregoing factors, the Company had a consolidated net loss
of $154,762 for the three months ended March 31, 2006, compared to a loss of $79,500 for the same period in 2005. Because of the sales declines in previous years and the increase in the cost of green beans, there can be no assurances that the
Company will be profitable in future periods.



23



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##### Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2006, the Company had working capital of $109,836 versus working capital of $245,608 as of March 31, 2005. The decrease in working capital is due primarily to an increase in accounts payable
of over $100,000 and a reduction in cash of over $45,000.

Net cash used in operating activities was $54,046 for the three months ended March 31, 2006
compared to net cash used in operating activities for the three months ended March 31, 2005 of $18,757. The increase in net cash used in operating activities in the three months of 2006 was the result of an increase in the loss this year
compared to the same period in fiscal 2005 of over $75,000 offset somewhat by changes in assets and liabilities.

Cash used in investing activities was
$48,828 for the three months ended March 31, 2006 compared to $7,846 used in the same period in 2005. Capital additions for the first three months of 2006 include $22,000 for computer and program upgrades, $14,000 for a used Toyota Corolla,
$5,000 for brewers and grinders, $5,000 for new plates and cylinders for label and bag changes and $2,000 for production equipment.

Net cash provided by
financing activities for the three months ended March 31, 2006 was $9,718 compared to cash used in financing activities of $19,020 during the same period in 2005. The cash provided by financing was a result of financing the computer and vehicle
purchase. Last year, for the same period, no new debt was acquired in the first quarter of 2005 (See below and Note 6 of Notes to Financial Statements).

Because of larger operating loss and capital purchases, cash at March 31, 2006 is over $90,000 lower than the cash balance at January 1, 2006 and nearly $46,000 lower than March 31, 2005.

In November 2004, the Company refinanced its note and credit line with Merrill Lynch by securing a term note with the Savings Bank of Mendocino which has a balance as of
March 31, 2006 of $327,412. This new note is amortized over ten years and is payable in five years with a balloon payment on December 1, 2009 at 3% over prime rate. The rate was 10.5% at March 31, 2006. The new note is collateralized
by the Companys accounts receivable, inventory, equipment, instruments, general intangibles and contract rights. This note is personally guaranteed by the Companys majority shareholders. (See Note 6 of Notes to the Financial Statements)

The Company also has a $30,000 line of credit with the Savings Bank of Mendocino with current borrowing at March 31, 2006. The credit line is
interest only payments renewable annually at 3% over the prime rate. Prime rate was 10.5% at March 31, 2006 with an outstanding balance on the line of $21,000. The credit line is collateralized by a security interest of first priority in all
accounts receivable, inventory equipment, instruments, general intangibles and contract rights. The line of credit is personally guaranteed by the Companys majority shareholders. (See Note 6 of Notes to Financial Statements)



24



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##### Table of Contents

The Company had a loan outstanding for $19,918 at March 31, 2006, payable to the majority shareholders Joan and Paul
Katzeff in monthly installments of interest only at 12%, with balance due on demand after June 30, 1996. (See Note 6 of Notes to Financial Statements)

At March 31, 2006, the Company had total borrowings of $535,312 including $348,412 owing to the Savings Bank of Mendocino. This compares to total borrowings of $573,261 as of March 31, 2005, including $352,645 outstanding to
Savings Bank of Mendocino at that time.

For long-term debt, see Note 6 and Note 10 of the Notes to Financial Statements. For operating leases, see Note 8
of the Notes to Financial Statements. For real estate leases, see Note 9 of the Notes to Financial Statements.



|                        |  |                        |           |                    |   |           |  |           |         |               |   |         |  |   |        
|----------------------- |  | ---------------------- | --------- | ------------------ | - | --------- |  | --------- | ------- | ------------- | - | ------- |  | - | -------
|                        |  | Payments Due By Period
|Contractual Obligations |  | Total                  |           | Less than One year |   | 1-3 years |  | 4-5 years |         | After 5 years
|Long Term Debt          |  | $                      | 535,312   |                    | $ | 73,845    |  | $         | 177,873 |               | $ | 98,807  |  | $ | 184,787
|Operating Leases        |  |                        | 53,665    |                    |   | 29,618    |  |           | 23,342  |               |   | 705     |  |   |       
|Real Estate Leases      |  |                        | 1,257,892 |                    |   | 122,021   |  |           | 312,601 |               |   | 322,515 |  |   | 500,755
|Total Cash Obligations  |  | $                      | 1,846,869 |                    | $ | 225,484   |  | $         | 513,816 |               | $ | 422,027 |  | $ | 685,542

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 stability of the Companys business would be in question.

RELATED PARTY
TRANSACTIONS

From time to time, the Company enters into various transactions with its majority shareholders, Paul and Joan Katzeff. See note 10
 Related Party Transactions in the Notes to the Financial Statements.



25



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##### Table of Contents

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.

CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Companys
management, including the Chief Executive Officer, the President and Chief Financial Officer, of the effectiveness of the Companys disclosure controls and procedures as of March 31, 2006. Based on that evaluation, the Companys
management, including the Chief Executive Officer, the President and Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective. There have been no changes in the Companys Disclosure controls
over financial reporting during the first quarter of 2006 that have materially affected or are reasonably likely to affect the Companys internal controls over financial reporting.

Part II  Other Information



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

- None -



26



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##### Table of Contents



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

- None -



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

- None -



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

- None -



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

- None -



|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K
|------- | --------------------------------



| | a. | Exhibits
| | -- | --------



|     |  |                                                                                                                                                    
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).
|     | 
|31.2 |  | Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (President)               
|     | 
|31.3 |  | Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer) 
|     | 
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).  
|     | 
|32.2 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (President).                
|     | 
|32.3 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).  



| | b. | No reports filed on Form 8-K
| | -- | ----------------------------



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##### Table of Contents

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THANKSGIVING COFFEE COMPANY, INC.



|                              |  |                         |  |             
|----------------------------- |  | ----------------------- |  | ------------
|Name                          |  | Title                   |  | Date        
|                              |  |                        
|/s/ Paul Katzeff Paul
Katzeff |  | Chief Executive Officer |  | May 12, 2006
|                              |  |                        
|/s/ Joan Katzeff Joan
Katzeff |  | President               |  | May 12, 2006
|                              |  |                        
|/s/ Sam Kraynek Sam
Kraynek   |  | Chief Financial Officer |  | May 12, 2006



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