10KSB/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB/A

Amendment No. 1

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

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

SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission File No. 33-960-70-LA

THANKSGIVING COFFEE COMPANY, INC.

(Name of small business issuer in its charter)

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

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

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

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

Title of each class Name of each exchange on which registered

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

(Title of class)

(Title of class)

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

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

State issuer’s revenues for its most recent fiscal year: $5,010,650

There have been no trades in the Company’s Common Stock since 1999. See Part II, Item 5, Market for Common Equity and Related Stockholder Matters.

As of March 25, 2003, there were 1,234,544 shares outstanding of common stock of the issuer.

DOCUMENTS INCORPORATED BY REFERENCE.

List hereunder the documents if incorporated by reference and the Part of this Form 10-KSB/A into which the document is incorporated: None.

Explanatory Note

This amendment on Form 10-KSB/A is being filed to amend the Annual Report of Thanksgiving Coffee Company, Inc. (the “Company”) on Form 10-KSB previously filed for the year ended December 31, 2002 (the “Prior Report”) for the purposes of correcting an inadvertent omission from the report of the Company’s independent accountants of the location of their offices and to add the accountants’ conformed signature to the filed report. No changes have been made to the financial statements contained in the Prior Report. We direct you to refer to our Quarterly Reports on Form 10-QSB and to the other reports we file with the Securities and Exchange Commission from time to time after the date of this report for more current information regarding the Company.

PART II

ITEM 7 FINANCIAL STATEMENTS

Information in response to this item is set forth in Item 14 beginning on page F-1 of this filing.

PART III

ITEM 13 EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a) Exhibits

3.1	Restated Articles of Incorporation of the Company.+
3.2	By laws of the Company.+
3.2.1	Amendment No. 1 to Bylaws of the Company, dated June 3, 1996.++
10.1	Business Loan Agreement dated as of September 5, 1995 by and between the Company and Wells Fargo Bank, N.A., as amended on August 11, 1997.+++
10.2	Lease agreements for the Company’s Fort Bragg facilities.
	10.2.1	Extension of Term and Further Amendment to Lease Agreement dated April 1, 1992.++++
	10.2.2	Further Amendment to Lease Agreement dated July 1, 1992.+
	10.2.3	Third Amendment to Lease Agreement dated July 1, 1994.+
	10.2.4	Exercise Option to Extend Lease Agreement April 1, 1995.+
10.3	Lease Agreement for the Company’s Bakery in Mendocino. ++++
10.4	Sample Coffee Purchase Agreement. +
10.5	Promissory Note issued by the Company to Joan and Paul Katzeff dated as of April 17, 1996.++++
10.6	Promissory Note issued by the Company to Joan and Paul Katzeff dated as of December 30, 1990.++++
10.7	Stock Purchase Agreement between the Company, Sustainable Harvest, Inc. and David Griswold as of December 31, 1997.++++!
10.8	Summary Plan Description of the Company’s Profit Sharing Plan. ++++
10.9	Business Loan Agreement dated as of August 13, 1997 by and between the Company and Wells Fargo Bank, N.A. +++++
10.10	Business Loan Agreement dated as of January 6, 1999 by and between the Company and Wells Fargo Bank, N.A. +++++
10.11	Non-exclusive License Agreement dated as of July 14, 1998 by and between the Company and Wyland International, LLC.+++++!!
10.12	Business Loan Agreement dated as of November 30, 2000 by and between the Company and Wells Fargo Bank, N.A.!!!
10.13	Promissory Note issued by the Company to Joan and Paul Katzeff dated as of April 1, 2001.**
10.14	Promissory Note issued by the Company to Joan and Paul Katzeff dated as of October, 2001.***
10.15	Promissory Note issued by the Company to Joan and Paul Katzeff as of April 1, 2002.****
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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

++ Incorporated by reference to the exhibits to the Company’s Form 10-QSB for the quarter ended June 30, 1997.

+++ Incorporated by reference to the exhibits to the Company’s Form 10-QSB for the quarter ended September 30, 1997.

++++ Incorporated by reference to the exhibits to the Company’s Form 10-KSB for the year ended December 31, 1997.

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

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

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

!!! Incorporated by reference to the exhibits to the Company’s Form 10-KSB for the year ended December 31, 2000.

** Incorporated by reference to the exhibits to the Company’s Form 10-QSB for the quarter ended June 30, 2001.

*** Incorporated by reference to the exhibits to the Company’s Form 10-QSB for the quarter ended September 30, 2001.

**** Incorporated by reference to the exhibits to the Company’s Form 10-QSB for the quarter ended June 30, 2002.

(b) Reports on 8-K None.

SIGNATURES

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

THANKSGIVING COFFEE COMPANY, INC.

/s/ Paul Katzeff

Paul Katzeff

Chief Executive Officer

October 8, 2003

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on dates indicated.

Name	Title	Date
/s/ Paul Katzeff	Chief Executive Officer (Principal Executive Officer) and Director	October 8, 2003
Paul Katzeff
/s/ Joan Katzeff	President, Chief Financial Officer (Principal Financial and Accounting Officer) and Director	October 8, 2003
Joan Katzeff
/s/ Roy Doughty	Director	October 8, 2003
Roy Doughty

ITEM 14 FINANCIAL STATEMENTS

Financial Statements

Thanksgiving Coffee Company, Inc.

Years Ended December 31, 2002 and 2001

with Report of Independent Accountants

Thanksgiving Coffee Company, Inc.
Audited Financial Statements
Years Ended December 31, 2002 and 2001
Report
Report of Independent Accountants	F-3
Reviewed Financial Statements
Balance Sheets	F-4
Statements of Income	F-6
Statements of Accumulated Deficit	F-7
Statements of Cash Flows	F-8
Notes to Financial Statements	F-9

[Letterhead of

SALLMANN, YANG & ALAMEDA

An Accountancy Corporation,

Certified Public Accountants

6601 Koll Center Parkway, Suite 180

Pleasanton, California 94566-3118

Phone: (925) 426-7744

Fax: (925) 426-7772

Web: www.taxaccess.com]

Report of Independent Accountants

To The Board of Directors

Thanksgiving Coffee Company, Inc.

Fort Bragg, California

We have audited the accompanying balance sheets of Thanksgiving Coffee Company, Inc. (a California Corporation) as of December 31, 2002 and 2001 and the related statements of income, retained earnings, and cash flows for each of the three years ended December 31, 2002, 2001 and 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements present fairly, in all material respects, the financial position of Thanksgiving Coffee Company, Inc. at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years ended December 31, 2002, 2001 and 2000, in conformity with accounting principles generally accepted in the United States of America.

/s/ SALLMANN, YANG & ALAMEDA

An Accountancy Corporation

SALLMANN, YANG & ALAMEDA

An Accountancy Corporation

Pleasanton, California

March 5, 2003

F-3

Thanksgiving Coffee Company, Inc. Balance Sheets
	December 31
	2002			2001
Assets
Current assets
Cash	$	65,174		$	98,876
Accounts receivable		308,660			324,505
Employee receivable		4,273			250
Inventory		378,878			379,470
Prepaid expenses		28,952			60,934
Deferred tax asset		25,074			—
Total current assets		811,011			864,035
Property and equipment
Property and equipment		2,539,736			2,426,369
Property held under capital lease		88,699			—
Accumulated depreciation		(1,990,354	)		(1,818,218	)
Total property and equipment		638,081			608,151
Other assets
Deposits and other assets		37,572			41,219
Goodwill		171,773			171,773
Other intangibles, net of amortization		43,250			48,807
Deferred tax asset		46,333			60,352
Total other assets		298,928			322,151
Total assets	$	1,748,020		$	1,794,337

See accompanying notes and accountants’ report

F-4

Thanksgiving Coffee Company, Inc.

Balance Sheets

	December 31
	2002		2001
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	302,903	$	322,232
Notes payable-bank, current portion		92,800		106,134
Notes payable-other, current portion		53,906		49,888
Notes payable-shareholders, current portion		42,055		78,639
Capital lease obligations, current portion		15,290		4,335
Accrued liabilities		54,798		47,024
Deferred income taxes		—		14,354
Total current liabilities		561,752		622,606
Long term debt
Notes payable-bank		185,600		278,400
Notes payable-other		23,211		60,286
Notes payable-shareholders		—		17,136
Capital lease obligations		47,920		—
Total long term debt		256,731		355,822
Total liabilities		818,483		978,428
Shareholders’ equity
Common stock, no par value, 1,960,000 shares authorized, 1,234,544 shares issued and outstanding		861,816		861,816
Additional paid in capital		24,600		24,600
Retained earnings (accumulated deficit)		43,121		(70,507	)
Total shareholders’ equity		929,537		815,909
Total liabilities and shareholders’ equity	$	1,748,020	$	1,794,337

See accompanying notes and accountants’ report

F-5

Thanksgiving Coffee Company, Inc.

Statements of Income

	Years Ended December 31
	2002			2001			2000
Income
Net sales	$	5,010,650		$	5,169,674		$	5,391,482
Cost of sales		2,587,937			2,762,426			2,897,929
Gross profit		2,422,713			2,407,248			2,493,553
Operating expenses
Selling, general and administrative expenses		2,108,374			2,053,318			2,200,577
Depreciation and amortization		169,786			202,009			204,989
Total operating expenses		2,278,160			2,255,327			2,405,566
Operating income		144,553			151,921			87,987
Other income (expense)
Interest income		330			2,784			2,575
Miscellaneous income (expense)		965			(8,271	)		12,238
Gain on sale of equipment		628			1,523			—
Labor settlement expense		—			—			(60,000	)
Interest expense		(57,457	)		(84,743	)		(97,650	)
Total other income (expense)		(55,534	)		(88,707	)		(142,837	)
Income (loss) before income taxes and cumulative effect of a change in accounting principle		89,019			63,214			(54,850	)
Income tax benefit (expense)		24,609			47,650			(30,883	)
Cumulative effect of change in accounting Principle		—			(2,013	)		—
Net income (loss)	$	113,628		$	108,851		$	(85,733	)
Earnings (loss) per share (basic)	$	0.09		$	0.09		$	(0.07	)
Earnings (loss) per share (dilutive)	$	0.09		$	0.09		$	(0.07	)

See accompanying notes and accountants’ report

F-6

Thanksgiving Coffee Company, Inc.

Statements of Retained Earnings

	December 31
	2002			2001			2000
Accumulated deficit, beginning	$	(70,507	)	$	(179,358	)	$	(93,625	)
Net income (loss)		113,628			108,851			(85,733	)
Retained earnings (accumulated deficit), ending	$	43,121		$	(70,507	)	$	(179,358	)

See accompanying notes and accountants’ report

F-7

Thanksgiving Coffee Company, Inc.

Statements of Cash Flows

	Years Ended December 31
	2002			2001			2000
Operating activities
Net income (loss)	$	113,628		$	108,851		$	(85,733	)
Noncash items included in net income (loss)
Depreciation and amortization		191,185			224,818			228,919
Gain on sale of equipment		(628	)		(1,523	)		—
Cumulative effect of change in accounting principle		—			2,013			—
Deferred income tax expense (benefit)		(25,409	)		(48,450	)		30,083
Changes in operating assets and liabilities
Receivables		11,822			56,991			14,283
Inventory		592			124,398			(16,589	)
Prepaid expenses		31,982			7,557			(11,341	)
Deposits and other assets		3,647			836			285
Accounts payable		(19,330	)		(170,306	)		85,615
Accrued liabilities		7,774			718			4,544
Net cash provided by operating activities		315,263			305,903			250,066
Investing activities
Purchases of property and equipment		(217,319	)		(94,551	)		(117,979	)
Proceeds from sale of equipment		2,389			3,167			—
Purchases of intangible assets		—			—			(2,500	)
Net cash used by investing activities		(214,930	)		(91,384	)		(120,479	)
Financing activities
Payments from notes receivable		—			12,028			10,000
Proceeds from notes payable and capital leases		87,699			66,967			64,302
Repayments of notes payable and capital leases		(221,734	)		(236,533	)		(203,150	)
Net cash used by financing activities		(134,035	)		(157,538	)		(128,848	)
Net increase (decrease) in cash		(33,702	)		56,981			739
Cash at beginning of year		98,876			41,895			41,156
Cash at end of year	$	65,174		$	98,876		$	41,895

See accompanying notes and accountants’ report

F-8

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

December 31, 2002 and 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. Outside of Northern California, the Company ships nationally throughout the fifty states by common carriers selling direct or through brokers and distributors. Distributors and retailers do not have the right to return products. Additionally, the Company produces and sells a line of high-quality tea products under the trademark of Royal Gardens Tea Company. The Company also sells coffee, tea and related specialty products through mail order and Internet sales on a nationwide basis. The Company sells sandwiches, pastries, coffee and tea through a bakery located in Mendocino, California.

Basis of Presentation

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

Concentration of Credit Risk

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

Inventory

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

Property and Equipment

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

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

F-9

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Property and Equipment (continued)

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

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

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

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

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

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

	Life in Years
Leasehold value	14
Trademark	17
Refinance costs	5

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

Investments in Consolidated Companies

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

F-10

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

1. Summary of Significant Accounting Policies (continued)

Profit Sharing Plan

The Company has a profit sharing plan covering substantially all of its employees. Benefits are based upon years of service and the employee’s compensation during the employment period. No contributions to the profit sharing plan were made for the years ended December 31, 2002, 2001 and 2000.

Futures and Options Contracts

The Company occasionally enters into exchange traded coffee futures and options contracts with the objective of minimizing cost risk due to market fluctuations. The Company does not define these contracts as hedge instruments pursuant to accounting principles and practices designated in Statement of Financial Accounting Standards No. 80, Accounting for Futures Contracts. Accordingly, changes in the market value of futures contracts (unrealized gains and losses) are reported by the Company in the period in which the change occurs and are included as a component of shareholders’ equity. Realized gains and losses are a component of cost of sales. The Company did not have any futures or options contracts in effect as of December 31, 2002, 2001 and 2000.

Compensated Absences

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

Advertising

The Company expenses costs of advertising the first time the advertising takes place, except direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Direct-response advertising consists primarily of mail order solicitation costs, typically mailed to customers who have specifically responded to this type of advertising. The mail order department documents whether orders come from catalogs or other sources when processing orders. Catalog costs are amortized over the period from the catalog mailing until the next catalog is issued. Advertising costs charged to expense were $14,907, $26,413 and $33,454 for the years ended December 31, 2002, 2001 and 2000, respectively.

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.

F-11

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

2. Accounts Receivable

Accounts receivable consist of the following:

	2002			2001
Accounts receivable	$	317,693		$	332,564
Less: Allowance for doubtful accounts		(9,033	)		(8,059	)
Accounts receivable, net	$	308,660		$	324,505

The Company uses the percentage method for uncollectible accounts. The allowance for doubtful accounts is estimated from 1% to 10% of total outstanding receivables as of December 31, 2002. The allowance for doubtful accounts was estimated at approximately 1% of total non-cash sales as of December 31, 2001. Bad debt expense for the years ended December 31, 2002, 2001 and 2000 was $3,224, $13,970, and $5,506, respectively. The adjustments to the allowance account for the years ended December 31, 2002 and 2001 was $974 and $3,019, respectively.

3. Inventory

Inventory consists of the following:

	2002		2001
Coffee
Unroasted	$	112,237	$	82,065
Roasted		90,394		99,084
Tea		12,175		14,493
Packaging, supplies and other merchandise held for sale		164,072		183,828
Total inventory	$	378,878	$	379,470

F-12

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

4. Property and Equipment

Property and equipment consists of the following:

	2002			2001
Equipment and fixtures	$	1,562,635		$	1,448,492
Furniture and equipment		287,653			280,516
Leasehold improvements		423,200			405,299
Transportation equipment		111,007			91,570
Marketing equipment		155,241			106,926
Property held under capital leases		88,699			93,566
Total property and equipment		2,628,435			2,426,369
Accumulated depreciation		(1,990,354	)		(1,818,218	)
Property and equipment, net	$	638,081		$	608,151

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

Depreciation expense for the years ended December 31, 2002, 2001 and 2000 was $185,628, $210,880 and $212,037, respectively.

5. Goodwill and Other Intangible Assets

As part of the adoption of FASB Statement 142 as of January 1, 2002, the Company no longer amortizes goodwill. The Company performed a test of impairment on goodwill which resulted in no impairment loss as of December 31, 2002.

The change in the carrying value of goodwill during the year ended December 31, 2002 follows:

Carrying value - beginning of year		$171,773
Goodwill acquired		—
Goodwill impairment losses		—
Carrying value - end of year	$	171,773

F-13

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

5. Goodwill and Other Intangible Assets (continued)

Intangible assets subject to amortization consist of the following:

	2002			2001
Leasehold value	$	67,000		$	67,000
Trademark		5,127			5,127
Refinance cost		2,500			2,500
Total intangible assets		74,627			74,627
Accumulated amortization		(31,377	)		(25,820	)
Other intangible assets, net	$	43,250		$	48,807

Amortization expense for the years ended December 31, 2002, 2001 and 2000 was $5,557, 13,938 and $16,882, respectively.

6. Long Term Debt

Notes Payable

	2002		2001
Note payable to Wells Fargo Bank, monthly installments of $7,733 plus interest at 3% over prime rate beginning December 15, 2000 (7.25% at December 31, 2002), final payment is due on January 15, 2005. The note payable is collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments, general intangibles and contract rights. The note is guaranteed by the Company’s majority shareholders.	$	278,400	$	371,200
Note payable to Wells Fargo Bank, payable in monthly installments of $1,667 plus interest at 1% over prime rate (5.75% at December 31, 2001), final payment became due and was paid on August 15, 2002. The note was secured by all accounts receivable, inventory, equipment, fixtures and improvements.		—		13,334
Note payable to majority shareholders, Paul and Joan Katzeff, payable in monthly installments of interest only at 12.00%, 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 $0 and $3,780 at December 31, 2002 and 2001, respectively.		24,919		24,919

F-14

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

6. Long Term Debt (continued)

Notes Payable

	2002		2001
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.	$	17,136	$	33,889
Note payable to the Estate of Laoma Yaski for the purchase of Mendocino Bakery, payable in monthly installments of $4,249, including interest at 10.00%, secured by property and equipment at the bakery, final payment due on November 14, 2003.		44,488		88,606
Note payable to Chase Manhattan Bank, payable in monthly installments of $324, including interest at 8.637%, secured by a vehicle, final payment due on October 26, 2004. This note is guaranteed by the Company’s majority shareholders.		6,575		9,748
Note payable to Chase Manhattan Bank, payable in monthly installments of $304, including interest at 9.90% secured by vehicle, final payment due on November 16, 2005. This note is guaranteed by the Company’s majority shareholders.		9,223		11,820
Note payable to Chrysler financing, payable in monthly installments of $335, including interest at 6.00% secured by vehicle, final payment due on October 30, 2007.		16,831		—
Note payable to majority shareholders, Paul and Joan Katzeff, payable in monthly installments of interest only at 10.00%, the balance was due in lump sum and was paid on October 1, 2002, unsecured.		—		30,000
Note payable to majority shareholders, Paul and Joan Katzeff, payable in one lump sum on April 1, 2002, including interest at 10.00% unsecured.		—		6,967

F-15

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

6. Long Term Debt (continued)

Capital Lease Obligations

	2002			2001
Note payable to First Sierra Computer Equipment, payable in monthly installments of $1,297, including interest at 14.00%, secured by equipment, final payment was due and paid on February 26, 2002.	$	—		$	2,550
Note payable to Avaya Financial Services, payable in monthly installments of $372, including interest at 12.00%, secured by equipment, final payment due on June 12, 2007.		15,418			—
Note payable to Nationwide Financial Services, payable in monthly installments of $1,414, including interest at 10.512%, secured by equipment, final payment due on May 10, 2006.		47,792			—
Note payable to Security Financial, payable in monthly installments of $910, including interest at 15.529%, secured by equipment, final payment was due and paid on February 22, 2002.		—			1,785
		460,782			594,818
Less current portion		(204,051	)		(238,996	)
Long term portion of notes payable and capital lease obligations	$	256,731		$	355,822

F-16

Interest paid for the years ended December 31, 2002, 2001 and 2000 was $57,457, $84,743 and $97,650, respectively.

As of December 31, 2002, maturities of notes payable and capital lease obligations for each of the next five years and in the aggregate are as follows:

Years Ending December 31
2003	$	204,051
2004		119,392
2005		118,442
2006		13,479
2007 and thereafter		5,418
	$	460,782

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

F-17

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

7. Income Taxes

The components of income tax (benefit) expense for the years ended December 31, 2002, 2001 and 2000 are as follows:

	2002			2001			2000
Federal – current	$	—		$	—		$	—
Federal – deferred		(27,466	)		(22,759	)		17,594
State – current		800			800			800
State – prior		—			—			—
State – deferred		2,057			(25,691	)		12,489
Total	$	(24,609	)	($	47,650	)	$	30,883

The Company computes income taxes using the asset and liability method under which deferred income taxes are provided for temporary differences between the financial bases of the Company’s assets and liabilities. As of December 31, 2002 and 2001, deferred tax assets recognized for deductible temporary differences and loss carryforwards total $71,407 and $60,352, respectively. Deferred tax liabilities recognized for taxable temporary differences total $0 and $14,354, respectively. The Company has a California manufacturer’s credit carryforward of $13,271 as of December 31, 2002 which may be used to offset California income taxes in the future.

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

Federal
Years Ending December 31,	Capital Loss		Contributions		Net Operating Loss		Total
2003	$	—	$	11,289	$	—	$	11,289
2005		—		12,067		—		12,067
2006		—		758		—		758
2017		—		—		290,210		290,210
2018		—		—		128,576		128,576
	$	—	$	24,114	$	418,786	$	442,900
California
Years Ending December 31,	Capital Loss		Contributions		Net Operating Loss		Total
2003	$	—	$	—	$	—	$	—
2004		—		4,177		28,950		33,127
2005		—		12,299		64,092		76,391
2007		—		5,396		—		5,396
	$	—	$	21,872	$	93,042	$	114,914

Income taxes paid for the years ended December 31, 2002, 2001 and 2000 were $800, $800 and $800, respectively.

F-18

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

8. Operating Leases

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

As of December 31, 2002, minimum annual lease payments due under these agreements for each of the next five years and in the aggregate are as follows:

Years Ending December 31,
2003	$	46,869
2004		42,889
2005		41,261
2006		30,764
2007 and thereafter		7,268
	$	169,051

Total operating lease payments were $60,337, $77,567 and $93,319 for the years ended December 31, 2002, 2001 and 2000, respectively.

9. Common Stock

	Number of Shares	No Par Value
Beginning balance, January 1, 2001	1,234,544	$	861,816
No activity	—		—
Balance, December 31, 2001	1,234,544		861,816
No activity	—		—
Ending balance, December 31, 2002	1,234,544	$	861,816

981,000 shares originally issued are restricted.

F-19

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

10. Stock Option Purchase Plan

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

Beginning balance, January 1, 2001	16,000
Shares expired during the year	—
Shares exercised during the year	—
Balance, December 31, 2001	16,000
Shares expired during the year	—
Shares exercised during the year	—
Ending balance, December 31, 2002	16,000

The related compensation expense for the years ended December 31, 2002, 2001 and 2000 was $0, $0 and $13,250, respectively.

11. Long Term Leases

The Company leases its corporate headquarters, warehouse and waterfront facilities from Paul and Joan Katzeff (the Company’s majority shareholders). The lease provides for monthly rental payments of $8,600 and the Company is responsible for all real estate taxes, insurance and maintenance costs related to the facilities. The lease provides for periodic cost of living increases during the term of the lease, including the option periods. The Company exercised an option to renew for one five-year term on March 31, 1995, and the lease was extended for successive one year terms on March 31, 2001 and March 31, 2002. The company has options to renew the lease for three successive five year renewal periods when the current one-year term expires on March 31, 2003.

Any deferred amounts are due based upon available cash flow as determined by the Company’s management or upon demand of the Company’s majority shareholders. Rental expense under the above lease was $103,200 $103,200 and $103,200 for the years ended December 31, 2002, 2001 and 2000, respectively. The Company has made substantial leasehold improvements (see Note 4) and intends, along with its major shareholders, to exercise all options under the terms of this lease.

The Company leases a bakery establishment in Mendocino, California. The lease currently provides for monthly rental payments of $3,150, $3,150 and $3,000 as of December 31, 2002, 2001 and 2000, respectively. The lease term expires on September 30, 2011.

F-20

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

11. Long Term Leases (continued)

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

As of December 31, 2002, minimum future rental payments for all leases for each of the next five years and in the aggregate are as follows:

Years Ending December 31,
2003	$	151,879
2004		151,879
2005		141,907
2006		141,000
Thereafter		270,750
	$	857,415

12. Related Party Transactions

As of December 31, 2002, the Company had (i) one interest only note payable due on demand and (ii) a principal and interest note, in each case payable to Paul and Joan Katzeff (the Company’s majority shareholders, see Note 6). The Company also leases properties from its majority shareholders (see Note 11).

The summary of payments made to Paul and Joan Katzeff in connection with these related party transactions for the years ended December 31, 2002, 2001 and 2000 is as follows:

	2002		2001		2000
Principal on notes	$	53,720	$	44,941	$	1,170
Interest expense	$	7,583	$	8,387	$	1,600
Rent expense	$	103,200	$	103,200	$	103,200

13. Commitments

A total of 16,000 stock options may be exercised or sold at any time at the discretion of a past officer, subject to the Company’s first right of refusal. The options will expire on December 31, 2003.

F-21

EX-31.1

Exhibit 31.1

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul Katzeff, certify that:

1. I have reviewed this Amendment No. 1 to annual report on Form 10-KSB/A of Thanksgiving Coffee Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	October 8, 2003
By:	/s/ Paul Katzeff
Paul Katzeff, Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joan Katzeff, certify that:

1. I have reviewed this Amendment No. 1 to annual report on Form 10-KSB/A of Thanksgiving Coffee Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	October 8, 2003
By:	/s/ Joan Katzeff
Joan Katzeff, President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the Annual Report on Form 10-KSB, as amended by Amendment No. 1 on Form 10-KSB/A, for the year ended December 31, 2002 as filed by Thanksgiving Coffee Company, Inc. with the Securities and Exchange Commission on the date hereof (collectively the “Report”), that:

(i) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Paul Katzeff

Chief Executive Officer

October 8, 2003

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the Annual Report on Form 10-KSB, as amended by Amendment No. 1 on Form 10-KSB/A, for the year ended December 31, 2002 as filed by Thanksgiving Coffee Company, Inc. with the Securities and Exchange Commission on the date hereof (collectively the “Report”), that:

(i) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Joan Katzeff

President and Chief Financial Officer

October 8, 2003