1.	Summary of Significant Accounting Policies

Nature of Operations

Thanksgiving Coffee Company, Inc. (the “Company”, “we”, or “tcci”), a California Corporation, engages in sourcing, blending and roasting high quality green coffee beans from small scale farmer co-ops worldwide with an emphasis on sustainability and fair trade certified coffee beans. The Company operates from their headquarters on the Mendocino coast in Fort Bragg, California, where they package, market, and distribute the quality branded coffee products through retail and wholesale distribution processes in addition to an internet presence.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of year or less at the time of purchase to be cash equivalents, and maintain its cash in bank deposit accounts at high credit quality financial institutions. All interest bearing and non-interest bearing transaction accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to

$250,000

indefinitely. The Company periodically maintains cash balances in excess of FDIC coverage. Management considers this to be a normal business risk.

Concentration of Credit Risk

For the years ended

December 31, 2019

and

December 31, 2018

one

customer accounted for approximately

29%,

and

8%,

respectively, of the Company's revenue. The customer is a distributor of the Company's product. The loss of this account could have an adverse impact on the Company.

As of

December 31, 2019,

one

customer accounted for approximately

21%

of the Company's accounts receivable. As of

December 31, 2018,

customers individually accounted for more than

10%

of the Company's accounts receivable.

For the years ended

December 31, 2019

and

December 31, 2018

one

vendor accounted for approximately

39%,

and

54%,

respectively, of the Company's green bean coffee purchases. See Note

to the financial statements “Related Party Transactions”. The loss of this vendor could have an adverse impact on the Company.

As of

December 31, 2019,

vendors A, B and C accounted for

23%,

12%

and

of Company's accounts payable, respectively. As of

December 31, 2018,

vendors A and B accounted for

25%

and

19%

of the Company's accounts payable, respectively.

Accounts Receivable

The Company extends credit to customers in the normal course of business and performs ongoing credit evaluations of customers, maintaining allowances for potential credit losses which, when realized, have been within management's expectations. Invoices are aged based on terms with the customer. The Company utilizes a percentage method to establish the allowance for doubtful accounts. The estimated allowance ranges from

10%

of outstanding receivables based on factors pertaining to the credit risk of specific customers, historical trends and other information. Delinquent accounts are written off when it is determined that amounts are uncollectible. The allowance for doubtful accounts is based on historical information and recorded as a charge to operating expense. At

December 31, 2019

and

2018

the Company's allowance for doubtful accounts was

$4,662

and

$7,315,

respectively.

The bad debt-write-offs for the years ended

December 31, 2019,

2018

were

$9,233

and

$1,162,

respectively.

Inventory

Inventory is reported at the lower of cost or net realizable value. Cost is determined using the

first

-in,

first

-out method, or FIFO. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.

The Company periodically reviews its inventory for potential slow-moving or obsolete items and writes down specific items to net realizable value, as appropriate. The Company writes down inventory based on forecasted demand and obsolescence. These factors are impacted by market and economic conditions, and changes in strategic direction, and require estimates that

may

include uncertain elements. Actual demand

may

differ from forecasted demand and such differences

may

have a material effect on recorded inventory values. Any write-down of inventory to the lower of cost or net realizable value creates a new cost basis that subsequently would

not

be marked up based on changes in underlying facts and circumstances.

Property and Equipment

Property and equipment are stated at cost and depreciated or amortized over their estimated useful lives using the straight-line method. Maintenance and repair costs are charged against operations as incurred. The estimated useful lives of the assets are as follows:

	Estimated Useful Lives (in years)
Automobiles		5
Equipment and fixtures	5	-	7
Office furniture and equipment	5	-	7
Leased equipment	5	-	12
Leasehold improvements	7	-	39

Revenue Recognition

The Company recognizes revenue in accordance with the

five

-step model as prescribed by Accounting Standards Codification (ASC)

606,

“Revenue from Contracts with Customers,” in which the Company evaluates the transfer of promised goods or services and recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for the goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC

606,

the Company performs the following

five

steps: (

) identify the contract(s) with a customer, (

) identify the performance obligations in the contract, (

) determine the transaction price, (

) allocate the transaction price to the performance obligations in the contract and (

) recognize the revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue once its performance obligation to the customer is completed and control of the product or service is transferred to the customer. Revenue reflects the total amount the Company receives, or expects to receive, from the customer and includes shipping costs that are billed and included in the consideration. The Company's contractual obligations to customers generally have a single point of obligation and are short term in nature. For sales through distributors, the Company recognizes revenue when the product is shipped, and title passes to the distributor. The Company's standard terms are 'FOB' shipping point, with

customer acceptance provisions. The cost of price promotions and rebates are treated as reductions of revenue.

products are sold on consignment. Credit sales are recorded as trade accounts receivable and

collateral is required. The Company has price incentive programs with its distributors to encourage product placement. The cost of price promotions and rebates are treated as reductions of revenue and revenues are presented net of sales allowances. If the conditions for revenue recognition are

not

met, the Company defers the revenue until all conditions are met. Freight charges are recognized as revenue at the time of delivery.

Leases

The Company adopted Accounting Standard Update (ASU)

No.

2016

02—Leases

(Topic

842

), as amended, as of

January 1, 2019,

using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a full retrospective approach. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.

In addition, The Company elected the hindsight practical expedient to determine the lease term for existing leases. In our application of hindsight, we evaluated the performance of the leased warehouse and office equipment. However, it was determined that

none

of the leases had renewal options.

Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of

$625,826

as of

January 1, 2019.

Shipping and Handling Charges

The Company reports shipping and handling fees charged to customers in Sales and marketing expense. The freight costs incurred for the years ended

December 31, 2019,

and

2018,

were

$195,505

and

$161,571,

respectively.

Sales Tax

States impose sales tax on certain sales to nonexempt customers. The Company collects that sales tax from customers and remits the entire amount to the state. The Company's accounting policy is to exclude the tax collected and remitted to the state from revenues and cost of goods sold.

Advertising

Advertising costs are expensed as incurred. The advertising costs incurred for the years ended

December 31, 2019,

and

2018,

were

$14,156

and

$8,578,

respectively.

Comprehensive Income

The Company has

components of other comprehensive income other than net income, and accordingly, the comprehensive income is equivalent to the net income for the years presented.

Income Taxes

The Company accounts for income taxes under the asset and liability method. 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 basis. 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.

A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Uncertain Tax Positions

The Company accounts for uncertainty in income taxes, by designating a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also considers various related matters such as de-recognition, interest, penalties, and disclosures required.

The Company's management has determined that it has

unrecognized tax benefits or liabilities to be recognized or disclosed in the financial statements. The Company accrues interest and penalties associated with uncertain tax positions as a part of operating expenses. As of

December 31, 2019,

and

December 31, 2018,

there were

accrued interest or penalties associated with uncertain tax positions.

As a result of net operating loss and credit carryforwards, the Company is subject to audit for tax years

2016

and forward for federal and California purposes.

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.

Recent Relevant Accounting Guidance

Not

Yet Effective

Income Taxes

December 2019,

the FASB issued ASU

2019

12,

Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance. The ASU is effective for fiscal years beginning after

December 15, 2020.

Early adoption is permitted. The Company is currently evaluating the effect that the new guidance will have on its financial statements and disclosures.

Credit Losses

June 2016,

the FASB issued ASU

2016

13,

Measurement of Credit Losses on Financial Instruments

, which requires more timely recognition of credit losses associated with financial assets. ASU

2016

requires financial assets (or a group of financial assets) measured at an amortized cost basis to be presented at the net amount expected to be collected. ASU

2016

is effective for fiscal years beginning after

December 15, 2022,

including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after

December 15, 2022,

including interim periods within those fiscal years. The Company is currently evaluating the effect that the new guidance will have on its financial statements and disclosures.