10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2009

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 Number: 33-960-70LA

THANKSGIVING COFFEE COMPANY, INC.

(Exact name of registrant as specified in its charter)

California	94-2823626
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
19100 South Harbor Drive, Fort Bragg, California	95437
(Address of principal executive offices)	(Zip Code)

(707) 964-0118

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b–2 of the Exchange Act. (Check one):

Large Accelerated Filer  ¨	Accelerated Filer  ¨	Non-Accelerated Filer  ¨	Smaller Reporting Company  x
		(Do not check if a smaller reporting company)

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

On May 14, 2009 the registrant had 1,236,744 shares of Class A common stock, no par value per share, and              shares of Class B common stock, par value              per share, outstanding.

FORM 10-Q

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	3
	Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December 31, 2008	4
	Consolidated Statements of Operations for the three months ended March 31, 2009 and March 31, 2008 (unaudited)	6
	Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and March 31, 2008 (unaudited)	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Submission of Matters to a Vote of Security Holders	22
Item 6.	Exhibits	22
Signatures		34

2

Financial Statements

and Notes to Financial Statements

Thanksgiving Coffee Company, Inc.

For the Three Months Ended March 31, 2009 and 2008

PART 1. Financial Information

Item 1. Financial Statements

The consolidated financial statements included herein have been prepared by Thanksgiving Coffee Company, Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such SEC rules and regulations. In the opinion of management of the Company, the accompanying statements contain all adjustments necessary to present fairly the financial position of the Company as of March 31, 2009 and December 31, 2008, and its results of operations for the three month periods ended March 31, 2009 and 2008 and its cash flows for the three month periods ended March 31, 2009 and 2008. The results for these interim periods are not necessarily indicative of the results for the entire year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto filed as a part of the Company’s annual report on Form 10-K.

3

Thanksgiving Coffee Company, Inc.

Balance Sheets

	March 31, 2009 (Unaudited)			December 31, 2008 See Note 1
Assets
Current assets
Cash	$	93,163		$	52,144
Accounts receivable, net of allowance		204,688			229,356
Inventories		317,944			339,323
Prepaid expenses		15,110			23,218
Total current assets		630,905			644,041
Property and equipment
Property and equipment		2,576,522			2,585,836
Accumulated depreciation		(2,232,522	)		(2,220,023	)
Total property and equipment		344,000			365,813
Other assets
Deposits and other assets		10,197			13,250
Other intangibles, net of amortization		9,123			10,329
Total other assets		19,320			23,579
Total assets	$	994,225		$	1,033,433

See accompanying notes to financial statements

4

Balance Sheets

	March 31, 2009 (Unaudited)			December 31, 2008 See Note 1
Liabilities and shareholders’ equity
Current liabilities
Accounts payable	$	311,452		$	331,287
Notes payable - bank		251,895			261,148
Notes payable - other		7,307			9,172
Note payable - shareholders		39,919			43,019
Capital lease obligations		36,348			42,149
Accrued liabilities		85,995			36,303
Total current liabilities		732,916			723,078
Long term debt
Notes payable - other		3,081			3,936
Notes payable - Shareholders		9,100			12,000
Capital lease obligations		29,396			38,886
Total long term debt		41,577			54,822
Total liabilities		774,493			777,900
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		(666,684	)		(630,883	)
Total shareholders’ equity		219,732			255,533
Total liabilities and shareholders’ equity	$	994,225		$	1,033,433

See accompanying notes to financial statements

5

Statements of Operations

Unaudited

	For the Three Months Ended March 31,
	2009			2008
Income
Net sales	$	1,079,650		$	1,045,072
Cost of sales		650,025			629,920
Gross profit		429,625			415,152
Operating expenses
Selling, general and administrative expenses		427,356			449,112
Depreciation and amortization		25,582			25,846
Total operating expenses		452,938			474,958
Operating loss		(23,313	)		(59,806	)
Other income (expense)
Miscellaneous income (expense)		(2,334	)		(2,410	)
Gain (loss) on sale of equipment		—			—
Interest expense		(9,354	)		(10,296	)
Total other income (expense)		(11,688	)		(12,706	)
Loss before income taxes		(35,001	)		(72,512	)
Income tax expense		(800	)		(800	)
Net loss	$	(35,801	)	$	(73,312	)
Loss per share (basic)	$	(0.029	)	$	(0.059	)
Loss per share (dilutive)	$	(0.029	)	$	(0.059	)
Weighted average number of shares		1,236,744			1,236,744

See accompanying notes to financial statements

6

Thanksgiving Coffee Company, Inc.

Statements of Cash Flows

Unaudited

	For the Three Months Ended March 31,
	2009			2008
Operating activities
Net loss	$	(35,801	)	$	(73,312	)
Adjustments to reconcile net loss to cash flows from operating activities:
Depreciation and amortization		28,104			28,490
Allowance for bad debts		(192	)		1,352
(Increase) decrease in:
Accounts receivable		24,858			14,524
Inventories		21,379			17,240
Prepaid expenses		8,109			12,838
Deposits and other assets		3,053			(236	)
Increase (decrease) in:
Accounts payable		(19,835	)		7,371
Accrued liabilities		49,693			(18,216	)
Net cash provided by (used in) operating activities		79,368			(9,949	)
Investing activities
Purchases of property and equipment		(5,085	)		(25,037	)
Proceeds from sale of equipment/disposal		—			—
Net cash (used in) investing activities		(5,085	)		(25,037	)
Financing activities
Proceeds from notes payable and capital leases		—			—
Repayments of notes payable and capital leases		(33,264	)		(27,543	)
Net cash (used in) financing activities		(33,264	)		(27,543	)
Decrease in cash		41,019			(62,529	)
Cash at beginning of period		52,144			104,035
Cash at end of period	$	93,163		$	41,506

See accompanying notes to financial statements

7

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements

March 31, 2009 and December 31, 2008

1. Basis of Presentation

The unaudited condensed financial statements in this Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. We have continued to follow the accounting policies disclosed in the financial statements included in our 2008 Form 10-K filed with the Securities and Exchange Commission (SEC). It is suggested that these statements be read in conjunction with the December 31, 2008 audited financial statements and the accompanying notes on Form 10-K, as filed with the SEC.

The interim financial information in this Form 10-Q reflects all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of our results of operations for the interim periods. The results of operations for the three months ended March 31, 2009 are not necessarily indicative of results to be expected for the full year.

Segment Reporting

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, changed the way public companies report information about segments of their business in their financial statements. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers. See
Note 12

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 basses. 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.

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.

8

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

2. Accounts Receivable

Accounts receivable consist of the following:

	3/31/2009			12/31/2008
Accounts receivable	$	210,228		$	235,532
Less: allowance for doubtful accounts		(5,540	)		(6,176	)
Net accounts receivable	$	204,688		$	229,356

The Company utilizes a percentage method to establish the allowance for doubtful accounts. The estimated allowance ranges from 1% to 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. Bad debt expense (recovery) for the three months ended March 31, 2009 and 2008 was $81 and $1,214 respectively.

3. Inventories

Inventories consist of the following:

	3/31/2009		12/31/2008
Coffee
Unroasted	$	95,853	$	110,244
Roasted		78,565		79,897
Tea		2,041		2,516
Packaging, supplies and other merchandise held for sale		141,485		146,666
Total inventories	$	317,944	$	339,323

4. Property and Equipment

Property and equipment consist of the following:

	3/31/2009			12/31/2008
Equipment	$	1,291,828		$	1,295,303
Furniture and fixtures		210,607			215,574
Leasehold improvements		458,989			459,861
Transportation equipment		177,776			177,776
Marketing equipment		166,162			166,162
Capitalized website development costs		14,076			14,076
Property held under capital leases		257,084			257,084
Total property and equipment		2,576,522			2,585,836
Accumulated depreciation		(2,232,522	)		(2,220,023	)
Property and equipment, net	$	344,000		$	365,813

Depreciation expense for the three months ended March 31, 2009 and 2008 was $26,898 and $27,284 respectively.

9

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

5. Goodwill and Other Intangible Assets

As part of the adoption of Statement of Financial Accounting Standards (FASB) No. 142, Goodwill and Other Tangible Assets as of January 1, 2002, the Company no longer amortizes goodwill. At December 31, 2008 the Company performed a test of impairment on goodwill that resulted in a write down of all remaining goodwill at that time.

Intangible assets subject to amortization consist of the following:

	3/31/2009			12/31/2008
Leasehold value	$	67,000		$	67,000
Trademarks		5,127			5,127
Total intangible assets		72,127			72,127
Accumulated amortization		(63,004	)		(61,798	)
Other intangibles, net of amortization	$	9,123		$	10,329

Amortization expense for the three months ended March 31, 2009 and 2008 was $1,206 for both years.

6. Deposits and Other Assets

Included in Deposits and Other Assets are artwork that was developed for the labels for the tea program and long-term deposits.

10

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

7. Long Term Debt

Notes Payable	3/31/2009		12/31/2008
Note payable to Savings Bank of Mendocino, payable in monthly installments of $4,307 plus interest at 2% over prime rate beginning January 1, 2005 (6.50% at March 31, 2009), 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.	$	238,895	$	247,148
Line of credit to Savings Bank of Mendocino, payable in monthly installments of interest only at 2% over prime rate beginning February 13, 2009 with a minimum rate of 6.50% (6.500% at March 31, 2009). The note payable for the line of credit is collateralized by a security interest of first priority in all accounts receivable, inventory, equipment, instruments, general intangible and contract rights along with a personal guarantee from the Company’s majority shareholders. The line is for a maximum of $25,000 and $13,000 has been used as of March 31, 2009.		13,000		14,000
Note payable to majority shareholders, Paul and Joan Katzeff, uncollateralized, payable in monthly installments of $2,000 plus interest at 12%paid monthly, due on July 15, 2010 .		29,100		35,100
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.		19,919		19,919
Note payable to Mercedes-Benz, payable in monthly installments of $691, including interest at 6.99%, collateralized by a vehicle, final payment due on September 24, 2009.		4,065		6,046
Note payable to Chrysler Financing, payable in monthly installments of $329, including interest at 15.492%, collateralized by a vehicle, final payment due on January 24, 2011		6,323		7,063

11

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

Capital Lease Obligations	3/31/2009	12/31/2008
Note payable to G.E. Capital, payable in monthly installments of $1,355, including interest at 16.78%, collateralized by equipment, final payment due on March 1, 2009.	—	3,952
Note payable to Avaya Financial Services, payable in monthly installments of $824, including interest at 5.855%, collateralized by equipment, final payment due on August 1, 2009.	4,062	6,451
Note payable to Axis Capital, payable in monthly installments of $709, including interest at 15.473%, collateralized by store fixtures, final payment due September 14, 2009.	3,413	5,358
Note payable to US Bancorp Manifest Funding Services payable in monthly installments of $462, including interest at 14.237%, collateralized by equipment, final payment due on May 22,2009	908	2,229
Note payable to Marlin Leasing payable in monthly installments of $544, including interest at 17.172%, collateralized by equipment, final payment due on March 1, 2010.	6,920	8,244
Note payable to Marlin Leasing payable in monthly installments of $428, including interest at 18.00%, collateralized by equipment, final payment due on October 1, 2010.	6,078	7,072
Note payable to US Bancorp Manifest Funding Services payable in monthly installments of $533, including interest at 22.24%, collateralized by equipment, final payment due on January 10, 2010.	4,870	6,180

12

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

7. Long Term Debt (continued)

Capital Lease Obligations	3/31/2009			12/31/2008
Note payable to Bank of the West payable in monthly installments of $489, including interest at 12.69% collateralized by equipment, final payment due on May 1, 2013	$	18,915		$	19,764
Note payable to BSB Leasing payable in monthly installments of $285, including interest at 15.89%, colateralized by equipment, final payment due on June 2, 2012		11,937			12,634
Note payable to BSB Leasing payable in monthly installments of $390, including interest at 14.30%, collateralized by equipment, final payment due June 2, 2012		8,641			9,150
	$	377,046		$	410,310
Less current portion		(335,469	)		(355,488	)
Long term portion of notes payable	$	41,577		$	54,822

Interest paid for the three months ended March 31, 2009 and 2008 was $9,354 and $10,296, respectively.

As of March 31, 2009, maturities of notes payable and capital lease obligations for each of the next five years and in the aggregate were as follows:

Years Ending June 30,
2009	$	325,135
2010		28,647
2011		11,818
2012		9,077
2013		2,369
Thereafter		—
	$	377,046

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

8. Income Taxes

Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company’s deferred tax assets consist of the benefit from net operating loss (NOL) carryforwards and temporary differences. The net operating loss carryforwards expire in various years through 2028. The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operation loss carryforwards. Net operating loss carryforwards may be further limited by a change in company ownership and other provisions of the tax laws.

13

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

The Company’s deferred tax assets, valuation allowance, and change in valuation allowance as of March 31, 2009 are as follows:

Period Ending	Estimated NOL Carryforward less Temporary Differences		NOL Expires	Benefit From NOL		Valuation Allowance			Change in Valuation Allowance			Net Tax Benefit
March 31, 2009
Federal	$	103,695	2017	$	15,554	$	(15,554	)	$	(15,554	)	$	—
		128,576	2018		19,286		(19,286	)		(19,286	)		—
		96,867	2023		14,530		(14,530	)		(14,530	)		—
		49,714	2024		7,457		(7,457	)		(7,457	)		—
		18,755	2025		2,813		(2,813	)		(2,813	)		—
		135,234	2026		20,285		(20,285	)		(20,285	)		—
		113,645	2027		17,047		(17,047	)		(17,047	)		—
		19,250	2028		2,888		(2,888	)		(2,888	)		—
	$	665,736		$	99,860	$	(99,860	)	$	(99,860	)	$	—
State	$	99,944	2016	$	8,835	$	(8,835	)	$	(8,835	)	$	—
		79,918	2017		7,065		(7,065	)		(7,065	)		—
		23,657	2018		2,091		(2,091	)		(2,091	)		—
	$	203,519		$	17,991	$	(17,991	)	$	(17,991	)	$	—

Income taxes at the expected statutory rate are reconciled to the Company’s actual income taxes as follows:

	2009
Tax (benefit) at federal statutory rate	(15.00	)%
State tax (benefit) net of federal benefit	(7.50	)
Non-taxable differences	0.65
Temporary differences	8.19
Valuation allowance	15.95
Tax provision (benefit) - effective rate	2.29

Income taxes paid for the three months ended March 31, 2009 and the year ended December 31, 2008 were $800 and $800 respectively.

14

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

9. 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, 2009, minimum annual lease payments due under these agreements for each of the next five years and in the aggregate were:

Years Ending December 31,
2009		9,709
2010		5,932
2011		5,391
2012		5,391
2013		5,391
Thereafter		1,487
	$	33,301

Total operating lease payments for the three months ended March 31, 2009 and 2008 was $1,657 and $8,548 respectively.

10. 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 ten-year lease term ends May 31, 2015. Rental expense under the lease for the three months ended March 31, 2009 and 2008 was $25,800 in both years.

The Company also leases a bakery establishment in Mendocino, California under an operating lease expiring September 30, 2011. Rental expense under this operating lease for the three months ended March 31, 2009 and 2008 was $13,290 and $12,660, respectively.

As of March 31, 2009, minimum future rental payments under noncancelable facilities operating leases for each of the next five years and in the aggregate are as follows:

Years ending December 31,
2009	$	117,930
2010		159,690
2011		147,120
2012		103,200
2013		103,200
Thereafter		206,400
	$	837,540

15

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December 31, 2008

11. Related Party Transactions

As of March 31, 2009, the Company has an interest only note payable, due on demand, to Paul and Joan Katzeff, (the Company’s majority shareholders, directors and officers). In addition, the Company has a note payable to Paul and Joan Katxeff with a principal balance of $29,100, as of March 31, 2009. The loan is uncollateralized, is due July 15, 2010, requires monthly payments of $2,000 and bears interest at 12% per annum. 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, 2009, is as follows:

Interest payments	$	1,435
Rent payments	$	21,500
Principal payments	$	6,000

The Company’s majority shareholders’ also guarantee certain notes payable of the Company (See Note 7).

12. Information on Business Segments

As noted in Note 1 in the Notes to the Financial Statements, the Company operates in two different business segments: the specialty coffee business and the retail bakery business. The specialty coffee business, although primarily based in California, sells to grocery stores, serving locations and other retail outlets throughout the United States and some international business. The bakery sells exclusively on the north coast of California in Mendocino and Fort Bragg.

Selected financial data by business segment

	3/31/2009			3/31/2008
Net Sales
Specialty Coffee	$	964,655		$	931,337
Bakery		125,808			120,967
Total	$	1,090,463		$	1,052,304
Intersegment Sales
Specialty Coffee	$	10,813		$	7,232
Total Sales	$	1,079,650		$	1,045,072
Operating Income/(Loss)
Specialty Coffee	$	11,656		$	(29,699	)
Bakery		(34,969	)		(30,107	)
Total	$	(23,313	)	$	(59,806	)
Depreciation and Amortization
Specialty Coffee	$	19,346		$	21,536
Bakery		6,236			4,310
Total	$	25,582		$	25,846

16

Thanksgiving Coffee Company, Inc.

Notes to Financial Statements (continued)

March 31, 2009 and December

12. Information on Business Segments (continued)

	3/31/2009		03/31/2008
Interest Expense
Specialty Coffee	$	8,513	$	10,286
Bakery		841		10
Total	$	9,354	$	10,296
	3/31/2009		12/31/2008
Assets
Specialty Coffee	$	880,374	$	919,093
Bakery		113,851		114,340
Total	$	994,225	$	1,033,433
Fixed Assets
Specialty Coffee	$	261,864	$	278,647
Bakery		82,136		87,166
Total	$	344,000	$	365,813

17

ITEM 2. 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-Q 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-Q. 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 primarily due to declines in the direct distribution sales method of the Company’s business (i.e., delivery by company truck). Increased competition, customer attrition and customers roasting green beans for their own use have all had a negative impact on the Company’s sales. The Company has tried a number of strategies that have not proven effective in abating these declines. The Company has changed its method of distribution to rely less on direct distribution (with only two routes) and instead uses independent distributors or shipping direct (via UPS or other common carrier). The effect of these changes on the Company’s sales has been limited but has reduced distribution expenses. 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.

The Company pays substantially more for its green beans than the market price, because of quality, organic nature of many of its lines and the fact that it uses fair-traded coffees. Green bean costs have continued to rise and have placed pressure on margins. If green bean costs 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 green bean pricing, and the Company cannot offset costs by raising prices, it would have a negative impact on the Company and its margins.

The Company has a revolving line of credit for $25,000 of which $13,000 is currently outstanding and a term debt facility of $238,895 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, 2009 versus March 31, 2008

Consolidated	Increase (Decrease)			Percent Change
Net Sales	$	34,578		3.3	%
Cost of Sales		20,105		3.2	%
Gross Margin %		.1	%	—	%
Selling, G&A Expense		(21,756	)	(4.8	)%
Depreciation And Amortization		(264	)	(1.0	)%
Interest Expense		(942	)	(9.2	)%
Net Income (Loss)		37,511		—	%

18

Consolidated net sales for the three months ended March 31, 2009 were $1,079,650, up 3.3%, or over $34,000 when compared with net sales of $1,045,072 for the same period in fiscal 2008.

Distribution revenues (e.g., revenues generated on the Company’s own truck distribution) were down $15,000 or 2.5% for the three months ended March 31, 2009, when compared with distribution sales for the same period in 2008. The decline appears to be a result of slower volume at existing customers as no customers have been lost. It is also a result of lower sales to a grocery chain in California that eliminates the Company’s products when they remodel existing stores.

National revenues (e.g., revenues not derived by mail order and direct truck distribution) were up $50,000, or 14% for the three months ended March 31, 2009 when compared to national sales for the same period in 2008. The increase is attributed to higher sales for the Company’s distributor in southern California, a new distributor in the central valley of California and the addition of a new museum in the bay area.

Mail order revenues (e.g., revenues generated from product sold directly to the consumer either through print media or the Internet) decreased $2,500, or 5% for the three months ended March 31, 2009 when compared to mail order sales for the same period in 2008. The decrease was attributable to a decline in the Cornucopia program through the elimination of some partners and a slowdown in the Company’s online store volume.

Sales of the Company’s bakery were up $5,000 for the three months ended March 31, 2009 when compared to bakery sales for the same period in 2008.

Consolidated cost of sales for the three months ended March 31, 2009 were $650,025, up 3.2%, or over $20,000 when compared with the cost of sales of $629,920 for the same period in 2008. This increase was a result of an increase in green bean costs of nearly $23,000.

Consolidated gross margin percentage (gross profit as a percentage of net sales) for the three months ended March 31, 2009 was 39.79%, up .07 percentage points when compared with gross margin of 39.72% for the same period in 2008.

Consolidated selling, general and administrative expenses were $427,356 for the three months ended March 31, 2009, a decrease of 4.8% or over $21,000 when compared with the selling, general and administrative expenses of $449,112 for the same period in 2008. The decrease was a result of lower wages of $5,000 and a reduction of travel expense of $17,000 because there was no promotional tour of interfaith groups in the United States as there was last year for the Mirembe Kowamera program.

Consolidated depreciation and amortization expenses for the three months ended March 31, 2009 were $25,582, a 1% decrease, or $264, when compared to depreciation expense of $25,846 for the same period in 2008.

Consolidated interest expense for the three months ended March 31, 2009 was $9,354, a 9.2% decrease or nearly $1,000 compared with interest expense of $10,296 for the same period in 2008. Total debt is $377,046 at March 31, 2009 versus $410,310 at December 31, 2008.

As a result of the foregoing factors, the Company had a consolidated net loss of $35,801 for the three months ended March 31, 2009, compared to a loss of $73,312 for the same period in 2008. Because of the increases in the cost of green beans, there can be no assurances that the Company will be profitable in future periods.

19

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2009, the Company had working capital deficit of ($102,011) versus working capital deficit of ($79,037) as of December 31, 2008. The decrease in working capital is due primarily to the increase in accrued liabilities of nearly $50,000 offset somewhat by a decrease in accounts payable of nearly $20,000. The working capital is a negative amount because the Company has reclassified a note from the Savings Bank of Mendocino of $238,895 to a current liability from long term debt because the loan is due in less than twelve months and requires a balloon payment in December of 2009. The Company plans to renew the loan at that time. However, there can be no assurances the Company will be successful in renewing the note.

Net cash provided by operating activities was $79,368 for the three months ended March 31, 2009 compared to net cash used by operating activities of $9,949 during the same period in 2008. The increase in net cash provided by operating activities in the three months of 2009 was the result of a reduced loss of over $37,000, a larger decline in inventory, receivables and prepaid expenses of over $13,000 and an increase in accrued liabilities of nearly $50,000.

Cash used in investing activities was $5,085 for the three months ended March 31, 2009 compared to $25,037 used in the same period in 2008. Capital additions for the first three months of 2009 were for brewers and grinders.

Net cash used in financing activities for the three months ended March 31, 2009 was $33,264 compared to net cash used in financing activities of $27,543 during the same period in 2008. The cash used by financing was a result of paying existing debt.

Because of the cash provided by operating activities, capital acquisitions and repayment of debt, cash at March 31, 2009 increased over $41,000 from the cash balance at January 1, 2009 and was over $51,000 higher than cash at March 31, 2008.

In November 2004, the Company secured a term note with the Savings Bank of Mendocino. This note is amortized over ten years and is payable in five years with a balloon payment on December 1, 2009 at 2% over prime rate. The rate was 6.50% at March 31, 2009. The 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. As of March 31, 2009, the balance on the note is $238,895 (See Note 7 of Notes to the Financial Statements).

The Company also has a $25,000 line of credit with the Savings Bank of Mendocino. The credit line is interest only payments renewable annually at 2% over the prime rate with a minimum rate of 6.5 %. The rate was 6.50% at March 31, 2009 with an outstanding balance on the line of $13,000. 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 7 of Notes to Financial Statements)

The Company has an interest-only note for $19,919 and a principal and interest note for $29,100 at March 31, 2009, payable to the majority shareholders, directors and officers, Joan and Paul Katzeff. The interest-only note is at 12%, with balance due on demand after June 30, 1996 and is uncollateralized. The principal and interest note is at 12% payable in monthly installments of $2,000 plus interest with the balance due on July 15, 2010 and is uncollateralized. (See Note 7 and Note 11 of Notes to Financial Statements)

At March 31, 2009, the Company had total borrowings of $377,046 including $251,895 owing to the Savings Bank of Mendocino. This compares to total borrowings of $410,310 as of December 31, 2008, including $261,148 outstanding to the Savings Bank of Mendocino.

For long-term debt, see Note 7 and Note 11 of the Notes to Financial Statements. For operating leases, see Note 9 of the Notes to Financial Statements. For real estate leases, see Note 10 and Note 11 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	$	377,046	$	325,135	$	40,465	$	11,446	$	—
Operating Leases		33,301		9,709		11,323		10,782		1,487
Real Estate Leases		837,540		117,930		306,810		206,400		206,400
Total Cash Obligations	$	1,247,887	$	452,774	$	358,598	$	228,628	$	207,887

20

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 “11 — Related Party Transactions” in the Notes to the Financial Statements.

SEASONALITY AND OTHER FACTORS AFFECTING PERFORMANCE

The Company’s business is seasonal in nature. The seasonal availability of green bean coffee in the first two quarters of the year and increased sales in the last quarter historically creates a high use of cash and a build up in inventories in the first two quarters, with a corresponding decrease in inventory and increase in cash in the last quarter. Because of the seasonality of the Company’s business, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year. Furthermore, past seasonal patterns are not necessarily indicative of future results.

INDEMNIFICATION MATTERS

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

At present, there is no pending litigation or proceeding involving any director, officer, employee or agent of the Company where indemnification would be required or permitted. The Company is not aware of any pending or threatened litigation or proceeding that might result in a claim for such indemnification.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s stock is generally illiquid and there have been few trades in recent years. There have been three trades in the Company’s Common Stock since 1999. In June 2004, 750 shares were traded at $4.50 per share. In December 2005, 400 shares were traded at $2.00 per share.

ITEM 4. 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, 2009. 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 2009 that have materially affected or are reasonably likely to affect the Company’s internal controls over financial reporting.

21

Part II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

-None-

ITEM 1A. RISK Factors

We have concerns regarding the current economic situation. The United States and the global economy is experiencing severe instability in the commercial and investment banking systems which is likely to continue to have far-reaching effects on the economic activity in the country for an indeterminable period. The long-term impact on the United States economy and the Company’s operating activities and ability to raise capital cannot be predicted at this time, but may be substantial.

Our coffee roasting facility is subject to state and local air-quality and emissions regulations. If we encounter difficulties in obtaining any necessary licenses or complying with these laws and regulations our ability to produce any of our roasted products would be severely limited. We believe that we are in compliance in all material respects with all such laws and regulations and we have obtained all material licenses that are required for the operation of our business. We are not aware of any environmental regulations that have or that we believe will have a material adverse effect on our operations.

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

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, The Registrant has duly caused this Quarterly Report to be signed on it behalf by the undersigned, thereunto duly authorized.

THANKSGIVING COFFEE COMPANY, INC.

Name	Title	Date
/s Paul Katzeff Paul Katzeff	Chief Executive Officer	May 15, 2009
/s/ Joan Katzeff Joan Katzeff	President	May 15, 2009
/s/ Sam Kraynek Sam Kraynek	Chief Financial Officer	May 15, 2009

23

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Paul Katzeff, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Thanksgiving Coffee Company, Inc.;

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

4. The small business issuer’s other certifying officers 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 small business issuer 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 small business issuer, 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 small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting;

5. The small business issuer’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’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 small business issuer’s ability to record, process, summarize and report financial information;

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

Date: May 15, 2009
By:	/s/ Paul Katzeff
Paul Katzeff, Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Joan Katzeff, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Thanksgiving Coffee Company, Inc.;

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

4. The small business issuer’s other certifying officers 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 small business issuer 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 small business issuer, 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 small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting;

5. The small business issuer’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’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 small business issuer’s ability to record, process, summarize and report financial information;

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

Date: May 15, 2009
By:	/s/ Joan Katzeff
Joan Katzeff, President

EX-31.3

Exhibit 31.3

CERTIFICATIONS

I, Sam Kraynek, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Thanksgiving Coffee Company, Inc.;

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

4. The small business issuer’s other certifying officers 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 small business issuer 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 small business issuer, 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 small business issuer’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 small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting;

5. The small business issuer’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’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 small business issuer’s ability to record, process, summarize and report financial information;

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

Date: May 15, 2009
By:	/s/ Sam Kraynek
Sam Kraynek, 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

In connection with the Quarterly Report of Thanksgiving Coffee Company, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, the undersigned Chief Executive Officer of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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

May 15, 2009

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

In connection with the Quarterly Report of Thanksgiving Coffee Company, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, the undersigned President of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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

May 15, 2009

EX-32.3

Exhibit 32.3

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Thanksgiving Coffee Company, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, the undersigned Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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/ Sam Kraynek

Chief Financial Officer

May 15, 2009