U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10K-SB
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
                             SECURITIES ACT OF 1934

                       FOR THE PERIOD ENDED MARCH 31, 2002

                        COMMISSION FILE NUMBER 000-28595

                              PEABODYS COFFEE, INC.
                 (Name of Small Business Issuer in its Charter)

     Nevada                                           87-0468654
     (State or other jurisdiction of                  (I.R.S. Employer
     Incorporation or organization)                   Identification No.)


     3845 Atherton Road, Suite 9
     Rocklin, California                              95765
     (Address of Principal Executive Office)          (ZipCode)

                                 (916) 632-6090
                           (Issuer's Telephone Number)

              Securities registered under Section 12(b) of the Act:
                                      None

              Securities registered under Section 12(g) of the Act:
                         Common Stock, $0.001 Par Value
                                (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 filings 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 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 or any
amendment to the Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year:   $3,059,676

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates, based upon the average bid and asked price of such common equity
as of June 25, 2002, [in the past 60 days], was approximately $11,417,267.

The  number of shares  outstanding  of each of the  Issuer's  classes  of common
equity, as of the latest practicable date, is 19,516,695 shares of common stock,
$0.001 par value.

Transitional Small Business Disclosure Format (Check one): Yes [x]; No [ ]

                                      -1-
<PAGE>
                                TABLE OF CONTENTS


PART I  (Alternative 2)

Item 1   Description of Business                                               3
Item 2   Description of Property                                              20
Item 3   Directors, Executive Officers and Significant Employees              20
Item 4   Remuneration of Directors and Officers                               21
Item 5   Security Ownership of Management and Certain Securityholders         22
Item 6   Interest of Management and Others in Certain Transactions            23

PART II

Item 1   Market Price of and Dividends on the Registrant's Common
         Equity and Other Shareholder Matters                                 24
Item 2   Legal Proceedings                                                    25
Item 3   Changes in and Disagreements with Accountants                        25
Item 4   Submission of Matters to a Vote of Security Holders                  26
Item 5   Compliance with Section 16(a) of the Exchange Act                    26
Item 6   Reports on Form 8-K                                                  26

PART F/S

PART III

Index to Exhibits                                                             28

SIGNATURES                                                                    29

                                      -2-
<PAGE>

                    INFORMATION REQUIRED IN ANNUAL REPORTS OF
                       TRANSITIONAL SMALL BUSINESS ISSUERS

                             PART I (ALTERNATIVE 2)

ITEM 1.   DESCRIPTION OF BUSINESS
          (FORM 1-A  MODEL B  ITEM 6)

OVERVIEW

     Peabodys Coffee,  Inc., a Nevada corporation (the "Company" or "Peabodys"),
is a retailer  and  marketer  of  certified  organic  branded  specialty  coffee
beverages  and  packaged  whole bean  coffees.  The  Company  plans to focus its
efforts on  establishing  wholesale  operations to enter the mass retail markets
through the sale of packaged whole bean coffees in supermarkets,  specialty food
stores and other mass retail venues.  The Company currently sells all its coffee
beverages  and whole bean coffees  through  company-operated  retail  stores and
espresso bars  (kiosks),  positioned  primarily in corporate  and  institutional
locations.  As of March 31, 2002,  the Company  operated 16 coffee  kiosks and 2
retail stores located throughout California.

     As described in more detail below,  despite  profitability  with respect to
individual stores and kiosks, the Company as a whole has not been profitable. As
shown in the accompanying financial statements,  for the fiscal year ended March
31, 2002, the Company had a net operating  loss of $632,402,  and an overall net
loss of $611,965.

     Peabodys  has  recently  converted  all  its  operations  from  the  use of
conventionally  grown  coffee  to  using  only  certified  organic  coffee.  The
Company's  organic  coffees are  independently  certified  by Quality  Assurance
International  ("QAI"),  a global leader in organic  certification  who recently
announced its  accreditation  from the United States  Department of  Agriculture
("USDA") to certify  organic claims under the USDA's National  Organic  Program.
The Company has  developed the Black Rhino  Coffee(TM)  trade name for marketing
certified organic coffee.

COMPANY BACKGROUND

PEABODYS CA

     The current  business of the Company  began with the  formation of Peabodys
Coffee, Inc., a California corporation ("Peabodys CA"), in 1995. Co-founder Todd
Tkachuk (who is currently an officer and director with the Company) conceived of
a company that would contract with foodservice  companies,  which held contracts
for  institutional  venues  such  as  corporate   facilities,   universities  or
hospitals. Peabodys CA would enter into a subcontract with the client (which had
a general  contract to provide  food  services to the host  facility) to install
coffee kiosks at the host organization. In return, Peabodys CA paid the client a
percentage of the gross revenues  generated by each kiosk. The Peabodys CA model
is the basis of the  existing  full  service  retail  operations  of the Company
today.

                                      -3-
<PAGE>

THE MERGER

     On March  12,  1999,  Peabodys  CA  entered  into a Plan and  Agreement  of
Reorganization   (the  "Agreement")  with  Mine-A-Max   Corporation,   a  Nevada
corporation  which was a development  stage mining company until its merger with
Peabodys CA. Mine-A-Max  Corporation  (hereinafter referred to as the "Company")
was incorporated under the laws of the State of Nevada on July 26, 1989 with the
name  Kimberly  Mines,  Inc.  for the  purpose of mineral  exploration  and mine
development.  Several  months later the Company was the  surviving  company in a
merger with Blue Ute Mining & Exploration,  Inc., a Utah corporation.  On August
15, 1997 the Company changed its name to Mine-A-Max  Corporation.  The Agreement
provided  for a share  exchange in which the  Company  offered  shareholders  of
Peabodys CA one (1) share of the Company's  common stock in exchange for one (1)
share of Peabodys  CA common  stock.  The shares were  offered by the Company in
reliance on the exemption from  registration  provided by Rule 506 of Regulation
D. The  Agreement  provided  further  that,  after the  Company  had  acquired a
majority of the  outstanding  stock of Peabodys  CA, the Company  would effect a
merger of Peabodys CA into the Company.  On March 15, 1999 the Company  filed an
Amendment  to Articles of  Incorporation  with the State of Nevada  changing its
name from Mine-A-Max  Corporation to Peabodys Coffee, Inc. On June 30, 1999, the
Company  effected a merger  ("Merger"),  with  Peabodys  CA as the  disappearing
corporation and the Company as the surviving corporation. All shares of Peabodys
CA common stock were converted to shares of the Company's common stock.

INDUSTRY OVERVIEW

     The Company  believes that the specialty  coffee  industry will continue to
grow.  According  to Mr.  Robert F.  Nelson,  President  and CEO of the National
Coffee Association  ("NCA"),  "...in 2001, 10% of American adults say they drink
gourmet  coffee every day,  that is,  premium  whole bean or ground  varieties -
exactly  double  from a year  ago." Mr.  Nelson  also  reported,  "...occasional
consumption  of  specialty  coffee has surged  during the past five years in the
United  States,  increasing  from 35% of the adult  population in 1997 to 62% in
2001 - from 80 million to 127 million  drinkers."  (transcript  of  presentation
titled "U.S. Coffee Trends: 1991-2001," in May 2001). According to the Specialty
Coffee  Association of America  ("SCAA"),  total U.S.  retail sales of specialty
coffee  beverages  were $5.3  billion in 2000 while  retail  sales of  specialty
coffee beans reached $2.5 billion.

     The Company  believes that several factors have contributed to the increase
in demand for specialty coffee and will continue to do so, including:

     -    Greater  consumer  awareness  of  specialty  coffee as a result of its
          increasing availability;

     -    Increased  quality  differentiation  over commercial  grade coffees by
          consumers;

     -    Increased  demand for all premium food products,  including  specialty
          coffee,  where the differential in price from the commercial brands is
          small  compared to the perceived  improvement  in product  quality and
          taste;

     -    Ease of preparation of specialty  coffees resulting from the increased
          use of automatic drip coffee makers and home espresso machines; and

     -    Increased pace and pressures of everyday life.  Specialty  coffee fits
          within the "affordable luxury" or "small self-indulgence"  categories,
          and as such directly  addresses a significant trend among consumers to
          make low-cost self-reward purchases to temper the stresses of everyday
          life.

                                      -4-
<PAGE>

SUSTAINABLE COFFEES

     The industry  buzzword  "Sustainable  Coffee"  emerged to represent a broad
spectrum of ideas  relating  to the  production  and  consumption  of  specialty
coffees.  In September 1997, the SCAA created a special task force to define the
term. The result was the adoption of a Statement of Understanding, which defined
the issue as having three legs: Environmental, Economic, and Social.

     The Company  believes  that most coffee  consumers  are unaware of the many
environmental,  economic, and social ramifications surrounding the production of
coffee.  The Company also believes that the majority of the conventional  coffee
industry  does not meet two basic  tests of  sustainability:  protection  of the
environment and social fairness.  A growing number of coffee  producers,  coffee
companies  and  consumers  are actively  taking  steps to  encourage  the coffee
industry to move  toward  more  environmentally  friendly  practices  and toward
practices which are more economically and socially beneficial for producers.

     Three  categories of coffees attempt to meet some or all of these criteria;
they are Organic,  Shade Grown and Fair Trade,  collectively termed "sustainable
coffees".  Each sustainable coffee has its own criteria,  creating  considerable
confusion.  Fair Trade coffee means that coffee farmers receive fair payments in
the form of a "floor" price for their beans. Although this allows coffee farmers
to  make  minimal  profits  during  depressed  market  conditions,   Fair  Trade
guidelines  do  not  adequately  address  issues  surrounding  the  environment,
biodiversity,  species preservation or whether or not the coffee trees come from
genetically modified rootstocks. Shade Grown refers to the condition under which
the coffee is grown.  Shade Grown  coffees  ensures that  multiple  species have
habitat and that there is  preservation of the dwindling  tropical  rainforests.
However,  Shade Grown does not address the use of agrochemicals,  or whether the
coffee trees come from  genetically  modified  rootstocks.  Nor does Shade Grown
coffee address important socioeconomic issues.

CERTIFIED-ORGANIC COFFEE

     Certified  Organic  coffee is produced  with methods that preserve the soil
and prohibit  the use of  agrochemicals.  Organic  coffee  farming  ensures that
shade-friendly  varieties  of coffee are  planted and that  full-sun  hybrids or
genetically modified coffee trees cannot (by law) be used. In addition,  similar
to Fair Trade,  Certified-Organic  coffees offer a premium to farmers and during
low markets  Certified-Organic  farmers are able to turn profits. As Taylor Maid
Farms' Roastmaster, Mark Inman states, "The checks and balances that result from
an organic  system comes from the  interaction  of a wide variety of life forms.
Organic  agriculture  is  more a  system  of  relationships  than a  means  to a
marketable  seal." (from  "Navigating the Sea of Terms: a Coffee Buyers' Guide,"
posted on Taylor Maid Farms'  website).  Organic  growers are also rewarded with
farms that remain fertile for decades,  with clean water,  and with good health.
The  Company  believes  that  Certified-Organic  coffee is the only  coffee that
addresses  the  social,   economic  and  environmental  issues  surrounding  the
sustainability of the coffee industry.

     According to the Sustainable  Coffee Survey of the North American Specialty
Coffee Industry ("SCS"), published in July 2001, Organic coffee has demonstrated
steady 20% annual  growth rates in recent  years.  The SCS also  indicates  that
consumers are willing to pay a modest  premium for  sustainable  coffee but they
prefer one-stop  shopping for their food needs,  and  availability  implies both
convenience  and  visibility.  In  addition,  the SCS  reports  that many  North
American  supermarkets  either do not stock sustainable  coffees or present only
one, often as a single origin or blend,  and usually  Organic.  According to the
SCS,  although  considerable  quantities of Organic  coffee are sold through the
grocery and supermarket channel, their ready availability is limited to the West
Coast and select urban areas.

                                      -5-
<PAGE>

ORGANICS

     The Company believes that organic products are emerging as a major trend in
the U.S. market.  According to Datamonitor  (Natural Foods Merchadiser,  Organic
Trade  Association),  retail  sales of organic  products in the U.S. are growing
steadily,  showing an annual compound growth rate of more than 22% over the last
five years.  A recent  study  published  by the Natural  Marketing  Institute in
cooperation with the Organic Trade Association  estimated that U.S. retail sales
of  organics in 2001 would be $9.3  billion  and $20 billion by 2005  assuming a
"conservative" annual growth rate of 20%.

     The  Company  believes  the U.S.  boom in  organic  products  is  fueled by
increasing consumer demand resulting from:

     -    consumer concerns about the general safety of their food;

     -    the higher quality of certified organic products;

     -    the  social  and  environmental   benefits  that  organic   production
          represents; and

     -    the perceived health benefits of consuming organic products.

     According to Roper Starch  Worldwide  ("RSW") in a report  released in July
2001, concerns about food safety, coupled with the assurances of health benefits
and high quality of  certified  organic  products,  are  strengthening  consumer
interest in organic foods. The RSW report also indicates:

     -    51% of  Americans  predict  that organic food will be a bigger part of
          their diet within the next five years;

     -    Six in ten  Americans  (63%) buy organic  foods and beverages at least
          occasionally;

     -    Two-thirds  (68%) say  organics  will be a major food trend in the new
          millennium.

     The Company  believes that  certified  organic foods and beverages  provide
American  consumers with peace of mind, an assurance of safety and the chance to
cast a vote  for a more  environmentally  friendly  kind of  agriculture.  It is
important to note that while 63% of U.S. consumers say they buy organic foods or
beverages at least  occasionally  when they shop, the Company  believes that the
lack of  availability  at  conventional  supermarkets  and grocery stores is one
reason many people don't buy more organic.  With high growth forecast  resulting
from rising consumer awareness and demand, the Company believes that the organic
movement is clearly moving from the commercial fringes into the mainstream.

                                      -6-
<PAGE>

BUSINESS STRATEGY

     The Company's  strategic goal is to establish  Black Rhino  Coffee(TM) as a
sustainable  and  dominant  packaged  brand of certified  organic  coffee in the
domestic mass retail market. This strategy represents the Company's  adolescence
- the transition from Peabodys' full service units (kiosks and retail stores) in
limited-geography   institutional  markets  to  a  widely  distributed  packaged
consumer brand called Black Rhino Coffee(TM).

BLACK RHINO COFFEE(TM)

     The Company  believes the specialty  coffee market  environment is one that
depends  heavily on brand  presence  for  sustainable  success.  The Black Rhino
Coffee(TM) brand differentiates itself from other specialty coffee brands by the
following:

     Certified  Organic Only. The Company offers ONLY certified  organic coffee.
The Company  does not offer any coffees  that are  produced  using  conventional
coffee  practices.  All Black Rhino  Coffee(TM) is naturally grown - no chemical
pesticides,  herbicides,  fungicides or chemical  fertilizers  have ever come in
contact with Black Rhino Coffee(TM) beans.

     High Quality  Coffee.  The Company sources and procures the highest quality
certified  organic  arabica beans  available  from the world's  coffee-producing
regions.  Each varietal of coffee is roasted by hand in small batches to achieve
its peak flavor. The Company believes that organically grown coffee beans mature
more slowly as nature intended - resulting in superior flavor.

     Competitive  Price.  The Company  offers Black Rhino  Coffee(TM)  at prices
comparable to non-organic high quality  specialty brands such as Starbucks.  The
Company believes that pricing high quality organic coffee  comparable to leading
non-organic  brands  distinguishes  Black Rhino  Coffee(TM)  from other  organic
coffees.  The Company  believes the biggest  barrier to  converting  non-organic
consumers to quality  organic  products is excessive  price  premiums  typically
associated with organic products.

     The Company has begun the transition from an operations  intensive  company
to a highly skilled corporation  focusing on brand ownership and management.  At
the appropriate  time, the Company  intends to exit its full service  operations
entirely and redeploy the capital in support of the  Company's  strategic  goal.
The Company  intends to complete  this  transition  within two years in a manner
that will  optimize  shareholder  value.  Full service  operations  are entirely
different in modus operandi,  capital needs,  system  requirements and essential
management   skills  from  those  of  packaged   consumer  brand  ownership  and
management.  The Company will only exit the full  service  business at the right
time for the right price.  In the meantime the Company will continue to give its
full service operations appropriate support.

     The  Company  recognizes  the need to  develop  in-house  skills  for brand
management.  The Company  believes this can be  accomplished  with a "light" but
"highly  skilled"  central  staff.  Although  the Company  intends to  outsource
production,  packaging  and  fulfillment,  it is essential to recruit or develop
top-level skills for the management of the Black Rhino Coffee(TM)  supply chain.
The Company believes that much of the sales,  marketing and  distribution  tasks
associated  with the Black Rhino  brand can be  outsourced  or executed  through
strategic  alliances,  however,  the Company will require high quality  consumer
brand management skills within the organization.

                                      -7-
<PAGE>

FULL SERVICE OPERATIONS

     The Company's  existing  business has been developed on a business strategy
based on the following concepts:

     Business and Institutional  Locations.  The Company focuses on locating its
coffee  kiosks  in  business  and  institutional  facilities.  The  Company  has
experienced  both  lower  competition  and  reduced  advertising  and  marketing
expenses  by  installing  kiosks in such  areas,  since the kiosks have a nearby
captive audience of employees and students at business and institutional sites.

     Low Cost  Operations.  The cost of opening and operating each kiosk is less
than the cost of opening and operating the fixed, retail stores operated by many
other specialty coffee retailers.

     The Company utilizes a  client-host/captive-consumer  model. This model has
two  distinctive  components.  The  client-host  component  means that  Peabodys
establishes  relationships  with  its  "clients"  (large  institutions  and food
service  providers) with the intention of multiple kiosk  placements  within the
client's area of operation. In lieu of rent, Peabodys normally pays the client a
percentage of the revenues  generated by each kiosk,  thereby  giving the client
incentive   to  assist   Peabodys  in  a   successful   kiosk   placement.   The
captive-consumer  component  refers to the  placement of kiosks in heavy traffic
areas where people  (potential  customers)  have already  congregated  for other
reasons. Examples of typical placements are hospitals, or school campuses.

     The typical  Peabodys site, which includes the kiosk,  related  components,
and workspace for employees,  occupies a footprint of  approximately  150 square
feet. Due to the client-host/captive-consumer model described above, the Company
usually incurs no fixed rental expense for this real estate. Likewise, there are
usually  no  common  area  maintenance  charges,  and  all  utilities,  such  as
electricity,  heat, air  conditioning,  and water,  are furnished by the host or
client at no cost to Peabodys.

     As of March 31, 2002,  the Company  operated 16 coffee  kiosks and 2 retail
stores  located  throughout  California.  The Company's 18 operating  units were
located in the  following  venues:  10 were located at  educational  sites (i.e.
colleges and universities); 6 were located at hospitals; and, 2 were store-front
retail  locations.  As of March 31, 2002, the Company achieved  profitability at
the "unit level" at all 18 locations.  The Company  designates a kiosk or retail
store to be profitable  at the "unit level" when the kiosk  generates net income
after  accounting for all expenses  directly related to the specific unit. These
direct  expenses  consist  of: cost of goods sold,  occupancy  costs,  operating
expenses  and fully  loaded labor costs which  include  employer  contributions,
benefits and workers compensation.

EXPANSION PLANS

     As previously  discussed,  the Company's strategic goal is to establish its
packaged  consumer Black Rhino Coffee(TM) brand in domestic mass retail markets.
The  Company  believes  that  the  strength  of  Marathon  Global,  an  Arkansas
corporation  which is a sales and marketing  consultant of the Company,  and its
mass market relationships,  supported by favorable market dynamics (see Industry
Overview) will provide fast growth opportunities for the Black Rhino Coffee(TM).
In addition,  the Company  believes that the Black Rhino  Coffee(TM) brand has a
compelling set of brand  characteristics that clearly  differentiate itself from
its competitors.

     The Company has already experienced significant interest in its Black Rhino
Coffee(TM)  brand. The Company intends to ship its first order of Black Rhino to
a major  national food  distributor  in Virginia in late July 2002. In addition,
the Company has secured the services of several  food  brokers to represent  the
Black  Rhino  Coffee(TM)  brand in various  parts of the U.S.  Through its joint
efforts with the sales force of Marathon Global, the Company  anticipates having
a shelf presence in 1,000

                                      -8-
<PAGE>

supermarkets or mass market retailers by the end of fiscal 2003.

     The Company does intend to allocate resources for the purpose of generating
new  growth  opportunities  for  its  full  service  retail  operations.  Should
high-quality   opportunities   present  themselves  within  existing  geographic
markets,  with existing  operating  management  and supply  infrastructure,  the
Company may, given optimal  conditions,  open additional full service units. All
existing  full  service  operations  will  be  given  appropriate   support.  As
previously  indicated,  the Company has clearly  defined its strategic  goal and
focus to be the  rapid  development  of Black  Rhino  Coffee(TM)  as a  packaged
consumer brand available through mass retail markets.

MARKETING STRATEGY

RETAIL SALES OF BLACK RHINO COFFEE(TM)

     The  Company  is aware of the  potential  pitfalls  associated  with  brand
marketing budgets.  The Company believes that today's consumers are nearly blind
to the  thousands of brand  messages  they are exposed to on a daily basis.  The
risk is to spend, spend and spend on creating consumer brand awareness and trial
purchase. While the Company accepts that a "No Spend" route is not an option, it
does not anticipate any material "above the line" marketing campaigns during its
initial  strategic  cycle aimed at  establishing  shelf presence in the domestic
mass retail  markets.  The Company  will  support  the brand,  but only  through
targeted tactical programs mutually developed and implemented with the Company's
retail clients.  Support costs for this  grassroots  approach will be identified
and budgeted within the basic economic model on a project-by-project basis.

KIOSK SALES

     The Company plans to re-brand all of its full service retail  operations to
Black Rhino Coffee(TM).  The Company fully implemented  certified organic coffee
into its full service  operations in November 2001 and has seen positive results
across the board.  The Company  anticipates  that full service  operations  will
benefit from the development of the Black Rhino Coffee(TM)  brand.  Full service
retail  units have  recently  gained  access to packaged  Black Rhino whole bean
coffees as well as other quality marketing materials.

SUPPLIERS

     The  Company  procures  its  coffee  from  Terranova   Roasting  Co.,  Inc.
("Terranova")  in  Sacramento,  California.  Terranova is a QAI  certified  (see
Overview section) coffee roaster serving central California.  The Company has no
contract in effect with Terranova other than the purchase orders it places.  The
Company  believes  that  Terranova may not be able to meet its needs in the near
future and that it may be necessary to contract out to other  certified  organic
coffee roasters.  The Company has been in contact with other qualified suppliers
and  certified   organic   roasters  who  could  fulfill  the  Company's  supply
requirements in the foreseeable future. Any risk associated with having only one
certified organic coffee roaster, therefore, appears to be minimal.

     The Company  participates  in the  selection  of its green coffee beans and
provides its proprietary specifications for degree of roast and blending recipes
to Terranova, which in turn purchases green beans, and then roasts and blends to
Peabodys'  exact  specifications.  Finished  product is  packaged,  sealed,  and
shipped through the Company's various distribution channels as ordered.

                                      -9-
<PAGE>

     The  Company  uses only the highest  quality  certified  organic  "arabica"
species of coffee.  The  supply and price of coffee are  subject to  significant
volatility.  Although most coffee trades in the commodity market,  coffee of the
quality  sought  by the  Company  tends  to  trade  on a  negotiated  basis at a
substantial premium above commodity coffee prices, depending upon the supply and
demand at the time of  purchase.  The  Company  acknowledges  that high  quality
certified  organic coffee is limited in  availability.  The Company depends upon
its relationships  with its roaster,  with coffee brokers and importers and with
exporters  for its  supply  of  certified  organic  green  coffee.  The  Company
believes,  based on  relationships  established  with its suppliers in the past,
that the risk of non-delivery is low.

     In recent years, green coffee prices have been under considerable  downward
pressure due to oversupply, and this situation is likely to persist in the short
term. The Company believes that low coffee price ranges generally experienced in
recent  years are not  considered  high  enough to support  proper  farming  and
processing  practices.  With the growth of the specialty  coffee segment,  it is
important  that prices  remain high enough to support world  consumption  of the
high  quality  coffees.  The  Company  generally  tries to pass on coffee  price
increases to its  customers.  There can be no assurance that the Company will be
successful in passing on green coffee price  increases  without  losses in sales
volume or gross margin.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS

     The preparation of this section  requires  management to make estimates and
assumptions about the past, current and future activities,  business  practices,
and  financial  records of the  Company.  Actual  results  may differ from these
estimates and assumptions.  Foreseeable  risks and  uncertainties  are described
elsewhere  in this  report  and in detail  under  "Risk  Factors  Affecting  the
Company".

     For the year ended  March 31,  2002,  the  Statements  of Loss show a 42.8%
increase  in sales and a 51.0%  increase  in gross  profit  over the prior year.
Although the Company  incurred a net loss for the year ended March 31, 2002, the
stockholders' deficit decreased due to proceeds from equity financing.

REVENUES

     Net  revenues  for the  year  ended  March  31,  2002  increased  42.8%  to
$3,059,676 from $2,141,946 for the corresponding period in fiscal 2001. This was
due  primarily  to the addition of five new sites in Southern  California  since
March 2001.  Kiosk and retail  outlet sales  accounted  for 100% of revenues for
both periods.  For the year ended March 31, 2002, net revenue was generated from
8 different major clients, with the largest client representing 24% of total net
revenue.

     During the year ended March 31, 2002, 8 units were closed or relocated  due
to unacceptable unit level operating  performance.  For the year ended March 31,
2002,  these 8 units  accounted for $97,923 of the  Company's  net revenue,  and
$6,869 of the total operating loss.

COSTS AND EXPENSES

     Cost of  goods  sold  for the  year  ended  March  31,  2002  increased  to
$1,149,629  from $876,738 for the same period in fiscal 2001. As a percentage of
net revenues, cost of goods sold decreased to 37.6% for the year ended March 31,
2002 from 40.9% for the  comparable  period in fiscal  2001.  The  decrease as a
percentage of net revenues was primarily due to the  elimination  of certain low
margin  products  and  continued  efforts to obtain  favorable  pricing from the
Company's suppliers.

                                      -10-
<PAGE>

     Employee  compensation  and  benefits  for the year  ended  March 31,  2002
increased to $1,445,385 from $1,102,508 for the same period in fiscal 2001. As a
percentage  of net revenues,  employee  compensation  and benefits  decreased to
47.2% for the year ended March 31, 2002 from 51.5% for the comparable  period in
fiscal 2001.  The decrease as a percentage  of net revenues was primarily due to
increased revenues and the efficiencies gained from corporate and administrative
labor cost controls.

     General  and  administrative  expenses  for the year ended  March 31,  2002
increased to $303,688  from  $256,717  for the same period in fiscal 2001.  As a
percentage of net revenues,  general and  administrative  expenses  decreased to
9.9% for the year ended March 31, 2002 from 12.0% for the  comparable  period in
fiscal 2001.  The decrease as a percentage  of net revenues was primarily due to
improved cash controls,  training cost savings  resulting from reduced  employee
turnover,  and reductions in expenses  related to  maintenance,  telephone,  and
travel.

     Occupancy  costs for the year ended  March 31, 2002  increased  to $341,657
from  $276,382  for the same  period  in fiscal  2001.  As a  percentage  of net
revenues,  occupancy  costs decreased to 11.2% for the year ended March 31, 2002
from  12.9%  for the  comparable  period  in  fiscal  2001.  The  decrease  as a
percentage of net revenues was  primarily  due to new client  contracts at lower
revenue sharing rates.

     Director and professional  fees for the year ended March 31, 2002 decreased
to $316,651  from  $372,662 for the same period in fiscal 2001.  The majority of
these expenses  result from the engagement of various  consultants to assist the
Company in obtaining growth financing and in the penetration of new markets.

     Operating  losses for the year ended March 31, 2002  decreased  to $632,402
from  $922,879  for the same  period  in fiscal  2001.  As a  percentage  of net
revenues,  operating losses decreased to 20.7% for the year ended March 31, 2002
from 43.1% for the comparable period in fiscal 2001.

     Net loss for the year ended  March 31,  2002  decreased  to  $611,965  from
$821,376 for the same period in fiscal 2001.  As a percentage  of net  revenues,
net losses  decreased  to 20.0% for the year ended March 31, 2002 from 38.3% for
the comparable period in fiscal 2001.

                                      -11-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Despite the "unit level"  profitability  described above under Full Service
Operations,  the Company has not been profitable.  As the accompanying financial
statements show, for the fiscal year ended March 31, 2002, the Company had a net
operating  loss of $632,402,  and an overall net loss of $611,965.  At March 31,
2002,  the  Company  ended its  fiscal  year with a working  capital  deficit of
$645,367, and a shareholders' deficit of $120,499.

     Because of the  Company's  operating  losses and financial  situation,  the
Independent Auditor's Report of the accompanying  financial statements expresses
a "going concern" opinion.  Going concern contemplates the realization of assets
and the  satisfaction  of  liabilities  in the normal  course of business over a
reasonable  length of time. The Company's ability to continue as a going concern
is  dependent  upon  several  factors.  These  factors  include  its ability to:
generate sufficient cash flows to meet its obligations on a timely basis; obtain
acceptance  of  payment  terms  for  certain  payables  to key  vendors;  obtain
additional  financing or  refinancing as may be required;  aggressively  control
costs, and; achieve profitability and positive cash flows.

     Management  plans to address these challenges by building on the successful
launch of its organic  Black Rhino  Coffee(TM)  brand into the U.S.  mass retail
sector. The brand achieved significant awareness at its introduction in May 2002
at the FMI  supermarket  convention  in Chicago.  The benefit of this channel of
trade is that a small  number of orders  can  significantly  increase  corporate
revenues and earnings.  Management believes that entry to this new market sector
will expose the Company to different  and  potentially  more  fertile  financing
opportunities - such as  project-based  non-dilutive  debt financing  secured by
purchase  order or accounts  receivable  notes.  Management  believes  this is a
crucial new  opportunity  for the Company given the  continuing  uncertainty  of
conventional equity markets.

     Management  also believes its strategic  alliance with Marathon Global will
facilitate  rapid market  penetration  by providing a level of  credibility  and
negotiating  strength otherwise  unavailable to the Company.  Management further
believes  its  engagement  of Ark of Commerce  will lead to  increased  investor
awareness and significant new sources of financing.  Management further believes
that the Company's gradual  transition from reliance on full-service units to an
asset-light  company  concentrating  more on brand ownership and management will
reduce the capital needs for future large tangible asset acquisitions.

     Cash  applied to  investing  activities  for the year ended  March 31, 2002
primarily  consisted of capital additions to property and equipment of $155,156.
The capital additions were primarily  related to the equipment  purchase for the
opening of new  facilities,  and costs  associated  with  refurbishing  existing
kiosks.

     The Company had net cash provided from  financing  activities  for the year
ended March 31, 2002 totaling  $560,330.  In January 2002, the Company secured a
line of credit for up to $300,000. This line of credit is for the acquisition of
equipment and kiosks as well as for meeting  working  capital  needs.  Cash from
financing activities primarily consists of $40,000 from net long-term borrowings
under the line of credit,  and $535,150  net  proceeds  from the sale of Company
stock. These amounts were primarily utilized in the day-to-day operations of the
Company.

                                      -12-
<PAGE>

COMPETITION

     The specialty coffee market is highly competitive.  Starbucks,  the leading
specialty  coffee  retailer,  has a significant  presence  nationwide  through a
distribution  agreement  with Kraft  Foods,  which gives it access to U.S.  mass
retail channels such as supermarkets and warehouse clubs.  However,  the Company
does not believe Starbucks currently offers certified organic coffee through its
distribution agreement with Kraft. Other competing brands with supermarket shelf
presence in multiple regions, including Seattle's Best and Green Mountain, offer
certified  organic coffee,  but only as a supplement to their core  conventional
coffees.  The Company is aware of several  small  regional  brands with  limited
shelf presence, offering certified organic coffee. A number of nationwide coffee
manufacturers,  such as Kraft General Foods  (Maxwell  House),  Proctor & Gamble
(Millstone),   and  Nestle,  distribute  coffee  products  in  supermarkets  and
convenience stores and have the potential to enter the organic coffee market.

     The Company is aware of other  companies  which sell specialty  coffee from
kiosks and coffee carts, but these are all very small operations with only a few
kiosk locations each. The Company is not aware of any other company, on either a
regional or national level,  which specializes in sales of specialty coffee from
kiosks or coffee carts on the same scale as the  Company,  or which has a number
of units approaching that of the Company.  The Company acknowledges that several
large,  well-capitalized multi-unit retailers, such as Starbucks, are capable of
entering the kiosk and coffee cart market. Currently,  however, to the Company's
knowledge  none of these  retailers  are  focusing  on the kiosk or coffee  cart
market.

INTELLECTUAL PROPERTY

     The Company has a registered  service  mark for its  rhinoceros  logo.  The
Company is aware of another  entity in North Carolina that is utilizing the name
"Peabodys"  in the coffee  industry.  The North  Carolina  entity has received a
federal trademark registration of the name "Peabodys." The Company believes that
it has the right to use the name  "Peabodys" in the areas in which it is used by
the Company because of first use of the name in those areas. However, if it were
determined  that  the  Company  were  not able to  continue  utilizing  the name
"Peabodys,"  it could have a material  adverse effect on the Company in that the
Company  would have to select a different  name under which to do business,  and
the Company would have to re-establish  any lost goodwill and name  recognition.
Because of its speculative  nature,  such potential adverse effect is impossible
to quantify at this time.

     The Company has  applications  pending with the U.S.  Patent and  Trademark
Office for the registration of the following  trademarks:  "Black Rhino coffee,"
"Alma  Blend,"  Spiritu  Blend,"  "Coffee  with Body and Soul," and "Black Rhino
Coffee with Rhinoceros  design." The Company has also filed applications for the
registration  of the "Black Rhino  Coffee"  trademark in Canada and the European
Community.

EMPLOYEES

     The Company currently has 94 employees of which 32 are full-time  employees
and 5 of which are administrative.

                                      -13-
<PAGE>

SEASONALITY

     Because the Company  serves both hot and cold coffee  drinks,  the sales of
the Company's products at most kiosk locations do not appear to be significantly
affected by the seasons. However, those kiosks located in educational facilities
are affected by the seasons to the extent that sales are significantly less when
school is not in session.

RISK FACTORS AFFECTING THE COMPANY

     LATE PAYMENTS RELATING TO DEBT. In an earlier private  placement,  Peabodys
offered and sold units,  with each unit consisting of a secured  promissory note
("Secured  Note") and  warrants to  purchase  common  stock.  The Company is now
obligated to make quarterly  payments on the interest  outstanding  and to repay
such  Secured  Notes.  As of March 31,  2002,  the  Company is in default on the
principal  balance  of  the  Secured  Notes  in the  amount  of  $35,000  and is
approximately  $32,132 in  arrears on such  interest  payments  relating  to the
Secured Notes. Under the terms of the Security Agreement relating to the Secured
Notes,  a  noteholder  has the right to (i) declare all  principal  and interest
immediately  due and owing;  (ii)  exercise  its rights and  remedies  under the
California  Commercial Code as a secured creditor having a security  interest in
the collateral,  which includes,  but is not limited to,  equipment,  inventory,
accounts,  trademarks and tradenames and other intellectual property rights (the
"Collateral"),  and, in  particular,  sell any part of the  Collateral and (iii)
exercise any other rights or remedies of a secured party under  California  law.
As of the date  hereof,  the  Company  has not  received  any  notice of default
relating to the Secured Notes.

     OPERATING LOSSES. The Company has incurred operating losses in each quarter
since its inception and has a significant  accumulated  deficit.  For the fiscal
year ended March 31, 2002,  the  Company's  operating  loss was $632,402 and its
shareholders'  deficit was  $120,499.  For the fiscal year ended March 31, 2001,
the Company's  operating loss was $922,879,  and its  shareholders'  deficit was
$197,834.  The  Company  will  continue  to  incur  losses  until  it is able to
establish significant sales of Black Rhino Coffee(TM) and increase the operating
contribution of its full service  operations.  The Company's possible success is
dependent  upon the  successful  development  and  marketing of its services and
products, as to which there is no assurance. Any future success that the Company
might enjoy will depend upon many factors,  including factors out of its control
or which cannot be predicted at this time.  These factors may include changes in
or  increased   levels  of  competition,   including  the  entry  of  additional
competitors and increased  success by existing  competitors,  changes in general
economic conditions,  increases in operating costs, including costs of supplies,
personnel and equipment,  reduced  margins  caused by competitive  pressures and
other factors.  These  conditions may have a materially  adverse effect upon the
Company or may force the Company to reduce or curtail operations.

     NEED  FOR  ADDITIONAL  CAPITAL.  Additional  capital  will be  required  to
effectively  support the  operations  and to otherwise  implement  the Company's
overall  business  strategy,  including rapid growth in  establishing  the Black
Rhino Coffee brand.  However,  there can be no assurance  that financing will be
available when needed on terms that are acceptable to the Company. The inability
to obtain additional capital will restrict the Company's ability to grow and may
reduce the Company's ability to continue to conduct business operations.  If the
Company is unable to obtain additional financing,  it will likely be required to
curtail its marketing and  development  plans and possibly cease its operations.
Any  additional  equity  financing  may  involve  substantial  dilution  to  the
Company's then-existing shareholders.

     RELIANCE ON MAJOR  CLIENTS.  The Company's four largest  clients  represent
59.6% of its gross  revenue for the year ended March 31, 2002.  The four largest
clients represented 63.4% of the gross

                                      -14-
<PAGE>

revenue for the year ended March 31, 2001. The Company would likely experience a
material decline in revenues if it were to lose any of its major clients.

     GENERAL RISKS OF BUSINESS.  The Company has  formulated  its business plans
and strategies based on certain assumptions  regarding the size of the specialty
coffee markets, the Company's anticipated share of the market, and the estimated
price and acceptance of the Company's  products.  Although these assumptions are
based on the best  estimates of  management,  there can be no assurance that the
Company's  assessments  regarding  market  size,  potential  market share of the
Company,  the  price at which  the  Company  will be able to sell its  products,
market acceptance of the Company's  products and a variety of other factors will
prove to be correct.

     GREEN COFFEE COST AND SUPPLY. The supply and price of coffee are subject to
significant  volatility.  Although most coffee  trades in the commodity  market,
coffee of the quality sought by the Company tends to trade on a negotiated basis
at a substantial  premium above  commodity  coffee  prices,  depending  upon the
supply and demand at the time of purchase.  The Company  acknowledges  that high
quality certified organic coffee is limited in availability. The Company depends
upon its relationships  with its roaster,  with coffee brokers and importers and
with  exporters for its supply of certified  organic  green coffee.  The Company
believes,  based on  relationships  established  with its suppliers in the past,
that the risk of  non-delivery  is low. An  increase in the prices of  specialty
coffees could have an adverse effect on the Company's profitability.

     COMPETITION.  As described above, the Company competes  indirectly  against
specialty  coffee  retailers  (such as Starbucks,  Diedrich  Coffee and others),
restaurant and beverage  outlets that serve coffee,  and directly with a growing
number of espresso  stands,  carts,  and stores in the  Company's  markets.  The
Company's  coffee  beverages  compete  directly against all other coffees on the
market,  including those sold in  supermarkets.  The specialty coffee segment is
becoming  increasingly   competitive.   Competitors  with  significant  economic
resources in both existing nonspecialty and specialty coffee businesses, such as
Kraft General Foods (Maxwell House),  Proctor & Gamble (Millstone),  and Nestle,
could at any time enter the Company's  proposed market with  competitive  coffee
products.

     The Company is aware of other  companies  which sell specialty  coffee from
kiosks and coffee carts, but these are all very small operations with only a few
kiosk locations each. The Company is not aware of any other company, on either a
regional or national level,  which specializes in sales of specialty coffee from
kiosks or coffee carts on the same scale as the  Company,  or which has a number
of units approaching that of the Company.  The Company acknowledges that several
large,  well-capitalized multi-unit retailers, such as Starbucks, are capable of
entering the kiosk and coffee cart market. Currently,  however, to the Company's
knowledge  none of these  retailers  are  focusing  on the kiosk or coffee  cart
market.

     ABILITY TO MANAGE  RAPID  GROWTH.  The success of the Company  will require
significant  expansion  of its  business.  Any  such  expansion  could  place  a
significant  strain on the Company's  resources and would require the Company to
hire  additional  personnel  to implement  additional  operating  and  financial
controls and improve coordination between marketing,  administration and finance
functions.  The Company  would be required to install  additional  reporting and
management  information  systems  for sales  monitoring,  inventory  control and
financial reporting. There can be no assurance that the Company would be able to
manage any substantial  expansion of its business,  and a failure to do so could
have a materially adverse effect on the Company's operating results.

                                      -15-
<PAGE>

     DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a significant
extent upon the continued  service of Todd Tkachuk.  Loss of the services of Mr.
Tkachuk could have a material adverse effect on the Company's growth,  revenues,
and prospective business. The Company does not maintain key-man insurance on the
life of Mr. Tkachuk. In addition, in order to successfully  implement and manage
its  business  plan,  the Company will be dependent  upon,  among other  things,
successfully   recruiting   qualified  managerial  and  sales  personnel  having
experience in business.  Competition for qualified individuals is intense. There
can be no assurance  that the Company  will be able to find,  attract and retain
existing employees or that it will be able to find, attract and retain qualified
personnel on acceptable terms.

     LACK OF  DIVIDENDS.  The  Company has not to date paid any  dividends  with
respect to its shares of Common  Stock and does not intend to pay  dividends  in
the foreseeable  future.  Instead,  the Company intends to apply any earnings to
the expansion and development of its business.

     THIN MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. The Company's common stock
has been traded on the OTC  Bulletin  Board  since  November  1997.  The Company
believes  that  factors such as  announcements  of  developments  related to the
Company's business,  fluctuations in the Company's quarterly or annual operating
results,  failure to meet securities analysts' expectations,  general conditions
in the  marketplace  and the worldwide  economy,  developments  in  intellectual
property rights and developments in the Company's relationships with clients and
suppliers  could cause the price of the  Company's  common  stock to  fluctuate,
perhaps substantially.

     OTC ELIGIBILITY  RULE. The NASD requires that companies  trading on the OTC
Bulletin Board, such as the Company,  must be reporting issuers under Section 12
of the Securities Exchange Act of 1934, as amended, and must be current in their
reports under Section 13, in order to maintain price quotation privileges on the
OTC Bulletin  Board ("OTC  Eligibility  Rule").  If the Company  fails to remain
current on its reporting requirements, the Company could be removed from the OTC
Bulletin Board. As a result,  the market liquidity for the Company's  securities
could be severely  adversely  affected by limiting the ability of broker-dealers
to sell the  Company's  securities  and the ability of  shareholders  sell their
securities in the secondary market.

ITEM 2.   DESCRIPTION OF PROPERTY
          (FORM 1-A  MODEL B  ITEM 7)

     The  Company's  principal  executive  offices are located at 3845  Atherton
Road,  Suite 9, Rocklin,  California,  95765,  and its telephone number is (916)
632-6090.  The facility is utilized in the following  manner:  a) administrative
offices,  b) professional  offices,  c) storage and warehousing,  and d) product
development.  The facility  consists of  approximately  three  thousand  (3,000)
square  feet of office and  warehouse  space,  leased for $2,857 per month.  The
lease expires in October 2002. The Company believes that its existing facilities
are adequate for its current use.

     The kiosks which the Company owns and uses for its day-to-day operations on
its sites vary from site to site,  but  generally  occupy  150 square  feet with
related equipment and display space.  Standard  equipment on each kiosk includes
an espresso  machine,  espresso  grinders,  a coffee brewer,  blender,  and cash
register,  and display racks for baked goods and other non-coffee items.  Kiosks
are usually  equipped with wheels for unit mobility,  although at most sites the
kiosk  remains in the same  location  permanently.  Historically,  the cost of a
kiosk,  including  internal  plumbing,  equipment,  inventory  and  signage  was
approximately $30,000.

                                      -16-
<PAGE>

ITEM 3.   DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
          (FORM 1-A  MODEL B  ITEM 8)

     The following table sets forth certain  information  regarding the officers
and directors of Peabodys:

Name                         Age             Position
--------------------------------------------------------------------------------
Todd N. Tkachuk              41              President, Chief Financial Officer,
                                             Secretary and Director
John Phillips                52              Chairman of the Board of Directors
Barry Gibbons                55              Director
Roman Kujath                 68              Director
David Lyman                  55              Director

     Directors   are  elected  to  serve  until  the  next  annual   meeting  of
stockholders  and until their  successors are elected and  qualified.  Currently
there are five seats on the Company's board of directors.

     Directors  serve  without  cash   compensation   and  without  other  fixed
remuneration.  Officers  are elected by the Board of  Directors  and serve until
their successors are appointed by the Board of Directors.  Biographical  resumes
of each officer and director are set forth below.

     Clifford  B. Young was an officer and  director  of the Company  during the
fiscal year ended March 31, 2002.  Mr. Young was terminated as an officer by the
Board of Directors on March 29, 2002. The termination resulted from a pattern of
willful  misconduct  and breach of the duty of loyalty on the part of Mr. Young.
Mr. Young resigned as a director on June 17, 2002. On June 18, 2002, the Company
filed a Current Report on Form 8-K announcing Mr. Young's resignation.

     Todd N.  Tkachuk  has been an officer and  director  of Peabodys  since its
inception.  In connection with the Merger,  Mr. Tkachuk became President,  Chief
Financial Officer, and Secretary,  and a Director, of the Company. In January of
2000, Mr. Tkachuk became Chairman of the Board.  Prior to his  involvement  with
Peabodys, Mr. Tkachuk served as President of Tony's Coffee Company, a Vancouver,
Canada-based  specialty coffee company. From 1987 to 1991, Mr. Tkachuk served as
President and CEO of Skytech Data Supply,  a wholesale  distributor  of computer
consumables  and  peripherals.  Mr. Tkachuk holds a B.A. in Business  Management
from Western Washington University (1983).

     John  Phillips is  chairman  of  Arkansas-based  Marathon  Global,  a fully
integrated  marketing,  sales and service company,  and a consultant to Peabodys
for strategic marketing, sales planning and infrastructure support. Mr. Phillips
is also chairman of international  wine importer Marathon Imports.  For 30 years
prior to his involvement  with Marathon Global and Marathon  International,  Mr.
Phillips built,  owned and operated the Phillips  Company  supermarket  chain, a
privately owned retail company with sales in excess of $300 million.

     Barry J. Gibbons became a Director and Chairman of the Board of Peabodys CA
in October 1996,  and became a Director and Chairman of the Board of the Company
in connection with the Merger. In January of 2000, Mr. Gibbons stepped down from
being Chairman of the Board, but remains a director to the Company. From January
1989 to  December  1993,  Mr.  Gibbons  served as Chief  Executive  Officer  and
Chairman  of Burger  King  Corporation.  From 1984 to 1989,  Mr.  Gibbons was an
employee of Grand

                                      -17-
<PAGE>

Metropolitan,  the U.K.-based international food, drink and retailing group. Mr.
Gibbons graduated from Liverpool University in 1969 with a degree in Economics.

     Roman Kujath has been a director of Peabodys CA since June 1998, and of the
Company  since the  Merger.  Mr.  Kujath has been  president  of Roman M. Kujath
Architects, Ltd. since 1975. Mr. Kujath has been responsible for over $1 billion
worth of  construction,  including the $100 million Place De Ville in Ottawa for
the  Campeau  Corporation.  Mr.  Kujath is a member  of the Royal  Architectural
Institute  of Canada,  a past  corporate  member of the  American  Institute  of
Architects,  a member of the Architectural Institute of British Columbia and the
Alberta Association of Architects.

     David Lyman is currently a partner of Capital Resource  Partners  (formerly
Jones,  Taylor & Co.), a merchant  banking firm providing merger and acquisition
financing, capital funding and advisory services to the transportation industry.
Prior to that, Dr. Lyman worked with a number of companies  including Frito Lay,
Pizza Hut,  northAmerican Van Lines, Capitol Records,  Family Vision Centers and
American Hospitality Concepts as an executive or consultant.  Additionally,  Dr.
Lyman was a principal with the Synectics  Group, a consulting firm that provided
strategic funding and operating solutions to emerging companies. Dr. Lyman has a
Bachelor  of Arts from  Dakota  Wesleyan  University  and a  Masters  and PhD in
Counseling Psychology from the University of Nebraska at Lincoln.

ITEM 4.   REMUNERATION OF DIRECTORS AND OFFICERS
          (FORM 1-A  MODEL B  ITEM 9)

(a) The following table sets forth the aggregate annual  remuneration of each of
the three highest paid persons who are officers or directors for the fiscal year
ending March 31, 2002.

Name of                         Capacities in which                 Aggregate
Individual or Group             Remuneration was received           Remuneration
--------------------------------------------------------------------------------
Todd N. Tkachuk                 Officer and Director                $  78,000.00
Clifford B. Young               Officer and Director                $  60,750.00
Officers and Directors as                                           $ 148,750.00
a Group (2 persons)

     Clifford  B. Young  became an officer  and  director of the Company in July
2001, and served in both capacities for nine months. Mr. Young was terminated as
an officer by the Board of Directors on March 29, 2002. The termination resulted
from a pattern  of willful  misconduct  and breach of the duty of loyalty on the
part of Mr.  Young.  Mr. Young  resigned as a director on June 17, 2002. On June
18, 2002,  the Company filed a Current Report on Form 8-K announcing Mr. Young's
resignation.

 (b) Mr.  Tkachuk does not have an  employment  agreement  with the company.  He
serves in his  capacity as  President,  Secretary  and Chief  Financial  Officer
pursuant to his election to those positions by the board of directors.

ITEM 5.   SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
          SECURITYHOLDERS
          (FORM 1-A  MODEL B  ITEM 10)

(a)  Voting Securities

                                      -18-
<PAGE>

NAME AND ADDRESS                                   NUMBER OF       PERCENTAGE OF
OF OWNER                        TITLE OF CLASS     SHARES OWNED    CLASS(1)
--------------------------------------------------------------------------------

Todd N. Tkachuk                 Common Stock          516,269        2.6%
3845 Atherton Road, Suite #9
Rocklin, CA 95765

Barry Gibbons                   Common Stock        1,220,000        6.3%
6665 S. W. 69th Lane
Miami, FL 33143

Roman Kujath                    Common Stock          613,297        3.1%
8926 119th Street
Edmonton, Alberta
Canada T6G 1W9

David Lyman                     Common Stock          149,480        0.8%
2789 Hospital Road
Saginaw, MI  48603

John Phillips                   Common Stock          350,000        1.8%
5210 Village Parkway
Rogers, AR  72758

All Officers and Directors      Common Stock        2,849,046       14.6%
As a Group (5 persons)

----------------------------
     (1)  Percentage based on 19,516,695 shares of Common Stock outstanding.

(b)  No other person holds or shares the power to vote the securities  described
     below.

(c)  The Company currently has no non-voting securities outstanding.

(d)  Options, Warrants and Rights

<TABLE>
<CAPTION>
                        SECURITIES CALLED FOR BY            EXERCISE                  EXERCISE
NAME OF HOLDER          OPTIONS, WARRANTS AND RIGHTS        PRICE                     DATE
--------------------------------------------------------------------------------------------------
<S>                     <C>                                 <C>                       <C>
Todd N. Tkachuk         866,000 Shares of Common Stock      $0.05 (720,000 shares)    fully vested
                                                                                      in June 2003
                                                            $0.70 (96,000 shares)     fully vested
                                                            $0.80 (50,000 shares)     fully vested

Barry Gibbons           120,000 Shares of Common Stock      $0.05 (120,000 shares)    fully vested
                                                                                      in March 2003

Roman Kujath            241,429 Shares of Common Stock      $0.05 (120,000 shares)    fully vested
                                                                                      in June 2003
                                                            $0.70 (31,429 shares)     fully vested
                                                            $0.80 (20,000 shares)     fully vested
                                                            $1.00 (70,000 shares)     fully vested

David Lyman             240,000 Shares of Common Stock      $0.20 (240,000 shares)    fully vested
                                                                                      in July 2003


                                      -19-
<PAGE>

John Phillips           380,000 Shares of Common Stock      $0.40 (180,000 shares)    fully vested
                                                                                      in April 2004
                                                            $0.40 (200,000 shares)    fully vested
                                                                                      in Dec. 2004

All Officers and Dirs.  1,847,429 Shares of Common Stock    $0.05 (960,000 shares)
As a Group (5 persons)                                      $0.20 (240,000 shares)
                                                            $0.40 (380,000 shares)
                                                            $0.70 (127,429 shares)
                                                            $0.80 ( 70,000 shares)
                                                            $1.00 ( 70,000 shares)
</TABLE>

(e)  The Company has no parents.


ITEM 6.   INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
          (FORM 1-A  MODEL B  ITEM 11)

     The  Company has engaged  the  services  of  Marathon  Global,  an Arkansas
corporation,  to represent the Company in selling its 100% organic coffee to the
mass-market retail sector. Mr. Phillips,  Chairman of the Board of Directors, is
the owner of Marathon Global. The agreement expires December 31, 2004.

                                      -20-
<PAGE>

                                     PART II

ITEM 1.   MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
          EQUITY AND OTHER SHAREHOLDER MATTERS

(A)  MARKET INFORMATION

     The Common Stock is traded in the  over-the-counter  market with quotations
carried on the National  Association of Securities Dealers,  Inc's "OTC Bulletin
Board" under the trading  symbol "PBDY." Prior to the Merger of Peabodys CA into
the Company,  and the associated  amendment of the Articles of  Incorporation to
change the Company's name, the Company was called  Mine-A-Max  Corporation,  and
traded under the symbol  "MAMX" and, for a brief  period,  "MAMXD." The transfer
agent and registrar for the Company is Interwest Transfer Company, Inc., located
in Salt Lake City, Utah.

     The following  table sets forth for the periods  indicated the high and low
bid prices for shares of the Company's  common stock for the past two years,  as
reported  on the OTC  Bulletin  Board.  These  quotations  reflect  inter-dealer
prices, without retail mark-up,  mark-down or commission,  and may not represent
actual transactions.

                                  Sales Price (1)(2)
                                  ------------------
                                   High       Low
                                   ----       ---

         2000
     Second Quarter                1.75       0.25
     Third Quarter                 0.51       0.2188
     Fourth Quarter                0.25       0.065

         2001
     First Quarter                 0.1563     0.0625
     Second Quarter                0.14       0.03
     Third Quarter                 0.85       0.04
     Fourth Quarter                1.38       0.38

         2002
     First Quarter                 0.755      0.51

     (1)  The source for data used in this chart is an OTC Quote Summary  Report
          provided by NASDAQ Trading and Marketing Services.

     (2)  The Company began trading on the OTC Bulletin  Board in  approximately
          November of 1997.

     The Company's  Common Stock is not listed on an exchange or NASDAQ,  but is
currently traded in the over-the-counter  market with price quotes listed on the
OTC Bulletin  Board of the  National  Association  of  Securities  Dealers,  Inc
("NASD").  Accordingly, an investor may find it more difficult to dispose of, or
obtain accurate quotations as to the market value of the common stock.

                                      -21-
<PAGE>

     Recent changes to the rules of the NASD require that  companies  trading on
the OTC Bulletin  Board,  such as the Company,  must be reporting  issuers under
Section 12 of the  Securities  Exchange  Act of 1934,  as  amended,  and must be
current in their reports under Section 13, in order to maintain price  quotation
privileges on the OTC Bulletin Board ("OTC  Eligibility  Rule").  If the Company
fails to remain  current on its  reporting  requirements,  the Company  could be
removed from the OTC Bulletin Board. As a result,  the market  liquidity for the
Company's  securities  could be severely  adversely  affected  by  limiting  the
ability of  broker-dealers  to sell the Company's  securities and the ability of
shareholders to sell their securities in the secondary market.

(B)  HOLDERS

     There are approximately 460 holders of the Company's common stock, which is
the only class of stock currently outstanding.

(C)  DIVIDENDS

     The  Company  has not paid any cash  dividends  on its common or  preferred
stock and does not anticipate  paying any such cash dividends in the foreseeable
future. Earnings, if any, will be retained to finance future growth. The Company
may issue  shares  of common  stock and  preferred  stock in  private  or public
offerings to obtain  financing,  capital or to acquire other businesses that can
improve its performance and growth. Issuance and or sales of substantial amounts
of common stock could adversely affect prevailing market prices of the Company's
common stock through dilution.

(D)  EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                    Number of securities to   Weighted average
                                    be issued upon exercise   exercise price of      Number of securities
                                    of outstanding options,   outstanding options,   remaining available
Plan Category                       warrants and rights       warrants and rights    for future issuance
---------------------------------   -----------------------   --------------------   --------------------
<S>                                         <C>                       <C>                  <C>
Equity compensation plans
approved by security holders                  215,429                 $0.76                358,500

Equity compensation plans not
approved by security holders                4,405,907                 $0.47                    -0-

Total                                       4,621,336                 $0.48                358,500
</TABLE>

     The  Company's two stock option plans were adopted with the approval of the
shareholders.  Equity  securities of the Company which have been  authorized for
issuance  without  the  approval  of  security  holders  are  pursuant  only  to
individual  compensation  arrangements.  These  arrangements  are  comprised  of
consulting  agreements,  broker  warrants and other warrants in connection  with
private  offerings of the  Company's  securities,  and various  non-plan  option
agreements.

                                      -22-
<PAGE>

ITEM 2.   LEGAL PROCEEDINGS

     On May 8, 2002,  the Company filed an action in the United States  District
Court,  Eastern District of California,  against its former CEO,  Clifford Brent
Young,  and others.  Peabodys  Coffee Inc. v. Young et al., No. S-02-994 LLK PAN
("Peabodys v. Young").  The complaint sought  declaratory and injunctive  relief
precluding  the  defendants  from  transferring  in  violation  of  the  federal
securities laws unregistered stock originally issued to Mr. Young. The complaint
also  alleged  that Mr.  Young,  in  association  with a former  employee of the
Company, had breached contractual duties,  and/or committed torts, in connection
with the purported  cancellation of contracts  between the Company and a client,
and in connection with other acts of competition, disparagement, and conversion.
The complaint further sought Mr. Young's removal as a director of the Company.

     On May 29,  2002,  the  Company  moved for a  temporary  restraining  order
precluding  any stock  transfers  and (as to Mr. Young and the former  employee)
from  competition  at  certain  sites  that  are the  subject  of a  non-compete
agreement  between the Company and Mr. Young.  Immediately  prior to the May 30,
2002 hearing on that motion,  Mr. Young filed a petition for bankruptcy with the
United States  Bankruptcy  Court,  Central  District of California,  staying the
action  as to him  (although  he did  not  list  the  action  in his  bankruptcy
petition). The Court denied the remainder of the motion.  Subsequently,  on June
17, 2002, Mr. Young resigned as a director of the Company.

     The  Company  also  challenged  the  client's  legal  right to  cancel  the
contracts.  On June 25, 2002, the Company settled the potential dispute with the
client and the former employee. The settlement provides that the client will pay
the  Company in exchange  for being  allowed to cancel the  contracts;  that the
claims  against the former  employee in Peabodys v. Young will be dismissed with
prejudice; and for other consideration.  The Company also has agreed or proposed
agreement  with most of the other  defendants who hold the  unregistered  stock,
that the claims against them will be dismissed  without  prejudice,  in exchange
for  agreement on the part of these persons not to transfer the stock before the
date such transfers may be made under the federal  securities  laws. The Company
is  assessing  its options as to its claims  against  Mr.  Young in light of his
bankruptcy filing.


ITEM 3.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

     The Company's principal  accountant is Nicholson & Olson, LLP of Roseville,
California.  There have been no disagreements  between the Company's  management
and the Company's accountant.


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

     No matters were submitted to a vote of the  shareholders  during the fourth
quarter of the fiscal year covered by this report.

ITEM 5.  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     The Company was  furnished  with no late  reports on Forms 3, 4 or 5 during
the period covered by this report.

                                      -23-
<PAGE>

ITEM 6.   REPORTS ON FORM 8-K

     No  reports on Form 8-K were  filed  during the last  quarter of the period
covered by this report.

                                      -24-
<PAGE>

                              PEABODYS COFFEE, INC.
                             (A NEVADA CORPORATION)


                          INDEPENDENT AUDITOR'S REPORT
                                       AND
                              FINANCIAL STATEMENTS


                                   YEARS ENDED
                             MARCH 31, 2002 AND 2001

                                      -25-
<PAGE>

                                TABLE OF CONTENTS

INDEPENDENT AUDITOR'S REPORT...................................................1

FINANCIAL STATEMENTS

         Balance Sheets........................................................2

         Statements of Loss....................................................3

         Statements of Stockholders' Deficit...................................4

         Statements of Cash Flows..............................................5

         Notes to Financial Statements......................................6-19

                                      -26-
<PAGE>

                                                                       NICHOLSON
                                                                         & OLSON
                                                    CERTIFIED PUBLIC ACCOUNTANTS
                                                   729 Sunrise Avenue, Suite 303
                                                     Roseville, California 95661
                                                                  (916) 786-7997

                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors and
Shareholders of Peabodys Coffee, Inc.


We have audited the  accompanying  balance  sheets of Peabodys  Coffee,  Inc. (a
Nevada corporation) as of March 31, 2002 and 2001, and the related statements of
loss,  stockholders'  deficit,  and cash flows for the years then  ended.  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 audit 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  referred to above present fairly, in
all material  respects,  the financial  position of Peabodys Coffee,  Inc. as of
March 31, 2002 and 2001,  and the results of its  operations  and its cash flows
for the years then ended in  conformity  with  accounting  principles  generally
accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 3 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net deficit in both working capital and  stockholders'  equity,  which
raise  substantial  doubt  about its  ability to  continue  as a going  concern.
Management's  plans  regarding  those matters are also  described in Note 3. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


Nicholson & Olson
Certified Public Accountants
Roseville, California
July 14, 2002

                                      -27-
<PAGE>

                              PEABODYS COFFEE, INC.
                                 BALANCE SHEETS
                             MARCH 31, 2002 AND 2001

<TABLE>
<CAPTION>
ASSETS                                                           2002             2001
                                                         ------------     ------------
Current Assets
<S>                                                      <C>              <C>
   Cash                                                  $      7,307     $      8,358
   Other receivables                                           20,330           21,505
   Inventories                                                 63,238           50,383
   Prepaid expenses                                            45,536           84,133
                                                         ------------     ------------
         Total Current Assets                                 136,411          164,379

Property and equipment (net)                                  415,610          421,414
Deposits and other assets                                     142,767          102,376
                                                         ------------     ------------
         Total Assets                                    $    694,788     $    688,169
                                                         ============     ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
   Cash overdraft                                        $     48,495     $     48,558
   Accounts payable                                           412,072          420,081
   Accrued expenses                                           279,720          310,544
   Other current liabilities                                       --           52,000
   Short-term borrowings                                           --           14,820
   Current portion of long-term debt                            6,491               --
   Bridge note financing                                       35,000           40,000
                                                         ------------     ------------
         Total Current Liabilities                            781,778          886,003
                                                         ------------     ------------

Long-term debt, net of current portion                         33,509               --
                                                         ------------     ------------
         Total Liabilities                                    815,287          886,003

Stockholders' Deficit
   Common stock authorized - 50,000,000 shares,
   issued and outstanding, 19,048,524 and 14,120,217,
   $.001 par value                                             19,049           14,120

   Paid-in capital                                          4,946,129        4,261,758
   Accumulated deficit                                     (5,085,677)      (4,473,712)
                                                         ------------     ------------
         Total Stockholders' Deficit                         (120,499)        (197,834)
                                                         ------------     ------------

         Total Liabilities and Stockholders' Deficit     $    694,788     $    688,169
                                                         ============     ============
</TABLE>

See accompanying notes to financial statements

                                      -28-
<PAGE>

                              PEABODYS COFFEE, INC.
                               STATEMENTS OF LOSS
                       YEARS ENDED MARCH 31, 2002 AND 2001

                                                          2002             2001
                                                  ------------     ------------

Sales                                             $  3,059,676     $  2,141,946

Cost of Sales                                        1,149,629          876,738
                                                  ------------     ------------

         Gross Profit                                1,910,047        1,265,208

Operating Expenses
   Employee compensation and benefits                1,445,385        1,102,508
   General and administrative expenses                 303,688          256,717
   Occupancy                                           341,657          276,382
   Director and professional fees                      316,651          372,662
   Depreciation and amortization                       131,964          126,959
   Loss on disposal of property and equipment               --           34,481
   Other operating expenses                              3,104           18,378
                                                  ------------     ------------
         Total Operating Expenses                    2,542,449        2,188,087
                                                  ------------     ------------

         Operating Loss                               (632,402)        (922,879)

Other income                                            24,000           32,000
Interest and other expense                             (58,230)         (18,877)
                                                  ------------     ------------

   Net loss before extraordinary item                 (666,632)        (909,756)
   Extraordinary item - forgiveness of debt             54,667           88,380
                                                  ------------     ------------

         Net Loss                                 $   (611,965)    $   (821,376)
                                                  ============     ============

Earnings Per Common Share:
   Net loss before extraordinary item             $      (0.04)    $      (0.09)
   Extraordinary item                                      .00              .01
                                                  ------------     ------------
   Net loss                                       $      (0.04)    $      (0.08)
                                                  ============     ============

See accompanying notes to financial statements

                                      -29-
<PAGE>

                              PEABODYS COFFEE, INC.
                       STATEMENTS OF STOCKHOLDERS' DEFICIT
                       YEARS ENDED MARCH 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                      Common Stock             Additional                          Total
                              ----------------------------      Paid-in        Accumulated      Stockholders'
                                 Shares          Amount         Capital          Deficit          Deficit
                              ------------    ------------    ------------     ------------     ------------
<S>                           <C>             <C>             <C>              <C>              <C>
Balance at March 31, 2000        8,059,304    $      8,059    $  3,244,942     $ (3,652,336)    $   (399,335)

Conversion of convertible
   debt into common stock           20,000              20          19,980               --           20,000
Exercise of warrants and
   stock options                   339,525             339          70,523               --           70,862
Stock issued under
   settlement agreements         1,243,055           1,244         238,264               --          239,508
Sale of common stock             3,288,333           3,288         350,219               --          353,507
Stock issued under service
   agreements                      670,000             670         313,330               --          314,000
Stock issued under
   non-compete agreement           500,000             500          24,500               --           25,000
Net Loss                                --              --              --         (821,376)        (821,376)
                              ------------    ------------    ------------     ------------     ------------

Balance at March 31, 2001       14,120,217          14,120       4,261,758       (4,473,712)        (197,834)

Conversion of convertible
   debt into common stock           12,500              13           4,987               --            5,000
Exercise of warrants and
   stock options                   354,807             355            (355)              --               --
Stock issued under
   settlement agreements             6,000               6           2,394               --            2,400
Sale of common stock             2,440,000           2,440         532,710               --          535,150
Stock issued under service
   agreements                    1,875,000           1,875         126,875               --          128,750
Stock issued under asset
   purchase agreements             240,000             240          17,760               --           18,000
Net Loss                                --              --              --         (611,965)        (611,965)
                              ------------    ------------    ------------     ------------     ------------

Balance at March 31, 2002       19,048,524    $     19,049    $  4,946,129     $ (5,085,677)    $   (120,499)
                              ============    ============    ============     ============     ============
</TABLE>

See accompanying notes to financial statements

                                      -30-
<PAGE>

                              PEABODYS COFFEE, INC.
                            STATEMENTS OF CASH FLOWS
                       YEARS ENDED MARCH 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                 2002             2001
                                                         ------------     ------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                      <C>              <C>
Net Loss                                                 $   (611,965)    $   (821,376)
Adjustments to reconcile net loss to net cash
applied to operating activities:
   Depreciation and amortization                              131,964          126,959
   Gain on extraordinary item - forgiveness of debt           (54,667)         (88,380)
   Loss on disposal of property and equipment                      --           34,481
   Other income from reduction of obligation to issue
   shares of common stock                                     (24,000)         (32,000)
Changes in operating assets and liabilities:
   Receivables                                                  1,175            6,361
   Inventories                                                (12,855)          (9,935)
   Prepaid expenses                                           144,016          233,278
   Cash overdraft                                                 (63)          48,558
   Accounts payable                                            75,002           38,931
   Accrued expenses                                           (29,573)         128,985
                                                         ------------     ------------
         Net cash applied to operating activities            (380,966)        (334,138)
                                                         ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale and transfer of equipment                      8,745           22,500
Additions to property and equipment                          (155,156)         (68,100)
Changes to deposits and other assets                          (34,004)          (9,894)
                                                         ------------     ------------
         Net cash applied to investing activities            (180,415)         (55,494)
                                                         ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term borrowings                 40,000               --
Proceeds from issuance of short-term borrowings                    --          225,200
Principal reductions of short-term borrowings                 (14,820)        (115,000)
Net proceeds from sale of stock                               535,150          285,532
Payments on capital lease obligations                              --           (1,113)
                                                         ------------     ------------
         Net cash provided by financing activities            560,330          394,619
                                                         ------------     ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS           (1,051)           4,987

CASH AND CASH EQUIVALENTS
Beginning of year                                               8,358            3,371
                                                         ------------     ------------
End of year                                              $      7,307     $      8,358
                                                         ============     ============
</TABLE>

See accompanying notes to financial statements

                                      -31-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

The  notes  to  the  financial  statements  include  a  summary  of  significant
accounting  policies and other notes considered  essential to fully disclose and
fairly  present  the  transactions  and  financial  position  of the  company as
follows:

Note 1     -    Significant Accounting Policies

Note 2     -    Related Party Transactions

Note 3     -    Going Concern

Note 4     -    Inventories

Note 5     -    Acquisitions

Note 6     -    Property and Equipment, and Intangible Assets

Note 7     -    Accounts Payable

Note 8     -    Accrued Expenses

Note 9     -    Short-Term Borrowings

Note 10    -    Lease Obligations

Note 11    -    Long-Term Debt

Note 12    -    Income Taxes

Note 13    -    Bridge Note Financing

Note 14    -    Stock Options and Warrants

Note 15    -    Earnings Per Common Share

Note 16    -    Supplemental Disclosures to Statement of Cash Flows

Note 17    -    Forgiveness of Debt

Note 18    -    Risks and Uncertainties

Note 19    -    Concentrations

Note 20    -    Commitments and Contingencies

Note 21    -    Subsequent Events

                                      -32-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Description of Business
-----------------------
Peabodys  Coffee,  Inc. (the "Company") owns and operates retail espresso coffee
bar kiosks in a variety of  corporate  and  institutional  locations  throughout
California  and Nevada.  The Company  has gained  access to this  segment of the
specialty coffee market by contracting with existing food service providers such
as Sodexho America,  Aramark, and The Compass Group, and by contracting directly
with host facilities.  The Company's  product  offerings  include:  high quality
coffee and espresso beverages, fruit smoothies,  pastries,  accompaniments,  and
coffee related accessories.

Estimates and Assumptions
-------------------------
The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses  during the reporting  period.  Actual  results may differ
from these estimates.

Cash and Cash Equivalents
-------------------------
The Company  considers  all highly liquid  instruments  with a maturity of three
months or less at the time of purchase to be cash equivalents.

Property and Equipment
----------------------
Property and equipment are recorded at cost.  Depreciation  and amortization are
primarily  accounted for on the  straight-line  method over the estimated useful
lives  of  the  assets,   generally  ranging  from  five  to  seven  years.  The
amortization  of site  improvements is based on the shorter of the lease term or
the life of the improvement.

Intangible Assets
-----------------
Goodwill  represents  the  excess of  acquisition  costs  over the fair value of
assets acquired. It is the Company's policy that goodwill and certain intangible
assets  with  indeterminable  lives  will  be  evaluated  based  on the  ongoing
profitability  of the assets in order to determine if any  impairment of the net
value has occurred.  No impairment of the net goodwill value has occurred during
the years ended March 31, 2002 and 2001.

Non-compete  agreements and other intangible assets with determinable  lives, if
any, are  amortized on a  straight-line  basis over the term of the agreement or
estimated useful life.

Income Taxes
------------
The Company  accounts  for income  taxes under the  provisions  of  Statement of
Financial  Accounting  Standards (SFAS) No. 109,  "Accounting for Income Taxes,"
which requires the use of the asset and liability  method of computing  deferred
income taxes.

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

Stock Transaction Costs
-----------------------
Transaction  costs  related  to the sale of  common  shares  are  recorded  as a
reduction to capital raised by the Company.

                                      -33-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Compensated Absences
--------------------
Employees  of the  Company  are  entitled  to  paid  vacation  depending  on job
classification,  length of service and other  factors.  It is  impracticable  to
estimate the amount of compensation  for future absences,  and  accordingly,  no
liability  has been  recorded  in the  accompanying  financial  statements.  The
Company's policy is to recognize the costs of compensated absences when actually
paid to employees.

Fair Value of Financial Instruments
-----------------------------------
The carrying value of cash and cash equivalents  approximates fair value because
of the short-term maturity of those instruments. The carrying value of long-term
debt approximates fair value.

Reclassifications
-----------------
Certain  amounts  from  the  March  31,  2001  financial  statements  have  been
reclassified to conform to the current year presentation.

NOTE 2 - RELATED PARTY TRANSACTIONS

During the years ended March 31, 2002 and 2001,  the following  stock option and
warrant transactions occurred with members of the Company's board of directors:

                                                         2002          2001
                                                   ----------    ----------
     Options and warrants granted,
          prices from $.05 to $.20 per share        2,160,000           -0-

     Options and warrants expired                         -0-           -0-

     Options and warrants exercised,
          price $.04 per share                            -0-       112,500

     Options and warrants cancelled,
          price $.05 per share                        720,000           -0-

     Options and warrants held at year-end,
          prices from $.05 to $.80 per share        1,707,429       267,429

At March  31,  2002  and  2001,  amounts  due to and due  from  related  parties
consisted of the following:

                                                         2002          2001
                                                   ----------    ----------
     Receivables from related parties              $   10,188    $   13,285
                                                   ==========    ==========

     Payables to related parties                   $   22,285    $   25,176
                                                   ==========    ==========

                                      -34-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 2 - RELATED PARTY TRANSACTIONS (CONTINUED)

Related parties provided management and other services to the Company on various
business  issues.  Fees incurred for such services  during the years ended March
31, 2002 and 2001 amounted to $-0- and $24,000, respectively.

Purchases  from a related party  supplier for the years ended March 31, 2002 and
2001 totaled $43,934 and $-0- for equipment, and $128,762 and $18,891 for coffee
and related products, respectively.

NOTE 3 - GOING CONCERN

The  accompanying  financial  statements  have been prepared in conformity  with
accounting principles generally accepted in the United States of America,  which
contemplates  continuation  of the  Company as a going  concern.  Going  concern
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal course of business  over a reasonable  length of time.  However,  the
Company has sustained  operating  losses since its inception and has deficits in
both  working  capital  and  stockholders   equity  of  $645,367  and  $120,499,
respectively, as of March 31, 2002.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and  classification of recorded asset amounts or the amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue as a going  concern.  The Company's  ability to continue as a
going  concern is dependent  upon several  factors.  These  factors  include its
ability to:  generate  sufficient cash flows to meet its obligations on a timely
basis;  obtain  acceptance of payment terms for certain payables to key vendors;
obtain  additional  financing or  refinancing  as may be required;  aggressively
control costs, and; achieve profitability and positive cash flows.

Management  plans to address  these  challenges  by building  on the  successful
launch of its organic  Black Rhino  Coffee(TM)  brand into the U.S.  mass retail
sector. The brand achieved significant awareness at its introduction in May 2002
at the FMI  supermarket  convention  in Chicago.  The benefit of this channel of
trade is that a small  number of orders  can  significantly  increase  corporate
revenues and earnings.  Management believes that entry to this new market sector
will expose the Company to different  and  potentially  more  fertile  financing
opportunities - such as  project-based  non-dilutive  debt financing  secured by
purchase  order or accounts  receivable  notes.  Management  believes  this is a
crucial new  opportunity  for the Company given the  continuing  uncertainty  of
conventional equity markets.

Management  also  believes its  strategic  alliance  with  Marathon  Global will
facilitate  rapid market  penetration  by providing a level of  credibility  and
negotiating  strength otherwise  unavailable to the Company.  Management further
believes  its  engagement  of Ark of Commerce  will lead to  increased  investor
awareness and significant new sources of financing.  Management further believes
that the Company's gradual  transition from reliance on full-service units to an
asset-light  company  concentrating  more on brand ownership and management will
reduce the capital needs for future large tangible asset acquisitions.

There  is  no  assurance  that  management's  plans  will  be  successful  or if
successful,  that they will result in the Company continuing as a going concern.
Additionally,  the sale of additional  equity or other securities will result in
dilution of the Company's stockholders.

                                      -35-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 4 - INVENTORIES

At March 31, 2002 and 2001, inventories were comprised of the following:

                                                         2002          2001
                                                   ----------    ----------
     Coffee                                        $   17,330    $   11,895
     Other merchandise held for sale                   33,722        22,631
     Packaging and other supplies                      12,186        15,857
                                                   ----------    ----------
                                                   $   63,238    $   50,383
                                                   ==========    ==========

NOTE 5 - ACQUISITIONS

During the year ended March 31, 2001, the Company  purchased certain assets of a
coffee roasting company in Van Nuys, California,  in exchange for the promise to
issue up to  320,000  shares of common  stock at $0.20 per  share.  Terms of the
agreement  specify that the actual number of shares to be issued is reduced each
month until the seller  obtains  the  release of certain  liens from the assets.
During the year ended March 31, 2002, the seller  obtained the required  release
of the liens,  resulting in the issuance of 40,000  shares.  There is no further
obligation to issue additional shares.

The purchase  price has been  allocated  to the acquired  assets on the basis of
their  estimated  fair value on the date of  acquisition.  The fair value of the
assets acquired is summarized as follows:

     Inventory                                     $   11,662
     Roasting equipment                                52,338
                                                   ----------
                                                   $   64,000

Effective  December 12, 2000,  the Company  transferred  possession of the above
roasting  equipment  for $20,000 to an  unrelated  party.  The book value of the
equipment was adjusted at September 30, 2000 to its net realizable value. During
the year ended March 31, 2002, clear title to the equipment was obtained and the
sale of the equipment was finalized.

NOTE 6 - PROPERTY AND EQUIPMENT, AND INTANGIBLE ASSETS

At March  31,  2002 and 2001,  property  and  equipment  were  comprised  of the
following:

                                                         2002          2001
                                                   ----------    ----------
     Kiosk carts                                   $  281,983    $  276,133
     Kiosk equipment                                  293,415       263,345
     Equipment and furniture                          232,482       245,443
     Signage                                           50,613        48,598
     Site improvements                                127,434        81,266
                                                   ----------    ---------
                                                      985,927       914,785
     Less: accumulated depreciation                  (570,317)     (493,371)
                                                   ----------    ----------
                                                   $  415,610    $  421,414
                                                   ==========    ==========

                                      -36-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 6 - PROPERTY AND EQUIPMENT, AND INTANGIBLE ASSETS (CONTINUED)

Included in other  assets at March 31,  2002 and 2001,  were  intangible  assets
comprised of the following:

                                                         2002          2001
                                                   ----------    ----------
     Goodwill                                      $   40,930    $   40,930
     Non competition agreement                         25,000        25,000
     Trade name                                        22,673         9,595
     Kiosk design                                       1,170         1,170
     Other identifiable intangibles                    14,600        14,600
                                                   ----------    ----------
                                                      104,373        91,295
     Less: accumulated amortization                   (30,636)      (13,692)
                                                   ----------    ----------
                                                   $   73,737    $   77,603
                                                   ==========    ==========

The Company recognized depreciation and amortization expense for the years ended
March 31, 2002 and 2001 as follows:

                                                         2002          2001
                                                   ----------    ----------
     Depreciation                                  $  115,020    $  118,312
     Amortization                                      16,944         8,647
                                                   ----------    ----------
                                                   $  131,964    $  126,959
                                                   ==========    ==========

NOTE 7 - ACCOUNTS PAYABLE

At March  31,  2002  and  2001,  approximately  39% and 63% of the  balances  in
accounts payable, respectively, have been outstanding for more than 90 days.

NOTE 8 - ACCRUED EXPENSES

At March 31, 2002 and 2001, accrued expenses were comprised of the following:

                                                         2002          2001
                                                   ----------    ----------
     Accrued interest                              $   32,272    $   29,320
     Accrued wages                                     47,393        49,739
     Estimated use tax                                 32,008        29,959
     Accrued payroll taxes                            162,397       197,231
     Other                                              5,650         4,295
                                                   ----------    ----------
                                                   $  279,720    $  310,544
                                                   ==========    ==========

The Company has accrued past due payroll tax obligations to the Internal Revenue
Service and the State of  California.  As of March 31, 2002 and 2001,  the total
amounts past due were $134,827 and $178,303, respectively. As of March 31, 2002,
the past due payroll tax  obligations to the State of California have been fully
satisfied.  The Company  continues to work with the Internal Revenue Service and
has made timely  payroll tax deposits  since July 2001.  Subsequent to March 31,
2002, the Company has paid an additional $38,000 towards the past due obligation
to the Internal Revenue Service.

                                      -37-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 9 - SHORT-TERM BORROWINGS

During the year ended March 31, 2002 and 2001,  the  Company  borrowed  funds to
provide short-term  working capital.  These working capital loans are unsecured,
non-interest  bearing, and amounted to $-0- and $14,820 as of March 31, 2002 and
2001, respectively.

NOTE 10 - LEASE OBLIGATIONS

The Company leases office space under an operating  lease  expiring  October 31,
2002, with an option to renew for one additional year. Rental expense under this
lease  agreement  amounted to $32,086 and $32,901 for the years ending March 31,
2002 and 2001, respectively.

During the year ended March 31, 2002, the Company  entered a long-term lease for
store space under an operating  lease expiring  January 31, 2008, with an option
to renew for an additional five years. Rental expense under this lease agreement
amounted to $16,750 for the year ended March 31, 2002.

Future minimum rental payments under these operating leases are as follows:

         Year ended March 31                           Amount
         -------------------                        ---------
                  2003                              $  58,749
                  2004                                 54,752
                  2005                                 57,488
                  2006                                 60,366
                  2007                                 63,380
                  Thereafter                           55,000
                                                    ---------
                                                    $ 349,735
                                                    =========

NOTE 11 - LONG-TERM DEBT

At March 31,  2002,  the Company has  available  a $300,000,  unsecured  line of
credit  with a  related  party.  Each  advance  against  this  line of credit is
evidenced by an interest  bearing note.  For each note, the Company is obligated
to issue a  warrant  to  purchase  one share of  common  stock  for each  dollar
borrowed,  at an exercise price of $ 0.40 per share. The outstanding  balance at
March 31, 2002 is summarized as follows.

                                                         2002          2001
                                                   ----------    ----------
     10% note, unsecured, payable in monthly
     installments of $849.88 including interest,
     due 03/31/07                                  $   40,000    $     -0-

     Less current portion                              (6,491)         -0-
                                                   ----------    ----------
                                                   $   33,509    $     -0-
                                                   ==========    ==========

                                      -38-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 11 - LONG-TERM DEBT (CONTINUED)

Aggregate maturities of long-term debt over the next five years are as follows:

     Year ended March 31                               Amount
     -------------------                            ---------
              2003                                  $   6,491
              2004                                      7,170
              2005                                      7,921
              2006                                      8,751
              2007                                      9,667
                                                    ---------
                                                    $  40,000

NOTE 12 - INCOME TAXES

The Company has  recorded a valuation  allowance  as an offset to the income tax
benefits  of its net  operating  losses for the years  ended  March 31, 2002 and
2001. This allowance is due to the uncertainty of realizing the necessary income
to utilize the loss carry forwards.

In addition to future income consideration,  there is additional  uncertainty as
to the ultimate  availability of some or all of the net operating  losses due to
past and potential future ownership changes.  Income tax laws can severely limit
the  availability of losses after a certain level of ownership  changes.  Due to
the  complexity of these rules  coupled with ongoing  losses the Company has not
determined any potential limitation.

The Company's net operating loss carryovers and related  expiration dates are as
follows:

                        Expires                                Expires
         Federal       Tax Year              California        Tax Year
         -------       --------              ----------        --------
     $    480,000          2008             $       -0-        Expired
        1,014,000          2009                     -0-        Expired
        1,034,000          2010                     -0-        Expired
          935,000          2017                  96,000           2002
          635,000          2018                 317,000           2003
          585,000          2019                 322,000           2004
          350,000          2021                 193,000           2006
     ------------                           -----------
     $  5,033,000                           $   928,000
     ============                           ===========

The details of deferred tax assets and liabilities are as follows:

                                                         2002          2001
                                                   ----------    ----------
     Deferred tax liabilities                      $      -0-    $      -0-
     Deferred tax assets                            1,340,000     1,290,000
     Valuation allowance                           (1,340,000)   (1,290,000)
                                                   ----------    ----------
     Net deferred tax asset                        $      -0-    $      -0-
                                                   ==========    ==========

                                      -39-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 13 - BRIDGE NOTE FINANCING

In May 1996,  the  Company  issued  "units"  consisting  of secured  convertible
promissory  notes and warrants to purchase the  Company's  common  stock.  As of
March 31, 2002 and 2001, there were $35,000 and $40,000, respectively, of bridge
notes outstanding. The notes are secured by all assets of the Company.

The Company is obligated to make  quarterly  interest  payments on the principal
balance  outstanding  at nine percent (9%) per annum and was  obligated to repay
the  principal  balance in full on December 31,  1998.  As of March 31, 2002 and
2001, the Company has accrued  $32,132 and $29,376 of interest  payable on these
notes,  respectively.  As of March 31,  2002,  the Company has not  received any
notice of default relating to the notes.

NOTE 14 - STOCK OPTIONS AND WARRANTS

The  Company  maintains  stock  option  plans  under which the Company may grant
incentive   stock  options  and   non-qualified   stock  options  to  employees,
consultants and non-employee directors.

Under the 1995 and 1999 Stock  Option  Plans,  the Company can grant  options to
purchase common shares,  up to an aggregate of 500,000 shares for each plan. The
maximum term of the options is ten years.  Options vest and expire  according to
the terms established at the grant date.

Under the 1995 Plan,  options to purchase  70,000 shares of common stock,  at an
exercise  price of $0.80 per share,  were  outstanding  as of March 31, 2002 and
2001.

Under the 1999 Plan,  options to purchase  145,429 and 163,429  shares of common
stock,  at an  exercise  price  ranging  from  $0.70 to $1.00  per  share,  were
outstanding as of March 31, 2002 and 2001, respectively

Non plan options to purchase  3,046,000 and 450,000  shares of common stock were
outstanding  as of March 31, 2002 and 2001,  respectively,  at an exercise price
ranging from $0.05 to $2.00 per share.

The Company accounts for its stock-based awards using the intrinsic value method
in accordance with APB Opinion 25 and related interpretations.  Accordingly,  no
compensation expense has been recognized in the financial statements.

SFAS  123  requires  the  disclosure  of  pro  forma  net  income/loss  and  net
income/loss  per  share as if the  Company  adopted  the fair  value  method  of
accounting for  stock-based  awards.  Had  compensation  costs for the Company's
stock-based compensation plans been accounted for using the fair value method at
the grant dates using the  Black-Scholes  model,  the Company's net loss and net
loss per share would not have  changed for the years  ending  March 31, 2002 and
2001.

                                      -40-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 14 - STOCK OPTIONS AND WARRANTS (CONTINUED)

A summary of the status of the Company's employee stock option plans as of March
31, 2002 and 2001 is presented below:

     Number of Options:                                  2002          2001
     -----------------                             ----------    ----------
     Outstanding at beginning of year                 683,429       920,929
     Granted                                        3,396,000       495,000
     Exercised                                        (70,000)     (312,275)
     Canceled                                        (720,000)      (68,000)
     Forfeited                                        (28,000)     (352,225)
                                                   ----------    ----------
     Outstanding at end of year                     3,261,429       683,429
                                                   ==========    ==========

     Exercisable                                    2,116,279       665,429
                                                   ==========    ==========

The number of options outstanding,  and the exercise prices as of March 31, 2002
and 2001 are as follows:

     Exercise Price                                      2002          2001
     --------------                                ----------    ----------
       $ 0.05                                       1,626,000           -0-
       $ 0.20                                         320,000       150,000
       $ 0.25                                         200,000           -0-
       $ 0.35                                         200,000           -0-
       $ 0.40                                         200,000           -0-
       $ 0.50                                         200,000           -0-
       $ 0.70                                         127,429       127,429
       $ 0.80                                          70,000        70,000
       $ 1.00                                         118,000       136,000
       $ 1.50                                         100,000       100,000
        $2.00                                         100,000       100,000
                                                   ----------    ----------
                                                    3,261,429       683,429
                                                   ==========    ==========

A summary of the status of the Company's  warrants as of March 31, 2002 and 2001
is presented below:

     Number of Warrants:                                 2002          2001
     ------------------                            ----------    ----------
     Outstanding and exercisable at
       beginning of year                            1,428,638     1,136,823
     Granted                                          240,000       359,315
     Exercised                                       (308,731)      (27,250)
     Canceled                                             -0-           -0-
     Forfeited                                            -0-       (40,250)
                                                   ----------    ----------
     Outstanding and exercisable at end of year     1,359,907     1,428,638
                                                   ==========    ==========

                                      -41-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 14 - STOCK OPTIONS AND WARRANTS (CONTINUED)

The number of warrants outstanding, and the exercise prices as of March 31, 2002
and 2001 are as follows:

     Exercise Price                                      2002          2001
     --------------                                ----------    ----------
       $ 0.10                                         150,000       150,000
       $ 0.35                                         100,000       100,000
       $ 0.40                                          40,000           -0-
       $ 0.50                                         200,000           -0-
       $ 0.70                                         332,500       641,231
       $ 1.00                                         337,407       337,407
       $ 2.00                                         100,000       100,000
        $2.50                                         100,000       100,000
                                                   ----------    ----------
                                                    1,359,907     1,428,638
                                                   ==========    ==========

NOTE 15 - EARNINGS PER COMMON SHARE

Earnings  per common  share are  computed by dividing  net income by the average
number of common  shares and common  stock  equivalents  outstanding  during the
year. The weighted average number of common shares  outstanding during the years
ended March 31, 2002 and 2001,  were  approximately  17,195,799 and  10,005,796,
respectively.

Common stock  equivalents are the net additional  number of shares that would be
issuable upon the exercise of the outstanding common stock options and warrants.
For the years ended March 31, 2002 and 2001,  fully diluted  earnings per common
share are  equal to basic  earnings  per  common  share  because  the  effect of
potentially  dilutive  securities  under the stock option plans and warrants are
anti-dilutive and therefore not included.

NOTE 16 - SUPPLEMENTAL DISCLOSURES TO STATEMENT OF CASH FLOWS

Non-cash investing and financing transactions for the years ended March 31, 2002
and 2001 are as follows:

                                                            2002          2001
                                                      ----------    ----------
     Issuance of common stock in exchange for
        services provided                             $  128,750    $  314,000

     Trade payables and accrued expenses forgiven         54,667        88,380

     Conversion of obligations on trade payables,
        accrued expenses, other liabilities, and
        bridge notes into shares of common stock          15,400       398,346

     Sale of equipment in exchange for obligations
          on trade payables and other liabilities         47,195           -0-

                                      -42-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 16 - SUPPLEMENTAL DISCLOSURES TO STATEMENT OF CASH FLOWS (CONTINUED)

                                                            2002          2001
                                                      ----------    ----------
     Issuance of common stock in exchange for
        property and equipment                            10,000           -0-

     Acquisition of inventory and equipment financed
        with an obligation to issue common stock             -0-        64,000

     Reduction of obligation to issue shares of
        common stock                                      24,000        32,000

     Issuance of common stock in exchange for a
          non-compete agreement                              -0-        25,000

NOTE 17 - FORGIVENESS OF DEBT

Forgiveness  of debt  amounted to $54,667 and $88,380 for the years ending March
31, 2002 and 2001, respectively. This income represents the forgiveness of trade
payables  and  accrued  expenses  recorded  as expenses in the current and prior
years. Significant transactions relating to forgiveness of debt are explained in
the following paragraphs.

On December 31, 2001, a current vendor of the Company agreed to forgive  $35,026
of trade payables.

On  September  30,  2000,  the  Company's  legal  counsel  agreed  to  accept  a
non-statutory option for the purchase of 150,000 shares of common stock, with an
exercise price of $0.20 per share as full and final settlement for accrued legal
fees totaling $20,000.

On December 31, 2000, a former employee of the Company agreed to forgive $34,484
of accrued  expenses in exchange for warrants to purchase  100,000 shares of the
Company's common stock at a price per share of $0.10.

A tax  effect  was not  attributed  to the  gain as the  gain  will  reduce  the
Company's prior net operating loss.

NOTE 18 - RISKS AND UNCERTAINTIES

The Company's  success depends  significantly  upon the continued service of its
President.  Loss of the services of the President could have a material  adverse
effect on the Company's growth,  revenues, and prospective business. The Company
does not maintain key-man life insurance on the President.

The Company has a registered  service mark for its rhinoceros  logo. The Company
is  aware of  another  entity  in  North  Carolina  that is  utilizing  the name
"Peabodys"  in the coffee  industry.  The North  Carolina  entity has received a
federal  trademark  registration  of the  name  "Peabodys".  While  the  Company
believes that it has the right to use the name "Peabodys", if it were determined
that the Company were not able to continue  utilizing  the name  "Peabodys",  it
could have a material  adverse  effect on the Company and the Company would have
to re-establish any lost goodwill and name recognition.

                                      -43-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 19 - CONCENTRATIONS

The Company  purchases 100% of its coffee bean inventory from one supplier.  The
Company believes the supplier's  current roasting capacity may not be sufficient
to meet its needs for the  foreseeable  future.  In the event such  relationship
terminates or the supplier's capacity is insufficient, the Company believes that
numerous other suppliers can fulfill the Company's inventory requirements.

The Company's kiosks are located throughout  California.  The Company has twelve
contracts  among these  locations,  with four major clients.  The Company's four
major  clients  represent  60% and 63% of its gross  revenues,  with the largest
client in each year  representing 24% and 23% for the years ended March 31, 2002
and 2001, respectively.

As of March  31,  2002 and  2001,  the  Company's  officers  and  directors  own
approximately  13% and 15%,  respectively,  of the outstanding  shares of common
stock. The Company's  dividend policy,  as well as other major decisions such as
wages,   acquisitions  and  financing  by  the  Company  will  be  significantly
influenced and controlled by such officers and directors.

NOTE 20 - COMMITMENTS AND CONTINGENCIES

On May 8, 2002,  the  Company  initiated  legal  action  against its former CEO,
Clifford Brent Young,  and others.  The complaint  alleged,  among other things,
that Mr.  Young,  in  association  with a former  employee of the  Company,  had
breached  contractual  duties,  and/or  committed  torts, in connection with the
purported  cancellation  of contracts  between the Company and a client,  and in
connection with other acts of competition, disparagement, and conversion. On May
30,  2002,  Mr.  Young filed a petition for  bankruptcy  with the United  States
Bankruptcy Court, Central District of California,  staying the action as to him.
The ultimate  ability of the Company to pursue relief  against Mr. Young remains
to be  determined,  and  there  can be no  assurance  that the  Company  will be
successful  in pursuing  its claims in that  forum.  The Company has settled its
claims against the former employee.

In the normal course of business, the Company has various legal claims and other
contingent matters outstanding.  Management believes that any ultimate liability
arising from these contingencies would not have a material adverse effect on the
Company's  results of  operations  or financial  condition at March 31, 2002 and
2001.

NOTE 21 - SUBSEQUENT EVENTS

Subsequent  to March 31,  2002,  the  Company has drawn an  additional  $244,000
against  its line of  credit,  under the same  terms  discussed  in Note 11. The
borrowings  accrue  interest at 10% per annum,  payable in monthly  installments
over five years.  In addition,  244,000  warrants to purchase  common stock at $
0.40 per share are issuable in conjunction with these borrowings.

                                      -44-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 21 - SUBSEQUENT EVENTS (CONTINUED)

On June 25,  2002, a dispute was settled  between the Company and a client.  The
dispute arose as to the client's  legal right to cancel  contracts for two kiosk
sites.  Pursuant  to the  settlement,  the client has paid the  Company  and the
contracts have been  cancelled.  For the year ended March 31, 2002,  these sites
accounted  for 24% of the  Company's  revenues  and  reduced the  Company's  net
operating loss by approximately $184,000.

On June 26, 2002, the Company  received  correspondence  from the trustee of the
bankruptcy estate of a former vendor requesting payment on a $250,000 obligation
the Company  believes was settled in 1999.  The Company  disputes the  trustee's
claim and intends to clarify and resolve the matter as soon as  practicable.  No
accrual has been recorded pending the outcome of this dispute.

                                      -45-
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                                    PART III

ITEM 1.        INDEX TO EXHIBITS

Exhibit No.    Description

2.1*           Articles of Incorporation of Kimberley Mines, Inc.

2.2*           Certificate of Amendment of Articles of Incorporation (Mine-A-Max
               Corp.)

2.3*           Certificate of Amendment of Articles of  Incorporation  (Peabodys
               Coffee, Inc.)

2.4*           Amended and Restated Bylaws of Peabodys Coffee, Inc.

2.5            Amendment No. 1 to Bylaws

3.1*           Peabodys Coffee, Inc. 1995 Stock Option Plan

3.2*           Peabodys Coffee, Inc. 1999 Stock Option Plan

6.1*           Executive Services Agreement with Barry J. Gibbons

6.2**          Asset Purchase Agreement with Arrosto Coffee Company, LLC

6.3***         Amendment No. 1--Arrosto Asset Purchase Agreement

6.4***         Amendment No. 2--Arrosto Asset Purchase Agreement

6.5            Manufacturers Representative Agreement.

*Incorporated  by  reference  to the  Company's  Registration  Statement on Form
10-SB, as amended,  originally  filed with the Commission under the Exchange Act
on December 21, 1999.

**Incorporated by reference to the Company's Annual Report on Form 10-KSB, filed
with the Commission on June 29, 2000.

***Incorporated  by reference to the Company's  Amended Quarterly Report for the
Period  Ending  September 30, 2000,  filed on Form 10-QSB/A with the  Commission
under the Exchange Act on February 1, 2001.

                                      -46-
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                                   SIGNATURES

     In accordance  with Section 13 of the Securities  Exchange Act of 1934, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                        PEABODYS COFFEE, INC.,
                                        A Nevada Corporation

                                        By: _____________/S/________________
                                            Todd Tkachuk, President

                                        Date: July 15, 2002

     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
the dates indicated.

Signature                      Title                              Date
---------                      -----                              ----


________/S/_______________     President, Chief Financial         July 15, 2002
Todd N. Tkachuk                Officer, and Director (Principal
                               Executive Officer and Principal
                               Financial Officer)

________/S/_______________     Director                           July 15, 2002
Roman Kujath



________/S/________________    Director                           July 15, 2002
Barry Gibbons



________/S/________________    Director                           July 15, 2002
David Lyman



________/S/________________    Director                           July 15, 2002
John Phillips

                                      -47-
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