UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

                 For the quarterly period ended March 31, 2002

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

               For the transition period from _______ to _______


                        Commission File Number 000-30444


                                  KAHALA CORP.
                     (fka Sports Group International, Inc.)
             (Exact name of registrant as specified in its charter)


            Florida                                               59-3474394
(State of other jurisdiction of                                (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                         7730 E. Greenway Rd., Suite 104
                            Scottsdale, Arizona 85260
                    (Address of principal executive offices)


                                 (480) 443-0200
              (Registrant's telephone number, including area code)


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

The number of shares outstanding of the registrant's Common Stock, $.001 per
value per share, as of May 10, 2002 was 22,317,875 shares.
<PAGE>
                                  KAHALA CORP.

                          Quarter Ended March 31, 2002

                                   FORM 10-QSB

                                      INDEX



Part I - FINANCIAL INFORMATION.................................................2

  ITEM 1 FINANCIAL STATEMENTS..................................................2

  ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............10

Part II - OTHER INFORMATION...................................................18

  ITEM 1 LEGAL PROCEEDINGS....................................................18

  ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS............................18

  ITEM 3 DEFAULTS UPON SENIOR SECURITIES......................................18

  ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................18

  ITEM 5 OTHER INFORMATION....................................................18

  ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.....................................19

SIGNATURES....................................................................26
<PAGE>
PART I - FINANCIAL INFORMATION

ITEM 1 FINANCIAL STATEMENTS

STATEMENT OF INFORMATION FURNISHED

The accompanying financial statements have been prepared in accordance with Form
10-QSB instructions and applicable items of Regulation S-B, and in the opinion
of management, contain all adjustments (consisting of only normal and recurring
accruals) necessary to present fairly the Company's financial position as of
March 31, 2002 and the Company's results of operations and statement of cash
flows for the three months ended March 31, 2002 and 2001. These results have
been determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the
Company's 2001 Annual Report on Form 10-KSB.

Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that the accompanying financial
statements be read in conjunction with the financial statements and related
notes thereto incorporated by reference in the Company's 2001 Annual Report on
Form 10-KSB.

                                       2
<PAGE>
KAHALA CORP.
CONSOLIDATED BALANCE SHEET
MARCH 31, 2002 (UNAUDITED)


ASSETS
CURRENT ASSETS
  Cash                                                             $  1,692,282
  Trade and other accounts receivable                                   527,260
  Inventories                                                           178,967
  Prepaid expenses and other assets                                      28,570
  Deferred income taxes                                                  96,782
  Notes receivable - current portion                                  2,037,100
                                                                   ------------
       Total current assets                                           4,560,961

PROPERTY AND EQUIPMENT, net                                             133,893

LEASE DEPOSITS                                                          137,085

NOTES RECEIVABLE - less current portion                               1,348,921

GOODWILL, net of accumulated amortization of $718,490                 4,861,625

DEFERRED INCOME TAXES                                                 1,127,778
                                                                   ------------
TOTAL ASSETS                                                       $ 12,170,263
                                                                   ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
  Accounts payable                                                 $    103,808
  Accrued liabilities                                                   859,324
  Line of credit                                                        589,911
  Notes payable - current portion                                       574,378
  Confirmed bankruptcy liabilities - current portion                    621,024
                                                                   ------------
       Total current liabilities                                      2,748,445

NOTES PAYABLE - long-term portion                                     2,532,220
CONFIRMED BANKRUPTCY LIABILITIES - long term portion                    326,900
DEFERRED FRANCHISE FEE INCOME                                           730,160
                                                                   ------------
       Total liabilities                                              6,337,725
                                                                   ------------
STOCKHOLDERS' EQUITY:
  Series A preferred stock, $10.00 par value, 575,000 shares
   designated, 575,000 issued                                         5,750,000
  Series B preferred stock, $10.00 par value, 650,000 shares
   designated, 650,000 issued                                         6,500,000
  Series C preferred stock, $10.00 par value, 160,000 shares
   designated, 160,000 issued                                         1,600,000
  Common stock, $.001 par value, 100,000,000 shares authorized,
   22,317,875 issued and outstanding                                     22,318
  Paid in capital                                                     6,640,787
  Accumulated deficit                                               (14,680,567)
                                                                   ------------
       Total stockholders' equity                                     5,832,538
                                                                   ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $ 12,170,263
                                                                   ============

                                       3
<PAGE>
KAHALA CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31,  (UNAUDITED)

                                                   2002                2001
                                               ------------        ------------
REVENUES:
  Net product and store sales                  $    336,530        $    686,189
  Franchise fees                                    110,000             227,750
  Royalties                                         419,861             494,691
  Rental income                                      32,000              48,398
                                               ------------        ------------
       Total revenues                               898,391           1,457,028
                                               ------------        ------------
EXPENSES:
  Cost of product sales                             147,824             275,083
  Personnel expenses                                329,252             594,077
  Rent                                               84,861             289,661
  Depreciation and amortization                       7,926             100,633
  General and administrative expenses               227,959             337,787
                                               ------------        ------------
       Total expenses                               797,822           1,597,241
                                               ------------        ------------

OPERATING (LOSS) INCOME                             100,569            (140,213)
                                               ------------        ------------
OTHER (INCOME) AND EXPENSES
  Loss on Sale of Assets                                 --              37,861
  Gain on Sale of Royalty Stream                         --            (300,000)
  Interest expense                                   20,447              37,677
  Interest income                                   (37,197)            (25,666)
                                               ------------        ------------

       Total other (income) expense                 (16,750)           (250,128)
                                               ------------        ------------

INCOME BEFORE INCOME TAXES                          117,319             109,915

INCOME TAX (BENEFIT) PROVISION                           --                  --
                                               ------------        ------------

NET INCOME (LOSS)                              $    117,319        $    109,915
                                               ============        ============
NET (LOSS) PER SHARE:
  Basic                                        $       0.01        $      (0.02)
                                               ============        ============

  Diluted                                      $          *        $      (0.02)
                                               ============        ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  Basic                                          22,317,875          13,558,949
                                               ============        ============
  Diluted                                        38,090,375          13,558,949
                                               ============        ============

* - less then $0.01 per share

                                       4
<PAGE>
KAHALA CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        2002           2001
                                                                    -----------    -----------
<S>                                                                 <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                 $   117,319    $   109,915
  Adjustments to reconcile net income to net cash
   provided by (used in) operating activities:
    Depreciation and amortization                                         7,926        100,633
    Loss on Sale of Assets                                                   --         37,861
    Changes in assets and liabilities:
     Trade and other accounts receivable                                 73,056       (194,307)
     Inventories                                                         (6,980)        14,915
     Prepaids and other current assets                                  (13,812)        (8,733)
     Accounts payable                                                   (39,413)        26,918
     Accrued liabilities                                               (196,143)      (236,568)
     Deferred franchise fee income                                      (30,000)       (90,000)
                                                                    -----------    -----------
          Net cash provided by (used in) operating activities           (88,047)      (239,366)
                                                                    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                        --       (138,530)
Financing of notes receivable                                          (550,000)            --
  Collections on notes receivable                                       190,334         94,553
  Proceeds from sale of property and equipment                               --        106,507
                                                                    -----------    -----------
          Net cash provided by (used in) investing activities          (359,666)        62,530
                                                                    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings on line of credit                                 --        378,522
Proceeds from borrowings on notes payable                             1,300,000             --
  Principal repayments on notes payable                                (139,779)      (222,143)
  Payments on confirmed bankruptcy liabilities                          (21,494)       (57,323)
                                                                    -----------    -----------
          Net cash provided by (used in) financing activities         1,138,727         99,056
                                                                    -----------    -----------

INCREASE (DECREASE) IN CASH                                             691,014        (77,780)

CASH, BEGINNING OF PERIOD                                             1,001,268         99,885
                                                                    -----------    -----------

CASH, END OF PERIOD                                                 $ 1,692,282    $    22,105
                                                                    ===========    ===========
</TABLE>

                                       5
<PAGE>
KAHALA CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS, (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED)


SUPPLEMENTAL CASH FLOW INFORMATION:                     2002       2001
                                                      --------   --------
  Interest paid                                       $ 20,447   $ 35,352
                                                      ========   ========

  Income taxes paid                                   $     --   $     --
                                                      ========   ========

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:

Common stock issued as preferred stock dividends      $     --   $334,250
                                                      ========   ========

Sale of property & equipment under notes receivable   $     --   $203,176
                                                      ========   ========

                                       6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001


1. BASIS OF PRESENTATION

The accompanying unaudited financial statements represent the financial position
of Kahala Corp. (the Company) as of March 31, 2002, including our results of
operations and cash flows for the three months ended March 31, 2002 and 2001.
These statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions for
Form 10-QSB. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles (GAAP) for complete
financial statements. In the opinion of management, all adjustments to these
unaudited financial statements necessary for a fair presentation of the results
for the interim period presented have been made. The results for the three
months ended March 31, 2002 and 2001 may not necessarily be indicative of the
results for the entire fiscal year. These financial statements should be read in
conjunction with our Form 10-KSB for the year ended December 31, 2001, including
specifically the financial statements and notes to such financial statements
contained therein.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our accounting policies, and the methods of applying those policies, which
affect the determination of our financial position, results of operations or
cash flows are summarized below:

CASH: includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less. At times, cash deposits may exceed government insured limits.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, Surf City Acquisition
Corp. II, Surf City Squeeze, Inc., Surf City Squeeze Franchise Corp., Kona Coast
Provisions, Inc. ("Kona"), Malibu Smoothie Franchise Corp., Selman Systems, Inc.
and its two operating subsidiaries, Frullati Enterprises, Inc. and Frullati
Franchise Systems, Inc., Fru-Cor, Inc., Rollerz Franchise Systems, LLC, Tahi
Mana, LLC, Tovali Products, LLC ("Tovali"), and R 1 Franchise Systems, LLC. All
significant inter company accounts and transactions are eliminated.

INVENTORIES: consist primarily of food products, drink mixes, supplements and
supplies. Inventories are recorded at the lower of cost or market on a first-in,
first-out basis.

REVENUE RECOGNITION: Initial franchise fees are deferred until substantially all
services and conditions relating to the sale of the franchise have been
performed or satisfied. The Company will occasionally finance the initial
franchise fee by taking a note receivable from the franchisee. The notes
receivable are typically payable by the franchisees over three to five years.

                                       7
<PAGE>
Fees from Area Development Agreements or similar development arrangements
("ADA") are recognized as revenue on a pro rata basis based on the number of
stores opened to-date to total stores to be developed as stipulated in the ADA.
If the total number of stores stipulated in the ADA are not opened at the
expiration of the ADA, the balance of such fees is recognized.

Kona and Tovali sell mixes, supplements and related supplies to franchisees.
Revenue on such sales is recognized when the product is shipped. Sales from the
corporate-owned stores are recognized at the point of sale.

The Company is entitled to marketing program income (the "Program Income") from
suppliers on the basis of product volume shipped by those suppliers to
franchised and corporate-owned stores. Program Income is recognized when
suppliers have shipped, and stores have received, products for which Program
Income apply.

The Company also receives sublease rental income. The Company is the primary
lessee on certain franchised stores. Rental income is recognized ratably over
the term of the subleases.

INCOME TAXES: The Company provides for income taxes based on the provisions of
Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES, which, among other things, requires that recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date of
the financial statements.

USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

GOODWILL: is recorded for the difference between the purchase price of the
acquired business and the fair value of the identifiable net assets. Beginning
in the three months ended March 31,2002, the Company began applying the
provisions of Financial Accounting Standards Board Statements of Financial
Accounting Standards No.'s 142 GOODWILL AND OTHER INTANGIBLE ASSETS. As of
January 1, 2002 the Company discontinued the practice of amortizing goodwill.
The Company has unamortized goodwill of $4,861,625 that resulted from the
acquisitions of Selman in 1999 and Rollerz in 2000. The Company performed the
tests for impairment of the carrying value of goodwill for these two reporting
units and has determined that no impairment existed at March 31, 2002.
Amortization expense for the period ended March 31, 2001 was $69,751.

                                       8
<PAGE>
3. INCOME TAXES

The Company recognizes deferred income taxes for the differences between
financial accounting and tax bases of assets and liabilities. Income taxes for
the periods ended March 31, 2002 and 2001 consisted of the following:

                                     2002        2001
                                   --------    --------
Current tax (benefit) provision    $ 36,044    $ 41,402
Deferred tax (benefit) provision    (36,044)    (41,402)
                                   --------    --------
Total income tax provision         $    -0-    $    -0-
                                   ========    ========

4. NET INCOME (LOSS) PER SHARE

Net income (loss) per share is calculated using the weighted average number of
shares of common stock outstanding during the year. Preferred stock dividends
are subtracted from the net income to determine the amount available to common
shareholders. See ITEM 5 OTHER INFORMATION - during the three month period
ending March 31, 2002, the preferred shareholders agreed to suspend dividends
indefinitely. Therefore, the calculation of the net income per share does not
reflect a preferred dividend for the three months ended March 31, 2002 in
arriving at the net income available to common shareholders. For the period
ended March 31, 2002, warrants and options to purchase 2,975,000 common shares
were not considered in the calculation for diluted earnings per share because
the effect of their inclusion would be anti-dilutive. For the period ended March
31, 2001, preferred stock convertible to 15,766,667 common shares and warrants
to purchase one million common shares were not considered in the calculation for
diluted earnings per share because the effect of their inclusion would be
anti-dilutive.

<TABLE>
<CAPTION>
                                               2002                                     2001
                                ----------------------------------       ----------------------------------
                                  Income                      Per          Income                      Per
                                  (Loss)        Shares       share         (Loss)        Shares       share
                                ---------    -----------     -----       ---------    -----------     -----
<S>                             <C>          <C>             <C>         <C>          <C>             <C>
Net (Loss) Income               $ 117,319                                $ 109,915
Preferred stock dividends              --                                 (334,250)

BASIC EARNINGS PER SHARE

Loss available to common
  stockholders                  $ 117,319     22,317,875     $(0.01)     $(224,335)    13,558,949     $(0.02)

Effect of dilutive securities         N/A                                      N/A

DILUTED EARNINGS PER SHARE      $ 117,319     38,090,375        *                                     $(0.02)
</TABLE>

* - less then $0.01 per share

                                       9
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENTS

Certain of the information discussed in this quarterly report, and in particular
in this section entitled "Management's Discussion and Analysis or Plan of
Operation," contain forward-looking statements that involve risks and
uncertainties that might adversely affect the Company's operating results in the
future in a material way. The words "believes," "may," "likely," "expects,"
"anticipates," and similar expressions identify forward-looking statements,
which speak only as of the date the statement was made. Such forward-looking
statements are within the meaning of that term in Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Such statements may include, but are not limited to, projections of
revenues, including sales of franchises and corporate-owned locations, income or
loss, plans for future operations, and financing needs or plans. Statements in
the Company's Annual Report on Form 10-KSB, including the Notes to the Company's
Consolidated Financial Statements and "Management Discussion and Analysis or
Plan of Operation", describe factors, among others, that could contribute to
such differences. Such factors include, without limitation, the effect of
national and regional economic and market conditions in the U.S. where the
Company franchises and operates store locations, costs of labor and employee
benefits, costs of marketing, the success or failure of marketing efforts, costs
of food and non-food items used in the operation of the Company's stores,
intensity of competition for locations and franchisees as well as customers,
perception of food safety, spending patterns and demographic trends, legal
claims and litigation, the availability of financing for the Company and its
franchisees at reasonable interest rates, and legislation and governmental
regulations affecting the Company's business. Many of these factors are beyond
the Company's control.

GENERAL

The Company was incorporated in the state of Florida in September 1997, as
Secretarial Services of Orlando, Inc. and in March 1999 changed its name to
Sports Group International, Inc. In January, 2001, the Company changed its name
to Kahala Corp. Prior to March 1999, the Company had no significant operations.
The term "Company" refers to Kahala Corp. and its subsidiaries. The Company's
common stock trades over-the-counter on the Electronic Bulletin Board under the
symbol "KAHA". From March, 1999 until January 31, 2001, the Company's common
stock traded on the over-the-counter Electronic Bulletin Board under the symbol
"SPGK."

The Company has developed its business through the following acquisitions: (i)
the Surf City Squeeze concept was acquired by the Company on March 15, 1999
through a reverse merger with Surf City Acquisition Corp. II ("SCAC"), with the
transaction being accounted for as a recapitalization of SCAC, with SCAC as the
acquirer; (ii) the Frullati Cafe and Bakery concept was acquired by the Company
on May 21, 1999 through its acquisition of 100% of Selman Systems, Inc.

                                       10
<PAGE>
("Selman") (the Company also acquired eight individual Frullati Cafe & Bakery
units through its purchase of 100% of Fru-Cor, Inc. ("Fru-Cor") on July 7,
1999); and (iii) the Rollerz concept was acquired during the second quarter of
2000 from a corporation owned and controlled by the Company's President and CEO
(the "Rollerz Transaction"). In addition to the above-mentioned acquisitions,
the Company developed the Tahi Mana concept internally during 2000, and, in
July, 2001, the Company provided debtor in possession financing to Ranch * 1,
Inc. as part of a longer term strategy to acquire the company, as discussed in
more detail below.

COMPANY OVERVIEW

The Company currently operates and franchises, under the Frullati Cafe and
Bakery, Surf City Squeeze, Rollerz, and Tahi Mana brand names (collectively, the
"Concepts"), juice bars and health food cafes that serve blended fruit drinks,
sandwiches, salads, soups, baked goods, healthy snacks, and nutritional
supplements in shopping malls, airports, medical centers, office buildings and
health clubs throughout the United States, Canada, and select Middle Eastern
countries. As of March 31, 2002, the Company, through its subsidiaries, has
approximately 209 total locations of the Concepts, all of which are either
franchised or licensed by third parties. Of the 209 total locations of the
Concepts, 111 operate as Surf City Squeeze outlets, 93 operate as Frullati Cafe
& Bakery outlets, 4 operate as Rollerz outlets, and 1 operates as a Tahi Mana
outlet. As of March 31, 2002, the Company did not own or operate any
corporate-owned locations. The Company also sells proprietary smoothie mixes and
other nutrients and supplements to its franchisees and licensees through its
wholly owned subsidiaries.

The stores operating under the Frullati Cafe and Bakery brand name are located
primarily in shopping malls, airports and hospitals in the midwest, southwest,
and southeastern United States. The average Frullati Cafe and Bakery store
derives approximately 60% of its total revenue from blended fruit drinks and
other beverage sales and approximately 40% from the sale of sandwiches, baked
goods, soups, salads and other healthy food items. The stores operating under
the Surf City Squeeze brand name are located in shopping malls and health clubs
primarily in California, Arizona and Canada. The average Surf City store derives
the majority of its revenue from the sale of blended fruit drinks and other
beverages, and nutrients and supplements that are added to the drinks. The
stores operating under the Rollerz brand name are located in office buildings
and shopping malls in Arizona, Texas, and California. The average Rollerz store
derives approximately 75% of its total revenues from gourmet rolled sandwiches,
soups, salads, baked goods, and other healthy snacks and approximately 25% from
the sale of blended fruit drinks and other beverage items. The store operating
under the Tahi Mana brand name is located in a health club in Arizona. The
average Tahi Mana store derives the majority of its revenue from the sale of
blended fruit drinks and other beverages, nutrients and supplements that are
added to the drinks or can be taken home, and healthy snacks. The Company is not
currently actively promoting or further developing its Tahi Mana brand for
multiple reasons set forth in detail in the Company's 2001 Form 10-KSB.

                                       11
<PAGE>
The Company derives its revenues primarily from area representative and
development fees, initial franchise and license fees, ongoing royalty payments,
sales from its company-owned stores, when applicable, and sales of nutritional
and health food products to its franchisees and licensees. The Company's
long-term strategy is to operate primarily as a franchisor, and through
strategic acquisitions and internal growth, to become one of the larger
franchisors of juice bars, healthy food cafes, and other retail quick service
food concepts in the United States and select international markets that include
Canada, Europe, the Middle East, Australia, and certain Pacific Rim countries.
The Company's pending acquisition of the Ranch * 1 grilled chicken concept
discussed below is one such strategic acquisition in furtherance of the
Company's long term strategy. The Company also plans to operate a limited number
of company-owned stores in certain key markets where the stores can be
geographically concentrated. The Company has not yet identified the areas where
it may wish to operate company-owned stores.

RANCH * 1 FINANCING, PLAN OF REORGANIZATION, AND ULTIMATE ACQUISITION

Ranch * 1, Inc., through its wholly owned subsidiaries, owns and operates and
franchises Ranch * 1 quick service restaurants that specialize in the sale of
grilled chicken sandwiches and other grilled chicken products, Ranch * 1 famous
fries, and other food and beverage items. Currently, there are 48 Ranch * 1
restaurants operating in 12 states, the District of Columbia, and Taiwan, of
which 41 are franchised to third parties and the remaining seven are corporately
owned. On July 3, 2001, Ranch * 1, Inc. and each of its wholly owned
subsidiaries (collectively, "Ranch 1") filed for Chapter 11 bankruptcy
protection in the U.S. Bankruptcy Court for the Southern District of New York.

During July, 2001, the Company, through a newly formed wholly owned subsidiary,
R 1 Franchise Systems, L.L.C. ("R 1 Franchise"), entered into a
Debtor-In-Possession Loan and Security Agreement with Ranch 1 to provide up to
$2,000,000 in debtor in possession financing to Ranch 1 during the pendency of
its bankruptcy reorganization (the "Loan Agreement"). In connection with the
Loan Agreement, on July 6, 2001, the Company and R 1 Franchise entered into a
Memorandum of Agreement with the Company's largest single shareholder, the
R.E.&M. Petersen Living Trust, that provides up to $2,500,000 to R 1 Franchise
for purposes of the Loan Agreement (the "Financing Agreement").

On July 31, 2001, the U.S. Bankruptcy Court for the Southern District of New
York entered a final order (the "Final Order") approving the Loan Agreement
between Ranch 1 and R 1 Franchise. As of March 31, 2002, R 1 Franchise has
advanced Ranch 1 $1,200,000 under the Loan Agreement. Additionally, as of March
31, 2002, R 1 Franchise has been advanced $2,500,000 under the Financing
Agreement.

The Final Order also approved a joint franchise marketing agreement between
Ranch 1 and R 1 Franchise that provides for R 1 Franchise to be paid a
commission equal to 50% of the initial franchise fees and area development fees
generated from sales by R 1 Franchise of new Ranch * 1 franchises and area
development rights during the period when Ranch 1 is operating under Chapter 11

                                       12
<PAGE>
bankruptcy protection. As of March 31, 2002, R 1 Franchise has been paid
$140,000 in commissions under this franchise marketing agreement.

In January, 2002, Ranch 1, R 1 Franchise, and the Official Committee of
Unsecured Creditors in the Ranch 1 bankruptcy case jointly filed a Plan of
Reorganization (the "Plan") and related Disclosure Statement with the Court. The
Plan and Disclosure Statement provide, among other things, for R 1 Franchise to
own 100% of the reorganized Ranch 1 upon the effective date, as detailed below,
of the Plan.

On February 14, 2002, the Court informally approved the Plan and related
Disclosure Statement. A formal confirmation order was subsequently submitted to
the Court (the "Confirmation Order"). On April 4, 2002, the Court formally
executed and entered the Confirmation Order, thereby formally approving the Plan
and related Disclosure Statement. Since the Court did not formally enter the
Confirmation Order until April 4, 2002, the Plan and related Disclosure
Statement will not be effective until May 1, 2002.

On May 1, 2002, in conjunction with the Plan, 100% of the equity of Ranch 1 is
owned by R 1 Franchise, a wholly owned subsidiary of the Company. The
outstanding amount under the Loan Agreement of $1,200,000 plus an additional
$1,300,000 in cash was contributed to Ranch 1 as equity on May 1, 2002. As a
result, the Company has assumed assets and liabilities under the Plan, including
payments to the creditors of Ranch 1, comprised of the following: (i) an initial
cash payment, after taking into account all class 1 creditors, to be finalized
on the date each class 2 creditor has been determined to have an allowed claim;
(ii) a 5 year note in the aggregate amount of $2,250,000 to class 2 creditors;
and (iii) a 7 year note in the aggregate amount of $575,000 to class 3
creditors.

RESULTS OF OPERATIONS

Total operating revenues for the three months ended March 31, 2002, decreased by
$558,637 to $898,391 from $1,457,028 during the same three month period in 2001.
This decrease in operating revenues is the result of the Company selling seven
company-owned locations of the Concepts to third party franchisees during the
nine month period April 1, 2001 until December 31, 2001 (the "2001 Store
Sales"). Additionally, during 2001, a total of ten under-performing
corporate-owned locations of the Concepts were closed in an effort to increase
the Company's overall profitability, none of which were closed during the three
month period ending March 31, 2001 (collectively, the "2001 Store Closures").
Royalty revenue decreased to $419,861 for the three months ended March 31, 2002
compared to $494,691 for the same period in 2001. Even though the Company has a
greater number of franchised units in 2002, the decrease is attributable
primarily to the sharing of royalties in Texas and Illinois under agreements
entered into in the year ended December 31, 2001.

Cost of product sales decreased to $147,824 for the three months ended March 31,
2002, compared to $275,083 for the same three month period in 2001. This
decrease is primarily the result of the 2001 Store Sales and the 2001 Store
Closures whereby the Company reduced the number of its corporate-owned locations
of the Concepts by a total of seventeen units during the period April 1, 2001 to
December 31, 2001 as discussed in the preceding paragraph. However, the gross
margin of store and product revenues decreased to approximately 56 % for the
three months ended March 31, 2002, compared to approximately 60 % for the three
months ended March 31, 2001. This decrease is attributable to the Company's
revenues for the three months ending March 31, 2002 including a greater
proportion of sales from lower margin raw materials and related supplies sold by
its Tovali subsidiary to the franchisees and licensees of the Company's Concepts
as the number of its corporate-owned units decreased to zero as of December 31,
2001.

Personnel costs decreased by $264,825 to $329,252 for the three months ended
March 31, 2002, compared to $594,077 for the same three month period in 2001.
This decrease in personnel costs is primarily attributable to the reduction in
staff associated with the 2001 Store Sales and 2001 Store Closures detailed

                                       13
<PAGE>
above, partially offset by an increase in the Company's corporate administrative
staff to support the additional franchisees who purchased the former
corporate-owned locations of the Concepts as part of the 2001 Store Sales.

Rent expense decreased by $204,800 to $84,861 for the three months ended March
31, 2002, compared to $289,661 for the same three month period of 2001. This
decrease in rent expense during the three months ended March 31, 2002 is
primarily the result of the Company selling a total of seven of its
corporate-owned locations of the Concepts during the period from April 1, 2001
through December 31, 2001, and closing an additional ten under performing
company-owned outlets of the Concepts during the same nine month period.

General and administrative expenses decreased by $109,828 to $227,959 for the
three months ended March 31, 2002, compared to $337,787 for the same period of
2001. This decrease in general and administrative expenses is primarily
attributable to the following items: (i) a decrease in travel expenses during
the first three months of 2002 since the Company no longer had corporate owned
locations scattered throughout the country to manage; (ii) a decrease in
insurance, workers compensation, and related overhead expenses at the individual
store level due to the Company no longer having corporate owed locations of the
Concepts as of December 31, 2001; and (iii) a reduction in health insurance and
related fringe benefits due to a reduction in the Company's number of employees
from the 2001 Store Sales and 2001 Store Closures.

Total other income decreased by $233,378 to $16,750 for the three months ended
March 31, 2002, compared to $250,128 for the same three month period of 2001.
This decrease in other income for the three months ended March 31, 2002 is
primarily due a non-recurring gain of $300,000 recorded in the first three
months of 2001 from the sale of the Company's future royalties from the
franchisees of its Concepts in the state of Illinois to Rilwala Foods, Inc., an
area representative of the Company whose controlling principal is Haresh Shah, a
current director of the Company. The above-referenced gain of $300,000 recorded
during the first quarter of 2001 was partially offset by a combination of the
following three items: (i) no loss on the sale of assets experienced during 2002
as the Company did not own any locations of the Concepts as of December 31,
2001; (ii) a reduction in interest expense during the first three months of 2002
due a reduction in the Company's overall level of indebtedness and historically
low interest rates; and (iii) an increase in interest income during the first
three months of 2002 resulting from an increased level of notes receivable
arising from the 2001 Store Sales and the sale of various area representative
agreements during the past year.

With no corporate-owned locations of the Concepts as of March 31, 2002, the
Company's future operating profitability has become more dependent upon
franchise and royalty revenue. Gross revenues should stabilize as the Company
has completed its transition from corporate-owned locations to having all
franchised locations of its Concepts. The Company will continue to attempt to
grow its existing Concepts through the franchising of new locations and
assisting franchisees in increasing volumes at their existing locations.

                                       14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2002, the Company's liquidity improved substantially compared to
both December 31, 2001 and March 31, 2001. The Company's current ratio is 1.66
as of March 31, 2002, compared to 1.11 as of December 31, 2001 and 0.67 as of
March 31, 2001. The improvement in the working capital and current ratio is due
primarily to cash drawn on the Company's Financing Agreement for Ranch*1. The
corresponding debt amount is classified as long-term.

The Company anticipates that it will have sufficient liquidity to sustain its
operations over the next 12 months, including its obligations under Ranch * 1's
Plan discussed above and its repayment obligations under the associated
Financing Agreement. In late December 1999, the Company obtained a $1,000,000
credit facility from a national banking institution comprised of an $800,000
term note (the "Term Note") and a $200,000 revolving line of credit. During the
first quarter of 2001, the Company entered into an agreement with the same
national banking institution to increase the amount of its revolving line of
credit from $200,000 to $500,000. Additionally, the Company is currently
negotiating with the same national banking institution to increase its revolving
line of credit by another $250,000. As of March 31, 2002, the balance
outstanding under the Term Note is approximately $211,573 and approximately
$492,911 is outstanding under the $500,000 revolving line of credit.

The Company does not anticipate the need for significant capital expenditures in
the near future. However, if certain prospective store locations would be better
as company-owned stores rather than franchised locations, the Company may
require significant capital to build-out and open those prospective stores.

During 2001, the Company continued to finance the sale of its corporate-owned
locations by taking notes receivable from the buyers. Most of the notes are
payable over three to five years. During the fourth quarter of 2001, the Company
wrote-off approximately $900,000 of its notes receivable balance due primarily
from franchisees due to uncollectibility, and established an additional reserve
for uncollectibility against its remaining notes receivable balance of
approximately $800,000. Notes receivable balances, after this allowance, totaled
3,386,021 at March 31, 2002. This practice of taking notes receivable and its
recent experience with uncollectable note receivable balances has caused the
Company to carefully manage its cash flows in order to maintain relationships
with vendors and meet payments on its debt obligations. Since the Company has
sold all of its corporate-owned locations, it does not anticipate an increase in
notes receivable at levels commensurate with that of the past twelve to eighteen
months.

Net cash used in operating activities was approximately $88,047 for the first
three months of 2002, compared to net cash used in operating activities of
$239,366 for the corresponding three month period of 2001. The primary sources

                                       15
<PAGE>
of cash from operating activities during the first three months of 2002 causing
this change are as follows: (i) net income of $117,319 during the first three
months of 2002; and (ii) a decrease in trade and other accounts receivable of
$73,056 during the same period as the Company has increased the collection
efforts on its outstanding royalties and related receivables from franchisees.
These sources of cash from operating activities during the first three months of
2002 were completely offset by the following uses of cash: (i) a decrease in
accounts payable and accrued liabilities of $235,556 during the first three
months of 2002 as the Company's continues to reduce its overall level of
outstanding obligations; and (ii) a reduction in deferred franchise fee income
of $30,000 during the first three months of 2002 as two new franchise units
opened during the first quarter of 2002 where the initial franchise fee was paid
in full during 2001.

Net cash used in investing activities was approximately $359,666 for the first
three months of 2002, compared to net cash provided by investing activities of
$62,530 during the comparable three month period of 2001. The primary reason for
this decrease is the Company advancing Ranch * 1, Inc. $550,000 during the first
quarter of 2002 under the Loan Agreement, partially offset by increased
collections on the Company's notes receivable during the same period.

Net cash provided by financing activities for the first three months of 2002 was
approximately $1,138,727, compared to net cash provided by financing activities
of $99,056 during the same three month period of 2001. The primary reason for
this increase was the Company borrowing an additional $1,300,000 under the
Financing Agreement to funds its advances to Ranch * 1, Inc. during the first
three months of 2002 discussed above, and to prepare for the closing of the
acquisition of the grilled chicken chain on May 1, 2002.

The Company believes that it can effectively implement its growth plans for the
current fiscal year's operations with the $1,000,000 credit facility, including
the newly increased $500,000 revolving line of credit, discussed above.
Nevertheless, in addition to current negotiations to increase its revolving line
of credit to $750,000, the Company is seeking additional debt or equity
financing from various sources, including investment banks, venture capitalists,
and private investors, to fund future expansion and for potential future
acquisitions.

The Company has never paid cash dividends on its common stock and does not
anticipate a change in this policy in the foreseeable future.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Factors that may affect the Company's future results are described in detail at
pages 39-40 of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2001. These factors include, without limitation, the effect of
national and regional economic and market conditions in the U.S. where the
Company franchises and operates store locations (including declining customer
traffic in airports and regional shopping malls due to the weakening United
States economy and the terrorist attacks of September 11, 2001), costs of labor

                                       16
<PAGE>
and employee benefits, costs of marketing, the success or failure of marketing
efforts, costs of food and non-food items used in the operation of the Company's
stores, intensity of competition for locations and franchisees as well as
customers, the Company's ability to negotiate favorable lease terminations with
the applicable landlords for the locations covered by the 2001 Store Closures,
perception of food safety, spending patterns and demographic trends, legal
claims and litigation, the availability of financing for the Company and its
franchisees at reasonable interest rates, the Company's ability to integrate the
Ranch * 1 concept with its four existing brands, and legislation and
governmental regulations affecting the Company's business. Many of these factors
are beyond the Company's control. Due to the factors noted above and in the
Company's Form 10-KSB for the year ended December 31, 2001, the Company's future
earnings and stock price may be subject to significant volatility. Any shortfall
in revenues or earnings from levels expected by the investing public or
securities analysts could have an immediate and significant adverse effect on
the trading price of the Company's common stock.

                                       17
<PAGE>
PART II - OTHER INFORMATION

ITEM 1 LEGAL PROCEEDINGS

NONE - The Company is party to several pending legal proceedings involving
primarily landlords and vendors, all of which are deemed by the management of
the Company to be ordinary and routine litigation incidental to the business,
and none of which is believed likely to have a material adverse effect on the
Company, its financial position or operations. SEE LIQUIDITY AND CAPITAL
RESOURCES - RISK FACTORS, in the Company's 2001 Form 10-KSB for additional
information on the number and status of the legal proceedings involving
landlords.

ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS

NONE

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

NONE

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

ITEM 5 OTHER INFORMATION

RANCH * 1 ACQUISITION:

On April 4, 2002, the Court formally executed and entered the Confirmation
Order, thereby formally approving Ranch * 1's Plan and related Disclosure
Statement. Due to the Confirmation Order being entered on April 4, 2002, the
Company, through its R 1 Franchise subsidiary, owns one hundred percent (100%)
of the reorganized Ranch * 1 and its wholly-owned subsidiaries effective May 1,
2002.

SUSPENSION OF DIVIDEND ON PREFERRED SHARES:

At its regular meeting in April, 2002, the Company's Board of Directors approved
the suspension of the quarterly dividends payable on all three of the Company's
outstanding classes of preferred stock effective December 1, 2001 until further
notice. Since inception, the dividend on all three classes of the Company's
preferred stock had been paid in shares of the Company's common stock.
Simultaneous with the Board of Director's action, the holders of the Company's
Series A, B, and C preferred stock each waived the cumulative feature of their
preferred shares during this dividend suspension period.

                                       18
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     EXHIBIT NUMBER      DESCRIPTION
     --------------      -----------

         2.1             Order Confirming First Modified Joint Plan of
                         Reorganization Proposed by the Debtor and the Official
                         Committee of Unsecured Creditors, incorporated by
                         reference to the Company's Registration Statement on
                         Form 10-SB filed with the Securities and Exchange
                         Commission on December 20, 1999, File No. 0-30444.

         2.2             First Modified Joint Plan of Reorganization Proposed by
                         the Debtor and the Official Committee of Unsecured
                         Creditors dated May 13, 1997, as amended July 22, 1997,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         2.3             Amended Disclosure Statement accompanying First
                         Modified Joint Plan of Reorganization Proposed by the
                         Debtor and the Official Committee of Unsecured
                         Creditors dated May 13, 1997, as amended July 22, 1997,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         2.4             Share Purchase Agreement between Sports Group
                         International, Inc. and Surf City Acquisition
                         Corporation II dated March 15, 1999, incorporated by
                         reference to the Company's Registration Statement on
                         Form 10-SB filed with the Securities and Exchange
                         Commission on December 20, 1999, File No. 0-30444.

         2.5             Membership Interest Purchase Agreement between Sports
                         Group International, Inc. and Apache Peak Capital,
                         L.LC., dated March 12, 1999, incorporated by reference

                                       19
<PAGE>
                         to the Company's Registration Statement on Form 10-SB
                         filed with the Securities and Exchange Commission on
                         December 20, 1999, File No. 0-30444.

         2.6             Share Purchase Agreement between Sports Group
                         International, Inc., Ziad S. Dalal and Selman Systems,
                         Inc. dated May 21, 1999, incorporated by reference to
                         the Company's Registration Statement on Form 10-SB
                         filed with the Securities and Exchange Commission on
                         December 20, 1999, File No. 0-30444.

         2.7             Stock Purchase Agreement between Selman Systems, Inc.,
                         Kenneth L. Musgrave, Ltd., Tony Condor and Larry Pearce
                         dated May 21, 1999, incorporated by reference to the
                         Company's Registration Statement on Form 10-SB filed
                         with the Securities and Exchange Commission on December
                         20, 1999, File No. 0-30444.

         3.1             Amended and Restated Articles of Incorporation of
                         Sports Group International, Inc., incorporated by
                         reference to the Company's Registration Statement on
                         Form 10-SB filed with the Securities and Exchange
                         Commission on December 20, 1999, File No. 0-30444.

         3.2             Bylaws of Sports Group International, Inc.,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         3.3             Articles of Amendment to the Company's Articles of
                         Incorporation filed December 28, 2000 Changing the
                         Company's Name to Kahala Corp. and Creating the Series
                         C Preferred Stock, incorporated by reference to the
                         2001 Annual Report filed on Form 10-KSB with the
                         Securities and Exchange Commission on April 15, 2002,
                         File No. 0-30444.

         3.4             Articles of Amendment to the Company's Articles of
                         Incorporation filed December 12, 2001 Adjusting the
                         Conversion Ratio of the Company's Series A & B
                         Preferred Stock, incorporated by reference to the 2001

                                       20
<PAGE>
                         Annual Report filed on Form 10-KSB with the Securities
                         and Exchange Commission on April 15, 2002, File No.
                         0-30444.

         4.1             Promissory Note with United Texas Bank, incorporated by
                         reference to the Company's Registration Statement on
                         Form 10-SB filed with the Securities and Exchange
                         Commission on December 20, 1999, File No. 0-30444.

         4.2             Bank One Promissory Note, incorporated by reference to
                         the Company's Registration Statement on Form 10-SB
                         filed with the Securities and Exchange Commission on
                         December 20, 1999, File No. 0-30444.

         4.3             Promissory Note between SCAC and the Petersen Trust,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         4.4             Consent and Waiver of Terms of Series A Preferred
                         Stock, incorporated by reference to the Company's
                         Registration Statement on Form 10-SB filed with the
                         Securities and Exchange Commission on December 20,
                         1999, File No. 0-30444.

         10.1            Sports Group International, Inc.'s 1999 Stock Option
                         Plan, incorporated by reference to the Company's
                         Registration Statement on Form 10-SB filed with the
                         Securities and Exchange Commission on December 20,
                         1999, File No. 0-30444.

         10.2            Employment Agreement between Mr. Kevin A. Blackwell and
                         Sports Group International, Inc. dated October 1, 1999,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         10.3            Employment Agreement between Mr. David A. Guarino and
                         Sports Group International, Inc. dated October 1, 1999,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and

                                       21
<PAGE>
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         10.4            Series B Preferred Stock and Warrant Purchase Agreement
                         between Sports Group International, Inc., Robert E.
                         Petersen and Margaret Petersen dated May 20, 1999,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         10.5            Warrant to purchase 1,000,000 shares of the Company's
                         Common Stock, incorporated by reference to the
                         Company's Registration Statement on Form 10-SB filed
                         with the Securities and Exchange Commission on December
                         20, 1999, File No. 0-30444.

         10.6            Master Franchise Agreement between Surf City Squeeze
                         Franchise Corp. and 1238176 Ontario, Inc. dated July 7,
                         1998, incorporated by reference to the Company's
                         Registration Statement on Form 10-SB filed with the
                         Securities and Exchange Commission on December 20,
                         1999, File No. 0-30444.

         10.7            Indemnification Agreement for Kathryn Blackwell,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         10.8            Indemnification Agreement for Kevin Blackwell,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         10.9            Indemnification Agreement for David Guarino,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         10.10           Indemnification Agreement for Robert Corliss,
                         incorporated by reference to the Company's Registration
                         Statement on Form 10-SB filed with the Securities and

                                       22
<PAGE>
                         Exchange Commission on December 20, 1999, File No.
                         0-30444.

         10.11           Indemnification Agreement for Don Plato, incorporated
                         by reference to the Company's Registration Statement on
                         Form 10-SB filed with the Securities and Exchange
                         Commission on December 20, 1999, File No. 0-30444.

         10.12           Compromise Settlement and Non-Modification Agreement
                         between Sports Group International, Inc., Selman
                         Systems, Inc., and Ziad S. Dalal, dated February 1,
                         2000, incorporated by reference to the Company's
                         Amendment No. 1 to its Form 10-SB/A Registration
                         Statement filed with the Securities and Exchange
                         Commission on February 16, 2000.

         10.13           Series C Preferred Stock Agreement between Sports Group
                         International, Inc. and Rilwala Group, Inc. dated
                         December 28, 2000, incorporated by reference to Exhibit
                         10.13 of the Company's 2000 Annual Report on Form
                         10-KSB filed with the Securities and Exchange
                         Commission on April 2, 2001, File No. 000-30444.

         10.14           Exclusive Master Development Agreement and Investment
                         Agreement between Sports Group International, Inc. and
                         Rilwala Group, Inc. dated November 1, 2000,
                         incorporated by reference to the Company's 2000 Annual
                         Report on Form 10-KSB filed with the Securities and
                         Exchange Commission on April 2, 2001, File No.
                         000-30444.

         10.15           Debtor-In-Possession Loan and Security Agreement by and
                         between R 1 Franchise Systems, L.L.C. and Ranch * 1,
                         Inc (and its affiliated entities) dated July 5, 2001,
                         incorporated by reference to the Company's Quarterly
                         Report on Form 10-QSB filed with the Securities and
                         Exchange Commission on August 14, 2001, File No.
                         000-30444.

         10.16           Final Order Entered by the United States Bankruptcy
                         Court for the Southern District of New York Authorizing
                         Ranch 1, Inc. (and its affiliated entities) to Obtain

                                       23
<PAGE>
                         Post-Petition Secured Financing Pursuant to Sections
                         364(C)(1), 364(C)(2) and 364(C)(3) of the Bankruptcy
                         Code, and Approving Joint Franchise Marketing
                         Agreement, incorporated by reference to the Company's
                         Quarterly Report on Form 10-QSB filed with the
                         Securities and Exchange Commission on August 14, 2001,
                         File No. 000-30444.

         10.17           Memorandum of Agreement by and between Kahala Corp., R
                         1 Franchise Systems, L.L.C. (fka Ranch * 1 Acquisition,
                         L.L.C.), and the RE&M Petersen Trust dated July 6,
                         2001, incorporated by reference to the 2001 Annual
                         Report filed on Form 10-KSB with the Securities and
                         Exchange Commission on April 15, 2002, File No.
                         0-30444.

         10.18           Plan of Reorganization Jointly Proposed By The Debtors,
                         The Official Committee of the Unsecured Creditors and R
                         1 Franchise Systems, LLC Filed With the United States
                         Bankruptcy Court for the Southern District of New York,
                         incorporated by reference to the 2001 Annual Report
                         filed on Form 10-KSB with the Securities and Exchange
                         Commission on April 15, 2002, File No. 0-30444.

         10.19           First Amended Disclosure Statement Pursuant to Section
                         1125 of the Bankruptcy Code for the Joint Plan of
                         Reorganization of Ranch * 1, Inc. and the Other
                         Above-Captioned Debtors and Debtors-In-Possession Filed
                         With the United States Bankruptcy Court for the
                         Southern District of New York, incorporated by
                         reference to the 2001 Annual Report filed on Form
                         10-KSB with the Securities and Exchange Commission on
                         April 15, 2002, File No. 0-30444.

         10.20           Continuing Royalty Fee Agreement by and between Kahala
                         Corp., Malibu Smoothie Franchise Corp., Frullati
                         Franchise Systems, Inc., Rollerz Franchise Systems,
                         LLC, Tahi Mana, LLC, and R. B. Texas Collections, Inc.
                         dated December 13, 2001, incorporated by reference to
                         the 2001 Annual Report filed on Form 10-KSB with the
                         Securities and Exchange Commission on April 15, 2002,
                         File No. 0-30444.

                                       24
<PAGE>
         10.21           Order Confirming Plan of Reorganization Jointly Filed
                         by the Debtors, the Official Committee of Unsecured
                         Creditors and R 1 Franchise Systems, L.L.C.,
                         incorporated by reference to the 2001 Annual Report
                         filed on Form 10-KSB with the Securities and Exchange
                         Commission on April 15, 2002, File No. 0-30444.

         11*             Computation of Per Share Earnings - Located in the
                         March 31, 2002 Statement of Operations and footnote
                         four to such financial statement filed herewith on page
                         four and nine, respectively.

         21              Subsidiary Information. (See Chart), incorporated by
                         reference to the Company's Registration Statement on
                         Form 10-SB filed with the Securities and Exchange
                         Commission on December 20, 1999, File No. 0-30444.

----------
*    Filed herewith.

(b)  Reports on Form 8-K

NONE

                                       25
<PAGE>
                                   SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


KAHALA CORP.
(Registrant)


By: /s/ Kevin Blackwell                                       Date: May 14, 2002
    ---------------------------------
    Kevin Blackwell
    President, CEO, and Director


By: /s/ David Guarino                                         Date: May 14, 2002
    ---------------------------------
    David Guarino
    Vice President, Chief Financial Officer, and Director
    (Principal Financial and Accounting Officer)

                                       26