FORM 10QSB


                  Quarterly Report under Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


For Quarter Ended                                 Commission File Number
-----------------                                 ----------------------
September 30, 2000                                      000-03651


                             PNW CAPITAL, INC.
            ---------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                                     06-1474412
--------------------------------                        -------------------
     (State of incorporation)                           (I.R.S. Employer
                                                        Identification No.)

                12925 W. Arlington Pl., Littleton, CO 80127
            ---------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (303) 412-2469


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                           Common Stock

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.

                        Yes [ x ] No [   ]

The number of common shares without par value outstanding on June 30,
2000 was 42,240,000 shares.


======================================================================




<PAGE>
<TABLE>
<CAPTION>

           PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
                        (A development stage enterprise)
                                 Balance Sheets
                    September 30, 2000 and December 31, 1999
<S>                                                                                <C>                   <C>


                                                                                       September 30,           December 31,
                                                                                                 2000                   1999
                                                                                           (Unaudited)              (Audited)
                                                                                   -------------------    -------------------
ASSETS
  Current assets:
    Cash                                                                                      $ 2,923                  $ 219
    Inventory, at cost                                                                          6,121                  2,816
    Prepaid expenses                                                                            4,169                    970
                                                                                   -------------------    -------------------
      Total current assets                                                                     13,213                  4,005
                                                                                   -------------------    -------------------

  Property and equipment, at cost, net of
    accumulated depreciation                                                                   11,605                      -
                                                                                   -------------------    -------------------

  Other assets:
    Investment in Multiplex Raceway Systems                                                    75,030                      -
    Website development costs in process                                                       71,861                      -
    Goodwill, net of accumulated amortization                                                 144,917                      -
                                                                                   -------------------    -------------------
      Total other assets                                                                      291,808                      -
                                                                                   -------------------    -------------------
                                                                                   -------------------    -------------------
      Total assets                                                                           $316,626                $ 4,005
                                                                                   ===================    ===================


LIABILITIES
  Current liabilities:
    Accounts payable and accrued expenses                                                    $ 46,393               $ 26,118
    Due to related parties                                                                          -                 36,332
    Accrued liability for contingencies                                                        25,000                 25,000
                                                                                   -------------------    -------------------
      Total current liabilities                                                                71,393                 87,450
                                                                                   -------------------    -------------------
                                                                                   -------------------    -------------------
      Total liabilities                                                                        71,393                 87,450
                                                                                   -------------------    -------------------

  Commitments and contingencies                                                             -                      -

STOCKHOLDERS' EQUITY (DEFICIT)
  Common stock, $.0001 par value, 100,000,000
    shares authorized, 49,540,000 and 33,750,000
    shares issued and outstanding                                                               4,954                  3,375
  Capital in excess of par value                                                            1,684,935                923,414
  Deficit accumulated during the
    development stage                                                                      (1,444,656)            (1,010,234)
                                                                                   -------------------    -------------------
      Total stockholders' equity (deficit)                                                    245,233                (83,445)
                                                                                   -------------------    -------------------

      Total liabilities and stockholders' equity                                             $316,626                $ 4,005
                                                                                   ===================    ===================
</TABLE>




<PAGE>
<TABLE>
<CAPTION>
           PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
                        (A development stage enterprise)
 Statements of Loss and Deficit for the Periods Ended September 30, 2000 and 1999
                                  (Unaudited)


<S>                                                                <C>                   <C>                      <C>

                                                                             Cumulative
                                                                            November 6,
                                                                           1996 through                         Nine Months
                                                                          September 30,                      Ended September 30,
                                                                                          ------------------------------------------

                                                                                   2000                    2000                 1999
                                                                   ---------------------  ----------------------  ------------------

Revenues                                                                       $ 15,537                     $ -             $ 9,394
                                                                   ---------------------  ----------------------  ------------------

Less, Costs and expenses:
  Cost of revenues                                                               76,201                       -              64,205
  Consulting and management fees                                                896,325                 340,799             121,449
  Provision for contingencies                                                    25,000                       -              25,000
  Depreciation and amortization                                                   5,526                   4,987                 305
  Writeoffs and abandonments of
    mineral properties                                                          276,000                       -                   -
  Other general and administrative                                              184,394                  89,584               5,943
                                                                   ---------------------  ----------------------  ------------------

    Total operating expenses                                                  1,463,446                 435,370             216,902
                                                                   ---------------------  ----------------------  ------------------

    Loss from operations                                                     (1,447,909)               (435,370)           (207,508)
                                                                   ---------------------  ----------------------  ------------------


Other income (expense):
  Interest income                                                                 2,724                     419                   -
  Foreign exchange                                                                  529                     529                   -
                                                                   ---------------------  ----------------------  ------------------

    Total other income (expense)                                                  3,253                     948                   -
                                                                   ---------------------  ----------------------  ------------------

    Loss before taxes on income                                              (1,444,656)               (434,422)           (207,508)

  Provision for income taxes                                                          -                       -                   -
                                                                   ---------------------  ----------------------  ------------------

      Net loss                                                              $(1,444,656)               (434,422)           (207,508)
                                                                   =====================

Deficit accumulated during the development stage:
  Beginning                                                                                          (1,010,234)           (750,830)
                                                                                          ----------------------  ------------------

  Ending                                                                                            $(1,444,656)          $(958,338)
                                                                                          ======================  ==================

Basic earnings (loss)
  per common share                                                                                      $ (0.01)            $ (0.01)
                                                                                          ======================  ==================

Weighted average shares outstanding                                                                  38,647,409          34,255,480
                                                                                          ======================  ==================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

           PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
                        (A development stage enterprise)
            Statements of Loss and Deficit For The Three Months Ended
                           September 30, 2000 and 1999
                                   (Unaudited)
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                       <C>                     <C>


                                                                                                             Three Months
                                                                                                         Ended September 30,
                                                                                          ------------------------------------------

                                                                                                      2000                    1999
                                                                                          ----------------------  ------------------

Revenues                                                                                                    $ -             $ 4,002
                                                                                          ----------------------  ------------------


Less, Costs and expenses:
  Cost of revenues                                                                                            -               8,373
  Consulting and management fees                                                                        266,749               1,000
  Depreciation and amortization                                                                           2,766                   -
  Other general and administrative                                                                       31,234               1,534
                                                                                          ----------------------  ------------------

    Total operating expenses                                                                            300,749              10,907
                                                                                          ----------------------  ------------------

    Loss from operations                                                                               (300,749)             (6,905)
                                                                                          ----------------------  ------------------


Other income (expense):
  Interest income                                                                                             -                   -
  Foreign exchange                                                                                           74                   -
                                                                                          ----------------------  ------------------

    Total other income (expense)                                                                             74                   -
                                                                                          ----------------------  ------------------

    Loss before taxes on income                                                                        (300,675)             (6,905)

  Provision for income taxes                                                                                  -                   -
                                                                                          ----------------------  ------------------

      Net loss                                                                                         (300,675)             (6,905)

Deficit accumulated during the development stage:
  Beginning                                                                                          (1,143,981)           (951,433)
                                                                                          ----------------------  ------------------

  Ending                                                                                            $(1,444,656)          $(958,338)
                                                                                          ======================  ==================


Basic earnings (loss)
  per common share                                                                                      $ (0.01)            $ (0.00)
                                                                                          ======================  ==================


Weighted average shares outstanding                                                                  43,010,652           33,750,000

                                                                                          ======================  ==================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

           PNW CAPITAL, INC. (Formerly Winchester Mining Corporation)
                        (A development stage enterprise)
                 Statements of Cash Flows For The Periods Ended
                           September 30, 2000 and 1999
                                   (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                     <C>                  <C>


                                                                             Cumulative
                                                                            November 6,
                                                                           1996 through          Nine Months
                                                                          September 30,                        Ended September 30,
                                                                                           ----------------------------------------

                                                                                   2000                 2000                  1999
                                                                   ---------------------   ------------------   -------------------

 Cash flows from operating activities:
  Net loss                                                                  $(1,444,656)          $ (434,422)           $ (207,508)
  Adjustments to reconcile net income to
   cash provided (used) by development
   stage activities:
    Provision for bad debts                                                      45,507                                          -
    Depreciation and amortization                                                 5,525                4,986                     -
    Change in current assets and liabilities:
      Inventory                                                                  (6,121)              (3,305)                    -
      Prepaid expenses                                                           (4,708)              (3,199)               (3,878)
      Accounts payable and accrued expenses                                      46,393               20,275                 4,670
      Accrued liability for contingencies                                        25,000                    -                25,000
      Due to related parties                                                    945,000              313,668                36,066
                                                                   ---------------------   ------------------   -------------------
                                                                   ---------------------   ------------------   -------------------
  Cash flows from operating activities                                         (388,060)            (101,997)             (145,650)
                                                                   ---------------------   ------------------   -------------------
                                                                   ---------------------   ------------------   -------------------

 Cash flows from investing activities:
   Purchase of equipment                                                        (12,451)             (12,451)                    -
   Investment in Multiplex                                                      (75,000)             (75,000)                    -
   Website development costs                                                    (71,861)             (71,861)                    -
   Acquisition of goodwill                                                     (149,057)            (149,057)                    -
   Loan to related party                                                        (50,000)                   -                     -
   Loan repayments                                                                4,493                    -                     -
                                                                   ---------------------   ------------------   -------------------
                                                                   ---------------------   ------------------   -------------------
  Cash flows from investing activities                                         (353,876)            (308,369)                    -
                                                                   ---------------------   ------------------   -------------------
                                                                   ---------------------   ------------------   -------------------

 Cash flows from financing activities:
  Net proceeds from sale of common stock                                        744,859              413,070               146,621
                                                                   ---------------------   ------------------   -------------------
                                                                   ---------------------   ------------------   -------------------
  Cash flows from financing activities                                          744,859              413,070               146,621
                                                                   ---------------------   ------------------   -------------------
                                                                   ---------------------   ------------------   -------------------

 Net increase (decrease)
  in cash and equivalents                                                       $ 2,923                2,704                   971
                                                                   =====================
                                                                   =====================

 Cash and equivalents:
  Beginning of period                                                                                    219                   149
                                                                                           ------------------   -------------------
                                                                                           ------------------   -------------------
  End of period                                                                                      $ 2,923               $ 1,120
                                                                                           ==================   ===================
                                                                                           ==================   ===================


 Supplemental cash flow disclosures:
  Cash paid for interest                                                            $ -                  $ -                   $ -
  Cash paid for income taxes                                                          -                    -                     -
  Non-cash financing and
   investing activities:
    Shares issued for debt                                                      595,000                    -               275,000
    Shares issued for services                                                  350,000              350,000
    Shares issued for investment                                                     30                   30

</TABLE>






<PAGE>




           PNW CAPITAL, INC. (FORMERLY WINCHESTER MINING CORPORATION)
                        (A development stage enterprise)
                     Notes to Unaudited Financial Statements
                               September 30, 2000
--------------------------------------------------------------------------------





The accompanying  unaudited interim financial statements include all adjustments
which  in the  opinion  of  management  are  necessary  in  order  to  make  the
accompanying financial statements not misleading,  and are of a normal recurring
nature.  However, the accompanying unaudited financial statements do not include
all of the  information and footnotes  necessary for a complete  presentation of
financial  position,  results of  operations,  cash flows and  stockholders'  in
conformity with generally accepted  accounting  principles.  Except as disclosed
herein,  there has been no material change in the  information  disclosed in the
notes to the financial statement included in the Company's annual report for the
year ended  December 31, 1999.  Operating  results for the three and nine months
ended September 30, 2000 are not necessarily  indicative of the results than can
be expected for the year ended December 31, 2000.

Note 1 - Development stage activities:
The Company is continuing to develop its on-line websites, from which it intends
to sell  licensed  products  from Disney,  National  Football  League,  National
Basketball Association,  Major League Baseball, NCAA, and similar organizations.
Approximately $72,000 has been incurred in development costs as of September 30,
2000, and completion is expected by the end of 2000. Accordingly, the Company is
still deemed to be a development stage enterprise.

Note 2 - Inventories:
Inventories  are  stated at the lower of cost or  market,  with cost  determined
using the first-in  first-out  (FIFO) method,  and consist of licensed  products
(finished goods) held for sale when the Company's websites become operational.

Note 3 - Property and equipment:
Property  and  equipment  are  stated  at cost  less  accumulated  depreciation,
computed on the  straight-line  method over the  estimated  useful  lives of the
assets. Estimated lives of depreciable assets range from five to seven years.

Note 4 - Investment in Multiplex Raceway Systems:
In May, 2000, the Company purchased 300,000 shares of Multiplex Raceway Systems,
a  privately-held  company  engaged in the  development  of fiber optic multiple
access  systems,  at a cost of $75,000 in cash.  Then, in September,  2000,  the
Company issued 300,000 shares of restricted common stock as additional  purchase
price;  this  transaction was recorded at the par value of the stock issued,  or
$30. The investment  represents 2.4% of the total  outstanding stock of Raceway.
The stock purchase  represents the Company's initial  investment against a total
commitment  to  purchase  25% of  Raceway's  stock  for total  consideration  of
$500,000 in cash and 2,000,000  shares of PNW Capital,  Inc.  common stock.  The
investment is recorded at cost.

Note 5 - Website development costs in process:
As  indicated  in Note 1 above,  the  company is in the  process  of  developing
websites from which to conduct its on-line retail operations. In March 2000, the
Emerging Issues Task Force reached a consensus on Issue No. 00-2, Accounting for
Website  Development  Costs,  ("EITF Issue No.  00-2") to be  applicable  to all
website  development  costs  incurred for the quarter  beginning  after June 30,
2000. The consensus  states that for specific  website  development  costs,  the
accounting  should be based  generally  on AICPA  Statement  of  Position  98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. Under SOP 98-1,  development  costs are capitalized and amortized to income
over the estimated useful life of the website.  The Company has elected to adopt
EITF Issue No. 00-2 and SOP 98-1 retroactively to January 1, 2000.


<PAGE>




The Company has incurred  $71,861 in  development  costs  through  September 30,
2000, which have been  capitalized;  no amortization  has been recorded,  as the
sites are incomplete. No costs had been incurred prior to January 1, 2000.

Note 6 - Goodwill:
On May 9, 2000,  the Company  acquired  all the  outstanding  stock of Hi-Plains
Energy Corp., a Wyoming  corporation that was also in the development stage, for
$15,600.  Concurrently therewith,  the Company paid consulting and legal fees of
$134,420 to facilitate the merger of Hi-Plains into  Winchester,  and the filing
of related  forms with the  Securities  and  Exchange  Commission.  The total of
$150,020 has been treated as the cost of the Hi-Plains shares.

Effective May 13, 2000, Hi-Plains was merged into Winchester, Winchester changed
its name to PNW Capital, Inc., and each share issued and outstanding immediately
prior to the effective date remained as issued and  outstanding  common stock in
Winchester (renamed PNW) without change.

The  purchase of the  Hi-Plains  stock and  subsequent  merger into PNW has been
treated as a purchase,  under which the excess of the purchase price  ($150,020)
over the net assets of Hi-Plains ($963) has been capitalized as Goodwill, and is
being  amortized  over a 15 year life.  Amortization  of $2,484  was  recognized
during the quarter ended September 30, 2000.

Note 7 - Federal income tax:
The currently  payable  (refundable)  provision  (credit) for Federal income tax
consists of the following:

                                           September 30,
                                 ----------------------------------------
                                          2000                 1999
                                  -----------------    -----------------
Currently payable (refundable)

  provision (credit)
  attributable to:
      Current operations              ($147,700)            ($70,500)
      Less:
       Limitation due to absence
                                  -----------------    -----------------
      Net amount payable
           (refundable)              $      -              $     -
                                  =================    =================


The Company follows Statement of Financial Accounting Standards number 109 (SFAS
109),  Accounting for Income Taxes. Deferred income taxes reflect the net effect
of (a) temporary  difference  between carrying amounts of assets and liabilities
for financial  purposes and the amounts used for income tax reporting  purposes,
and (b) net  operating  loss  carryforwards.  The  cumulative  tax effect at the
expected rate of 34% of significant  items comprising the Company's net deferred
tax amounts are as follows:


                                                September 30,
                                                   2000
                                             -----------------
      Deferred tax assets
        attributable to:
          Net operating loss carry-
      Less, Valuation allowance                   (491,100)
                                             -----------------
      Net deferred tax assets                  $      -
                                             =================




<PAGE>




At September  30, 2000,  the Company had net  operating  loss  carryovers  which
expire as follows:

       Expires:                         Amount
         December 31, 2011             $10,100
         December 31, 2012             489,200
         December 31, 2013             251,500
         December 31, 2014             259,400
         December 31, 2015             434,400
                                   -----------------
           Total                    $1,444,600
                                   =================

Note 8 - Common stock:
During the development  stage, the Company has issued shares of its common stock
as follows:
<TABLE>
<CAPTION>
<S>                                                          <C>                      <C>                 <C>

                                                                                   Price Per
      Description and Dates                                      Shares                Share               Amount
      ------------------------------------------------ ----------------- -- ----------------- --- ----------------
      Shares issued for cash:
        November 7, 1996                                         50,000               $0.010                 $500
        February 27, 1997                                    20,000,000                0.010              200,000
        July 17, 1998                                         5,200,000                0.062              320,000
        March 15, 1999                                        2,000,000                0.050              100,000
        March 31, 1999                                        1,000,000                0.050               50,000
        March 13, 2000                                        1,790,000                0.161              288,190
        May 17, 2000                                          6,700,000                0.218              146,302

      Shares issued for debt (1):
        March 15, 1999                                        3,500,000                0.050              175,000
        March 31, 1999                                        2,000,000                0.050              100,000

      Shares issued for services(2):
        September 20, 2000                                    7,000,000                0.050              350,000
</TABLE>

(1)      Value based on face value of obligation relieved.
(2)      Value based on quoted value of shares issued.

Note 9 - Restatement of first quarter, 2000 results of operations:
As a result of the  implementation  of SOP 98-1 (see Note 5 above),  the Company
retroactively   capitalized  $69,261  in  website  development  costs  that  had
previously been expensed during the quarter ended March 31, 2000. Following is a
summary of the  Company's  operations  for the quarter  ended March 31, 2000, as
restated:

                                                   Quarter Ended March 31,
                                         ---------------------------------------
                                               2000                 1999
                                           ----------------    -----------------
      Revenues                                $      -             $      -
                                           ----------------    -----------------
      Less:
        Costs of revenues                            -               50,026
        Consulting and management fees          35,669              113,833
        Provision for contingencies                  -               25,000
        Other general and administrative        21,349                  346
                                           ----------------    -----------------
      Loss before taxes on income              (57,018)            (189,205)
        Provision for taxes on income                -                    -
                                           ----------------    -----------------
      Net loss                                ($57,018)           ($189,205)
                                           ================    =================




<PAGE>



The accompanying  unaudited interim financial statements include all adjustments
which  in the  opinion  of  management  are  necessary  in  order  to  make  the
accompanying financial statements not misleading,  and are of a normal recurring
nature.  However, the accompanying unaudited financial statements do not include
all of the  information and footnotes  necessary for a complete  presentation of
financial  position,  results of  operations,  cash flows and  stockholders'  in
conformity with generally accepted  accounting  principles.  Except as disclosed
herein,  there has been no material change in the  information  disclosed in the
notes to the financial statement included in the Company's annual report for the
year ended  December 31, 1999.  Operating  results for the three and nine months
ended September 30, 2000 are not necessarily  indicative of the results than can
be expected for the year ended December 31, 2000.

Note 1 - Development stage activities:
The Company is continuing to develop its on-line websites, from which it intends
to sell  licensed  products  from Disney,  National  Football  League,  National
Basketball Association,  Major League Baseball, NCAA, and similar organizations.
Approximately $72,000 has been incurred in development costs as of September 30,
2000, and completion is expected by the end of 2000. Accordingly, the Company is
still deemed to be a development stage enterprise.

Note 2 - Inventories:
Inventories  are  stated at the lower of cost or  market,  with cost  determined
using the first-in  first-out  (FIFO) method,  and consist of licensed  products
(finished goods) held for sale when the Company's websites become operational.

Note 3 - Property and equipment:
Property  and  equipment  are  stated  at cost  less  accumulated  depreciation,
computed on the  straight-line  method over the  estimated  useful  lives of the
assets. Estimated lives of depreciable assets range from five to seven years.

Note 4 - Investment in Multiplex Raceway Systems:
In May, 2000, the Company purchased 300,000 shares of Multiplex Raceway Systems,
a  privately-held  company  engaged in the  development  of fiber optic multiple
access  systems,  at a cost of $75,000 in cash.  Then, in September,  2000,  the
Company issued 300,000 shares of restricted common stock as additional  purchase
price;  this  transaction was recorded at the par value of the stock issued,  or
$30. The investment  represents 2.4% of the total  outstanding stock of Raceway.
The stock purchase  represents the Company's initial  investment against a total
commitment  to  purchase  25% of  Raceway's  stock  for total  consideration  of
$500,000 in cash and 2,000,000  shares of PNW Capital,  Inc.  common stock.  The
investment is recorded at cost.

Note 5 - Website development costs in process:
As  indicated  in Note 1 above,  the  company is in the  process  of  developing
websites from which to conduct its on-line retail operations. In March 2000, the
Emerging Issues Task Force reached a consensus on Issue No. 00-2, Accounting for
Website  Development  Costs,  ("EITF Issue No.  00-2") to be  applicable  to all
website  development  costs  incurred for the quarter  beginning  after June 30,
2000. The consensus  states that for specific  website  development  costs,  the
accounting  should be based  generally  on AICPA  Statement  of  Position  98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. Under SOP 98-1,  development  costs are capitalized and amortized to income
over the estimated useful life of the website.  The Company has elected to adopt
EITF Issue No. 00-2 and SOP 98-1 retroactively to January 1, 2000.

<PAGE>

The Company has incurred  $71,861 in  development  costs  through  September 30,
2000, which have been  capitalized;  no amortization  has been recorded,  as the
sites are incomplete. No costs had been incurred prior to January 1, 2000.

Note 6 - Goodwill:
On May 9, 2000,  the Company  acquired  all the  outstanding  stock of Hi-Plains
Energy Corp., a Wyoming  corporation that was also in the development stage, for
$15,600.  Concurrently therewith,  the Company paid consulting and legal fees of
$134,420 to facilitate the merger of Hi-Plains into  Winchester,  and the filing
of related  forms with the  Securities  and  Exchange  Commission.  The total of
$150,020 has been treated as the cost of the Hi-Plains shares.

Effective May 13, 2000, Hi-Plains was merged into Winchester, Winchester changed
its name to PNW Capital, Inc., and each share issued and outstanding immediately
prior to the effective date remained as issued and  outstanding  common stock in
Winchester (renamed PNW) without change.

The  purchase of the  Hi-Plains  stock and  subsequent  merger into PNW has been
treated as a purchase,  under which the excess of the purchase price  ($150,020)
over the net assets of Hi-Plains ($963) has been capitalized as Goodwill, and is
being  amortized  over a 15 year life.  Amortization  of $2,484  was  recognized
during the quarter ended September 30, 2000.

Note 7 - Federal income tax:
The currently  payable  (refundable)  provision  (credit) for Federal income tax
consists of the following:

                                                  September 30,
                                        ----------------------------------------
                                           2000                 1999
                                          -----------------    -----------------
      Currently payable (refundable)
        provision (credit)
        attributable to:
          Current operations              ($147,700)            ($70,500)
          Less:
            Limitation due to absence
                                          -----------------    -----------------
          Net amount payable
           (refundable)                    $      -              $     -
                                          =================    =================


The Company follows Statement of Financial Accounting Standards number 109 (SFAS
109),  Accounting for Income Taxes. Deferred income taxes reflect the net effect
of (a) temporary  difference  between carrying amounts of assets and liabilities
for financial  purposes and the amounts used for income tax reporting  purposes,
and (b) net  operating  loss  carryforwards.  The  cumulative  tax effect at the
expected rate of 34% of significant  items comprising the Company's net deferred
tax amounts are as follows:


                                                       September 30,
                                                           2000
                                                     -----------------
      Deferred tax assets
        attributable to:
          Net operating loss carry-
      Less, Valuation allowance                          (491,100)
                                                     -----------------
      Net deferred tax assets                          $      -
                                                     =================

<PAGE>

At September  30, 2000,  the Company had net  operating  loss  carryovers  which
expire as follows:

       Expires:                                   Amount
         December 31, 2011                       $10,100
         December 31, 2012                       489,200
         December 31, 2013                       251,500
         December 31, 2014                       259,400
         December 31, 2015                       434,400
                                            -----------------
           Total                              $1,444,600
                                            =================

Note 8 - Common stock:
During the development  stage, the Company has issued shares of its common stock
as follows:
<TABLE>
<CAPTION>
<S>                                                          <C>                      <C>                 <C>

                                                                                   Price Per
      Description and Dates                                      Shares                Share               Amount
      ------------------------------------------------ ----------------- -- ----------------- --- ----------------
      Shares issued for cash:
        November 7, 1996                                         50,000               $0.010                 $500
        February 27, 1997                                    20,000,000                0.010              200,000
        July 17, 1998                                         5,200,000                0.062              320,000
        March 15, 1999                                        2,000,000                0.050              100,000
        March 31, 1999                                        1,000,000                0.050               50,000
        March 13, 2000                                        1,790,000                0.161              288,190
        May 17, 2000                                          6,700,000                0.218              146,302

      Shares issued for debt (1):
        March 15, 1999                                        3,500,000                0.050              175,000
        March 31, 1999                                        2,000,000                0.050              100,000

      Shares issued for services(2):
        September 20, 2000                                    7,000,000                0.050              350,000
</TABLE>

(3)      Value based on face value of obligation relieved.
(4)      Value based on quoted value of shares issued.

Note 9 - Restatement of first quarter, 2000 results of operations:
As a result of the  implementation  of SOP 98-1 (see Note 5 above),  the Company
retroactively   capitalized  $69,261  in  website  development  costs  that  had
previously been expensed during the quarter ended March 31, 2000. Following is a
summary of the  Company's  operations  for the quarter  ended March 31, 2000, as
restated:

                                               Quarter Ended March 31,
                                         ---------------------------------------
                                             2000                 1999
                                         ----------------    -----------------
      Revenues                            $      -             $      -
                                         ----------------    -----------------
      Less:
        Costs of revenues                        -               50,026
        Consulting and management fees      35,669              113,833
        Provision for contingencies              -               25,000
        Other general and administrative    21,349                  346
                                         ----------------    -----------------
      Loss before taxes on income          (57,018)            (189,205)
        Provision for taxes on income            -                    -
                                         ----------------    -----------------
      Net loss                            ($57,018)           ($189,205)
                                         ================    =================

<PAGE>

The effect of the restatement on cash flows for the quarter ended March 31, 2000
was to increase operating cash flows by $69,261, and to decrease cash flows from
investing activities by the same amount.

Note 10 - Stock options and stock issued for services:
In August,  2000, the Company adopted the 2000  Nonqualified  Stock Option Plan.
The Plan sets aside  10,000,000  shares of common  stock  option for issuance to
employees, directors, officers, attorneys, accountants,  consultants or advisors
to the company. The Plan has a ten year term.

On  September  20,  2000,  the Company  granted  options to two officers and two
consultants to purchase  7,000,000 shares of the Company's common stock at $0.05
per share under the Plan.  The options were  immediately  exercised,  and shares
were issued in satisfaction of the Company's  obligation to the four individuals
for consulting services rendered through September 30, 2000. The transaction was
recorded by a charge to expense for  $257,035,  and a charge of $92,965  against
amounts previously accrued for such services, for a total value of $350,000.

Also on September 20, 2000, the Company granted options to five consultants (one
of whom is also a  director)  to  purchase  2,200,000  shares at $0.05 per share
under the Plan.  The options are  exercisable  at any time before ten years from
the date the Plan was adopted.  At September 30, 2000, none of these options had
been exercised.

Note 11 - Subsequent  event:  On September 25, 2000, the Company  authorized the
acquisition of 100% of the outstanding stock of Peanut Butter and Jelly, Inc. in
exchange for 47,460,000 restricted common shares of the Company,  subject to the
completion of an appropriate agreement.  In connection therewith,  the Company's
three Directors,  Wayne Miller, Gary Burnie, and Barry Miller, agreed to resign,
subject to Notice being mailed to shareholders under Section 14f, to be replaced
by Daniel C. Silva and Joseph L. McFarland, Jr.

Peanut Butter and Jelly, Inc. is also a development stage company.

The  acquisition  is expected to be completed  prior to the end of calendar year
2000.

<PAGE>

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

Liquidity and Capital Resources
-------------------------------

The Company's  cash  position at September  30, 2000 was $2,923,  an increase of
$2,704 from December 31, 1999.

Other assets  increased by $291,808,  consisting  of increases in  Investment in
Multiplex Raceway Systems of $75,030,  increase in Website  Development Costs in
Process of $71,861, and increase in Goodwill (net) of $144,917.  These items are
described more fully in the notes to the financial statements.

The above increases in assets were financed from the sale of 6,700,000 shares of
common  stock for net  proceeds of $413,070  during the first nine months of the
current year.  Also, the Company issued  7,000,000 shares of its common stock to
four  officers,   directors  and   consultants  in  connection   with  its  2000
Nonqualified Stock Option Plan, and in satisfaction of the Company's  obligation
to the four for management and consulting services rendered. The transaction was
recorded by a charge to expense for  $257,035,  and a charge of $92,965  against
amounts previously accrued for such services, for a total value of $350,000.

RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

The Company had no revenues  during the nine months  ended  September  30, 2000,
compared to $9,394 during the comparable  period of 1999. The 1999 revenues were
derived from referral fees to internet casino sites, an activity which has since
ceased.

Loss from operations  increased to ($434,422) in 2000, compared to ($207,508) in
1999,  primarily as a result of increases in consulting and management  fees and
other general and administrative  expenses. There was no provision or credit for
income taxes in either  period.  The loss per share was ($.01) for the period in
both 2000 and 1999.

The Company expects  continued losses as it remains in the development stage and
while it completes development of its websites. The Company expects the websites
to be  operational  by the end of 2000.  The Company also expects to  experience
continuing  development  stage losses after  completion  of its  acquisition  of
Peanut Butter and Jelly, Inc.

THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO SAME PERIOD IN 1999

     The Company  operations were focused on its website  development during the
third quarter. The Company was also seeking to restructure and recapitalize,  in
light of the  decline  in  internet  business  opportunities  and  high  cost of
successful  execution of its business model.  The Company had no revenues during
the quarter in 2000 and $4,002 in revenues in the quarter in 1999.

     The Company incurred  $300,749 in expenses in the quarter in 2000, of which
$266,749  were  compensation  expenses to  officers,  directors  and others.  By
comparison  the Company  had  $10,907 in  expenses  in the quarter of 1999.  The
Company  had a net loss of  ($300,749)  and  ($6,905) in the quarter in 2000 and
1999  respectively.  Loss per share was  ($.01) in 2000 and ($.0) in 1999 in the
quarter.

<PAGE>



                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.
None.

Item 2.  Changes in Securities.
None.  See item 5.

Item 3. Defaults Upon Senior Securities.
None.

Item 4.  Submission of Matters to a Vote of Security Holders.
None.

Item 5.  Other information.

Stock Options

In August,  2000, the Company adopted the 2000  Nonqualified  Stock Option Plan.
The Plan sets aside  10,000,000  shares of common  stock  option for issuance to
employees, directors, officers, attorneys, accountants,  consultants or advisors
to the company. The Plan has a ten year term.

On September 20, 2000, the Company granted  options to four officers,  directors
and consultants to purchase  7,000,000  shares of the Company's  common stock at
$0.05 per share under the Plan.  The options  were  immediately  exercised,  and
shares were  issued in  satisfaction  of the  Company's  obligation  to the four
individuals for consulting  services  rendered  through  September 30, 2000. The
transaction  was recorded by a charge to expense for  $257,035,  and a charge of
$92,965 against amounts previously accrued for such services,  for a total value
of $350,000.

Also on September 20, 2000, the Company granted options to five consultants (one
of whom is also a  director)  to  purchase  2,200,000  shares at $0.05 per share
under the Plan.  The options are  exercisable  at any time before ten years from
the date the Plan was adopted.  At September 30, 2000, none of these options had
been exercised.

Acquisition of Peanut Butter and Jelly, Inc.

On September 25, 2000,  the Company  authorized  the  acquisition of 100% of the
outstanding  stock of Peanut Butter and Jelly,  Inc. in exchange for  47,460,000
restricted  common  shares  of the  Company,  subject  to the  completion  of an
appropriate agreement.  In connection therewith,  the Company's three Directors,
Wayne Miller, Gary Burnie, and Barry Miller,  resigned,  to be effective upon 10
days after filing of the 14f and mailing to  shareholders  and were  replaced by
Daniel C. Silva and Joseph L.  McFarland,  Jr. Peanut Butter and Jelly,  Inc. is
also a development stage company.

The  acquisition  is expected to be completed  prior to the end of calendar year
2000.

<PAGE>

                             SIGNATURES

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

     Dated this 4th day of December 2000.


                              PNW CAPITAL, INC.



                              BY:
                                   /s/Daniel C. Silva
                                   Daniel C. Silva, President