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 September 30, 1996


              [ ] 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 0-21397
                                              -------

          ---------------------------------------------------

                               Coffee People, Inc.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Oregon                                           93-1073218
-------------------------------                         --------------------
(State or other jurisdiction of                         (I.R.S Employer
incorporation or organization)                           Identification No.)

                   3259 NW 29th Avenue, Portland, Oregon 97210
                                 (503) 223-7714 

Check  whether  the  registrant  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities 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 [  ]                          No [ x ]

As of September 30, 1996, there were 3,228,020 shares of the registrant's Common
Stock outstanding.
--------------------------------------------------------------------------------
<PAGE>
                              COFFEE PEOPLE, INC.

                                     INDEX


PART I.   FINANCIAL INFORMATION

  No.                                                                     Page
------                                                                    ----

Item 1.   Financial Statements                                               4

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                          8


PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                  13

Signatures                                                                  14




<PAGE>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                               COFFEE PEOPLE, INC.

                                 BALANCE SHEETS
                             (Dollars in thousands)

                                     ASSETS

                                              September 30,        December 31,
                                                  1996                 1995
                                              -------------        ------------
                                               (Unaudited)
Current assets:
  Cash and cash equivalents                     $  13,207            $     260
  Accounts receivable                                  21                    9
  Inventories                                         198                  264
  Prepaid expenses                                    107                  112
  Deferred tax assets                                  14                   13
  Other current assets                                 30                    -
                                                ---------            ---------
    Total current assets                           13,577                  658

Property and equipment, net                         2,650                2,155
Other assets                                           61                   23
                                                ---------            ---------
    Total assets                                $  16,288            $   2,836
                                                =========            =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities:
  Current portion of long-term debt
    and capital lease obligations               $     131            $     147
  Line of credit                                        -                  175
  Accounts payable                                    544                  775
  Accrued liabilities                                 319                  196
  Income taxes payable                                 53                   55
                                                ---------            ---------
    Total current liabilities                       1,047                1,348


Deferred tax liability                                 66                   66

Long-term debt and capital lease
  obligations                                         475                  567

Stockholders' equity:
  Preferred stock, no par value; authorized
    10,000,000 shares, none issued or outstanding       -                    -
  Common stock, no par value; authorized,
    $50,000,000 shares; issued, 3,228,020, and
    1,936,233 shares; outstanding, 3,228,020
    and 1,405,044 shares                           14,608                1,476
  Stock subscription notes receivable                (275)                (341)
  Retained earnings                                   367                  187
  Treasury stock                                        -                 (467)
                                                ---------            ---------
    Total stockholders' equity                     14,700                  855
                                                ---------            ---------
Total liabilities and stockholders' equity      $  16,288            $   2,836
                                                =========            =========


                See accompanying notes to financial statements.

<PAGE>
                              COFFEE PEOPLE, INC.

                              STATEMENTS OF INCOME
                  (Dollars in thousands, except per share data)


                              Three Months Ended          Nine Months Ended
                           ------------------------    ------------------------
                             Sept. 30,    Sept. 30,     Sept. 30,    Sept. 30,
                               1996         1995           1996        1995
                           -----------   ----------    ----------   -----------
                           (Unaudited)   (Unaudited)   (Unaudited)  (Unaudited)

Revenues:
  Retail sales               $  3,107    $   2,984      $   8,885   $   8,131
  Wholesale and other              41           50            142         148
                             --------    ---------      ---------   ---------
    Total revenues              3,148        3,034          9,027       8,279

Cost of sales and related
  occupancy expenses            1,542        1,465          4,324       3,996

Store operating expenses          976          939          2,745       2,556

Other operating expenses            5           16             44          46

Depreciation and amortization     132          104            364         271

General and administrative
  expenses                        443          387          1,323       1,106
                             --------    ---------      ---------   ---------
    Income from operations         50          123            227         304

Other income                       49            8            132          28

Interest expense                  (22)         (36)           (65)        (95)
                             --------    ---------      ---------   ---------
    Income before provision
      for income taxes             77           95            294         237

Provision for income taxes        (30)         (32)          (113)        (82)
                             --------    ---------      ---------   ---------
Net income                   $     47    $      63      $     181   $     155
                             ========    =========      =========   =========

Earnings per share           $   0.02    $    0.04      $    0.09   $    0.10
                             ========    =========      =========   =========

Shares used in computing
  earnings per share        2,134,929    1,507,687      2,066,253   1,498,541


                See accompanying notes to financial statements.

<PAGE>
                              COFFEE PEOPLE, INC.

                            STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)

                                                         Nine Months Ended
                                                 ------------------------------
                                                    Sept. 30,      Sept. 30,
                                                      1996           1995
                                                 --------------  --------------
                                                  (Unaudited)      (Unaudited)

Cash flows from operating activities:
  Net income                                        $     181      $    155
  Adjustments to reconcile net income
    to net cash provided by operating
    activities -
      Depreciation and amortization                       364           271
      Deferred provision for income taxes                   -            (1)
      Interest income on stock subscription notes         (18)          (18)
      Changes in operating assets and liabilities:
          (Increase) in accounts receivable               (12)           (3)
          Decrease (increase) in inventories               66           (71)
          Decrease in prepaid expenses                      5            25
          (Increase) decrease in other current assets     (30)            3
          (Decrease) in accounts payable                 (231)         (159)
          Increase in accrued liabilities                 121            20
          (Decrease) increase in income taxes payable      (2)           59
          (Decrease) in other current liabilities           -           (22)
                                                   ----------      --------
     Net cash provided by operating activities            444           259

Cash flows from investing activities:
  Purchase of property and equipment                     (859)         (885)
  (Increase) decrease in other assets                     (38)           74
                                                   ----------      --------
     Net cash used in investing activities               (897)         (811)

Cash flows from financing activities:
  Proceeds from long-term debt and capital
    lease obligations                                       -           748
  Repayment of debt and capital lease obligations        (271)         (186)
  Repayment of related party debt                         (12)         (226)
  Issuance of common stock, net                        13,599             1
  Proceeds from payment on stock subscription note         84             -
  Dividends                                                 -           (56)
                                                   ----------      --------
    Net cash provided by financing activities          13,400           281
                                                   ----------      --------

Increase (decrease) in cash                            12,947          (271)

Cash, beginning of the period                             260           472
                                                   ----------      --------

Cash, end of the period                            $   13,207      $    201
                                                   ==========      ========


                See accompanying notes to financial statements.
<PAGE>

                               COFFEE PEOPLE, INC.
                          NOTES TO FINANCIAL STATEMENTS

     For the Three Months and Nine Months Ended September 30, 1996 and 1995
                                  (Unaudited)


NOTE 1.    FINANCIAL STATEMENT PRESENTATION:

The interim financial data is unaudited;  however, in the opinion of management,
the interim data includes all  adjustments,  consisting only of normal recurring
adjustments,  necessary  for a fair  statement  of the  results  for the interim
periods.  The  financial  statements  included  herein have been prepared by the
Company  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission.  Certain information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles   have  been  condensed  or  omitted   pursuant  to  such  rules  and
regulations,  although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading.

The organization and business of the Company,  the accounting  policies followed
by the Company and other information are contained in the notes to the Company's
financial  statements filed as part of the Company's  registration  statement on
Form SB-2,  as filed with the  Securities  and  Exchange  Commission,  effective
September 25, 1996.

NOTE 2.   PERFORMANCE WARRANTS:

In connection with the Private Placement, the Company issued warrants to certain
investors  entitling  the holders  thereof to purchase an  aggregate  of 131,250
shares of Common Stock at $0.0067 per share (the  "Performance  Warrants").  The
Performance  Warrants  have been  cancelled  pursuant to the  Company's  initial
public  offering  effective  September 25, 1996 and are therefore not considered
Common Stock  equivalents for the purposes of calculating  earnings per share at
September 30, 1996 and 1995.

NOTE 3.   STOCK SUBSCRIPTION NOTES RECEIVABLE:

In connection with the Company's initial public offering effective September 25,
1996,  a key  employee  sold  25,000  shares of Common  Stock.  A portion of the
proceeds were applied to pay all accrued  interest and the principal  balance of
the portion of a stock  subscription note attributable to the shares sold in the
offering.

NOTE 4.   INITIAL PUBLIC OFFERING:

Effective  September 25, 1996, the Company  completed an initial public offering
in which it sold 1,225,000 shares of Common Stock at a price of $9.00 per share.
The  Company's  proceeds  from  the  initial  public  offering  included  in the
financial statements are net of offering costs.

NOTE 5.   FACILITIES:

One of the  Company's  stores is  operated  at a  location  for  which  there is
currently no term lease in effect. The lessor at such location, therefore, could
at any time demand that the Company vacate the premises on 30 days prior written
notice.  The Company is negotiating with the lessor for a long-term lease. There
can be no assurance,  however, that a lease for such location will be obtainable
on commerically  reasonable terms, or at all. Another of the Company's stores is
operated pursuant to a lease which expires on December 31, 1996. There can be no
assurance  that the Company  will be able to renew its lease for such  location.
The loss of either of such locations would have a material adverse effect on the
Company.



<PAGE>


Item 2:  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

The following discussion contains forward-looking  statements within the meaning
of the federal securities laws and involves a number of risks and uncertainties.
Actual  future  results  and trends may differ  materially  from the  statements
contained in this  discussion  depending  on a variety of factors.  Such factors
include, but are not liminted to, the price and availability of green coffee and
other raw materials,  successful execution of the Company's expansion plans, the
ability of the Company to manage growth,  the impact of competition,  acceptance
of the Company's  products and image outside of Oregon and other risks  detailed
in the Company's Registration Statement on Form SB-2, as amended, filed with the
Securities and Exchange Commission.

OVERVIEW
--------

Coffee People sells coffee  beverages,  coffee  beans,  cookies,  pastries,  ice
cream,  shakes,  and coffee related  merchandise.  The first Coffee People store
opened in 1983. As of September 30, 1996, the Company operated 19 stores.

In January  1996,  the Company  raised net proceeds of  $3,725,000  in a private
placement of Common Stock.  In September  1996,  the Company  completed a public
offering in which it raised  approximately  $10 million in net proceeds from the
sale of 1,225,000  shares of Common Stock.  Coffee People intends to use the net
proceeds from the public offering and the private  placement to open at least 30
new stores in two or more new markets by the end of 1997.

The Company opened two new stores in 1995 as it  concentrated on raising capital
and  prepared  for its  national  expansion.  The Company  has  devoted  1996 to
building its management team, developing its infrastructure,  developing its new
retail store prototype, selecting new markets and identifying sites within those
markets. Because of the small number of new stores opened in 1995 and because of
the  relatively  long lead time to  develop  new  stores,  the  Company  has not
realized significant sales increases in 1996.

New stores  typically  incur higher than normal  operating  costs and lower than
normal revenues during the first few months of store operation.  For purposes of
planning,  the Company  projects a store to break even at the store level by the
third month of operation  and to make a profit after the  allocation  of general
and  administrative  expenses by the sixth month of  operation.  There can be no
assurance, however, that the Company will be able to achieve these results.

Store opening costs,  including  employee  recruiting and training and new store
marketing and promotion expenses,  are expensed by the Company as incurred.  The
concentration  of these costs in periods  when a large  number of new stores are
being opened will significantly  affect the Company's operating results for such
periods.

As new markets  are  developed  and as new stores  mature,  the Company  expects
average  store sales in maturing  markets to increase.  However,  as the Company
strives to build overall market share,  annual average store sales and year over
year comparable  store sales  comparisons may decline as new stores are built in
relatively close proximity to existing stores.

<PAGE>

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED  SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED  SEPTEMBER
30, 1995

Revenues. Total revenues increased 3.8% to $3,148,000 for the three months ended
September  30, 1996 from  $3,034,000  for the same period in 1995.  Retail sales
increased  4.1% to $3,107,000  for the 1996 period from  $2,984,000 for the 1995
period.

Comparable  store sales for the 18 stores open for the full third  quarter ended
September 30, 1996 and 1995  decreased  1.8% due primarily to a 21.8% decline in
sales at one of the  Company's  stores  located  in a  shopping  center  that is
undergoing  redevelopment  and by a 19.0%  decline in another  store  located in
close proximity to one of the Company's top producing  stores.  The lease on the
latter  store  will  expire  in the  spring  of 1997 and is not  expected  to be
renewed.

Incremental sales from the store that opened after September 30, 1995 offset the
decline in  comparable  store sales and  accounts  for the  overall  increase in
retail sales for the three months ended September 30, 1996.

Wholesale and other sales  decreased 18.0% to $41,000 for the three months ended
September  30, 1996 from $50,000 for the same period in 1995.  This decrease was
expected  due to the  Company's  decision  to turn  over  the  servicing  of the
Company's wholesale business to an outside firm. In the future, the Company will
receive a fee based upon the wholesale sales generated by the outside firm.

Costs and expenses. Cost of sales and related occupancy expenses as a percentage
of total  revenues  increased to 49.0% for the three months ended  September 30,
1996 from 48.3% for the same period in 1995.  The  increase is due  primarily to
higher prices for milk, chocolate and pastry. In response to these higher costs,
the Company in September  raised prices on certain products which resulted in an
overall  price  increase  of  approximately  4.0%.  There  can be no  assurance,
however, that revenues will increase by this amount, or at all.

Store  operating  expenses as a percentage of retail sales  remained  relatively
stable at 31.4% for the three  months  ended  September  30, 1996 as compared to
31.5% for the same period in 1995.

Depreciation  and  amortization  as a percentage of total revenues  increased to
4.2% for the three months ended September 30, 1996 from 3.4% for the same period
in 1995,  due primarily to the impact of higher  build-out  costs for the stores
opened in 1994 and 1995.  These stores carry  higher  depreciation  expense as a
percentage of total revenues than stores opened prior to 1994.

<PAGE>

General and  administrative  expenses increased to $443,000 for the three months
ended September 30, 1996 from $387,000 for the same period in 1995 due primarily
to the addition of key management personnel and other costs necessary to support
the Company's  growth  plans.  As a percentage  of total  revenues,  general and
administrative  expenses increased to 14.1% in the 1996 period from 12.8% in the
1995 period.

Average  store  sales  and  contribution  margin.  For the  three  months  ended
September 30, 1996, the Company's 12 neighborhood and drive-through  stores open
for the full period  achieved  average  store  sales of $186,000  and an average
store  contribution  margin of 18.7%  compared to $188,000 and 19.5% in the same
period of 1995.  The five  airport  stores and one kiosk store open for the full
period   achieved   average  store  sales  of  $116,000  and  an  average  store
contribution  margin of 12.1% compared to $122,000 and 12.2% for the same period
in 1995. The difference between  contribution  margins realized on the Company's
neighborhood  stores compared to its airport stores is primarily a result of the
percentage rent paid at Portland International Airport on sales generated at the
airport stores.


NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995

Revenues.  Total revenues increased 9.0% to $9,027,000 for the nine months ended
September  30, 1996 from  $8,279,000  for the same period in 1995.  Retail sales
increased  9.3% to $8,885,000  for the 1996 period from  $8,131,000 for the 1995
period.

Comparable  store sales for the 17 stores  open for the full nine  months  ended
September 30, 1996 and 1995 increased  0.9% primarily due to higher  transaction
volumes at two of the newly opened stores which were  building  sales during the
1995  period.  Comparable  store sales  during the 1996  period  were  adversely
affected by a 21.0% decline in sales at one of the Company's stores located in a
shopping  center that is  undergoing  redevelopment  and by a 17.3% decline in a
store located in close  proximity to one of the Company's top producing  stores.
The lease on the  latter  store  will  expire  in the  spring of 1997 and is not
expected to be renewed.  The increase in comparable  store sales represents 9.5%
of the overall increase in sales. Incremental sales from the store opened during
the nine months ended  September 30, 1995  contributed  31.8% of the increase in
retail sales and  incremental  sales from the store opened after  September  30,
1995 contributed 58.4% of the increase.

Wholesale and other sales  decreased  4.1% to $142,000 for the nine months ended
September 30, 1996 from  $148,000 for the same period in 1995.  The decrease was
expected  due to the  Company's  decision  to turn  over  the  servicing  of the
Company's  wholesale  business to an outside firm.  For the future,  the Company
will receive a fee based upon the wholesale sales generated by the outside firm.

Costs and expenses. Cost of sales and related occupancy expenses as a percentage
of total  revenues  decreased to 47.9% for the nine months ended  September  30,
1996 from 48.3% for the same period in 1995.  The  decrease is due  primarily to
lower green coffee prices.

Store  operating  expenses as a percentage of retail sales  remained  relatively
stable at 30.9% for the nine  months  ended  September  30,  1996 as compared to
31.4% for the same period in 1995.

Depreciation  and  amortization  as a percentage of total revenues  increased to
4.0% for the period  ended  September  30, 1996 from 3.3% for the same period in
1995,  due  primarily  to the  impact of higher  build-out  costs for the stores
opened in 1994 and 1995.  These stores carry  higher  depreciation  expense as a
percentage of total revenues than stores opened prior to 1994.

<PAGE>

General and administrative  expenses increased to $1,323,000 for the nine months
ended  September  30,  1996  from  $1,106,000  for the same  period  in 1995 due
primarily to the addition of key management  personnel,  including the Company's
President and Chief Operating Officer,  and other costs necessary to support the
Company's  growth  plans.  As  a  percentage  of  total  revenues,  general  and
administrative  expenses increased to 14.7% in the 1996 period from 13.4% in the
1995 period.

Average  store sales and store  contribution  margin.  For the nine months ended
September 30, 1996, the Company's neighborhood and drive-through stores open for
the full period  achieved  average  store sales of $547,000 and an average store
contribution  margin of 19.8%  compared to $552,000 and 19.4% in the same period
in 1995.  The five  airport  stores and one kiosk store open for the full period
achieved  average  store sales of  $314,000  and an average  store  contribution
margin of 10.8%  compared to $316,000 and 14.4% for the same period in 1995. The
difference   between  the   contribution   margins  realized  on  the  Company's
neighborhood  stores compared to its airport stores is primarily a result of the
percentage rent paid at Portland International Airport on sales generated at the
airport  stores.  The  decline in store  contribution  margins at the  Company's
airport stores is due primarily to higher labor costs and depreciation  expenses
incurred at these airport stores.

Other income.  Other income as a percentage of total revenues  increased to 1.5%
for the nine months  ended  September  30, 1996 from 0.3% for the same period in
1995 due to interest earned on the proceeds from the Company's private placement
completed in January 1996.

Interest Expense.  Interest expense as a percentage of total revenues  decreased
to 0.7% for the nine  months  ended  September  30,  1996 from 1.1% for the same
period in 1995, primarily as a result of utilizing portions of the proceeds from
the Company's private placement to reduce interest-bearing obligations.

LIQUIDITY AND CAPITAL RESOURCES

The Company  plans to open at least 30 new retail  stores by the end of 1997 and
to continue further expansion  thereafter.  The Company currently estimates that
the average cost of  constructing a new  neighborhood  coffee house based on its
new prototype design,  including site selection costs, lease negotiation,  store
design,  permitting,  architectural fees,  construction  supervision,  leasehold
improvements  and equipment,  will be  approximately  $325,000.  There can be no
assurance that costs of constructing new stores will not exceed such estimate.

As of September 30, 1996 the Company had  $13,207,000  in cash and  equivalents.
Working capital as of September 30, 1996, totaled $12,530,000,  as compared to a
working capital deficiency of $690,000 at December 31, 1995.

For the nine months ended  September  30, 1996,  and for 1995,  cash provided by
operating activities was $444,000 and $259,000, respectively.


<PAGE>


Historically,  the Company has financed its growth primarily through the sale of
equity  securities,  the issuance of notes  payable and the periodic use of bank
debt.  For the nine  months  ended  September  30, 1996 the Company had net cash
provided by financing  activities of  $13,400,000,  primarily as a result of the
recent initial public  offering which resulted in  approximately  $10,183,000 in
net proceeds before offering costs and $3,725,000 in net proceeds  received from
a private placement of Common Stock completed in January 1996.

For the nine  months  ended  September  30,  1996  and  1995,  net cash  used in
investing activities was $897,000 and $811,000 respectively.  The primary use of
net cash used in investing  activities  is capital  expenditures  for new retail
stores. The Company currently  estimates that capital  expenditures  through the
end of 1997 will be approximately $10.0 million, substantially all of which will
be used to develop new stores.

The Company  believes that  anticipated  cash flow from  operations and existing
cash will be sufficient to meet the Company's  anticipated capital  requirements
for planned expansion for at least the next 12 months.

COFFEE PRICES AND OTHER EXPENSES AND RISKS

The Company  believes  that it has  adequate  sources of supply of  high-quality
specialty  coffee  to meet  its  expansion  needs  for the  foreseeable  future.
However, coffee prices can be volatile. Supply and price can be affected by many
factors,  such as weather,  politics and economic  conditions  in the  producing
countries.  The  Company's  ability to raise prices in response to rising coffee
prices may be limited by competitive  pressures if other major specialty  coffee
retailers do not raise prices.  The Company's  inability to pass through  higher
coffee prices in the form of higher retail prices for beans and beverages  could
have a material adverse effect on the Company.  Alternatively,  if coffee prices
remain  too low,  there  could be  adverse  impacts  on the level of supply  and
quality  of coffee  available  from  producing  countries,  which  could  have a
material adverse effect on the Company.

On November 5, 1996,  Oregon voters passed a ballot  initiative which will raise
the state minimum wage over a three-year period from $4.75 per hour to $6.50 per
hour. The Company currently pays all employees, other than newly hired employees
participating in a 20-hour training program, above the minimum wage that will be
in effect in 1997. Accordingly, the Company does not expect the new minimum wage
to have a material adverse effect in 1997. It is uncertain what impact,  if any,
the minimum wage increase will have on the Company's  operating  results  beyond
1997; any impact is expected to be mitigated,  however, by the Company's planned
expansion outside of Oregon.

In addition,  the Comapny  believes that in the future its results of operations
and  earnings  could be  significantly  affected by other  factors,  such as the
Company's  ability to find optimal  store  locations  at favorable  lease rates,
increased  competition  within the  specialty  coffee  industry,  the  Company's
continued  ability  to  hire,  train  and  retain  qualified  personnel  and the
Company's  continued  ability to obtain adequate  capital to finance its planned
expansion.

<PAGE>

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

     (a)  Exhibits

          11   Statement Regarding Computation of Per Share Earnings

          27   Financial Data Schedule

     (b)  Report on Form 8-K

          No   current  Reports on Form 8-K were filed during the period covered
          by this report.

<PAGE>

                                   SIGNATURES


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


                                        Coffee People, Inc.



                                        /s/ Kenneth B. Ross
                                        -----------------------
                                        Kenneth B. Ross
                                        Chief Financial Officer

                                        Signing on behalf of the registrant and
                                        as principal financial officer