UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

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

                  For the quarterly period ended March 31, 2000

                                       OR

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

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

                        Commission file number 333-57931

                                TUMBLEWEED, INC.
             (Exact name of registrant as specified in its charter)

          DELAWARE                                      61-1327945

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


                1900 Mellwood Avenue, Louisville, Kentucky 40206

                    (Address of principal executive offices)

                                 (502) 893-0323

               (Registrants telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
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 shares of common stock,  par value of $.01 per share,  outstanding
on May 2, 2000 was 5,844,230.

Exhibit Index: Page 16










                                        1


<PAGE>



                                TUMBLEWEED, INC.

                                      INDEX

PART I.     FINANCIAL INFORMATION                                           PAGE
  Item 1.     Financial Statements (Unaudited)

   a)    Consolidated Statements of Operations for the three months          3
         ended March 31, 2000 and 1999
   b)    Consolidated Balance Sheets as of March 31, 2000 and
         December 31, 1999                                                   4
   c)    Consolidated Statements of Cash Flows for three months ended
         March 31, 2000 and 1999                                             5
   d)    Consolidated Notes to Financial Statements                          6

  Item 2.     Management's Discussion and Analysis of
              Financial Condition and Results of Operations                 11

  Item 3.     Quantitative and Qualitative Disclosures About
              Market Risk                                                   15

PART II.    OTHER INFORMATION

  Item 6.     Exhibits and Reports on Form 8-K                              16

Signature                                                                   17





                                        2


<PAGE>



                                Tumbleweed, Inc.

                      Consolidated Statements of Operations

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                             Three Months Ended

                                                                                  March 31
                                                                           2000            1999
                                                                       ------------    ------------
Revenues:
<S>                                                                    <C>             <C>
   Restaurant sales                                                    $ 12,821,270    $ 11,332,318
   Commissary sales                                                         422,606         286,237
   Franchise fees and royalties                                             228,967         251,169
   Other revenues                                                           159,525          89,645
                                                                       ------------    ------------
Total revenues                                                           13,632,368      11,959,369
Operating expenses:
   Restaurant cost of sales                                               3,671,644       3,263,400
   Commissary cost of sales                                                 375,103         260,254
   Operating expenses                                                     6,745,055       5,832,410
   Selling, general and administrative expenses                           1,276,007       1,184,728
   Preopening expenses                                                       86,064         134,805
   Depreciation and amortization                                            518,020         418,465
                                                                       ------------    ------------
Total operating expenses                                                 12,671,893      11,094,062
                                                                       ------------    ------------
Income from operations                                                      960,475         865,307
Other income (expense):
   Interest income                                                            4,272          17,023
   Interest expense                                                        (321,470)       (263,365)
                                                                       ------------    ------------
Total other expense                                                        (317,198)       (246,342)
                                                                       ------------    ------------
Income before income taxes and cumulative effect of a
   change in accounting principle                                           643,277         618,965
Provision for income taxes:
   Current and deferred                                                    (225,147)       (216,638)
   Deferred taxes related to change in tax status                                --        (639,623)
                                                                       ------------    ------------
Total provision for income taxes                                           (225,147)       (856,261)
                                                                       ------------    ------------
Income (loss) before cumulative effect of a change
   in accounting principle                                                  418,130        (237,296)
Cumulative effect of a change in accounting principle, net
   of tax                                                                        --        (341,035)
                                                                       ------------    ------------
Net income (loss)                                                      $    418,130    $   (578,331)
                                                                       ============    ============
Basic and diluted earnings per share:
   Income (loss) before cumulative effect of a change in accounting
   principle                                                           $       0.07    $      (0.04)
   Cumulative effect of a change in accounting principle, net of tax             --           (0.06)
                                                                       ------------    ------------
   Net income (loss)                                                   $       0.07    $      (0.10)
                                                                       ============    ============
Pro forma income data :
   Income before income taxes and cumulative effect of a
     change in accounting principle as reported                                        $    618,965
   Pro forma income taxes                                                                  (216,638)
                                                                                       ------------
   Pro forma income before cumulative effect of a change
     in accounting principle                                                                402,327
   Cumulative effect of a change in accounting principle,
     net of tax                                                                            (341,035)
                                                                                       ------------
   Pro forma net income                                                                $     61,292
                                                                                       ============
Pro forma basic and diluted earnings per share:
   Pro forma income before cumulative effect of a change
     in accounting principle                                                           $       0.07
   Cumulative effect of a change in accounting principle,
     net of tax                                                                               (0.06)
                                                                                       ------------
   Pro forma net income                                                                $       0.01
                                                                                       ============
</TABLE>
See accompanying notes.
                                       3

<PAGE>
                                Tumbleweed, Inc.

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>


                                                                         March 31      December 31
                                                                          2000            1999
                                                                       (Unaudited)
                                                                       ------------    ------------
Assets
Current assets:
<S>                                                                    <C>             <C>
   Cash and cash equivalents                                           $    456,425    $    640,189
   Accounts receivable                                                      825,909         606,283
   Inventories                                                            1,674,282       1,597,794
   Prepaid expenses                                                         407,381         389,271
                                                                       ------------    ------------
Total current assets                                                      3,363,997       3,233,537
Property and equipment, net                                              30,559,997      30,147,559
Goodwill, net of accumulated amortization of
   $579,396 in 2000 and $551,478 in 1999                                  2,709,347       2,737,265
Other assets                                                                511,447         460,817
                                                                       ------------    ------------
Total assets                                                           $ 37,144,788    $ 36,579,178
                                                                       ============    ============

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                    $  1,596,094    $  1,102,024
   Accrued liabilities                                                    1,739,134       1,832,736
   Deferred income taxes                                                    382,552         286,885
   Current maturities on long-term
     debt and capital leases                                              1,028,443       1,028,443
                                                                       ------------    ------------
Total current liabilities                                                 4,746,223       4,250,088

Long-term liabilities:
   Long-term debt, less current maturities                               11,189,576      11,347,047
   Capital lease obligations, less current maturities                     2,647,086       2,769,339
   Deferred income taxes                                                    540,629         489,869
   Other liabilities                                                        190,000         160,000
                                                                       ------------    ------------
Total long-term liabilities                                              14,567,291      14,766,255
                                                                       ------------    ------------
Total liabilities                                                        19,313,514      19,016,343

Stockholders' equity:
   Preferred stock, $.01 par value, 1,000,000
     shares authorized; no shares issued
     and outstanding                                                            -                 -
   Common stock, $.01 par value, 16,500,000
     shares authorized; 5,881,630 shares issued
     at March 31, 2000 and December 31, 1999                                 58,818          58,818
   Paid-in capital                                                       16,294,006      16,294,006
   Treasury stock, 24,700 shares at March 31, 2000                         (149,691)              -
   Retained earnings                                                       ,628,141       1,210,011
                                                                       ------------    ------------
     Total stockholders' equity                                          17,831,274      17,562,835
                                                                       ------------    ------------
Total liabilities and stockholders' equity                             $ 37,144,788    $ 36,579,178
                                                                       ============    ============
</TABLE>

See accompanying notes.

                                        4


<PAGE>





                                Tumbleweed, Inc.

                      Consolidated Statements of Cash Flows

                                   (Unaudited)

 <TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                          March 31

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

Operating activities:
<S>                                                           <C>            <C>
   Net income (loss)                                          $   418,130    $  (578,331)
   Adjustments to reconcile net income (loss) to net
       cash provided by operating activities:
        Depreciation and amortization                             518,020        418,463
        Deferred income taxes                                     146,427        563,976
        Loss on disposition of property and equipment               2,474          1,114
        Changes in operating assets and liabilities:
          Accounts receivable                                    (219,626)        (2,729)
          Inventories                                             (76,488)        (3,233)
          Deferred preopening expenses                                 --        524,669
          Prepaid expenses                                        (19,581)       (60,812)
          Other assets                                            (54,212)       (23,838)
          Accounts payable                                        494,070       (270,970)
          Accrued liabilities                                     (93,602)        (1,917)
          Other liabilities                                        30,000         11,750
                                                              -----------    -----------
Net cash provided by operating activities                       1,145,612        578,142

Investing activities:
   Purchases of property and equipment                           (899,961)    (1,520,927)
                                                              -----------    -----------
Net cash used in investing activities                            (899,961)    (1,520,927)

Financing activities:
   Proceeds from common stock offering                                 --      7,765,347
   Proceeds from issuance of long-term debt                       404,000      3,529,914
   Payments on long-term debt and capital lease obligations      (683,724)    (4,145,921)
   Payment on short-term borrowings                                    --     (6,990,348)
   Purchase of treasury stock                                    (149,691)            --
   Payment of public offering costs                                    --       (403,150)
                                                              -----------    -----------
Net cash used in by financing activities                         (429,415)      (244,158)
                                                              -----------    -----------

Net decrease in cash and cash equivalents                        (183,764)    (1,186,943)

Cash and cash equivalents at beginning of period                  640,189      1,898,973
                                                              -----------    -----------
Cash and cash equivalents at end of period                    $   456,425    $   712,030
                                                              ===========    ===========

Supplemental cash flow information:

   Cash paid for interest, net of amount capitalized          $   314,688    $   260,502
                                                              ===========    ===========
   Cash paid for income taxes                                 $    45,260    $        --
                                                              ===========    ===========
</TABLE>


See accompanying notes.

                                        5


<PAGE>



                                TUMBLEWEED, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

                                 March 31, 2000

1.    BASIS OF PRESENTATION

MERGER OF TUMBLEWEED, LLC AND TUMBLEWEED, INC.

Tumbleweed,  Inc.  (the  Company)  was  legally  formed  in  December  1997  and
capitalized  on June 23, 1998 with the  issuance of 13 shares of Company  common
stock at $10 per share.  Effective  January 1, 1999, and as a result of the sale
of  776,630  shares  of  common  stock  in an  initial  public  offering  (IPO),
Tumbleweed,  LLC  (Tumbleweed)  was merged into the  Company.  The  interests of
Tumbleweed  members at the time of the  merger  were  converted  into a total of
5,105,000 shares of Company common stock.

RESTAURANT FACILITIES

As of March 31, 2000,  the Company owns and operates 29 restaurants in Kentucky,
Indiana and Ohio and  franchises  an  additional  18  restaurants  in  Kentucky,
Indiana,  Illinois,  Tennessee and  Wisconsin.  The Company also licenses  seven
restaurants in Germany, Jordan, Saudi Arabia, Egypt and England.

INTERIM FINANCIAL REPORTING

The  accompanying  consolidated  financial  statements have been prepared by the
Company without audit,  with the exception of the December 31, 1999 consolidated
balance  sheet  which  was  derived  from  the  audited  consolidated  financial
statements  included in the  Company's  Form 10-K.  The  accompanying  unaudited
consolidated   financial  statements  have  been  prepared  in  accordance  with
generally accepted accounting  principles for interim financial reporting and in
accordance  with Rule 10-01 of  Regulation  S-X.  These  consolidated  financial
statements, note disclosures and other information should be read in conjunction
with the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1999.

In the opinion of  management,  the  unaudited  interim  consolidated  financial
statements contained in this report reflect all adjustments,  consisting of only
normal  recurring  accruals,  which are necessary for a fair  presentation.  The
results  of  operations  for the  three  months  ended  March  31,  2000 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 2000.

PRO FORMA FINANCIAL INFORMATION

Pursuant to the rules and regulations of the Securities and Exchange Commission,
the pro forma net income in the accompanying pro forma income data for the three
months ended March 31, 1999  reflects a pro forma  adjustment  to income  before
income  taxes and  cumulative  effect of a change in  accounting  principle  for
federal and state  income  taxes as if the Company had been a regular  corporate
taxpayer  since its  inception.  Pro forma  income  taxes for 1999  excludes the
deferred tax effects of  Tumbleweed  changing from a limited  liability  company
(which is taxed as a  partnership)  to a  regular  corporate  taxable  status on
January 1, 1999.  Pro forma income taxes for 1999 are at an estimated  effective
rate of 35%.

2.   CHANGE IN ACCOUNTING PRINCIPLE

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement of Position (SOP) 98-5,  "Reporting the Costs of Start-Up Activities."
The SOP was effective beginning January 1, 1999 and requires that start-up costs
capitalized  prior to January  1, 1999 be  written-off  and any future  start-up
costs be expensed  as  incurred.  Prior to 1999,  the  Company  capitalized  its
preopening  costs incurred in connection with opening new restaurant  locations.
The unamortized  balance of the Company's deferred preopening costs ($524,669 as
of December  31,  1998) was  written-off  (net of income taxes of $183,634) as a
cumulative effect of an accounting change on January 1, 1999.

                                        6


<PAGE>



3.   ACCRUED LIABILITIES

Accrued liabilities consist of:


                                               March 31    December 31
                                                 2000         1999
                                              ----------   ----------

          Accrued payroll and related taxes   $  812,546   $  611,566
          Accrued insurance and fees             141,260      251,923
          Accrued taxes, other than payroll      503,662      423,954
          Gift certificate liability             168,187      396,747
          Other                                  113,479      148,546
                                              ----------   ----------
                                              $1,739,134   $1,832,736
                                              ==========   ==========

4.   LONG-TERM DEBT

Long-term debt consists of:


                                                       March 31      December 31
                                                         2000           1999
                                                     -----------    ------------
Secured $6,500,000  mortgage  revolving
  line of credit note, bearing interest at prime
  rate plus .25% (9.25% at March 31, 2000), due
  December 31, 2003                                  $ 5,207,148   $ 5,242,148

Secured mortgage note payable, bearing interest
  at commercial paper rate plus 2.65% (8.73% at
  March 31, 2000), due February 17, 2006               2,643,925     2,691,433

Secured mortgage note payable,  bearing interest
  at prime rate plus 1% (10.0% at March 31, 2000),
  payable in monthly installments through
  October 1, 2017                                      1,055,789     1,061,614

Secured mortgage note payable, bearing interest at
  8.75%, payable in monthly installments through
  February 15, 2008                                      948,890       957,992

Secured mortgage note payable, bearing interest at
  prime rate (9.0% at March 31, 2000), payable
  in monthly installments through March 1, 2006          653,688       658,071

Secured mortgage note payable, bearing interest at
  prime rate plus 1.25% (10.25% at March 31, 2000),
  payable in monthly installments through
  November 27, 2016                                      625,000       634,375

Other installment notes payable                          578,321       624,599
                                                     -----------   -----------
                                                      11,712,761    11,870,232
Less current maturities                                  523,185       523,185
                                                     -----------   -----------
Long-term debt                                       $11,189,576   $11,347,047
                                                     ===========   ===========



Property and equipment  with a net book value of  approximately  $20,700,000  at
March 31, 2000 collateralize the Company's long-term debt.

                                        7


<PAGE>



5.   COMMITMENTS

At March 31, 2000, the Company had commitments of approximately $950,000 for the
completion of the  construction of three  restaurants.  The commitments  will be
funded by cash reserves, proceeds from the $6,500,000 mortgage revolving line of
credit and landlord financing.

6.  EARNINGS PER SHARE

The following is a  reconciliation  of the Company's basic and diluted  earnings
per share for the three months ended March 31, 2000 and 1999 in accordance  with
FAS 128, "Earnings per Share."

                                                       2000           1999
                                                   -----------    -----------
  Numerator:
     Income (loss) before cumulative effect of
       a change in accounting principle            $   418,130    $  (237,296)
     Cumulative effect of a change in accounting
       principle, net of tax                                --       (341,035)
                                                   -----------    -----------
     Net income (loss)                             $   418,130    $  (578,331)
                                                   ===========    ===========
     Pro forma income data :
       Pro forma income before cumulative effect
       of a change in accounting principle                        $   402,327
     Cumulative effect of a change in accounting
       principle, net of tax                                         (341,035)
                                                                  -----------
       Pro forma net income                                       $    61,292
                                                                  ===========
  Denominator :
     Weighted average shares
       outstanding                                   5,874,634      5,881,630
     Effect of dilutive securities:
       Director and employee stock options               4,766             --
                                                   -----------    -----------
     Denominator for diluted earnings per
       share - adjusted weighted
       average and assumed conversions               5,879,400      5,881,630
                                                   ===========    ===========



7.   SEGMENT INFORMATION

The  Company  has  three  reportable  segments:   restaurants,   commissary  and
corporate.   The   restaurant   segment   consists  of  the  operations  of  all
company-owned  restaurants  and  derives  its  revenues  from  the  sale of food
products to the general public. The commissary segment derives its revenues from
the sale of food  products to company-  owned and  franchised  restaurants.  The
corporate  segment  derives  revenues from sale of franchise  rights,  franchise
royalties and related services used in restaurant  operations,  and contains the
selling, general and administrative activities of the Company.

Generally,  the Company evaluates  performance and allocates  resources based on
pre-tax  income.  The accounting  policies of the segments are the same as those
described in the summary of  significant  accounting  policies in the  Company's
Annual Report on Form 10-K.

                                        8


<PAGE>



7.  SEGMENT INFORMATION (continued)

Segment information for the three months ended March 31 is as follows:

2000:
<TABLE>
<CAPTION>

                                              Restaurant    Commissary     Corporate        Totals
                                              -----------   -----------   -----------    -----------
<S>                                           <C>           <C>           <C>            <C>

Revenues from external
   customers                                  $12,821,270   $   422,606   $   388,492    $13,632,368
Intersegment revenues                                  --       633,909            --        633,909
General and
   administrative expenses                             --            --     1,014,478      1,014,478
Advertising expenses                                   --            --       261,529        261,529
Depreciation and
   amortization                                   408,421        29,688        79,911        518,020
Net interest expense                                   --        44,025       273,173        317,198
Income (loss) before income taxes and
   cumulative effect of a change in
   accounting principle                         1,743,541        18,000    (1,118,264)       643,277

1999:
                                              Restaurant    Commissary     Corporate        Totals
                                              -----------   -----------   -----------    -----------
Revenues from external
   customers                                  $11,332,318   $   286,237   $   340,814    $11,959,369
Intersegment revenues                                  --       667,885            --        667,885
General and
   administrative expenses                             --            --       889,766        899,766
Advertising expenses                                   --            --       284,962        284,962
Depreciation and
   amortization                                   332,639        29,688        56,138        418,465
Net interest expense                                   --        41,825       204,517        246,342
Income (loss) before income taxes and
   cumulative effect of a change in
   accounting principle                         1,736,628        15,098    (1,132,761)       618,965
</TABLE>


8.  INCOME TAXES

Concurrent  with the merger of the Company as  described  in Note 1,  Tumbleweed
converted  from a limited  liability  company  into a C  corporation  and is now
subject to federal and state  income  taxes.  As of the date of the merger,  the
Company  recorded a net  deferred tax  liability  and  corresponding  income tax
expense  for  cumulative  temporary  differences  between  the tax basis and the
reported  amounts of the Company's  assets and  liabilities.  At the date of the
merger, the net differences equaled approximately  $1,780,000 resulting in a net
deferred tax liability and corresponding income tax expense of $639,623 which is
included in the deferred income tax provision in the  accompanying  statement of
operations for the three months ended March 31, 1999.

Income taxes on the  Company's  income for the three months ended March 31, 2000
and 1999 have been provided for at an estimated effective tax rate of 35%.

                                        9


<PAGE>



9.  TREASURY STOCK

On January 14, 2000, the Board of Directors approved the repurchase from time to
time of up to $500,000 of the Company's  Common Stock.  Purchases may be made in
the open market as well as by private transaction at times and prices considered
appropriate by the Company,  subject to applicable  rules and  regulations.  The
purchases will be funded by cash  reserves.  Through March 31, 2000, the Company
has repurchased 24,700 shares at a total cost of $149,691.

10.  CONTINGENCIES

The Company has guaranteed  renewals of certain guaranteed  indebtedness and any
replacement indebtedness of TW-Tennessee, LLC, a franchisee,  (TW-Tennessee), to
the extent and in amounts not to exceed the amounts  guaranteed  as of September
30, 1998. As of March 31, 2000, the Company has guaranteed certain  TW-Tennessee
obligations  as follows:  a) up to  $1,200,000  under a bank line of credit,  b)
approximately $2,800,000 of a lease financing agreement, and c) equipment leases
with  a  bank  totaling   approximately  $793,000  jointly  and  severally  with
TW-Tennessee common members. During 1999, the landlord under the lease financing
agreement  declared  TW-Tennessee  to be in default,  and  accelerated  the rent
obligations under the leases.  Negotiations are continuing  between the landlord
and the  principals of  TW-Tennessee  regarding the  restructuring  of the lease
obligations,  and management of the Company believes the TW-Tennessee's  default
under the  leases  will not  ultimately  have a material  adverse  impact on the
Company's financial position, results of operations or cash flows.

                                        10


<PAGE>




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

We make various  forward-looking  statements about our business in the following
discussion.  When making these forward-looking  statements, we use words such as
expects,  believes,  estimates,  anticipates,  plans and similar  expressions to
identify them. We also identify  important  cautionary  factors that could cause
our  actual  results  to  differ   materially   from  those   projected  in  the
forward-looking  statements  we make.  Factors  that  realistically  could cause
results  to  differ  materially  from  those  projected  in the  forward-looking
statements  include the availability and cost of financing and other events that
affect  our  restaurant  expansion  program,  changes  in food and other  costs,
changes in national, regional or local economic conditions,  changes in consumer
tastes,  competitive  factors  such as changes in the  number  and  location  of
competing  restaurants,  the  availability of experienced  management and hourly
employees, and other factors set forth below.

Of the 54 Tumbleweed  restaurants as of March 31, 2000, we owned and operated 29
restaurants in Kentucky, Indiana and Ohio, franchised 18 restaurants in Indiana,
Illinois,  Kentucky,  Tennessee and Wisconsin, and licensed seven restaurants in
Germany, Jordan, Saudi Arabia, Egypt and England.  Subsequent to March 31, 2000,
four  franchised  restaurants  located in Wisconsin,  West Virginia and Michigan
were opened.

The  following  section  should  be  read  in  conjunction  with  our  financial
statements and the related notes included elsewhere in this filing.

RESULTS OF OPERATIONS

The table,  on the next page,  sets forth the percentage  relationship  to total
revenues of certain income  statement data,  except where noted, for the periods
indicated.

                                       11


<PAGE>



                                                        Three Months Ended
                                                              March 31

                                                         2000         1999
                                                         -----        -----
  Revenues:
    Restaurant sales                                      94.1 %       94.8 %
    Commissary sales                                       3.1          2.4
    Franchise fees and royalties                           1.7          2.1
    Other revenues                                         1.1          0.7
                                                         -----        -----
      Total revenues                                     100.0        100.0
  Operating expenses:
    Restaurant cost of sales (1)                          28.6         28.8
    Commissary cost of sales (2)                          88.8         90.9
    Operating expenses (1)                                52.6         51.5
    Selling, general and administrative
    expenses                                               9.4          9.9
    Preopening expenses                                    0.6          1.1
    Depreciation and amortization                          3.8          3.5
                                                         -----        -----
      Total operating expenses                            93.0         92.8
                                                         -----        -----
      Income from operations                               7.0          7.2
  Interest expense, net                                   (2.3)        (2.0)
                                                         -----        -----
  Income before income taxes and
    cumulative effect of a change in
    accounting principle                                   4.7          5.2
  Provision for income taxes:
    Current and deferred                                  (1.6)        (1.8)
    Deferred taxes related to change in
    tax status                                            --           (5.4)
                                                         -----        -----
  Total provision  for income taxes                       (1.6)        (7.2)
                                                         -----        -----
   Income (loss) before cumulative effect
     of a change in accounting principle                   3.1         (2.0)
   Cumulative effect of a change in
     accounting principle, net of tax                     --           (2.8)
                                                         -----        -----
   Net income (loss)                                       3.1 %       (4.8)%
                                                         =====        =====
Pro forma income data:
   Income before income taxes and
   cumulative effect of a change in
   accounting principle as reported                                     5.2 %
Pro forma income taxes (3)                                             (1.8)
                                                                      -----
Pro forma income before cumulative
   effect of a change in accounting principle                           3.4
Cumulative effect of a change in
   accounting principle, net of tax                                    (2.8)
                                                                      -----
Pro forma net income                                                    0.6 %
                                                                      =====
(1)   As percentage of restaurant sales.
(2)   As percentage of commissary sales.
(3)    The  pro  forma  income  taxes   reflect  the  effect  of  the  corporate
       reorganization  on the  historical  net income  assuming  the Company was
       taxed as a C corporation for income tax purposes since its inception with
       an assumed combined federal and state effective tax rate of 35%.

                                       12


<PAGE>



COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999

Total revenues increased by $1,672,999 or 14.0% for the three months ended March
31,  2000  compared  to the same  period  in 1999  primarily  as a result of the
following:

   Restaurant  sales increased by $1,488,952 or 13.1% for the three months ended
   March 31,  2000  compared  to the same  period in 1999.  The  increase is due
   primarily to four additional company-owned  restaurants being opened the full
   three  months  ended  March 31,  2000  versus the same  period in 1999 and an
   increase in same store sales of 0.1% for the three month period.

   Commissary sales to franchised and licensed restaurants increased by $136,369
   or 47.6% for the three  months  ended  March 31,  2000  compared  to the same
   period in 1999.  The  increase  is due  primarily  to the  addition  of seven
   franchised or licensed restaurants since March 31, 1999.

   Franchise  fees and  royalties  decreased  by  $22,202  or 8.8% for the three
   months ended March 31, 2000 compared to same period in 1999. The decrease was
   due to a $35,000 decrease in franchise fees received upon the

    opening of one new franchised restaurant during the three months ended March
    31, 2000  compared to two during the same  period in 1999.  The  decrease in
    franchise fees for the three month period was partially  offset by a $12,798
    increase  in  royalty  income  as a  result  of an  increase  in  franchised
    restaurants.

   Other revenues increased by $69,880 or 78.0% for the three months ended March
   31, 2000 compared to the same period in 1999  primarily due to an increase in
   volume related purchasing rebates.

Restaurant  cost of sales  increased  by $408,244 or 12.5% for the three  months
ended March 31,  2000  compared to the same  period in 1999.  The  increase  was
principally due to four additional  Company-owned  restaurants  being opened the
full  three  months  ended  March  31,  2000  versus  the same  period  in 1999.
Restaurant cost of sales decreased as a percentage of sales by 0.2% to 28.6% for
the three months  ended March 31, 2000  compared to 28.8% during the same period
in 1999.

Commissary cost of sales increased  $114,849 or 44.1% for the three months ended
March 31, 2000  compared to the same period in 1999.  The increase in commissary
cost of sales is due  primarily to the addition of seven  franchised or licensed
restaurants since March 31, 2000 . As a percentage to sales,  commissary cost of
sales decreased 2.1%.

Restaurant  operating  expenses  increased  by  $912,645  or 15.6% for the three
months  ended March 31, 2000  compared to the same period in 1999.  The increase
reflects four additional  Company-owned  restaurants being opened the full three
months ended March 31, 2000 versus the same period in 1999.  Operating  expenses
increased  as a  percentage  of  restaurant  sales to 52.6% for the three months
ended March 31, 2000 from 51.5% for the same period in 1999  primarily  due to a
0.7% increase in  promotional  costs and a 0.5%  increase in management  payroll
costs.

Selling,  general and  administrative  expenses increased by $91,279 or 7.7% for
the three months ended March 31, 2000  compared to the same period in 1999.  The
increase  was due in part to the  addition  of  management  and staff  personnel
during  1999 and the three  months  ended  March 31, 2000 to support the growing
restaurant base.  Because of the Company's  restaurant growth plans,  management
expects  selling,  general and  administrative  expenses to continue to increase
during the  remainder  of 2000 in absolute  dollars.  As a  percentage  to total
revenues,  selling,  general and  administrative  expenses were 9.4% and 9.9% of
revenues for the three months ended March 31, 2000 and 1999, respectively.

Preopening  expenses  were $86,064 and $134,805 for the three months ended March
31, 2000 and 1999,  respectively.  Preopening  expenses are start-up costs which
are incurred in connection  with opening new restaurant  locations.  These costs
are expensed as incurred and will  fluctuate  based on the number of  restaurant
locations which are in the process of being prepared for opening.

Depreciation and amortization  expense  increased $99,555 or 23.8% for the three
months ended March 31, 2000 compared to the same period in 1999 due primarily to
four  additional  Company-owned  restaurants  being opened the full three months
ended March 31, 2000 versus the same period in 1999.

                                       13


<PAGE>



Net interest expense increased $70,856 or 28.8% for the three months ended March
31,  2000  compared  to the same  period in 1999.  The  increase  resulted  from
increased  borrowing  to  fund  the  growth  in  Company-owned  restaurants  and
increases in the prime interest rate during 1999 and 2000.

The combined  effective  federal and state income tax rate was approximately 35%
for the three months ended March 31, 2000 and 1999 (excluding the charge related
to change in tax status, discussed below). As a result of a change in tax status
from a limited  liability  corporation to a C corporation  effective  January 1,
1999, we recorded a net deferred  income tax liability and income tax expense of
$639,623 in 1999.

The  Company's  income  before  cumulative  effect  of a  change  in  accounting
principle  increased  $15,803 or 3.9% for the three months  ended March  31,2000
compared to pro forma income before  cumulative effect of a change in accounting
principle  for the three months ended March 31, 1999.  Earnings per share before
cumulative  effect of a change in  accounting  principle was $0.07 for the three
months  ended March 31, 2000 as compared to pro forma  earnings per share before
cumulative  effect of a change in  accounting  principle  of $0.07 for the three
months ended March 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

Our ability to expand the number of our  restaurants  will depend on a number of
factors,  including the selection and availability of quality  restaurant sites,
the negotiation of acceptable  lease or purchase terms, the securing of required
governmental  permits and approvals,  the adequate  supervision of construction,
the hiring,  training and retaining of skilled  management and other  personnel,
the  availability  of adequate  financing and other  factors,  many of which are
beyond our control.  The hiring and retention of management and other  personnel
may be  difficult  given  the low  unemployment  rates in the  areas in which we
intend to  operate.  There can be no  assurance  that we will be  successful  in
opening the number of restaurants  anticipated in a timely manner.  Furthermore,
there can be no assurance that our new  restaurants  will generate sales revenue
or profit margins  consistent  with those of our existing  restaurants,  or that
these new restaurants will be operated profitably.

Our principal  capital needs arise from the development of new restaurants,  and
to a lesser extent,  maintenance  and  improvement of existing  facilities.  The
principal  sources  of  capital  to  fund  these  expenditures  were  internally
generated cash flow, bank  borrowings,  lease financing and an equity  offering.
The table below provides certain  information  regarding our sources and uses of
cash for the periods presented.

                                                Three Months Ended
                                                      March  31

                                              2000              1999
                                          -------------      -----------
Net cash provided by operations          $    1,145,612     $    578,142
Purchases of property and equipment             899,961        1,520,927
Proceeds from common stock offering                   -        7,765,347
Net payments on long-term
   debt and capital lease obligations           279,724          616,007
Payment on short-term borrowings                      -        6,990,348



Our single largest use of funds has been for capital expenditures  consisting of
land, building and equipment  associated with our restaurant  expansion program.
The  substantial  growth  of the  Company  over  the  period  has  not  required
significant additional working capital. Sales are predominantly for cash and the
business  does  not  require  the  maintenance  of  significant  receivables  or
inventories. In addition, it is common within the restaurant industry to receive
trade credit on the purchase of food,  beverage and supplies,  thereby  reducing
the need for incremental working capital to support sales increases.

We both own and lease our restaurant  facilities.  Management determines whether
to  acquire  or  lease a  restaurant  facility  based on its  evaluation  of the
financing alternatives available for a particular site.

                                       14


<PAGE>



We plan to open five  additional  Company-owned  Tumbleweed  restaurants  during
2000, depending on the availability of quality sites, the hiring and training of
sufficiently  skilled management and other personnel,  and other factors.  As of
March 31, 2000, we had three restaurants under  construction which currently are
planned to open during the second quarter of 2000.

We have used and will continue to utilize mortgage,  sale/leaseback and landlord
financing,  as well as  equipment  leasing and  financing,  for a portion of the
development  costs of  restaurants  which will open during 2000.  The  remaining
costs have been and will be funded by available  cash  reserves,  cash  provided
from operations and borrowing capacity. Management believes such sources will be
sufficient to fund our expansion  plans through 2000.  Should our actual results
of operations fall short of, or our rate of expansion  significantly  exceed our
plans, or should our costs or capital expenditures exceed  expectations,  we may
need to seek additional  financing in the future. In negotiating such financing,
there can be no assurance  that we will be able to raise  additional  capital on
terms satisfactory to us.

In order to  provide  any  additional  funds  necessary  to  pursue  our  growth
strategy,  we may incur, from time to time,  additional short and long-term bank
indebtedness  and may issue, in public or private  transactions,  our equity and
debt securities, the availability and terms of which will depend upon market and
other conditions.  There is no assurance that such additional  financing will be
available on terms acceptable to us.

We have a $6,500,000  mortgage  revolving line of credit note with National City
Bank (the "Credit  Facility").  At March 31, 2000 we had outstanding  borrowings
under the Credit  Facility of  $5,207,148.  The note bears interest at the Prime
Rate plus .25%  (9.25% at March 31,  2000) and is due  December  31,  2003.  The
Credit  Facility  imposes  restrictions on us with respect to the maintenance of
certain  financial ratios,  the incurrence of indebtedness,  the sale of assets,
mergers, capital expenditures and the payment of dividends.

CHANGE IN ACCOUNTING PRINCIPLE

In April 1998, the American  Institute of Certified  Public  Accountants  issued
Statement of Position (SOP) 98-5,  "Reporting the Costs of Start-Up Activities."
The SOP was effective beginning January 1, 1999 and requires that start-up costs
capitalized  prior to January  1, 1999 be  written-off  and any future  start-up
costs be expensed as incurred.  Prior to 1999,  we  capitalized  our  preopening
costs  incurred  in  connection  with  opening  new  restaurant  locations.  The
unamortized  balance of the Company's deferred  preopening costs ($524,669 as of
December  31,  1998) were  written-off  (net of income  taxes of  $183,634) as a
cumulative effect of an accounting change on January 1, 1999.

IMPACT OF INFLATION

The  impact  of  inflation  on the  cost of  food,  labor,  equipment,  land and
construction costs could harm our operations. We pay a majority of our employees
hourly  rates  related to federal and state  minimum  wage laws.  As a result of
increased competition and the low unemployment rates in the markets in which our
restaurants  are located,  we have  continued to increase  wages and benefits in
order to  attract  and  retain  management  personnel  and  hourly  workers.  In
addition,  most of our leases require us to pay taxes,  insurance,  maintenance,
repairs  and  utility  costs,  and  these  costs  are  subject  to  inflationary
pressures.  Most of the leases  provide for increases in rent based on increases
in the  consumer  price  index when the leases are  renewed.  We may  attempt to
offset the effect of inflation through periodic menu price increases,  economies
of  scale  in  purchasing  and  cost  controls  and   efficiencies  at  existing
restaurants.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not  enter  into  derivative  transactions  or  speculate  on  the  future
direction of interest rates.  We are exposed to interest rate changes  primarily
as a  result  of our  variable  rate  debt  instruments.  As of March  31,  2000
approximately  $10,600,000  of our debt bore  interest  at  variable  rates.  We
believe that the effect,  if any, of reasonably  possible  near-term  changes in
interest  rates on our financial  position,  results of operations or cash flows
would not be significant.

                                       15


<PAGE>



PART II.    OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

   (a)    Exhibits:

   *2.1   Agreement and Plan of Merger, dated as of September 23, 1998,
          between Tumbleweed, LLC and Registrant

   *3.1   Certificate of Incorporation of Tumbleweed, Inc., as amended.

   *3.2   Bylaws of Registrant

   *10.1  Master International License Agreement, dated August 29, 1997,
          between Tumbleweed International LLC and Tumbleweed, LLC

   *10.2  Employment Agreement between John A. Butorac, Jr. and Tumbleweed, Inc.

   *10.3  Employment Agreement between James M. Mulrooney and Tumbleweed, Inc.

   *10.4  Sublease Agreement,  dated February 5, 1997, between TW-Dixie Bash,
          LLC and Tumbleweed, LLC (for Bardstown Road restaurant)

   *10.5  Sublease  Agreement,  dated  February  5, 1997,  between TW- Dixie
          Bash, LLC and Tumbleweed, LLC (for Valley Station restaurant)

   *10.6  Commitment Letter, dated September 12, 1997,between CNL Fund Advisors,
          Inc. and TW Tennessee, LLC

   *10.7  Tumbleweed, Inc. 1998 Stock Option and Incentive Compensation Plan

   *10.8  Form of Standard Franchise Agreement for Tumbleweed, LLC

   *10.9  Articles of Incorporation of Tumbleweed Marketing Fund, Inc

   *10.10 By laws of Tumbleweed Marketing Fund, Inc.

   *10.11 Bonus Compensation Plan for Senior Executives

  **10.12 Revolving Line of Credit Note, dated April 21, 1999, between
          Tumbleweed, Inc. and National City Bank of Kentucky and related
          Loan Agreement

    27.1  Financial Data Schedule

   *99.1  Registration Rights Agreement between Tumbleweed, Inc. and
          Tumbleweed, LLC

          *   Incorporated by reference to exhibits filed with the Commission on
              September 29, 1998 in Form S-1 Registration No. 333-57931

         **   Incorporated by reference to exhibits filed with the Commission on
              May 12, 1999 in Form 10-Q File No. 333-57931.

   (b)      Reports on Form 8-K

            Tumbleweed, Inc. filed Form 8-K on January 14, 2000 to report in
            Item 5 that its Board of Directors approved the repurchase of up to
            $500,000 of the Company's common stock.


Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.

                                       16

<PAGE>



                                    Signature

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 there unto duly authorized.

Dated:        May 4, 2000                            Tumbleweed, Inc.

                                                     By:  /s/ James M. Mulrooney
                                                     -----------------------
                                                     James M. Mulrooney
                                                     Executive Vice President
                                                     Chief Financial Officer

















                                       17