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, 2001

                                       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 1, 2001 was 5,839,230.


Exhibit Index: Page 16



<PAGE>



                                TUMBLEWEED, INC.

                                      INDEX


PART I.     FINANCIAL INFORMATION                                          PAGE
      Item 1. Financial Statements (Unaudited)
              a) Consolidated Statements of Operations for the
                 three months ended March 31, 2001 and 2000                 3
              b) Consolidated Balance Sheets as of March 31, 2001
                 and December 31, 2000                                      4
              c) Consolidated Statements of Cash Flows for the
                 three months ended March 31, 2001 and 2000                 5
              d) Notes to Consolidated 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 1.     Legal Proceedings                                           16
   Item 6.     Exhibits and Reports on Form 8-K                            16

Signature                                                                  18





                                        2

<PAGE>

                                Tumbleweed, Inc.
                      Consolidated Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>





                                                                   Three Months Ended
                                                                        March 31
                                                                  2001            2000
                                                              ------------    ------------
Revenues:
<S>                                                           <C>             <C>
   Restaurant sales                                           $ 13,651,652    $ 12,821,270
   Commissary sales                                                455,747         422,606
   Franchise fees and royalties                                    336,446         228,967
   Other revenues                                                  190,419         159,525
                                                              ------------    ------------

Total revenues                                                  14,634,264      13,632,368

Operating expenses:
   Restaurant cost of sales                                      4,378,405       3,671,644
   Commissary cost of sales                                        397,517         375,103
   Operating expenses                                            7,530,279       6,745,055
   Selling, general and administrative expenses                  1,560,879       1,276,007
   Preopening expenses                                                 -            86,064
   Depreciation and amortization                                   574,567         518,020
                                                              ------------    ------------

Total operating expenses                                        14,441,647      12,671,893
                                                              ------------    ------------

Income from operations                                             192,617         960,475

Other income (expense):
   Interest expense, net                                          (382,024)       (317,198)
   Equity in income of TW-Springhurst                               12,683             -
                                                              ------------    ------------

Total other expense                                               (369,341)       (317,198)
                                                              ------------    ------------

Income (loss) before income taxes                                 (176,724)        643,277
Provision (benefit) for income taxes - current and deferred        (58,320)        225,147
                                                              ------------    ------------

Net income (loss)                                             $   (118,404)   $    418,130
                                                              ============    ============

Basic and diluted earnings (loss) per share:                  $      (0.02)   $       0.07
                                                              ============    ============
</TABLE>

See accompanying notes.


                                        3

<PAGE>

<TABLE>


                                Tumbleweed, Inc.
                           Consolidated Balance Sheets

<CAPTION>

                                                          March 31       December 31
                                                            2001            2000
                                                        (Unaudited)
                                                        ------------    ------------
Assets
Current assets:
<S>                                                     <C>             <C>
   Cash and cash equivalents                            $      1,099    $    281,829
   Accounts receivable, net of allowance of $68,464          601,038         757,956
   Income tax receivable                                     432,374         240,875
   Inventories                                             1,982,168       1,780,577
   Prepaid expenses and other assets                         302,492         345,148
                                                        ------------    ------------
Total current assets                                       3,319,171       3,406,385
Property and equipment, net                               32,061,641      31,795,454
Goodwill, net of accumulated amortization of
   $704,458 in 2001 and $669,395 in 2000                   3,441,554       3,476,617
Investment in TW-Springhurst                                  93,780         141,097
Other assets                                                 619,400         633,335
                                                        ------------    ------------
Total assets                                            $ 39,535,546    $ 39,452,888
                                                        ============    ============

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                     $  2,034,292    $  1,113,443
   Accrued liabilities                                     2,057,734       2,489,727
   Deferred income taxes                                     107,320           8,244
   Current maturities on long-term
     debt and capital leases                               2,035,750       2,040,667
                                                        ------------    ------------
Total current liabilities                                  6,235,096       5,652,081

Long-term liabilities:
   Long-term debt, less current maturities                12,135,156      12,422,904
   Capital lease obligations, less current maturities      2,387,144       2,534,877
   Deferred income taxes                                     865,053         831,525
   Other liabilities                                         160,000         140,000
                                                        ------------    ------------
Total long-term liabilities                               15,547,353      15,929,306
                                                        ------------    ------------
Total liabilities                                         21,782,449      21,581,387

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               58,818          58,818
   Paid-in capital                                        16,294,006      16,294,006
   Treasury stock, 42,400 shares                            (254,695)       (254,695)
   Retained earnings                                       1,654,968       1,773,372
                                                        ------------    ------------
     Total stockholders' equity                           17,753,097      17,871,501
                                                        ------------    ------------
Total liabilities and stockholders' equity              $ 39,535,546    $ 39,452,888
                                                        ============    ============
</TABLE>

See accompanying notes.




                                        4

<PAGE>
<TABLE>




                                Tumbleweed, Inc.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<CAPTION>
                                                                   Three Months Ended
                                                                        March 31
                                                                  2001           2000
                                                              ------------   ------------

Operating activities:
<S>                                                           <C>            <C>
   Net income (loss)                                          $  (118,404)   $   418,130
   Adjustments to reconcile net income (loss) to net
       cash provided by operating activities:
        Depreciation and amortization                             574,567        518,020
        Deferred income taxes                                     132,604        146,427
        Equity in income of TW-Springhurst                        (12,683)           -
        Loss on disposition of property and equipment              16,260          2,474
        Changes in operating assets and liabilities:
          Accounts receivable                                     156,918       (219,626)
          Income tax receivable                                  (191,499)           -
          Inventories                                            (201,591)       (76,488)
          Prepaid expenses                                         40,142        (19,581)
          Other assets                                              9,689        (54,212)
          Accounts payable                                        920,849        494,070
          Accrued liabilities                                    (431,993)       (93,602)
          Other liabilities                                        20,000         30,000
                                                              -----------    -----------
Net cash provided by operating activities                         914,859      1,145,612

Investing activities:
    Purchases of property and equipment                          (815,191)      (899,961)
   Distribution from TW-Springhurst                                60,000            -
                                                              -----------    -----------
Net cash used in investing activities                            (755,191)      (899,961)

Financing activities:
   Proceeds from issuance of long-term debt                     1,349,000        404,000
   Payments on long-term debt and capital lease obligations    (1,789,398)      (683,724)
   Purchase of treasury stock                                         -         (149,691)
                                                              -----------    -----------
Net cash used in financing activities                            (440,398)      (429,415)
                                                              -----------    -----------

Net decrease in cash and cash equivalents                        (280,730)      (183,764)

Cash and cash equivalents at beginning of period                  281,829        640,189
                                                              -----------    -----------
Cash and cash equivalents at end of period                    $     1,099    $   456,425
                                                              ===========    ===========



</TABLE>


See accompanying notes.









                                        5

<PAGE>



                                TUMBLEWEED, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 March 31, 2001
1.    BASIS OF PRESENTATION

Restaurant Facilities

As of March 31, 2001,  the Company  owned,  franchised or licensed 65 Tumbleweed
restaurants.  The Company owned and operated 36 restaurants in Kentucky, Indiana
and Ohio,  including one restaurant  which is 50% owned through a joint venture.
There were 21 franchised  restaurants  located in Indiana,  Illinois,  Kentucky,
Michigan,  Virginia,  West Virginia and Wisconsin and eight licensed restaurants
located  outside the United  States in Germany,  Jordan,  Egypt,  Saudi  Arabia,
England  and  Turkey.  The  following  table  reflects  changes in the number of
Company-owned,  franchise and licensed restaurants during the three months ended
March 31, 2001.


   Company-owned restaurants:
     In operation, beginning of period                36
     Restaurants opened                                0
                                                --------
     In operation, end of period                      36

   Franchise and licensed restaurants:
     In operation, beginning of period                27
     Restaurants opened                                2
                                                --------
     In operation, end of period                      29
                                                --------
         System Total                                 65
                                                ========


Interim Financial Reporting

The  accompanying  consolidated  financial  statements have been prepared by the
Company without audit,  with the exception of the December 31, 2000 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, 2000.

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,  2001 are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 2001.

2.   ACCRUED LIABILITIES

Accrued liabilities consist of:

                                                 March 31      December 31
                                                   2001            2000
                                               ------------    ------------

Accrued payroll, severance and related taxes   $    975,426    $    897,841
Accrued insurance and fees                          165,142         282,281
Accrued taxes, other than payroll                   613,417         548,703
Gift certificate liability                          216,242         470,652
Deferred income related to involuntary
  conversion of non-monetary assets                   5,556         204,893
Other                                                81,951          85,357
                                               ------------    ------------
                                               $  2,057,734    $  2,489,727
                                               ============    ============

                                       6
<PAGE>

3.   LONG-TERM DEBT

Long-term debt consists of:

                                                      March 31      December 31
                                                        2001           2000
                                                    ------------   -------------
Secured $6,500,000 mortgage revolving line of
  credit note, bearing interest at prime rate
  plus .25% (8.25% at March 31, 2001), due
  December 31, 2003                                 $  5,361,148   $   5,496,148

Secured mortgage note payable, bearing interest
  at commercial paper rate plus 2.65% (7.65% at
  March 31, 2001), due February 17, 2006               2,453,890       2,501,399

Secured mortgage note payable, bearing interest at
  prime rate plus 1% (9.0% at March 31, 2001),
  payable in monthly installments through October 1,
  2017                                                 1,032,950       1,039,068


Secured $6,500,000  mortgage  revolving line of
  credit note, bearing interest at prime rate
  plus .25% (8.25% at March 31, 2001), due
  October 3, 2001                                        914,868         915,868

Secured mortgage note payable, bearing interest at
  8.75%, payable in monthly installments through
  February 15, 2008                                      911,854         921,756

Secured mortgage note payable bearing interest at
  commercial paper rate plus 2.65% (7.65% at
  March 31, 2001), due December 31, 2001                 800,000         800,000

Secured mortgage note payable, bearing interest
  at prime rate (8.0% at March 31, 2001), payable
  in monthly installments through March 1, 2006          639,298         644,185

Secured mortgage note payable, bearing interest at
  prime rate plus 1.25% (9.25% at March 31, 2001),
  payable in monthly installments through
  November 27, 2016                                      587,500         596,875

Secured mortgage note payable, bearing interest at
  10.52%, payable in monthly installments through
  August 18, 2005                                        485,373         506,700

Other installment notes payable                          363,003         415,633
                                                     -----------    ------------
                                                      13,549,884      13,837,632
Less current maturities                                1,414,728       1,414,728
                                                     -----------    ------------
Long-term debt                                      $ 12,135,156   $  12,422,904
                                                     ===========    ============

Property and equipment  with a net book value of  approximately  $23,000,000  at
March 31, 2001 collateralize the Company's long-term debt.

The Loan  Agreement of the  $6,500,000  line of credit which matures  October 3,
2001 currently has a maximum amount  available of up to $1,440,000.  The Company
can increase this amount by providing the Bank with additional  collateral.  The
current  principal  balance at March 31, 2001 is  $914,868.  The Loan  Agreement
provides for  extensions  of the maturity date until the line of credit has been
repaid or for the conversion of the current  outstanding  principal balance to a
Term Loan with a maturity of 5-years from the date of conversion.

                                        7

<PAGE>

3.   LONG-TERM DEBT (continued)

For the quarter  ended March 31, 2001,  the Company was not in  compliance  with
certain financial covenants pertaining to its mortgage revolving lines of credit
(balances at March 31, 2001 were  $5,361,148  and  $914,868) and a mortgage note
payable  (balance at March 31, 2001 was  $2,453,890).  The Company has  received
waivers  from the lenders to cure the  non-compliance.  It is  uncertain at this
time if the Company  will be in  compliance  with all of its loan  covenants  in
future periods. If it does not comply with the covenants in future periods,  the
lenders would be entitled,  at their  discretion,  to exercise  certain remedies
including acceleration of repayment.

4.  EARNINGS PER SHARE

The following is a  reconciliation  of the Company's basic and diluted  earnings
(loss)  per share data for the three  months  ended  March 31,  2001 and 2000 in
accordance with FAS 128, "Earnings per Share."


                                                           2001        2000
                                                       -----------  -----------
Numerator:
   Net income (loss)                                   $  (118,404) $   418,130
                                                        ==========   ==========

Denominator:
   Weighted average shares
      outstanding - basic                                5,839,230    5,874,634
   Effect of dilutive securities:
      Director and employee stock options                       51        4,766
                                                        ----------   ----------
   Denominator for diluted earnings per share -
      adjusted weighted average and assumed conversions  5,839,281    5,879,400
                                                        ==========   ==========

5.   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.

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

<TABLE>
<CAPTION>


2001:
                                     Restaurant        Commissary         Corporate          Totals
                                    ------------     --------------     -------------     ------------
Revenues from external
<S>                                <C>              <C>                <C>               <C>
   customers                       $  13,651,652    $       454,747    $      526,865    $  14,634,264
Intersegment revenues                          -            683,620                 -          683,620
General and
   administrative expenses                     -                  -         1,102,367        1,102,367
Advertising expenses                           -                  -           458,512          458,512
Depreciation and
   amortization                          452,916             26,649            95,002          574,567
Net interest expense                           -             44,025           337,999          382,024
Income (loss) before income taxes      1,170,783             29,959        (1,377,466)       (176,724)

</TABLE>




                                        8

<PAGE>

5.  SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>

2000:
                                            Restaurant        Commissary         Corporate          Totals
                                           ------------     --------------     -------------     ------------
Revenues from external
<S>                                       <C>              <C>                <C>               <C>
   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             1,743,541             18,000        (1,118,264)         643,277
</TABLE>

6.  INCOME TAXES

Income taxes on the  Company's  income  (loss) before income taxes for the three
months  ended March 31,  2001 and 2000 have been  provided  for at an  estimated
effective tax rate of 33% and 35%, respectively.

7.  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.  The Company  had  guaranteed  certain  TW-Tennessee  obligations  as
follows,  jointly and  severally  with  TW-Tennessee  common  members:  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.

In March 2001, the bank which holds the line of credit filed suit in the Circuit
Court of  Jefferson  County,  Kentucky  against  TW-Tennessee  and  against  the
guarantors  of the line of credit,  including  the Company and a Director of the
Company.  Prior  to the  suit  being  filed,  the  Company  along  with  certain
guarantors  made a partial  payment to the bank. If the bank is  unsuccessful in
collecting the remaining  payments from the other guarantors,  the Company would
have exposure totaling approximately  $1,000,000.  While the Company believes it
has  fulfilled its  obligation to the bank and intends to vigorously  defend its
position,  it is too early in the process to predict with certainty the ultimate
outcome of this  matter  since the suit is in the early  pleading  stages and no
discovery has taken place.

During  1999,  the  Landlord  under  the  lease  financing   agreement  declared
TW-Tennessee to be in default,  and accelerated the rent  obligations  under the
leases.  On May 8,  2000,  the  Landlord  filed suit in the  Chancery  Court for
Davidson County, Tennessee,  against TW-Tennessee and against certain guarantors
of the lease  obligations,  including the Company and a Director of the Company.
The Company and certain guarantors of the lease obligations reached an agreement
with the Landlord, under which the Company and such guarantors paid certain sums
to the Landlord as a final  settlement  of all claims of the  Landlord,  and the
Landlord  dismissed  its legal  action  against and  released  the Company  from
further liability under its guarantees.

The  lessor  under  the  equipment   leases  with   TW-Tennessee   has  declared
TW-Tennessee to be in default  thereunder and demanded  payment in full from all
guarantors of the leases,  including the Company. The Company has made a partial
payment  to the lessor and is  working  with the  lessor in  pursuing  the other
guarantors of the equipment leases that have not made any payment. If the lessor
is unsuccessful in collecting the remaining sums due from the other  guarantors,
the Company would have additional exposure totaling approximately $312,000.

As a result of the  settlement  with the Landlord under the  TW-Tennessee  lease
financing  agreement,  and given the demand for payment by the lessor  under the
TW-Tennessee equipment leases and by the bank that holds the line of credit, the
Company  has  incurred  a  loss   related  to  the   Company's   guarantees   of
TW-Tennessee's  obligations.  The Company established a reserve in the amount of
$725,000  during 2000 of which  approximately  $717,000  had been paid out as of
March 31, 2001.  The reserve  amount was based on the  Company's  payment to the
Landlord under the TW-Tennessee lease financing  agreement,  the Company's share
of the various remaining guarantees of TW



                                        9

<PAGE>

7.  CONTINGENCIES (continued)

Tennessee  obligations and an estimated amount for legal costs which will likely
be incurred in  connection  with the  resolution  of this matter.  The Company's
management believes that it will not incur any significant  additional losses in
connection with this matter.

8.  OTHER EVENT

TW Funding,  LLC is an entity  owned by certain  officers  and  directors of the
Company. The members of TW Funding, LLC guaranteed a loan incurred by TW Funding
to finance  its  purchase  of 400,000  shares of Common  Stock in the  Company's
initial public offering in January 1999. The shares held by TW Funding,  as well
as 1,900,000  shares of Company  Common  Stock,  of which  1,800,000  shares are
beneficially owned by directors of the Company,  have been pledged to secure the
loan and their  guarantee.  This pledge totals 2,300,000 shares of Common Stock.
The loan matured on March 31, 2001. On or about May 5, 2001, the $4 million loan
of TW Funding, LLC was declared in default and, as a result, Mr. Gerald Mansbach
has become the  beneficial  owner of the above  described  shares,  representing
approximately  39.0% of the Company,  with the power to vote and dispose of such
shares.



















                                       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.

As  of  March  31,  2001,  we  owned,   franchised  or  licensed  65  Tumbleweed
restaurants. We owned and operated 36 restaurants in Kentucky, Indiana and Ohio,
including one restaurant which is 50% owned through a joint venture.  There were
21 franchised restaurants in Indiana, Illinois, Kentucky,  Wisconsin,  Virginia,
West Virginia and Michigan,  and eight licensed  restaurants located outside the
United States in Germany, Jordan, Saudi Arabia, Egypt, England and Turkey.

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.
<TABLE>
<CAPTION>


                                                         Three Months Ended
                                                              March 31
                                                       2001              2000
                                                   -------------     -------------
Revenues:
<S>                                                         <C>               <C>
   Restaurant sales                                         93.3  %           94.1 %
   Commissary sales                                          3.1               3.1
   Franchise fees and royalties                              2.3               1.7
   Other revenues                                            1.3               1.1
                                                   -------------     -------------
     Total revenues                                        100.0             100.0
Operating expenses:
   Restaurant cost of sales (1)                             32.1              28.6
   Commissary cost of sales (2)                             87.2              88.8
   Operating expenses (1)                                   55.2              52.6
   Selling, general and administrative expenses             10.7               9.4
   Preopening expenses                                         -               0.6
   Depreciation and amortization                             3.9               3.8
                                                   -------------     -------------
     Total operating expenses                               98.7              93.0
                                                   -------------     -------------
     Income from operations                                  1.3               7.0
Other expense, net                                          (2.5)             (2.3)
                                                   -------------     -------------
Income (loss) before income taxes                           (1.2)              4.7
Provision (benefit) for income taxes - current
   and deferred                                             (0.4)              1.6
                                                   -------------     -------------
Net  income (loss)                                          (0.8) %            3.1 %
                                                   =============     =============
<FN>

(1)   As percentage of restaurant sales.
(2)   As percentage of commissary sales.
</FN>
</TABLE>




                                       11

<PAGE>

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000

Total revenues  increased by $1,001,896 or 7.3% for the three months ended March
31,  2001  compared  to the same  period  in 2000  primarily  as a result of the
following:

   Restaurant  sales  increased  by $830,382 or 6.5% for the three  months ended
   March 31,  2001  compared  to the same  period in 2000.  The  increase is due
   primarily to the addition of six  Company-owned  restaurants  since March 31,
   2000. The increase is partially offset by a 1.0% decrease in same store sales
   for the three month period.

   Commissary sales to franchised and licensed restaurants  increased by $33,141
   or 7.8% for the three months ended March 31, 2001 compared to the same period
   in 2000.  The increase is due  primarily  to four  additional  franchised  or
   licensed restaurants since March 31, 2000.

   Franchise  fees and  royalties  increased  by $107,479 or 46.9% for the three
   months ended March 31, 2001 compared to same period in 2000.  Franchise  fees
   increased  $35,000  in 2001 due to the fact  that  there  were two  franchise
   restaurant  openings in the 2001 three month period compared to one franchise
   restaurant opening in 2000. Royalty income increased $72,479 during the three
   month  period  primarily  due  to  four  additional  franchised  or  licensed
   restaurants since March 31, 2000.

   Other revenues increased by $30,894 or 19.4% for the three months ended March
   31, 2001  compared to the same period in 2000  primarily due to the fact that
   other  revenues  for the  2001  three  month  period  includes  approximately
   $100,000 of insurance proceeds as it relates to a business  interruption as a
   result of a fire which occurred in June 2000 at a  Company-owned  restaurant.
   See Notes to Consolidated  Financial Statements in the Company's December 31,
   2000 Form 10-K for a detail  discussion.  There was no similar  income in the
   2000 three month period.  This increase is partially  offset by a decrease in
   volume related purchasing rebates in 2001 compared to 2000.

Restaurant  cost of sales  increased  by $706,761 or 19.2% for the three  months
ended March 31,  2001  compared to the same  period in 2000.  The  increase  was
principally due to the addition of six Company-owned restaurants since March 31,
2000.  Restaurant  cost of sales  increased as a percentage  of sales by 3.5% to
32.1% for the three  months  ended March 31, 2001  compared to 28.6%  during the
same  period in 2000.  The 3.5%  increase is mainly the result of an increase in
the cost of beef (primarily steaks and ribs).

Commissary  cost of sales  increased  $22,414 or 6.0% for the three months ended
March 31, 2001  compared to the same period in 2000.  The increase in commissary
cost of  sales  is due  primarily  to four  additional  franchised  or  licensed
restaurants  since  March  31,  2000  . As a  percentage  to  commissary  sales,
commissary  cost of sales  decreased  1.6% for the three  months ended March 31,
2001 compared to the same period in 2000. The 1.6% decrease is mainly the result
of a reduction in commissary overhead costs.

Restaurant  operating  expenses  increased  by  $785,224  or 11.6% for the three
months  ended March 31, 2001  compared to the same period in 2000.  The increase
reflects the  addition of six  Company-owned  restaurants  since March 31, 2000.
Operating  expenses  increased as a percentage of restaurant  sales to 55.2% for
the three  months  ended  March 31,  2001 from 52.6% for the same period in 2000
primarily  due to a 1.0%  increase in utilities  and a 0.6%  increase in payroll
costs.

Selling,  general and administrative expenses increased by $284,872 or 22.3% for
the three months ended March 31, 2001  compared to the same period in 2000.  The
increase in selling,  general and  administrative  expenses  for the three month
period is primarily due to increased advertising costs of approximately $197,000
and the cost of  implementing  a new menu  during  the first  quarter of 2001 of
approximately  $95,000.  The  increase  in selling,  general and  administrative
expenses  for the three  month  period is  partially  offset by a  reduction  in
payroll  costs for  corporate  personnel.  As a  percentage  to total  revenues,
selling, general and administrative expenses were 10.7% and 9.4% of revenues for
the three months ended March 31, 2001 and 2000, respectively.

Preopening  expenses  were  $86,064 for the three  months  ended March 31, 2000.
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. There were no preopening expenses incurred during
the three months ended March 31, 2001.


                                       12

<PAGE>

Depreciation and amortization  expense  increased $56,547 or 10.9% for the three
months ended March 31, 2001 compared to the same period in 2000 due primarily to
the addition of six Company-owned restaurants since March 31, 2000.

Net interest expense increased $64,826 or 20.4% for the three months ended March
31,  2001  compared to the same  period in 2000.  The  increase is the result of
increased  borrowing to fund the growth in Company-owned  restaurants  partially
offset by decreases in the prime interest rate during 2001.

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 capital needs for the period ended March 31, 2000 arose from the development
of new  restaurants,  and to a lesser  extent,  maintenance  and  improvement of
existing restaurant  facilities.  The principal sources of capital to fund these
expenditures  were  internally  generated cash flow,  bank  borrowings and lease
financing.  Our capital needs for the period ended March 31, 2001 arose from the
reconstruction  of a restaurant  facility  which was damaged by fire during June
2000, and to a lesser extent, maintenance and improvement of existing restaurant
facilities.  The  source of  capital to fund the  reconstruction  was  insurance
proceeds  received  during 2000.  The  maintenance  expenditures  were funded by
internally  generated cash flow. The table below  provides  certain  information
regarding our sources and uses of cash for the periods presented.


                                                Three Months Ended
                                                     March 31

                                              2001               2000
                                          ------------       ------------
Net cash provided by operations          $     914,859      $   1,145,612
Purchases of property and equipment           (815,191)          (899,961)
Net payments on long-term
   debt and capital lease obligations         (440,398)          (279,724)




Our single  largest use of funds  during the period ended March 31, 2000 was for
capital expenditures  consisting of land, building and equipment.  The growth of
the  Company  during the 2000  period  did not  require  significant  additional
working capital. Our largest use of funds during the period ended March 31, 2001
was for the  reconstruction  of a restaurant  facility which was damaged by fire
during 2000 and for payments on long-term  debt and capital  lease  obligations.
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.

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.  The Company  had  guaranteed  certain  TW-Tennessee  obligations  as
follows,  jointly and  severally  with  TW-Tennessee  common  members:  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.

In March 2001, the bank which holds the line of credit filed suit in the Circuit
Court of  Jefferson  County,  Kentucky  against  TW-Tennessee  and  against  the
guarantors  of the line of credit,  including  the Company and a Director of the
Company.  Prior  to the  suit  being  filed,  the  Company  along  with  certain
guarantors  made a partial  payment to the bank. If the bank is  unsuccessful in
collecting the remaining  payments from the other guarantors,  the Company would
have

                                       13

<PAGE>

exposure totaling  approximately  $1,000,000.  While the Company believes it has
fulfilled  its  obligation  to the bank and  intends  to  vigorously  defend its
position,  it is too early in the process to predict with certainty the ultimate
outcome of this  matter  since the suit is in the early  pleading  stages and no
discovery has taken place.

During  1999,  the  Landlord  under  the  lease  financing   agreement  declared
TW-Tennessee to be in default,  and accelerated the rent  obligations  under the
leases.  On May 8,  2000,  the  Landlord  filed suit in the  Chancery  Court for
Davidson County, Tennessee,  against TW-Tennessee and against certain guarantors
of the lease  obligations,  including the Company and a Director of the Company.
The Company and certain guarantors of the lease obligations reached an agreement
with the Landlord, under which the Company and such guarantors paid certain sums
to the Landlord as a final  settlement  of all claims of the  Landlord,  and the
Landlord  dismissed  its legal  action  against and  released  the Company  from
further liability under its guarantees.

The  lessor  under  the  equipment   leases  with   TW-Tennessee   has  declared
TW-Tennessee to be in default  thereunder and demanded  payment in full from all
guarantors of the leases,  including the Company. The Company has made a partial
payment  to the lessor and is  working  with the  lessor in  pursuing  the other
guarantors of the equipment leases that have not made any payment. If the lessor
is unsuccessful in collecting the remaining sums due from the other  guarantors,
the Company would have additional exposure totaling approximately $312,000.

As a result of the  settlement  with the Landlord under the  TW-Tennessee  lease
financing  agreement,  and given the demand for payment by the lessor  under the
TW-Tennessee equipment leases and by the bank that holds the line of credit, the
Company  has  incurred  a  loss   related  to  the   Company's   guarantees   of
TW-Tennessee's  obligations.  The Company established a reserve in the amount of
$725,000  during 2000 of which  approximately  $717,000  had been paid out as of
March 31, 2001.  The reserve  amount was based on the  Company's  payment to the
Landlord under the TW-Tennessee lease financing  agreement,  the Company's share
of the various remaining guarantees of TW Tennessee obligations and an estimated
amount for legal costs which will  likely be  incurred  in  connection  with the
resolution of this matter.  The Company's  management  believes that it will not
incur any significant additional losses in connection with this matter.

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.

In the next 12 months,  the Company expects the demand on future liquidity to be
from the ongoing maintenance and improvement of existing restaurant  facilities.
As of  March  31,  2001,  the  Company  had  no  material  commitments  for  the
construction  of new  restaurants  or  maintenance  or  improvement  of existing
restaurant facilities.

We have a $6,500,000  mortgage revolving line of credit with a bank. As of March
31, 2001, we had outstanding  borrowings  under the line of credit in the amount
of  $5,361,148.  The note bears  interest  at the prime rate plus .25% (8.25% at
March 31,  2001) 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.

We also have an additional  $6,500,000  mortgage revolving line of credit with a
bank.  As of March 31, 2001,  we had  outstanding  borrowings  under the line of
credit in the amount of $914,868. The note bears interest at the prime rate plus
 .25%  (8.25% at March 31,  2001) and is due October 3, 2001.  Upon the  maturity
date, the Loan Agreement  provides for extensions of the maturity date until the
line of credit has been repaid or for the conversion of the current  outstanding
principal  balance  to a Term Loan with a maturity  of 5-years  from the date of
conversion. The current maximum amount available on the revolving line of credit
is $1,440,000  which can be increased up to $6,500,000 as additional  collateral
is provided by the Company.  The note imposes  restrictions  on the Company 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.

For the quarter  ended March 31, 2001,  the Company was not in  compliance  with
certain financial covenants pertaining to its mortgage revolving lines of credit
(balances at March 31, 2001 were  $5,361,148  and  $914,868) and a mortgage note
payable  (balance at March 31, 2001 was  $2,453,890).  The Company has  received
waivers  from the lenders to cure the  non-compliance.  It is  uncertain at this
time if the Company  will be in  compliance  with its loan  covenants  in future
periods. If it does not comply with the covenants in future periods, the lenders
would be entitled,  at their discretion,  to exercise certain remedies including
acceleration of repayment.


                                       14

<PAGE>

OTHER EVENT

TW Funding,  LLC is an entity  owned by certain  officers  and  directors of the
Company. The members of TW Funding, LLC guaranteed a loan incurred by TW Funding
to finance  its  purchase  of 400,000  shares of Common  Stock in the  Company's
initial public offering in January 1999. The shares held by TW Funding,  as well
as 1,900,000  shares of Company  Common  Stock,  of which  1,800,000  shares are
beneficially owned by directors of the Company,  have been pledged to secure the
loan and their  guarantee.  This pledge totals 2,300,000 shares of Common Stock.
The loan matured on March 31, 2001. On or about May 5, 2001, the $4 million loan
of TW Funding, LLC was declared in default and, as a result, Mr. Gerald Mansbach
has become the  beneficial  owner of the above  described  shares,  representing
approximately  39.0% of the Company,  with the power to vote and dispose of such
shares.

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,  2001
approximately  $11,976,000  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 1.    LEGAL PROCEEDINGS

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.  The Company  had  guaranteed  certain  TW-Tennessee  obligations  as
follows,  jointly and  severally  with  TW-Tennessee  common  members:  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.

In March 2001, the bank which holds the line of credit filed suit in the Circuit
Court of  Jefferson  County,  Kentucky  against  TW-Tennessee  and  against  the
guarantors  of the line of credit,  including  the Company and a Director of the
Company.  Prior  to the  suit  being  filed,  the  Company  along  with  certain
guarantors  made a partial  payment to the bank. If the bank is  unsuccessful in
collecting the remaining  payments from the other guarantors,  the Company would
have exposure totaling approximately  $1,000,000.  While the Company believes it
has  fulfilled its  obligation to the bank and intends to vigorously  defend its
position,  it is too early in the process to predict with certainty the ultimate
outcome of this  matter  since the suit is in the early  pleading  stages and no
discovery has taken place.

During  1999,  the  Landlord  under  the  lease  financing   agreement  declared
TW-Tennessee to be in default,  and accelerated the rent  obligations  under the
leases.  On May 8,  2000,  the  Landlord  filed suit in the  Chancery  Court for
Davidson County, Tennessee,  against TW-Tennessee and against certain guarantors
of the lease  obligations,  including the Company and a Director of the Company.
The Company and certain guarantors of the lease obligations reached an agreement
with the Landlord, under which the Company and such guarantors paid certain sums
to the Landlord as a final  settlement  of all claims of the  Landlord,  and the
Landlord  dismissed  its legal  action  against and  released  the Company  from
further liability under its guarantees.

The  lessor  under  the  equipment   leases  with   TW-Tennessee   has  declared
TW-Tennessee to be in default  thereunder and demanded  payment in full from all
guarantors of the leases,  including the Company. The Company has made a partial
payment  to the lessor and is  working  with the  lessor in  pursuing  the other
guarantors of the equipment leases that have not made any payment. If the lessor
is unsuccessful in collecting the remaining sums due from the other  guarantors,
the Company would have additional exposure totaling approximately $312,000.

As a result of the  settlement  with the Landlord under the  TW-Tennessee  lease
financing  agreement,  and given the demand for payment by the lessor  under the
TW-Tennessee equipment leases and by the bank that holds the line of credit, the
Company  has  incurred  a  loss   related  to  the   Company's   guarantees   of
TW-Tennessee's  obligations.  The Company established a reserve in the amount of
$725,000  during 2000 of which  approximately  $717,000  had been paid out as of
March 31, 2001.  The reserve  amount was based on the  Company's  payment to the
Landlord under the TW-Tennessee lease financing  agreement,  the Company's share
of the various remaining guarantees of TW Tennessee obligations and an estimated
amount for legal costs which will  likely be  incurred  in  connection  with the
resolution of this matter.  The Company's  management  believes that it will not
incur any significant additional losses in connection with this matter.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

  (a)    Exhibits:

         None

  (b)    Reports on Form 8-K

         Tumbleweed,  Inc.  filed Form 8-K  on January 11, 2001 to report  under
         Item 1 that  the  Company  along  with  TW  Funding,  LLC  and  certain
         guarantors,  which  include some of the  officers and  directors of the
         Company,  entered into a  Forbearance,  Confidentiality  and  Amendment
         Agreement as of December 31, 2000 which  extended the maturity  date of
         TW Funding, LLC's loan to March 31, 2001.

         Tumbleweed, Inc. filed Form 8-K  on May 11, 2001 to report under Item 1
         that on or about May 5, 2001,  the $4 million  loan of TW Funding,  LLC
         was  declared  in  default.  That loan is secured by 400,000  shares of
         Tumbleweed,  Inc.  owned by TW Funding,  LLC and  1,900,000  additional
         shares owned by members of TW



                                       16

<PAGE>

         Funding,  LLC,  including  some officers and directors of  Tumbleweed,
         Inc.  Mr.  Mansbach  has  become  the  beneficial  owner  of the  above
         described shares, representing approximately 39.0% of the Company, with
         the power to vote and dispose of such shares.

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














































                                       17

<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 15, 2001                Tumbleweed, Inc.

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






































                                       18

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