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 September 7, 2003

                                       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)


             2301 River Road, Suite 200, 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 ____
                     ----

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ____  No  X
                                                        -----

The number of shares of common stock,  par value of $.01 per share,  outstanding
on October 15, 2003 was 5,916,153.











<PAGE>



                                TUMBLEWEED, INC.

                                      INDEX


PART I.  FINANCIAL INFORMATION                                             PAGE
  Item 1. Financial Statements (Unaudited)
    a)  Consolidated Statements of Operations for the thirty-six weeks
        and twelve weeks ended September 7, 2003 and September 8, 2002        3
    b)  Consolidated Balance Sheets as of September 7, 2003 and
        December 29, 2002                                                     4
    c)  Consolidated Statements of Cash Flows for the thirty-six weeks
        ended September 7, 2003 and September 8, 2002                         5
    d)  Notes to Consolidated Financial Statements                            6

  Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                          15

  Item 3. Quantitative and Qualitative Disclosures About Market Risk         22

  Item 4. Controls and Procedures                                            22

PART II.    OTHER INFORMATION

  Item 1. Legal Proceedings                                                  23
  Item 6. Exhibits and Reports on Form 8-K                                   24

Signature                                                                    25







                                        2

<PAGE>



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





                                                         Thirty-Six                     Twelve Weeks
                                                         Weeks Ended                        Ended
                                                -----------------------------   -----------------------------
                                                 September 7,   September 8,    September 7,    September 8,
                                                     2003           2002            2003            2002
                                                --------------  -------------   -------------   -------------
Revenues:
<S>                                            <C>             <C>             <C>             <C>
   Restaurant sales                            $    38,788,974 $   38,842,539  $   12,839,727  $   12,282,972
   Commissary sales                                  1,556,226      1,184,254         504,731         387,775
   Franchise fees and royalties                        978,226        842,695         342,717         301,138
   Other revenues                                      280,873        433,857          70,616         138,967
                                                --------------  -------------   -------------   -------------

Total revenues                                      41,604,299     41,303,345      13,757,791      13,110,852

Operating expenses:
   Restaurant cost of sales                         11,365,157     11,734,799       3,807,245       3,679,397
   Commissary cost of sales                          1,313,716      1,058,016         410,341         346,419
   Operating expenses                               21,169,816     21,571,863       7,111,996       6,911,550
   Selling, general and administrative
      expenses                                       4,369,118      4,058,398       1,366,359       1,210,807
   Preopening expenses                                  65,846              -          36,981               -
   Depreciation and amortization                     1,429,047      1,356,633         483,150         446,772
                                                --------------  -------------   -------------   -------------

Total operating expenses                            39,712,700     39,779,709      13,216,072      12,594,945
                                                --------------  -------------   -------------   -------------

Income from operations                               1,891,599      1,523,636         541,719         515,907

Interest expense, net                                 (933,450)      (699,960)       (302,560)       (235,488)
                                                --------------  -------------   -------------   -------------

Income before income taxes and cumulative
   effect of a change in accounting principle          958,149        823,676         239,159         280,419
Provision for income taxes - current and
   deferred                                            421,586        477,731         105,230         238,698
                                                --------------  -------------   -------------   -------------

Income before cumulative effect of a change
   in accounting principle                             536,563        345,945         133,929          41,721
Cumulative effect of a change in accounting
   principle, net of tax ($845,873)                          -     (1,503,773)              -               -
                                                --------------  -------------   -------------   -------------
Net income (loss)                              $       536,563 $   (1,157,828) $      133,929  $       41,721
                                                ==============  =============   =============   =============

Basic and diluted earnings (loss) per share:
    Income before cumulative effect of a
       change in accounting principle          $          0.09 $         0.06  $         0.02  $         0.01
    Cumulative effect of a change in accounting
       principle, net of tax                                 -          (0.25)              -               -
                                                --------------  -------------   -------------   -------------
    Net income (loss)                          $          0.09 $        (0.19) $         0.02  $         0.01
                                                ==============  =============   =============   =============
</TABLE>

See accompanying notes.


                                        3

<PAGE>



                                Tumbleweed, Inc.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>

                                                                            As of
                                                                         September 7,           As of
                                                                             2003           December 29,
                                                                         (Unaudited)            2002
                                                                        --------------     ---------------
Assets
Current assets:
<S>                                                                    <C>                <C>
   Cash and cash equivalents                                           $     4,272,896    $      1,334,631
   Accounts receivable                                                         544,260             942,241
   Inventories                                                               1,969,855           1,786,207
   Prepaid expenses and other assets                                           840,003             601,751
                                                                        --------------     ---------------
Total current assets                                                         7,627,014           4,664,830
Property and equipment, net                                                 27,788,029          26,699,920
Goodwill                                                                       174,657             174,657
Intangible assets, net                                                       1,523,453           1,524,530
Deferred income taxes                                                          226,411             281,840
Other assets                                                                   866,798             631,365
                                                                        --------------     ---------------
Total assets                                                           $    38,206,362    $     33,977,142
                                                                        ==============     ===============

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                    $     1,994,187    $      1,292,871
   Accrued liabilities                                                       2,630,585           2,951,024
   Deferred income taxes                                                       307,961             153,249
   Current maturities on long-term
     debt and capital leases                                                   922,025           1,191,874
                                                                        --------------     ---------------
Total current liabilities                                                    5,854,758           5,589,018

Long-term liabilities:
   Long-term debt, less current maturities                                  16,894,812          13,251,083
   Capital lease obligations, less current maturities                        1,180,871           1,437,683
   Other liabilities                                                           105,000              65,000
                                                                        --------------     ---------------
Total long-term liabilities                                                 18,180,683          14,753,766
                                                                        --------------     ---------------
Total liabilities                                                           24,035,441          20,342,784

Commitments and contingencies (Note 11)

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;
     5,958,553 shares issued at September 7, 2003 and
     December 29, 2002                                                          59,587              59,587
   Paid-in capital                                                          16,393,235          16,393,235
   Treasury stock, 42,400 shares                                              (254,695)           (254,695)
   Retained deficit                                                         (2,027,206)         (2,563,769)
                                                                        --------------     ---------------
     Total stockholders' equity                                             14,170,921          13,634,358
                                                                        --------------     ---------------
Total liabilities and stockholders' equity                             $    38,206,362    $     33,977,142
                                                                        ==============     ===============
</TABLE>

See accompanying notes.











                                        4

<PAGE>



                                Tumbleweed, Inc.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                                          Thirty-Six           Thirty-Six
                                                                          Weeks Ended         Weeks Ended
                                                                         September 7,         September 8,
                                                                             2003                 2002
                                                                       -----------------    ----------------

Operating activities:
<S>                                                                   <C>                  <C>
   Net income (loss)                                                  $          536,563   $      (1,157,828)
   Adjustments to reconcile net income (loss) to net
       cash provided by operating activities:
        Depreciation and amortization                                          1,429,047           1,356,633
        Provision for doubtful accounts                                                -              (4,202)
        Deferred income taxes                                                    210,141            (309,030)
        Loss on disposition of property and equipment                             98,232              72,735
        Cumulative effect of a change in accounting
            principle                                                                  -           2,349,646
        Changes in operating assets and liabilities:
          Accounts receivable                                                    397,981            (233,453)
          Income tax receivable (payable)                                        379,645               4,593
          Inventories                                                           (183,648)            (45,393)
          Prepaid expenses                                                      (642,239)            (35,779)
          Other assets                                                          (248,364)           (165,767)
          Accounts payable                                                       701,316             451,699
          Accrued liabilities                                                   (320,439)           (901,328)
          Other liabilities                                                       40,000             (55,000)
                                                                       -----------------    ----------------
Net cash provided by operating activities                                      2,398,235           1,327,526

Investing activities:
    Purchases of property and equipment                                       (2,577,038)           (630,905)
   Business acquisition                                                                -            (150,000)
                                                                       -----------------    ----------------
Net cash used in investing activities                                         (2,577,038)           (780,905)

Financing activities:
   Proceeds from issuance of long-term debt                                   18,322,877           1,014,812
   Payments on long-term debt and capital lease obligations                  (15,205,809)         (2,047,255)
                                                                       -----------------    ----------------
Net cash provided by (used in) financing activities                            3,117,068          (1,032,443)
                                                                       -----------------    ----------------

Net increase (decrease) in cash and cash equivalents                           2,938,265            (485,822)

Cash and cash equivalents at beginning of period                               1,334,631             757,266
                                                                       -----------------    ----------------
Cash and cash equivalents at end of period                            $        4,272,896   $         271,444
                                                                       =================    ================
</TABLE>


See accompanying notes.










                                        5

<PAGE>



                                TUMBLEWEED, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                September 7, 2003


1.  BASIS OF PRESENTATION

Restaurant Facilities

As of September 7, 2003, the Company owned, franchised or licensed 56 Tumbleweed
restaurants.  The Company owned and operated 31 restaurants in Kentucky, Indiana
and Ohio.  There were 21 franchised  restaurants  located in Indiana,  Illinois,
Kentucky and Wisconsin and four licensed  restaurants located outside the United
States in  Germany,  Jordan,  Egypt and Turkey.  The  following  table  reflects
changes in the  number of  Company-owned,  franchise  and  licensed  restaurants
during the thirty-six weeks ended September 7, 2003.


Company-owned restaurants:
     In operation, beginning of period                31
     Restaurants opened                                0
     Restaurants closed                                0
                                                --------
     In operation, end of period                      31

Franchise and licensed restaurants:
     In operation, beginning of period                25
     Restaurants opened                                2
     Restaurants closed                               (2)
                                                --------
     In operation, end of period                      25
                                                --------
         System Total                                 56
                                                ========

Interim Financial Reporting

The  accompanying  consolidated  financial  statements have been prepared by the
Company without audit,  with the exception of the December 29, 2002 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
accounting  principles  generally  accepted  in the United  States  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 29, 2002.

In the opinion of  management,  the  unaudited  interim  consolidated  financial
statements  contained in this report  reflect all  adjustments,  consisting of a
change  in  accounting  principle  and  normal  recurring  accruals,  which  are
necessary for a fair presentation.  The results of operations for the thirty-six
weeks and twelve weeks ended September 7, 2003 are not necessarily indicative of
the results that may be expected for the fiscal year ended December 28, 2003.


Recently Issued Accounting Standards

In April 2002, the FASB issued SFAS No. 145  "Rescission of FASB  Statements No.
4,44, and 64,  Amendment of FASB  Statement No. 13, and Technical  Corrections,"
which is effective for the Company in 2003.  SFAS No. 145 eliminates SFAS No. 4,
which required all gains (losses) from  extinguishment  of debt to be classified
as an  extraordinary  item,  net of related income tax effect,  and thus,  gains
(losses) from extinguishment of debt should be classified as extraordinary items
only if they meet the  criteria  in APB Opinion No. 30. SFAS No. 145 amends SFAS
No. 13 to  eliminate  an  inconsistency  between  the  required  accounting  for
sale-leaseback  transactions  and the  required  accounting  for  certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions.  Additionally, SFAS No.145 rescinds SFAS No. 44 and 64 because the
statements are no longer applicable.  Tumbleweed will adopt SFAS No. 145 in 2003
which will result in  reclassifying  its loss on unamortized  loan costs,  which
occured  during the fourth  quarter of  2002,from  an  extraordinary  item to an
operating item in the  Consolidated  Statement of Operations for the fiscal year
ended December 29, 2002.

                                        6

<PAGE>



1.  BASIS OF PRESENTATION (continued)

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable Interest Entities,  an interpretation of ARB No. 51" ("FIN 46"). FIN 46
addresses the consolidation of entities whose equity holders have either (a) not
provided  sufficient  equity at risk to allow  the  entity  to  finance  its own
activities  or (b) do  not  possess  certain  characteristics  of a  controlling
financial interest.  FIN 46 requires the consolidation of these entities,  known
as  variable  interest  entities  ("VIEs"),  by the primary  beneficiary  of the
entity.  The primary  beneficiary  is the entity,  if any,  that is subject to a
majority  of the risk of loss from the VIE's  activities,  entitled to receive a
majority of the VIE's residual returns,  or both. FIN 46 applies  immediately to
variable  interests in VIEs  created or obtained  after  January 31,  2003.  For
variable  interests  in a VIE  created  before  February  1,  2003,  FIN  46 was
originally  effective no later than the beginning of the first interim or annual
reporting period  beginning after June 15, 2003 (the quarter  beginning June 16,
2003 for the  Company).  However,  on  October  8, 2003,  the FASB  delayed  the
effective date for consolidating  variable  interests created before February 1,
2003 until the end of the period  ending after  December 15, 2003  (December 28,
2003 for the  Company).  The  Company's  management  continues  to evaluate  the
requirements of FIN 46 with respect to the Company's  specific facts,  including
but not limited to certain advertising funds and franchise agreements,  in order
to determine the impact, if any, on its financial statements.

Stock-Based Compensation Costs

The  Company  has a  stock-based  compensation  (stock  option)  plan  which  is
described more fully in the Company's  Form 10-K.  The Company  accounts for the
plan using the  intrinsic  value method of APB Opinion No. 25,  "Accounting  for
Stock Issued to Employees"  ("APB 25").  Because all options  granted under this
plan had an exercise  price equal to the market value of the  underlying  common
stock on the date of grant, no stock-based compensation cost has been recognized
in the consolidated statements of operations.  Had stock-based compensation cost
for the plan been  determined  using the fair value  recognition  provisions  of
Statement of Financial  Accounting  Standards ("SFAS") No. 123,  "Accounting for
Stock-Based  Compensation," the effect on the Company's  consolidated net income
and earnings per share would have been as follows for the  thirty-six  weeks and
twelve weeks ended September 7, 2003 and September 8, 2002:
<TABLE>
<CAPTION>


                                                      Thirty-Six                          Twelve
                                                     Weeks Ended                        Weeks Ended
                                            ------------------------------    -------------------------------
                                             September 7,    September 8,      September 7,     September 8,
                                                 2003            2002              2003             2002
                                            --------------  --------------    ---------------   -------------
<S>                                        <C>             <C>               <C>               <C>
Net income (loss) as reported              $       536,563 $    (1,157,828)  $        133,929  $       41,721
Stock-based compensation cost using fair
   value method, net of related tax effects        356,944         539,502             94,829         158,267
                                            --------------  --------------    ---------------   -------------
Pro forma net income (loss)                $       179,619 $    (1,697,330)  $         39,100  $     (116,546)
                                            ==============  ==============    ===============   =============

Earnings (loss) per share:
   Basic and diluted, as reported          $          0.09 $         (0.19)  $           0.02  $         0.01
   Pro forma basic and diluted                        0.03           (0.29)              0.01           (0.02)
</TABLE>

2. GOODWILL AND INTANGIBLE ASSETS

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 141,  "Business  Combinations," and SFAS No. 142, "Goodwill
and Other  Intangible  Assets."  During the first  quarter of 2002,  the Company
determined  that all  goodwill  as of January 1, 2002  related to two  reporting
units was impaired. The fair value of each unit was determined using appropriate
valuation  techniques.  As a result  of the  transitional  impairment  test,  an
impairment  loss in the amount of  $1,503,773,  net of tax,  was  recorded  as a
cumulative  effect of a change in accounting  principle during the first quarter
of 2002.

During the fourth  quarter of 2002,  the  Company  completed  the annual test of
impairment and determined that there was no impairment of the $174,657  goodwill
acquired during the purchase of the remaining 50% interest in TW-Springhurst nor
the  $1,455,966  in  Tumbleweed   licensing   rights  acquired  from  Tumbleweed
International,   LLC.  See  Notes  7  and  8  for  further  discussion  of  this
transaction.





                                        7

<PAGE>



2. GOODWILL AND INTANGIBLE ASSETS (continued)

The Company acquired Tumbleweed International, LLC (see Note 8) during the first
quarter of 2002, which resulted in the acquisition of an intangible asset in the
amount of $1,525,966  and is included in the corporate  segment.  The intangible
asset  consists of  $1,455,966  in  international  licensing  rights,  which are
indefinitely  lived assets not subject to  amortization  under SFAS No. 142, and
$70,000  of  existing  franchise  contracts,  which are  definite  lived  assets
amortized over the 45 year contract  period.  During the first three quarters of
2003, the Company recorded amortization expense totaling $1,077 for the definite
lived intangible.  The amortization expense for each of the next five years will
approximate $1,555 per year.

3.   ACCRUED LIABILITIES

Accrued liabilities consist of:
<TABLE>
<CAPTION>


                                                               September 7,        December 29,
                                                                   2003                2002
                                                              ---------------     --------------

<S>                                                          <C>                 <C>
Accrued payroll and related taxes                            $      1,080,626    $       979,082
Accrued taxes, other than payroll                                   1,022,499            609,900
Gift card and certificate liability                                   233,193            524,870
Reserve for loss on guarantees of indebtedness                         44,034             74,573
Reserve for store closing costs                                       208,449            290,990
Other                                                                  41,784            471,609
                                                              ---------------     --------------
                                                             $      2,630,585    $     2,951,024
                                                              ===============     ==============
</TABLE>

4.   LONG-TERM DEBT

Long-term debt consists of:
<TABLE>
<CAPTION>


                                                               September 7,        December 29,
                                                                   2003                2002
                                                              ---------------     ---------------
Secured mortgage payable, bearing interest at LIBOR plus
4.20% (5.3% at September 7, 2003), payable in monthly
<S>                                                          <C>                 <C>
installments through January 1, 2018                         $      7,157,938    $              -

Secured mortgage payable, bearing interest at 8.52%, payable
in monthly installments through January 1, 2018                     6,961,671                   -

Secured mortgage payable, bearing interest at 8.32%, payable
in monthly installments through January 1, 2013                     1,673,264                   -

Secured mortgage payable, bearing interest at LIBOR plus
4.20% (5.3% at September 7, 2003), payable in monthly
installments through January 1, 2013                                1,659,764                   -

Secured $1,300,000 note payable, bearing interest at prime
rate plus 1/2% (4.5% at September 7, 2003), due February 1,
2005                                                                  322,878                   -

Secured $5,960,000 mortgage revolving line of credit note,
bearing interest at prime rate plus .25%, due December 31,
2003                                                                        -           5,801,148

Secured mortgage note payable, bearing interest at
commercial paper rate plus 2.65%, due April 1, 2003                         -           2,130,342

</TABLE>

                              (Continued next page)

                                       8
<PAGE>


4.   LONG-TERM DEBT (continued)
<TABLE>
<CAPTION>


                                                               September 7,        December 29,
                                                                   2003                2002
                                                              ---------------     ---------------

Secured mortgage payable, bearing interest at 7.5%,
payable in monthly installments through January 22, 2007
<S>                                                          <C>                 <C>
with a lump sum payment due February 22, 2002                $              -    $      1,395,253

Secured mortgage note payable, bearing interest at prime
rate plus 1%, payable in monthly installments through
October 1, 2017                                                             -             972,916

Secured mortgage note payable, bearing interest at 8.75%,
payable in monthly installments through February 15, 2008                   -             838,428


Secured $875,000 mortgage revolving line of credit note,
bearing interest at prime rate plus 2.0%, due April 1, 2003                 -             874,868

Secured mortgage note payable, bearing interest at prime
rate, payable in monthly installments through March 1,
2006                                                                        -             570,604

Secured mortgage note payable, bearing interest at prime
rate plus  1.25%, payable in monthly installments through
November 27, 2016                                                           -             521,875

Secured mortgage note payable, bearing interest at
10.52%, payable in monthly installments through August                      -             319,373
18, 2005

Unsecured note payable bearing interest at 7.5%, due
February 22, 2007                                                           -             282,113

Other installment notes payable                                             -             288,703
                                                              ---------------     ---------------

                                                                   17,775,515          13,995,623
Less current maturities                                               880,703             744,540
                                                              ---------------     ---------------
Long-term debt                                               $     16,894,812    $     13,251,083
                                                              ===============     ===============
</TABLE>

Based on the borrowing  rates  currently  available to the Company for mortgages
with  similar  terms and  average  maturities,  the fair value of long term debt
approximates carrying value.

On December 31, 2002, the Company  completed an $18.0 million  financing package
with  GE  Capital   Franchise   Finance   Corporation.   The  financing  package
consolidated all of the Company's  outstanding debt and equipment capital leases
and provided approximately $2.9 million for the remodel and expansion of Company
restaurants.  The debt bears  interest at both fixed rates ranging from 8.32% to
8.52%  ($8,872,000)  and a variable rate of LIBOR plus 4.20%  ($9,128,000)  with
terms of 10 to 15 years.  The debt is secured by fifteen  fee simple  properties
and  substantially  all of the  equipment  owned by the Company  with a net book
value of  approximately  $22,500,000  at  September  7, 2003.  The Company is in
compliance with various  financial  covenants at the end of the third quarter of
2003 and  management  expects to be in  compliance  with the  various  financial
covenants throughout 2003.

On August 4, 2003, the Company obtained construction  financing in the amount of
$1,300,000.  The note  bears  interest  at the  prime  rate plus 1/2% and is due
February 1, 2005. At September 7, 2003, the note had a balance of $322,878.  The
proceeds of the loan along with cash reserves and an equipment  operating  lease
will be used to fund the estimated new restaurant facility  construction cost of
$2,600,000.  The restaurant is located in Dublin, Ohio and is currently expected
to open in the fourth quarter of 2003.  Upon its maturity,  the Company plans to
replace the construction loan with permanent financing.




                                        9

<PAGE>



5.  EARNINGS PER SHARE

The following is a  reconciliation  of the Company's basic and diluted  earnings
(loss) per share data for the thirty-six  weeks and twelve weeks ended September
7, 2003 and September 8, 2002 in accordance with SFAS 128, "Earnings per Share."
<TABLE>
<CAPTION>


                                                     Thirty-Six        Thirty-Six     Twelve Weeks      Twelve Weeks
                                                     Weeks Ended      Weeks Ended         Ended             Ended
                                                    September 7,      September 8,    September 7,      September 8,
                                                        2003              2002            2003              2002
                                                   ---------------   --------------  ---------------   ---------------
Numerator:
    Income before cumulative effect of a
<S>                                               <C>               <C>             <C>               <C>
       change in accounting principle             $        536,563  $       345,945 $        133,929  $         41,721
    Cumulative effect of a change in accounting
       principle, net of tax                                     -       (1,503,773)               -                 -
                                                   ---------------   --------------  ---------------   ---------------
    Net income (loss)                             $        536,563  $    (1,157,828)$        133,929  $         41,721
                                                   ===============   ==============  ===============   ===============

Denominator:
    Weighted average shares outstanding - basic          5,916,153        5,916,153        5,916,153         5,916,153
    Effect of dilutive securities:
        Director and employee stock options                  8,986            7,324            9,266             8,052
                                                   ---------------   --------------  ---------------   ---------------
    Denominator for diluted earnings per share
    - adjusted weighted average and assumed
    conversions                                          5,925,139        5,923,477        5,925,419         5,924,205
                                                   ===============   ==============  ===============   ===============
</TABLE>


6.   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  and
non-affiliated  restaurant concepts. 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  thirty-six  weeks ended  September  7, 2003 is as
follows:
<TABLE>
<CAPTION>


                                                       Restaurant       Commissary        Corporate         Totals
                                                      -------------    ------------     -------------    ------------
Revenues from external
<S>                                                 <C>              <C>               <C>              <C>
   customers                                        $    38,788,974  $    1,556,226    $    1,259,099   $  41,604,299
Intersegment revenues                                             -       1,742,694                 -       1,742,694
General and
   administrative expenses                                        -               -         3,054,193       3,054,193
Advertising expenses                                              -               -         1,314,925       1,314,925
Depreciation and amortization                             1,164,213          68,645           196,189       1,429,047
Net interest expense                                              -         102,537           830,913         933,450
Income (loss) before income taxes                         4,674,318         174,037        (3,890,206 )       958,149

</TABLE>







                                       10

<PAGE>



6.   SEGMENT INFORMATION (continued)

Segment  information  for the  thirty-six  weeks ended  September  8, 2002 is as
follows:
<TABLE>
<CAPTION>


                                                       Restaurant       Commissary        Corporate         Totals
                                                      -------------    ------------     -------------    -------------
Revenues from external
<S>                                                 <C>              <C>               <C>              <C>
   customers                                        $    38,842,539  $    1,184,254    $    1,276,552   $  41,303,345
Intersegment revenues                                             -       1,776,380                 -       1,776,380
General and
   administrative expenses                                        -               -         2,749,542       2,749,542
Advertising expenses                                              -               -         1,308,856       1,308,856
Depreciation and
   amortization                                           1,110,979          56,493           189,161       1,356,633
Net interest expense                                              -         105,876           594,084         699,960
Income (loss) before income taxes and
   cumulative effect of a change in accounting
   principle                                              3,997,506          61,287        (3,235,108 )       823,676

Segment information for the twelve weeks ended September 7, 2003 is as follows:


                                                       Restaurant       Commissary        Corporate         Totals
                                                      -------------    ------------     -------------    -------------
Revenues from external
   customers                                        $    12,839,727  $      504,731    $      413,333   $  13,757,791
Intersegment revenues                                             -         571,607                 -         571,607
General and
   administrative expenses                                        -               -           932,294         932,294
Advertising expenses                                              -               -           434,065         434,065
Depreciation and amortization                               396,293          22,644            64,213         483,150
Net interest expense                                              -          34,179           268,381         302,560
Income (loss) before income taxes                         1,377,339          71,661        (1,209,841 )       239,159

Segment information for the twelve weeks ended September 8, 2002 is as follows:


                                                       Restaurant       Commissary        Corporate         Totals
                                                      -------------    ------------     -------------    -------------
Revenues from external
   customers                                        $    12,282,972  $      387,775    $      440,105   $  13,110,852
Intersegment revenues                                             -         581,661                 -         581,661
General and
   administrative expenses                                        -               -           793,308         793,308
Advertising expenses                                              -               -           417,499         417,499
Depreciation and
   amortization                                             364,993          18,831            62,948         446,772
Net interest expense                                              -          35,292           200,196         235,488
Income (loss) before income taxes and
   cumulative effect of a change in accounting
   principle                                              1,181,394          19,694          (920,669 )       280,419
</TABLE>

7.  INVESTMENT IN TW-SPRINGHURST

During the year ended December 31, 2000, the Company made a $200,000  investment
in  TW-Springhurst,  LLC  ("TW-  Springhurst"),  the  owner  and  operator  of a
Tumbleweed  restaurant in Louisville,  Kentucky.  Through December 31, 2001, the
Company  had a 50%  interest  with  the  remaining  50%  held by  TW-Springhurst
Investors,   LLC.  A  current  and  former   director   of  the  Company   owned
TW-Springhurst  Investors,  LLC. On January 1, 2002,  the Company  acquired  the
remaining  50% interest  held by  TW-Springhurst  Investors  for  $267,000.  The
Company  also assumed  TW-Springhurst,  LLC's note payable to a bank which had a
balance  of  approximately  $161,000  on the date of  purchase.  An  independent
business   valuation   appraisal  was  used  to  assist  Company  management  in
determining the purchase price.



                                       11

<PAGE>



7.  INVESTMENT IN TW-SPRINGHURST (continued)

The purchase price has been allocated as follows:


Assets and liabilities acquired:
  Inventory                         $       55,674
  Property and equipment                   317,601
  Deposits                                   1,200
  Other                                      5,677
  Note payable                           (161,394)
                                     -------------
                                           218,758
Investment in TW-Springhurst             (126,415)
Goodwill                                   174,657
                                     -------------
                                    $      267,000
                                     =============

8.  ACQUISITION OF INTERNATIONAL

On January 1, 2002, the Company  purchased the ownership  interest in Tumbleweed
International,  LLC  ("International")  for $1.5 million  from  TW-International
Investors,  Inc. and Chi-Chi's  International  Operations,  Inc. ("CCIO").  CCIO
owned 40% of  International.  The President and Chief  Executive  Officer of the
Company is the sole shareholder of CCIO. Members of TW-International  Investors,
Inc. include three current  directors of the Company.  The acquisition gives the
Company  direct  control  and  benefit  of the  international  licensing  of the
Tumbleweed concept.  In connection with the acquisition,  the Company assumed an
existing $1.4 million bank loan of TW-International  Investors,  Inc. and issued
76,923  shares of its common  stock to CCIO.  The  Company  has  entered  into a
commission  agreement  with CCIO in  connection  with the sale of  international
regional licenses by International.

The  transaction  was  accounted  for as a purchase and the  purchase  price was
allocated  to the  intangible  assets  acquired - the  Tumbleweed  international
licensing  rights  and  existing  franchise  contracts.  The  allocation  of the
purchase price is summarized as follows.


Note payable                        $    1,425,968
Common stock                                   769
Paid-in capital                             99,229
                                     -------------
                                    $    1,525,966
                                     =============
Intangible assets:
   Tumbleweed licensing rights      $    1,455,966
   Contracts in place                       70,000
                                     -------------
                                    $    1,525,966
                                     =============

9.  INCOME TAXES

Income taxes on the Company's  income before income taxes and cumulative  effect
of a change in accounting  principle for the thirty-six weeks ended September 7,
2003 and September 8, 2002 have been provided for at an estimated  effective tax
rate of 44% and 58%,  respectively.  The  effective  tax rate  differs  from the
statutory  federal tax rate of 34%  substantially due to the impact of permanent
differences.

10.  INVOLUNTARY CONVERSION OF NON-MONETARY ASSETS

As a result of a fire on July 11, 2002 at a Company-owned restaurant in Ohio, an
involuntary conversion of a non- monetary asset occurred.  During the thirty-six
weeks ended  September 7, 2003 and  September 8, 2002,  the Company  recorded as
other  revenues  approximately  $34,000 and $70,000,  respectively,  of business
interruption income which was reimbursed by the Company's insurance.







                                       12

<PAGE>



11.  COMMITMENTS AND CONTINGENCIES

At September 7, 2003, the Company had a commitment of approximately $860,000 for
the completion of the  construction of one restaurant  facility.  The commitment
will be funded by proceeds from the $1,300,000  note payable which had a balance
of $322,878 at September 7, 2003 (see Note 4).

The Company  guaranteed  certain  equipment leases with a bank for TW-Tennessee,
LLC, a former franchisee (TW- Tennessee) of the Company in which the Company and
David M. Roth, a Director of the Company, were formerly members. The Company has
agreed to assume  and pay one of the  equipment  leases  totaling  approximately
$125,000  and remains  contingently  liable on two other  equipment  leases that
currently have a remaining  balance of  approximately  $17,000 which the Company
believes will be assumed and paid by other guarantors.  In the fourth quarter of
2001, the Company reserved  $125,000 to cover its portion of the equipment lease
it  assumed.  As of  September  7, 2003,  the reserve  balance is  approximately
$44,000 which  management  believes is sufficient to satisfy the remaining lease
obligation.  The  Company's  management  believes it will not incur  significant
additional losses in connection with this matter.

On December  16,  2002,  the  Company  filed a Complaint  in  Jefferson  County,
Kentucky  Circuit  Court  against  American  Federal,  Inc.  ("AFI")  seeking  a
declaratory  judgment  that the Company has no  contractual  obligation to pay a
commission to AFI, in  connection  with a  Conditional  Commitment  entered into
between   AFI  and  the   Company   and  is  seeking   damages   for  fraud  and
misrepresentation  when AFI provided a commitment for a $20.1 million  financing
which the Company  believes AFI never intended to fund as they had  represented.
In response,  AFI filed suit in the United States District Court for the Eastern
District of Missouri seeking payment of approximately  $500,000 which includes a
$405,000 commitment fee plus additional  charges,  fees and costs related to the
Conditional  Commitment,  as well as  damages  for  breach of  contract,  unjust
enrichment and  misrepresentation/fraud.  This matter is in the early  discovery
stage.  Management  believes that AFI's claims are without merit,  but it is too
early to predict an outcome.  The Company intends to vigorously defend itself in
connection  with this matter.  As of September 7, 2003, the Company has not made
an accrual in the accompanying consolidated financial statements for a potential
liability in connection with this matter.

We are also subject to claims and legal  actions in the  ordinary  course of our
business.  Certain of these claims and actions may involve related  parties.  We
believe  that all such  claims  and  actions  are either  adequately  covered by
insurance  or would not have a  material  adverse  effect on us if  decided in a
manner unfavorable to us.

12.  OTHER EVENTS

On June 16,  2003,  the  Company's  Board of Directors  approved a  one-for-5000
reverse stock split to be immediately  followed by a 5000-for-one  forward stock
split,  subject to stockholder  approval.  Persons otherwise entitled to receive
less than one share in the reverse  stock split would receive cash in the amount
of $1.10 per share. The Board preliminarily  approved the transaction on May 19,
2003,  subject to receipt of a fairness  opinion from FTN  Financial  Securities
Corp.  ("FTN"),  financial  advisor to the special  committee of the Board,  and
stockholder  approval.  On June 16, 2003,  the Board  approved  the  transaction
following the Committee's  receipt of a fairness  opinion with regard to the per
share  cash  amount  to  be  paid  in  the  reverse   split  from  FTN  and  the
recommendation  of the  special  committee.  The  transaction  is subject to the
approval  of the  stockholders.  Stockholders  will  be  asked  to  approve  the
transaction at the annual meeting of stockholders  currently expected to be held
in the fourth quarter of 2003. The transaction, if approved by the stockholders,
would  reduce the number of  stockholders  below the level at which the  Company
would be required to continue to file reports  with the SEC,  and the  Company's
stock would no longer be traded on the Nasdaq  Small Cap Market.  Any trading of
the Company's  common stock after the transaction  would only occur in the "pink
sheets"  or  in  privately  negotiated  sales.  Company's  management  currently
estimates that the total funds required to pay the consideration to stockholders
entitled to receive cash for their shares and to pay fees and expenses  relating
to the transaction  will be  approximately  $1.0 million.  Cash reserves will be
used to fund the transaction.  If the above described  transaction is completed,
it is  expected  that the  remaining  stockholders  will be asked to  approve  a
conversion  of the Company  from a Delaware  corporation  to a Delaware  limited
liability company.  The conversion would be accomplished through the transfer of
the  Company's  assets  and  liabilities  to  a  newly-formed  Delaware  limited
liability  company and  liquidation  of the existing  Delaware  corporation.  No
additional equity  contributions to the Company or the limited liability company
would be required.






                                       13

<PAGE>



13.  SUBSEQUENT EVENTS

Subsequent to September 7, 2003, the Company  purchased  approximately 1.5 acres
of land in Louisville, Kentucky for approximately $824,000. The Company plans to
construct a 5,100 square foot Tumbleweed restaurant on this property.  The total
project cost,  including preopening costs, is currently estimated at $2,500,000.
The  Company  currently  anticipates  using sale  leaseback  financing  and cash
reserves to fund the project cost.





















































                                       14

<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  September  7,  2003,  we owned,  franchised  or  licensed  56  Tumbleweed
restaurants.  The Company owned and operated 31 restaurants in Kentucky, Indiana
and Ohio. There were 21 franchised  restaurants in Indiana,  Illinois,  Kentucky
and Wisconsin and four licensed restaurants located outside the United States in
Germany, Jordan, Egypt and Turkey.

During  the  first  quarter  of 2002,  the  Company  closed  four  Company-owned
restaurant  locations.  The  restaurants  were located in Cincinnati,  Ohio (2),
Columbus,  Ohio (1), and Evansville,  Indiana (1). The restaurant  closings were
part  of a  strategic  management  decision  to  eliminate  lower  sales  volume
restaurants  that were  unprofitable  in 2001 and to focus its  energies  on the
continued  improvement of per-store  average sales volumes.  On January 1, 2002,
the Company  purchased from its joint venture partner the remaining 50% interest
in a restaurant  location.  See Note 7 to the consolidated  financial statements
for a further discussion of this transaction.

During  the second  quarter  of 2002,  the  Company  sold one of its  restaurant
locations to a  franchisee.  This was in accordance  with the Company's  plan it
established  in the fourth  quarter of 2001.  In connection  with the plan,  the
Company  had  taken a charge  to  earnings  in  accordance  with  SFAS No.  121,
"Impairment  of  Long-Lived  Assets." The personal  property had no value on the
books of the Company as a result of this special charge.  The franchisee assumed
the building lease and purchased the inventory for $11,000.

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
























                                       15

<PAGE>



RESULTS OF OPERATIONS

The table  below sets forth the  percentage  relationship  to total  revenues of
certain income statement data, except where noted, for the periods indicated.
<TABLE>
<CAPTION>


                                                              Thirty-Six                       Twelve Weeks
                                                              Weeks Ended                         Ended
                                                    -------------------------------   ------------------------------
                                                     September 7,     September 8,    September 7,     September 8,
                                                         2003             2002            2003             2002
                                                    --------------    -------------   -------------    -------------
Revenues:
<S>                                                           <C>              <C>             <C>              <C>
   Restaurant sales                                           93.2%            94.0%           93.3%            93.7%
   Commissary sales                                            3.7              2.9             3.7              3.0
   Franchise fees and royalties                                2.4              2.0             2.5              2.3
   Other revenues                                              0.7              1.1             0.5              1.0
                                                    --------------    -------------   -------------    -------------
     Total revenues                                          100.0            100.0           100.0            100.0
Operating expenses:
   Restaurant cost of sales (1)                               29.3             30.2            29.7             30.0
   Commissary cost of sales (2)                               84.4             89.3            81.3             89.3
   Operating expenses (1)                                     54.6             55.5            55.4             56.3
   Selling, general and administrative expenses               10.5              9.8             9.9              9.2
   Preopening expenses                                         0.2                -             0.3                -
   Depreciation and amortization                               3.4              3.3             3.5              3.4
                                                    --------------    -------------   -------------    -------------
     Total operating expenses                                 95.5             96.3            96.1             96.1
                                                    --------------    -------------   -------------    -------------
     Income from operations                                    4.5              3.7             3.9              3.9
Interest expense, net                                         (2.2)            (1.7)           (2.2)            (1.8)
                                                    --------------    -------------   -------------    -------------
Income before income taxes and cumulative
    effect of a change in accounting principle                 2.3              2.0             1.7              2.1
Provision for income taxes - current
   and deferred                                                1.0              1.2             0.7              1.8
                                                    --------------    -------------   -------------    -------------
Income before cumulative effect of a
   change in accounting principle                              1.3              0.8             1.0              0.3
Cumulative effect of a change in accounting
   principle, net of tax                                         -             (3.6)              -                -
                                                    --------------    -------------   -------------    -------------
Net income (loss)                                              1.3%            (2.8)%           1.0 %            0.3%
                                                    ==============    =============   =============    =============

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



COMPARISON OF THE FIRST THREE QUARTERS OF 2003 AND 2002

Total  revenues  increased  by $300,954 or 0.7% for the first three  quarters of
2003 compared to the same period in 2002 primarily as a result of the following:

   Restaurant sales decreased by $53,565 or 0.1% for the first three quarters of
   2003 compared to the same period in 2002. The decrease in restaurant sales is
   primarily a result of the closing of four  Company-owned  restaurants  during
   the  first  quarter  of 2002,  the  temporary  closing  of one  Company-owned
   restaurant  in  July  2002  as  a  result  of  a  fire  (restaurant  reopened
   mid-February  2003),  and  the  sale  of one  Company-owned  restaurant  to a
   franchisee  during the second  quarter of 2002.  The  decrease in  restaurant
   sales is  partially  offset by a 0.7%  increase  in same store  sales for the
   first three quarters of 2003 and a 2.0% menu price  increase in  mid-February
   2003.

   Commissary  sales to franchised and licensed  restaurants and  non-affiliated
   restaurant  concepts  increased  by  $371,972  or 31.4% for the  first  three
   quarters  of 2003  compared  to the same  period  in 2002.  The  increase  in
   commissary   sales  is  primarily  a  result  of  an  increase  in  sales  to
   non-affiliated  restaurant  concepts  and  the  addition  of  two  franchised
   restaurants during 2003.

   Franchise  fees and  royalties  increased  by $135,531 or 16.1% for the first
   three quarters of 2003 compared to the same period in 2002.  Franchise income
   increased $70,000 as a result of having two franchise  restaurant openings in
   the first three quarters of 2003 compared to no franchise restaurant openings
   during the first three quarters of 2002. Royalty

                                       16

<PAGE>



   income  increased  $65,531  primarily  as  a  result  of  the  two  franchise
   restaurant  openings  during the first three  quarters of 2003 and  increased
   royalties received from international licensees.

   Other revenues decreased by $152,984 or 35.3% for the first three quarters of
   2003 compared to the same period in 2002 partially as a result of a temporary
   decrease in purchasing  rebates.  The decrease in other  revenues can also be
   attributed to recognizing  as income,  in 2002,  $55,000 of development  fees
   which were  forfeited by a franchisee.  There was no similar  income in 2003.
   Additionally,  the  decrease  in other  income is due to the fact that  other
   income for the 2002 period includes $70,000 of insurance  proceeds  (business
   interruption  income)  compared to $34,000 of insurance  proceeds in the 2003
   period.  The insurance  proceeds were a result of a fire which  occurred at a
   Company-owned restaurant in July 2002.

Restaurant  cost of sales  decreased  by  $369,642  or 3.1% for the first  three
quarters of 2003 compared to the same period in 2002. The decrease in restaurant
cost of sales  is  primarily  a  result  of the  closing  of four  Company-owned
restaurants  during the first  quarter  of 2002,  the  temporary  closing of one
Company-owned restaurant in July 2002 as a result of a fire (restaurant reopened
mid-February 2003), and the sale of one Company-owned restaurant to a franchisee
during  the second  quarter of 2002.  Restaurant  cost of sales  decreased  as a
percentage of restaurant  sales by 0.9% to 29.3% for the first three quarters of
2003 compared to 30.2% during the same period in 2002. The 0.9% decrease in cost
of sales as a percentage of restaurant sales is primarily the result of improved
operating  efficiencies and lower product costs at the restaurant level combined
with a 2.0% menu price increase in mid-February 2003.

Commissary  cost of sales  increased  $255,700  or  24.2%  for the  first  three
quarters of 2003 compared to the same period in 2002. The increase in commissary
cost of sales is due  primarily  to the increase in sales.  As a  percentage  of
commissary  sales,  commissary  cost of sales decreased 4.9% for the first three
quarters of 2003 compared to the same period in 2002 primarily as a result of an
increase in sales to non-affiliated restaurant concepts.

Restaurant  operating expenses decreased by $402,047 or 1.9% for the first three
quarters of 2003 compared to the same period in 2002.  The decrease in operating
expenses is primarily a result of the closing of four Company-owned  restaurants
during the first  quarter of 2002,  the temporary  closing of one  Company-owned
restaurant in July 2002 as a result of a fire (restaurant reopened  mid-February
2003), and the sale of one  Company-owned  restaurant to a franchisee during the
second  quarter  of  2002.  Operating  expenses  decreased  as a  percentage  of
restaurant  sales by 0.9% to 54.6% for the  first  three  quarters  of 2003 from
55.5% for the same  period in 2002  primarily  as a result of  decreased  hourly
labor  costs  and  administrative  costs  and a  2.0%  menu  price  increase  in
mid-February 2003.

Selling,  general and administrative  expenses increased by $310,720 or 7.7% for
the first  three  quarters  of 2003  compared  to the same  period in 2002.  The
increase in selling,  general and administrative  expenses is primarily a result
of training costs incurred as a result of two franchise  restaurant  openings in
the first three  quarters of 2003 (no similar  expense was incurred in the first
three   quarters  of  2002),   increased   management   development   costs  for
Company-owned restaurants and increased incentive based compensation costs. As a
percentage to total revenues,  selling, general and administrative expenses were
10.5% and 9.8% for the first three quarters of 2003 and 2002, respectively.

Preopening  expenses  were $65,846 for the first three  quarters of 2003.  These
expenses  represent  the  portion of  preopening  costs  which were  incurred in
connection with the 2003 reopening of the restaurant which had been destroyed by
fire in July 2002 that were not  recoverable  from  insurance and start-up costs
incurred  in  connection  with the opening of two  restaurants.  These costs are
expensed as incurred and will fluctuate  based on the size of the restaurant and
the number of restaurant  locations  which are in the process of being  prepared
for opening.  The Company is currently preparing for restaurant openings in late
2003 and early 2004.

Depreciation and amortization  expense  increased  $72,414 or 5.3% for the first
three quarters of 2003 compared to the same period in 2002 primarily as a result
of capital improvements made to existing Company-owned restaurants.

Net interest expense increased $233,490 or 33.4% for the first three quarters of
2003 compared to the same period in 2002.  The increase in net interest  expense
is primarily a result of the  approximately  $3.2 million of additional debt the
Company incurred in connection with the debt refinancing  which was completed on
December 31, 2002.  See "Liquidity  and Capital  Resources"  section below for a
further discussion of this transaction.





                                       17

<PAGE>



Income taxes on the Company's  income before income taxes and cumulative  effect
of a change in  accounting  principle  for the first three  quarters of 2003 and
2002 have been  provided for at an estimated  effective tax rate of 44% and 58%,
respectively. The effective tax rate differs from the statutory federal tax rate
of 34% substantially due to the impact of permanent differences.

COMPARISON OF THE THIRD QUARTER OF 2003 AND 2002

Total  revenues  increased  by  $646,939  or 4.9% for the third  quarter of 2003
compared to the same period in 2002 primarily as a result of the following:

   Restaurant  sales increased by $556,755 or 4.5% for the third quarter of 2003
   compared to the same period in 2002.  The  increase  in  restaurant  sales is
   primarily  due to the fact  that a  Company-owned  restaurant  which had been
   destroyed  by fire in the third  quarter of 2002 (July) was reopened in early
   2003 (February).  The increase in restaurant sales is also a result of a 1.3%
   increase  in same store  sales for the third  quarter of 2003 and a 2.0% menu
   price increase in mid- February 2003.

   Commissary  sales to franchised and licensed  restaurants and  non-affiliated
   restaurant  concepts  increased by $116,956 or 30.2% for the third quarter of
   2003 compared to the same period in 2002. The increase in commissary sales is
   primarily  a result  of an  increase  in sales to  non-affiliated  restaurant
   concepts and the addition of two franchised restaurants during 2003.

   Franchise fees and royalties increased $41,579 or 13.8% for the third quarter
   of 2003 compared to the same period in 2002. Royalty income increased $41,579
   primarily as a result of two franchise  restaurant  openings during the first
   two quarters of 2003 and  increased  royalties  received  from  international
   licensees. There was no franchise income in either the 2003 or 2002 periods.

   Other  revenues  decreased by $68,351 or 49.2% for the third  quarter of 2003
   compared to the same period in 2002. The decrease in other revenues is due to
   the  fact  that  the 2002  period  includes  $70,000  of  insurance  proceeds
   (business interruption income recorded as other revenue in 2002) which were a
   result of a fire in July  2002 at a  Company-owned  restaurant.  There was no
   similar income in the same period of 2003.

Restaurant  cost of sales increased by $127,848 or 3.5% for the third quarter of
2003  compared to the same period in 2002.  The increase in  restaurant  cost of
sales is primarily  due to the fact that a  Company-owned  restaurant  which had
been destroyed by fire in the third quarter of 2002 (July) was reopened in early
2003 (February).  Restaurant cost of sales decreased as a percentage of sales by
0.3% to 29.7% for the third  quarter of 2003  compared to 30.0%  during the same
period in 2002. The 0.3% decrease in cost of sales as a percentage of restaurant
sales is  primarily  the result of  improved  operating  efficiencies  and lower
product costs at the  restaurant  level combined with a 2.0% menu price increase
in mid- February 2003.

Commissary  cost of sales  increased  $63,922 or 18.4% for the third  quarter of
2003  compared to the same period in 2002.  The increase in  commissary  cost of
sales is due  primarily to the increase in sales.  As a percentage of commissary
sales,  commissary  cost of sales  decreased  8.0% for the third quarter of 2003
compared  to the same  period  in 2002 as a result  of an  increase  in sales to
non-affiliated restaurant concepts.

Restaurant  operating  expenses  increased  by  $200,446  or 2.9% for the  third
quarter  of 2003  compared  to the same  period  in 2002 due to the fact  that a
Company-owned  restaurant  which had been destroyed by fire in the third quarter
of 2002  (July)  was  reopened  in early  2003  (February).  Operating  expenses
decreased as a  percentage  of  restaurant  sales by 0.9% to 55.4% for the third
quarter of 2003 from 56.3% for the same period in 2002  primarily as a result of
decreased  hourly  labor  costs and  administrative  costs and a 2.0% menu price
increase in mid-February 2003.

Selling,  general and administrative expenses increased by $155,552 or 12.8% for
the third quarter of 2003  compared to the same period in 2002.  The increase in
selling,  general and administrative expenses is primarily a result of increased
incentive based compensation costs. As a percentage to total revenues,  selling,
general and administrative  expenses were 9.9% and 9.2% for the third quarter of
2003 and 2002, respectively.

Preopening  expenses  were $36,981 for the third  quarter of 2003.  The expenses
represent  start-up  costs  incurred  in  connection  with  the  opening  of two
restaurants.  These costs are expensed as incurred and will  fluctuate  based on
the size of the restaurant and the number of restaurant  locations  which are in
the process of being prepared for opening. The

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Company is currently  preparing for  restaurant  openings in late 2003 and early
2004.

Depreciation and amortization  expense  increased  $36,378 or 8.1% for the third
quarter of 2003  compared  to the same period in 2002  primarily  as a result of
capital improvements made to existing Company-owned restaurants.

Net interest  expense  increased  $67,072 or 28.5% for the third quarter of 2003
compared to the same period in 2002.  The increase in net  interest  expense for
the third  quarter is  primarily a result of the  approximately  $3.2 million of
additional  debt the Company  incurred in connection  with the debt  refinancing
which was  completed  December 31, 2002.  See below for a further  discussion of
this transaction.

Income taxes on the Company's  income before income taxes and cumulative  effect
of a change in accounting  principle for the third quarter of 2003 and 2002 have
been  provided  for  at  an  estimated  effective  tax  rate  of  44%  and  85%,
respectively. The effective tax rate differs from the statutory federal tax rate
of 34% substantially due to the impact of permanent differences.

LIQUIDITY AND CAPITAL RESOURCES

On December 31, 2002, the Company  completed an $18.0 million  financing package
with GE Capital  Franchise  Finance  Corporation (GE). The loan was divided into
two real  estate  loans  totaling  $14.5  million  secured by fifteen fee simple
properties,  one loan  ($7,122,000  original amount) bearing interest at a fixed
rate of 8.52% for 15 years  and the  other  ($7,378,000  original  amount)  at a
variable  rate of LIBOR plus 4.20% over 15 years.  The Company also entered into
two equipment loan agreements totaling $3.5 million secured by substantially all
the equipment of the Company.  One equipment loan  ($1,750,000  original amount)
bears interest at a fixed rate of 8.32% over 10 years while the other  equipment
loan  ($1,750,000  original amount) has a variable rate of LIBOR plus 4.20% over
10 years. The financing  package  consolidated all of the Company's  outstanding
debt and provides approximately $1.7 million for the remodel,  modernization and
/ or upgrade of the  properties  described in the renovation  agreements  signed
with GE. The Company has until June 30, 2004 to complete the renovations, unless
the  Company  obtains  GE's  written  consent  for an  extension  of such  date.
Additionally,  the  financing  package  provides for $1.2 million to be used for
expansion of Company  restaurants.  The loan imposes restrictions on the Company
with respect to the maintenance of certain financial  covenants,  the incurrence
of  indebtedness,  the sale of assets and capital  expenditures.  The Company is
required to  maintain  two  separate  Fixed  Charge  Coverage  Ratios.  One is a
Corporate  Fixed Charge  Coverage Ratio of 1.25:1 based on results of the entire
company and the second,  an aggregate  Fixed Charge  Coverage  Ratio of at least
1.25:1 on the  properties  used as  collateral  on these loans.  Both ratios are
determined  as of the last day of each fiscal  year with  respect to the twelve-
month  period  of time  immediately  preceding  the date of  determination.  The
Company  must also  maintain a Funded Debt to EBITDA  ratio not to exceed 5.5 to
1.0,  determined as of the last day of each fiscal quarter for the  twelve-month
period  of time  immediately  preceding  the  date of  determination.  With  the
exception of new store  development,  the Company shall not incur debt in excess
of $500,000  per year  without  prior  written  consent of GE. The Company is in
compliance with various  financial  covenants at the end of the third quarter of
2003, and management  expects to be in compliance  with the financial  covenants
throughout 2003.

On August 4, 2003, the Company obtained construction  financing in the amount of
$1,300,000.  The note  bears  interest  at the  prime  rate plus 1/2% and is due
February 1, 2005. At September 7, 2003, the note had a balance of $322,878.  The
proceeds of the loan along with cash reserves and an equipment  operating  lease
will be used to fund the estimated  construction  cost of  $2,600,000.  Upon its
maturity,  the Company  plans to replace the  construction  loan with  permanent
financing.  In negotiating  such  financing,  there can be no assurance that the
Company will be able to obtain financing on terms  satisfactory to the Company's
management.

Our  capital  needs  during  the first  three  quarters  of 2003  arose from the
reconstruction of a restaurant  facility which was damaged by fire in July 2002,
the maintenance and improvement of existing restaurant facilities,  the purchase
of 2.2 acres of land in Dublin,  Ohio and the  commencement of construction of a
restaurant  facility on this site which is anticipated to open during the fourth
quarter of 2003. Our capital needs during the first three quarters of 2002 arose
from the  maintenance  and improvement of existing  restaurant  facilities.  The
source of capital to fund the  reconstruction  was primarily  insurance proceeds
received in 2002 and 2003. The  maintenance and  improvement  expenditures  were
funded by internally  generated cash flow. The 2003  maintenance and improvement
expenditures  were also partially funded by the $1.7 million  generated from the
debt  refinancing,  as discussed  above.  The source of capital to fund the land
purchase  and  restaurant  facility  construction  costs  was the  $1.2  million
generated  from  the  $18.0  million  financing  package  and the  $1.3  million
construction loan. (See discussion above regarding both loans).


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<PAGE>



The table below provides certain  information  regarding our sources and uses of
cash for the periods presented.


                                            Thirty-Six          Thirty-Six
                                           Weeks Ended          Weeks Ended
                                           September 7,        September 8,
                                               2003                2002
                                         ----------------    -----------------
Net cash provided by operations         $       2,398,235   $        1,327,526
Purchases of property and equipment            (2,577,038)            (630,905)
Business acquisition                                    -             (150,000)
Net borrowings (payments) on long-term
   debt and capital lease obligations           3,117,068           (1,032,443)

The Company's  largest use of funds during the first three  quarters of 2003 was
for the  reconstruction  of a restaurant  facility  which was damaged by fire in
July 2002  (restaurant  reopened in  mid-February  2003),  payments of long-term
debt,  maintenance  and  improvement  of  existing  restaurant  facilities,  the
purchase of land in Dublin,  Ohio, and restaurant  facility  construction costs.
The Company's  largest  sources of funds during the first three quarters of 2003
were  proceeds  from  the  debt  refinancing,  cash  reserves,  cash  flow  from
operations,  and  insurance  proceeds for the property and  equipment  which was
destroyed  in July 2002.  The  Company's  largest use of funds  during the first
three  quarters of 2002 was for the payment of long-term  debt and capital lease
obligations   and  for  the   acquisition  of  the  remaining  50%  interest  in
TW-Springhurst.  The Company's  largest  sources of funds during the first three
quarters of 2002 were proceeds from the Company's two mortgage  revolving  lines
of credit and cash flow from operations.  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.

In the next 12 months,  the Company  expects to construct one to two  additional
restaurant  facilities in addition to the restaurant  facility  currently  under
construction.  Our ability to expand our number of 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.

In the next 12 months,  the Company expects the demand on future liquidity to be
principally from the ongoing  maintenance and improvement of existing restaurant
facilities  and  from  the  construction  of one to  two  additional  restaurant
facilities in addition to the restaurant  facility currently under construction.
At September 7, 2003, the Company had a commitment of approximately $860,000 for
the completion of the  construction of one restaurant  facility.  The commitment
will be funded by proceeds from the $1,300,000  note payable which had a balance
of $322,878 at  September  7, 2003.  In  addition  to the $1.2  million  reserve
established  as a result of the GE financing  package,  the Company will utilize
mortgage, sale/leaseback and/or landlord financing, as well as equipment leasing
and financing, for a portion of the development costs of restaurants the Company
plans to open in the next 12  months.  The  remaining  costs  will be  funded by
available cash reserves and cash provided from operations.  Management  believes
such sources will be  sufficient to fund the  Company's  expansion  plans in the
next 12 months. Should the Company's actual results of operations fall short of,
or the Company's  rate of expansion  significantly  exceed plans,  or should the
Company's costs of capital  expenditures  exceed  expectations,  the Company may
need to seek additional  financing in the future. In negotiating such financing,
there can be no  assurance  that the  Company  will be able to raise  additional
capital on terms satisfactory to the Company's management.

On June 16,  2003,  the  Company's  Board of Directors  approved a  one-for-5000
reverse stock split to be immediately  followed by a 5000-for-one  forward stock
split,  subject to stockholder  approval.  Persons otherwise entitled to receive
less than one share in the reverse  stock split would receive cash in the amount
of $1.10 per share. The Board preliminarily  approved the transaction on May 19,
2003, subject to receipt of a fairness opinion from FTN Financial

                                       20

<PAGE>



Securities  Corp.  ("FTN"),  financial  advisor to the special  committee of the
Board,  and  stockholder  approval.  On June 16,  2003,  the Board  approved the
transaction  following the Committee's receipt of a fairness opinion with regard
to the per share cash  amount to be paid in the  reverse  split from FTN and the
recommendation  of the  special  committee.  The  transaction  is subject to the
approval  of the  stockholders.  Stockholders  will  be  asked  to  approve  the
transaction at the annual meeting of stockholders  currently expected to be held
in the fourth quarter of 2003. The transaction, if approved by the stockholders,
would  reduce the number of  stockholders  below the level at which the  Company
would be required to continue to file reports  with the SEC,  and the  Company's
stock would no longer be traded on the Nasdaq  Small Cap Market.  Any trading of
the Company's  common stock after the transaction  would only occur in the "pink
sheets"  or  in  privately  negotiated  sales.  Company's  management  currently
estimates that the total funds required to pay the consideration to stockholders
entitled to receive cash for their shares and to pay fees and expenses  relating
to the transaction  will be  approximately  $1.0 million.  Cash reserves will be
used to fund the transaction.  If the above described  transaction is completed,
it is  expected  that the  remaining  stockholders  will be asked to  approve  a
conversion  of the Company  from a Delaware  corporation  to a Delaware  limited
liability company.  The conversion would be accomplished through the transfer of
the  Company's  assets  and  liabilities  to  a  newly-formed  Delaware  limited
liability  company and  liquidation  of the existing  Delaware  corporation.  No
additional equity  contributions to the Company or the limited liability company
would be required.

Subsequent to September 7, 2003, the Company  purchased  approximately 1.5 acres
of land in Louisville, Kentucky for approximately $824,000. The Company plans to
construct a 5,100 square foot Tumbleweed restaurant on this property.  The total
project cost,  including preopening costs, is currently estimated at $2,500,000.
The  Company  currently  anticipates  using sale  leaseback  financing  and cash
reserves to fund the project cost. In negotiating  such financing,  there can be
no  assurance  that  the  Company  will be able to  obtain  financing  on  terms
satisfactory to the Company's management.

The Company  guaranteed  certain  equipment leases with a bank for TW-Tennessee,
LLC, a former franchisee (TW- Tennessee) of the Company in which the Company and
David M. Roth, a Director of the Company, were formerly members. The Company has
agreed to assume  and pay one of the  equipment  leases  totaling  approximately
$125,000  and remains  contingently  liable on two other  equipment  leases that
currently have a remaining  balance of  approximately  $17,000 which the Company
believes will be assumed and paid by other guarantors.  In the fourth quarter of
2001, the Company reserved  $125,000 to cover its portion of the equipment lease
it  assumed.  As of  September  7, 2003,  the reserve  balance is  approximately
$44,000 which  management  believes is sufficient to satisfy the remaining lease
obligation.  The  Company's  management  believes it will not incur  significant
additional losses in connection with this matter.

On December  16,  2002,  the  Company  filed a Complaint  in  Jefferson  County,
Kentucky  Circuit  Court  against  American  Federal,  Inc.  ("AFI")  seeking  a
declaratory  judgment  that the Company has no  contractual  obligation to pay a
commission to AFI, in  connection  with a  Conditional  Commitment  entered into
between   AFI  and  the   Company   and  is  seeking   damages   for  fraud  and
misrepresentation  when AFI provided a commitment for a $20.1 million  financing
which the Company  believes AFI never intended to fund as they had  represented.
In response,  AFI filed suit in the United States District Court for the Eastern
District of Missouri seeking payment of approximately  $500,000 which includes a
$405,000 commitment fee plus additional  charges,  fees and costs related to the
Conditional  Commitment,  as well as  damages  for  breach of  contract,  unjust
enrichment and  misrepresentation/fraud.  This matter is in the early  discovery
stage.  Management  believes that AFI's claims are without merit,  but it is too
early to predict an outcome.  The Company intends to vigorously defend itself in
connection  with this matter.  As of September 7, 2003, the Company has not made
an accrual in the accompanying consolidated financial statements for a potential
liability in connection with this matter.

We are also subject to claims and legal  actions in the  ordinary  course of our
business.  Certain of these claims and actions may involve related  parties.  We
believe  that all such  claims  and  actions  are either  adequately  covered by
insurance  or would not have a  material  adverse  effect on us if  decided in a
manner unfavorable to us.

IMPACT OF INFLATION

The  impact  of  inflation  on the  cost of  food,  labor,  equipment,  land and
construction costs could harm our operations. The Company pays a majority of its
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 the  Company's  restaurants  are  located,  the Company has  continued  to
increase wages and benefits in order to attract and retain management  personnel
and hourly  workers.  In  addition,  most of the  Company's  leases  require the
Company 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. The Company may attempt to offset the

                                       21

<PAGE>



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

The Company  does not enter into  derivative  transactions  or  speculate on the
future direction of interest rates.  The Company's  primary market risk exposure
with  regards  to  financial  instruments  is  changes in  interest  rates.  The
Company's debt bears interest at both fixed and variable  rates. On September 7,
2003, a hypothetical  100 basis point increase in interest rates would result in
an  approximately  $450,000  decrease  in fair value of debt and would  increase
annual interest expense on the variable rate mortgages by approximately $91,000.

ITEM 4.  CONTROLS AND PROCEDURES

Within 90 days prior to the filing of this report, the Company's Chief Executive
Officer  and  Chief   Financial   Officer   conducted  an   evaluation   of  the
effectiveness,  design and  operation of the Company's  disclosure  controls and
procedures as defined in Exchange Act Rule 13a-14.  Based upon that  evaluation,
such officers  concluded that the Company's  disclosure  controls and procedures
are effective to ensure that  information  required to be disclosed is recorded,
processed,  summarized,  and  reported  in a timely  manner.  There have been no
significant  changes in the Company's internal controls or in other factors that
could  significantly  effect  these  controls  subsequent  to  the  date  of the
evaluation referred to above.







































                                       22

<PAGE>



PART II.    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

The Company  guaranteed  certain  equipment leases with a bank for TW-Tennessee,
LLC, a former franchisee (TW- Tennessee) of the Company in which the Company and
David M. Roth, a Director of the Company, were formerly members. The Company has
agreed to assume  and pay one of the  equipment  leases  totaling  approximately
$125,000  and remains  contingently  liable on two other  equipment  leases that
currently have a remaining  balance of  approximately  $17,000 which the Company
believes will be assumed and paid by other guarantors.  In the fourth quarter of
2001, the Company reserved  $125,000 to cover its portion of the equipment lease
it  assumed.  As of  September  7, 2003,  the reserve  balance is  approximately
$44,000 which  management  believes is sufficient to satisfy the remaining lease
obligation.  The  Company's  management  believes it will not incur  significant
additional losses in connection with this matter.

On December  16,  2002,  the  Company  filed a Complaint  in  Jefferson  County,
Kentucky  Circuit  Court  against  American  Federal,  Inc.  ("AFI")  seeking  a
declaratory  judgment  that the Company has no  contractual  obligation to pay a
commission to AFI, in  connection  with a  Conditional  Commitment  entered into
between   AFI  and  the   Company   and  is  seeking   damages   for  fraud  and
misrepresentation  when AFI provided a commitment for a $20.1 million  financing
which the Company  believes AFI never intended to fund as they had  represented.
In response,  AFI filed suit in the United States District Court for the Eastern
District of Missouri seeking payment of approximately  $500,000 which includes a
$405,000 commitment fee plus additional  charges,  fees and costs related to the
Conditional  Commitment,  as well as  damages  for  breach of  contract,  unjust
enrichment and  misrepresentation/fraud.  This matter is in the early  discovery
stage.  Management  believes that AFI's claims are without merit,  but it is too
early to predict an outcome.  The Company intends to vigorously defend itself in
connection  with this matter.  As of September 7, 2003, the Company has not made
an accrual in the accompanying consolidated financial statements for a potential
liability in connection with this matter.

We are also subject to claims and legal  actions in the  ordinary  course of our
business.  Certain of these claims and actions may involve related  parties.  We
believe  that all such  claims  and  actions  are either  adequately  covered by
insurance  or would not have a  material  adverse  effect on us if  decided in a
manner unfavorable to us.































                                       23

<PAGE>



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

   (a)   Exhibits  -

         Exhibit 31        Certifications pursuant to Section 302, of the
                           Sarbanes-Oxley Act of 2002

         Exhibit           32 Certifications  pursuant to Section 1350,  Chapter
                           63 of  Title  18,  United  States  Code,  as  adopted
                           pursuant to Section 906 of the  Sarbanes-Oxley Act of
                           2002


   (b)   Reports on Form 8-K

          On June 16,  2003,  the Company  filed Form 8-K to report under Item 5
         that its Board of Directors had approved a  one-for-5000  reverse stock
         split to be immediately followed by a 5000-for-one forward stock split.
         The Board approved the  transaction  following the Special  Committee's
         receipt of a fairness  opinion with regard to the per share cash amount
         to be paid in the reverse split from FTN Financial Securities Corp. and
         the recommendation of the Special Committee. The transaction is subject
         to the approval of stockholders.  Stockholders will be asked to approve
         the  transaction  at  the  annual  meeting  of  stockholders  currently
         expected to be held in the fourth quarter of 2003. The transaction,  if
         approved by stockholders, would reduce the number of stockholders below
         the level at which the  Company  would be  required to continue to file
         reports with the SEC.

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





































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<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:       October 21, 2003                       Tumbleweed, Inc.

                                       By:  /s/   Glennon F. Mattingly
                                                  --------------------
                                                  Glennon F. Mattingly
                                                  Senior Vice President
                                                  Chief Financial Officer
































                                       25