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 June 16, 2002

                                       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

The number of shares of common stock,  par value of $.01 per share,  outstanding
on July 12, 2002 was 5,916,153.













                                        1

<PAGE>



                                TUMBLEWEED, INC.

                                      INDEX


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

      a)    Consolidated Statements of Operations for the twenty-four
            weeks and twelve weeks ended June 16, 2002 and the six
            months and three months ended June 30, 2001                      3
      b)    Consolidated Balance Sheets as of June 16, 2002 and
            December 31, 2001                                                4
      c)    Consolidated Statements of Cash Flows for the twenty-four
            weeks ended June 16, 2002 and the six months ended
            June 30, 2001                                                    5
      d)    Notes to Consolidated Financial Statements                       6

  Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations                           14


  Item 3.     Quantitative and Qualitative Disclosures About
              Market Risk                                                   20


PART II.    OTHER INFORMATION

  Item 1.     Legal Proceedings                                             21
  Item 6.     Exhibits and Reports on Form 8-K                              21

Signature                                                                   22





                                        2

<PAGE>

<TABLE>


                                Tumbleweed, Inc.
                      Consolidated Statements of Operations
                                   (Unaudited)

<CAPTION>




                                                        Twenty-Four        Six Months       Twelve Weeks     Three Months
                                                        Weeks Ended          Ended             Ended             Ended
                                                          June 16,          June 30,          June 16,         June 30,
                                                            2002              2001              2002             2001
                                                      ----------------   --------------   ----------------  ---------------
Revenues:
<S>                                                  <C>                <C>              <C>               <C>
    Restaurant sales                                 $      26,559,567  $    27,744,945  $      13,095,974 $     14,093,293
    Commissary sales                                           796,479          917,058            414,593          461,311
    Franchise fees and royalties                               541,557          657,607            291,709          321,161
    Other revenues                                             294,890          260,699            205,462           70,280
                                                      ----------------   --------------   ----------------  ---------------

Total revenues                                              28,192,493       29,580,309         14,007,738       14,946,045

Operating expenses:
    Restaurant cost of sales                                 8,055,402        8,823,012          3,982,795        4,444,606
    Commissary cost of sales                                   711,597          800,233            364,662          402,717
    Operating expenses                                      14,660,313       15,172,415          7,269,656        7,642,136
    Selling, general and administrative expenses             2,847,591        3,025,240          1,410,514        1,464,361
    Depreciation and amortization                              909,861        1,169,943            452,542          595,375
                                                      ----------------   --------------   ----------------  ---------------

Total operating expenses                                    27,184,764       28,990,843         13,480,169       14,549,195
                                                      ----------------   --------------   ----------------  ---------------

Income from operations                                       1,007,729          589,466            527,569          396,850

Other income (expense):
    Interest expense, net                                     (464,472)        (725,014)          (230,394)        (342,990)
    Equity in income of TW-Springhurst                               -           33,902                  -           21,219
                                                      ----------------   --------------   ----------------  ---------------

Total other expense                                           (464,472)        (691,112)          (230,394)        (321,771)
                                                      ----------------   --------------   ----------------  ---------------

Income (loss) before income taxes and cumulative
     effect of a change in accounting  principle               543,257         (101,646)           297,175           75,079
Provision (benefit) for income taxes - current and                              (30,494
     deferred                                                  239,036                 )           130,757           27,828
                                                      ----------------   --------------   ----------------  ---------------

Income (loss) before cumulative effect of a change
     in accounting principle                                   304,221          (71,152)           166,418           47,251
Cumulative effect of a change in accounting
   principle, net of tax ($845,873)                         (1,503,773)               -                  -                -
                                                      ----------------   --------------   ----------------  ---------------
Net income (loss)                                    $      (1,199,552)  $      (71,152)  $        166,418 $         47,251
                                                      ================   ==============   ================  ===============

Basic and diluted earnings (loss) per share:
     Income (loss) before cumulative effect of a
      change in accounting principle                 $            0.05  $         (0.01)  $           0.03 $           0.01
     Cumulative effect of a change in accounting
        principle,net of tax                                     (0.25)               -                  -                -
                                                      ----------------   --------------   ----------------  ---------------
    Net income (loss)                                $           (0.20)  $        (0.01)  $           0.03 $           0.01
                                                      ================   ==============   ================  ===============

</TABLE>

See accompanying notes.


                                        3

<PAGE>

<TABLE>


                                Tumbleweed, Inc.
                           Consolidated Balance Sheets
<CAPTION>


                                                                           June 16,
                                                                             2002              December 31,
                                                                         (Unaudited)               2001
                                                                        --------------        --------------
ASSETS
Current assets:
<S>                                                                    <C>                   <C>
   Cash and cash equivalents                                           $       331,852       $       757,266
   Accounts receivable, net of allowance of $4,202
      in 2001                                                                  681,134               350,586
   Inventories                                                               1,831,426             1,785,481
   Deferred income taxes                                                             -               123,318
   Prepaid expenses and other assets                                           562,787               517,280
                                                                        --------------        --------------
Total current assets                                                         3,407,199             3,533,931
Property and equipment, net                                                 28,112,710            28,380,038
Goodwill, net of accumulated amortization of
   $723,897 in 2001                                                            174,657             2,349,646
Intangible assets                                                            1,497,966                     -
Investment in TW-Springhurst                                                         -               126,415
Deferred income taxes                                                          833,865                     -
Other assets                                                                   645,786               507,320
                                                                        --------------        --------------
Total assets                                                           $    34,672,183       $    34,897,350
                                                                        ==============        ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                    $     1,585,620       $     1,269,967
   Accrued liabilities                                                       2,951,839             3,542,511
   Deferred income taxes                                                       299,105                     -
   Current maturities on long-term
     debt and capital leases                                                 4,402,265             1,601,374
                                                                        --------------        --------------
Total current liabilities                                                    9,238,829             6,413,852

Long-term liabilities:
   Long-term debt, less current maturities                                  10,308,774            11,843,939
   Capital lease obligations, less current maturities                        1,660,111             1,989,820
   Deferred income taxes                                                             -                30,716
   Other liabilities                                                            65,000               120,000
                                                                        --------------        --------------
Total long-term liabilities                                                 12,033,885            13,984,475
                                                                        --------------        --------------
Total liabilities                                                           21,272,714            20,398,327

Commitments and contingencies (Note 10)

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; 5,916,153 and 5,881,630 shares issued
     at June 16, 2002 and December 31, 2001, respectively                       59,587                58,818
   Paid-in capital                                                          16,393,235            16,294,006
   Treasury stock, 42,400 shares                                              (254,695)             (254,695)
   Retained deficit                                                         (2,798,658)           (1,599,106)
                                                                        --------------        --------------
     Total stockholders' equity                                             13,399,469            14,499,023
                                                                        --------------        --------------
Total liabilities and stockholders' equity                             $    34,672,183       $    34,897,350
                                                                        ==============        ==============

</TABLE>

See accompanying notes.

                                       4
<PAGE>

<TABLE>

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

<CAPTION>


                                                                          Twenty-Four          Six Months
                                                                          Weeks Ended            Ended
                                                                           June 16,             June 30,
                                                                             2002                 2001
                                                                       -----------------    ----------------

Operating activities:
<S>                                                                   <C>                  <C>
   Net loss                                                           $       (1,199,552)  $         (71,152)
   Adjustments to reconcile net loss to net
       cash provided by operating activities:
        Depreciation and amortization                                            909,861           1,169,943
        Deferred income taxes                                                   (442,158)            235,341
        Equity in income of TW-Springhurst                                             -             (33,902)
        Loss on disposition of property and equipment                             42,107              18,567
        Cumulative effect of a change in accounting principle                  2,349,646                   -
        Changes in operating assets and liabilities:
          Accounts receivable                                                   (329,673)            291,022
          Income tax receivable                                                 (102,285)            (62,600)
          Inventories                                                              9,729            (247,445)
          Prepaid expenses                                                        49,350              74,968
          Other assets                                                          (143,624)             17,720
          Accounts payable                                                       317,739             306,218
          Accrued liabilities                                                   (590,672)           (562,566)
          Other liabilities                                                      (55,000)            (20,000)
                                                                       -----------------    ----------------
Net cash provided by operating activities                                        815,468           1,116,114

Investing activities:
    Purchases of property and equipment                                         (350,537)           (836,211)
   Business acquisition                                                         (267,000)                  -
   Distribution from TW-Springhurst                                                    -              73,500
                                                                       -----------------    ----------------
Net cash used in investing activities                                           (617,537)           (762,711)

Financing activities:
   Proceeds from issuance of long-term debt                                    1,037,000           2,979,120
   Payments on long-term debt and capital lease obligations                   (1,660,345)         (3,417,340)
                                                                       -----------------    ----------------
Net cash used in investing activities                                           (623,345)           (438,220)
                                                                       -----------------    ----------------

Net decrease in cash and cash equivalents                                       (425,414)            (84,817)

Cash and cash equivalents at beginning of period                                 757,266             281,829
                                                                       -----------------    ----------------
Cash and cash equivalents at end of period                            $          331,852   $         197,012
                                                                       =================    ================


</TABLE>



See accompanying notes.





                                        5

<PAGE>



                                TUMBLEWEED, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  June 16, 2002


1.  BASIS OF PRESENTATION

RESTAURANT FACILITIES

As of June 16, 2002,  the Company  owned,  franchised  or licensed 57 Tumbleweed
restaurants.  The Company owned and operated 31 restaurants in Kentucky, Indiana
and Ohio.  There were 20 franchised  restaurants  located in Indiana,  Illinois,
Kentucky,  Michigan,  and Wisconsin and six licensed restaurants located outside
the United States in Germany,  Jordan,  Egypt, England and Turkey. The following
table reflects  changes in the number of Company- owned,  franchise and licensed
restaurants during the twenty-four weeks ended June 16, 2002.


Company-owned restaurants:
     In operation, beginning of period                    36
     Restaurants opened                                    0
     Restaurant sold to franchisee                        (1)
     Restaurants closed                                   (4)
                                                   ---------
     In operation, end of period                          31

Franchise and licensed restaurants:
     In operation, beginning of period                    29
     Restaurants opened                                    0
     Restaurant purchased from Tumbleweed, Inc.            1
     Restaurants closed                                   (4)
                                                   ---------
     In operation, end of period                          26
                                                   ---------
         System Total                                     57
                                                   =========

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  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.

INTERIM FINANCIAL REPORTING

The  accompanying  consolidated  financial  statements have been prepared by the
Company without audit,  with the exception of the December 31, 2001 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 31, 2001.

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 twenty-four
weeks and twelve weeks ended June 16, 2002 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2002.


                                        6

<PAGE>



1.  BASIS OF PRESENTATION (continued)

FISCAL YEAR

Beginning  January 1, 2002,  the  Company  changed its fiscal year to end on the
last Sunday in December from a December 31 year end. The first three quarters of
each fiscal year,  beginning in 2002, consist of 12 weeks and the fourth quarter
consists  of 16 weeks.  The  first two  quarters  of 2002  consists  of 167 days
compared to 181 days in 2001 which resulted in lower  revenues of  approximately
$2,230,000.

RECENTLY ISSUED ACCOUNTING STANDARDS

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets."  This  statement  supercedes  SFAS No.  121,"
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be Disposed  of," and the  accounting  and  reporting  provisions  of Accounting
Principles  Board  (APB)  Opinion No. 30,  "Reporting  Results of  Operations  -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual  and  Infrequently  Occurring  Events  and  Transactions."  SFAS No. 144
requires that one accounting model be used for long-lived  assets to be disposed
of by sale, whether previously held and used or newly acquired,  and it broadens
the   presentation   of   discontinued   operations  to  include  more  disposal
transactions.  The Company  adopted the provisions of SFAS No. 144 as of January
1, 2002 and determined that SFAS No. 144 had no impact on its financial position
and results of operations.

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." SFAS No. 141  eliminates the pooling of interest
method of  accounting  and  amortization  of goodwill for business  combinations
initiated  after  June 30,  2001.  SFAS  No.  142  requires  that  goodwill  and
intangible  assets with  indefinite  useful  lives no longer be  amortized,  but
instead  be tested  for  impairment  annually,  or more  frequently  if  certain
indicators  arise. The provisions of SFAS No. 142 also require the completion of
a  transitional  impairment  test  within  six  months  of  adoption,  with  any
impairments  identified treated as a cumulative effect of a change in accounting
principle.

During the first quarter of 2002, the Company determined that all goodwill as of
January 1, 2002 related to two reporting  units. The fair value of each unit was
determined using certain 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.

If the Company had accounted for its goodwill under SFAS No. 142 for all periods
presented,  the  Company's  net income  (loss) and income (loss) per share would
have been as follows:
<TABLE>
<CAPTION>


                                           Twenty-Four          Six Months        Twelve Weeks      Three Months
                                           Weeks Ended            Ended              Ended             Ended
                                             June 16,            June 30,           June 16,          June 30,
                                               2002                2001               2002              2001
                                          --------------     ----------------  -----------------   --------------

<S>                                      <C>                <C>                <C>                <C>
Net income (loss)                        $    (1,199,552)   $         (71,152) $         166,418  $        47,251
Add back:
    Goodwill amortization, net of tax                  -               70,126                  -           35,063
                                          --------------     ----------------  -----------------   --------------
Adjusted net income (loss)               $    (1,199,552)   $          (1,026) $         166,418  $        82,314
                                          ==============     ================  =================   ==============

Basic and diluted loss per share:
    Net income (loss)                    $         (0.20)   $           (0.01) $            0.03  $          0.01
    Goodwill amortization, net of tax                  -                 0.01                  -             0.00
                                          --------------     ----------------  -----------------   --------------
    Adjusted net income (loss)           $         (0.20)   $            0.00  $            0.03  $          0.01
                                          ==============     ================  =================   ==============


</TABLE>




                                        7

<PAGE>



2. GOODWILL AND INTANGIBLE ASSETS (continued)

The following table sets forth the Company's goodwill  transactions in the first
quarter of 2002. All transactions occurred in the restaurant segment.


Balance as of January 1, 2002                              $      2,349,646
Goodwill acquired in the TW-Springhurst acquisition                 174,657
Impairment loss                                                  (2,349,646)
                                                             --------------
Balance as of June 16, 2002                                $        174,657
                                                             ==============

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 $1,497,966 and is included in the corporate segment.

3.   ACCRUED LIABILITIES

Accrued liabilities consist of:

<TABLE>
<CAPTION>

                                                                 June 16,          December 31,
                                                                   2002                2001
                                                              ---------------     --------------

<S>                                                          <C>                 <C>
Accrued payroll, severance and related taxes                 $      1,007,780    $       946,545
Accrued insurance and fees                                            220,714            192,978
Accrued taxes, other than payroll                                     770,756            683,449
Gift certificate liability                                            250,561            475,914
Reserve for loss on guarantees of indebtedness                         95,157            565,000
Reserve for store closing costs                                       410,228            601,186
Other                                                                 196,643             77,439
                                                              ---------------     --------------
                                                             $      2,951,839    $     3,542,511
                                                              ===============     ==============
</TABLE>

4.   LONG-TERM DEBT

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


                                                                June 16,          December 31,
                                                                  2002                2001
                                                             ---------------     ---------------
<S>                                                         <C>                 <C>
Secured  $5,960,000  mortgage revolving line of credit
note, bearing interest at prime rate plus .25% (5.0% at
June 16, 2002), due December 31, 2003                       $      5,501,148    $      5,726,148

Secured mortgage note payable, bearing interest at
commercial paper rate plus 2.65% (4.41% at June 16,
2002), due April 1, 2003                                           2,204,550           2,299,567

Secured  mortgage note payable,  bearing  interest at
7.50%,  payable in monthly installments through
January 22, 2007 with a lump sum payment due February
22, 2007                                                           1,386,966                   -

Secured mortgage note payable,  bearing interest at prime
rate plus 1% (5.75% at June 16, 2002), payable in monthly
installments through October 1, 2017                                 989,861           1,009,847



                              (Continued next page)




                                        8

<PAGE>



4.   LONG-TERM DEBT (continued)


                                                                June 16,          December 31,
                                                                  2002                2001
                                                             ---------------     ---------------


Secured mortgage note payable, bearing interest at 8.75%,
payable in monthly installments through February 15, 2008   $        860,553    $        881,933


Secured  $975,000  mortgage  revolving line of credit
note,  bearing interest at prime rate plus 2.0% (6.75%
at June 16, 2002), due April 1, 2003                                 924,868             964,868

Secured mortgage note payable, bearing interest at prime
rate (4.75% at June 16, 2002), payable in monthly
installments through March 1, 2006                                   594,454             613,632

Secured  mortgage note payable,  bearing interest at prime
rate plus 1.25% (6.0% at June 16), payable in monthly
installments through November 27, 2016                               540,625             559,375

Secured mortgage note payable, bearing interest at 10.52%,
payable in monthly installments through August 18, 2005              378,119             417,937

Unsecured note payable bearing interest at 7.50%, due
February 22, 2007                                                    292,663                   -

Secured mortgage note payable, bearing interest at
commercial paper rate plus 2.65% (4.41% at June 16,
2002), due April 1, 2003                                             224,611             224,611

Other installment notes payable                                      359,802             206,167
                                                             ---------------     ---------------

                                                                  14,258,220          12,904,085
Less Current maturities                                            3,949,446           1,060,146
                                                             ---------------     ---------------
Long-term debt                                              $     10,308,774    $     11,843,939
                                                             ===============     ===============

</TABLE>

Property and equipment  with a net book value of  approximately  $21,550,000  at
June 16, 2002 collateralize the Company's long-term debt.

In accordance with the loan agreement,  the $975,000 mortgage  revolving line of
credit note was reduced to $925,000 on June 30, 2002.

The Company was in violation of the debt coverage ratio covenant  related to the
revolving  lines of credit  (balances  as of June 16, 2002 were  $5,501,148  and
$924,868) as of June 16, 2002. The covenant  violation  resulted  primarily from
the amount of the current  maturities of debt.  The lenders have waived the debt
covenant  violation  as of June 16,  2002.  The  Company  is  currently  seeking
financing which would replace the majority of the Company's  debt.  There can be
no assurances  that this  financing will be obtained or that such financing will
be  available on terms  acceptable  to the Company.  If the  refinancing  is not
obtained by the end of the third  quarter,  it is  uncertain at this time if the
Company will be in compliance  with the debt coverage  ratio  covenant in future
periods as a result of the  current  maturities  of debt.  If it does not comply
with the covenants in future  periods,  the lenders would be entitled,  at their
discretion, to exercise certain remedies including acceleration of repayment.









                                        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 twenty- four weeks and twelve weeks ended June 16,
2002 and the six months and three months ended June 30, 2001 in accordance  with
FAS 128, "Earnings per Share."
<TABLE>
<CAPTION>


                                                Twenty-Four      Six Months       Twelve Weeks      Three Months
                                                Weeks Ended         Ended             Ended            Ended
                                                  June 16,        June 30,          June 16,          June 30,
                                                    2002            2001              2002              2001
                                               --------------   -------------    ---------------  ----------------
Numerator:
    Income (loss) before cumulative effect of
<S>                                           <C>              <C>              <C>              <C>
     a  change in accounting principle        $       304,221  $      (71,152)  $        166,418 $          47,251
    Cumulative effect of a change in
     accounting principle, net of tax              (1,503,773)              -                  -                 -
                                               --------------   -------------    ---------------  ----------------
    Net income (loss)                         $    (1,199,552)  $     (71,152)  $        116,418 $          47,251
                                               ==============   =============    ===============  ================

Denominator:
   Weighted average shares
      outstanding - basic                           5,916,153       5,839,230          5,916,153         5,839,230
   Effect of dilutive securities:
      Director and employee stock options               3,577             329              3,064               259
                                               --------------   -------------    ---------------  ----------------
   Denominator for diluted earnings per share
   - adjusted weighted average and assumed
     conversions                                    5,919,730       5,839,559          5,919,217         5,839,489
                                               ==============   =============    ===============  ================
</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.  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 twenty-four weeks ended June 16, 2002 is as follows:

<TABLE>
<CAPTION>


                                             Restaurant       Commissary        Corporate         Totals
                                            -------------   ---------------   --------------   ------------
Revenues from external
<S>                                       <C>              <C>               <C>              <C>
   customers                              $    26,559,567  $        796,479  $       836,447  $  28,192,493
Intersegment revenues                                   -         1,194,719                -      1,194,719
General and
   administrative expenses                              -                 -        1,956,234      1,956,234
Advertising expenses                                    -                 -          891,357        891,357
Depreciation and
   amortization                                   745,986            37,662          126,213        909,861
Net interest expense                                    -            70,584          393,888        464,472

Income (loss) before income taxes
   and cumulative effect of a change in
   accounting principle                         2,816,112            41,584       (2,314,439)       543,257

</TABLE>
                                       10

<PAGE>

6.   SEGMENT INFORMATION (continued)

Segment information for the six months ended June 30, 2001 is as follows:
<TABLE>
<CAPTION>


                                             Restaurant       Commissary        Corporate         Totals
                                            -------------   ---------------   -------------    ------------
Revenues from external
<S>                                       <C>              <C>               <C>              <C>
   customers                              $    27,744,945  $        917,058  $      918,306   $  29,580,309
Intersegment revenues                                   -         1,375,587               -       1,375,587
General and
   administrative expenses                              -                 -       2,093,059       2,093,059
Advertising expenses                                    -                 -         932,181         932,181
Depreciation and
   amortization                                   926,782            53,298         189,863       1,169,943
Net interest expense                                    -            88,050         636,964         725,014
Income (loss) before income taxes               2,479,384            60,285      (2,641,315 )      (101,646)
</TABLE>

Segment information for the twelve weeks ended June 16, 2002 is as follows::
<TABLE>
<CAPTION>


                                             Restaurant       Commissary        Corporate         Totals
                                            -------------   ---------------   -------------    ------------
Revenues from external
<S>                                       <C>              <C>               <C>              <C>
   customers                              $    13,095,974  $        414,593  $      497,171   $  14,007,738
Intersegment revenues                                   -           621,890               -         621,890
General and
   administrative expenses                              -                 -         973,072         973,072
Advertising expenses                                    -                 -         437,442         437,442
Depreciation and
   amortization                                   371,373            18,831          62,338         452,542
Net interest expense                                    -            35,292         195,102         230,394
Income (loss) before income taxes
   and cumulative effect of a
   change in accounting principle               1,316,413            28,284      (1,047,522 )       297,175
</TABLE>

Segment information for the three months ended June 30, 2001 is as follows:
<TABLE>
<CAPTION>


                                             Restaurant       Commissary        Corporate         Totals
                                            -------------   ---------------   -------------    ------------
Revenues from external
<S>                                       <C>              <C>               <C>              <C>
   customers                              $    14,093,293  $        461,311  $      391,441   $  14,946,045
Intersegment revenues                                   -           691,967               -         691,967
General and
   administrative expenses                              -                 -         990,692         990,692
Advertising expenses                                    -                 -         473,669         473,669
Depreciation and
   amortization                                   473,866            26,649          94,860         595,375
Net interest expense                                    -            44,025         298,965         342,990
Income (loss) before income taxes               1,400,219            30,326      (1,355,466 )        75,079

</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. During the six months ended June
30,  2001,   the  Company   received  a  cash   distribution   of  $73,500  from
TW-Springhurst.  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 own TW-Springhurst  Investors,  LLC. The Company's share
of  TW-Springhurst's  net income was $33,902  for the six months  ended June 30,
2001. 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



                                       11

<PAGE>



7.  INVESTMENT IN TW-SPRINGHURST (continued)

$161,000 on the date of purchase.  An independent  business valuation  appraisal
was used to assist Company  management in determining  the purchase  price.  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 has
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                        $    1,397,968
Common stock                                   769
Paid-in capital                             99,229
                                     -------------
                                    $    1,497,966
                                     =============
Intangible assets:
   Tumbleweed licensing rights      $    1,427,966
   Contracts in place                       70,000
                                     -------------
                                    $    1,497,966
                                     =============

9.  INCOME TAXES

Income taxes on the Company's  income before income taxes and cumulative  effect
of a change in  accounting  principle for the  twenty-four  weeks ended June 16,
2002 and the six  months  ended  June 30,  2001  have  been  provided  for at an
estimated  effective  tax rate of 44% and 30%,  respectively.  The effective tax
rate  differs  from the  statutory  federal  tax rate of 34% as a result  of the
impact of employment tax credits and state income taxes.

10.  CONTINGENCIES

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 is
in negotiation with the bank under the equipment leases and the other guarantors
to resolve the  Company's  obligations  relative to the  equipment  leases.  The
Company  believes  that  it  will  be  obligated  to  assume  and pay one of the
equipment leases totaling  approximately  $125,000 and will remain  contingently
liable on two other equipment  leases which the Company believes will be assumed
and paid by other  guarantors.  These  negotiations are ongoing and no agreement
has been reached. If no agreement is reached, the Company would have


                                       12

<PAGE>



10.  CONTINGENCIES (continued)

additional exposure totaling  approximately  $180,000.  In the fourth quarter of
2001, the Company reserved  $125,000 to cover its portion of the equipment lease
it  expects to  assume.  The  Company's  management  believes  it will not incur
significant additional losses in connection with this matter.

11.  SUBSEQUENT EVENT

On July 11, 2002, a Company-owned  restaurant in Ohio was destroyed by fire. The
Company has insurance which will cover the assets lost in the fire and will also
cover the lost  profit  and  continuing  expenses  as a result  of the  business
interruption. Management does not believe this event will have a material impact
on the Company's cash flow.
































                                       13

<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 June 16, 2002, we owned, franchised or licensed 57 Tumbleweed restaurants.
The Company  owned and operated 31  restaurants  in Kentucky,  Indiana and Ohio.
There were 20 franchised restaurants in Indiana, Illinois, Kentucky,  Wisconsin,
and Michigan,  and six licensed restaurants located outside the United States in
Germany, Jordan, Egypt, England 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.


























                                       14

<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>


                                                   Twenty-Four       Six Months      Twelve Weeks     Three Months
                                                   Weeks Ended         Ended            Ended            Ended
                                                     June 16,         June 30,         June 16,         June 30,
                                                       2002             2001             2002             2001
                                                  --------------   --------------   --------------  ----------------
Revenues:
<S>                                                         <C>              <C>              <C>               <C>
   Restaurant sales                                         94.2  %          93.8  %          93.5 %            94.3 %
   Commissary sales                                          2.8              3.1              2.9               3.1
   Franchise fees and royalties                              1.9              2.2              2.1               2.1
   Other revenues                                            1.1              0.9              1.5               0.5
                                                  --------------   --------------   --------------  ----------------
     Total revenues                                        100.0            100.0            100.0             100.0
Operating expenses:
   Restaurant cost of sales (1)                             30.3             31.8             30.4              31.5
   Commissary cost of sales (2)                             89.3             87.3             88.0              87.3
   Operating expenses (1)                                   55.2             54.7             55.5              54.2
   Selling, general and administrative expenses             10.1             10.2             10.1               9.8
   Depreciation and amortization                             3.2              4.0              3.2               4.0
     Total operating expenses                               96.4             98.0             96.2              97.3
                                                  --------------   --------------   --------------  ----------------
     Income from operations                                  3.6              2.0              3.8               2.7
Other expense, net                                          (1.7)            (2.3)            (1.7)             (2.2)
                                                  --------------   --------------   --------------  ----------------
Income (loss) before income taxes and cumulative
    effect of a change in accounting principle               1.9             (0.3)             2.1               0.5
Provision (benefit) for income taxes - current
   and deferred                                              0.8             (0.1)             0.9               0.2
                                                  --------------   --------------   --------------  ----------------
Income (loss) before cumulative effect of a
   change in accounting principle                            1.1             (0.2)             1.2               0.3
Cumulative effect of a change in accounting
   principle, net of tax                                    (5.3)               -                -                 -
                                                  --------------   --------------   --------------  ----------------
Net income (loss)                                           (4.2) %          (0.2)%            1.2 %             0.3 %
                                                  ==============   ==============   ==============  ================
<FN>

 (1)   As percentage of restaurant sales.

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

Beginning  January 1, 2002,  the  Company  changed its fiscal year to end on the
last Sunday in December  from a December 31 year end.  The first two quarters of
2002 consists of 167 days compared to 181 days in 2001 and the second quarter of
2002  consists  of 84 days  compared  to 91 days in 2001.  On an overall  basis,
revenues  and  expenses  decreased as a result of 14 fewer days in the first two
quarters of 2002 compared to the first two quarters of 2001 and seven fewer days
in the second quarter of 2002 compared to the second quarter of 2001.

COMPARISON OF THE FIRST TWO QUARTERS OF 2002 AND 2001

Total  revenues  decreased by  $1,387,816  or 4.7% for the first two quarters of
2002 compared to the same period in 2001 primarily as a result of the following:

   Restaurant  sales  decreased by $1,185,378 or 4.3% for the first two quarters
   of 2002 compared to the same period in 2001. The decrease in restaurant sales
   is primarily a result of the Company's change in its fiscal year, the closing
   of four  Company-owned  restaurants  during the first quarter of 2002 and the
   sale of one  Company-owned  restaurant  to a  franchisee  during  the  second
   quarter of 2002 (see above for  discussion  of all  items).  The  decrease in
   restaurant  sales is partially  offset by a 3.6% increase in same store sales
   for the first twenty-four weeks.

   Commissary sales to franchised and licensed restaurants decreased by $120,579
   or 13.2% for the first two  quarters  of 2002  compared to the same period in
   2001. The decrease in commissary sales is primarily a result of the Company's
   change in its fiscal year, as discussed above.



                                       15

<PAGE>



   Franchise fees and royalties decreased by $116,050 or 17.6% for the first two
   quarters  of 2002  compared  to the same  period  in 2001.  Franchise  income
   decreased $110,000 as a result of having three franchise  restaurant openings
   in the  first  two  quarters  of 2001  compared  to no  franchise  restaurant
   openings  during the first two  quarters of 2002.  Royalty  income  decreased
   $6,050  primarily as a result of the Company's  change in its fiscal year, as
   discussed above.

   Other  revenues  increased  by $34,191 or 13.1% for the first two quarters of
   2002  compared to the same period in 2001  primarily as a result of increased
   purchasing rebates in 2002 compared to the 2001 period. The increase in other
   revenues  can  also  be  attributed  to  recognizing  as  income  $55,000  of
   development fees which were forfeited by a franchisee.  The increase in other
   revenues is partially offset by a decrease in insurance proceeds which relate
   to a business  interruption as a result of a fire which occurred in June 2000
   at a Company-owned restaurant.  Other revenues includes $100,000 of insurance
   proceeds for the 2001 period. There is no similar income in the 2002 period.

Restaurant  cost of  sales  decreased  by  $767,610  or 8.7% for the  first  two
quarters of 2002 compared to the same period in 2001. The decrease in restaurant
cost of sales is primarily a result of the Company's  change in its fiscal year,
as discussed above.  Restaurant cost of sales decreased as a percentage of sales
by 1.5% to 30.3% for the 2002 period compared to 31.8% during the same period in
2001.  The 1.5% decrease in cost of sales is primarily the result of a temporary
increase in the cost of beef and pork (primarily steaks and ribs,  respectively)
during the first part of 2001.

Commissary cost of sales  decreased  $88,636 or 11.1% for the first two quarters
of 2002 compared to the same period in 2001. The decrease in commissary  cost of
sales is due primarily to the Company's  change in its fiscal year, as discussed
above. As a percentage to commissary  sales,  commissary cost of sales increased
2.0% for the 2002  period  compared  to the same  period  in 2001 as a result of
higher raw material product costs.

Restaurant  operating  expenses  decreased by $512,102 or 3.4% for the first two
quarters of 2002 compared to the same period in 2001.  The decrease in operating
expenses is primarily a result of the  Company's  change in its fiscal year,  as
discussed  above.  Operating  expenses  increased as a percentage  of restaurant
sales by 0.5% to 55.2% for the 2002  period  from  54.7% for the same  period in
2001 primarily as a result of increased local marketing costs.

Selling,  general and administrative  expenses decreased by $177,649 or 5.9% for
the first two quarters of 2002 compared to the same period in 2001. The decrease
in selling,  general and  administrative  expenses  primarily is due to the fact
that  the  2001  period  includes  the  cost  of  implementing  a  new  menu  of
approximately  $95,000.  There was no similar  expense in 2002.  The decrease in
selling,  general and administrative  expenses is also attributable to decreased
payroll  costs  as a result  of the  elimination  of  several  positions  in the
corporate  segment.  As a percentage  to total  revenues,  selling,  general and
administrative  expenses  were  10.1% and  10.2% for the 2002 and 2001  periods,
respectively.

Depreciation and amortization  expense decreased $260,082 or 22.2% for the first
two quarters of 2002 compared to the same period in 2001 as a result of goodwill
no longer being amortized in accordance with SFAS No. 142, and the write-down of
assets in the fourth  quarter of 2001 (see above for  discussion of both items).
The decrease in depreciation and amortization  expense is also attributed to the
Company's change in its fiscal year, as discussed above.

Net interest expense  decreased  $260,542 or 35.9% for the first two quarters of
2002 compared to the same period in 2001.  The decrease in net interest  expense
is the result of decreases in the prime interest rate during 2001.

Income taxes on the Company's  income before income taxes and cumulative  effect
of a change in  accounting  principle for the  twenty-four  weeks ended June 16,
2002 and the six  months  ended  June 30,  2001  have  been  provided  for at an
estimated  effective  tax rate of 44% and 30%,  respectively.  The effective tax
rate  differs  from the  statutory  federal  tax rate of 34% as a result  of the
impact of employment tax credits and state income taxes.

COMPARISON OF THE SECOND QUARTER OF 2002 VERSUS THE SECOND QUARTER OF 2001

Total  revenues  decreased  by $938,307  or 6.3% for the second  quarter of 2002
period  compared  to the  same  period  in 2001  primarily  as a  result  of the
following:



                                       16

<PAGE>



   Restaurant sales decreased by $997,319 or 7.1% for the second quarter of 2002
   compared to the same period in 2001.  The decrease in  restaurant  sales is a
   result of the  Company's  change in its  fiscal  year,  the  closing  of four
   Company-owned  restaurants  during the first  quarter of 2002 and the sale of
   one  Company-owned  restaurant to a franchisee  during the second  quarter of
   2002 (see above for  discussion  of all items).  The  decrease in  restaurant
   sales is  partially  offset by a 4.1%  increase  in same store  sales for the
   second quarter.

   Commissary sales  to franchised and licensed restaurants decreased by $46,718
   or 10.1% for  the second quarter of 2002 compared to the same period in 2001.
   The  decrease  in  commissary  sales is  primarily a result of the  Company's
   change in its fiscal year, as discussed above.

   Franchise  fees and  royalties  decreased  by  $29,452 or 9.2% for the second
   quarter  of 2002  compared  to the  same  period  in 2001.  Franchise  income
   decreased $35,000  primarily as a  result of having one franchise  restaurant
   opening in the second  quarter of  2001  compared to no franchise  restaurant
   openings during the second  quarter of 2002. The decrease in franchise income
   is partially offset by a $5,548 increase in royalty income.

   Other  revenues  increased  by  $135,182 or 192.3% for the second  quarter of
   2002 compared to the same period  in 2001 as a result of increased purchasing
   rebates. The increase  in other revenues can also be attributed to $55,000 of
   development fees which were forfeited by a franchisee.

Restaurant  cost of sales  decreased by $461,811 or 10.4% for the second quarter
of 2002 compared to the same period in 2001. The decrease in restaurant  cost of
sales is a result of the  Company's  change in its fiscal  year,  the closing of
four Company-owned  restaurants during the first quarter of 2002 and the sale of
one  Company-owned  restaurant to a franchisee during the second quarter of 2002
(see above for discussion of all items). Restaurant cost of sales decreased as a
percentage of sales by 1.1% to 30.4% for the second  quarter of 2002 compared to
31.5%  during the same  period in 2001.  The 1.1%  decrease  in cost of sales is
primarily  the  result  of a  temporary  increase  in the  cost of beef and pork
(primarily steaks and ribs, respectively) during the first part of 2001.

Commissary  cost of sales  decreased  $38,055 or 9.4% for the second  quarter of
2002  compared to the same period in 2001.  The decrease in  commissary  cost of
sales is  primarily  a result of the  Company's  change in its fiscal  year,  as
discussed above. As a percentage to commissary  sales,  commissary cost of sales
increased  0.7% for the second  quarter of 2002  compared  to the same period in
2001 as a result of higher raw material product costs.

Restaurant  operating  expenses  decreased  by  $372,480  or 4.9% for the second
quarter of 2002  compared to the same period in 2001.  The decrease in operating
expenses is a result of the Company's  change in its fiscal year, the closing of
four Company-owned  restaurants during the first quarter of 2002 and the sale of
one  Company-owned  restaurant to a franchisee during the second quarter of 2002
(see above for  discussion  of all items).  Operating  expenses  increased  as a
percentage of restaurant  sales by 1.3% to 55.5% for the second  quarter of 2002
from 54.2% for the same period in 2001 primarily as a result of increased repair
and maintenance costs and local marketing expenses.

Selling,  general and  administrative  expenses decreased by $53,847 or 3.7% for
the second  quarter of 2002 compared to the same period in 2001. The decrease in
selling,   general  and  administrative  expenses  for  the  second  quarter  is
attributable  to  decreased  payroll  costs as a result  of the  elimination  of
several positions in the corporate  segment.  As a percentage to total revenues,
selling,  general and administrative expenses were 10.1% and 9.8% for the second
quarter of 2002 and 2001, respectively

Depreciation and amortization expense decreased $142,833 or 24.0% for the second
quarter of 2002  compared  to the same period in 2001 as a result of goodwill no
longer being  amortized in accordance  with SFAS No. 142, and the  write-down of
assets in the fourth  quarter of 2001(see  above for  discussion of both items).
The decrease in depreciation and amortization  expense is also attributed to the
Company's change in its fiscal year, as discussed above.

Net interest expense decreased  $112,596 or 32.8% for the second quarter of 2002
compared to the same period in 2001.  The decrease in net  interest  expense for
the second  quarter is the result of decreases in the prime interest rate during
2001.

LIQUIDITY AND CAPITAL RESOURCES

In 2002, the Company  expects to construct one additional  restaurant  facility.
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


                                       17

<PAGE>



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

Our capital  needs during the period ended June 16, 2002 arose from  maintenance
and improvement of existing restaurant facilities. The source of capital to fund
the maintenance and improvement expenditures was internally generated cash flow.
Our  capital   needs  for  the  period  ended  June  30,  2001  arose  from  the
reconstruction  of a restaurant  facility  which was damaged by fire during June
2000, and to a lesser extent, maintenance and improvement of existing restaurant
facilities.  The  source of  capital to fund the  reconstruction  was  insurance
proceeds received during 2000. The maintenance and improvement expenditures were
funded by internally generated cash flow.

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


                                            Twenty-Four          Six Months
                                            Weeks Ended             Ended
                                              June 16,            June 30,
                                                2002                2001
                                          ----------------    -----------------
Net cash provided by operations          $         815,466   $        1,116,114
Purchases of property and equipment               (350,537)            (836,211)
Business acquisition                              (267,000)                   -
Net payments on long-term
   debt and capital lease obligations             (623,343)            (438,220)

Our largest use of funds during the 2002 period was for the payment of long-term
debt and capital lease  obligations and for the acquisition of the remaining 50%
interest in TW-Springhurst.  Our largest use of funds during the 2001 period was
for the reconstruction of a restaurant facility which was damaged by fire during
2000 and for payments on long-term debt and capital lease obligations. Sales are
predominantly  for cash and the  business  does not require the  maintenance  of
significant  receivables or  inventories.  In addition,  it is common within the
restaurant  industry to receive  trade credit on the purchase of food,  beverage
and  supplies,  thereby  reducing the need for  incremental  working  capital to
support sales increases.

The Company  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 is
in negotiation with the bank under the equipment leases and the other guarantors
to resolve the  Company's  obligations  relative to the  equipment  leases.  The
Company  believes  that  it  will  be  obligated  to  assume  and pay one of the
equipment leases totaling  approximately  $125,000 and will remain  contingently
liable on two other equipment  leases which the Company believes will be assumed
and paid by other  guarantors.  These  negotiations are ongoing and no agreement
has been reached. If no agreement is reached,  the Company would have additional
exposure  totaling  approximately  $180,000.  In the fourth quarter of 2001, the
Company reserved $125,000 to cover its portion of the equipment lease it expects
to assume.  The  Company's  management  believes  it will not incur  significant
additional losses in connection with this matter.

The  Company  both  owns  and  leases  its  restaurant  facilities.   Management
determines  whether  to  acquire  or lease a  restaurant  facility  based on its
evaluation of the financing alternatives available for a particular site.

In the next 12 months,  the Company expects the demand on future liquidity to be
principally from the ongoing  maintenance and improvement of existing restaurant
facilities  and  from  the  construction  of one to  two  additional  restaurant
facilities. As of June 16, 2002, the Company had no material commitments for the
construction  of  new  restaurants,   maintenance  or  improvement  of  existing
restaurant facilities. We will utilize mortgage,  sale/leaseback and/or landlord
financing,  as well as  equipment  leasing and  financing,  for a portion of the
development  cost of the restaurant we plan to open in 2002. The remaining costs
will be funded by available  cash  reserves,  cash provided from  operations and
borrowing capacity.  Management believes such sources will be sufficient to fund
our expansion  plans through 2002.  Should our actual results of operations fall
short of, or our rate of expansion  significantly  exceed  plans,  or should our
costs  of  capital  expenditures  exceed  expectations,  we  may  need  to  seek
additional


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financing  in  the  future.  In  negotiating  such  financing,  there  can be no
assurance that we will be able to raise additional capital on terms satisfactory
to us.

The Company has a $5,960,000  mortgage  revolving line of credit with a bank. As
of June 16,  2002,  we had  outstanding  borrowings  under the line of credit of
$5,501,148.  The note bears  interest  at the prime rate plus .25% (5.0% at June
16, 2002) and is due December 31, 2003. The Company also has a $975,000 mortgage
revolving  line of credit with a bank. As of June 16, 2002,  we had  outstanding
borrowings under the line of credit of $924,868.  The note bears interest at the
prime  rate plus 2.0%  (6.75% at June 16,  2002).  In  accordance  with the loan
agreement,  the $975,000  mortgage  revolving line of credit note was reduced to
$925,000 on June 30, 2002. The note matures April 1, 2003. Both of the revolving
lines  of  credit  impose  restrictions  on  the  Company  with  respect  to the
maintenance of certain  financial  ratios,  the incurrence of indebtedness,  the
sale of assets, mergers, capital expenditures and the payment of dividends.

The Company was in violation of the debt coverage ratio covenant  related to the
revolving  lines of credit  (balances  as of June 16, 2002 were  $5,501,148  and
$924,868) as of June 16, 2002. The covenant  violation  resulted  primarily from
the amount of the current  maturities of debt.  The lenders have waived the debt
covenant  violation  as of June 16,  2002.  The  Company  is  currently  seeking
financing which would replace the majority of the Company's  debt.  There can be
no assurances  that this  financing will be obtained or that such financing will
be  available on terms  acceptable  to the Company.  If the  refinancing  is not
obtained by the end of the third  quarter,  it is  uncertain at this time if the
Company will be in compliance  with the debt coverage  ratio  covenant in future
periods as a result of the  current  maturities  of debt.  If it does not comply
with the covenants in future  periods,  the lenders would be entitled,  at their
discretion, to exercise certain remedies including acceleration of repayment.

OTHER EVENTS

Beginning January 1, 2002, the Company  implemented a 401(k) plan. All employees
who are at least 21 years of age with one year of service in which they worked a
minimum of 1,000 hours are  eligible.  An employee can  contribute  up to 15% of
their  gross  salary.  The  Company  will match 25% of the first 4% an  employee
contributes.  The employee becomes vested in the Company contribution based on a
five-year vesting schedule.

During the second quarter of 2002, the Company was notified that its application
to list its Common Stock on The Nasdaq  SmallCap  Market had been approved.  The
Company's  securities  were  transferred  to The Nasdaq  SmallCap  Market at the
opening of business on Tuesday,  May 28, 2002 and  continues  to trade under the
symbol of TWED.

On June 3, 2002, a group  consisting of Gerald Mansbach,  the Company's  largest
stockholder,  Terrance A. Smith,  the  Company's  Chairman,  President and Chief
Executive  Officer,  and David M. Roth, a director of the  Company,  submitted a
proposal to the Company's Board of Directors to acquire all the Company's common
stock not currently owned by them or others they may invite to join their group.
The proposal  contemplates a cash tender offer price of $1.75 per share. On June
5, 2002, three additional directors, Minx Auerbach, George Keller and Lewis Bass
joined Gerald Mansbach, Terrance A. Smith and David M. Roth in their proposal to
acquire all the  Company's  common  stock not owned by their group at a price of
$1.75 per share. The group owns  approximately 60% of the Company's  outstanding
common stock.

The Board has appointed a Special Committee of independent directors to evaluate
the proposal. The Special Committee has engaged an investment banking firm and a
law firm to act as advisors in  connection  with its review of the tender  offer
proposal.

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 effect of  inflation
through periodic menu price increases, economies of scale in purchasing and cost
controls and efficiencies at existing restaurants.




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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 is exposed to interest  rate
changes primarily as a result of variable rate debt instruments.  As of June 16,
2002, approximately  $11,050,000 of the Company's debt bore interest at variable
rates.  A 1% change in the  variable  interest  rate on this debt  equates to an
approximate $100,000 change in interest for a twelve month period.





















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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 is
in negotiation with the bank under the equipment leases and the other guarantors
to resolve the  Company's  obligations  relative to the  equipment  leases.  The
Company  believes  that  it  will  be  obligated  to  assume  and pay one of the
equipment leases totaling  approximately  $125,000 and will remain  contingently
liable on two other equipment  leases which the Company believes will be assumed
and paid by other  guarantors.  These  negotiations are ongoing and no agreement
has been reached. If no agreement is reached,  the Company would have additional
exposure  totaling  approximately  $180,000.  In the fourth quarter of 2001, the
Company reserved $125,000 to cover its portion of the equipment lease it expects
to assume.  The  Company's  management  believes  it will not incur  significant
additional losses in connection with this matter.



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits  - None

(b)      Reports on Form 8-K

         Tumbleweed,  Inc.  (the  Company)  filed  Form 8-K  on May 24,  2002 to
         report  under  Item 5 and Item 7,  Exhibit  99.1,  that  the  Company's
         securities were being  transferred to The Nasdaq SmallCap Market at the
         opening of business on Tuesday, May 28, 2002.

         The Company  filed  Form 8-K on June 3, 2002 to report under Item 5 and
         Item 7, Exhibit 99.1, that a group consisting of Gerald  Mansbach,  the
         Company's  largest  stockholder,   Terrance  A.  Smith,  the  Company's
         Chairman,  President and Chief Executive Officer,  and David M. Roth, a
         director of the Company, submitted a proposal to the Company's Board of
         Directors to acquire all the  Company's  stock not  currently  owned by
         them or by others  they may invite to join their  group.  The  proposal
         contemplates a cash tender offer price of $1.75 per share.

         The Company  filed  Form 8-K on June 5, 2002 to report under Item 5 and
         Item 7, Exhibit 99.1, that three additional  directors were joining the
         group  which had,  on June 3, 2002,  made a proposal  to the  Company's
         Board of Directors  to acquire all the  Company's  stock.  The Form 8-K
         also reported  that a Special  Committee of  independent  directors had
         been appointed by the Board to evaluate the proposal.

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






















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                                    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:       July 30, 2002                            Tumbleweed, Inc.

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








































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