UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

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

                  For the quarterly period ended March 24, 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 May 1, 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
                  twelve weeks ended March 24, 2002 and the three
                  months ended March 31, 2001                              3
               b) Consolidated Balance Sheets as of March 24, 2002 and
                  December 31, 2001                                        4
               c) Consolidated Statements of Cash Flows for the twelve
                  weeks ended March 24, 2002 and the three months ended
                  March 31, 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                                                       19


PART II.    OTHER INFORMATION

      Item 1.     Legal Proceedings                                       20
      Item 6.     Exhibits and Reports on Form 8-K                        21

Signature                                                                 22





                                        2

<PAGE>

<TABLE>


                                Tumbleweed, Inc.
                      Consolidated Statements of Operations
                                   (Unaudited)


<CAPTION>



                                                                    Twelve Weeks       Three Months
                                                                       Ended               Ended
                                                                      March 24,          March 31,
                                                                        2002               2001
                                                                  ----------------   -----------------
Revenues:
<S>                                                              <C>                <C>
   Restaurant sales                                              $      13,463,593  $       13,651,652
   Commissary sales                                                        381,886             455,747
   Franchise fees and royalties                                            249,848             336,446
   Other revenues                                                           89,427             190,419
                                                                  ----------------   -----------------

Total revenues                                                          14,184,754          14,634,264

Operating expenses:
   Restaurant cost of sales                                              4,072,607           4,378,405
   Commissary cost of sales                                                346,935             397,517
   Operating expenses                                                    7,390,657           7,530,279
   Selling, general and administrative expenses                          1,437,077           1,560,879
   Depreciation and amortization                                           457,319             574,567
                                                                  ----------------   -----------------

Total operating expenses                                                13,704,595          14,441,647
                                                                  ----------------   -----------------

Income from operations                                                     480,159             192,617

Other income (expense):
   Interest expense, net                                                  (234,078)           (382,024)
   Equity in income of TW-Springhurst                                            -              12,683
                                                                  ----------------   -----------------

Total other expense                                                       (234,078)           (369,341)
                                                                  ----------------   -----------------

Income (loss) before income taxes and cumulative effect of
    a change in accounting  principle                                      246,081            (176,724)
Provision (benefit) for income taxes - current and deferred                108,276             (58,320)
                                                                  ----------------   -----------------

Income (loss) before cumulative effect of a change in
    accounting principle                                                   137,805            (118,404)
Cumulative effect of a change in accounting  principle, net
    of tax ($845,873)                                                   (1,503,773)                  -
                                                                  ----------------   -----------------
Net loss                                                         $      (1,365,968)  $        (118,404)
                                                                  ================   =================

Basic and diluted earnings (loss) per share:
    Income (loss) before cumulative effect of a change in
         accounting principle                                    $            0.02  $            (0.02)
    Cumulative effect of a change in accounting  principle,
        net of tax                                                           (0.25)                  -
                                                                  ----------------   -----------------
    Net loss                                                     $           (0.23)  $           (0.02)
                                                                  ================   =================
</TABLE>

See accompanying notes.


                                        3

<PAGE>
<TABLE>



                                Tumbleweed, Inc.
                           Consolidated Balance Sheets
<CAPTION>

                                                                          March 24,
                                                                            2002               December 31,
                                                                         (Unaudited)               2001
                                                                        --------------        --------------
Assets
Current assets:
<S>                                                                    <C>                   <C>
   Cash and cash equivalents                                           $       717,321       $       757,266
   Accounts receivable, net of allowance of $4,202
      in 2001 and 2002                                                         404,701               350,586
   Inventories                                                               1,822,071             1,785,481
   Deferred income taxes                                                             -               123,318
   Prepaid expenses and other assets                                           652,940               517,280
                                                                        --------------        --------------
Total current assets                                                         3,597,033             3,533,931
Property and equipment, net                                                 28,302,550            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                                                          855,465                     -
Other assets                                                                   634,257               507,320
                                                                        --------------        --------------
Total assets                                                           $    35,061,928       $    34,897,350
                                                                        ==============        ==============

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                                                    $     1,652,853       $     1,269,967
   Accrued liabilities                                                       3,068,878             3,542,511
   Deferred income taxes                                                       205,011                     -
   Current maturities on long-term
     debt and capital leases                                                 1,541,680             1,601,374
                                                                        --------------        --------------
Total current liabilities                                                    6,468,422             6,413,852

Long-term liabilities:
   Long-term debt, less current maturities                                  13,471,218            11,843,939
   Capital lease obligations, less current maturities                        1,769,235             1,989,820
   Deferred income taxes                                                             -                30,716
   Other liabilities                                                           120,000               120,000
                                                                        --------------        --------------
Total long-term liabilities                                                 15,360,453            13,984,475
                                                                        --------------        --------------
Total liabilities                                                           21,828,875            20,398,327

Commitments and contingencies (Note 9)

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 March 24, 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                                                         (2,965,074)           (1,599,106)
                                                                        --------------        --------------
     Total stockholders' equity                                             13,233,053            14,499,023
                                                                        --------------        --------------
Total liabilities and stockholders' equity                             $    35,061,928       $    34,897,350
                                                                        ==============        ==============
</TABLE>

See accompanying notes.

                                       4

<PAGE>

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

<TABLE>
<CAPTION>


                                                                         Twelve Weeks         Three Months
                                                                             Ended               Ended
                                                                           March 24,           March 31,
                                                                             2002                 2001
                                                                       -----------------    ----------------

Operating activities:
<S>                                                                   <C>                  <C>
   Net loss                                                           $       (1,365,968)  $        (118,404)
   Adjustments to reconcile net loss  to net
       cash provided by operating activities:
        Depreciation and amortization                                            457,319             574,567
        Deferred income taxes                                                   (557,852)            132,604
        Equity in income of TW-Springhurst                                             -             (12,683)
        Loss on disposition of property and equipment                             19,496              16,260
        Cumulative effect of a change in accounting principle                  2,349,646                   -
        Changes in operating assets and liabilities:
          Accounts receivable                                                    (53,240)            156,918
          Income tax receivable                                                 (154,968)           (191,499)
          Inventories                                                             19,084            (201,591)
          Prepaid expenses                                                        16,951              40,142
          Other assets                                                          (129,685)              9,689
          Accounts payable                                                       384,972             920,849
          Accrued liabilities                                                   (473,633)           (431,993)
          Other liabilities                                                            -              20,000
                                                                       -----------------    ----------------
Net cash provided by operating activities                                        512,122             914,859

Investing activities:
    Purchases of property and equipment                                          (72,707)           (815,191)
   Business acquisition                                                         (267,000)                  -
   Distribution from TW-Springhurst                                                    -              60,000
                                                                       -----------------    ----------------
Net cash used in investing activities                                           (339,707)           (755,191)

Financing activities:
   Proceeds from issuance of long-term debt                                    1,113,394           1,349,000
   Payments on long-term debt and capital lease obligations                   (1,325,754)         (1,789,398)
                                                                       -----------------    ----------------
Net cash used in investing activities                                           (212,360)           (440,398)
                                                                       -----------------    ----------------

Net decrease in cash and cash equivalents                                       (39,945)            (280,730)

Cash and cash equivalents at beginning of period                                 757,266             281,829
                                                                       -----------------    ----------------
Cash and cash equivalents at end of period                            $          717,321   $           1,099
                                                                       =================    ================



</TABLE>


See accompanying notes.





                                        5

<PAGE>




                                TUMBLEWEED, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                 March 24, 2002


1.  BASIS OF PRESENTATION

Restaurant Facilities

As of March 24, 2002,  the Company  owned,  franchised or licensed 59 Tumbleweed
restaurants.  The Company owned and operated 32 restaurants in Kentucky, Indiana
and Ohio.  There were 21 franchised  restaurants  located in Indiana,  Illinois,
Kentucky,  Michigan, Virginia 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 twelve weeks ended March 24, 2002.


Company-owned restaurants:
     In operation, beginning of period                36
     Restaurants opened                                0
     Restaurants closed                               (4)
                                                --------
     In operation, end of period                      32

Franchise and licensed restaurants:
     In operation, beginning of period                29
     Restaurants opened                                0
     Restaurants closed                               (2)
                                                --------
     In operation, end of period                      27
                                                --------
         System Total                                 59
                                                ========

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.

The two licensed  restaurants which closed during the first quarter of 2002 were
located in Germany and Saudi Arabia.

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 twelve
weeks ended March 24, 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 quarter of 2002 consists of 83 days compared to
90 days in 2001 which resulted in lower revenues of approximately $1,025,000.

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 has  adopted  the  provisions  of SFAS No. 144 as of
January  1,  2002 and has  determined  that  SFAS No.  144 has 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 loss and loss per share would have been as follows:


                                          Twelve Weeks           Three Months
                                              Ended                  Ended
                                            March 24,              March 31,
                                              2002                   2002
                                         ---------------        ---------------

Net loss                                $     (1,365,968)      $       (118,404)
Add back:
     Goodwill amortization, net of tax                 -                 35,063
                                         ---------------        ---------------
Adjusted net loss                       $     (1,365,968)      $        (83,341)
                                         ===============        ===============

Basic and diluted loss per share:
    Net loss                            $          (0.23)      $          (0.02)
    Goodwill amortization, net of tax                  -                   0.00
                                         ---------------        ---------------
    Adjusted net loss                   $          (0.23)      $          (0.02)
                                         ===============        ===============






                                        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 March 24, 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 unamortized  intangible
asset in the amount of $1,497,966 and is included in the corporate segment.

3.   ACCRUED LIABILITIES

Accrued liabilities consist of:

                                                   March 24,     December 31,
                                                     2002            2001
                                                -------------    ------------

Accrued payroll, severance and related taxes    $   1,086,655    $    946,545
Accrued insurance and fees                             75,038         192,978
Accrued taxes, other than payroll                     847,376         683,449
Gift certificate liability                            275,108         475,914
Reserve for loss on guarantees of indebtedness        150,524         565,000
Reserve for store closing costs                       532,091         601,186
Other                                                 102,086          77,439
                                                 ------------     -----------
                                                $   3,068,878    $  3,542,511
                                                 ============     ===========

4.   LONG-TERM DEBT

Long-term debt consists of:


                                                   March 24,      December 31,
                                                     2002            2001
                                                 ------------     -----------
Secured  $5,960,000  mortgage revolving line
of credit note, bearing interest at
prime rate plus .25% (5.0% at March 24,
2002), due December 31, 2003                    $   5,591,148    $  5,726,148

Secured mortgage note payable, bearing interest
at commercial paper rate plus 2.65% (4.45% at
March 24, 2002), due April 1, 2003                  2,252,059       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                               1,394,765               -

Secured mortgage note payable, bearing interest
at prime rate plus 1% (5.75% at March 24, 2002),
payable in monthly installments through
October 1, 2017                                       999,803       1,009,847



                              (Continued next page)



                                        8

<PAGE>



4.   LONG-TERM DEBT (continued)


                                                  March 24,       December 31,
                                                     2002            2001
                                                 ------------     -----------

Secured mortgage note payable, bearing interest
at 8.75%, payable in monthly installments
through February 15, 2008                       $     871,152    $    881,933


Secured  $975,000  mortgage  revolving line of
credit note,  bearing interest at prime rate
plus 2.0% (6.75% at March 24, 2002), due
April 1, 2003                                         964,868         964,868

Secured  mortgage note payable, bearing interest
at prime rate (4.75% at March 24, 2002), payable
in monthly installments through March 1, 2006         602,123         613,632

Secured mortgage note payable, bearing interest
at prime rate plus 1.25% (6.0% at March 24,
2002), payable in monthly installments through
November 27, 2016                                     550,000         559,375

Secured mortgage note payable, bearing interest
at 10.52%, payable in monthly installments
through August 18, 2005                               394,255         417,937

Unsecured note payable bearing interest at
7.50%, due February 22, 2007                          297,797              -

Secured mortgage note payable, bearing interest
at commercial paper rate plus 2.65% (4.45% at
March 24, 2002), due April 1, 2003                    224,611         224,611

Other installment notes payable                       406,614         206,167
                                                 ------------     -----------

                                                   14,549,195      12,904,085
Less Current maturities                             1,077,977       1,060,146
                                                 ------------     -----------
Long-term debt                                  $  13,471,218    $ 11,843,939
                                                 ============     ===========


Property and equipment  with a net book value of  approximately  $21,700,000  at
March 24, 2002 collateralize the Company's long-term debt.
























                                        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 twelve weeks ended March 24, 2002 and three months
ended March 31, 2001 in accordance with FAS 128, "Earnings per Share."
<TABLE>
<CAPTION>


                                                                        Twelve Weeks        Three Months
                                                                           Ended                Ended
                                                                         March 24,            March 31,
                                                                            2002                2001
                                                                      ----------------    -----------------
Numerator:
<S>                                                                  <C>                 <C>
    Income (loss) before cumulative effect of a change in accounting
      principle                                                      $         137,805   $         (118,404)
    Cumulative effect of a change in accounting principle, net of tax       (1,503,773)                   -
                                                                      ----------------    -----------------
    Net Loss                                                         $      (1,365,968)  $         (118,404)
                                                                      ================    =================

Denominator:
   Weighted average shares
      outstanding - basic                                                    5,916,153            5,839,230
   Effect of dilutive securities:
      Director and employee stock options                                        3,463                   51
                                                                      ----------------    -----------------
   Denominator for diluted earnings per share -
      adjusted weighted average and assumed conversions                      5,919,616            5,839,281
                                                                      ================    =================

</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 twelve weeks ended March 24, 2002 is as follows:
<TABLE>
<CAPTION>



                                                       Restaurant       Commissary        Corporate         Totals
                                                      -------------    ------------     -------------    -------------
Revenues from external
<S>                                                 <C>              <C>               <C>              <C>
   customers                                        $    13,463,593  $      381,886    $      339,275   $  14,184,754
Intersegment revenues                                             -         572,829                 -         572,829
General and
   administrative expenses                                        -               -           983,162         983,162
Advertising expenses                                              -               -           453,915         453,915
Depreciation and
   amortization                                             374,613          18,831            63,875         457,319
Net interest expense                                              -          35,292           198,786         234,078
Income (loss) before income taxes and
 cumulative effect of a change in accounting
 principle                                                1,557,766          13,300        (1,324,985)        246,081

</TABLE>





                                        10


<PAGE>
6.  SEGMENT INFORMATION (continued)

Segment information for the three months ended March 31, 2001 is as follows:
<TABLE>
<CAPTION>



                                                       Restaurant       Commissary        Corporate         Totals
                                                      -------------    ------------     -------------    -------------
Revenues from external
<S>                                                 <C>              <C>               <C>              <C>
   customers                                        $    13,651,652  $      455,747    $      526,865   $  14,634,264
Intersegment revenues                                             -         683,620                 -         683,620
General and
   administrative expenses                                        -               -         1,102,367       1,102,367
Advertising expenses                                              -               -           458,512         458,512
Depreciation and
   amortization                                             452,916          26,649            95,002         574,567
Net interest expense                                              -          44,025           337,999         382,024
Income (loss) before income taxes                         1,170,783          29,959        (1,377,466)       (176,724)
</TABLE>

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 three months ended
March 31,  2001,  the  Company  received a cash  distribution  of  $60,000  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 $12,683 for the three months ended March 31,
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  $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  certain  assets  from  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 will also enter
into  a  commission   agreement  with  CCIO  in  connection  with  the  sale  of
international regional licenses by International.








                                       11

<PAGE>


8.  ACQUISITION OF INTERNATIONAL (continued)

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  tentative  pending  completion  of  the  valuation  of  the
intangible assets.


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 twelve weeks ended March 24, 2002
and the three months ended March 31, 2001 have been provided for at an estimated
effective tax rate of 44% and 33%, 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  renewals  of certain  guaranteed  indebtedness  and any
replacement   indebtedness   of  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,  to the extent and in amounts  not to
exceed the  amounts  guaranteed  as of  September  30,  1998.  The  Company  had
guaranteed certain  TW-Tennessee  obligations as follows,  jointly and severally
with  TW-Tennessee  common  members:  a) up to  $1,200,000  under a bank line of
credit,  b)  approximately  $2,800,000 of a lease  financing  agreement,  and c)
equipment leases with a bank.

In March 2001, the bank which held the line of credit  extended to  TW-Tennessee
filed suit in the  Circuit  Court of  Jefferson  County,  Kentucky  against  the
Company,  the Director and others to enforce certain limited guaranty agreements
(the "Tennessee  Litigation").  The Company paid the sum of $195,044 against its
line of credit  guarantee in September  2000. The Company  undertook  settlement
discussions with the bank and the other guarantors  during 2001. On December 28,
2001, the court entered summary  judgment  against the Company and certain other
guarantors  including the affected Director.  The amount of the judgment against
the Company was  $1,004,956.  Prior to  enforcement of the judgment by the bank,
the parties  continued  settlement  discussions which resulted in the settlement
described below.

By complaint dated October 4, 2001, Douglas H. Morris, II and Michael R. Greene,
plaintiffs,  filed an action (the  "Morris and Greene  Lawsuit")  in the Circuit
Court  of  Jefferson   County,   Kentucky   against  the   Company,   Tumbleweed
International,  LLC and others,  including David Roth, a current Director of the
Company,  alleging damage to the plaintiffs as a result of (i) the management of
the  TW-Tennessee   restaurants  by  the  Company,  (ii)  the  alleged  wrongful
application of proceeds of the Company's purchase of the Medina, Ohio restaurant
and  (iii)  the  alleged  wrongful  conversion  of loan  proceeds  belonging  to
TW-International, LLC to TWED-Charleston, Inc. Prior to answering the complaint,
the Company  entered  into  settlement  discussions  with the  plaintiffs  which
resulted in the settlement described below.

Beginning in 2001, the Company had settlement  discussions with the bank holding
the  TW-Tennessee  line of credit,  the other guarantors of that line of credit,
the plaintiffs in the Morris and Greene Lawsuit and certain of the  shareholders
of TW International Investors,  Inc. and TWI-B, Inc. regarding the resolution of
the Tennessee Litigation, the Morris and Greene Lawsuit and related matters.

On  February  28,  2002,  the Company  entered  into a  Confidential  Settlement
Agreement and Mutual  Release (the  "Settlement  Agreement")  which resolved the
Tennessee  Litigation,  the Morris and Greene Lawsuit and related  matters.  The
Settlement  Agreement  provided  for a cash  payment by the  Company to the bank
holding  the  TW-Tennessee  line of credit of  $75,000  and the  execution  of a
promissory note, payable to the bank, in the face amount of $300,000. In


                                       12

<PAGE>



10.  CONTINGENCIES (continued)

addition,  subject to certain  conditions,  the Company  will pay to the bank an
additional amount of up to $200,000 in the event Tumbleweed  International,  LLC
successfully  sells  regional  international  licenses and receives  proceeds in
excess of the  $1,400,000 in  indebtedness  assumed by the Company in connection
with its acquisition of the interests of TW  International  Investors,  Inc. and
TWI-B, Inc. in Tumbleweed International, LLC (see Note 8). The completion of the
acquisition of the interests of TW International Investors, Inc. and TWI-B, Inc.
in Tumbleweed International, LLC is included in the Settlement Agreement.

As a result of the Settlement Agreement, the Tennessee Litigation and the Morris
and Greene Lawsuit were dismissed.  In addition,  the parties to the settlement,
including  certain  Directors of the Company (George  Keller,  David M. Roth and
Minx Auerbach),  granted mutual  releases to one another  regarding all matters,
other than those  specifically  excluded.  Among the matters  excluded  from the
mutual release contained in the Settlement  Agreement are claims asserted by the
holder of the equipment leases granted to TW-Tennessee relative to guarantees by
the Company  and others,  including  David M. Roth,  a Director of the  Company,
relative to such equipment  leases.  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, as a result of the settlement  discussions,  the
Company  increased a reserve  established  in 2000 by the  additional  amount of
$565,000, for a total of $1,290,000,  of which approximately $1,140,000 had been
paid out as of March 24, 2002.  The Company  increased this reserve to cover its
portion of the settlement  payments to the bank holding the TW-Tennessee line of
credit and pay  related  costs,  including  legal  expenses.  The  reserve  also
includes an additional  charge for the equipment lease which the Company expects
to assume, and for payments made by the Company in 2001 on other lease financing
claims related to TW-Tennessee.  The Company's  management  believes it will not
incur significant additional losses in connection with these matters.











                                       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  March  24,  2002,  we  owned,   franchised  or  licensed  59  Tumbleweed
restaurants.  The Company owned and operated 32 restaurants in Kentucky, Indiana
and Ohio. There were 21 franchised restaurants in Indiana,  Illinois,  Kentucky,
Wisconsin,  Virginia 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  for  a  further  discussion  of  this
transaction.

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>

                                                            Twelve Weeks    Three Months
                                                               Ended            Ended
                                                              March 24        March 31
                                                                2002            2001
                                                           --------------   -------------
Revenues:
<S>                                                                  <C>             <C>
   Restaurant sales                                                  94.9  %         93.3  %
   Commissary sales                                                   2.7             3.1
   Franchise fees and royalties                                       1.8             2.3
   Other revenues                                                     0.6             1.3
                                                           --------------   -------------
     Total revenues                                                 100.0           100.0
Operating expenses:
   Restaurant cost of sales (1)                                      30.2            32.1
   Commissary cost of sales (2)                                      90.8            87.2
   Operating expenses (1)                                            54.9            55.2
   Selling, general and administrative expenses                      10.1            10.7
   Depreciation and amortization                                      3.2             3.9
     Total operating expenses                                        96.6            98.7
                                                           --------------   -------------
     Income from operations                                           3.4             1.3
Other expense, net                                                   (1.7)           (2.5)
                                                           --------------   -------------
Income (loss) before income taxes and cumulative
    effect of a change in accounting principle                        1.7            (1.2)
Provision (benefit) for income taxes - current
   and deferred                                                       0.7            (0.4)
                                                                            -------------
Income (loss) before cumulative effect of a
   change in accounting principle                                     1.0            (0.8)
Cumulative effect of a change in accounting
   principle, net of tax                                            (10.6)              -
                                                           --------------   -------------
Net  loss                                                            (9.6) %         (0.8)%
                                                           ==============   =============

</TABLE>

 (1)   As percentage of restaurant sales.
 (2)   As percentage of commissary sales.

COMPARISON OF THE FIRST QUARTER OF 2002 AND 2001

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  quarter of 2002
consists of 83 days compared to 90 days in 2001. On an overall  basis,  revenues
and expenses  decreased as a result of 7 fewer days in the first quarter of 2002
compared to the first quarter of 2001.

Total  revenues  decreased  by  $431,865  or 3.0% for the first  quarter of 2002
compared to the same period in 2001 primarily as a result of the following:

   Restaurant  sales decreased by $188,059 or 1.4% for the first quarter 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, as discussed
   above.  The  decrease  in  restaurant  sales is  partially  offset  by a 3.1%
   increase in same store sales for the first quarter.

   Commissary sales to franchised and licensed restaurants  decreased by $73,861
   or 16.2% for the first  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  $86,598 or 25.7% for the first
   quarter  of 2002  compared  to the  same  period  in 2001.  Franchise  income
   decreased  $70,000  primarily as a result of having two franchise  restaurant
   openings in the first  quarter of 2001  compared to no  franchise  restaurant
   openings during the first quarter of 2002.


                                       15

<PAGE>



   Royalty  income  decreased  $16,598  primarily  as a result of the  Company's
   change in its fiscal year, as discussed above.

   Other  revenues  decreased by $100,992 or 53.0% for the first quarter of 2002
   compared to the same period in 2001  primarily due to 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 first  quarter of 2001.  There was no
   similar income in the first quarter of 2002.

Restaurant  cost of sales decreased by $305,798 or 7.0% for the first quarter 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
1.9% to 30.2% for the first  quarter of 2002  compared to 32.1%  during the same
period in 2001.  The 1.9% 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  $50,582 or 12.7% for the first  quarter of
2002  compared to the same period in 2001.  The decrease in  commissary  cost of
sales is due primarily to decreased  sales of Mexican  products  produced by the
commissary.  As a  percentage  to  commissary  sales,  commissary  cost of sales
increased 3.6% for the first quarter of 2002 compared to the same period in 2001
as a result of higher raw material product costs.

Restaurant  operating  expenses  decreased  by  $139,622  or 1.9% for the  first
quarter 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  decreased as a percentage  of restaurant
sales by 0.3% to 54.9% for the  first  quarter  of 2002 from  55.2% for the same
period in 2001.

Selling,  general and administrative  expenses decreased by $123,802 or 7.9% for
the first quarter of 2002  compared to the same period in 2001.  The decrease in
selling, general and administrative expenses for the first quarter is due to the
fact that the first quarter of 2001 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 10.7% for the first quarter of 2002 and
2001, respectively.

Depreciation and amortization  expense decreased $117,248 or 20.4% for the first
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  $147,946 or 38.7% for the first quarter of 2002
compared to the same period in 2001.  The decrease in net  interest  expense for
the first  quarter 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 twelve weeks ended March 24, 2002
and the three months ended March 31, 2001 have been provided for at an estimated
effective tax rate of 44% and 33%, 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.

LIQUIDITY AND CAPITAL RESOURCES

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




                                       16

<PAGE>



Our capital needs during the period ended March 24, 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  March  31,  2001  arose  from  the
reconstruction  of a restaurant  facility  which was damaged by fire during June
2000, and to a lesser extent, maintenance and improvement of existing restaurant
facilities.  The  source of  capital to fund the  reconstruction  was  insurance
proceeds received during 2000. The maintenance 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.



                                            Twelve Weeks        Three Months
                                               Ended                Ended
                                             March 24,            March 31,
                                                2002                2001
                                          ----------------    -----------------
Net cash provided by operations          $         512,122   $          914,859
Purchases of property and equipment                (72,202)            (815,191)
Business acquisition                              (267,000)                   -
Net borrowings (payments) on long-term
   debt and capital lease obligations             (212,360)            (440,398)

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

The Company  guaranteed  renewals  of certain  guaranteed  indebtedness  and any
replacement   indebtedness   of  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,  to the extent and in amounts  not to
exceed the  amounts  guaranteed  as of  September  30,  1998.  The  Company  had
guaranteed certain  TW-Tennessee  obligations as follows,  jointly and severally
with  TW-Tennessee  common  members:  a) up to  $1,200,000  under a bank line of
credit,  b)  approximately  $2,800,000 of a lease  financing  agreement,  and c)
equipment leases with a bank.

Beginning in 2001, the Company had settlement  discussions with the bank holding
the TW-Tennessee line of credit, the other guarantors of that line of credit and
certain of the shareholders of TW International Investors, Inc. and TWI- B, Inc.
regarding the resolution of the Tennessee Litigation and related matters.

On  February  28,  2002,  the Company  entered  into a  Confidential  Settlement
Agreement and Mutual  Release (the  "Settlement  Agreement")  which resolved the
Tennessee  Litigation and related matters. The Settlement Agreement provided for
a cash  payment by the  Company to the bank  holding  the  TW-Tennessee  line of
credit of $75,000 and the execution of a promissory  note,  payable to the bank,
in the face amount of $300,000. In addition,  subject to certain conditions, the
Company will pay to the bank an additional amount of up to $200,000 in the event
Tumbleweed International, LLC successfully sells regional international licenses
and receives proceeds in excess of the $1,400,000 in indebtedness assumed by the
Company in connection with its acquisition of the interests of TW  International
Investors, Inc. and TWI-B, Inc. in Tumbleweed International, LLC. The completion
of the  acquisition  of the interests of TW  International  Investors,  Inc. and
TWI-B,  Inc. in  Tumbleweed  International,  LLC is  included in the  Settlement
Agreement.

As a result of the Settlement Agreement, the Tennessee Litigation was dismissed.
In addition,  the parties to the settlement,  including certain Directors of the
Company  (George  Keller,  David M. Roth and Minx M.  Auerbach),  granted mutual
releases to one another  regarding  all matters,  other than those  specifically
excluded.  Among the matters  excluded from the mutual release  contained in the
Settlement  Agreement are claims asserted by the holder of the equipment  leases
granted to  TW-Tennessee  relative  to  guarantees  by the  Company  and others,
including  David M. Roth, a Director of the Company,  relative to such equipment
leases.  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


                                       17

<PAGE>



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, as a result of the settlement  discussions,  the Company
increased a reserve  established in 2000 by the  additional  amount of $565,000,
for a total of $1,290,000,  of which approximately  $1,140,000 had been paid out
as of March 24, 2002. The Company increased this reserve to cover its portion of
the settlement  payments to the bank holding the TW-Tennessee line of credit and
pay related  costs,  including  legal  expenses.  The reserve  also  includes an
additional  charge for the equipment  lease which the Company expects to assume,
and for  payments  made by the Company in 2001 on other lease  financing  claims
related to  TW-Tennessee.  The Company's  management  believes it will not incur
significant additional losses in connection with these matters.

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

In the next 12 months,  the Company expects the demand on future liquidity to be
principally from the ongoing  maintenance and improvement of existing restaurant
facilities  and  from  the  construction  of one to  two  additional  restaurant
facilities.  As of March 24, 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  costs of restaurants  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 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 March 24, 2002,  we had  outstanding  borrowings  under the line of credit of
$5,591,148.  The note bears  interest at the prime rate plus .25% (5.0% at March
24, 2002) and is due December 31, 2003. The Company also has a $975,000 mortgage
revolving  line of credit with a bank. As of March 24, 2002, we had  outstanding
borrowings under the line of credit of $964,868.  The note bears interest at the
prime rate plus 2.0% (6.75% at March 24, 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.

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.

The Company has been  notified by Nasdaq that it has not met the minimum  public
float requirement of $5 million over 30 consecutive  trading days as required by
Nasdaq's National Market rules.  Nasdaq has given the Company until May 15, 2002
to regain  compliance.  The Company will not regain  compliance  by May 15, 2002
which  will  cause  Nasdaq to delist  the  Company's  securities  from  Nasdaq's
National Market System. The Company is currently evaluating its options.

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 March 24,
2002, approximately  $11,300,000 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  renewals  of certain  guaranteed  indebtedness  and any
replacement   indebtedness   of  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,  to the extent and in amounts  not to
exceed the  amounts  guaranteed  as of  September  30,  1998.  The  Company  had
guaranteed certain  TW-Tennessee  obligations as follows,  jointly and severally
with  TW-Tennessee  common  members:  a) up to  $1,200,000  under a bank line of
credit,  b)  approximately  $2,800,000 of a lease  financing  agreement,  and c)
equipment leases with a bank.

In March 2001, the bank which held the line of credit  extended to  TW-Tennessee
filed suit in the  Circuit  Court of  Jefferson  County,  Kentucky  against  the
Company,  the Director and others to enforce certain limited guaranty agreements
(the "Tennessee  Litigation").  The Company paid the sum of $195,044 against its
line of credit  guarantee in September  2000. The Company  undertook  settlement
discussions with the bank and the other guarantors  during 2001. On December 28,
2001, the court entered summary  judgment  against the Company and certain other
guarantors  including the affected Director.  The amount of the judgment against
the Company was  $1,004,956.  Prior to  enforcement of the judgment by the bank,
the parties  continued  settlement  discussions which resulted in the settlement
described below.

By complaint dated October 4, 2001, Douglas H. Morris, II and Michael R. Greene,
plaintiffs,  filed an action (the  "Morris and Greene  Lawsuit")  in the Circuit
Court  of  Jefferson   County,   Kentucky   against  the   Company,   Tumbleweed
International,  LLC and others,  including David Roth, a current Director of the
Company,  alleging damage to the plaintiffs as a result of (i) the management of
the  TW-Tennessee   restaurants  by  the  Company,  (ii)  the  alleged  wrongful
application of proceeds of the Company's purchase of the Medina, Ohio restaurant
and  (iii)  the  alleged  wrongful  conversion  of loan  proceeds  belonging  to
TW-International, LLC to TWED-Charleston, Inc. Prior to answering the complaint,
the Company  entered  into  settlement  discussions  with the  plaintiffs  which
resulted in the settlement described below.

Beginning in 2001, the Company had settlement  discussions with the bank holding
the  TW-Tennessee  line of credit,  the other guarantors of that line of credit,
the plaintiffs in the Morris and Greene Lawsuit and certain of the  shareholders
of TW International Investors,  Inc. and TWI-B, Inc. regarding the resolution of
the Tennessee Litigation, the Morris and Greene Lawsuit and related matters.

On  February  28,  2002,  the Company  entered  into a  Confidential  Settlement
Agreement and Mutual  Release (the  "Settlement  Agreement")  which resolved the
Tennessee  Litigation,  the Morris and Greene Lawsuit and related  matters.  The
Settlement  Agreement  provided  for a cash  payment by the  Company to the bank
holding  the  TW-Tennessee  line of credit of  $75,000  and the  execution  of a
promissory  note,  payable  to the  bank,  in the face  amount of  $300,000.  In
addition,  subject to certain  conditions,  the Company  will pay to the bank an
additional amount of up to $200,000 in the event Tumbleweed  International,  LLC
successfully  sells  regional  international  licenses and receives  proceeds in
excess of the  $1,400,000 in  indebtedness  assumed by the Company in connection
with its acquisition of the interests of TW  International  Investors,  Inc. and
TWI-B, Inc. in Tumbleweed International,  LLC. The completion of the acquisition
of the  interests  of TW  International  Investors,  Inc.  and  TWI-B,  Inc.  in
Tumbleweed International, LLC is included in the Settlement Agreement.

As a result of the Settlement Agreement, the Tennessee Litigation and the Morris
and Greene Lawsuit were dismissed.  In addition,  the parties to the settlement,
including  certain  Directors of the Company (George  Keller,  David M. Roth and
Minx Auerbach),  granted mutual  releases to one another  regarding all matters,
other than those  specifically  excluded.  Among the matters  excluded  from the
mutual release contained in the Settlement  Agreement are claims asserted by the
holder of the equipment leases granted to TW-Tennessee relative to guarantees by
the Company  and others,  including  David M. Roth,  a Director of the  Company,
relative to such equipment  leases.  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, as a result of the settlement  discussions,  the
Company  increased a reserve  established  in 2000 by the  additional  amount of
$565,000, for a total of $1,290,000, of which approximately $1,140,000 had been


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paid out as of March 24, 2002.  The Company  increased this reserve to cover its
portion of the settlement  payments to the bank holding the TW-Tennessee line of
credit and pay  related  costs,  including  legal  expenses.  The  reserve  also
includes an additional  charge for the equipment lease which the Company expects
to assume, and for payments made by the Company in 2001 on other lease financing
claims related to TW-Tennessee.  The Company's  management  believes it will not
incur significant additional losses in connection with these matters.

ITEM 6.   EXHIBITS AND REPORTS ON FORM

     (a)  Exhibits  - None

     (b)  Reports on Form 8-K

     Tumbleweed,  Inc. (the  Company)  filed Form 8-K on March 7, 2002 to report
under Item 5 the following  items:  a) a settlement  agreement  with the Bank of
Louisville  had  been  finalized  and the  reserve  for loss  contingencies  was
increased  $565,000;  b) a fourth  quarter  pre-tax  charge of $4.3  million  in
special  charges  related to the impairment of six  restaurants;  c) the Company
expected to write off goodwill of $2.3  million to comply with a new  accounting
standard;  and d) the  resignation of John A. Butorac,  Jr. as a Director of the
Company.

     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:       May 7, 2002                                Tumbleweed, Inc.

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








































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