<PAGE>   1
                       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 October 28, 2000
                                       ----------------

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

        FOR THE TRANSITION PERIOD FROM ___________ TO ___________

                         COMMISSION FILE NUMBER 0-27920

                              Garden Botanika, Inc.
                              ---------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                Washington                               91-1464962
                ----------                               ----------
    (STATE OR OTHER JURISDICTION OF           (IRS EMPLOYER IDENTIFICATION NO.)
     INCORPORATION OR ORGANIZATION)


                              8624 154th Avenue NE
                            Redmond, Washington 98052
                            -------------------------
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (425) 881-9603
                                 --------------
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]

INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT. YES [ ] NO [X]

THE REGISTRANT HAD 7,069,098 SHARES OF COMMON STOCK, $0.01 PAR VALUE,
OUTSTANDING AT OCTOBER 28, 2000.


<PAGE>   2
                              GARDEN BOTANIKA, INC.
                               INDEX TO FORM 10-Q

                                                                            PAGE

PART I - FINANCIAL INFORMATION .............................................   3

        ITEM 1 -    FINANCIAL STATEMENTS                                       3

               Balance Sheets...............................................  10

               Statements of Operations.....................................  11

               Statements of Cash Flows.....................................  12

               Notes to Financial Statements................................  13


        ITEM 2 -    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF
                    OPERATIONS..............................................   3

PART II - OTHER INFORMATION.................................................   8

        ITEM 1 - LEGAL PROCEEDINGS..........................................   8

        ITEM 2 - CHANGES IN SECURITIES......................................   9

        ITEM 3 - DEFAULTS UPON SENIOR SECURITIES............................   9

        ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS........   9

        ITEM 5 - OTHER INFORMATION..........................................   9

        ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K...........................   9


                                       2
<PAGE>   3
PART I - FINANCIAL INFORMATION:

ITEM 1 - FINANCIAL STATEMENTS -

        The unaudited balance sheet as of October 28, 2000, audited balance
sheet as of January 29, 2000 and unaudited statements of operations and cash
flows of Garden Botanika, Inc. (the "Company") for the nine-month periods ended
October 28, 2000 and October 30, 1999 are attached. Notes to the unaudited
financial statements are also attached.

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

        This discussion should be read in conjunction with the "Management's
Discussion and Analysis" section included in the Company's Annual Report on Form
10-K dated April 28, 2000, which has previously been filed with the Securities
and Exchange Commission.

        Certain statements in this discussion constitute "forward-looking
statements" and involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of the Company or
its industry to be materially different from any future results, performance or
achievements expressed or implied by such forward looking statements. Such
factors include, among other things, court actions related to the Company's
bankruptcy filing; the Company's losses and lack of profitability to date;
fluctuations and/or declines in comparable store sales results; competition; and
the Company's ability to successfully implement changes in its business
strategies.

        On April 20, 1999 (the "Petition Date"), Garden Botanika filed a
voluntary petition for relief under Chapter 11, Title 11 of the United States
Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the
Western District of Washington at Seattle, Washington (the "Bankruptcy Court"),
Case No. 99-04464 (the "Chapter 11 Case"). The Company's financial statements
have been prepared on a going-concern basis, which contemplates continuity of
operations, realization of assets, liquidation of liabilities and commitments in
the normal course of business. The Chapter 11 Case, related circumstances and
the losses from operations raise substantial doubt about the Company's ability
to continue as a going concern. The appropriateness of reporting on a
going-concern basis is dependent upon, among other things, confirmation of a
plan of reorganization and future profitable operations (see "Liquidity and
Capital Resources," "Legal Proceedings" and Note 1 to "Notes to Financial
Statements"). Realization of the Company's assets and liquidation of its
liabilities at their recorded amounts is subject to significant uncertainty.
While under the protection of Chapter 11, the Company may sell or otherwise
dispose of assets, and liquidate or settle liabilities, for amounts other than
those reflected in the accompanying financial statements. The financial
statements do not include any adjustments relating to the recoverability of the
value of recorded asset amounts or the amounts and classification of liabilities
that might be necessary as a consequence of a plan of reorganization. Because of
the seasonality of its mall-based business, the Company has historically
experienced net losses in the first three quarters of each fiscal year and this
pattern continued in fiscal 2000.

The Company expects to reorganize under Chapter 11 and propose a reorganization
plan that provides for emergence from bankruptcy at an appropriate time.
Following the grant by the Bankruptcy Court of its request, Garden Botanika and
its Creditors' Committee have been given the exclusive right to file a
reorganization plan through March 1, 2001 on a joint basis (the "Exclusive
Period"), provided that, if the Company were to file a non-consensual plan
during the Exclusive Period, the Company's Creditors' Committee would have the
right to file a competing plan. The

                                       3
<PAGE>   4
Bankruptcy Court may also grant a further request to extend the Exclusive
Period. There can be no assurance, however, that the Company will propose a plan
in a timely fashion or that, if requested, the Bankruptcy Court will grant a
further extension. After expiration of the Exclusive Period with any extensions,
creditors of the Company and other parties-in-interest have the right to propose
their own reorganization plans. Although management expects to file a
reorganization plan that provides the means for satisfying claims and interests
in the Company, there can be no assurance that a plan will be proposed or that,
if proposed, it will be confirmed by the Bankruptcy Court or that, if confirmed,
it will be consummated. At this time, it is not possible to predict the outcome
of the Chapter 11 Case or its effects on the Company's business.

        The Company had 109 stores in operation at October 28, 2000 compared to
148 stores at October 30, 1999 and 148 stores at January 29, 2000. The average
age of the Company's stores at October 28, 2000 was 69 months.

        The Company reports on a 52/53-week year, consisting of four 13-week
quarters. The fiscal year ends on the Saturday nearest the end of January.

        RESULTS OF OPERATIONS -

        (a) COMPARISON OF THE QUARTERLY PERIODS ENDED OCTOBER 28, 2000 AND
OCTOBER 30, 1999.

        Net Sales. Net sales for the third quarter of fiscal 2000 were $9.8
million, compared to net sales of $12.7 million for the comparable prior period,
a decrease of 23%. Store net sales decreased $3.0 million, or 27%, during the
quarter, primarily due to the decrease in the number of stores, combined with a
9% decrease in comparable store sales (sales for continuing stores open at least
one complete fiscal year). The 9% decrease in comparable store sales for the
quarter was driven by decreases of 12% in August, 8% in September and 6% in
October. In the third quarter of fiscal 1999, comparable store sales decreased
11%, consisting of decreases of 6% in August, 11% in September and 16% in
October. The Company's combined mail order and Internet sales decreased $26,000,
or 5%, versus the comparable prior period. Recognized revenue from sales of
annual memberships in the Company's discount-based "Garden Club" customer
loyalty program decreased $156,000, or 22%. Membership sales are amortized over
the course of twelve months. During the third quarter of fiscal 2000, the
Company recorded sales at wholesale in the amount of $345,000. There were no
sales at wholesale in the third quarter of fiscal 1999.

        Gross Margin. Gross margin increased as a percentage of net sales from
35% in the third quarter of fiscal 1999 to 36% in the third quarter of fiscal
2000. This increase primarily reflects improved occupancy costs due, in part, to
the taking of impairment reserves which reduced depreciation expense. The dollar
amount of gross margin decreased by $900,000, or 21%, primarily as a result of
the decrease in customer transactions due to the closure of stores.

        Operating Expenses.

            Stores and Catalog. The dollar amount of store and catalog expenses,
including distribution, decreased by $793,000, or 16%, from the comparable prior
period, primarily as a result of the decrease in the number of stores and
reductions in advertising expense. As a percentage of net sales, store and
catalog expenses increased to 43% from 39% in the third quarter of fiscal 1999
due to the overall decrease in sales.

            General and Administrative. The dollar amount of general and
administrative expenses decreased by $150,000, or 8%, from the comparable prior
period. As a percentage of net sales, general and administrative expenses were
16% in the third quarter of fiscal 2000 and 14% in the comparable prior period.

                                       4
<PAGE>   5
            Provision for Store Closing and Asset Impairment. During the fiscal
quarter ended October 30, 1999, the Company reviewed the asset values of its
stores individually in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121. As a result of that review, a charge in the amount
of $2.2 million was recorded at the end of the third quarter of fiscal 1999 to
recognize the potential impairment of the carrying value of the long lived
assets at 49 of its operating store locations. During the fiscal quarter ended
October 28, 2000, the Company again reviewed the asset values of its stores in
accordance with SFAS No. 121 and recorded a charge in the amount of $1.5 million
to recognize the potential impairment of the carrying value of the long lived
assets at 56 of its stores.

            The determination of impairment for any given store is highly
sensitive to assumptions regarding future performance. Therefore, there can be
no assurance that a future deterioration in performance will not require an
additional impairment charge for one or more of these stores, or that a future
charge may not be necessary for other stores.

        Operating Loss. For the reasons explained above, the Company's operating
loss deceased by $2.2 million, or 50%, to $2.2 million as compared to the third
quarter of fiscal 1999. As a percentage of net sales, the third quarter
operating loss decreased to 23% from 35% in the comparable prior period.

        Interest Income (Expense), Net. Net interest expense during the third
quarter of fiscal 2000 was $95,000, compared to net interest expense of $88,000
during the comparable prior period.

        Reorganization Charges. During the quarter ended July 29, 2000, the
Company incurred certain costs relating to the Chapter 11 bankruptcy
proceedings. These costs include legal and other professional fees for the third
quarter of approximately $128,000, compared to approximately $246,000 in the
comparable prior period.

        Income Tax Provision. Due to its pre-tax losses, the Company did not
record an income tax provision for the third quarter of either fiscal 2000 or
fiscal 1999.

        Net Loss and Per Share Data. The Company's net loss decreased 49% from
from $4.8 million, or $0.68 per share, during the third quarter of fiscal 1999
to $2.4 million, or $0.34 per share, during the third quarter of fiscal 2000.
The absolute dollar decrease in net loss was due to the factors discussed above.

        (b) COMPARISON OF THE NINE-MONTH PERIODS ENDED OCTOBER 28, 2000 AND
OCTOBER 30, 1999.

        Net Sales. Net sales for the nine-month period ended October 28, 2000
were $30.7 million, compared to net sales of $44.1 million for the comparable
prior period, a decrease of 30%. Store net sales decreased $13.6 million, or
35%, during the nine months, primarily due to the decrease in the number of
stores, combined with a 10% decrease in comparable store sales (sales for
continuing stores open at least one complete fiscal year). In the first nine
months of fiscal 1999, comparable store sales decreased 11%. The Company's
combined mail order and Internet sales decreased $231,000, or 12%, versus the
comparable prior period. Recognized revenue from sales of annual memberships in
the Company's discount-based "Garden Club" customer loyalty program decreased
$469,000, or 21%. During the first nine months of fiscal 2000, the Company
recorded sales at wholesale in the amount of $1.5 million. There were no sales
at wholesale for the first nine months of fiscal 1999.

                                       5
<PAGE>   6
        Gross Margin. Gross margin improved as a percentage of net sales from
34% in the first nine months of fiscal 1999 to 36% in the first nine months of
fiscal 2000. This increase primarily reflects the impact of the closure of
poorly performing stores with lower average margins than the Company's store
base at the period end. The dollar amount of gross margin decreased by $3.9
million, or 26%, primarily as a result of the decrease in customer transactions
due to the closure of stores.

        Operating Expenses.

             Stores and Catalog. The dollar amount of store and catalog
expenses, including distribution, decreased by $5.7 million, or 33%, from the
comparable prior period, primarily as a result of the decrease in the number of
stores and reductions in advertising expense. As a percentage of net sales,
store and catalog expenses decreased to 38% from 39% in the first nine months of
fiscal 1999, primarily due to the leveraging impact of the higher average sales
of the Company's continuing store base, the reductions in advertising and the
lower operating expense of sales at wholesale.

             General and Administrative. The dollar amount of general and
administrative expenses decreased by $1.1 million, or 19%, from the comparable
prior period, primarily reflecting the corporate expense reductions implemented
beginning in February of 1999 through reductions in the Company's workforce. As
a percentage of net sales, general and administrative expenses were 15% in the
first nine months of fiscal 2000 and 13% in the comparable prior period.

             Provision for Store Closing and Asset Impairment. During the first
nine months of fiscal 1999, the Company recorded a provision for store closure
of $6.6 million to cover the estimated lease termination and other store exit
costs associated with the closure of 95 poorly performing retail store locations
and the rejection of leases and a provision for impairment of the carrying value
of its long lived assets under FAS No. 121 in the amount of $2.2 million. These
amounts were offset by approximately $1.1 million in deferred rent liability for
the 95 rejected leases that had previously been recorded on the balance sheet.
During the first nine months of fiscal 2000, the Company closed 39 stores.
Substantially all costs associated with these closings were provided prior to
the first quarter of fiscal 2000. During the fiscal quarter ended October 28,
2000, the Company reviewed the asset values of its stores in accordance with
SFAS No. 121 and recorded a charge in the amount of $1.5 million to recognize
the potential impairment of the carrying value of the long lived assets at 56 of
its stores.

        Operating Loss. For the reasons explained above, the Company's operating
loss decreased 66%, from $15.9 million to $5.3 million, in the respective
nine-month periods. As a percentage of net sales, the first nine month operating
loss decreased to 17% from 36% in the comparable prior period.

        Interest Income (Expense), Net. Net interest expense during the first
nine months of fiscal 2000 was $64,000, or 0.2% of net sales, compared to net
interest expense of $147,000, or 0.3% of net sales, during the comparable prior
period.

        Reorganization Charges. During the nine months ended October 28, 2000,
the Company incurred certain costs relating to the Chapter 11 bankruptcy
proceedings. These costs include legal and other professional fees through the
end of the third quarter of approximately $705,000, compared to approximately
$1,178,000 in the prior fiscal period.

        Income Tax Provision. Due to its pre-tax losses, the Company did not
record an income tax provision for the first nine months of either fiscal 2000
or fiscal 1999.

                                       6
<PAGE>   7
        Net Loss and Per Share Data. The Company's net loss decreased 65% from
$17.2 million, or $2.43 per share, during the first nine months of fiscal 1999
to $6.0 million, or $0.86 per share, during the first nine months of fiscal
2000. The absolute dollar decrease in net loss was due to the factors discussed
above.

        LIQUIDITY AND CAPITAL RESOURCES -

        On April 23, 1999, the Company entered a Loan and Security Agreement
(the "DIP Facility") with BankBoston Retail Finance Inc., which has since been
succeeded by Fleet Retail Finance Inc. ("Fleet"). The DIP Facility is intended
to provide Garden Botanika with the cash and liquidity to conduct its operations
and pay for inventory during the course of the Chapter 11 Case. The DIP
Facility, which was amended in the first quarter of fiscal 2000, consists of a
revolving line of credit in the amount of $7.0 million, subject to a borrowing
base calculated as the lesser of 70% of eligible inventory or 80% of the net
liquidation value, except that, for the period from September 15 to December 15,
the borrowing base is calculated as 90% of eligible inventory. With the
permission of the Company's Creditors' Committee, a cash set-aside for the
benefit of creditors of approximately $1.6 million can also be part of the
borrowing base. The facility expires on the earlier of April 23, 2001 or the
Company's emergence from bankruptcy. The DIP Facility, which is secured by the
assets of the Company, bears interest at Fleet's prime lending rate plus one
percent (1.0%). In addition, the Company is obligated to pay a facility fee of
$3,000 monthly and an annual unused line fee of one quarter of one percent
(0.25%) of the average unused portion of the line. The Company is required to
maintain certain financial covenants, including covenants relating to earnings
and limitations on losses that vary from month to month. The DIP Facility also
contains restrictive covenants including, among other things, the maintenance of
inventory levels, limitations on the creation of additional indebtedness and a
prohibition on the payment of dividends. Excess availability under the DIP
Facility as of December 11, 2000 was $1.0 million. As of December 11, 2000, the
Company had borrowed $5.5 million under the DIP Facility.

        The Company funded its net cash loss of $3.8 million (net loss before
depreciation and amortization) and the buildup in inventory for the holiday
season primarily with existing cash and borrowings under the DIP facility.

        The Company believes that its cash balance at the end of the third
quarter of fiscal 2000, combined with its cash flow from operations and
borrowings under its DIP Facility, will be sufficient to satisfy its currently
anticipated working capital and capital expenditure requirements through fiscal
2000. However, comparable store sales for the month of November decreased by
17%, and the Company's cash balance during the remainder of the fourth quarter
will be highly dependent on the results of holiday sales. The Company's uses of
capital for the remainder of fiscal 2000 are expected to include working capital
for operating expenses and satisfaction of liabilities incurred subsequent to
the Petition Date, expenditures related to maintaining its stores, interest
payments on outstanding borrowings and costs associated with the Chapter 11
Case. The Company's future working capital requirements consist primarily of the
purchase of inventory, which is expected to be maintained at the level of
$55,000 per store during non-holiday periods, which is in addition to the raw
materials and components held at the Company's manufacturing facility and at
suppliers. The Company's capital requirements, and its ability to obtain
financing, may vary significantly from those anticipated, however, depending
particularly on operating results and other factors. The Company's long-term
liquidity and the adequacy of the Company's capital resources cannot be
determined until a plan of reorganization has been developed and confirmed in
connection with the Chapter 11 Case.

        As a debtor-in-possession, actions against the Company to collect
pre-petition indebtedness are stayed and certain contractual obligations may not
be enforced against the Company. With the approval of the Bankruptcy Court,
certain of these obligations may be paid prior to the confirmation of a
reorganization plan. To date, the Company has received approval to pay cus-


                                       7
<PAGE>   8
tomary obligations associated with the daily operations of its business,
including the timely payment of new inventory shipments, employee wages and
other obligations. The ultimate amount of, and settlement terms for, the
Company's pre-petition liabilities are subject to the approval of a plan of
reorganization and, accordingly, the timing and form of settlement are not
presently determinable.

PART II - OTHER INFORMATION:

ITEM 1 - LEGAL PROCEEDINGS -

        On April 20, 1999, Garden Botanika filed a voluntary petition for relief
under the Bankruptcy Code, Chapter 11, Title 11 of the United States Code, with
the United States Bankruptcy Court for the Western District of Washington,
Seattle, Washington 98101, Case No. 99-04464. Under Section 362 of the
Bankruptcy Code, during the Chapter 11 Case, creditors and other parties in
interest may not, without Bankruptcy Court approval: (i) commence or continue
judicial, administrative or other proceedings against the Company that were or
could have been commenced prior to commencement of the Chapter 11 Case, or
recover a claim that arose prior to commencement of the case; (ii) enforce any
pre-petition judgments against the Company; (iii) take any action to obtain
possession of or exercise control over property of the Company or its estate;
(iv) create, perfect or enforce any lien against the property of the Company;
(v) collect, assess or recover claims against the Company that arose before the
commencement of the case; or (vi) set off any debt owing to the Company that
arose prior to the commencement of the case against a claim of such creditor or
party in interest against the Company that arose before the commencement of the
case.

        Although the Company is authorized to operate its business and manage
its properties as a debtor-in-possession, it may not engage in transactions
outside of the ordinary course of business without complying with the notice and
hearing provisions of the Bankruptcy Code and obtaining Bankruptcy Court
approval. As a debtor-in-possession, the Company has the right, subject to
Bankruptcy Court approval and certain other limitations, to assume or reject
executory, pre-petition contracts and unexpired leases. Any damages resulting
from rejection are treated as general unsecured claims in the reorganization
case, subject to certain limitations under the Bankruptcy Code.

        Under the Bankruptcy Code, as a general matter, a creditor's claim is
treated as secured only to the extent of the value of such creditor's
collateral, and the balance of such creditor's claim is treated as unsecured.
Generally, unsecured and undersecured debt does not accrue interest after the
Petition Date. Pre-petition claims that were contingent or unliquidated at the
commencement of the Chapter 11 Case are generally allowable against the Company
in amounts to be fixed by the Bankruptcy Court or otherwise agreed upon. These
claims, including without limitation those which arise in connection with the
rejection of executory contracts and leases, are expected to be substantial. The
Company has established certain reserves approximating what the Company believes
will be its liability under some of these claims.

        Inherent in a successful plan of reorganization is a capital structure
which permits the Company to generate sufficient cash flow after reorganization
to meet its restructured obligations and fund the current obligations of the
Company. Under the Bankruptcy Code, the rights and treatment of pre-petition
creditors and stockholders may be substantially altered. At this time, it is not
possible to predict the outcome of the Chapter 11 Case, in general, or the
effects of the Chapter 11 Case on the business of the Company or on the
interests of creditors.

                                       8
<PAGE>   9
ITEM 2 - CHANGES IN SECURITIES -

        None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES -

        None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS -

        None

ITEM 5 - OTHER INFORMATION -

        None

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K -

        (a)     Exhibits:

      EXHIBIT

      NUMBER   DESCRIPTION

        None

        (b)  Reports on Form 8-K:

             No reports on Form 8-K were filed during the third quarter of
fiscal 2000.

SIGNATURES:

Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

                                GARDEN BOTANIKA, INC.
                                -------------------------
                                Registrant

December 12, 2000               /s/ William L. Lawrence, Jr.
----------------------          ----------------------------
Date                            William L. Lawrence, Jr.
                                President and Chief Executive Officer
                                (Principal Executive, Financial and Accounting
                                Officer)


                                       9
<PAGE>   10
                              GARDEN BOTANIKA, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                       (Unaudited)
                                                                         28-Oct      29-Jan
                                                                          2000        2000
                                                                       ----------- -----------
                                                                       (amounts in thousands)
<S>                                                                    <C>         <C>
                                     ASSETS

Current assets:
   Cash and cash equivalents                                               $1,999      $2,480
   Inventory liquidation receivable                                             -       2,382
   Inventories                                                             13,317       9,585
   Prepaid expenses:
     Rent                                                                     799         731
     Other                                                                  1,535       1,081
                                                                       ----------- -----------
       Total current assets                                                17,650      16,259

Property and equipment:
   Leasehold improvements                                                  17,986      19,450
   Furniture and equipment                                                  9,098       8,948
   Equipment under capital lease                                              261         261
                                                                       ----------- -----------
                                                                           27,345      28,659
   Less accumulated depreciation and amortization                         (18,260)    (16,041)
                                                                       ----------- -----------
     Net property and equipment                                             9,085      12,618
                                                                       ----------- -----------
       Total assets                                                       $26,735     $28,877
                                                                       =========== ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Note payable to bank                                                    $4,556           -
   Accounts payable                                                         4,878      $2,182
   Reserve for store closing                                                   96         547
   Accrued salaries, wages and benefits                                       885       1,113
   Accrued sales tax                                                          245         496
   Garden Club- deferred revenue                                              772       1,263
   Other                                                                      168         517
                                                                       ----------- -----------
       Total current liabilities                                           11,600       6,118

Liabilities subject to compromise                                          18,390      18,390
Deferred rent and other                                                     1,561       1,632
                                                                       ----------- -----------
       Total liabilities                                                   31,551      26,140

Commitments

Shareholders' (deficit) equity:
   Preferred Stock, $.01 par value;
     10,000,000 shares authorized; none issued and outstanding                  -           -
   Common  Stock, $.01 par value;
     36,092,374 shares authorized; 7,069,098 issued and outstanding        98,693      98,693
   Accumulated deficit                                                   (103,509)    (95,956)
                                                                       ----------- -----------
       Total shareholders' (deficit) equity                                (4,816)      2,737
                                                                       ----------- -----------
       Total liabilities & shareholders' (deficit)equity                  $26,735     $28,877
                                                                       =========== ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       10
<PAGE>   11

                            GARDEN BOTANIKA, INC.
                           STATEMENTS OF OPERATIONS

                (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                           (UNAUDITED)            (UNAUDITED)
                                                          QUARTER ENDED        NINE MONTHS ENDED
                                                         -----------------     ------------------
                                                          28-OCT   30-OCT       28-OCT    30-OCT
                                                           2000     1999         2000      1999
                                                         -------- --------     --------  --------
<S>                                                      <C>      <C>          <C>       <C>
Net sales                                                 $9,802  $12,718      $30,785   $44,134
Cost of sales (including buying and occupancy costs)       6,229    8,210       19,802    29,224
                                                         -------- --------     --------  --------
     Gross margin                                          3,573    4,508       10,983    14,910

Operating expenses:
   Stores and catalog                                      4,174    4,967       11,653    17,399
   General and administrative                              1,607    1,757        4,614     5,672
Provision for store closing                                1,500    2,239        1,500     7,719
                                                         -------- --------     --------  --------
     Operating loss                                       (3,708)  (4,455)      (6,784)  (15,880)

Interest income (expense), net                               (95)     (88)         (64)     (147)
Reorganization charges                                      (128)    (246)        (705)   (1,178)
                                                         -------- --------     --------  --------
     Net loss                                            $(3,931) $(4,789)     $(7,553)  $(17,205)
                                                         ======== ========     ========  ========


Net loss per share                                        $(0.56)  $(0.68)      $(1.07)   $(2.43)

Weighted average common and common equivalent shares       7,069    7,069        7,069     7,069
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                       11
<PAGE>   12
                              GARDEN BOTANIKA, INC.
                            STATEMENTS OF CASH FLOWS
                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                                                  (UNAUDITED)
                                                                               NINE MONTHS ENDED
                                                                            ----------------------
                                                                              28-OCT     30-OCT
                                                                               2000       1999
                                                                            ----------  ----------
<S>                                                                         <C>         <C>
Cash flows from operating activities:
   Net loss                                                                 $  (7,553)  $ (17,205)
                                                                            ----------  ----------

   Adjustments to reconcile net loss to net cash used by operating
     activities:
     Depreciation and amortization                                              2,219       2,797
     Loss on retirement of property and equipment                                             243
     Provision for store closing and impairment losses                          1,500       2,239
     Changes in assets and liabilities:
       Inventories                                                             (3,732)     (2,282)
       Inventory liquidation receivable                                         2,382           -
       Prepaid rent  and other assets                                            (522)        603
       Accounts payable, accrued expenses and liabilities subject to
          compromise                                                              926       6,659
       Deferred rent and other                                                    (71)       (902)
                                                                            ----------  ----------
        Total adjustments                                                       2,702       9,357
                                                                            ----------  ----------
        Net cash used by operating activities                                  (4,851)     (7,848)
                                                                            ----------  ----------

Cash flows from investing activities:
   Additions to property and equipment                                           (186)        (30)
                                                                            ----------  ----------
        Net cash used by investing activities                                    (186)        (30)
                                                                            ----------  ----------

Cash flows from financing activities:
   Advances (payments) on note payable to bank                                  4,556       4,560
   Other                                                                            0          45
                                                                            ----------  ----------
        Net cash used by investing activities                                   4,556       4,605
                                                                            ----------  ----------

(Decrease) increase in cash and cash equivalents                                 (481)     (3,273)
Cash and cash equivalents, beginning of period                                  2,480       4,295
                                                                            ----------  ----------
Cash and cash equivalents, end of period                                       $1,999      $1,022
                                                                            ==========  ==========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       12
<PAGE>   13
GARDEN BOTANIKA, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 28, 2000 (UNAUDITED)

1. The accompanying unaudited financial statements include the accounts of
Garden Botanika, Inc. (the "Company"), a Washington corporation. These financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial reporting and pursuant to the rules and
regulations of the Securities and Exchange Commission. While these statements
reflect all normal recurring adjustments which are, in the opinion of
management, necessary for fair presentation of the results of the interim
period, they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. For
further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K dated April 28, 2000, which
has previously been filed with the Securities and Exchange Commission.

On April 20, 1999, the Company filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code and is presently operating its
business as a debtor-in-possession subject to the jurisdiction of the United
States Bankruptcy Court for the Western District of Washington. The Company's
financial statements have been prepared on a going-concern basis, which
contemplates continuity of operations, realization of assets, liquidation of
liabilities and commitments in the normal course of business. The Chapter 11
case, related circumstances and the losses from operations raise substantial
doubt about the Company's ability to continue as a going concern. The
appropriateness of reporting on a going-concern basis is dependent upon, among
other things, confirmation of a plan of reorganization and future profitable
operations. Realization of its assets and liquidation of its liabilities at
their recorded amounts is subject to significant uncertainty. While under the
protection of Chapter 11, the Company may sell or otherwise dispose of assets,
and liquidate or settle liabilities, for amounts other than those reflected in
the accompanying financial statements. The financial statements do not include
any adjustments relating to the recoverability of the value of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
as a consequence of a plan of reorganization.

2. The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the amounts of revenues and expenses reported during the period. Actual
results could differ from those estimates.

3. In the calculation of weighted average common and common equivalent shares,
nonqualified stock options and warrants to purchase common stock are considered
common stock equivalents. Such options and warrants are converted using the
treasury stock method, which assumes that the shares issuable upon exercise of
the options or warrants were outstanding for the full period. In accordance with
generally accepted accounting principles, no common stock equivalents are shown
for the third quarter or the first nine months of either fiscal 2000 or 1999,
as their effect would have been anti-dilutive.

                                       13
<PAGE>   14

                 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                         (UNAUDITED)                (UNAUDITED)
                                                                        QUARTER ENDED             NINE MONTHS ENDED
                                                                     ----------  ----------    ----------  ----------
                                                                       28 OCT      30 OCT        28 OCT      30 OCT
                                                                        2000        1999          2000        1999
                                                                     ----------  ----------    ----------  ----------
<S>                                                                 <C>          <C>          <C>          <C>
PRIMARY:
     Earnings -
          Net earnings (loss) applicable to common and common
            equivalent shares                                        $  (3,931)  $  (4,789)    $  (7,553)  $ (17,205)
                                                                     ----------  ----------    ----------  ----------
    Shares -
          Weighted average common shares outstanding                     7,069       7,069         7,069       7,069
          Net effect of stock options, based on treasury stock
             method using average market price (1)                          --          --            --          --
                                                                     ----------  ----------    ----------  ----------
Weighted average common and common equivalent shares                     7,069       7,069         7,069       7,069
                                                                     ----------  ----------    ----------  ----------
Primary earnings (loss) per common and common equivalent share       $   (0.56)  $   (0.68)    $   (1.07)  $   (2.43)
                                                                     ----------  ----------    ----------  ----------
</TABLE>

FULLY DILUTED:

        Fully diluted earnings (loss) per share is not presented, as there were
        no potentially dilutive securities

4. The results of operations for the nine months ended October 28, 2000 are not
necessarily indicative of the results to be expected for the full fiscal year.
In each of the past three fiscal years, 37% to 39% of the Company's annual net
sales and all of its profits, if any, have been realized during its fourth
fiscal quarter, particularly during the November and December holiday selling
period. The Company expects this pattern to continue during the current fiscal
year. The Company's quarterly results of operations may also fluctuate
significantly as a result of a variety of other factors, including, among
others, increases or decreases in comparable store sales, adverse weather
conditions, shifts in the timing of holidays, shifts in the timing of promotions
and catalog mailings and changes in the Company's product mix.

5. During the first nine months of fiscal 1999, the Company recorded a provision
for store closure of $6.6 million to cover the estimated lease termination and
other store exit costs associated with the closure of 95 poorly performing
retail store locations and the rejection of leases and a provision for
impairment of the carrying value of its long lived assets under FAS No. 121 in
the amount of $2.2 million. These amounts were offset by approximately $1.1
million in deferred rent liability for the 95 rejected leases that had
previously been recorded on the balance sheet. During the first nine months of
fiscal 2000, the Company closed 39 stores. Substantially all costs associated
with these closings were provided prior to the first quarter of fiscal 2000.
During the fiscal quarter ended October 28, 2000, the Company reviewed the asset
values of its stores in accordance with SFAS No. 121 and recorded a charge in
the amount of $1.5 million to recognize the potential impairment of the carrying
value of the long lived assets at 56 of its stores.

6. In the Chapter 11 case, substantially all unsecured liabilities as of the
petition date are subject to compromise or other treatment under a plan of
reorganization to be confirmed by the bankruptcy court after submission to any
required vote by the affected parties. For financial reporting purposes, those
liabilities and obligations whose treatment and satisfaction are dependent on
the outcome of the Chapter 11 case have been segregated and classified as
liabilities subject to compromise in the accompanying balance sheet. The
ultimate amount of and settlement terms for such liabilities are subject to an
approved plan of reorganization and are not presently determinable. Included in
liabilities subject to compromise as of October 28, 2000 are pre-petition
accounts payable of $9.7 million and estimated lease termination costs of $8.7
million.

                                       14