U. S. SECURITIES AND EXCHANGE
                        COMMISSION Washington, D.C. 20549

                                   FORM 10-QSB

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

                For the quarterly period ended December 31, 2003

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

                        Commission file number 000-28595

                              PEABODYS COFFEE, INC.
                 (Name of Small Business Issuer in its Charter)

            Nevada                                               87-0468654
(State or other jurisdiction of                              (I.R.S. Employer
Incorporation or organization)                               Identification No.)

             3845 Atherton Road, Suite 9, Rocklin, California, 95765
                     (Address of Principal Executive Office)

                                 (916) 632-6090
                           (Issuer's Telephone Number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 35,961,358 shares of common stock.

Transitional Small Business Disclosure Format (Check One):   Yes [X]  No [ ]


                                     - 1 -
<PAGE>

                                TABLE OF CONTENTS

Part I - Financial Information

   Item 1     Financial Statements                                            3

   Item 2     Management's Discussion and Analysis or Plan of Operation      15

   Item 3     Controls and Procedures                                        17

Part II - Other Information

   Item 1     Legal Proceedings                                              18

   Item 2     Changes in Securities and Use of Proceeds                      18

   Item 3     Defaults Upon Senior Securities                                18

   Item 4     Submission of Matters to a Vote of Security Holders            18

   Item 5     Other Information                                              19

   Item 6     Exhibits and Reports on Form 8-K                               19

   Item 7     Signatures                                                     20


                                     - 2 -
<PAGE>

                              PEABODYS COFFEE, INC.
                                 Balance Sheets
                           December 31, 2003 and 2002
                                    Unaudited

<TABLE>
<CAPTION>
                                                                          2003                 2002
                                                                   ----------------      ---------------
<S>                                                                         <C>                  <C>
ASSETS

Current Assets
        Cash                                                               $ 3,110             $ 59,357
        Accounts Receivable                                                 56,094               24,709
        Inventories                                                         65,862               83,049
        Prepaid Expenses                                                     1,384               72,684
                                                                   ----------------      ---------------
              Total Current Assets                                         126,450              239,799

        Property and Equipment (Net)                                       132,153              343,859
        Deposits and Other Assets                                           94,706              162,210
                                                                   ----------------      ---------------
              Total Assets                                                 353,309              745,868
                                                                   ================      ===============


LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
        Cash Overdraft                                                    $ 36,166                  $ -
        Accounts Payable                                                   338,770              439,676
        Accrued Expenses                                                   260,331              350,215
        Short-Term Borrowings                                              649,253              192,573
        Short-Term Deferred Revenue                                         12,500                    -
        Bridge Financing                                                    35,000               35,000
                                                                   ----------------      ---------------
              Total Current Liabilities                                  1,332,020            1,017,464

Long-Term Liabilities
        Long-Term Debt (Net of Current Portion)                             30,188               11,105
        Secured Convertible Debentures                                     250,000                7,534
        Long-Term Deferred Revenue                                           6,250                    -
                                                                   ----------------      ---------------
              Total Long-Term Liabilities                                  286,438               18,639

              Total Liabilities                                          1,618,458            1,036,103

Stockholders' Deficit
        Common Stock - Authorized 50,000,000 shares,
        issued and outstanding,  35,711,358 and 21,618,476
        $.001 Par Value                                                     35,711               21,618
        Paid-In Capital                                                  6,685,234            5,701,573
        Deferred Expenses                                                  (23,335)             (76,663)
        Accummulated Deficit                                            (7,962,759)          (5,936,763)
                                                                   ----------------      ---------------
              Total Stockholders' Deficit                               (1,265,149)            (290,235)
                                                                   ----------------      ---------------
              Total Liabilities and Stockholders' Deficit                $ 353,309            $ 745,868
                                                                   ================      ===============
</TABLE>


                                     - 3 -
<PAGE>

                              PEABODYS COFFEE, INC.
                   Statements of Loss and Accumulated Deficit
                           December 31, 2003 and 2002
                                    Unaudited

<TABLE>
<CAPTION>
                                                               Nine Months Ended                Three Months Ended
                                                                  December 31,                      December 31,

                                                                  2003            2002              2003            2002
                                                        -------------------------------   -------------------------------
<S>                                                          <C>             <C>                 <C>           <C>
SALES                                                        1,377,390       1,987,106           368,180       $ 598,714

COST OF SALES                                                  637,026         831,518           189,429         243,996
                                                        -------------------------------   -------------------------------
              Gross Profit                                     740,364       1,155,588           178,751         354,718

OPERATING EXPENSES
        Employee Compensation and Benefits                     720,679       1,051,710           196,347         351,773
        General and Administrative Expenses                    244,603         258,003            56,479          95,473
        Occupancy                                              172,103         231,851            44,763          71,977
        Director and Professional Fees                         240,217         282,803            54,340         101,588
        Depreciation and Amortization                           68,522          95,645            25,312          31,875
        Other Operating Expenses                                     -               -                 -               -
                                                        -------------------------------   -------------------------------
              Total Operating Expense                        1,446,124       1,920,012           377,241         652,686
                                                        -------------------------------   -------------------------------
              Operating Loss                                  (705,760)       (764,424)         (198,490)       (297,968)

        Other Income (Loss)                                    (75,300)            242              (442)              -
        Legal Expense - Former CEO/President                         -        (153,253)                -          (6,874)
        Interest and Other Expense                            (390,605)        (37,588)         (101,332)        (20,506)
                                                        -----------------------------------------------------------------
              Net Loss Before Extraordinary Item            (1,171,665)       (955,023) #       (300,264)       (325,348)

              Extraordinary Item                                 8,274         103,937                45             217
                                                        -------------------------------   -------------------------------
              NET LOSS                                      (1,163,391)       (851,086)         (300,219)       (325,131)

        Accumulated Deficit, Beginning of Period            (6,799,368)     (5,085,677)       (7,662,539)     (5,611,632)
                                                        -------------------------------   -------------------------------
        Accumulated Deficit, End of Period                $ (7,962,759)   $ (5,936,763)     $ (7,962,759)   $ (5,936,763)
                                                        ===============================   ===============================

        Earnings Per Common Share
              Net Loss Before Extraordinary Item                 (0.03)          (0.05)            (0.01)          (0.02)
              Extraordinary Item                                  0.00            0.01              0.00            0.00
                                                        -------------------------------   -------------------------------
              Net Loss                                           (0.03)          (0.04)            (0.01)          (0.02)
                                                        ===============================   ===============================
</TABLE>

See accompanying notes to financial statements


                                     - 4 -
<PAGE>

                             PEABODYS COFFEE, INC.
                            Statement of Cash Flows
                   Nine Months Ended December, 2003 and 2002
                                   Unaudited

<TABLE>
<CAPTION>
                                                                                 2003                       2002
                                                                         -----------------          -----------------
<S>                                                                          <C>                          <C>
Cash Flow From Operating Activities
        Net Loss                                                             $ (1,163,391)                $ (851,086)

        Changes in Operating Assets and Liabilities
              Receivables                                                          39,136                    (92,879)
              Inventories                                                          (8,804)                   (19,811)
              Prepaid Expenses                                                     (3,446)                   (12,759)
              Cash Overdraft                                                       11,522                    (48,495)
              Accounts Payable                                                     89,585                    212,057
              Accrued Expenses                                                    (51,996)                    72,204
              Deferred Revenue                                                     18,750                          -
                                                                                                     .
        Adjustments
              Depreciation and Amortization                                        68,522                     95,645
              Debt Settlements and Forgiveness of Debt                                  -                   (103,937)
              Non-Cash Consulting Fees                                             45,746                     96,442
              Slotting Fees                                                        43,625                     27,250
              Gain/Loss on Disposal of Property                                    75,300                       (966)
              Debenutre Accretion                                                       -                      7,534
              Financing Costs-Secured Convertible Debentures                      336,805                          -

                                                                         -----------------          -----------------
              Net Cash Provided/(Applied) Operating Activities                   (498,647)                  (618,801)

Cash Flow From Investing Activities
        Additions - Fixed Assets                                                  (19,879)                   (77,526)
        Disposals - Property & Equipment                                           54,000                     57,379
        Changes in Deposits and Other Assets                                        7,410                     13,115

        Brand Development Costs                                                   (17,985)                   (65,269)

                                                                         -----------------          -----------------
              Net Cash Provided/(Applied) Investing Activities                     23,546                    (72,301)

Cash Flows From Financing Activities
        Net Proceeds From Sale of Stock                                           100,000                    122,658
        Proceeds from Sale of Notes Payable                                             -                    639,000
        Principal reductions of notes payable                                    (127,905)                   (18,506)
        Issuance of Convertible Debenture                                         500,000                          -

                                                                         -----------------          -----------------
              Net Cash Provided/(Applied) Financing Activities                    472,095                    743,152

                                                                         -----------------          -----------------
Net Decrease in Cash and Cash Equivalents                                          (3,006)                    52,050

Cash and Cash Equivalents
        Beginning of Period                                                         6,116                      7,307
                                                                         -----------------          -----------------
        Ending of Period                                                            3,110                     59,357
                                                                         =================          =================
</TABLE>

See accompanying notes to financial statements


                                     - 5 -
<PAGE>

The notes to the financial statements include a summary of significant
accounting policies and other notes considered essential to fully disclose and
fairly present the transactions and financial position of the company as
follows:

Note   1     -   Significant Accounting Policies

Note   2     -   Going Concern

Note   3     -   Inventories

Note   4     -   Property and Equipment, and Intangible Assets

Note   5     -   Accounts Payable

Note   6     -   Accrued Expenses

Note   7         Deferred Revenue

Note   8     -   Short-Term Borrowings

Note   9         Secured Convertible Debentures

Note  10     -   Long-Term Debt

Note  11     -   Bridge Note Financing

Note  12     -   Earnings Per Common Share

Note  13     -   Supplemental Disclosures to Statement of Cash Flows

Note  14     -   Commitments and Contingencies


See accompanying notes to financial statements


                                     - 6 -
<PAGE>

Note 1 - Significant Accounting Policies

Basis of Presentation

The financial statements included herein have been prepared by Peabodys Coffee
Inc., without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in conformity with accounting
principles generally accepted in the United States of America have been omitted
pursuant to such rules and regulations of the Securities and Exchange
Commission. Peabodys Coffee Inc. believes that the disclosures are adequate to
make the information presented not misleading when read in conjunction with its
financial statements for the year ended March 31, 2003 included on Form 10-KSB.
The financial information presented reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the financial position
and the results of operations for the interim periods presented. The results of
operations for the nine months ended December 31, 2003, are not necessarily
indicative of the results to be expected for the full year ending March 31,
2004, or any other period.

Description of Business

Peabodys Coffee (the "Company") is a retailer and marketer of certified organic
branded specialty coffee beverages and packaged whole bean coffees. The Company
owns and operates retail espresso coffee bar kiosks in a variety of corporate
and institutional locations throughout California. The Company has also
established wholesale operations and has entered the mass retail markets through
the sale of packaged whole bean coffees in supermarkets, specialty food stores
and other mass retail venues under its Black Rhino Coffee(TM) brand.

Reclassifications

Certain amounts from the December 31, 2002 financial statements have been
reclassified to conform to the current period presentation.

Note 2 - Going Concern

The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplates continuation of the Company as a going concern. Going concern
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business over a reasonable length of time. However, the
Company has sustained operating losses since its inception and has deficits in
both working capital and stockholders equity of $1,205,570 and $1,265,149
respectively, as of December 31, 2003.

The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's ability to continue as a
going concern is dependent upon several factors. These factors include its
ability to: generate sufficient cash flows to meet its obligations on a timely
basis; obtain acceptance of payment terms for certain payables to key vendors;
obtain additional financing or refinancing as may be required; aggressively
control costs, and; achieve profitability and positive cash flows.

Management plans to address these challenges by focusing on the further
development of the Black Rhino Coffee(TM) brand in the U.S. mass retail sector.
Since introduction in May 2002 at the FMI supermarket convention, the brand has
penetrated the shelves of approximately 650 supermarkets and other mass retail
venues. The benefit of this channel of trade is that a small number of orders
can significantly increase corporate revenues and earnings.

See accompanying notes to financial statements


                                     - 7 -
<PAGE>

Management believes that the introduction of Black Rhino ground coffee will
increase revenue, allowing access to a broader consumer market and that new
redesigned brand packaging will improve the in-store shelf impact. Management
has also realigned upstream supply chain to meet operational requirements of the
grocery and mass retail distribution channels and redesigned business processes
to support those operational requirements.

Management believes that entry to this new market sector will eventually expose
the Company to financing opportunities - such as project-based debt financing
secured by purchase orders or accounts receivable. Management also believes that
an orderly exit from full service retail will allow for the redeployment of
capital to support the Company's strategic goal while reducing central overhead
costs.

There is no assurance that management's plans will be successful or if
successful, that they will result in the Company continuing as a going concern.
Additionally, the sale of additional equity or other securities will result in
dilution of the Company's stockholders.

Note 3 - Inventories

At December 31, 2003 and 2002, inventories were comprised of the following:

                                                2003                     2002
                                    -----------------        -----------------

Coffee                                       $ 8,887                 $ 36,674
Other Food                                    10,458                   18,621
Packaging and Other Supplies                  46,518                   27,755
                                    -----------------        -----------------
                                            $ 65,863                 $ 83,049
                                    =================        =================

See accompanying notes to financial statements


                                     - 8 -
<PAGE>

Note 4 - Property and Equipment, and Intangible Assets

At December 31, 2003 and 2002, property and equipment were comprised of the
following:

<TABLE>
<CAPTION>
                                                                           2003                        2002
                                                               -----------------           -----------------
<S>                                                                    <C>                        <C>
              Kiosk Carts                                              $ 84,042                   $ 267,733
              Kiosk Equipment                                            85,129                     292,862
              Equipment and Furniture                                   176,484                     261,357
              Signage                                                    28,610                      60,113
              Site Improvements                                          52,731                     118,376
              Assets Not In Service                                      93,824                           -
                                                               -----------------           -----------------
                                                                        520,820                 $ 1,000,441

              Less:   Accumulated Depreciation                         (388,666)                   (656,582)
                                                               -----------------           -----------------
                                                                      $ 132,153                   $ 343,859
                                                               =================           =================
</TABLE>


Included in other assets at December 31, 2002 and 2001, were intangible assets
comprised of the following:

<TABLE>
<CAPTION>
                                                                           2003                        2002
                                                               -----------------           -----------------
<S>                                                                         <C>                    <C>
              Goodwill                                                      $ -                    $ 40,930
              Non-Competition Agreement                                       -                      25,000
              Trade Name                                                 68,038                      88,253
              Kiosk Design                                                    -                       2,241
              Other Indentifiable Intangibles                                 -                      14,600
                                                               -----------------           -----------------
                                                                       $ 68,038                   $ 171,024
</TABLE>


The Company recognized depreciation and amortization expense for the six months
ended December 31, 2003 and 2002 as follows:

<TABLE>
<CAPTION>
                                                                           2003                        2002
                                                               -----------------           -----------------
<S>                                                                      <C>                       <C>
              Depreciation                                               65,352                    $ 86,265
              Amortization                                                3,170                       9,380
                                                               -----------------           -----------------
                                                                       $ 68,522                    $ 95,645
</TABLE>


Note 5 - Accounts Payable

At December 31, 2003 and 2002, approximately 41% and 40% of the balances in
accounts payable, respectively, have been outstanding for more than 90 days.

See accompanying notes to financial statements


                                     - 9 -
<PAGE>

Note 6 - Accrued Expenses

At December, 2003 and 2002, accrued expenses were comprised of the following:

<TABLE>
<CAPTION>
                                                                           2003                        2002
                                                               -----------------           -----------------
<S>                                                                    <C>                         <C>
              Accrued Interest                                         $ 45,633                    $ 40,086
              Accrued Wages                                              31,662                      48,202
              Accrued Sales and Use Tax                                  35,272                      32,008
              Accrued Payroll Taxes                                     136,108                     198,464
              Other                                                      11,656                       7,649
                                                               -----------------           -----------------
                                                                      $ 260,331                   $ 326,409
                                                               =================           =================
</TABLE>

Included in accrued payroll taxes at September 30, 2003 and September 30, 2002
are past due payroll tax obligations in the amount of $155,000 and $162,158,
respectively. Management has entered into a repayment plan with the Internal
Revenue Service.

Note 7 - Deferred Revenue

On June 12, 2003, a licensed operator, purchased a two-year licensing agreement,
related to sale of the San Diego State University site assets, in the amount of
$25,000. This agreement will be amortized on a straight-line basis starting in
July of 2003. The deferred revenue has been allocated to current and non-current
liabilities

Note 8 - Short-Term Borrowings

During the nine months ended December 31, 2003 and 2002, the Company borrowed
funds to provide short-term working capital. Details of these loans are as
follows:

<TABLE>
<CAPTION>
                                                                                     2003                     2002
                                                                                ----------------        -----------------
<S>                                                                              <C>                             <C>
          10% Note, unsecured, payable in monthly installments
          of $212.47 including interest, due 05/31/07                            $             7,353             $ 9,073

          10% note, unsecured, payable in monthly installments
          of $318.71, including interest, due 05/30/07                                        -                    4,605

          10% Note, unsecured, payable in monthly installments
          of $106.24 including interest, due 06/30/07                                           3,752                  -

          10% Note, unsecured, payable in monthly installments
          of $3,136.77 including interest, due 03/31/05                                       64,215                   -
</TABLE>

Note 9 - Secured Convertible Debentures

2002 Debentures

In order to provide working capital and financing for the Company's operation
and expansion, as of December 20, 2002, the Company entered into a securities
purchase agreement and related agreements with three accredited investors (the
"Purchasers") for the purchase of up to $750,000 of the Company's 10%
Convertible Debentures. The debentures bear interest at a rate of 10% per annum,
payable quarterly in common stock or cash at the option of the Purchasers. The
debentures are to be sold in three separate tranches. The terms of the
securities purchase agreement and related agreements restrict the Company's
ability to issue stock without the Purchasers' approval, except to comply with
existing contractual arrangements; specifically with investors holding bridge
notes, notes payable, options and warrants.

See accompanying notes to financial statements


                                     - 10 -
<PAGE>

The first tranche, in the amount of $250,000, was consummated December 20, 2002,
and the convertible debentures relating to the first tranche are due December
20, 2003. The aggregate net proceeds of the December 2002 tranche, after payment
of some related expenses, were approximately $201,000. The second tranche, in
the amount of $250,000, was consummated January 23, 2003 and the convertible
debentures relating to the second tranche are due January 23, 2004. The
aggregate net proceeds of the January 2003 tranche were approximately $215,000.
The third tranche, in the amount of $250,000 was consummated on May 20, 2003 and
the convertible debentures relating to the third tranche are due May 20, 2004.
The aggregate net proceeds of the third tranche were approximately $212,000.

On December 4, 2003, the Company entered into a Redemption Agreement with the
three accredited investors. Pursuant to the Redemption Agreement, the Company
has made an initial payment against the outstanding Secured Convertible
Debentures issued to the three accredited investors and has agreed to further
payments each month thereafter, until the debentures are redeemed in full.
During such time as the Company has met its prepayment obligations, the
accredited investors have agreed to refrain from converting their debentures
into shares of the Company's common stock.

The debentures initially are convertible into shares of common stock at the
lesser of $0.30 per share or 50% of the average of the three lowest intraday
trading prices for a share of common stock during the twenty trading days
immediately preceding conversion.

Pursuant to the Rules and Regulations of the Securities and Exchange Commission
regarding beneficial conversion features, using the intrinsic value method, the
Company allocated the total $250,000 for each tranche to the conversion feature
resulting in a corresponding credit to additional paid in capital. The Company
is recording as financing costs, the excess of the fair market value of the
common stock at the debenture issuance date over the conversion price. For the
nine months ended December 31, 2003, the financing cost amounted to a total of
$500,000.

Upon the issuance of the December 2002 debentures, the Purchasers received
five-year term warrants to purchase 625,000 shares of the Company's common stock
at an initial exercise price of $0.25 per share. Upon the issuance of the
January 2003 debentures, the Purchasers received five-year term warrants to
purchase 625,000 shares of the Company's common stock at an initial exercise
price of $0.25 per share. Subsequent to March 31, 2003, upon the issuance of the
May 2003 debentures, the Purchasers received five-year term warrants to purchase
625,000 shares of the Company's common stock at an initial exercise price of
$0.25 per share. The fair market value of the warrants were deemed immaterial as
estimated on the grant date using the Black-Scholes option pricing method as
required under SFAS 123.

2003 Debenture

To obtain funding for our ongoing operations, to pay the 2002 debentures we
entered into a Securities Purchase Agreement with an accredited investors in
December 2003 for the sale of (i) $250,000 in convertible debentures and (ii)
warrants to buy 2,500,000 shares of our common stock. La Jolla Cove Investors
provided us with an aggregate of $250,000 as follows:

      o     $100,000 was disbursed to the 2002 debenture holders on December 8,
            2003;
      o     $100,000 was disbursed to us on December 8, 2003; and
      o     $50,000 has been retained for services provided to our company by
            various professionals, which was disbursed upon effectiveness of our
            registration statement;

See accompanying notes to financial statements


                                     - 11 -
<PAGE>

The debentures bear interest at 7 3/4%, mature two years from the date of
issuance, and are convertible into our common stock, at the selling
stockholder's option. The convertible debentures are convertible into the number
of our shares of common stock equal to the principal amount of the debentures
being converted multiplied by 11, less the product of the conversion price
multiplied by ten times the dollar amount of the debenture. The conversion price
for the convertible debenture is the lesser of (i) $0.25 or (ii) eighty percent
of the of the average of the five lowest volume weighted average prices during
the twenty (20) trading days prior to the conversion. Accordingly, there is in
fact no limit on the number of shares into which the debenture may be converted.
In addition, the selling stockholder is obligated to exercise the warrant
concurrently with the submission of a conversion notice by the selling
stockholder. The warrant is exercisable into 2,500,000 shares of common stock at
an exercise price of $1.00 per share. The investor agreed to make payments to
our current debtholders in the amount of $50,000 per month until the debtholders
are paid in full. Such payments shall be applied toward the future exercise of
the warrants held by the investor.

La Jolla Cove Investors has contractually committed to convert not less than
5.0% and not more than 15.0% of the original face value of the debenture monthly
beginning the month after the effective date of the Registration Statement
covering the debenture. The 15% maximum is not applicable if the market price at
the time of the conversion at anytime during the applicable month is higher than
the market price at closing of the financing. La Jolla Cove Investors is
required to exercise warrants concurrently with the exercise of a conversion
notice under the debenture and is committed to exercise at least 5%, but not
more than 15%, of the warrants per month. The 15% maximum is not applicable if
the market price at the time of the conversion at anytime during the applicable
month is higher than the market price at closing of the financing. In the event
that La Jolla Investors breaches the minimum and maximum restrictions on the
debenture and warrant, La Jolla will not be entitled to collect interest on the
debenture for that month.

La Jolla has further contractually agreed to restrict its ability to convert the
debenture or exercise their warrants and receive shares of our common stock such
that the number of shares held by the Holder and its affiliates after such
conversion or exercise does not exceed 4.9% of the then issued and outstanding
shares of our common stock.

In the event that the registration statement is not declared effective by the
required deadline, La Jolla may demand repayment of the debenture at 125% of the
face amount outstanding, plus all accrued and unpaid interest, in cash. If the
repayment is accelerated, we are also obligated to issue to La Jolla 50,000
shares of common stock for each 30 day period, or portion thereof, during which
the face amount, including interest thereon, remains unpaid. If La Jolla does
not elect to accelerate the debenture, we are required to immediately issue to
La Jolla 50,000 shares of common stock for each 30 day period, or portion
thereof, during which the face amount, including interest thereon, remains
unpaid.

See accompanying notes to financial statements


                                     - 12 -
<PAGE>

Note 10 - Long-Term Debt

The outstanding balance at December 31, 2003 and 2002 is summarized as follows:

<TABLE>
<CAPTION>
                                                                                     2003                     2002
                                                                                ----------------        -----------------
<S>                                                                              <C>                             <C>
          10% Note, unsecured, payable in monthly installments
          of $212.47 including interest, due 05/31/07                            $             7,353             $ 9,073

          10% note, unsecured, payable in monthly installments
          of $318.71, including interest, due 05/30/07                                        -                    4,605

          10% Note, unsecured, payable in monthly installments
          of $106.24 including interest, due 06/30/07                                           3,752                  -

          10% Note, unsecured, payable in monthly installments
          of $3,136.77 including interest, due 03/31/05                                       64,215                   -


          Less current portion                                                               (45,132)             (2,573)
                                                                                ----------------        -----------------
                                                                                         30,188                   11,105
                                                                                ================        =================
</TABLE>

Aggregate maturities of long-term debt over the next five years are as follows:

          Twelve months ended September                      Amount
                                                         ----------------
          2004                                            $           45,132
          2005                                                         30,188
          2006
          2007
          2008
                                                          $           75,320
                                                          ==================

Note 11 - Bridge Note Financing

In May 1996, the Company issued "units" consisting of secured convertible
promissory notes and warrants to purchase the Company's common stock. As of
December 31, 2003 and 2002, there were $35,000 and $35,000, respectively, of
bridge notes outstanding. The notes are secured by all assets of the Company.

The Company is obligated to make quarterly interest payments on the principal
balance outstanding at nine percent (9%) per annum and to repay such principal
balance in full on December 31, 1998. As of June 30, 2003 and 2002, the Company
has accrued $40,089 and $33,650 respectively, of interest payable on these
notes. As of December 31, 2003, the Company has not received any notice of
default relating to the notes.

See accompanying notes to financial statements


                                     - 13 -
<PAGE>

Note 12 - Earnings Per Common Share

Earnings per common share are computed by dividing net income by the average
number of common shares and common stock equivalents outstanding during the
period. The weighted average number of common shares outstanding during the nine
months ended December 31, 2003 and 2002, were 35,711,358 and 21,567,120,
respectively.

Common stock equivalents are the net additional number of shares that would be
issuable upon the exercise of the outstanding common stock options and warrants.
For the nine months ended December 31, 2003 and 2002, fully diluted earnings per
common share are equal to basic earnings per common share because the effect of
potentially dilutive securities underlying the stock options and warrants are
anti-dilutive and therefore not included.

Note 13 - Supplemental Disclosures to Statement of Cash Flows

Non-cash investing and financing transactions for the nine months ended December
31, 2003 and 2002, are as follows:

<TABLE>
<CAPTION>
                                                                                      2003                    2002
                                                                                 ---------------         ---------------
<S>                                                                               <C>                     <C>
          Issuance of Common Stock in Exchange for
               Services Provided                                                  $           5,750       $         85,000

          Issuance of common stock in exchange for
             discharge of obligations on long-term
             borrowings, trade payables and other liablilities                                -                 300,356

          Trade payables and accrued expenses forgiven                                              -              103,937

          Conversion of Trade Payables to Short-Term Note                               111,832                  80,217

          Credit Memos issued to customers for slotting agreements                            -                  88,500

          Conversion Convertible Debentures To Common Stock                             370,711                       -
</TABLE>

Note 14 - Commitments and Contingencies

On May 8, 2002, the Company initiated legal action against its former CEO,
Clifford Brent Young, and others. The complaint alleged, among other things,
that Mr. Young, in association with a former employee of the Company, had
breached contractual duties, and/or committed torts, in connection with the
purported cancellation of contracts between the Company and a client, and in
connection with other acts of competition, disparagement, and conversion. On May
30, 2002, Mr. Young filed a petition for bankruptcy with the United States
Bankruptcy Court, Central District of California, staying the action as to him.
The ultimate ability of the Company to pursue relief against Mr. Young remains
to be determined, and there can be no assurance that the Company will be
successful in pursuing its claims in that forum. The Company has settled its
claims against the former employee.

The Company has engaged in settlement negotiations for over a year regarding the
status of the 500,000 shares transferred by Mr. Young to various individuals
with no resolution as of this date. We are currently evaluating our options with
respect to this matter.

In the normal course of business, the Company has various legal claims and other
contingent matters outstanding. Management believes that any ultimate liability
arising from these contingencies would not have a material adverse effect on the
Company's results of operations or financial condition at December 31, 2003 and
2002.

See accompanying notes to financial statements


                                     - 14 -
<PAGE>

Item 2. Management's Discussion And Analysis Of Financial Conditions And Results
Of Operations

      The preparation of this section requires management to make estimates and
assumptions about the past, current and future activities, business practices,
and financial records of the Company. Actual results may differ from these
estimates and assumptions.

      Revenues

      Net revenues for the nine months ended December 31, 2003 decreased 30.1%
to $1,377,390 from $1,987,106 for the same period in fiscal 2002. This was
primarily due to the closing of full service sites during the year. Retail sales
accounted for 88.0% of revenues and wholesale accounted for 12.0% in the nine
months ended December 31, 2003.

      Costs and Expenses

      Cost of sales for the nine months ended December 31, 2003 decreased 23.4%
to $637,026 from $831,518 for the same period in fiscal 2002. As a percentage of
net revenues, cost of sales increased to 46.2% for the nine months ended
December 31, 2003 from 41.8% for the comparable period in fiscal 2002. The
increase as a percent of net revenues is primarily due to increase in wholesale
revenues.

      Employee compensation and benefits for the nine months ended December 31,
2003 decreased to $720,678 from $1,051,710 for the same period in fiscal 2002.
As a percentage of net revenues, employee compensation and benefits decreased to
52.3% for the nine months ended December 31, 2003 from 52.9% for the comparable
period in fiscal 2002.

      General and administrative expenses for the nine months ended December 31,
2003 decreased to $244,603 from $258,003 for the same period in fiscal 2002. As
a percentage of net revenues, general and administrative expenses increased to
17.8% for the nine months ended December 31, 2003 from 13.0% for the comparable
period in fiscal 2002.

      Occupancy costs for the nine months ended December 31, 2003 decreased to
$172,103 from $231,851 for the same period in fiscal 2002. As a percentage of
net revenues, occupancy costs increased to 12.5% for the nine months ended
December 31, 2003 from 11.7% for the comparable period in 2002.

      Director and professional fees for the nine months ended December 31, 2003
decreased to $240,217 from $282,803 for the same period in fiscal 2002. As a
percentage of net revenues, director and professional fees increased to 17.4%
for the nine months ended December 31, 2003 from 14.2% for the comparable period
in 2002.The majority of these expenses result from the engagement of various
consultants to assist the Company in penetrating new markets and further
developing its packaged consumer brand of Black Rhino Coffee(TM).

See accompanying notes to financial statements


                                     - 15 -
<PAGE>

      Depreciation and amortization expense for the nine months ended December
31, 2003 decreased to $68,522 from $95,645 for the same period in fiscal 2002.
As a percentage of net revenues, depreciation and amortization expense increased
to 5.0% for the nine months ended December 31, 2003 from 4.8% for the comparable
period in fiscal 2002.

      Operating losses for the nine months ended December 31, 2003 decreased to
$705,760 from $764,424 for the same period in fiscal 2002. As a percentage of
net revenues, operating losses increased to 51.2% for the nine months ended
December 31, 2003 from 38.5% for the comparable period in fiscal 2002.

      Net loss for the nine months ended December 31, 2003 increased to
$1,163,391 from $851,086 for the same period in fiscal 2002. As a percentage of
net revenues, net losses increased to 84.5% for the nine months ended December
31, 2003 from 42.8% for the comparable period in fiscal 2002.

      Liquidity And Capital Resources

      As the accompanying financial statements show, for the nine months ended
December 31, 2003, the Company had a net operating loss of $705,760 and an
overall net loss of $1,163,391. At December 31, 2003, the Company has a working
capital deficit of $1,205,570 and a shareholder's deficit of $1,265,149.

      The Company's ability to continue as a going concern is dependent upon
several factors. These factors include our ability to: generate sufficient cash
flows to meet our obligations on a timely basis; obtain acceptance of payment
terms for certain payables to key vendors; obtain additional financing or
refinancing as may be required; aggressively control costs, and; achieve
profitability and positive cash flows.

      We plan to address these challenges by building on the successful launch
of our organic Black Rhino Coffee(TM) brand into the U.S. mass retail sector.
Since introduction in May 2002 at the FMI supermarket convention, the brand has
penetrated the shelves of approximately 650 supermarkets and mass retailers. The
benefit of this channel of trade is that a small number of orders can
significantly increase our revenues and earnings. We believe that entry to this
new market sector will expose us to different and potentially more fertile
financing opportunities - such as project-based debt financing secured by
purchase order or accounts receivable notes. We believe this is a crucial new
opportunity for us given the continuing uncertainty of conventional equity
markets.

      We further believe that our gradual transition from reliance on
full-service units to an asset-light company concentrating more on brand
ownership and management will reduce the capital needs for future large tangible
asset acquisitions.

      The Company had net cash provided from financing activities for the nine
months ended December 31, 2003 totaling $472,095. Cash from financing activities
primarily consists of $500,000 from issuance of a convertible debenture. These
amounts were primarily utilized in the day-to-day operations of the Company.

See accompanying notes to financial statements


                                     - 16 -
<PAGE>

Item 3. Controls and Procedures

a. Evaluation of disclosure controls and procedures.

      Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the last
day of the period covered by this quarterly report (the "Evaluation Date").
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the material information relating to us required
to be included in our periodic SEC filings.

b. Changes in internal controls.

      There were no significant changes made in our internal controls over
financial reporting (as defined in Rule 13 a-15(f) under the Exchange Act)
during the period covered by this report that materially affected or are
reasonably likely to materially affect our internal controls over financial
reporting.

See accompanying notes to financial statements


                                     - 17 -
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      On May 8, 2002, the Company filed an action in the United States District
Court, Eastern District of California, against its former CEO, Clifford Brent
Young, and others. Peabodys Coffee Inc. v. Young et al., No. S-02-994 LLK PAN
("Peabodys v. Young"). The complaint sought declaratory and injunctive relief
precluding the defendants from transferring in violation of the federal
securities laws unregistered stock originally issued to Mr. Young. The complaint
also alleged that Mr. Young, in association with a former employee of the
Company, had breached contractual duties, and/or committed torts, in connection
with the purported cancellation of contracts between the Company and a client,
and in connection with other acts of competition, disparagement, and conversion.
The complaint further sought Mr. Young's removal as a director of the Company.

      On May 29, 2002, the Company moved for a temporary restraining order
precluding any stock transfers and (as to Mr. Young and the former employee)
from competition at certain sites that are the subject of a non-compete
agreement between the Company and Mr. Young. Immediately prior to the May 30,
2002 hearing on that motion, Mr. Young filed a petition for bankruptcy with the
United States Bankruptcy Court, Central District of California, staying the
action as to him (although he did not list the action in his bankruptcy
petition). The Court denied the remainder of the motion. Subsequently, on June
17, 2002, Mr. Young resigned as a director of the Company.

      The Company also challenged the client's legal right to cancel the
contracts. On June 25, 2002, the Company settled the potential dispute with the
client and the former employee. The settlement provides that the client will pay
the Company in exchange for being allowed to cancel the contracts; that the
claims against the former employee in Peabodys v. Young will be dismissed with
prejudice; and for other consideration. The Company also has agreed or proposed
agreement with most of the other defendants who hold the unregistered stock,
that the claims against them will be dismissed without prejudice, in exchange
for agreement on the part of these persons not to transfer the stock before the
date such transfers may be made under the federal securities laws. The Company
is assessing its options as to its claims against Mr. Young in light of his
bankruptcy filing.

Item 2. Changes in Securities and Use of Proceeds

      On October 22, 2003, in order to induce three accredited investors holding
the Company's convertible debentures issued pursuant to the December 2002
Securities Purchase Agreement, to exercise their warrants, we issued additional
warrants to purchase an aggregate of 875,000 shares of common stock to the three
accredited investors in. The warrants are exercisable into 875,000 shares of
common stock at a price of $.08 per share. In addition, in December 2003, the
accredited investors and the Company entered into Settlement Agreement and
Release whereby the parties agreed to the prepayment of the outstanding
debentures, including principal and interest, according to a prepayment
schedule. The Company was also required to issue the accredited investors
500,000 shares of common stock.

      On December 31, 2003, the Company converted an outstanding promissory note
in the amount of $100,000 into 2,000,000 shares of common stock at the price of
$.05 per share. Each of the note holders was an accredited investor.

See accompanying notes to financial statements


                                     - 18 -
<PAGE>

      From February 2003 until April 2003, the Company issued an aggregate of
75,000 shares of common stock to Cervelle Group LLC for consulting services.

      To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with an accredited investors in December 2003 for the sale of
(i) $250,000 in convertible debentures and (ii) warrants to buy 2,500,000 shares
of our common stock. La Jolla Cove Investors provided us with an aggregate of
$250,000 as follows:

      o     $100,000 was disbursed to various of our secured debtholders on
            December 8, 2003;
      o     $100,000 was disbursed to us on December 8, 2003; and
      o     $50,000 has been retained for services provided to our company by
            various professionals, which was disbursed upon effectiveness of our
            registration statement;

      The debentures bear interest at 7 3/4%, mature two years from the date of
issuance, and are convertible into our common stock, at the selling
stockholder's option. The convertible debentures are convertible into the number
of our shares of common stock equal to the principal amount of the debentures
being converted multiplied by 11, less the product of the conversion price
multiplied by ten times the dollar amount of the debenture. The conversion price
for the convertible debenture is the lesser of (i) $0.25 or (ii) eighty percent
of the of the average of the five lowest volume weighted average prices during
the twenty (20) trading days prior to the conversion. Accordingly, there is in
fact no limit on the number of shares into which the debenture may be converted.
In addition, the selling stockholder is obligated to exercise the warrant
concurrently with the submission of a conversion notice by the selling
stockholder. The warrant is exercisable into 2,500,000 shares of common stock at
an exercise price of $1.00 per share. The investor agreed to make payments to
our current debtholders in the amount of $50,000 per month until the debtholders
are paid in full. Such payments shall be applied toward the future exercise of
the warrants held by the investor.

      La Jolla Cove Investors has contractually committed to convert not less
than 5.0% and not more than 15.0% of the original face value of the debenture
monthly beginning the month after the effective date of the Registration
Statement covering the debenture. The 15% maximum is not applicable if the
market price at the time of the conversion at anytime during the applicable
month is higher than the market price at closing of the financing. La Jolla Cove
Investors is required to exercise warrants concurrently with the exercise of a
conversion notice under the debenture and is committed to exercise at least 5%,
but not more than 15%, of the warrants per month. The 15% maximum is not
applicable if the market price at the time of the conversion at anytime during
the applicable month is higher than the market price at closing of the
financing. In the event that La Jolla Investors breaches the minimum and maximum
restrictions on the debenture and warrant, La Jolla will not be entitled to
collect interest on the debenture for that month.

      La Jolla has further contractually agreed to restrict its ability to
convert the debenture or exercise their warrants and receive shares of our
common stock such that the number of shares held by the Holder and its
affiliates after such conversion or exercise does not exceed 4.9% of the then
issued and outstanding shares of our common stock.

      In the event that the registration statement is not declared effective by
the required deadline, La Jolla may demand repayment of the Debenture of 125% of
the face amount outstanding, plus all accrued and unpaid interest, in cash. If
the repayment is accelerated, we are also obligated to issue to La Jolla 50,000
shares of common stock for each 30 day period, or portion thereof, during which
the face amount, including interest thereon, remains unpaid. If La Jolla does
not elect to accelerate the debenture, we are required to immediately issue to
La Jolla 50,000 shares of common stock for each 30 day period, or portion
thereof, during which the face amount, including interest thereon, remains
unpaid.

See accompanying notes to financial statements


                                     - 19 -
<PAGE>

      In January 2004, the Company issued an aggregate of 250,000 shares of
common stock to Cervelle Group LLC for consulting services of which 50,000
shares are issuable immediately and 33,333 are issuable each month over the
following six months. The issuance was exempt from registration under Section
4(2) of the Securities Act of 1933, as amended.

* All of the above offerings and sales were deemed to be exempt under rule 506
of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. No
advertising or general solicitation was employed in offering the securities. The
offerings and sales were made to a limited number of persons, all of whom were
accredited investors, business associates of the Company or executive officers
of the Company, and transfer was restricted by the Company in accordance with
the requirements of the Securities Act of 1933. In addition to representations
by the above-referenced persons, we have made independent determinations that
all of the above-referenced persons were accredited or sophisticated investors,
and that they were capable of analyzing the merits and risks of their
investment, and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access to
our Securities and Exchange Commission filings.

Item 3. Defaults on 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
No.     Description
---     -----------

31      Certification of the Company's Chief Executive Officer and Chief
        Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002

32      Certification of the Company's Chief Executive Officer and Chief
        Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
        2002

(b)   Reports on Form 8-K

      None


                                     - 20 -
<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        PEABODYS COFFEE, INC.,
                                        A Nevada Corporation

                                        By: /S/  Todd Tkachuk
                                           -------------------------------------
                                           Todd Tkachuk, President
                                        Date: February 23, 2004

See accompanying notes to financial statements


                                     - 21 -