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

                                   FORM 10-QSB
                               AMENDMENT NUMBER 1

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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: 22,980,616 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     16


Part II - Other Information

     Item 1     Legal Proceedings                                             19

     Item 2     Changes in Securities                                         19

     Item 3     Defaults Upon Senior Securities                               19

     Item 4     Submission of Matters to a Vote of Security Holders           19

     Item 5     Other Information                                             20

     Item 6     Exhibits and Reports on Form 8-K                              20

     Signatures                                                               21

                                      -2-
<PAGE>

                              PEABODYS COFFEE, INC.
                                 BALANCE SHEETS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

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

Current Assets
<S>                                                      <C>              <C>
    Cash                                                 $      7,270     $      6,211
    Other receivables                                          52,180           49,186
    Inventories                                                54,462           61,048
    Prepaid expenses                                           25,722            7,322
                                                         ------------     ------------
          Total Current Assets                                139,634          123,767

    Property and equipment (net)                              164,170          391,378
    Deposits and other assets                                  84,561          226,331
                                                         ------------     ------------

          Total Assets                                   $    388,365     $    741,476
                                                         ============     ============


LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
    Cash overdraft                                       $         --     $     39,520
    Accounts payable                                          390,557          592,214
    Accrued expenses                                          305,372          244,236
    Short-term borrowings                                      60,000           10,000
    Short-term deferred revenue                                12,500               --
    Secured convertible debentures                            687,000               --
    Current portion of long-term debt                          35,988           46,673
    Bridge note financing                                      35,000           35,000
                                                         ------------     ------------
          Total Current Liabilities                         1,526,417          967,643
                                                         ------------     ------------

Long-term debt, net of current portion                         45,776          231,710
Long-term deferred revenue                                     12,500               --
                                                         ------------     ------------
    Total long-term liabilities                                58,276          231,710
                                                         ------------     ------------
          Total Liabilities                                 1,584,693        1,199,353

Stockholders' Deficit
    Common stock authorized - 50,000,000 shares,
    issued and outstanding, 22,980,616 and 19,516,695
    $.001 par value                                            23,006           19,517

    Paid-in capital                                         6,289,204        5,037,661
    Deferred expenses                                         (49,999)         (64,466)
    Accumulated deficit                                    (7,458,539)      (5,450,589)
                                                         ------------     ------------

          Total Stockholders' Deficit                      (1,196,328)        (457,877)
                                                         ------------     ------------

          Total Liabilities and Stockholders' Deficit    $    388,365     $    741,476
                                                         ============     ============
</TABLE>

See accompanying notes to financial statements

                                      -3-
<PAGE>

                              PEABODYS COFFEE, INC.
                   STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
                    THREE MONTHS ENDED JUNE 30, 2003 AND 2002
                                    UNAUDITED

                                                      2003             2002
                                                  ------------     ------------
Sales                                             $    545,093     $    799,797

Cost of Sales                                          232,301          328,949
                                                  ------------     ------------

    Gross Profit                                       312,792          470,848

Operating expenses
    Employee compensation and benefits                 304,452          388,299
    General and administrative expenses                 97,953           81,873
    Occupancy                                           66,333           88,743
    Director and professional fees                     121,876          116,640
    Depreciation and amortization                       29,442           31,895
    Other operating expenses                                --               --
                                                  ------------     ------------
                                                       620,056          707,450
                                                  ------------     ------------

    Operating Loss                                    (307,264)        (236,602)

Other income (Loss)                                    (81,373)           7,892
Legal expense - former president/CEO                        --         (130,000)
Interest and other expense                            (270,534)          (6,374)
                                                  ------------     ------------

    Net loss before extraordinary item                (659,171)        (365,084)
    Extraordinary item - forgiveness of debt                --              172
                                                  ------------     ------------

    Net Loss                                          (659,171)        (364,912)

Accumulated Deficit, beginning of period            (6,799,368)      (5,085,677)
                                                  ------------     ------------

Accumulated Deficit, end of period                $ (7,458,539)    $ (5,450,589)
                                                  ============     ============

Earnings per common share:
    Net loss before extraordinary item            $      (0.03)    $      (0.02)
    Extraordinary item                                      --                0
                                                  ------------     ------------
    Net loss                                      $      (0.03)    $      (0.02)
                                                  ============     ============

See accompanying notes to financial statements

                                      -4-
<PAGE>

                     PEABODYS COFFEE, INC.
                   Statements of Cash Flows
           Three Months Ended June 30, 2003 and 2002
                           Unaudited

<TABLE>
<CAPTION>
                                                                        2003             2002
                                                                    ------------     ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                 <C>              <C>
Net Loss                                                            $   (659,171)    $   (364,912)
Adjustments to reconcile net loss to net cash
provided by (applied to) operating activities:
     Depreciation and amortization                                        29,442           31,895
     Debt settlements and forgiveness of debt                                 --           (1,138)
     Loss on disposal of property and equipment                           81,373               --
     Non-cash consulting fees                                             19,082           43,531
     Financing costs-convertible debentures                              250,000               --
Changes in operating assets and liabilities:
     Receivables                                                         (35,222)          18,241
     Inventories                                                          20,205            2,190
     Prepaid expenses                                                     22,732           (5,312)
     Cash overdraft                                                      (24,644)          (8,975)
     Accounts payable                                                     29,540          186,913
     Accrued expenses                                                    (38,137)         (35,484)
     Increases in deferred revenue                                        25,000               --
                                                                    ------------     ------------
          Net cash provided by (applied to) operating activities        (279,800)        (133,051)

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment                                        6,048          (57,253)
Changes in valuation of Goodwill                                          36,839               --
Changes to deposits and other assets                                      (5,066)         (71,175)
                                                                    ------------     ------------
          Net cash applied to investing activities                        37,821         (128,428)

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of stock                                               --           12,000
Proceeds from issuance of notes payable                                       --          254,000
Proceeds from issuance of secured debentures                             250,000               --
Conversion of secured debentures to common stock                           2,768               --
Repayments of short-term borrowings                                       (9,000)              --
Principal reductions of notes payable                                       (635)          (5,617)
                                                                    ------------     ------------
          Net cash provided by financing activities                      243,133          260,383

NET DECREASE IN CASH AND
CASH EQUIVALENTS                                                           1,154           (1,096)

CASH AND CASH EQUIVALENTS
Beginning of period                                                        6,116            7,307
                                                                    ------------     ------------
End of period                                                       $      7,270     $      6,211
                                                                    ============     ============
</TABLE>

See accompanying notes to financial statements

                                      -5-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

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

                                      -6-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

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, 2002 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,  2002,  are not  necessarily
indicative  of the  results to be expected  for the full year  ending  March 31,
2003, 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 to enter 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  June  30,  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  $1,386,783  and  $1,196,328,
respectively, as of June 30, 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.

                                      -7-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

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  500  supermarkets.  The benefit of this
channel  of trade is that a small  number of orders can  significantly  increase
corporate revenues and earnings.  The brand has experienced reorders from all of
its retail  distribution  channels and  management  believes that further orders
will continue, quite possibly on an accelerated basis.

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 June 30, 2003 and 2002, inventories were comprised of the following:

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

     Coffee                                    $     18,126    $     19,240
     Other food and beverage items                   13,117          28,775
     Packaging and other supplies                    23,219          13,033
                                               ------------    ------------
                                               $     54,462    $     61,048
                                               ============    ============

                                      -8-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

NOTE 4 - PROPERTY AND EQUIPMENT, AND INTANGIBLE ASSETS

At June 30,  2003  and  2002,  property  and  equipment  were  comprised  of the
following:

                                                   2003            2002
                                               ------------    ------------
     Kiosk carts                                     84,042         263,733
     Kiosk equipment                                 85,525         293,663
     Equipment and furniture                        169,625         263,430
     Signage                                         28,609          53,032
     Site improvements                               52,731         116,592
     Assets not in service                           93,824              --
                                               ------------    ------------
                                                    514,356         990,450
     Less:  accumulated depreciation               (350,186)       (599,072)
                                               ------------    ------------
                                               $    164,170    $    391,378
                                               ============    ============

Included  in other  assets at June 30,  2003 and 2002,  were  intangible  assets
comprised of the following:

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

     Goodwill                                  $         --    $     40,930
     Non-competition agreement                           --          25,000
     Trade name                                      53,224          83,497
     Kiosk design                                        --           1,170
     Other identifiable intangibles                  50,100          14,600
                                               ------------    ------------
                                                    103,324         165,197
     Less:  accumulated amortization                (40,100)        (33,776)
                                               ------------    ------------
                                               $     63,224    $    131,421
                                               ============    ============

The  Company  recognized  depreciation  and  amortization  expense for the three
months ended June 30, 2003 and 2002 as follows:

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

     Depreciation                              $     26,872    $     28,755
     Amortization                                     2,570           3,140
                                               ------------    ------------
                                               $     29,442    $     31,895
                                               ============    ============

                                      -9-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

NOTE 5 - ACCOUNTS PAYABLE

At June 30, 2003 and 2002, approximately 41% and 28% of the balances in accounts
payable, respectively, have been outstanding for more than 90 days.


NOTE 6 - ACCRUED EXPENSES

At June 30, 2003 and 2002, accrued expenses were comprised of the following:

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

     Accrued interest                             66,004.00    $     43,020
     Accrued wages                                33,824.00          40,071
     Accrued sales and use tax                    31,083.00          32,008
     Accrued payroll taxes                       171,666.00         123,787
     Other                                         2,795.00           5,350
                                               ------------    ------------
                                               $    305,372    $    244,236
                                               ============    ============

Included  in accrued  payroll  taxes at June 30, 2003 and June 30, 2002 are past
due  payroll  tax   obligations   in  the  amount  of  $171,666  and   $101,447,
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.

                                      -10-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED


NOTE 8 - SHORT-TERM BORROWINGS

During the three months ended June 30, 2003 and 2002, the Company borrowed funds
to provide short-term working capital. Details of these loans are as follows:

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

     Unsecured loan, 10% interest per annum, interest
     only due monthly, balance due March 31, 2004        $       --   $   10,000

     Unsecured loan, 10% interest per annum, interest
     only due monthly, balance due March 31, 2004        $   10,000   $       --

     Unsecured loan, 10% interest per annum, interest
     only due monthly, balance due March 31, 2004        $   50,000   $       --

NOTE 9 - SECURED CONVERTIBLE 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.

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.
The aggregate net proceeds of the third tranche were approximately $212,000.

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.

                                      -11-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

NOTE 9 - SECURED CONVERTIBLE DEBENTURES (CONTINUED)

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
quarter ended June 30, 2003, the financing cost amounted to a total of $250,000.

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. As of the date of this  report no  warrants  have been
exercised.

                                      -12-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

NOTE 10 - LONG-TERM DEBT

The outstanding balance at June 30, 2003 is summarized as follows:

                                                          2003          2002
                                                       ----------    ----------
10% Note, unsecured, payable in monthly installments
of $849.88 including interest, due 03/31/07            $       --    $   38,438

10% Note, unsecured, payable in monthly installments
of $2,528.40 including interest, due 04/30/07                  --       115,914

10% Note, unsecured, payable in monthly installments
of $1,593.53 including interest, due 05/30/07                  --        74,031

10% Note, unsecured, payable in monthly installments
of $1,062.36 including interest, due 06/30/07                  --        50,000

10% Note, unsecured, payable in monthly installments
of $212.47 including interest, due 05/31/07            $    8,235            --

10% Note, unsecured, payable in monthly installments
of $106.24 including interest, due 06/30/07                 4,189            --

10% Note, unsecured, payable in monthly installments
of $3,136.77 including interest, due 03/31/05              69,340

Less current portion                                      (35,988)      (46,673)
                                                       ----------    ----------
                                                       $   45,776    $  231,710
                                                       ==========    ==========

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

     Twelve months ended June 30            Amount
                                       -----------
     2004                              $    34,106
     2005                                   35,560
     2006                                   11,542
     2007                                    3,433
     2008                                       --
                                       -----------
                                       $    84,640
                                       ===========

                                      -13-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

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 June
30, 2003 and 2003, 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 June 30, 2003,  the Company has not received any notice of default
relating to the notes.

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
three  months  ended June 30, 2003 and 2002,  were  22,980,616  and  19,377,039,
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 three months ended June 30, 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 three months ended June
30, 2003 and 2002, are as follows:

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

Issuance of common stock in exchange for
     services provided                                  $       --    $   80,000

Sale of equipment in exchange for receivable                    --        52,730

Trade payables and accrued expenses forgiven                    --         6,771

Converson of 10.0% secured debentures to
     shares of common stock                                 63,000            --

                                      -14-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002
                                    UNAUDITED

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  nine  months
regarding the status of the 500,000  shares  transferred by Mr. Young to various
individuals with no resolution as of this date.  Management  anticipates that it
will  reach a  settlement  within  the  next  three to six  months  and that the
settlement  will provide for the redemption by the Company of the 500,000 shares
currently owned by Mr. Young and his transferees.  At the very least, management
expect that the court will enjoin Mr. Young and his transferees from registering
any of the 500,000 shares received by them.

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 June 30, 2003 and
2002.

                                      -15-
<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 three  months ended June 30, 2003  decreased  31.8% to
$545,094  from  $799,797 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 89.5% of revenues and  wholesale  accounted  for 10.5% in the quarter  ended
June 30, 2003.

     COSTS AND EXPENSES

     Cost of sales for the three months ended June 30, 2003  decreased  29.1% to
$232,301  from  $328,949 for the same period in fiscal 2002.  As a percentage of
net revenues,  cost of sales  increased to 42.6% for the three months ended June
30, 2003 from 41.1% 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 three months ended June 30, 2003
decreased to $304,452  from  $388,299  for the same period in fiscal 2002.  As a
percentage  of net revenues,  employee  compensation  and benefits  increased to
55.9% for the three  months  ended June 30,  2003 from 48.5% for the  comparable
period in fiscal  2002.  The  increase as a percent of net revenues is primarily
due to decrease in revenues, despite a real cost decrease.

     General and  administrative  expenses  for the three  months ended June 30,
2003  increased to $97,953 from $81,873 for the same period in fiscal 2002. As a
percentage of net revenues,  general and  administrative  expenses  increased to
18.0% for the three  months  ended June 30,  2003 from 10.2% for the  comparable
period in fiscal  2002.  The  increase as a percent of net revenues is primarily
due to slotting fees.

     Occupancy  costs for the three  months  ended June 30,  2003  decreased  to
$66,333 from $88,743 for the same period in fiscal 2002.  As a percentage of net
revenues, occupancy costs increased to 12.2% for the three months ended June 30,
2003 from 11.1% for the comparable period in 2002.

     Director  and  professional  fees for the three  months ended June 30, 2003
increased to $121,876  from  $116,640  for the same period in fiscal  2002.  The
majority of these expenses result from the engagement of various  consultants to
assist the Company in obtaining  growth financing and in penetrating new markets
with its packaged  consumer brand of Black Rhino  Coffee(TM).  In addition,  the
Company recognized the fees related to its annual audit for the year ended March
31, 2003 during the three months ended June 30,  2003.  Comparable  annual audit
fees for the year ended March 31, 2002 were  recognized  during the three months
ended September 30, 2002.

                                      -16-
<PAGE>

     Depreciation and  amortization  expense for the three months ended June 30,
2003  increased to $29,442 from $31,895 for the same period in fiscal 2002. As a
percentage of net revenues,  depreciation and amortization  expense increased to
5.4% for the three  months  ended  June 30,  2003  from 4.0% for the  comparable
period in fiscal 2002.

     Operating  losses for the three  months  ended June 30, 2003  increased  to
$307,264  from  $236,602 the same period in fiscal 2002.  As a percentage of net
revenues,  operating  losses  increased to 56.4% for the three months ended June
30, 2003 from 29.6% for the comparable period in fiscal 2002.

     Net loss for the three  months  ended June 30, 2003  increased  to $659,171
from  $364,912  for the same  period  in fiscal  2002.  As a  percentage  of net
revenues,  net losses  increased  to 120.9% for the three  months ended June 30,
2003 from 45.6% for the comparable period in fiscal 2002.

     LIQUIDITY AND CAPITAL RESOURCES

     Despite the Company's "unit level" profitability,  the Company has not been
profitable.  As the accompanying financial statements show, for the three months
ended June 30, 2003,  the Company had a net operating  loss of $307,264,  and an
overall  net loss of  $659,171.  At June 30,  2003,  the  Company  has a working
capital deficit of $1,386,783, and a shareholder's deficit of $1,196,328.

     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  500  supermarkets.  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 also believe our strategic alliance with Marathon Global will facilitate
rapid market  penetration  by providing a level of credibility  and  negotiating
strength  otherwise  unavailable  to us. 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.

     Cash  applied to investing  activities  for the three months ended June 30,
2003  consisted of capital  additions  to property  and  equipment of $6,048 and
decreases  to deposits and other assets of $5,004.  The capital  additions  were
primarily  related to costs  associated  with purchase of kiosk  equipment.  The
decreases  to  deposits  and other  assets  were  primarily  due to write off of
deposits related to sale of sites.

                                      -17-
<PAGE>

     The Company had net cash provided from  financing  activities for the three
months ended June 30, 2003 totaling  $243,133.  Cash from  financing  activities
primarily  consists of $250,000 from issuance of  convertible  debenture.  These
amounts were primarily utilized in the day-to-day operations of the Company.

                                      -18-
<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

     None

ITEM 3.   DEFAULTS ON SENIOR SECURITIES

     None

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

     The Company has held no regularly scheduled,  called or special meetings of
shareholders during the reporting period.

                                      -19-
<PAGE>

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 pursuant
               to Section 302 of the Sarbanes-Oxley Act of 2002

32             Certification  of the Company's Chief Executive  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, President
                                        Date:    August 14, 2002

                                      -21-
<PAGE>