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, 2001

             [ ] 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: 18,911,024 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

Part II - Other Information

     Item 1    Legal Proceedings                                              17

     Item 2    Changes in Securities                                          17

     Item 3    Defaults Upon Senior Securities                                18

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

     Item 5    Other Information                                              18

     Item 6    Exhibits and Reports on Form 8-K                               18

     Signatures                                                               19

                                       -2-
<PAGE>

                              PEABODYS COFFEE, INC.
                                 BALANCE SHEETS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                           2001             2000
                                                                   ------------     ------------

ASSETS

Current Assets
<S>                                                                <C>              <C>
   Cash                                                            $     75,492     $      4,018
   Other receivables                                                     44,353           20,893
   Inventories                                                           60,628           48,068
   Prepaid expenses                                                      83,510           81,274
                                                                   ------------     ------------
           Total Current Assets                                    $    263,983     $    154,253

Property and equipment (net)                                            384,764          431,899
Deposits and other assets                                               101,453          153,593
                                                                   ------------     ------------

           Total Assets                                            $    750,200     $    739,745
                                                                   ============     ============


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
   Cash overdraft                                                  $         --     $     45,311
   Accounts payable                                                     339,501          485,784
   Accrued expenses                                                     326,409          265,332
   Liability for acquisition of inventory and equipment                      --           56,000
   Other current liabilities                                                 --           20,000
   Short-term borrowings                                                     --           21,320
   Bridge note financing                                                 40,000           40,000
                                                                   ------------     ------------

           Total Current Liabilities                               $    705,910     $    933,747
                                                                   ------------     ------------

Stockholders' Equity (Deficit)
   Common stock authorized - 50,000,000 shares,
   issued and outstanding, 18,911,024 and 10,951,717
   $.001 par value                                                 $     18,911     $     10,952

   Paid-in capital                                                    4,891,267        4,092,136
   Accumulated deficit                                               (4,865,888)      (4,297,090)
                                                                   ------------     ------------

           Total Stockholders' Equity (Deficit)                    $     44,290     $   (194,002)
                                                                   ------------     ------------

           Total Liabilities and Stockholders' Equity (Deficit)    $    750,200     $    739,745
                                                                   ============     ============
</TABLE>

See accompanying notes to financial statements

                                       -3-
<PAGE>

                              PEABODYS COFFEE, INC.
                   STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                       Nine Months Ended                 Three Months Ended
                                                         December 31,                      December 31,
                                                     2001             2000             2001             2000
                                                     ----             ----             ----             ----

<S>                                              <C>              <C>              <C>              <C>
Sales                                            $  2,138,873     $  1,502,267     $    862,566     $    556,046

Cost of Sales                                         804,565          604,314          324,239          232,680
                                                 ------------     ------------     ------------     ------------

           Gross Profit                          $  1,334,308     $    897,953     $    538,327     $    323,366

Operating expenses
   Employee compensation and benefits                 992,021          765,893          397,087          289,718
   General and administrative expenses                234,409          238,872           86,656           69,179
   Occupancy                                          244,886          205,264           96,011           63,915
   Director and professional fees                     191,866          287,833           71,880           93,120
   Depreciation and amortization                       95,001           83,070           32,247           27,690
   Loss on disposal of property and equipment              --           34,481               --               --
   Other operating expenses                             3,105            6,378              605            2,439
                                                 ------------     ------------     ------------     ------------
                                                 $  1,761,288     $  1,621,791     $    684,486     $    546,061
                                                 ------------     ------------     ------------     ------------

   Operating Loss                                $   (426,980)    $   (723,838)    $   (146,159)    $   (222,695)

Other income                                           24,000            8,000               --            8,000
Interest and other expense                            (35,275)         (11,939)         (24,458)          (5,837)
                                                 ------------     ------------     ------------     ------------

   Net loss before extraordinary item            $   (438,255)    $   (727,777)    $   (170,617)    $   (220,532)
   Extraordinary item - forgiveness of debt            46,079           83,023           36,190           36,484
                                                 ------------     ------------     ------------     ------------

           Net Loss                              $   (392,176)    $   (644,754)    $   (134,427)    $   (184,048)

Accumulated Deficit, beginning of period           (4,473,712)      (3,652,336)      (4,731,461)      (4,113,042)
                                                 ------------     ------------     ------------     ------------

Accumulated Deficit, end of period               $ (4,865,888)    $ (4,297,090)    $ (4,865,888)    $ (4,297,090)
                                                 ============     ============     ============     ============


Earnings per common share:
   Net loss before extraordinary item            $      (0.02)    $      (0.08)    $      (0.01)    $      (0.02)
   Extraordinary item                                    0.00             0.01             0.00             0.00
                                                 ------------     ------------     ------------     ------------
   Net loss                                      $      (0.02)    $      (0.07)    $      (0.01)    $      (0.02)
                                                 ============     ============     ============     ============
</TABLE>

See accompanying notes to financial statements

                                       -4-
<PAGE>

                              PEABODYS COFFEE, INC.
                            STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

<TABLE>
<CAPTION>
                                                                           2001             2000
                                                                   ------------     ------------

CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                                <C>              <C>
Net Loss                                                           $   (392,176)    $   (644,754)
Adjustments to reconcile net loss to net cash
used by operating activities:
   Depreciation and amortization                                         95,001           83,070
   Gain on extraordinary item - forgiveness of debt                     (46,079)         (83,023)
   Loss on disposal of property and equipment                                --           34,481
   Other income from reduction of obligation to issue
   shares of common stock                                               (24,000)          (8,000)
Changes in operating assets and liabilities:
   Receivables                                                          (22,848)           4,473
   Inventories                                                          (10,245)          (7,620)
   Prepaid expenses                                                      68,220          171,817
   Cash overdraft                                                       (48,558)          45,311
   Accounts payable                                                      (4,906)          57,488
   Accrued expenses                                                      15,865           79,272
   Other current liabilities                                                 --           20,000
                                                                   ------------     ------------
           Net cash used by operating activities                   $   (369,726)    $   (247,485)

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property and equipment                                     (95,546)         (40,843)
Changes to deposits and other assets                                     22,076          (13,144)
                                                                   ------------     ------------
           Net cash used by investing activities                   $    (73,470)    $    (53,987)

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from sale of stock                                         525,150          260,532
Proceeds from issuance of notes payable                                      --          103,200
Repayments of short-term borrowings                                     (14,820)              --
Principal reductions of notes payable                                        --          (60,500)
Payments on capital lease obligations                                        --           (1,113)
                                                                   ------------     ------------
           Net cash provided by financing activities               $    510,330     $    302,119

NET INCREASE IN CASH AND
CASH EQUIVALENTS                                                         67,134              647

CASH AND CASH EQUIVALENTS
Beginning of period                                                       8,358            3,371
                                                                   ------------     ------------
End of period                                                      $     75,492     $      4,018
                                                                   ============     ============
</TABLE>

See accompanying notes to financial statements

                                       -5-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    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   -    Related Party Transactions

Note  3   -    Going Concern

Note  4   -    Acquisitions

Note  5   -    Inventories

Note  6   -    Property and Equipment

Note  7   -    Accounts Payable

Note  8   -    Bridge Note Financing

Note  9   -    Supplemental  Disclosures  of Non-Cash  Investing  and  Financing
               Transactions

Note 10   -    Forgiveness of Debt

Note 11   -    Accrued Expenses

Note 12   -    Commitments and Contingencies

Note 13   -    Short-Term Borrowings

Note 14   -    Stockholders' Equity (Deficit)

Note 15   -    Earnings Per Common Share

                                       -6-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Description of Business
-----------------------
Peabodys  Coffee (the  "Company")  owns and operates  retail espresso coffee bar
kiosks  in  a  variety  of  corporate  and  institutional  locations  throughout
California  and Nevada.  The Company  has gained  access to this  segment of the
specialty coffee market by contracting with existing food service providers such
as Sodexho  America,  Aramark,  The Compass Group,  and through direct contracts
with selected clients.  The Company's product  offerings  include:  high quality
coffee and espresso beverages, fruit smoothies,  pastries,  accompaniments,  and
coffee related accessories.

Estimates and Assumptions
-------------------------
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results may differ from these estimates.

Basis of Presentation
---------------------
In the opinion of management,  all adjustments of a normal and recurring nature,
which were  considered  necessary  for a fair  presentation  of these  financial
statements,  have been included.  It is suggested that these statements are read
in conjunction with the financial  statements and footnotes  thereto included in
the annual  report of the  Company on Form  10-KSB for the year ended  March 31,
2001.  The results of operations  for the period ended December 31, 2001 may not
necessarily be indicative of the operating results for the entire fiscal year.

Incorporation by Reference
--------------------------
The following  notes from the Company's  audited  financial  statements  for the
years ended March 31, 2001 and 2000 included in the Annual Report of the Company
on Form  10-KSB,  filed  with  the  Commission  on June  29,  2001,  are  hereby
incorporated by reference:

     Note  2 - Related Party Transactions
     Note 10 - Lease Obligations
     Note 12 - Income Taxes
     Note 15 - Stock Option Plans
     Note 16 - Warrants
     Note 20 - Risks and Uncertainties
     Note 21 - Concentrations

Cash and Cash Equivalents
-------------------------
The Company  considers  all highly liquid  instruments  with a maturity of three
months or less at the time of purchase to be cash equivalents.

                                       -7-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Property and Equipment
----------------------
Property and equipment are recorded at cost.  Depreciation  and amortization are
primarily  accounted for on the  straight-line  method over the estimated useful
lives  of  the  assets,   generally  ranging  from  five  to  seven  years.  The
amortization  of site  improvements is based on the shorter of the lease term or
the life of the improvement.

Intangible Assets
-----------------
Goodwill  represents  the  excess of  acquisition  costs  over the fair value of
assets   acquired.   It  is  the  Company's   policy  to  evaluate  the  ongoing
profitability  of the acquired assets in order to determine if any impairment of
the net goodwill value has occurred.

Non-compete   agreements  and  other  intangible   assets  are  amortized  on  a
straight-line basis over the term of the agreement.

Income Taxes
------------
The Company  accounts  for income  taxes under the  provisions  of  Statement of
Financial  Accounting  Standards No. 109,  "Accounting  for Income Taxes," which
requires the use of the asset and liability method of computing  deferred income
taxes.

Inventories
-----------
Inventories  are  stated at the lower of cost  (first-in,  first-out  method) or
market.

Stock Transaction Costs
-----------------------
Transaction  costs  related  to the sale of  common  shares  are  recorded  as a
reduction to capital raised by the Company.

Compensated Absences
--------------------
Employees  of the  Company  are  entitled  to  paid  vacation  depending  on job
classification,  length of service and other  factors.  It is  impracticable  to
estimate the amount of compensation  for future absences,  and  accordingly,  no
liability  has been  recorded  in the  accompanying  financial  statements.  The
Company's policy is to recognize the costs of compensated absences when actually
paid to employees.

Fair Value of Financial Instruments
-----------------------------------
The carrying value of cash and cash equivalents  approximates fair value because
of the short-term maturity of those instruments.

Reclassifications
-----------------
Certain  amounts  from the  December  31, 2000  financial  statements  have been
reclassified to conform to the current year presentation.

                                       -8-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

NOTE 2 - RELATED PARTY TRANSACTIONS

The Company has a supply  relationship  with another  company that is owned by a
member of the Company's Board of Directors.  Purchases from this company for the
nine months ended  December 31, 2001 totaled  $43,934 for equipment and $128,983
for coffee and related  products.  At December 31, 2001,  $38,090 was accrued in
accounts payable.

At December 31, 2001, the Company has a $10,000 short-term  unsecured receivable
from a shareholder.

During the nine months ended December 31, 2000, a member of the Company's  Board
of Directors  provided  management  and other services to the Company on various
business issues.  Fees incurred for these services were $18,000. At December 31,
2000, $6,000 was accrued in accounts payable.

NOTE 3 - GOING CONCERN

These statements are presented on the basis that the Company is 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.
The accompanying financial statements show an operating loss for the nine months
ended  December 31, 2001 of $426,980,  and current  liabilities  exceed  current
assets by $441,927.  Without an infusion of  additional  capital,  the Company's
ability to continue  operations is doubtful.  No adjustment has been made to the
financial  statements  relating  to the  uncertainty  of  continuing  as a going
concern.

Management's Plan
-----------------
The Board and management  acknowledge  the issues raised as to the future of the
Company.  Over the past  several  years,  the Company has  eliminated  over $1.5
million of debt through a combination of debt forgiveness and conversion of debt
to equity,  and intends to further  reduce debt via the same  approach.  Also, a
concerted  effort is being placed on an  evaluation  of the  Company's  business
practices with the goal of achieving  positive cash flow from  operations.  This
evaluation  includes  the  Company's  site  locations,   product  quality,  menu
selection, and pricing policy.

In  addition,  the Company has engaged the  services of various  consultants  to
enhance its merger and acquisition  activity,  its capital raising efforts,  and
its ability to penetrate new distribution channels. The Company's long-term goal
is to distribute its branded  organic coffee in the  mass-market  retail sector,
while expanding its e-commerce capabilities.

During the nine months ended  December 31, 2001, the Company's  capital  raising
efforts have resulted in $525,150 of net proceeds from the sale of common stock.
In January  2002,  the Company was approved for a leasing line of credit,  which
will provide the  necessary  growth  financing for the purchase of equipment and
kiosks.  The parties are working towards  preparing a written  document  setting
forth the terms of the agreement.  Management  believes the combination of these
efforts will allow the Company to continue as a going concern.

                                       -9-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

NOTE 4 - ACQUISITIONS

During the year ended March 31, 2001, the Company  purchased certain assets of a
coffee roasting company in Van Nuys, California,  in exchange for the promise to
issue up to  320,000  shares of common  stock at $0.20 per  share.  Terms of the
agreement  specify that the actual number of shares to be issued is reduced each
month until the seller  obtains  the  release of certain  liens from the assets.
During the nine months ended December 31, 2001, the seller obtained the required
release of the liens,  resulting in the issuance of 40,000  shares.  There is no
further obligation to issue additional shares.

The purchase  price has been  allocated  to the acquired  assets on the basis of
their  estimated  fair value on the date of  acquisition.  The fair value of the
assets acquired is summarized as follows:

     Inventory                                                   $   11,662
     Roasting equipment                                              52,338
                                                                 ----------
                                                                 $   64,000
                                                                 ==========

Effective  December 12, 2000,  the Company  transferred  possession of the above
roasting  equipment  for $20,000 to an  unrelated  party.  The book value of the
equipment was adjusted at September 30, 2000 to its net realizable value. During
the nine months  ended  December  31,  2001,  clear title to the  equipment  was
obtained and the sale of the equipment was finalized.

NOTE 5 - INVENTORIES

At December 31, 2001 and 2000, inventories were comprised of the following:

                                                      2001             2000
                                              ------------     ------------

     Coffee                                   $     11,946     $      9,809
     Other food and beverage items                  28,418           20,386
     Packaging and other supplies                   20,264           17,873
                                              ------------     ------------
                                              $     60,628     $     48,068
                                              ============     ============

                                      -10-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

NOTE 6 - PROPERTY AND EQUIPMENT

At December 31, 2001 and 2000,  property  and  equipment  were  comprised of the
following:

                                                      2001             2000
                                              ------------     ------------

     Kiosk carts and equipment                $    544,687     $    513,364
     Equipment and furniture                       226,996          250,711
     Signage                                        49,997           46,029
     Site improvements                             104,646           79,924
                                              ------------     ------------
                                                   926,326          890,028
     Less: accumulated depreciation               (541,562)        (458,129)
                                              ------------     ------------
                                              $    384,764     $    431,899
                                              ============     ============

NOTE 7 - ACCOUNTS PAYABLE

Of the $339,501 and $485,784 in accounts  payable at December 31, 2001 and 2000,
approximately  51% and  68%  have  been  outstanding  for  more  than  90  days,
respectively.

NOTE 8 - 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. There were
$40,000 of bridge notes outstanding at December 31, 2001 and 2000. 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 December  31, 2001 and 2000,  the
Company has accrued  $34,224 and $27,859 of interest  payable on these notes. As
of  December  31,  2001,  the  Company  has not  received  any notice of default
relating to the notes.

                                      -11-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

NOTE  9  -  SUPPLEMENTAL   DISCLOSURES  OF  NON-CASH   INVESTING  AND  FINANCING
            TRANSACTIONS

Non-cash investing and financing transactions for the nine months ended December
31, 2001 and 2000 are as follows:

                                                                 2001       2000
                                                                 ----       ----

    Issuance of common stock in exchange for
         services provided                                   $ 88,750   $314,000

    Trade payables and accrued expenses forgiven               46,079     73,757

    Acquisition of inventory and equipment financed
         with an obligation to issue common stock                  --     64,000

    Reduction of obligation to issue shares of common
         stock                                                 24,000      8,000

    Issuance of common stock in exchange for
         property and equipment                                10,000         --

    Sale of equipment in exchange for obligations
         on trade payables and other liabilities               47,195

    Conversion of obligations on trade payables,
         accrued expenses, and other liabilities into
         shares of common stock                                10,400    255,555

    Conversion of obligations on bridge financing
         notes into shares of common stock                         --     20,000

    Accrued interest on bridge note obligations
         forgiven in exchange for warrants to
         purchase common stock                                     --      9,266

NOTE 10 - FORGIVENESS OF DEBT

Forgiveness  of debt  amounted to $46,079 and $83,023 for the nine months ending
December 31, 2001 and 2000, respectively. This income represents the forgiveness
of trade payables and accrued  expenses  recorded as expenses in the current and
prior  years.  Significant  transactions  relating  to  forgiveness  of debt are
explained in the following paragraphs.

On December 31 2001, a current vendor of the Company  agreed to forgive  $35,026
of trade payables.

                                      -12-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

NOTE 10 - FORGIVENESS OF DEBT (CONTINUED)

In 1996 the Company issued interest  bearing,  convertible,  secured  promissory
notes ("Bridge Notes").  The majority of the Bridge Note holders have elected to
convert their  outstanding  principal  balance into common stock at a conversion
price of $1.00 per share.  In  addition,  the Bridge Note holders who elected to
convert their  outstanding  principal  agreed to forgive the Company of its debt
obligations  related to accrued  interest on their  Bridge  Notes.  For the nine
months ended December 31, 2000, in exchange for the debt  forgiveness of $9,266,
the Company  issued  warrants to purchase  9,266 shares of the Company's  common
stock at a price per share of $1.00.

On  September  30,  2000,  the  Company's  legal  counsel  agreed  to  accept  a
non-statutory option for the purchase of 150,000 shares of common stock, with an
exercise price of $0.20 per share as full and final settlement for accrued legal
fees totaling $20,000.

On December 31, 2000, a former employee of the Company agreed to forgive $36,484
of accrued  expenses in exchange for warrants to purchase  100,000 shares of the
Company's common stock at a price per share of $0.10.

A tax  effect  was not  attributed  to the  gain,  as the gain will  reduce  the
Company's prior net operating loss.

NOTE 11 - ACCRUED EXPENSES

At December 31, 2001 and 2000, accrued expenses were comprised of the following:

                                                      2001             2000
                                              ------------     ------------

     Accrued interest                         $     40,086     $     27,859
     Accrued wages                                  48,202           82,028
     Accrued sales and use tax                      36,169           29,959
     Accrued payroll taxes                         198,464          121,191
     Other                                           3,488            4,295
                                              ------------     ------------
                                              $    326,409     $    265,332
                                              ============     ============

NOTE 12 - COMMITMENTS AND CONTINGENCIES

As of December 31, 2001 and 2000, the Company has accrued $198,464 and $121,191,
respectively,  for payroll  taxes,  penalties  and  interest due to the Internal
Revenue  Service  and the  State  of  California.  Management  has met  with the
Internal  Revenue  Service and Employment  Development  Department and is in the
process of making payment arrangements.

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, 2001 and
2000.

                                      -13-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000
                                    UNAUDITED

NOTE 13 - SHORT-TERM BORROWINGS

During the nine months ended  December 31, 2001 and 2000,  the Company  borrowed
funds to provide  short-term  working  capital.  These working capital loans are
unsecured,  non-interest bearing, and amounted to $0 and $21,320 at December 31,
2001 and 2000, respectively.

NOTE 14 - STOCKHOLDERS' EQUITY (DEFICIT)

The Company is authorized to issue up to 50,000,000  shares of common stock, par
value $.001.  At December 31, 2001 and 2000 there were 18,911,024 and 10,951,717
shares of common stock outstanding, respectively.

At  December  31,  2001 and 2000 the  Company  had not paid any  dividends  with
respect to its shares of common stock.

NOTE 15 - 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,  2001 and  2000,  were  16,593,043  and  9,556,569,
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, 2001 and 2000, 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.

                                      -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, 2001 increased 42.4% to
$2,138,873  from  $1,502,267  for the  same  period  in  fiscal  2000.  This was
primarily  due to the  opening of new  hospital  locations  and a retail cafe in
Southern  California.  Retail  sales  accounted  for 100% of  revenues  for both
periods.

          COSTS AND EXPENSES

     Cost of sales for the nine months ended December 31, 2001  increased  33.1%
to $804,565 from $604,314 for the same period in fiscal 2000. As a percentage of
net  revenues,  cost of sales  decreased  to 37.6%  for the  nine  months  ended
December  31,  2001 from 40.2% for the  comparable  period in fiscal  2000.  The
decrease as a percent of net revenues is  primarily  due to the  elimination  of
certain low margin products and continued  efforts to obtain  favorable  pricing
from the Company's suppliers.

     Employee  compensation  and benefits for the nine months ended December 31,
2001  increased to $992,021 from $765,893 for the same period in fiscal 2000. As
a percentage of net revenues,  employee  compensation and benefits  decreased to
46.4% for the nine months ended  December 31, 2001 from 51.0% for the comparable
period in fiscal  2000.  The  decrease as a percent of net revenues is primarily
due to  increased  revenues  and the  efficiencies  gained  from  corporate  and
administrative labor cost controls.

     General and administrative  expenses for the nine months ended December 31,
2001  decreased to $234,409 from $238,872 for the same period in fiscal 2000. As
a percentage of net revenues,  general and administrative  expenses decreased to
11.0% for the nine months ended  December 31, 2001 from 15.9% for the comparable
period in fiscal  2000.  The  decrease as a percent of net revenues is primarily
due to training cost savings resulting from reduced employee  turnover,  as well
as reduced travel and telephone expenses.

     Occupancy  costs for the nine months ended  December 31, 2001  increased to
$244,886  from  $205,264 for the same period in fiscal 2000.  As a percentage of
net  revenues,  occupancy  costs  decreased  to 11.4% for the nine months  ended
December  31, 2001 from 13.7% for the  comparable  period in fiscal  2000.  This
decrease as a percent of net revenues is primarily due to lower average  revenue
sharing rates at the Company's new hospital locations and its retail cafe.

     Director and professional  fees for the nine months ended December 31, 2001
decreased to $191,866  from  $287,833  for the same period in fiscal  2000.  The
majority of these expenses result from the engagement of various  consultants to
assist the Company in obtaining  growth  financing and in the penetration of new
markets.

                                      -15-
<PAGE>

     Depreciation  and  amortization  expense for the nine months ended December
31, 2001  increased  to $95,001 from $83,070 for the same period in fiscal 2000.
As a percentage of net revenues, depreciation and amortization expense decreased
to 4.4% for the nine months ended December 31, 2001 from 5.5% for the comparable
period in fiscal 2000.

     Operating  losses for the nine months ended  December 31, 2001 decreased to
$426,980  from  $723,838 the same period in fiscal 2000.  As a percentage of net
revenues, operating losses decreased to 20.0% for the nine months ended December
31, 2001 from 48.2% for the comparable period in fiscal 2000.

     Net loss for the nine months ended  December 31, 2001 decreased to $392,176
from  $644,754  for the same  period  in fiscal  2000.  As a  percentage  of net
revenues,  net losses  decreased to 18.3% for the nine months ended December 31,
2001 from 42.9% for the comparable period in fiscal 2000.

          LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2001, the Company's  working capital  deficit  decreased to
$441,927  from  $779,494 at December  31,  2000.  As  discussed in Note 3 of the
accompanying  financial  statements,  the  Company  is  aggressively  working to
eliminate debt through a combination of debt  forgiveness and conversion of debt
to equity.  The Company is also evaluating its business  practices with the goal
of achieving positive cash flow from operations.

     In January 2002,  the Company was approved for a leasing line of credit for
up to $300,000.  This leasing line of credit will provide the  necessary  growth
financing  for the  purchase of  equipment  and kiosks.  The parties are working
towards  preparing a written  document setting forth the terms of the agreement.
The Company is also actively pursuing  opportunities in the organic  sustainable
coffee  market,  including  distribution  of its branded  organic  coffee to the
mass-market retail sector and through e-commerce channels.

     Cash utilized for investing  activities  for the nine months ended December
31, 2001 primarily  consisted of capital  additions to property and equipment of
$95,546.  The capital additions were primarily related to the equipment purchase
for the  opening  of new  facilities,  and costs  associated  with  refurbishing
existing kiosks.

                                      -16-
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     None

ITEM 2.   CHANGES IN SECURITIES

     (c)  The  following   equity   securities  were  sold  by  the  Company  in
unregistered transactions during the period covered by this report:

     On October 17, 2001, the Company sold 50,000 shares of its common stock, at
a price of $0.40 per  share,  in a private  offering  exempt  under  Rule 506 of
Regulation D promulgated  under Section 4(2), as amended.  The offering began in
the previous  quarter on August 18, 2001,  with sales  reported on the Company's
Form 10-QSB  Quarterly  Report for the Quarter  Ended  September  30, 2001.  The
offering  terminated  with the sale on October 17. The sales during the offering
were to both individuals and entities, all of which were accredited investors.

     On October 22, 2001,  the Company  issued  296,282 shares to an entity upon
the exercise of a warrant,  which had been granted for legal services  rendered.
The issuance was exempt from  registration  under Section 4(2) of the Securities
Act of 1933, as amended.  The exercise was a "cashless" exercise under the terms
of the warrant,  with the exercise price being paid with shares of the Company's
stock at its  then-current  market  value.  The entity to whom the  shares  were
issued had a  pre-existing  relationship  with the Company,  was  controlled  by
sophisticated  investors,  and had  access to the same  information  as would be
included in a registration statement prepared by the Company.

     On November 1, 2001, the Company issued 58,525 shares to an individual upon
the exercise of a warrant,  which had been granted for legal services  rendered.
The issuance was exempt from  registration  under Section 4(2) of the Securities
Act of 1933, as amended.  The exercise was a "cashless" exercise under the terms
of the warrant,  with the exercise price being paid with shares of the Company's
stock at its  then-current  market value. The individual to whom the shares were
issued had a pre-existing  relationship  with the Company,  was a  sophisticated
investor,  and had  access to the same  information  as would be  included  in a
registration statement prepared by the Company.

     From November 30, 2001, continuing through the end of the period covered by
this report, the Company has sold 713,500 shares of its common stock, at a price
of $0.40 per share, in a private  offering exempt under Rule 506 of Regulation D
promulgated  under Section 4(2), as amended.  The sales were to both individuals
and  entities,   all  of  which  were  accredited   investors  (except  for  one
unaccredited  investor who purchased  6,000  shares).  In  connection  with this
offering,  during the month of December 2001, the Company  granted a warrant for
the purchase of 11,250  shares,  at an exercise  price of $0.40 per share,  to a
brokerage  firm  participating  in the  offering.  The  issuance was exempt from
registration  under Section 4(2) of the Securities Act of 1933, as amended.  The
entity to whom the warrant was issued had a pre-existing  relationship  with the
Company, was a sophisticated investor, and had access to the same information as
would be included in a registration statement prepared by the Company.

                                      -17-
<PAGE>

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.

ITEM 5.   OTHER INFORMATION

     None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits
          --------

Exhibit No.    Description
-----------    -----------

2.1*           Articles of Incorporation of Kimberley Mines, Inc.
2.2*           Certificate of Amendment of Articles of Incorporation (Mine-A-Max
               Corp.)
2.3*           Certificate of Amendment of Articles of  Incorporation  (Peabodys
               Coffee, Inc.)
2.4*           Amended and Restated Bylaws of Peabodys Coffee, Inc.
3.1*           Peabodys Coffee, Inc. 1995 Stock Option Plan
3.2*           Peabodys Coffee, Inc. 1999 Stock Option Plan
6.1*           Executive Services Agreement with Barry J. Gibbons
6.2**          Asset Purchase Agreement with Arrosto Coffee Company, LLC
6.3***         Amendment No. 1--Arrosto Asset Purchase Agreement
6.4***         Amendment No. 2--Arrosto Asset Purchase Agreement

*Incorporated  by  reference  to the  Company's  Registration  Statement on Form
10-SB, as amended,  originally  filed with the Commission under the Exchange Act
on December 21, 1999.

**Incorporated by reference to the Company's Annual Report on Form 10-KSB, filed
with the Commission on June 29, 2000.

***Incorporated  by reference to the Company's  Amended Quarterly Report for the
Period  Ending  September 30, 2000,  filed on Form 10-QSB/A with the  Commission
under the Exchange Act on February 1, 2001.

     (b)  REPORTS ON FORM 8-K.  The Company  filed no reports on Form 8-K during
the reporting period.

                                      -18-
<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/
                                            ------------------------------------
                                            Cliff B. Young, President

                                        Date: February 14, 2002

                                      -19-