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 SEPTEMBER 30, 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                                     98-0209293
     (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 filings 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: 17,792,717 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     14

Part II - Other Information

     Item 1     Legal Proceedings                                             16

     Item 2     Changes in Securities                                         16

     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                              19

     Signatures                                                               20

                                      -2-
<PAGE>

                              PEABODYS COFFEE, INC.
                                 BALANCE SHEETS
                           SEPTEMBER 30, 2001 AND 2000
                                    UNAUDITED

                                                         2001           2000
                                                     -----------    -----------
ASSETS

Current Assets
   Cash                                              $     7,866    $     7,688
   Other receivables                                      31,384         16,192
   Inventories                                            49,028         45,763
   Prepaid expenses                                       96,429        145,960
                                                     -----------    -----------
      Total Current Assets                               184,707        215,603

Property and equipment (net)                             391,405        441,515
Deposits and other assets                                125,191        167,774
                                                     -----------    -----------

      Total Assets                                   $   701,303    $   824,892
                                                     ===========    ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
   Cash overdraft                                    $    40,208    $    27,763
   Accounts payable                                      392,007        439,350
   Accrued expenses                                      327,101        273,684
   Liability for acquisition of inventory
      and equipment                                           --         64,000
   Capital lease obligations                                  --            436
   Short-term borrowings                                  14,820         33,420
   Bridge note financing                                  40,000         40,000
                                                     -----------    -----------

      Total Current Liabilities                          814,136        878,653
                                                     -----------    -----------
Stockholders' Deficit
   Common stock authorized - 50,000,000 shares,
   issued and outstanding, 17,792,717 and
   10,678,384 $.001 par value                        $    17,793    $    10,678

   Paid-in capital                                     4,600,835      4,048,603
   Accumulated deficit                                (4,731,461)    (4,113,042)
                                                     -----------    -----------

      Total Stockholders' Deficit                       (112,833)       (53,761)
                                                     -----------    -----------

      Total Liabilities and Stockholders' Deficit    $   701,303    $   824,892
                                                     ===========    ===========

See accompanying notes to financial statements

                                      -3-
<PAGE>

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

<TABLE>
<CAPTION>
                                                     Six Months Ended             Three Months Ended
                                                       September 30,                 September 30,
                                                    2001           2000           2001           2000
                                                    ----           ----           ----           ----
<S>                                             <C>            <C>            <C>            <C>
Sales                                           $ 1,276,307    $   946,221    $   572,791    $   444,838

Cost of Sales                                       480,326        371,634        205,984        162,338
                                                -----------    -----------    -----------    -----------

      Gross Profit                                  795,981        574,587        366,807        282,500

Operating expenses
   Employee compensation and benefits               594,934        476,175        283,999        230,746
   General and administrative expenses              147,753        169,693         93,148        108,822
   Occupancy                                        148,875        141,349         67,638         70,540
   Director and professional fees                   119,986        194,713         84,813         80,791
   Depreciation and amortization                     62,754         55,380         33,999         27,690
   Loss on disposal of property and equipment            --         34,481             --         34,481
   Other operating expenses                           2,500          3,939          2,500          3,051
                                                -----------    -----------    -----------    -----------
                                                  1,076,802      1,075,730        566,097        556,121
                                                -----------    -----------    -----------    -----------

   Operating Loss                                  (280,821)      (501,143)      (199,290)      (273,621)

Other income                                         24,000             --             --             --
Interest expense                                    (10,817)        (6,102)        (8,086)        (3,314)
                                                -----------    -----------    -----------    -----------

   Net loss before extraordinary item              (267,638)      (507,245)      (207,376)      (276,935)
   Extraordinary item - forgiveness of debt           9,889         46,539          4,862         37,273
                                                -----------    -----------    -----------    -----------

      Net Loss                                     (257,749)      (460,706)      (202,514)      (239,662)

Accumulated Deficit, beginning of period         (4,473,712)    (3,652,336)    (4,528,947)    (3,873,380)
                                                -----------    -----------    -----------    -----------

Accumulated Deficit, end of period              $(4,731,461)   $(4,113,042)   $(4,731,461)   $(4,113,042)
                                                ===========    ===========    ===========    ===========

Earnings per common share:
   Net loss before extraordinary item           $     (0.02)   $     (0.05)   $     (0.01)   $     (0.02)
   Extraordinary item                                  0.00           0.00           0.00           0.00
                                                -----------    -----------    -----------    -----------
   Net loss                                     $     (0.02)   $     (0.05)   $     (0.01)   $     (0.02)
                                                ===========    ===========    ===========    ===========
</TABLE>

See accompanying notes to financial statements

                                      -4-
<PAGE>

                              PEABODYS COFFEE, INC.
                            STATEMENTS OF CASH FLOWS
                  SIX MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
                                    UNAUDITED

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

CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss                                                 $(257,749)   $(460,706)
Adjustments to reconcile net loss to net cash
used by operating activities:
   Depreciation and amortization                            62,754       55,380
   Gain on extraordinary item - forgiveness of debt         (9,889)     (46,539)
   Loss on disposal of property and equipment                   --       34,481
   Other income from reduction of obligation to issue
   shares of common stock                                  (24,000)          --
Changes in operating assets and liabilities:
   Receivables                                              (9,879)       9,174
   Inventories                                               1,355       (5,315)
   Prepaid expenses                                         55,301      103,131
   Cash overdraft                                           (8,350)      27,763
   Accounts payable                                          9,010       11,053
   Accrued expenses                                         16,557       51,141
                                                         ---------    ---------
      Net cash used by operating activities               (164,890)    (220,437)

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property and equipment                        (69,940)     (22,769)
Changes to deposits and other assets                        (1,662)     (27,325)
Acquisition of intangibles                                      --           --
                                                         ---------    ---------
      Net cash used by investing activities                (71,602)     (50,094)

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from sale of stock                            236,000      231,025
Proceeds from issuance of notes payable                         --       95,000
Principal reductions of notes payable                           --      (50,500)
Payments on capital lease obligations                           --         (677)
                                                         ---------    ---------
      Net cash provided by financing activities            236,000      274,848

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS                                              (492)       4,317

CASH AND CASH EQUIVALENTS
Beginning of period                                          8,358        3,371
                                                         ---------    ---------
End of period                                            $   7,866    $   7,688
                                                         =========    =========

See accompanying notes to financial statements

                                      -5-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 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' Deficit

Note  15  -   Earnings Per Common Share

                                      -6-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 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  September 30, 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
                           SEPTEMBER 30, 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  September  30, 2000  financial  statements  have been
reclassified to conform to the current year presentation.

                                      -8-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 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
six months ended  September  30, 2001 totaled  $43,934 for equipment and $96,886
for coffee and related products.  At September 30, 2001,  $68,721 was accrued in
accounts payable.

At September 30, 2001, the Company has a $10,000 short-term unsecured receivable
from a shareholder.

During the six months ended  September 30, 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 $12,000. At September 30,
2000, $0 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 six months
ended  September 30, 2001 of $280,821,  and current  liabilities  exceed current
assets by $629,429.  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 merger and  acquisition  activity and capital
raising efforts. Management believes the combination of these efforts will allow
the Company to continue as a going concern.

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 quarter ended  September 30, 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.

                                      -9-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000
                                    UNAUDITED

NOTE 4 - ACQUISITIONS - CONTINUED

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 quarter ended September 30, 2001,  clear title to the equipment was obtained
and the sale of the equipment was finalized.

NOTE 5 - INVENTORIES

At September 30, 2001 and 2000, inventories were comprised of the following:

                                              2001         2000
                                           ---------    ---------
     Coffee                                $   8,782    $  10,900
     Other food and beverage items            21,803       25,923
     Packaging and other supplies             18,443        8,940
                                           ---------    ---------
                                           $  49,028    $  45,763
                                           =========    =========

NOTE 6 - PROPERTY AND EQUIPMENT

At September  30, 2001 and 2000,  property and equipment  were  comprised of the
following:

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

     Kiosk carts and equipment             $ 547,597    $ 500,449
     Equipment and furniture                 228,291      249,754
     Signage                                  49,179       44,356
     Site improvements                        79,145       77,395
                                           ---------    ---------
                                             904,212      871,954
     Less: accumulated depreciation         (512,807)    (430,439)
                                           ---------    ---------
                                           $ 391,405    $ 441,515
                                           =========    =========

NOTE 7 - ACCOUNTS PAYABLE

Of the $392,007 and $439,350 in accounts payable at September 30, 2001 and 2000,
approximately  59% and  76%  have  been  outstanding  for  more  than  90  days,
respectively.

                                      -10-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000
                                    UNAUDITED

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 September 30, 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  September  30, 2001 and 2000,  the
Company has accrued  $32,566 and $26,342 of interest  payable on these notes. As
of  September  30,  2001,  the  Company has not  received  any notice of default
relating to the notes.

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

Non-cash investing and financing transactions for the six months ended September
30, 2001 and 2000 are as follows:

                                                                2001      2000
                                                                ----      ----
     Issuance of common stock in exchange for
        services provided                                     $ 88,750  $310,000

     Trade payables forgiven                                     9,889    37,273

     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        --

     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                                   8,000   245,255

     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

                                      -11-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000
                                    UNAUDITED

NOTE 10 - FORGIVENESS OF DEBT

Forgiveness  of debt  amounted to $9,889 and  $46,539 for the six months  ending
September  30,  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.

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 six
months ended September 30, 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.

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  September  30,  2001  and  2000,  accrued  expenses  were  comprised  of the
following:

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

     Accrued interest                      $  32,566    $  32,826
     Accrued wages                            65,489      157,585
     Estimated use tax                        29,959       29,959
     Accrued payroll taxes                   198,603       47,433
     Other                                       484        5,881
                                           ---------    ---------
                                           $ 327,101    $ 273,684
                                           =========    =========

NOTE 12 - COMMITMENTS AND CONTINGENCIES

As of September 30, 2001 and 2000, the Company has accrued  $198,603 and $47,433
of 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 September 30, 2001 and
2000.

                                      -12-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000
                                    UNAUDITED

NOTE 13 - SHORT-TERM BORROWINGS

During the six months ended  September 30, 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  $14,820  and  $33,420  at
September 30, 2001 and 2000 respectively.

NOTE 14 - STOCKHOLDERS' DEFICIT

The Company is authorized to issue up to 50,000,000  shares of common stock, par
value $.001. At September 30, 2001 and 2000 there were 17,792,717 and 10,678,384
shares of common stock outstanding, respectively.

At  September  30,  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 six
months  ended  September  30,  2001 and 2000,  were  15,772,581  and  8,911,804,
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 six months ended September 30, 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.

                                      -13-
<PAGE>

                              PEABODYS COFFEE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 2001 AND 2000
                                    UNAUDITED

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 six months ended September 30, 2001 increased 34.9% to
$1,276,307  from $946,221 for the same period in fiscal 2000. This was primarily
due to the opening of new  hospital  locations  in Southern  California.  Retail
sales accounted for 100% of revenues for both periods.

          COSTS AND EXPENSES

     Cost of sales for the six months ended  September 30, 2001 increased  29.2%
to $480,326 from $371,634 for the same period in fiscal 2000. As a percentage of
net  revenues,  cost of  sales  decreased  to  37.6%  for the six  months  ended
September 30, 2001 from 39.3% for the comparable period in fiscal 2000.

     Employee  compensation  and benefits for the six months ended September 30,
2001  increased to $594,934 from $476,175 for the same period in fiscal 2000. As
a percentage of net revenues,  employee  compensation and benefits  decreased to
46.6% for the six months ended  September 30, 2001 from 50.3% 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 six months ended September 30,
2001  decreased to $147,753 from $169,693 for the same period in fiscal 2000. As
a percentage of net revenues,  general and administrative  expenses decreased to
11.6% for the six months ended  September 30, 2001 from 17.9% 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 six months ended  September 30, 2001  increased to
$148,875  from  $141,349 for the same period in fiscal 2000.  As a percentage of
net  revenues,  occupancy  costs  decreased  to 11.7% for the six  months  ended
September  30, 2001 from 14.9% for the  comparable  period in fiscal 2000.  This
decrease  is  primarily  due to  lower  average  revenue  sharing  rates  at the
Company's new hospital locations.

     Director and professional  fees for the six months ended September 30, 2001
decreased to $119,986  from  $194,713  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.

     Depreciation  and  amortization  expense for the six months ended September
30, 2001  increased  to $62,754 from $55,380 for the same period in fiscal 2000.
As a percentage of net revenues, depreciation and amortization expense decreased
to 4.9% for the six months ended September 30, 2001 from 5.9% for the comparable
period in fiscal 2000.

                                      -14-
<PAGE>

     Operating  losses for the six months ended  September 30, 2001 decreased to
$280,821  from  $501,143 the same period in fiscal 2000.  As a percentage of net
revenues, operating losses decreased to 22.0% for the six months ended September
30, 2001 from 53.0% for the comparable period in fiscal 2000.

     Net loss for the six months ended  September 30, 2001 decreased to $257,749
from  $460,706  for the same  period  in fiscal  2000.  As a  percentage  of net
revenues,  net losses  decreased to 20.2% for the six months ended September 30,
2001 from 48.7% for the comparable period in fiscal 2000.

          LIQUIDITY AND CAPITAL RESOURCES

     At  September  30,  2000,  the  Company  has a working  capital  deficit of
$629,429. 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.

     Cash utilized for investing  activities for the six months ended  September
30, 2001 primarily  consisted of capital  additions to property and equipment of
$69,940.  The capital additions were primarily related to the equipment purchase
for the  opening  of new  facilities,  and costs  associated  with  refurbishing
existing kiosks.

     The  Company  estimates  that it will  require  approximately  $300,000  of
additional  investment  capital in order to open  sufficient  new sites to reach
break even with operational  costs.  Such growth will require  approximately six
months to achieve  after receipt of the  investment  capital.  In addition,  the
Company requires  additional  investment  capital to address the current working
capital deficit.

                                      -15-
<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 July 1, 2001, the Company granted  non-statutory  stock options to three
of the directors of the Company for 240,000  shares each, for a total of 720,000
shares.  The options have a term of 5 years and vest at a rate of 10,000  shares
per month, with 30,000 shares vested upon grant, with an exercise price of $0.05
per share. The options were granted under the exemption provided by Section 4(2)
of the  Securities  Act of 1933, as amended.  Each optionee was a  sophisticated
investor with a preexisting relationship with the Company, and had access to the
same  information as would be included in a registration  statement  prepared by
the Company.

     On July 1, 2001, the Company granted  non-statutory stock options to two of
its executive  officers pursuant to employment  agreements,  with 720,000 shares
under one  agreement  and  480,000  under the  other,  for a total of  1,200,000
shares.  The options have a term of 5 years and vest monthly over a period of 24
months,  with an exercise  price of $0.05 per share.  The options  were  granted
under the  exemptions  provided by Sections 4(2) and 3(a)(11) of the  Securities
Act of 1933,  as amended.  Each  optionee was a  sophisticated  investor  with a
preexisting  relationship  with the Company,  a resident of California,  and had
access to the same information as would be included in a registration  statement
prepared by the Company.

     On July 1, 2001, the Company  granted  non-statutory  stock options for the
purchase of 388,000  shares to 13 of its employees  pursuant to non-plan  option
agreements. The options have a term of 5 years and vest monthly over a period of
12  months  (with  slight   variations  in  the  vesting   schedules  among  the
agreements), with an exercise price of $0.05 per share. The options were granted
under the  exemptions  provided by Sections 4(2) and 3(a)(11) of the  Securities
Act of 1933,  as amended.  Each  optionee was a  sophisticated  investor  with a
preexisting  relationship  with the Company,  a resident of California,  and had
access to the same information as would be included in a registration  statement
prepared by the Company.

     On July 1, 2001, the Company granted a  non-statutory  stock option for the
purchase of 48,000 shares to an individual for consulting  services.  The option
has a term of 5 years and vests  monthly  over a period  of 12  months,  with an
exercise  price of $0.05 per share.  The option was granted under the exemptions
provided  by  Sections  4(2) and  3(a)(11)  of the  Securities  Act of 1933,  as
amended.   The  optionee  was  a  sophisticated   investor  with  a  preexisting
relationship with the Company,  a resident of California,  and had access to the
same  information as would be included in a registration  statement  prepared by
the Company.

                                      -16-
<PAGE>

     On July 2, 2001, the Company granted a  non-statutory  stock option for the
purchase of 600,000 shares to an entity for consulting services.  The option has
a term of 2 years, is fully vested, and has an exercise price of $0.25 per share
for 200,000 shares,  $0.35 per share for 200,000 shares, and $0.50 per share for
200,000 shares.  The option was granted under the exemption  provided by Section
4(2) of the Securities Act of 1933, as amended. The optionee was a sophisticated
investor with a preexisting  relationship with the Company and had access to the
same  information as would be included in a registration  statement  prepared by
the Company.

     On July 2, 2001, the Company issued 600,000 shares of its common stock,  at
a price of $0.05 per share, as consideration for consulting services. The shares
were issued to an entity (500,000 shares) and to an individual (100,000 shares).
The issuances were exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended.  Both the entity and the  individual to whom the shares
were issued had  pre-existing  relationships  with the  Company,  the entity was
controlled by a  sophisticated  investor and the individual was a  sophisticated
investor,  and both  investors  had access to the same  information  as would be
included in a registration statement prepared by the Company.

     On July 2, 2001, the Company issued 75,000 shares of its common stock, at a
price of $0.05 per share, as consideration for consulting services. The issuance
was exempt from  registration  under Section 4(2) of the Securities Act of 1933,
as amended. The entity receiving the shares had a pre-existing relationship with
the Company, was controlled by a sophisticated  investor,  and had access to the
same  information as would be included in a registration  statement  prepared by
the Company.

     On July 6, 2001, the Company sold 1,020,000  shares of its common stock, at
a price  of  $0.05  per  share,  to a  private  investor.  The  investor  was an
accredited  investor.  The shares were issued in a transaction exempt under Rule
506 of Regulation D promulgated  under  Section 4(2) of the  Securities  Act, as
amended.

     On July 6, 2001, the Company granted a non-statutory stock option to one of
the  directors  of the Company for  240,000  shares.  The option has a term of 5
years and vests  monthly  over 24 months,  with an  exercise  price of $0.20 per
share.  The option was granted under the  exemption  provided by Section 4(2) of
the  Securities  Act of 1933,  as  amended.  The  optionee  was a  sophisticated
investor with a preexisting relationship with the Company, and had access to the
same  information as would be included in a registration  statement  prepared by
the Company.

     On July 7, 2001, the Company  granted a warrant for the purchase of 200,000
shares to an individual  for  consulting  services.  The warrant has a term of 5
years, is fully vested,  with an exercise price of $0.50 per share.  The warrant
was granted under the exemption  provided by Sections 4(2) of the Securities Act
of 1933, as amended. The grantee was a sophisticated investor with a preexisting
relationship  with the Company,  and had access to the same information as would
be included in a registration statement prepared by the Company.

     On July 7, 2001, the Company issued 100,000 shares of its common stock,  at
a price of $0.05 per  share,  as  consideration  for  consulting  services.  The
issuance was exempt from  registration  under Section 4(2) of the Securities Act
of 1933, as amended.  The  individual  receiving  the shares 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>

     On July 16, 2001, the Company issued 40,000 shares of its common stock,  at
a price of $0.20 per share,  to an entity in a private  transaction.  The shares
served as  consideration  for certain assets  purchased by the Company under the
terms of an  earlier  Asset  Purchase  Agreement.  The shares  were  issued in a
transaction exempt under Rule 506 of Regulation D promulgated under Section 4(2)
of the Securities Act, as amended.

     On July 28, 2001, the Company sold 300,000 shares of its common stock, at a
price of $0.20 per share, to a private investor.  The investor was an accredited
investor.  The shares  were  issued in a  transaction  exempt  under Rule 506 of
Regulation D promulgated under Section 4(2) of the Securities Act, as amended.

     On August 13, 2001,  the Company  issued 50,000 shares of its common stock,
at a price of $0.20  per  share,  to a private  investor.  The  investor  was an
accredited  investor.  The shares were issued in a transaction exempt under Rule
506 of Regulation D promulgated  under  Section 4(2) of the  Securities  Act, as
amended.

     From August 18, 2001,  continuing  through the end of the period covered by
this report, the Company has sold 287,500 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 whom were accredited investors.

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

                                      -18-
<PAGE>

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.

                                      -19-
<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:   November 14, 2001

                                      -20-