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, 2003

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

                        COMMISSION FILE NUMBER 000-28595

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

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

             3845 ATHERTON ROAD, SUITE 9, ROCKLIN, CALIFORNIA, 95765
                     (Address of Principal Executive Office)

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

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X ] No [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 29,237,760 shares of common stock.

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

                                      -1-
<PAGE>

                                TABLE OF CONTENTS

Part I - Financial Information

     Item 1 Financial Statements                                              3

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

     Item 3 Controls and Procedures                                          17

Part II - Other Information

     Item 1 Legal Proceedings                                                18

     Item 2 Changes in Securities and Use of Proceeds                        18

     Item 3 Defaults Upon Senior Securities                                  18

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

     Item 5 Other Information                                                19

     Item 6 Exhibits and Reports on Form 8-K                                 19

     Item 7 Signatures                                                       20

                                      -2-
<PAGE>

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

<TABLE>
<CAPTION>
                                                              2003             2002
                                                          ------------     ------------
ASSETS
<S>                                                       <C>              <C>
CURRENT ASSETS
     Cash                                                 $      3,509     $      7,016
     Accounts Receivable                                        13,938           14,936
     Inventories                                                76,308           77,937
     Prepaid Expenses                                            5,804          124,371
                                                          ------------     ------------
          TOTAL CURRENT ASSETS                                  99,559          224,260

     Property and Equipment (Net)                              161,678          368,771
     Deposits and Other Assets                                  93,761          203,251
                                                          ------------     ------------
          TOTAL ASSETS                                         354,998          796,282
                                                          ============     ============
LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
     Cash Overdraft                                       $     25,515     $     13,876
     Accounts Payable                                          429,925          492,301
     Accrued Expenses                                          307,331          285,708
     Short-Term Borrowings                                     185,733           90,217
     Short-Term Deferred Revenue                                12,500               --
     Secured Convertible Debentures                            498,000               --
     Current Portion of Long-Term Debt                              --            4,173
     Bridge Financing                                           35,000           35,000
                                                          ------------     ------------
          TOTAL CURRENT LIABILITIES                          1,494,003          921,275

LONG-TERM LIABILITIES
     Long-Term Debt (Net of Current Portion)                    37,380           19,718
     Long-Term Deferred Revenue                                  9,375               --
                                                          ------------     ------------
          TOTAL LONG-TERM LIABILITIES                           46,755           19,718

STOCKHOLDERS' DEFICIT
     Common Stock - Authorized 50,000,000 shares,
     issued and outstanding, 29,237,760 and 21,567,120
     $.001 Par Value                                            29,238           21,567

     Paid-In Capital                                         6,484,208        5,445,354
     Deferred Expenses                                         (36,667)              --
     Accummulated Deficit                                   (7,662,539)      (5,611,632)
                                                          ------------     ------------
          TOTAL STOCKHOLDERS' DEFICIT                       (1,185,760)        (144,711)
                                                          ------------     ------------
          TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT     $    354,998     $    796,282
                                                          ------------     ------------

See accompanying notes to financial statements

                                                       -3-
<PAGE>

                             PEABODYS COFFEE, INC.
                   STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
                           SEPTEMBER 30, 2003 AND 2002
                                    UNAUDITED

<CAPTION>
                                                            Six Months Ended                 Three Months Ended
                                                              September 30,                     September 30,

                                                          2003             2002             2003             2002
                                                      -----------------------------     -----------------------------
<S>                                                   <C>              <C>              <C>              <C>
SALES                                                 $  1,009,210     $  1,388,392     $    464,116     $    588,595

COST OF SALES                                              447,597          587,522          214,278          258,573
                                                      -----------------------------     -----------------------------
          GROSS PROFIT                                     561,613          800,870          249,839          330,022

OPERATING EXPENSES
     Employee Compensation and Benefits                    524,331          699,937          219,878          311,638
     General and Administrative Expenses                   188,123          162,530           90,170           80,657
     Occupancy                                             127,340          159,874           61,007           71,131
     Director and Professional Fees                        185,878          181,215           64,002           64,575
     Depreciation and Amortization                          43,210           63,770           13,768           31,875
     Other Operating Expenses                               74,857               --               --               --
                                                      -----------------------------     -----------------------------
          TOTAL OPERATING EXPENSE                        1,143,738        1,267,326          448,825          559,876
                                                      -----------------------------     -----------------------------
          OPERATING LOSS                                  (582,125)        (466,456)        (198,987)        (229,854)

     Other Income (Loss)                                        --              242            6,516           (7,650)
     Legal Expense - Former CEO/President                       --         (146,379)              --          (16,379)
     Interest and Other Expense                            289,274          (17,082)         (18,740)         (10,708)
                                                      -----------------------------     -----------------------------
          NET LOSS BEFORE EXTRAORDINARY ITEM              (871,399)        (629,675)        (211,211)        (264,591)

          Extraordinary Item - Forgiveness of Debt           8,228          103,720            7,212          103,548
                                                      -----------------------------     -----------------------------
          NET LOSS                                        (863,171)        (525,955)        (203,999)        (161,043)

     Accumulated Deficit, Beginning of Period           (6,799,368)      (5,085,677)      (7,458,540)      (5,450,589)
                                                      -----------------------------     -----------------------------
     Accumulated Deficit, End of Period               $ (7,662,539)    $ (5,611,632)    $ (7,662,539)    $ (5,611,632)
                                                      =============================     =============================

     EARNINGS PER COMMON SHARE
          Net Loss Before Extraordinary Item                 (0.03)           (0.03)           (0.01)           (0.01)
          Extraordinary Item                                  0.00             0.00             0.00             0.00
                                                      -----------------------------     -----------------------------
          Net Loss                                           (0.03)           (0.02)           (0.01)           (0.01)
                                                      -----------------------------     -----------------------------

See accompanying notes to financial statements

                                       -4-
<PAGE>

                              PEABODYS COFFEE, INC.
                             STATEMENT OF CASH FLOWS
                  SIX MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                    UNAUDITED

<CAPTION>
                                                                      2003             2002
                                                              ------------     ------------
CASH FLOW FROM OPERATING ACTIVITIES
<S>                                                           <C>              <C>
     Net Loss                                                 $   (863,171)    $   (525,955)

     Changes in Operating Assets and Liabilities
          Receivables                                               (3,520)         (62,106)
          Inventories                                                1,641          (14,699)
          Prepaid Expenses                                         (42,650)         (10,488)
          Cash Overdraft                                               871          (34,619)
          Accounts Payable                                          68,907          263,620
          Accrued Expenses                                         (36,178)           7,697
          Deferred Revenue                                           9,375               --

     Adjustments
          Depreciation and Amortization                             43,510           63,770
          Debt Settlements and Forgiveness of Debt                  (7,212)        (103,720)
          Non-Cash Consulting Fees                                  13,332           83,110
          Slotting Fees                                                 --            5,625
          Loss on Disposal of Property                              80,870               --
          Financing Costs on Issuance of Secured Debenture         250,000               --
                                                              ------------     ------------
          NET CASH PROVIDED/(APPLIED) OPERATING ACTIVITIES         380,500          198,190

CASH FLOW FROM INVESTING ACTIVITIES
     Additions - Fixed Assets                                      (26,224)         (73,683)
     Disposals - Property & Equipment                              116,049           57,379
     Changes in Valuation of Goodwill                               36,839               --
     Changes in Deposits and Other Assets                           17,200           11,857
     Brand Development Costs                                            --          (65,269)
                                                              ------------     ------------
          NET CASH PROVIDED/(APPLIED) INVESTING ACTIVITIES         143,864          (69,716)

CASH FLOWS FROM FINANCING ACTIVITIES
     Net Proceeds From Sale of Stock                                    --          126,658
     Proceeds From Issuance of Notes Payable                        82,000          289,000
     Principal Reductions of Notes Payable                              --          (17,502)
     Conversion of Secured Debentures to Common Stock               (2,000)              --
     Issuance of Common Stock Due to Conversion                    267,004               --
     Repayments of Short-Term Borrowings                            (1,304)              --
     Principal Reductions of Notes Payable                          (9,000)              --
                                                              ------------     ------------
          NET CASH PROVIDED/(APPLIED) FINANCING ACTIVITIES         336,700          398,156
                                                              ------------     ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS                           (2,107)             675

CASH AND CASH EQUIVALENTS
     Beginning of Period                                             5,616            7,307
                                                              ------------     ------------
     Ending of Period                                                3,509            7,982
                                                              ============     ============
</TABLE>

See accompanying notes to financial statements

                                       -5-
<PAGE>

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

Note      1     -   Significant Accounting Policies

Note      2     -   Going Concern

Note      3     -   Inventories

Note      4     -   Property and Equipment, and Intangible Assets

Note      5     -   Accounts Payable

Note      6     -   Accrued Expenses

Note      7     -   Deferred Revenue

Note      8     -   Short-Term Borrowings

Note      9     -   Secured Convertible Debentures

Note     10     -   Long-Term Debt

Note     11     -   Bridge Note Financing

Note     12     -   Earnings Per Common Share

Note     13     -   Supplemental Disclosures to Statement of Cash Flows

Note     14     -   Commitments and Contingencies

                                      -6-
<PAGE>

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------
The financial  statements  included herein have been prepared by Peabodys Coffee
Inc., without audit, pursuant to the rules and regulations of the Securities and
Exchange  Commission.  Certain  information  and footnote  disclosures  normally
included  in  financial   statements  prepared  in  conformity  with  accounting
principles  generally accepted in the United States of America have been omitted
pursuant  to  such  rules  and   regulations  of  the  Securities  and  Exchange
Commission.  Peabodys Coffee Inc.  believes that the disclosures are adequate to
make the information  presented not misleading when read in conjunction with its
financial  statements for the year ended March 31, 2003 included on Form 10-KSB.
The financial  information  presented reflects all adjustments which are, in the
opinion of management,  necessary for a fair statement of the financial position
and the results of operations for the interim periods presented.  The results of
operations  for the six months ended  September  30, 2003,  are not  necessarily
indicative  of the  results to be expected  for the full year  ending  March 31,
2004, or any other period.

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

Reclassifications
-----------------
Certain  amounts from the  September  30, 2002  financial  statements  have been
reclassified to conform to the current period presentation.

NOTE 2 - GOING CONCERN

The  accompanying  financial  statements  have been prepared in conformity  with
accounting principles generally accepted in the United States of America,  which
contemplates  continuation  of the  Company as a going  concern.  Going  concern
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal course of business  over a reasonable  length of time.  However,  the
Company has sustained  operating  losses since its inception and has deficits in
both  working  capital  and  stockholders  equity of  $1,394,444  and  $1,185,60
respectively, as of September 30, 2003.

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

Management  plans  to  address  these  challenges  by  focusing  on the  further
development of the Black Rhino  Coffee(TM) brand in the U.S. mass retail sector.
Since introduction in May 2002 at the FMI supermarket convention,  the brand has
penetrated the shelves of approximately 500 supermarkets. The

                                      -7-
<PAGE>

benefit  of this  channel  of  trade  is  that a  small  number  of  orders  can
significantly increase corporate revenues and earnings.

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

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

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

NOTE 3 - INVENTORIES

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

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

     Coffee                                     $ 20,917              $ 25,857
     Other Food                                    8,725                22,250
     Packaging and Other Supplies                 46,667                29,830
                                        -----------------     -----------------
                                                $ 76,308              $ 77,937
                                        =================     =================

                                      -8-
<PAGE>

NOTE 4 - PROPERTY AND EQUIPMENT, AND INTANGIBLE ASSETS

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

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

     Kiosk Carts                                $ 84,042             $ 267,733
     Kiosk Equipment                              91,701               290,263
     Equipment and Furniture                     174,425               261,097
     Signage                                      28,610                60,113
     Site Improvements                            52,731               117,392
     Assets Not In Service                        93,824                     -
                                        -----------------     -----------------
                                                 525,333             $ 996,598

     Less:   Accumulated Depreciation           (363,654)             (627,827)
                                        -----------------     -----------------
                                               $ 161,678             $ 368,771
                                        =================     =================

Included in other assets at September 30, 2002 and 2001, were intangible  assets
comprised of the following:

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

     Goodwill                                        $ -              $ 40,930
     Non-Competition Agreement                         -                25,000
     Trade Name                                   67,253                88,253
     Kiosk Design                                      -                 1,170
     Other Indentifiable Intangibles                   -                14,600
                                        -----------------     -----------------
                                                $ 67,253             $ 169,953


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

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

     Depreciation                                 40,340              $ 57,510
     Amortization                                  2,870                 6,260
                                        -----------------     -----------------
                                                $ 43,210              $ 63,770
NOTE 5 - ACCOUNTS PAYABLE

At  September  30, 2003 and 2002,  approximately  41% and 40% of the balances in
accounts payable, respectively, have been outstanding for more than 90 days.

                                      -9-
<PAGE>

NOTE 6 - ACCRUED EXPENSES

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

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

     Accrued Interest                      $ 70,350                    $ 44,589
     Accrued Wages                           42,322                      44,515
     Accrued Sales and Use Tax               31,083                      32,008
     Accrued Payroll Taxes                  155,749                     162,158
     Other                                    7,827                       2,438
                                   -----------------           -----------------
                                          $ 307,331                   $ 285,708
                                   =================           =================

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

NOTE 7 - DEFERRED REVENUE

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

NOTE 8 - SHORT-TERM BORROWINGS

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

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

Unsecured loan, 10% Interest Per Annum, Interest
Only Due Monthly, Balance Due March 31,2004           $ 10,000          $ -

Unsecured loan, 10% Interest Per Annum, Interest
Only Due Monthly, Balance Due March 31,2004           $ 50,000          $ -


Non-Interest Bearing Loan                             $ 87,000          $ -

NOTE 9 - SECURED CONVERTIBLE DEBENTURES

In order to provide  working  capital and financing for the Company's  operation
and expansion,  as of December 20, 2002,  the Company  entered into a securities
purchase agreement and related  agreements with three accredited  investors (the
"Purchasers")  for  the  purchase  of  up  to  $750,000  of  the  Company's  10%
Convertible Debentures. The debentures bear interest at a rate of 10% per annum,
payable  quarterly in common stock or cash at the option of the Purchasers.  The
debentures  are  to be  sold  in  three  separate  tranches.  The  terms  of the
securities purchase agreement and related agreements  restrict the Company's

                                      -10-
<PAGE>

ability to issue stock without the Purchasers'  approval,  except to comply with
existing  contractual  arrangements;  specifically with investors holding bridge
notes, notes payable, options and warrants.

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

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

Pursuant to the Rules and Regulations of the Securities and Exchange  Commission
regarding beneficial conversion features,  using the intrinsic value method, the
Company allocated the total $250,000 for each tranche to the conversion  feature
resulting in a corresponding  credit to additional paid in capital.  The Company
is  recording  as  financing  costs,  the excess of the fair market value of the
common stock at the debenture  issuance date over the conversion  price. For the
six months ended  September 30, 2003,  the financing cost amounted to a total of
$250,000.

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

                                      -11-
<PAGE>

NOTE 10 - LONG-TERM DEBT

The outstanding balance at September 30, 2003 and 2002 is summarized as follows:

<TABLE>
<CAPTION>
                                                                   2003                   2002
                                                              ---------------        -------------
<S>                                                           <C>                           <C>
     10% Note, unsecured, payable in monthly installments
     of $212.47 including interest, due 05/31/07              $        7,800                9,477

     10% note, unsecured, payable in monthly installments
     of $318.71, including interest, due 05/30/07                         --               14,414

     10% Note, unsecured, payable in monthly installments
     of $106.24 including interest, due 06/30/07                       3,973                   --

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

     Less current portion                                            (43,732)              (4,173)
                                                              ---------------        -------------
                                                              $       37,380            $  19,718
</TABLE>

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

     Twelve months ended September          Amount
     -----------------------------      --------------
     2004                                $      34,462
     2005                                       35,844
     2006                                        7,961
     2007                                        2,846
     2008                                           --
                                        --------------
                                         $      81,113
                                        ==============

NOTE 11 - BRIDGE NOTE FINANCING

In May 1996,  the  Company  issued  "units"  consisting  of secured  convertible
promissory  notes and warrants to purchase the  Company's  common  stock.  As of
September 30, 2003 and 2002,  there were $35,000 and $35,000,  respectively,  of
bridge notes outstanding. The notes are secured by all assets of the Company.

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

NOTE 12 - EARNINGS PER COMMON SHARE

Earnings  per common  share are  computed by dividing  net income by the average
number of common

                                      -12-
<PAGE>

shares and common stock equivalents  outstanding during the period. The weighted
average  number  of  common  shares  outstanding  during  the six  months  ended
September 30, 2003 and 2002, were 29,237,760 and 21,567,120, respectively.

Common stock  equivalents are the net additional  number of shares that would be
issuable upon the exercise of the outstanding common stock options and warrants.
For the six months ended September 30, 2003 and 2002, fully diluted earnings per
common share are equal to basic  earnings per common share because the effect of
potentially  dilutive  securities  underlying the stock options and warrants are
anti-dilutive and therefore not included.

NOTE 13 - SUPPLEMENTAL DISCLOSURES TO STATEMENT OF CASH FLOWS

Non-cash  investing  and  financing  transactions  for the  three  months  ended
September 30, 2003 and 2002, are as follows:

<TABLE>
<CAPTION>
                                                             2003                   2002
                                                         --------------         --------------
<S>                                                      <C>                    <C>
     Issuance of Common Stock in Exchange for
          Services Provided                              $           --         $       80,000

     Trade payables and accrued expenses forgiven                 7,212                103,720

     Conversion of Trade Payables to Short-Term Note             67,000                 80,217

     Conversion of 10.0% secured debentures to
          shares of common stock                                252,000                     --
</TABLE>

NOTE 14 - COMMITMENTS AND CONTINGENCIES

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

The  Company  has  engaged  in  settlement  negotiations  for over  nine  months
regarding the status of the 500,000  shares  transferred by Mr. Young to various
individuals with no resolution as of this date.  Management  anticipates that it
will reach a  settlement  within the next three  months and that the  settlement
will provide for the redemption by the Company of the 500,000  shares  currently
owned by Mr.

                                      -13-
<PAGE>

Young and his transferees.  At the very least,  management expect that the court
will enjoin Mr. Young and his  transferees  from  registering any of the 500,000
shares received by them.

In the normal course of business, the Company has various legal claims and other
contingent matters outstanding.  Management believes that any ultimate liability
arising from these contingencies would not have a material adverse effect on the
Company's results of operations or financial condition at September 30, 2003 and
2002.

                                      -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 six months ended September 30, 2003 decreased 27.3% to
$1,009,210  from  $1,388,392  for the  same  period  in  fiscal  2002.  This was
primarily due to the closing of full service sites during the year. Retail sales
accounted  for 88.0% of revenues and  wholesale  accounted  for 12.0% in the six
months ended September 30, 2003.

     COSTS AND EXPENSES

     Cost of sales for the six months ended  September 30, 2003 decreased  23.8%
to $447,597 from $587,522 for the same period in fiscal 2002. As a percentage of
net  revenues,  cost of  sales  increased  to  44.4%  for the six  months  ended
September  30, 2003 from 42.3% for the  comparable  period in fiscal  2002.  The
increase as a percent of net revenues is primarily  due to increase in wholesale
revenues.

     Employee  compensation  and benefits for the six months ended September 30,
2003  decreased to $524,331 from $699,936 for the same period in fiscal 2002. As
a percentage of net revenues,  employee  compensation and benefits  increased to
52.0% for the six months ended  September 30, 2003 from 50.4% for the comparable
period in fiscal  2002.  The  increase as a percent of net revenues is primarily
due to decrease in revenues, despite a real cost decrease.

     General and administrative  expenses for the six months ended September 30,
2003  increased to $188,123 from $162,530 for the same period in fiscal 2002. As
a percentage of net revenues,  general and administrative  expenses increased to
18.6% for the six months ended  September 30, 2003 from 11.7% for the comparable
period in fiscal  2002.  The  increase as a percent of net revenues is primarily
due to slotting fees.

     Occupancy  costs for the six months ended  September 30, 2003  decreased to
$127,340  from  $159,874 for the same period in fiscal 2002.  As a percentage of
net  revenues,  occupancy  costs  increased  to 12.6% for the six  months  ended
September 30, 2003 from 11.5% for the comparable period in 2002.

     Director and professional  fees for the six months ended September 30, 2003
increased to $185,878  from  $181,215  for the same period in fiscal  2002.  The
majority of these expenses result from the engagement of various  consultants to
assist the Company in obtaining  growth financing and in penetrating new markets
with its packaged consumer brand of Black Rhino Coffee(TM).

                                      -15-
<PAGE>

     Depreciation  and  amortization  expense for the six months ended September
30, 2003  decreased  to $43,210 from $63,770 for the same period in fiscal 2002.
As a percentage of net revenues, depreciation and amortization expense decreased
to 4.3% for the six months ended September 30, 2003 from 4.6% for the comparable
period in fiscal 2002.

     Operating  losses for the six months ended  September 30, 2003 increased to
$582,125  from  $466,213 for the same period in fiscal 2002.  As a percentage of
net  revenues,  operating  losses  increased  to 57.7% for the six months  ended
September 30, 2003 from 33.6% for the comparable period in fiscal 2002.

     Net loss for the six months ended  September 30, 2003 increased to $863,171
from  $525,954  for the same  period  in fiscal  2002.  As a  percentage  of net
revenues,  net losses  increased to 85.5% for the six months ended September 30,
2003 from 37.9% for the comparable period in fiscal 2002.

     LIQUIDITY AND CAPITAL RESOURCES

     As the  accompanying  financial  statements  show, for the six months ended
September  30,  2003,  the Company had a net  operating  loss of $582,125 and an
overall net loss of $863,171.  At September 30, 2003,  the Company has a working
capital deficit of $1,394,444 and a shareholder's deficit of $1,185,760.

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

     We plan to address these challenges by building on the successful launch of
our organic Black Rhino Coffee(TM) brand into the U.S. mass retail sector. Since
introduction  in May  2002 at the FMI  supermarket  convention,  the  brand  has
penetrated the shelves of approximately  500  supermarkets.  The benefit of this
channel of trade is that a small number of orders can significantly increase our
revenues  and  earnings.  We believe  that entry to this new market  sector will
expose us to different and potentially  more fertile  financing  opportunities -
such as  project-based  debt  financing  secured by  purchase  order or accounts
receivable  notes. We believe this is a crucial new opportunity for us given the
continuing uncertainty of conventional equity markets.

     We also believe our strategic alliance with Marathon Global will facilitate
rapid market  penetration  by providing a level of credibility  and  negotiating
strength  otherwise  unavailable  to us. We  further  believe  that our  gradual
transition  from  reliance  on  full-service  units  to an  asset-light  company
concentrating  more on brand  ownership and  management  will reduce the capital
needs for future large tangible asset acquisitions.

     The Company had net cash provided  from  financing  activities  for the six
months  ended  September  30,  2003  totaling  $336,700.   Cash  from  financing
activities  primarily  consists  of  $250,000  from  issuance  of a  convertible
debenture. These amounts were primarily utilized in the day-to-day operations of
the Company.

                                      -16-
<PAGE>

ITEM 3.   CONTROLS AND PROCEDURES

a.   Evaluation of disclosure controls and procedures.

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

b.   Changes in internal controls.

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

                                      -17-
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

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

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

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


ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

          None

ITEM 3.   DEFAULTS ON SENIOR SECURITIES

          None

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

          None

                                      -18-
<PAGE>

ITEM 5.   OTHER INFORMATION

          None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

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

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

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


     (b)  Reports on Form 8-K

          None

                                      -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/____________________
                                            Todd Tkachuk, President
                                        Date: November 19, 2003

                                      -20-
<PAGE>