SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)

/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended          June 29, 1997
                          ----------------------

/_/  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _______________ to ______________

                           Commission File No. 1-13818

                      THE RATTLESNAKE HOLDING COMPANY, INC.
             (Exact name of registrant as specified in its charter)

           Delaware                               06-1369616
(State or other jurisdiction of                (I.R.S. Employer
incorporation or organization)                Identification No.)

   439 East 82nd Street
   New York, New York                               10028
(Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code (212) 452-2359

Securities registered pursuant to Section 12(b) of the Exchange Act:

                                               Name of each
                                               exchange on
         Title of each class                 which registered

    Common Stock, $.001 par value         Boston Stock Exchange

Securities registered pursuant to Section 12(g) of the Exchange Act:

                                      NONE
     (Title of class)
     (Title of class)

                            [Cover Page 1 of 2 Pages]



<PAGE>


     Check whether the Issuer (1) has 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
                                                                      ---   ---

     Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.   [X]

     The Issuer's revenues for its most recent fiscal ended June 29, 1997 were
$8,265,474.

     On September 17, 1997, the Company received a letter from NASDAQ indicating
that the Company would be removed from the NASDAQ small cap listing at the close
of business on September 17, 1997 due to its failure to comply with the minimum
capital and surplus requirement of $1,000,000 and the $1.00 minimum stock price.
On September 17, 1997 the Company was removed from the NASDAQ small cap listing.
The Company continues to trade on the OTC Bulletin Board and the Boston Stock
Exchange.

     On October 13, 1997, the aggregate market value of the voting stock of The
Rattlesnake Holding Company, Inc. (consisting of Common Stock, $.001 par value)
held by non-affiliates of the Registrant was approximately $742,064 based on the
average closing bid and asked prices for such Common Stock on said date as
reported by NASDAQ.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

     On October 13, 1997, there were 2,650,227 shares of Common Stock, $.001 par
value, were issued and outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None




                            [Cover Page 2 of 2 Pages]


<PAGE>




                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

     The Rattlesnake Holding Company, Inc. (the "Company") was organized in June
1993 to develop, own and operate a chain of casual dining restaurants featuring
a southwestern theme. The Company currently operates three restaurants under the
name "Rattlesnake Southwestern Grill." The Rattlesnake concept is designed to
appeal to the casual dining guest by creating a relaxed restaurant experience
for families and couples in an attractive southwestern setting. Each restaurant
features contemporary southwestern decor with desert pastel colors and native
American art and artifacts. The restaurants include a 40 to 60 foot full relief,
mosaic rattlesnake bar, sculpted and tiled by artisans. The varied "all day"
menu offers wide selection and customer value and includes traditional favorites
as well as spicy recipes inspired by the cuisine of Arizona, New Mexico and
Texas. Checks average $10.25 at lunch and $13.90 at dinner per person.

     The first Rattlesnake Southwestern Grill was opened in June 1992 in
historic South Norwalk, Connecticut as a prototype and distinguished entry into
the "theme" restaurant market segment. The Company opened seven additional
restaurants in Hamden, Fairfield and Danbury, Connecticut and Lynbrook, White
Plains and Yorktown Heights, New York and Flemington, New Jersey. All existing
Rattlesnake Restaurants are located in renovated facilities where restaurants
were previously operated. In January 1997, as part of the Company's revised
business plan the Company evaluated it's restaurant operations on a location by
location basis. As a result of this evaluation, the Company closed three
operating locations during fiscal year 1997 which did not meet the Company's
performance standards. These locations included Fairfield, Connecticut, Yorktown
Heights and White Plains New York. The New York City location which was not
opened for operations was sold as part of the Company's revised business plan
and modified expansion strategy. On September 17, 1997 the Company closed its
facility located in Lynbrook, New York pursuant to fiscal 1997 board approval.
Management still believes this area is conducive to the Rattlesnake concept and
is investigating other potential opportunities in the area. In January 1996, the
Company closed it's Hamden, Connecticut location due to poor performance.

     The Company was incorporated in the State of Delaware on June 8, 1993. The
executive offices of the Company are located at 439 East 82nd Street, New York,
New York 10028, and its telephone number is 212-452-2359.



                                       1
<PAGE>



     Due to a number of factors, including the Company's limited operating
history, small restaurant base and geographic concentration, as well as the
dependence of the Company's expansion strategy on certain external factors which
it cannot control, there can be no assurance that the Company's plan of
operation will prove profitable or commercially viable.


GENERAL BUSINESS DEVELOPMENTS DURING THE LAST FISCAL YEAR


     The Company's Board of Directors voted in January of 1997 to revise the
current business plan, in view of continued losses and marginal performance at a
number of the restaurants. In addition, cost reductions would be sought through
reductions in overhead and staffing. A decision was made to sell marginal
restaurants, including the Fairfield, Connecticut and White Plains and Yorktown
Heights, New York restaurants, and to sell the lease for the New York City
facility which had not yet been developed. The Company also closed its facility
located in Lynbrook, New York.

     During fiscal 1997 there have been several changes in the management of the
Corporation. On March 15, 1997, an agreement was signed between the Company and
Vice Chairman & Chief Administrative Officer which amended the December 1995
employment agreement. Under the new agreement, the former Vice Chairman & Chief
Administrative Officer accepted the position of acting Co-CEO. On March 15,
1997, an agreement was signed between the Company and Chairman & Chief Executive
Officer which terminated the previous December 1, 1994 employment agreement and
any and all oral agreements relating to his employment. On March 29, 1997, an
agreement was signed between the Company and a Director of the Corporation for
acceptance of the position of acting Co-CEO for up to 150 days. On June 2, 1997,
an agreement was signed between the Company & Executive Vice president which
terminated the December 1, 1994 employment agreement and any and all oral
agreements relating to his employment. On July 25, 1997, an agreement was signed
between the Company and President which terminated the previous December 1 1994
employment agreement and any and all oral agreements relating to the employment.

     In July 1996, the Company sold to an outside investor through a separate
offering, an additional 2,000 shares of preferred stock under the same terms of
the preferred stock offering of June 1996.

     In fiscal 1997 the Board of Directors authorized the closing of the
Rattlesnake Southwestern Grill Restaurant located in Fairfield, Connecticut. The
facility was closed on January 4, 1997. The fixed assets, leasehold improvements
and intangibles at



                                       2
<PAGE>



the facility have been written off. The building is reflected at the lower of
cost or market and is currently accounted for in the financial statements as
"asset held for sale." A net loss of $394,941 relating to the closing of the
Fairfield location, was recorded in fiscal 1997.

     In fiscal 1997 the Board of Directors authorized the closing of the
Rattlesnake Southwestern Grill Restaurant located in White Plans, New York. The
facility was closed on March 1, 1997 and sold on July 16, 1997. The Company sold
all of the assets of White Plains except for cash, accounts receivable and
certain items specified in the Asset Purchase Agreement in exchange for a
release from its note payable to the landlord of $276,499 and the receipt of a
$23,500 note receivable from the purchaser. The facility was sold to a group
which included the Company's Chairman of the Board. A net loss of $224,135,
relating to the closing of the White Plains location was recorded in fiscal
1997.

     In fiscal 1997 the Board of Directors authorized the closing of the
Rattlesnake Southwestern Grill Restaurant located in Yorktown Heights, New York.
The facility was closed on June 9, 1997 and sold on June 27, 1997. The purchaser
assumed the remaining outstanding balance of the notes payable to the landlord
and the related lease obligation. A net loss of $362,091, relating to the
Yorktown Heights location, was recorded in fiscal 1997.

     The Restaurant location on 86th Street in New York was never opened and the
Restaurant was sold on May 29, 1997 for total consideration aggregating
$289,387. Rattlesnake remains a guarantor of the lease. A net loss of $306,456,
relating to the selling of the 86th Street location, was recorded in fiscal
1997.

     On March 4, 1997, the Company entered into a private financing arrangement
with two individuals to provide a total of $500,000 of convertible subordinated
secured debt. The Notes are for a term of six months at an interest rate of 18%.
The principal amount of the Notes may be converted into the Company's common
stock at a conversion price of $0.75 per share anytime before the repayment of
principal. The Notes are fully subordinated to all "senior indebtedness" of the
Company and are secured by all the issued and outstanding shares of the
Company's wholly-owned subsidiaries Rattlesnake Ventures, Inc.,
Rattlesnake-Danbury, Inc., Rattlesnake-Flemington, Inc. and
Rattlesnake-Lynbrook, Inc.

     On March 15, 1997, an agreement was signed between the Company and Chairman
& Chief Executive Officer which terminated the previous December 1, 1994
employment agreement and any and all oral agreements relating to his employment.
The agreement included payments for expense reimbursement, accrued and unused



                                       3
<PAGE>



vacation, medical, dental, disability and life insurance and severance payments.
In connection with this agreement, the Chief Executive Officer's employee stock
options shall be immediately vested and shall be amended to constitute
non-qualified employee stock options and the strike price is reduced to an
exercise price of $2.00.

     On March 15, 1997, an agreement was signed between the Company and Vice
Chairman & Chief Administrative Officer which amended the December 1995
employment agreement. Under the new agreement, the former Vice Chairman & Chief
Administrative Officer will accept the position of acting Co-Chief Executive
Officer. This agreement waives any base rate or annual rate increases per the
previous agreement and modified the term to March 1, 1997 through February 28,
1999. Services are provided on a part-time consulting basis as needed. The
compensation for the period March 1, 1997 through February 28, 1999 will be
$75,000 plus benefits. This agreement also included the grant of an option to
purchase 125,000 shares of stock at the closing price on the date of this
agreement ($1-1/16). The agreement also includes that in the event the stock
options previously granted under the current Rattlesnake stock option plans are
repriced for any employee, the existing stock option grants for the acting
Co-CEO will be repriced at the same time as any repricing and under the same
terms and conditions.

     On May 29, 1997, an agreement was signed between the Company and a Director
of the Corporation for acceptance of the position of acting Co-CEO for up to 150
days. This agreement included five months of compensation at $5,000 a month plus
expense and 100,000 warrants at the current price.

     On June 2, 1997, an agreement was signed between the Company & Executive
Vice president which terminated the December 1, 1994 employment agreement and
any and all oral agreements relating to his employment. The agreement included
payments for expense reimbursement, accrued and unused vacation, medical,
dental, disability and life insurance and severance payments. In connection with
this agreement, the Executive Vice President's stock options are hereby replaced
by a warrant to purchase up to 200,000 shares of common stock exercisable at the
closing bid on the date of this agreement ($.25).

     On June 2, 1997, the Company executed a letter of intent with an investment
banking firm to raise additional capital through a private placement to be sold
on a "best efforts" basis. The acting Co-CEO is affiliated with the investment
banking firm.

     On July 25, 1997, an agreement was signed between the Company and President
which terminated the previous December 1 1994 agreement and any and all oral
agreements relating to the employment. The agreement included payments for
expense



                                       4
<PAGE>



reimbursement, accrued and unused vacation, medical, dental, disability and life
insurance and severance payments. In connection with this agreement the
President's employee stock options are replaced by a warrant to purchase up to
150,000 shares of common stock exercisable at the closing bid price on July 18,
1997 ($7/16).

     On August 21, 1997, the Company signed a Reorganization and Stock Exchange
Agreement (the Agreement) with the Ottomanelli Group, as defined as 34th Street
Cafe Associates, Inc., Garden State Cafe Corporation, Ottomanelli Brothers West,
Ltd. and Ottomanelli's Cafe Franchising Corporation. This agreement includes
Ottomanelli Group companies contributing one hundred percent of its stock in
exchange for thirty-seven and one-half percent of Rattlesnake common stock and
common stock purchase options, warrants and convertible dilutive securities
equal to thirty seven and one half percent of all outstanding options, warrants
and convertible dilutive securities of Rattlesnake. The agreement is subject to
cancellation by either party prior to closing under specified terms of the
Agreement.

     In fiscal 1997, the Board of Directors authorized the disposition of the
Rattlesnake Southwestern Grill Restaurant located in Lynbrook, New York. On
September 17, 1997 the Company closed the restaurant and wrote-off the related
assets to the estimated realizable value. A net loss of $374,852 relating to the
closing of this location was recorded in fiscal 1997.

     On October 1, 1997 the Vice President of Finance resigned as an officer and
employee of the Company. The former Vice President of Finance continued working
as a consultant for a period of approximately four weeks. A new Vice President
of Finance was hired on October 16, 1997. Louis R. Malikow is currently acting
Principal Accounting Officer.


                              BUSINESS ORGANIZATION

     In March 1992, Rattlesnake Ventures, Inc. ("RVI") was organized for the
purpose of owning and operating the South Norwalk facility. In June 1993, the
Company was established to act as a holding company for the restaurants and in
August 1993, acquired all of the outstanding shares of RVI in exchange for
685,617 shares of common stock. In November 1993, the Company acquired all of
the outstanding shares of PEN-Z Corp. ("PEN-Z") from Penny Markatos, the mother
of Peter Markatos, the former Executive Vice President of the Company, for a
$300,000 note, 36,084 shares of Common Stock, and other consideration. See
"Certain Relationships and Related Transactions." At the time of the
acquisition, PEN-Z was not an operating entity and its principal asset was the
liquor license for the Yorktown Heights facility. The Company has established
new subsidiary corporations



                                       5
<PAGE>



for each new restaurant operation and such subsidiaries are owned by the Holding
company.

THE CONCEPT - THE RATTLESNAKE SOUTHWESTERN GRILL

     The Rattlesnake Southwestern Grill concept was designed and developed to
take advantage of the many available restaurants in choice locations whose
operations for any one of a number of reasons did not succeed. The Rattlesnake's
ability to adapt its design to existing "upfitted" facilities enables it to
completely renovate and outfit a facility for less than an average of $70.00 per
square feet, exclusive of facility acquisition costs. Moreover, the Company has
completed full conversions of existing restaurant facilities from take-over to
opening in six to eight weeks. The Company believes this formula gives the
Rattlesnake a significant advantage in rollout time and cost over industry
leaders in the same segment.

     The Company believes that the relatively low costs of acquisition and the
speed of renovation increase the Company's ability to generate revenues rapidly.
Further, the trend toward two wage earner families will strongly influence
dining habits for the nineties and beyond as families prepare less meals at home
during the work week. The emphasis on quality meals in comfortable surroundings
will move families to consider alternatives to the fast food restaurants.
Tablecloth restaurants, while very popular, are not able to accommodate this
market due to their relatively high prices for the repeat customer (2 to 3 times
per week). The Company believes the expanding theme restaurant segment has
become the concept of choice for families whose working parents have moved away
from in-home dining and toward frequent outside dining. The Company also
believes that casual "theme" restaurants represent a strong segment of the
restaurant market and that southwestern concepts represent a highly appealing
but unsaturated portion of that segment.

     However, due to a number of factors, including the Company's limited
operating history, historical operating losses, small restaurant base and
geographic concentration, as well as the dependence of the Company's expansion
strategy on certain external factors which it cannot control, there can be no
assurance that the Company's plan of operation will prove profitable or
commercially viable.

     The Company's revised business plan allows for consideration of a multiple
theme concept approach for future restaurants. This revised approach will be
tested with the conversion of one or more Rattlesnake restaurants into a Steak
House concept. In addition, one or more of the currently operating Rattlesnake
restaurants may be converted to Ottomanelli Cafe restaurants.



                                       6
<PAGE>



THE RATTLESNAKE MENU

     The menu of the Rattlesnake is a varied offering which provides a wide
selection and customer value. It is a diverse "all day" menu which offers
traditional favorites and spicy recipes inspired by the cuisine of Arizona, New
Mexico and Texas. Dinner customers can choose from slow-cooked Texas style BBQ
ribs and "shredded" meats to grilled salmon. Light alternatives include salad,
sandwich or pasta selections. The Rattlesnake also offers a prime 1/2 pound,
"Buckaroo Burger" where customers can choose from a variety of toppings as
add-ons. Other selections include "Rattlesnake Prairie Pizza," a southwestern
variation of the Italian classic, with choices from BBQ chicken and smoked
chorizo sausage to Santa Fe garden vegetables, all atop a paper thin crust made
from lightly fried flour tortillas. The Rattlesnake also offers three varieties
of chili; the "Soon to be Famous, Three Bean, Beef and Chorizo Chili" made with
top round of beef, instead of ground meat; "Buzzards Breath Chicken Chili" a
white chili filled with grilled boneless breast of chicken, white beans, garlic
and green chilies; and savory "Navajo Vegetable Chili" which offers a fat-free
healthful alternative. Fajitas are among the strongest segment of the menu and
the Rattlesnake offers a variety including the standard chicken, beef and
shrimp, and the more unusual portabello mushroom, salmon, spicy chorizo sausage
and vegetarian. The Company also added Diamond Brand Angus steaks to the menu
which capitalizes on the renewed popularity of steakhouses and quality beef.

     Menu prices range from $1.95 to $23.95, with an average per person check of
$10.25 for lunch and $13.90 for dinner. The Company believes that many of these
menu items are popular in the take-out food market, and the Company has launched
an initiative called "Grub to Go," offering an alternative to the traditional
Chinese and pizza take-out options. The Company is also currently developing an
off-premises catering program offering corporate and private Southwestern
barbecues and buffets, delivered and served at client locations.

MARKETING STRATEGY

     The Company believes that the upward trend in theme type restaurants will
continue as the public continues its desire for value and entertainment.
Restaurants are entertainment, and in this respect, the Rattlesnake appeals to a
broad spectrum of the market. The largest segment is the 25 to 35 year old
seeking diverse fare in an environment conducive to socializing. The menu,
energetic bar and live entertainment in a contemporary southwestern ambiance
provide the inducement for this market. Family business is encouraged as the
Rattlesnake is a "kid friendly" restaurant offering "Kid's Grub" menu, crayons,
balloons and games. The energy of the restaurant relieves parents



                                       7
<PAGE>



of the fear that their children might disturb other diners. The unique nature of
the product is also a repeat business generator. The Company attempts to offer
many menu items which can only be obtained at The Rattlesnake Southwestern
Grill.

     The Company believes that further opportunities exist in the areas of "Take
Out" and "Off Premises" Catering. Many families consist of multiple wage
earners, many of which regularly seek take out foods as alternatives to cooking
in or eating out. The food at the Rattlesnake is well suited for these meals.
Catering is also a potential growth component of the business. Many corporations
are currently seeking unique experiences as well as low cost alternatives for
company entertainment.

     In addition to these concepts, the Company intends to explore additional
themes to complement the Rattlesnake concept. This will allow it to maximize the
potential of each restaurant, and allow for a possible conversion to a secondary
concept, should the current one experience a decline as the Restaurant matures.
In furtherance of this approach, Rattlesnake has agreed to merge with the
Ottomanelli Group, and may convert one or more Rattlesnake restaurants to
Ottomanelli Cafes. It should be noted that the proposed merger can be canceled
by either party prior to closing

RESTAURANT MANAGEMENT AND EMPLOYEES

     The Company seeks to attract and retain high caliber restaurant managers by
providing them with an appropriate balance of autonomy, direction and attractive
financial incentives. The Company has developed a management incentive program
under which new general managers will work with senior management to prepare
quarterly budgets and performance plans for their restaurants. More experienced
general managers, who have demonstrated the ability to achieve planned
objectives, may be promoted to the district manager level. The Company believes
that by providing its general managers and district managers with short and
long-term financial incentives, it will continue to attract and retain high
caliber personnel. Company policy strongly favors promoting existing
non-management employees into management positions. Management trainees must
demonstrate their ability in every area of restaurant operations before being
considered for promotion.

     To assure that its employees properly implement the Company's commitment to
consistently high quality food and attentive service, the Company has developed
manuals regarding its policies and procedures for all aspects of restaurant
operation, including food handling and preparation and dining room and beverage
service operations. New employees are trained by corporate personnel and by
experienced employees who have



                                       8
<PAGE>



demonstrated their familiarity with and ability to consistently implement
Company policies. The Company believes that by requiring its employees to adhere
to these policies, giving them direct internal training by corporate personnel
and using experienced employees to train new ones, it will provide the
consistently high quality of food and service its customers desire.

     In addition, Company policy is generally to assign each server tables with
seating for no more than twelve to fourteen guests to enable the server to
provide attentive service. The Company believes it provides a supportive work
environment which attracts experienced servers.

     Each restaurant will be directly operated by a management team consisting
of:


General Manager:            Has full operational responsibility including
                            profit and loss and in house promotions.

Assistant General Manager:  Second in command and is directly responsible and
                            reporting issues as well as repairs and maintenance.

                            Reports to the General Manager.

Front of the House Manager: Directs Human Resources and front-of-house training
                            programs as well as scheduling and employee
                            reviews. Reports to General Manager.

Kitchen Manager:            Responsible for all food operations including
                            production, purchasing, inventories, food cost
                            controls, sanitation and personnel. Reports to the
                            General Manager.

Assistant Kitchen Manager:  Directly responsible for line production,
                            preparation schedules and daily sanitation.

                            Reports to the Kitchen Manager.



                                       9
<PAGE>



     The entire management team is directly supervised by and responsible to the
director of operations.

     Cooks, service staff and support personnel will be recruited from local
areas surrounding each individual restaurant, and although there can be no
assurance, it is anticipated that a sufficient number of qualified personnel
will be available in each area. Restaurant sites will be selected giving full
consideration to the availability of lower level hourly personnel. All personnel
will follow a two-week training protocol and receive qualifying examinations
before completion of their probationary employment. All candidates for
employment must consent to random and periodic drug screening, if requested by
the Company.

RESTAURANT SYSTEMS & CONTROLS

     The Company requires each restaurant unit to adhere to a strict program of
systems and controls which were designed to prevent theft and minimize losses
resulting from poor product handling and manpower utilization. Cash and credit
card transactions are controlled by electronic register systems which compute
all sales transactions by server, product and time of day. Sales and cash are
reconciled and monitored daily. All food items, beverages and supplies are
inventoried weekly and detailed computerized reports of are compiled from this
information. These reports along with other support materials are used to
generate weekly operating statements for units to summarize data for weekly
review. The control system allows for rapid and geographically diverse growth
while maintaining the integrity of the data received.

TRADEMARK RIGHTS

     The Company uses or intends to use various trade names and marks in the
Company's business, including "Rattlesnake Southwestern Grill" and variations of
that name and mark. Another business has registered the name "The Rattlesnake
Club" as a federal trademark.

     The Company has obtained a license for the use of the name "The Rattlesnake
Southwestern Grill" and variations of that name and mark from this trademark
holder. In April 1995, the Company entered into an agreement with RC Holdings
Inc. ("RC"), the owner of the Rattlesnake trademark, which grants the Company
the license to use the trademark in connection with its existing and future
facilities. The agreement limits the ability of the Company to open restaurants
under the Rattlesnake name within a 24-month period in the areas of Las Vegas,
Nevada, Phoenix, Arizona, Seattle, Washington, Dallas and Houston, Texas,
Chicago, Illinois and Southern Florida. After the expiration of the



                                       10
<PAGE>



24-month period, the Company will not be able to open in locations if, within a
50-mile radius, there is an existing or proposed location of a facility
established or to be established by RC. Irrespective of the foregoing, neither
RC nor the Company may open a restaurant within five miles of each other in an
urban area, or 15 miles of each other in any other area. At no time may the
Company open up a Rattlesnake facility in the states of Colorado or Michigan
without the prior written consent of RC. RC is currently the operator of fine
dining establishments in Colorado and Michigan. The Company does not consider
its establishments to be in direct competition with those operated by RC.

     The Company paid RC $5,000 in August 1995 for these licensing rights, and
is obligated to pay RC an annual fee of $5,000 for the existing facilities, and
an annual fee of $2,500 a year for each of the first ten additional facilities,
$1,500 per year for the next ten additional facilities, and $1,000 per year for
each additional facility in excess of 20.

     There can be no assurance that any application by the Company to register
any tradenames and trademarks used by the Company will be approved and/or that
the right to the use of any such trademarks outside of their respective current
areas of usage will not be claimed by others. If trademarks are issued, there
can be no assurance as to the extent of the protection that will be granted to
the Company as a result of having such trademarks or that the Company will be
able to afford the expenses of any complex litigation which may be necessary to
enforce its trademark or license rights. The Company was successful in its
defense of the Rattlesnake trademark against an operating restaurant in the
vicinity of one of the Company's restaurants. Future failure of the Company to
successfully enforce license and trademark rights may have a material adverse
impact on the Company's business.

COMPETITION

     The restaurant industry is intensely competitive with respect to price,
service, type and quality of food, location and other factors. The Company has
many well established competitors with substantially greater financial resources
and a longer history of operations than the Company. In light of the Company's
recent establishment of its restaurant operations, small number of facilities
and geographical concentration, the Company has not had a significant impact on
the restaurant industry. The Company competes with locally-owned restaurants, as
well as national and regional restaurant chains, many of which are better
established in the Company's existing and future markets. Changes in customer
tastes, economic conditions, demographic trends, and the location and number of
competing restaurants, as well as the type of cuisine served by competitors,
could adversely affect the



                                       11
<PAGE>



Company's business as well as the availability of experienced management and
hourly employees.

     Although the Company competes generally with all other casual dining
restaurants, the Company believes there are few restaurant concepts that are
directly competitive in the Southwestern "theme" market. Most notable of these
competitors is Chili's which is currently a chain operated by Brinker
International. There are other concepts which exist in a "Southwestern" venue
such as the steakhouses Longhorn, Lonestar and Santa Fe, and the Mexican
restaurants On the Border, Chi-Chi's and EL Torito. There are also a large
number of Bar-B-Que restaurants such as Virgil's . Other casual theme restaurant
concepts such as Friday's and Bennigan's compete with the Company for the casual
diner, although their concept is distinct from Rattlesnake. The Company is not
aware of any other restaurant which is comparable in concept, menu variety or
decor; however, the Company believes that the current interest in the American
Southwest will stimulate the emergence of such competitors.

     The Company believes that restaurants are entertainment, and in this
respect, intends to compete by designing the Rattlesnake to appeal to a broad
spectrum of the market. The menu, energetic bar and live entertainment in a
contemporary Southwestern ambiance appeal to this market. Family business is
encouraged as the Rattlesnake is a "kid friendly" restaurant offering "Kid's
Grub" menu, crayons, balloons and games. The energy of the restaurant relieves
parents of the fear that their children might disturb other diners. The unique
nature of the product is also a repeat business generator. The Company attempts
to offer menu items which will be identified with The Rattlesnake Southwestern
Grill.

     Although management believes it will gain market acceptance, there can be
no assurance that the Company will be able to successfully compete in its
market.

FRANCHISING/LICENSING

     The Company has no immediate plans to franchise or license. However, the
Company believes that one or both may be appropriate outside its near-term
expansion territory in the northeast United States and, if potential
franchisees/licensees with the necessary experience, stature and financing
express interest, the Company may pursue appropriate opportunities.

GOVERNMENT REGULATION

     The Company is subject to a variety of federal, state and local laws. Each
of the Company's restaurants is subject to licensing and regulation by a number
of government authorities,



                                       12
<PAGE>



including alcoholic beverage control, health, safety, sanitation, building and
fire agencies in the state or municipality in which the restaurant is located.
Difficulties in obtaining or failure to obtain required licenses or approvals
could delay or prevent the development of a new restaurant in a particular area.

     A substantial portion of the Company's revenues is attributable to the sale
of alcoholic beverages. Approximately 30% of net restaurant sales were derived
from the sale of beverages, including alcohol. Alcoholic beverage control
regulations require each of the Company's restaurants to apply to a state
authority and, in certain locations, county or municipal authorities for a
license or permit to sell alcoholic beverages on the premises. Typically,
licenses must be renewed annually and may be revoked or suspended for cause at
any time. Alcoholic beverage control regulations relate to numerous aspects of
restaurant operations, including minimum age of patrons and employees, hours of
operation, advertising, wholesale purchasing, inventory control and handling,
storage and dispensing of alcoholic beverages.

     The failure of a restaurant to obtain or retain liquor or food service
licenses would severely adversely affect the restaurant's operations. To reduce
this risk, each Company restaurant is operated in accordance with procedures
intended to assure compliance with applicable codes and regulations.

     The Company is subject in certain states to "dram shop" statutes, which
generally provide a person injured by an intoxicated person the right to recover
damages from an establishment that wrongfully served alcoholic beverages to the
intoxicated person. The Company presently carries an average liquor liability
coverage as part of its existing $1,000,000 comprehensive general liability
insurance, as well as excess liability coverage of $2,000,000 per occurrence,
with no deductible. The Company has never been named as a defendant in a lawsuit
involving "dram shop" liability.

     The Company's restaurant operations are also subject to federal and state
laws governing such matters as the minimum hourly wage, unemployment tax rates,
sales tax and similar matters, over which the Company has no control. A majority
of the Company's service, food preparation and other personnel are paid at rates
related to the federal minimum wage, and the October 1, 1997 minimum wage
increase could increase the Company's labor costs.

     The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use and environmental laws and
regulations.



                                       13
<PAGE>



ITEM 2. DESCRIPTION OF PROPERTIES

EXECUTIVE OFFICES

     The Company's executive offices are located at 439 East 82nd Street, New
York, New York 10028, and its telephone number is 212/452-2359.


RESTAURANT FACILITIES

     The Company's first location in South Norwalk, Connecticut occupies 2,600
square feet on the corner of Washington Avenue and South Main Street in the
historic restoration district of South Norwalk. The facility was opened in June
1992 and has a five-year lease with two five-year options. The current rent is
$58,900 annually with minimum escalation's over the course of the three
five-year periods. The space is comprised of two dining rooms and a large
dining/bar room where the mosaic rattlesnake is located. This facility was the
prototype facility and tested the feasibility of the Rattlesnake Concept.

     The second facility in Hamden, Connecticut was closed in January 1996 due
to the inability of the facility to achieve the consistent level of revenues
required by the company.

     The third facility located at 355 Kear Street in Yorktown Heights
(Westchester County), New York was closed on June 9, 1997 due to the inability
of the facility to meet the Company's performance standards. This facility was
sold on June 27, 1997.

     The fourth Rattlesnake restaurant, located at 55 Miller Street in downtown
Fairfield, Connecticut, ceased operations on January 4, 1997. Management is
currently marketing the property for sale. The facility was unable to meet the
Company's performance standards.

     The fifth restaurant located at 1241 Mamaroneck Avenue, White Plains, New
York, was closed on March 1, 1997, due to the inability of the facility to
achieve the consistent level of revenues required by the Company. This
restaurant was sold on July 16, 1997 to an investment group which includes the
Chairman of the Board of Directors.

     The sixth restaurant was opened in Danbury, Connecticut in August 1995. The
Danbury restaurant is in the vicinity of major shopping facilities and across
from a multiplex movie theater. The five-year lease includes three five-year
renewal options and has an initial annual rent of $102,480 plus real estate
taxes. The Company has an option to purchase the facility for $1,365,000.



                                       14
<PAGE>



     The seventh restaurant was opened in Flemington, New Jersey in November
1995. The Company purchased the lease for $100,000 and liquor license for
$150,000. The Company has a seven year lease on a net-net basis with a base rent
of $80,400 a year plus a percentage of sales over a stated sales volume.

     The eighth restaurant was opened in Lynbrook, New York in June 1996, and as
part of the Strategic Plan as revised in fiscal 1997, was determined not to have
met the Company's performance standard and was closed on September 17, 1997. The
Company recorded a loss of $374,852 in fiscal 1997 as a result of this closing.
Management still believes this area is conducive to the Rattlesnake concept and
is investigating other potential opportunities in the area.


     The Company has sold the lease for the restaurant located at 86th Street in
New York City. A lease for the facility was signed in November 1996, prior to
the implementation of the Company's revised business plan. The facility was
never developed and the lease was sold on May 29, 1997.

     The following table sets forth certain information with respect to the
Company's restaurants currently operating:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Opening Date    Location               Approximate Seating    Restaurant Size        Lease
                                       Capacity(2)            (Approximate Square    Expiration(1)
                                                              Feet)
-----------------------------------------------------------------------------------------------------------
<S>             <C>                    <C>                    <C>                    <C> 
June 1992       2 South Main Street    120                    3,270                  May 2012
                South Norwalk, CT
-----------------------------------------------------------------------------------------------------------

August 1995     106 Federal Road       225                    7,200                  March 2015
                Danbury, CT
-----------------------------------------------------------------------------------------------------------

November 1995   Route 202              250                    7,800                  August 2010
                Flemington, NJ
-----------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Including all renewal options that may be exercised in the Company's sole
     discretion.

(2)  Excludes outside dining area and seating.



                                       15
<PAGE>



ITEM 3. LEGAL PROCEEDINGS

     The Company is a party to a lawsuit involving its South Norwalk facility.
The owner of an apartment above the facility has commenced an action against the
Company seeking damages for nuisance and has complained to local authorities for
excessive noise. The action is being defended by the Company's insurance carrier
and other than causing the elimination of live entertainment at the facility,
the Company does not believe the action will have a material adverse effect on
its financial position or results of operation. All of the Company's other
facilities, existing and proposed, are free-standing buildings which do not
adjoin residential apartments. The Company does not anticipate similar problems
with any of its other facilities.

     The Company is a party to no other material legal proceedings.


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

        NOT APPLICABLE


                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Upon the effectiveness of the Company's public offering on June 29, 1995,
the Common Stock of the Company commenced trading in the over-the-counter market
and was listed on the small cap market of the NASDAQ Stock Market ("NASDAQ")
under the symbol RTTL and the Boston Stock Exchange under the symbol RTT.

     The following is the range of high and low bid prices for the Company's
stock for the periods indicated below:

COMMON STOCK                                   HIGH              LOW

Fiscal Year 1997
 1st Quarter                                   4-3/4             1-7/8
 2nd Quarter                                   3-7/8             1-1/8
 3rd Quarter                                   2-1/8             7/8
 4th Quarter                                   1                 1/4

Fiscal Year 1996
 1st Quarter                                   6                 5-1/2
 2nd Quarter                                   6-1/8             5-1/2
 3rd Quarter                                   5-1/2             2-5/8
 4th Quarter                                   4-1/8             2-7/8



                                       16
<PAGE>



Fiscal Year 1995
 4th Quarter (from June 29, 1995)              5-5/8             5-1/2

     The above quotations represent prices between dealers, do not include
retail mark-ups, mark-downs, or commissions, and do not necessarily represent
actual transactions.

     There are approximately 250 holders of record of all the Company's Common
Stock but the Company believes there are more than 700 beneficial holders of the
Company's Common Stock.

     On September 17, 1997, the Company received a letter from NASDAQ indicating
that the Company would be removed from the NASDAQ small cap listing at the close
of business on September 17, 1997 due to its failure to comply with the minimum
capital and surplus requirement of $1,000,000 and the $1.00 minimum stock price.
On September 17, 1997 the Company was removed from the NASDAQ small cap listing.
The Company continues to trade on the OTC Bulletin Board on the Boston Stock
Exchange.


                                 DIVIDEND POLICY

     The Company has not paid any dividends upon its Common Stock since its
inception. The Company does not expect to pay any dividends upon its Common
Stock in the foreseeable future and plans to retain earnings, if any, to finance
the development and expansion of its business. In June and July 1996 the Company
issued 56,500 shares of preferred stock for $24.50 per share. Each share is
entitled to cumulative semi-annual dividends of $.9187 payable on May 15 and
November 15 of each year commencing November 15, 1996 and accruing from the date
of issuance. Unpaid dividends will accumulate and be payable prior to the
payment of any dividends on the Common Stock. No dividends will be payable
unless the Company has funds legally available therefor. To date, the Board of
Directors has not declared any dividends. The Company has recorded dividends not
declared and not paid for the preferred stock aggregating $103,818 as of June
29, 1997.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

     The following discussion of the results of operations and financial
condition should be read in conjunction with the Company's audited consolidated
financial statements and notes thereto.

INTRODUCTION

     Rattlesnake Holding Company, Inc. is the parent corporation of three
subsidiary companies operating at individual



                                       17
<PAGE>



restaurant locations, utilizing the unique Rattlesnake Southwestern Grill
concept. The following table identifies the three operating locations and the
date operations commenced at each of those locations:


RESTAURANT LOCATIONS                OPERATIONS COMMENCEMENT DATE

Flemington, New Jersey              November 1995
Danbury, Connecticut                August 1995
South Norwalk, Connecticut          June 1992

     The Company has modified its expansion and operating strategy to facilitate
a more rapid course to profitability and accelerate the reduction of losses.
This new strategy incorporates a sharpened focus on existing profitable
restaurants, the elimination or conversion of unprofitable restaurants and the
implementation of aggressive cost cutting measures designed to reduce operating
expenses and improve restaurant operating performance. Management formulated
this new strategy in the second quarter and began it's actual implementation in
the third quarter of fiscal year 1997. The Company has closed four of it's
unprofitable locations and has sold three of these locations. On May 29, 1997
the Company sold it's facility located at 86th Street in New York City. The
Company had not opened this facility for operations.

     The Company's strategy of aggressive growth, utilizing a low cost
restaurant concept adaptable to different leasehold configurations in a short
construction timetable, has met with some difficulty, particularly in the areas
of inconsistent operating performance of newer units. As a result, the Board of
Directors voted in January 1997 to adopt a revised business plan that focuses on
profitability of existing restaurants and the closing of marginal restaurants
including Fairfield, Connecticut, White Plains, Yorktown Heights and Lynbrook,
New York.


FISCAL YEAR ENDED JUNE 29, 1997 AS COMPARED WITH FISCAL YEAR
ENDED JUNE 30, 1996

GENERAL DISCUSSION

     Net restaurant sales decreased 4.7% to $7,851,950 for the fiscal year ended
June 29, 1997 from $8,242,809 for the twelve months ended June 30, 1996. The
decrease in net restaurant sales resulted from the net effect of the closing of
the Fairfield, Connecticut, White Plains and Yorktown Heights, New York
restaurants in fiscal 1997 offset by an increase in the Danbury, Flemington and
Lynbrook restaurants operating for a full year as compared to the prior period.
For the fiscal year ended June 29,



                                       18
<PAGE>



1997, the Company generated a net loss of $4,797,857 as compared to a net loss
of $3,193,155 for the fiscal year ended June 30, 1996, an increase of
$1,604,702. The increased loss was principally attributed to losses incurred
from the closing of restaurant sites of $1,731,842.

     Restaurant operating losses were $(136,256) for the fiscal year ended June
29, 1997 as compared with $(159,235) for the fiscal year ended June 30, 1996.
This decrease in operating losses was principally attributable to the
implementation of the Company's cost reduction plan. The benefits recognized by
these cost reductions were offset by the cost incurred relating to the
maintenance of closed restaurants prior to their sale.

RESTAURANT SALES

     Gross restaurant sales decreased 5.6% to $8,265,474 for the fiscal year
ended June 29, 1997 from $8,755,565 for the fiscal year ended June 30, 1996. The
decrease in restaurant sales resulted from the decrease in the number of
operating restaurants during the fiscal 1997 period. The number of operating
restaurants decreased from seven to four in the period ended June 29, 1997. The
Company closed three of it's restaurants in fiscal year 1997 as follows:
Fairfield, Connecticut in January 1997; White Plains, New York in March 1997;
and Yorktown Heights, New York in June 1997. The restaurant located in Lynbrook,
New York was closed in September 1997. As a result of these restaurant closings
and the timing of restaurant openings, South Norwalk represents the only
restaurant for which same store sales can be analyzed. Same store sales for the
South Norwalk location increased $104,084 for the twelve month period ended June
29, 1997.

PROMOTIONAL SALES

     Promotional sales decreased from $512,756 for fiscal year ended June 30,
1996 to $413,524 for fiscal year ended June 29, 1997. This decrease is
attributed to a reduction in couponing and direct mail advertisement incentives
which were distributed to counter extreme winter weather conditions during
fiscal year 1996. Promotional sales have decreased as a percentage of gross
sales in fiscal year 1997 to 5.0% from 5.9% in fiscal year 1996. This decrease
as a percentage of sales is the result of the beneficial effects of clustered
marketing efforts and shared costs among all of the Rattlesnake restaurants.

FOOD AND BEVERAGE COSTS

     Food and beverage costs remained constant as a percentage of net restaurant
sales at 31.1% in fiscal year 1997



                                       19
<PAGE>



and 1996. The cost of food and beverage sales decreased to $2,443,860 for the
fiscal year ended June 29, 1997, as compared with $2,565,905 for the fiscal year
ended June 30, 1996. The Company was able to maintain it's food and beverage
cost level through the implementation of a new menu, revised recipes, improved
inventory utilization, increased purchasing efficiencies and improved training
methods. This was done despite increases in the cost of chicken, beef, and
produce. There can be no assurance that the Company will be able to maintain
these cost levels.

RESTAURANT SALARIES AND FRINGE BENEFITS

     Restaurant salaries and fringe benefits, which consist of direct salaries
of restaurant managers, hourly employee wages and related fringe benefits,
decreased to $2,792,622 for the fiscal year ended June 29, 1997 as compared to
$3,109,435 for the fiscal year ended June 30, 1996. This decrease is
attributable to the opening of additional restaurants during fiscal 1996 and no
restaurant openings in fiscal 1997. As a percentage of net sales, these costs
decreased to 35.6% in fiscal 1997 from 37.7% in fiscal 1996, principally due to
increased restaurant management and operating personnel in newly opened
restaurants in fiscal 1996. The decrease is also attributed to the
implementation of the Company's cost reduction plan under which it reduced
restaurant management and staff during the fourth quarter of fiscal year 1997.

OCCUPANCY AND RELATED EXPENSES

     Occupancy and related expenses, which include linen, repairs, maintenance,
utilities, rent, insurance and other occupancy related expenses, decreased to
$2,025,198 for the fiscal year ended June 29, 1997 from $2,118,444 for the
fiscal year end June 30, 1996. As a percentage of net restaurant sales, these
costs increased to 25.8% in fiscal 1997 from 25.7% in fiscal 1996. The increase
as a percentage of sales can be attributed primarily to the costs associated
with the maintenance of the three restaurants closed in fiscal year 1997 prior
to their sale.

DEPRECIATION AND AMORTIZATION EXPENSE

     Depreciation and amortization expenses, including the amortization of
pre-opening store expenses, increased as a percentage of gross restaurant sales
to 9.3% for the fiscal year ended June 29, 1997 from 7.4% for the fiscal year
end June 30, 1996. These expenses increased to $726,526 in fiscal year ended
June 29, 1997 from $608,260 for the fiscal year end June 30, 1996. This increase
is primarily attributable to the depreciation and amortization recorded on
restaurants which were closed during



                                       20
<PAGE>



fiscal year 1997.

GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses decreased to $2,715,293 in
fiscal year ended June 29, 1997 from $2,810,433 for the fiscal year end June 30,
1996. As a percentage of net sales, selling, general and administrative expenses
increased from 34.1% in 1996 to 34.6% in 1997. These reductions in expense are a
direct result of the Company's implementation of it's cost reduction plan. The
increase as a percentage of sales reflect the impact of the decreased sales
resulting from the closing of related restaurant sites

AMORTIZATION OF DEBT ISSUANCE COSTS

     Debt issuance costs are principally associated with the subordinated notes
component of the Company's $1,800,000 unit offering and were capitalized and
amortized ratably over the initial one year term of the debt. As a result of the
restructuring of this debt, the related unamortized debt issuance costs of
$72,114 were offset against the extraordinary gain recognized in this
transaction in fiscal year 1996.

LOSS ON CLOSURE OF RESTAURANT SITES

     The Rattlesnake Southwestern Grill Restaurant located in Fairfield,
Connecticut was closed on January 4, 1997. The fixed assets, leasehold
improvements and intangibles at the facility have been written off and is
recorded at it's estimated fair value. The facility is currently being offered
for sale. A net loss of $394,941 relating to the closing of the Fairfield
location, was recorded during the 1997 fiscal year.

     The Rattlesnake Southwestern Grill Restaurant located in White Plains, New
York was closed on March 1, 1997 and sold on July 16, 1997. The facility was
sold to individuals including the Company's Chairman of the Board. A net loss of
$224,135 relating to the closing of the White Plains location, was recorded in
fiscal 1997.

     The Rattlesnake Southwestern Grill Restaurant located in Yorktown Heights,
New York was closed on June 9, 1997 and sold on June 27, 1997. A net loss of
$362,091 relating to the closing of the Yorktown Heights location, was recorded
in fiscal 1997.

     The restaurant location on 86th Street in New York City was never opened
and the Company sold the fixed assets on May 29, 1997 and transferred it's
interest in the lease at that location. A net loss of $306,456, relating to the
selling of the 86th Street location was recorded in fiscal 1997.



                                       21
<PAGE>



     On September 17, 1997 the Company closed its facility located in Lynbrook,
New York pursuant to fiscal 1997 Board approval, as it was not meeting the
Company's performance standards as part of the Strategic Plan. The Company
recorded a net loss of $374,852 in fiscal 1997 as a result of this closing.


INTEREST EXPENSES

     Interest expense increased to $172,886 for the fiscal year ended June 29,
1997 from $108,536 for the fiscal year end June 30, 1996. This increase resulted
from additional borrowing by the Company and the increased interest rate
relating to the extension of the Series C Notes Payable.


FISCAL YEAR ENDED JUNE 30, 1996 AS COMPARED WITH FISCAL YEAR ENDED JUNE 30, 1995

RESTAURANT SALES

     Gross restaurant sales increased 63.9% to $8,755,565 for the fiscal year
ended June 30, 1996 from $5,340,657 for the fiscal year ended June 30, 1995. The
increase in restaurant sales resulted from the increase in the number of
restaurants operating during the fiscal 1996 period. The number of operating
restaurants increased from five to eight for the period ended June 30, 1996,
prior to the closing of the Hamden, Connecticut facility in January 1996. The
three new restaurants are located in Danbury, Connecticut; Flemington, New
Jersey; and Lynbrook, New York. The White Plains location was open for only
three weeks in fiscal year 1995, thus also contributing to the increased sales
in fiscal year 1996. Danbury, Flemington and Lynbrook were opened in August
1995, November 1995 and June 1996 respectively.

     For the three restaurants operating for a full twelve months in fiscal year
1995 and 1996, same store sales declined by $508,551. This decline is attributed
to decreased sales experienced by Yorktown and Fairfield. These comparative
sales declines are attributed to the typical higher sales levels experienced by
these new units during fiscal 1995. South Norwalk, which was not a new unit in
fiscal 1995 experienced an increase in sales. The severe weather conditions
experienced in the country's northeastern region had a dramatic affect on sales
specifically during the second and third quarters of fiscal year 1996.



                                       22
<PAGE>



PROMOTIONAL SALES

     Promotional sales increased from $362,589 for fiscal year ended June 30,
1995 to $512,756 for fiscal year ended June 30, 1996. This increase is
attributed to couponing and direct mail advertisement targeted as sales
incentives to counter extreme winter weather conditions during fiscal year 1996.
Promotional sales have decreased as a percentage of gross sales in fiscal year
1996 to 5.9% from 6.8% in fiscal year 1995. This decrease as a percentage of
sales is the result of the beneficial effects of clustered marketing efforts and
shared costs among all of the Rattlesnake restaurants.


FOOD AND BEVERAGE COSTS

     Food and beverage costs decreased as a percentage of net restaurant sales
to 31.1% in fiscal year ended June 30, 1996 as compared to 32.4% for the twelve
months ended June 30, 1995, despite the opening of three facilities in fiscal
year 1996 and the typically higher costs associated with new facilities. The
cost of food and beverage sales increased to $2,565,905 for the fiscal year
ended June 30, 1996, as compared with $1,610,680 for the fiscal year ended June
30, 1995. The decrease of the food and beverage cost rates as a percentage of
net restaurant sales was attributable to the new menu, revised recipes, improved
inventory utilization, increased purchasing efficiencies and improved training
methods. The company was able to maintain these lower cost levels despite
increases in the cost of chicken, beef, and produce in fiscal 1996. There can be
no assurance that the Company will be able to maintain these cost levels.

RESTAURANT SALARIES AND FRINGE BENEFITS

     Restaurant salaries and fringe benefits, which consist of direct salaries
of restaurant managers, hourly employee wages and related fringe benefits,
increased to $3,109,435 for the fiscal year ended June 30, 1996 as compared to
$1,804,129 for the fiscal year ended June 30, 1995. This increase is
attributable to the opening of additional restaurants during fiscal 1996. As a
percentage of net sales, these costs increased to 37.7% in fiscal 1996 from
36.2% in fiscal 1995, principally due to increased restaurant management and
operating personnel in newly opened restaurants. The Company believes that the
management component of restaurant salaries should be moderate in the future, as
existing restaurant supervisory personnel can manage the anticipated growth in
restaurants in fiscal 1997.



                                       23
<PAGE>



OCCUPANCY AND RELATED EXPENSES

     Occupancy and related expenses, which include linen, repairs, maintenance,
utilities, rent, insurance and other occupancy related expenses, increased to
$2,118,444 for the fiscal year ended June 30, 1996 from $1,306,469 for the
fiscal year ended June 30, 1995. As a percentage of net restaurant sales, these
costs decreased to 25.7% in fiscal 1996 from 26.2% in fiscal 1995. The decrease
can be attributed primarily to the enhanced controls and improved site
selection.

DEPRECIATION AND AMOTIZATION EXPENSE

     Depreciation and amortization expenses, including the amortization of
pre-opening store expenses, decreased as a percentage of gross restaurant sales
to 7.4% for fiscal year ended June 30, 1996 from 7.8% for the fiscal year end
June 30, 1995. These expenses increased to $608,260 in fiscal year ended June
30, 1996 from $388,695 for the fiscal year end June 30, 1995. This increase is
primarily attributable to the opening of new restaurants, the expansion of the
corporate offices and other capital expenditures.

GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses increased to $2,810,433 in
fiscal year ended June 30, 1996 from $1,332,237 for the fiscal year end June 30,
1995. As a percentage of net sales, selling, general and administrative expenses
increased from 26.8% in 1995 to 34.1% in 1996. These expenditures include a
foundation for the implementation of its expansion strategy. These investments
included additional corporate level accounting, administrative and restaurant
management personnel. The Company also made expenditures necessary to establish
the Company as a public company including professional fees, directors and
officers insurance, printing costs, postage and professional service dues.
Additionally, increased advertising, marketing and the cost of promotional
programs contributed to the increases in selling, general and administrative
expenses as did the other expenses directly relating the opening of new
restaurants.

AMORTIZATION OF DEBT ISSUANCE COSTS

     Debt issuance costs are principally associated with the subordinated notes
component of the Company's $1,800,000 unit offering and were capitalized and
amortized ratably over the initial one year term of the debt. As a result of the
restructuring of this debt, the related unamortized debt issuance costs of
$72,114 were offset against the extraordinary gain recognized in this
transaction in fiscal year 1996.



                                       24
<PAGE>



LOSS ON CLOSURE OF RESTAURANT

     On December 31, 1995, the Board of Directors authorized the closing of the
Rattlesnake Southwestern Grill Restaurant located in Hamden, Connecticut. The
facility was closed on January 7, 1996. A majority of the fixed assets at the
facility have been removed to be utilized at other existing or new facilities.
All remaining fixed assets and leasehold improvements have been abandoned and
all intangible assets have been written off. A loss of $192,311 relating to the
closing of the Hamden location was recorded during the 1996 fiscal year.

INTEREST EXPENSES

     Interest expense decreased to $108,536 for the fiscal year ended June 30,
1996 from $264,279 for the fiscal year end June 30, 1995. The decrease resulted
from the repayment of notes upon completion of the IPO.


LIQUIDITY

     The Company's cash position decreased by $616,392 during the year ended
June 29, 1997, principally as a result of net cash used in operating activities
of $1,654,066.

     Net cash used in operating activities consisting primarily of the
$4,797,857 net loss for the year, offset by a decrease in accounts payable of
$177,779, depreciation and amortization of $797,092, loss on closure of
restaurant sites of $1,850,043, valuation of warrants for services of $293,750,
decrease in prepaid of $119,016 and an increase in other current liabilities of
$157,016.

     The Company utilized $477,864 for investing activities, principally for
capital expenditures and lease acquisition costs.

     The Company generated $1,515,538 in cash from financing activities during
the year ended June 29, 1996, principally through the proceeds of the private
placement of preferred stock and the issuance of $500,000 convertible notes,
offset by $272,087 repayment of borrowings.

     In fiscal 1997, the Company offered to convert the Series A Note to a
Series C Note, which provided for a one year extension of the maturity date, in
exchange for an increase in the interest rate from 9% to 15% and one warrant for
each dollar of indebtedness. The warrants provided for exercise prices ranging
between $2.50 and 3.00 and expire on August 6, 2001. These warrants were valued
and the related expense of $121,962 was recorded in the financial statements for
the fiscal year



                                       25
<PAGE>



ended June 29, 1997. Note holders aggregating $303,749 accepted the terms of the
extension and the remaining $221,243 of $524,992 were paid in cash.

     On June 24, 1996, the Company entered into an agreement to continue its
participation in a discounted meal program in exchange for $230,000 in temporary
financing, of which $115,000 was received in June 1996 and the remainder was
received in July 1996. On October 3, 1996 the Company received $150,000 from
another dining service company for meal credits at the Company's restaurants.

     At June 29, 1997, the Company has available a net operating loss
carryforward (NOL) for Federal and State income tax purposes of approximately
$10,870,000, which are available to offset future taxable income, if any, before
2012. In accordance with Section 382 of the Internal Revenue Code of 1986, as
amended, a change in more than 50% in the beneficial ownership of the Company
within a three-year period (an "Ownership Change"), will place an annual limit
on the Company's ability to utilize its existing NOL carryforwards to offset
taxable income in current and future periods. The Company believes that an
ownership change has occurred and will cause the annual limitations to apply.
The Company has not determined what the maximum annual amount of taxable income
is that can be reduced by the NOL carryforwards.

     On March 31 1996, the Company exercised its option to purchase the building
housing the Fairfield facility for $425,000. This transaction was closed on
August 31, 1996 and was financed by a principal stockholder through a 15% short
term note due on January 2, 1997. In addition the investor received 50,000
warrants at an exercise price equal to the market price at the date of the
grant. The Fairfield facility was closed in January 1997 and is currently being
offered for sale. The Company anticipates that the proceeds of the sale will be
used to repay the short term note which was due January 2, 1997 and is currently
in default.

     On August 7, 1996, the Company signed a purchase and sale agreement for
$388,000 for a restaurant location on 86th Street in New York city. Included in
the purchase price was the lease and certain furniture, fixtures and equipment.
This restaurant location was never opened and the Company sold the assets on May
29, 1997 and transferred it's interest in the lease at that location in exchange
for cash of $260,000 and reimbursement of prepaid rent of $29,387. Rattlesnake
remains a guarantor of the lease. A net loss of $306,456, relating to the
selling of the 86th Street location was recorded during the 1997 fiscal year

     The Rattlesnake Southwestern Grill Restaurant located in



                                       26
<PAGE>



White Plains, New York was closed on March 1, 1997 and sold on July 16, 1997.
The Company sold all of the assets of White Plains except for cash, accounts
receivable and certain items specified in the Asset Purchase Agreement in
exchange for a release from its note payable to the landlord of $276,499 and
receipt of $23,500 note receivable from the purchaser. The facility was sold to
a group which includes the Company's Chairman of the Board. A net loss of
$224,135 relating to the closing of the White Plains location, was recorded in
fiscal 1997.

     The Rattlesnake Southwestern Grill Restaurant located in Yorktown Heights,
New York was closed on June 9, 1997 and sold on June 27, 1997. A net loss of
$362,091 relating to the closing of the Yorktown Heights location, was recorded
during fiscal 1997.

     On October 10, 1996, a letter of intent was executed with an investment
banking firm to raise $1,500,000-$3,000,000 through a private placement to be
sold on a "best effort" basis. No funds were raised through this arrangement.

     On March 4, 1997 the Company entered into a private financing arrangement
to provide $500,000 of convertible subordinated secured debt. The notes are for
a term of 6 months at an interest rate of 18%. The principal amount of the notes
may be converted into the Company's common stock at a conversion price of $.75
per share any time before repayment of principal. The notes are secured by all
of the issued and outstanding shares of the Company's wholly owned subsidiaries
Rattlesnake Ventures, Inc., Rattlesnake-Danbury, Inc., Rattlesnake-Lynbrook,
Inc., and Rattlesnake-Flemington, Inc. The Company has received a demand for
payment of notes due September 4, 1997. The Company is currently negotiating the
refinance of these notes with an outside investor.

     On June 2, 1997, the Company executed a letter of intent with an investment
banking firm to raise $2,500,000 of additional capital through a private
placement to be sold on a "best efforts" basis. The acting CO-CEO is affiliated
with the investment banking firm.

     On August 21, 1997 the Company signed a Reorganization and Stock Exchange
Agreement (the Agreement) with the Ottomanelli Group, defined as 34th Street
Cafe Associates, Inc., Garden Street Cafe Corporation, Ottomanelli Brothers
West, Ltd. and Ottomanelli's Cafe Franchising Corporation. This agreement
includes Ottomanelli Group contributing one hundred percent of it's stock in
exchange for thirty seven and one-half percent of all outstanding common stock
options warrants and convertible dilutive securities of Rattlesnake. The
agreement is subject to cancellation by either party prior to closing under
specified



                                       27
<PAGE>



terms of the Agreement.

     From September 11 through September 29, the Company entered into a private
financing arrangement with four individuals to provide $250,000 of bridge
financing at 10% interest per annum and with a due date of the earlier of the
closing of the proposed private placement or December 31, 1997.

     On September 17, 1997 the Company closed it's facility located in Lynbrook,
New York pursuant to fiscal 1997 Board approval, as it was not meeting the
Company's performance standards as part of the Strategic Plan. The Company
recorded a net loss of $374,852 in fiscal 1997 as a result of this closure.


SEASONALITY AND EXTERNAL INFLUENCES ON QUARTERLY RESULTS

     The Company's sales and earnings do not reflect a seasonality of the
business. Quarterly results have been and, in the future are likely to be,
substantially affected by the timing of new restaurant openings. Because of the
impact of new restaurant openings, results for any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year and cannot
be used to indicate financial performance for the entire year.


IMPACT OF ACCOUNTING STANDARDS

     In the second quarter of fiscal 1998, the Company is required to adopt
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per share".
This statement establishes standards for computing and presenting earnings per
share (EPS), replacing the presentation of currently required Primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires the dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of operations. When SFAS No. 128 is adopted, the
Company will be required to restate its EPS data for all prior periods
presented. The Corporation does not expect the impact of the adoption of this
statement to be material to previously reported EPS amounts.


ITEM 7. FINANCIAL STATEMENTS

     See attached Financial Statements annexed hereto.



                                       28
<PAGE>



ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        Not Applicable.


ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS.


                                   MANAGEMENT

     The executive officers and directors of the Company are as follows:

         NAME             AGE             OFFICE

     William J. Opper     54      Chairman of the Board

     Stephen A. Stein     45      Co-Acting Chief Executive Officer and Director

     Louis R. Malikow     50      Co-Acting Chief Executive
                                  Officer and Director

     Roger Rankin         52      Director


     William J. Opper, has served as Chairman of the Board of the Company since
its inception and he had served as Chief executive Officer from inception to
March 1997. He had also served as President of each of its subsidiaries from
June 1992 through March 1997. Mr Opper is a member of a group of investors that
has acquired the facility formerly known as Rattlesnake White Plains. From 1986
through 1991, Mr. Opper served as Senior Partner of Atlantic Professional
Resources, Inc., a management and marketing consulting firm serving the
restaurant, food service and hospitality industries. From 1981 to 1986, Mr.
Opper was Vice President of Marketing for NCI Foodservice, Inc., where he
developed marketing programs. Previously, Mr. Opper was the principal owner of
eight full service restaurants. Mr. Opper graduated St. Bonaventure University
with a Bachelor of Arts degree in History.

     Stephen A. Stein, joined the Company as a Director in November 1994 and
served as Vice Chairman and Chief Administrative Officer from December 1995 to
March 1997. From March 1, 1997 to date Mr. Stein is serving as the Company's
Co-Acting Chief Executive Officer. From March 1997, to date Mr. Stein has been a
Managing Director of the Corporate Finance Department at Commonwealth
Associates, a New York City based investment bank. On June 2, 1997, the Company
executed a letter of intent with Commonwealth Associates to raise additional



                                       29
<PAGE>



capital through a private placement to be sold on a "best efforts" basis. The
Company has signed a From 1983 to 1995, Mr. Stein was a principal and the
President of David's Cookies, Inc. (or its predecessors), a
manufacturer/distributor with a chain of retail specialty food stores and
franchise outlets with locations worldwide. From 1990 to the present, Mr. Stein
has owned and operated a food management consulting firm, SAS Ventures, Inc. Mr.
Stein is also a former practicing attorney and a graduate of Ohio State
University and Vermont Law School.

     Louis R. Malikow, has served as Secretary and Director of the Company since
September 1993 and as Co-Acting Chief Executive Officer since May 29, 1997. Mr.
Malikow has served as Principal Accounting Officer since October 1, 1997. Mr.
Malikow is an attorney and the proprietor of Louis R. Malikow Associates, a tax
and financial consulting firm which he founded in 1990. From 1975 to 1990, Mr.
Malikow served as Vice President of The Ayco Corporation, Inc. a tax and
financial consulting firm. He is a graduate of Syracuse University School of
Management with a degree in Corporate Finance and is also a graduate of The
Albany Law School.

     Roger Rankin, joined the Company as a Director in November 1994. From 1991
to present Mr. Rankin is active as a private investor. From 1986 to 1991, Mr.
Rankin served as Chairman and Chief Executive Officer of Top Source
Technologies, Inc., a publicly traded (American Stock Exchange) manufacturing
company in the automotive industry. From 1976 to 1984, Mr. Rankin was the
principal owner and operator of Rankin Distributing, a company with
wholesale/retail stores selling automotive stereo equipment.

     A Vice President of Finance was hired on October 16,1997.

CLASSIFICATION OF THE BOARD OF DIRECTORS

     The number of directors comprising the entire Board of Directors is such
number as determined in accordance with the By-Laws of the Company. The
Company's By-Laws provide that the number of directors shall be not less than
three nor more than eleven. The Company's Certificate of Incorporation provides
for a classified or "staggered" Board of Directors. The classified or
"staggered" Board of Directors is comprised of three classes of directors
elected for initial terms expiring at the 1995, 1996 and 1997 Annual Meeting of
Stockholders. Thereafter, each class is elected for a term of three years. By
reason of the classified Board of Directors, one class of the Board comes up for
re-election each year. Any further amendment to the Company's Certificate of
Incorporation affecting the classified Board may only be adopted upon the
affirmative vote of not less than 75% of the issued and outstanding shares
entitled to vote thereon. Officers serve at the discretion of the Board of
Directors of the



                                       30
<PAGE>



Company. There are no family relationships among any of the officers or
directors. The underwriting agreement in connection with the Public Offering
granted the underwriter, Auerbach, Pollak & Richardson, Inc., the right to
designate an observer to the Board of Directors for a period of five years.

     Mr. Opper was elected as Class 1 Directors to serve for a term of three
years until the 1997 Annual Meeting of Stockholders; Mr. Malikow was elected as
Class 2 Director to serve for a term of two years until the 1996 Annual Meeting
of Stockholders; and Messrs. Stein and Rankin were each elected as Class 3
Directors to serve for a term of one year until the Company's 1995 Annual
Meeting of Stockholders. During the Company's 1995 Annual Meeting of
Stockholders, Messrs. Stein and Rankin were re-elected for a three year term to
the Board of Directors. Thereafter, each class of directors standing for
re-election shall be elected for a term of three years. There has not been a
1996 Annual Shareholders Meeting.

COMMITTEES OF THE BOARD OF DIRECTORS

     The Board of Directors has standing Audit, Compensation and Executive
Committees.

     Audit Committee. The members of the Audit Committee are Roger Rankin, and
Louis R. Malikow. The Audit Committee reviews: (i) the Corporation's audit
functions; (ii) with management, the finances, financial condition and interim
financial statements of the Corporation; (iii) with the Corporation's
independent auditors, the year-end financial statements; and (iv) the
implementation of any action recommended by the independent auditors. The Audit
Committee of the Board of Directors met once during fiscal 1997.

     Executive Committee. The Executive Committee has all of the powers of the
Board of Directors except it may not, among other things: (i) amend the
Certificate of Incorporation or Bylaws; (ii) enter into agreements to borrow
money in excess of $100,000; (iii) grant security interests to secure
obligations of more than $100,000; (iv) authorize private placements or public
offerings of the Company's securities; (v) authorize the acquisition of any
major assets or business or change the business of the Corporation; or (vi)
authorize the employment of any independent contractor for compensation in
excess of $50,000. The Executive Committee of the Board of Directors met several
times during fiscal 1997.

     Compensation Committee. The only member of the Compensation Committee is
Roger Rankin. The Compensation Committee administers the Corporation's 1994
Stock Option Plan and Non-Employee Director Stock Option Plan and negotiates and
reviews of all employment agreements of executive officers of the



                                       31
<PAGE>



Corporation.

MEETINGS OF THE BOARD OF DIRECTORS

     During the fiscal year ended June 29, 1997, the Board of Directors of the
Company met on 9 occasions and voted by unanimous written consent on 9
occasions. No member of the Board of Directors attended less than 75% of the
aggregate number of (i) the total number of meetings of the Board of Directors
or (ii) the total number of meetings held by all Committees of the Board of
Directors.

CERTAIN REPORTS

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and officers, and persons who own, directly or
indirectly, more than 10% of a registered class of the Corporation's equity
securities, to file with the Securities and Exchange Commission ("SEC") reports
of ownership and reports of changes in ownership of common stock and other
equity securities of the Company. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms that they file. Based solely on review of the copies
of such reports received by the Company, the Company believes that all Section
16(a) filing requirements applicable to officers, directors and 10% shareholders
were complied with during the 1997 fiscal year.


ITEM 10. EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

     The following provides certain information concerning all Plan and Non-Plan
(as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded to,
earned by, paid by the Company during the periods ended June 29, 1997, June 30,
1996, and 1995 for each of the named executive officers of the Company.



                                       32
<PAGE>



                           SUMMARY COMPENSATION TABLE
                               ANNUAL COMPENSATION

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                        Long Term Compensation Awards
-----------------------------------------------------------------------------------------------------------------
                                                          Other                               No. of Securities
Name and        Fiscal                                    Annual                              Underlying 
Principal       Year         Salary       Bonus(2)        Compensation  Restricted Stock      Options
Position                                                  (3)           Awards                Granted
-----------------------------------------------------------------------------------------------------------------
<S>             <C>          <C>          <C>             <C>           <C>                   <C> 
William J.      1997         $93,500      $0              $0                                  0(8)
Opper           1996         $90,000      $0              $20,000       (4)                   150,000(5)
 Chairman,      1995(1)      $85,000      $0              $0            (4)                   0
Former CEO
-----------------------------------------------------------------------------------------------------------------
Stephan A.      1997         $86,250      $0              $0            (4)                   125,000(7)
Stein           1996         $72,500      $0              $10,000       (4)                   120,000(6)
 Former Vice    1995         $0           $0              $0            (4)                   0
Chairman and
Chief
Administrative
Officer
 Acting Co-CEO
-----------------------------------------------------------------------------------------------------------------
David C.        1997         $93,500      $0              $0                                  0(10)
Sederholt       1996         $90,000      $0              $20,000       (4)                   150,000(5)
Former          1995(1)      $85,000      $0              $0            (4)                   0
President
-----------------------------------------------------------------------------------------------------------------
Peter C.        1997         $88,000      $0              $0                                  0(9)
Markatos        1996         $84,600      $0              $20,000       (4)                   200,000(5)
Former          1995(1)      $80,000      $0              $0            (4)                   0
Executive
Vice President
-----------------------------------------------------------------------------------------------------------------
Louis R.        1997         $5,000       $0              $0            0                     100,000(11)
Malikow
Acting Co-CEO
Acting
Principal
Accounting
Officer
-----------------------------------------------------------------------------------------------------------------
</TABLE>


----------

(1)  Commencing July 1, 1994, the salaries of Messrs. Opper, Sederholt and
     Markatos were increased to $85,000, $85,000 and $80,000 per year,
     respectively. In December 1994, these three executives entered into
     employment agreements with the company which continued the salaries for the
     next year. See "Employment Agreements" below. On March 15, 1997 Mr. Opper
     signed an agreement with the Company resigning his position as Chief
     Executive Officer terminating the previous December 1, 1994 employment
     agreement including any and all oral agreements relating to his employment.
     On June 2, 1997 Mr. Markatos signed an agreement with the Company resigning
     his position as Executive Vice



                                       33
<PAGE>



     President terminating the previous December 1, 1994 employment agreement
     including any and all oral agreements relating to his employment. On July
     25, 1997 Mr. Sederholt signed an agreement with the Company resigning his
     position as President and terminating the previous December 1, 1994
     employment agreement including any and all oral agreements relating to his
     employment.

(2)  Pursuant to the terms of their employment agreements dated December 1, 1994
     Messrs. Opper, Sederholt and Markatos are to receive a cash bonus each year
     during the term of their agreements equal to 4%, 3% and 3%, respectively,
     of the earnings before interest and taxes of the Company, as defined
     ("EBIT") up to $1,000,000, 3%, 2.25% and 2.25% of EBIT in excess of
     $1,000,000 up to $2,000,000, and 2%, 1.5% and 1.5% of EBIT in excess of
     $2,000,000, contingent on the Company achieving at least $500,000 in EBIT.
     See "Employment Agreements."

(3)  Pursuant to the terms of their employment agreements, Messrs. Opper, Stein,
     Sederholt and Markatos may receive additional compensation as determined
     from time to time by the Board of Directors. During fiscal year 1996, the
     Board of Directors approved the above additional compensation to its
     executive officers.

(4)  No restricted stock awards were granted in fiscal 1997; however, Messrs.
     Opper, Sederholt and Markatos owned 283,361, 144,158 and 0, respectively,
     restricted shares of the Company's Common Stock as of June 29, 1997, the
     market value of which was $252,303, $126,130 and 0, respectively.

(5)  In December 1994, pursuant to the terms of their employment agreements,
     Messrs. Opper, Sederholt and Markatos, respectively, were granted options
     to purchase an aggregate of 150,000, 150,000 and 200,000 shares of the
     Company's Common Stock, respectively exercisable at $4.50 per share,
     vesting at one-third each year commencing December 1, 1995. See "Employment
     Agreements." At the date of Messrs. Opper, Sederholt and Markatos'
     separation these original options were terminated and equivalent options
     were issued to Mr. Opper at an exercise price of $2.00 and equivalent
     warrants were issued to Mr. Sederholt at a price of $ 7/16 and Mr. Markatos
     at an exercise price of $ 1/4.

(6)  In December 1995, pursuant to the terms of Mr. Stein's employment
     agreement, 120,000 options were granted to purchase shares of common stock
     at an exercise price of $5.25 per share, vesting one-third each year.

(7)  On March 15, 1997 Mr. Stein amended his employment agreement and received
     an option to purchase 125,000 shares of the Company's Common stock at an
     exercise price of $1-1/16. The agreement also includes that in the event
     the stock options are repriced for any employee, the existing stock option
     grants for Mr. Stein will be repriced at the same time as any repricing and
     under the same terms and conditions. No adjustments have been made to the
     exercise price of Mr. Stein's



                                       34
<PAGE>



     outstanding options. See "Employment Agreements" below.

(8)  On March 15, 1997 Mr. Opper signed an agreement with the Company resigning
     his position as Chief Executive Officer terminating the previous December
     1, 1994 employment agreement including any and all oral agreements relating
     to his employment. In connection with this agreement, Mr. Opper's employee
     stock options shall be immediately vested and shall be amended to
     constitute non-qualified employee stock options and the strike price is
     reduced to an exercise price of $2.00.

(9)  On June 2, 1997 Mr. Markatos signed an agreement with the Company resigning
     his position as Executive Vice President terminating the previous December
     1, 1994 employment agreement including any and all oral agreements relating
     to his employment.

(10) On July 25, 1997 Mr. Sederholt signed an agreement with the Company
     resigning his position as President and terminating the previous December
     1, 1994 employment agreement including any and all oral agreements relating
     to his employment.

(11) On May 29, 1997, Mr. Malikow signed an agreement with the Company accepting
     the position of acting Co-CEO for up to 150 days. This agreement included
     five months compensation at $5,000 per month plus expenses, and the grant
     of 100,000 warrants at the then current price $.3125.


STOCK OPTIONS

     The following table sets forth certain information concerning the grant of
stock options made as of the last fiscal year under the Company's 1994 Employees
Stock Option Plan to each of the named executive officers of the Company and
non-executive employees as a group.


                                OPTION/SAR GRANTS
                               (Individual Grants)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                   No. of Securities
                   Underlying          Percentage of Total     Exercise of
Name               Options Granted     Options/Fiscal Year     Base Price        Expiration Date
-------------------------------------------------------------------------------------------------
<S>                <C>                 <C>                     <C>               <C>
Stephan A. Stein   125,000             43%                     $1-1/16           03/01/02
-------------------------------------------------------------------------------------------------
Non-Executive      165,000             57%                     $0.38-$5.25       11/27/00-5/28/02
Employees
-------------------------------------------------------------------------------------------------
</TABLE>



                                       35
<PAGE>



     The following table contains information with respect to the named
executive officers concerning options held as of the last fiscal year.


                         AGGREGATED OPTION/SAR EXERCISES
                             IN LAST FISCAL YEAR AND
                            FY-END OPTIONS/SAR VALUES

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                       Aggregated Option/SAR Exercises
                       In Last Fiscal Year and FY-End
                       Options/SAR Values
-----------------------------------------------------------------------------------------------------------
                       Shares          Value Realized     Number of Unexercised      Value of Unexercised
                       Acquired on                        Options as of June 29,     In-the-Money Options
Name                   Exercise                           1997 Exercisable/          at June 29, 1997(1)
                                                          Unexercisable              Exercisable/
                                                                                     Unexercisable
-----------------------------------------------------------------------------------------------------------

<S>                    <C>                                <C>                        <C> 
William J. Opper       0               --                 150,000/150,000            $0/0
-----------------------------------------------------------------------------------------------------------
Stephan A. Stein       0               --                 205,000/285,000            $0/0
-----------------------------------------------------------------------------------------------------------
David C. Sederholt     0               --                 100,000/150,000            $0/0
-----------------------------------------------------------------------------------------------------------
Peter C. Markatos      0               --                 120,000/120,000            $0/0
-----------------------------------------------------------------------------------------------------------
Louis R. Malikow       0               __                 55,000/55,000              $0/0
-----------------------------------------------------------------------------------------------------------
</TABLE>

----------

1.   Market value at June 29, 1997 was $ 7/8 per share.


EMPLOYMENT AGREEMENTS

     The Company entered into three-year employment agreements with the
Company's Chairman of the Board and Chief Executive Officer, William J. Opper;
the Company's President and Chief Operating Officer, David C.



                                       36
<PAGE>



Sederholt and the Executive Vice President, Peter Markatos, in December 1994.
The employment agreements provide for (i) annual compensation of $85,000,
$85,000 and $80,000, respectively for the first year of the agreements,
increasing by 10% in each of the second and third years; (ii) a bonus of 4%, 3%
and 3%, respectively, of the Company's earnings before interest and taxes
("EBIT") up to $1,000,000 (as defined in the agreement), 3%, 2.25% and 2.25%,
respectively of the amount of EBIT in excess of $1,000,000 up to $2,000,000 and
2%, 1.5% and 1.5%, respectively, of the EBIT in excess of $2,000,000, providing
the Company achieves at least $500,000 in EBIT, with such additional bonuses as
may be awarded in the discretion of the Board of Directors; (iii) the award of
non-qualified stock options to purchase 150,000, 150,000 and 200,000 shares of
Common Stock, respectively at an exercise price of $4.50 per share (iv) certain
insurance and severance benefits and (v) automobile expenses. Messrs. Opper,
Sederholt and Markatos signed separation agreements with the Company terminating
their rights under the December 1994 Employment Agreements. See "Severance
Agreements" below.

     In December 1995, the Company entered into a three year employment
agreement with Stephen A. Stein, the Company's Vice-Chairman and Chief
Administrative Officer. The agreement provides for a base salary of $90,000 per
year increasing 10% per annum plus a bonus to be determined by the Board of
Directors. The agreement also granted Mr. Stein 120,000 five year employee stock
options exercisable at $5.25 per share as well as certain insurance and
severance benefits and automobile expense payment. On March 15, 1997 Mr. Stein
signed an agreement with the Company which amended the December 1995 employment
agreement. Under the new agreement, Mr. Stein resigned his position as Vice
Chairman & Chief Administrative Officer and accepted the position of Acting
Chief Executive Officer. This agreement waives any base rate or annual rate
increases per the previous agreement and modified the term to March 1, 1997
through February 28, 1999. Services are provided on a part-time consulting basis
as needed for New Business Development Services. The compensation for the period
March 1, 1997 through February 28, 1999 will be $75,000 plus benefits annually,
payable as an independent contractor. This agreement also included the grant of
an option to purchase 125,000 shares of stock at the closing price on the date
of this agreement ($1.0625). The agreement also includes that in the event the
stock options are repriced for any employee, the existing stock option grants
for Mr. Stein will be repriced at the same time as any repricing and under the
same terms and conditions.

     On May 29, 1997, Mr. Malikow signed an agreement with the Company accepting
the position of acting Co-CEO for up to 150 days. This agreement included five
months compensation at $5,000 per month plus expenses, and the grant of 100,000
warrants at the then current price ($.3125).

     The Non-Executive Directors will receive options under the Non- Executive
Director Stock Option Plan to purchase 25,000 shares of Common Stock upon
joining the Board and options to purchase 15,000 shares each year they serve on
the Board. The directors will be reimbursed for expenses incurred in order to
attend meetings of the Board of Directors and have waived receiving a meeting
fee.



                                       37
<PAGE>



SEVERANCE AGREEMENTS

     On March 15, 1997 Mr. Opper signed an agreement with the Company resigning
his position as Chief Executive Officer terminating the previous December 1,
1994 employment agreement including any and all oral agreements relating to his
employment. The agreement included payments for expense reimbursement, accrued
and unused vacation, medical, dental and life insurance and severance payments,
all unpaid amounts are accrued in the June 29, 1997 financials. In connection
with this agreement, Mr. Opper's employee stock options shall be immediately
vested and shall be amended to constitute non-qualified employee stock options
and the strike price is reduced to an exercise price of $2.00.

     On June 2, 1997 Mr. Markatos signed an agreement with the Company resigning
his position as Executive Vice President terminating the previous December 1,
1994 employment agreement including any and all oral agreements relating to his
employment. The agreement included payments for expense reimbursement, accrued
and unused vacation, medical, dental and life insurance and severance payments,
all unpaid amounts are accrued in the June 29, 1997 financials. In connection
with this agreement, Mr. Markatos' stock options are hereby replaced by a
warrant to purchase up to 200,000 shares of common stock exercisable at the
closing bid price on the date of this agreement ($.25).

     On July 25, 1997 Mr. Sederholt signed an agreement with the Company
resigning his position as President and terminating the previous December 1,
1994 employment agreement including any and all oral agreements relating to his
employment. The agreement included payments for expense reimbursement and the
continued use of a company leased vehicle, with the Company obligated to pay the
lease payment only, accrued and unused vacation, medical, dental and life
insurance and severance payments. In connection with this agreement, Mr.
Sederholt's stock options were replaced by a warrant to purchase up to 150,000
shares of common stock exercisable at the closing bid price on July 18, 1997
($.4375).

STOCK OPTION PLANS

     In December 1994, the Company adopted the 1994 Employees Stock Option Plan
(the "Plan"). The Plan provides for the grant of options to purchase up to
1,000,000 shares of the Company's Common Stock. Under the terms of the Plan,
options granted thereunder may be designated as options which qualify for
incentive stock option treatment ("ISOs") under Section 422A of the Code, or
options which do not so qualify ("Non-ISOs").

     The Plan is administered by the Board of Directors or by a Stock Option
Committee designated by the Board of Directors. The Board or the Stock Option
Committee has the discretion to determine the eligible employees to whom, and
the times and the price at which, options will be granted. Whether such options
shall be ISOs or Non-ISOs; the periods during which each option will be
exercisable; and the number of shares subject to each option, shall be
determined by the Board or Committee. The Board or



                                       38
<PAGE>



Committee shall have full authority to interpret the Plan and to establish and
amend rules and regulations relating thereto.

     Under the Plan, the exercise price of an option designated as an ISO shall
not be less than the fair market value of the Common Stock on the date the
option is granted. However, in the event an option designated as an ISO is
granted to a ten percent stockholder (as defined in the Plan) such exercise
price shall be at least 110% of such fair market value. Exercise prices of
Non-ISOs options may be less than such fair market value. The aggregate fair
market value of shares subject to options granted to a participant which are
designated as ISOs which become exercisable in any calendar year shall not
exceed $100,000. The "fair market value" will be the closing NASDAQ bid price,
or if the Company's Common Stock is not quoted by NASDAQ, as reported by the
National Quotation Bureau, Inc., or a market maker of the Company's Common
Stock, or if the Common Stock is not quoted by any of the above, by the Board of
Directors acting in good faith.

     The Board or the Stock Option Committee, as the case may be, may, in its
sole discretion, grant bonuses or authorize loans to or guarantee loans obtained
by an optionee to enable such optionee to pay any taxes that may arise in
connection with the exercise or cancellation of an option.

     Unless sooner terminated, the Plan will expire in November, 2004.

     The Plan is currently administered by the Board of Directors, although the
Board may designate a Stock Option Committee to administer the Plan, comprised
of three individuals at least two of whom shall be Directors.

     In December 1994, the Company adopted the Non-Executive Director Stock
Option Plan (the "Director Plan"). The Director Plan provides for issuance of a
maximum of 500,000 shares of the Company's Common Stock upon the exercise of
stock options granted under the Director Plan. Options are granted under the
Director Plan until December 2004 to (i) non-executive directors as defined and
(ii) members of any advisory board established by the Company who are not full
time employees of the Company or any of its subsidiaries. The Director Plan
provides that each non-executive director will automatically be granted an
option to purchase 25,000 shares upon joining the Board of Directors, and on
each December 1st thereafter each non-executive director will automatically be
granted an option to purchase 15,000 shares, provided such person has served as
a director for the 12 months immediately prior to such December 1st.

     The exercise price for options granted under the Director Plan shall be
100% of the fair market value of the Common Stock on the date of grant. The
"fair market value" will be the closing NASDAQ bid price, or if the Company's
Common Stock is not quoted by NASDAQ, as reported by the National Quotation
Bureau, Inc., or a market maker of the Company's Common Stock, or if the Common
Stock is not quoted by any of the above by the Board of Directors acting in good
faith. Until otherwise provided in the Stock Option Plan the exercise price of
options granted under the Director Plan must be paid at the time of exercise,
either in cash, by delivery of



                                       39
<PAGE>



shares of common Stock of the Company or by a combination of each. The term of
each option commences on the date it is granted and unless terminated sooner as
provided in the Director Plan, expires five years from the date of grant. The
Director Plan is administered by a committee of the Board of Directors composed
of not fewer than three persons who are officers of the Company (the
"Committee"). The Committee has no discretion to determine which non-executive
director or advisory board member will receive options or the number of shares
subject to the option, the term of the option or the exercisability of the
option. However, the Committee will make all determinations of the
interpretation of the Director Plan. Options granted under the Director Plan are
not qualified for incentive stock option treatment.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information, as October, 1997, with respect
to the Company's Common Stock owned by each person known to the Company to be
the beneficial owner of more than five percent (5%) of the Company's Common
Stock, each director and all officers and directors as a group.


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Name                              Position with Company       Amount and Nature     Percentage of Class
                                                              of Beneficial
                                                              Ownership(1)
-----------------------------------------------------------------------------------------------------------
<S>                               <C>                         <C>                   <C>  
William J. Opper                  Chairman of the Board       433,361 (2)           15.5%
The Rattlesnake Holding
Company, Inc.
3 Stamford Landing
Suite 130
Stamford, CT 06902
-----------------------------------------------------------------------------------------------------------
Stephan A. Stein                  Acting Co-Chief Executive   205,000 (3)           7.2%
The Rattlesnake Holding           Officer and Director
Company, Inc.
3 Stamford Landing
Suite 130
Stamford, CT 06902
-----------------------------------------------------------------------------------------------------------
David C. Sederholt                Stockholder                 294,158 (4)           10.5%
-----------------------------------------------------------------------------------------------------------
Peter C. Markatos                 Stockholder                 200,000 (5)           7.0%
-----------------------------------------------------------------------------------------------------------
Donald M. Zuckert                 Stockholder                 163,252 (6)           6.0%
-----------------------------------------------------------------------------------------------------------
Louis R. Malikow                  Secretary, Director and     191,517 (7)           6.8%
Louis R. Malikow Associates       Acting Co-Chief Executive
679 Plank Road                    Officer
-----------------------------------------------------------------------------------------------------------
Clifton Park, New York 12065
-----------------------------------------------------------------------------------------------------------
Roger Rankin                      Director                    203,434 (8)           7.3%
17561 S.E. Conch Bar Ave.
Tequesta, FL 33463
-----------------------------------------------------------------------------------------------------------
Guy B. Snowden                    Stockholder
4080 Ibis Point Circle                                        272,422 (9)           10.0%
Boca Raton, Fl 33431
-----------------------------------------------------------------------------------------------------------
All Officers and Directors as a                               1,690,722             49.8%
Group (7 persons)
-----------------------------------------------------------------------------------------------------------
</TABLE>



                                       40
<PAGE>




----------

(1)  Each person listed has sole voting and investment power over the shares
     listed as beneficially owned unless otherwise indicated.

(2)  Includes 150,000 vested options to purchase shares of Common Stock.

(3)  Includes options to purchase 40,000 shares of Common Stock. Does not
     include non-vested options to purchase 80,000 shares of Common Stock.

(4)  Includes warrants to purchase 150,000 shares of Common Stock.

(5)  Does not include 36,084 shares held by the mother of Mr. Markatos. Does
     include 200,000 warrants to purchase shares of Common Stock.

(6)  Includes options to purchase 55,000 shares of Common Stock.

(7)  Includes (i) options to purchase 55,000 shares; (ii) 100,000 shares
     issuable upon exercise of a warrant.

(8)  Includes (i) options to purchase 55,000 shares; (ii) 77,000 shares issuable
     upon exercise of a warrant, and 15,151 shares issuable upon conversion of a
     convertible Note, and 50,000 warrants issuable in conjunction with a bridge
     financing in September 1997.

(9)  Includes (i) 27,671 shares held in five trusts established for each of Mr.
     Snowden's children, (ii) 36,500 shares issuable upon exercise of a warrant,
     (iii) 50,000 warrants issued to Mr. Snowden's children July 1, 1996 and
     (iv)50,000 warrants issuable in conjunction with a bridge financing in
     September 1997.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In May 1992, William J. Opper, the Chairman of the Board and former CEO,
loaned the Company $100,000 on a five-year note at an interest rate of 9% per
annum. This note was subsequently paid in full in July



                                       41
<PAGE>



1995. Mr. Opper's brother privately purchased an aggregate of $95,000 principal
amount of 12% convertible promissory notes which were converted to common stock
and warrants to purchase 34,675 shares from Donald M. Zuckert. On July 16, 1997
the Company sold all of the assets of the Rattlesnake Southwestern Grill
restaurant located in White Plains, New York to a group of individuals of which
William J. Opper , the Company's Chairman was a member. Mr. Opper disclaims any
beneficial interest from this transaction. Mr. Opper disclaims any beneficial
interest in this transaction.

     In January 1994, David Sederholt, the Company's former President and Chief
Operating Officer, loaned the Company $22,300 on a note payable in two years at
an interest rate of 9% per annum. This note was subsequently paid in full in
August 1995. In June 1994, Mr. Sederholt's mother-in-law loaned the Company
$10,000 on a note payable on demand at an interest rate of 12% per annum. This
note was subsequently paid in full in August 1995.

     In June 1994, in connection with the acquisition of the Yorktown Heights
facility, the Company purchased all of the shares of PEN-Z Corp. Inc. from Penny
Markatos, the mother of Peter Markatos, the Company's former Executive
Vice-President, for a $300,000 note payable monthly through May 2009 at an
interest rate of prime plus 1% and Mrs. Markatos received 36,084 shares of
Common Stock and a trust of which Mrs. Markatos is Trustee, sold the furniture
and equipment in the Yorktown Heights location to the Company for $100,000
payable on a note due monthly through April 2009 at an interest rate of prime
plus 1%. The Yorktown Heights facility was sold on June 27, 1997 and the Company
was relieved of these related notes. Peter Markatos disclaimed any beneficial
interest of any transaction involving his mother.

     On May 29, 1997, Louis R. Malikow, Secretary and a Director of the Company
agreed to act as Co-CEO for a period not to exceed 150 days. Mr. Malikow will be
paid $5,000 per month plus expenses incurred while acting on the Company's
behalf in this capacity. In addition, Mr. Malikow has been granted warrants to
purchase 100,000 shares of the Company stock at $.3125, the mean price of the
stock on May 29, 1997. 50,000 of the warrants vested May 29, 1997 with the
remaining 50,000 vesting on November 29, 1997.

     In September 1997 Roger Rankin, a Director of the Company, loaned the
Company $50,000 as part of a bridge financing at 10% interest per annum and with
a due date of the earlier of the closing of the proposed private placement or
December 31, 1997.

     Guy Snowden, a principal stockholder of the Company, loaned the Company
$52,500 pursuant to a demand note at 15% interest per annum. This note was
subsequently paid in full August 1995. Mr. Snowden in December 1994 purchased
$100,000 principal amount of 12% convertible promissory notes, convertible at
$4.00 per share, and warrants to purchase 36,500 shares of the Company's common
stock at an exercise price of $4.50. The note was converted into 25,000 shares
of Rattlesnake Common stock. In



                                       42
<PAGE>



August 1996, Mr. Snowden loaned the Company $425,000 to finance the purchase of
the Fairfield location. This First Mortgage note is at 15% and is due January
1997. As additional consideration Mr. Snowden received 50,000 warrants at the
market price at the date of grant. In September 1997, Mr. Snowden loaned the
Company $50,000 as part of a bridge financing at 10% interest per annum and with
a due date of the earlier of the closing of the proposed private placement or
December 31, 1997.

     Stephen A. Stein, the Company's acting Co-CEO and director and former
Vice-Chairman, has provided, and expects to continue to provide, investment
banking services for Commonwealth Associates. The Company has engaged, and in
the future may continue to engage, Commonwealth Associates to provide advisory
and/or financing activities. Mr. Stein disclaims any beneficial interest in any
transaction or activity involving the Company and Commonwealth Associates.

     Except as provided herein, the Company has not entered into any material
transactions or series of similar transactions with any director, executive
officer or any security holder owning 5% or more of the Company's Common Stock.

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Financial Statement Schedules

     None

(b)  Reports on Form 8-K

     During the quarter ended June 29, 1997 the Company filed no reports on Form
8-K.

(c)  Exhibits

     The following exhibits, designated by an asterisk (*), have been previously
filed with the Commission with the Company's registration on Form SB-2 (File No.
33-88486) and those designated with two asterisks have been filed with the
Company's 10KSB for the year ended June 30, 1995, and those with three asterisks
(***) have been filed with the Company's 10KSB for the year ended June 30, 1996,
and, pursuant to 17 C.F.R. Section 230.411, are incorporated by reference. Those
not so designated are filed herewith. The following exhibits, designated by a
dagger (+), will be filed by Amendment.

Exhibit No.            Description

2.1*                   Merger Agreement dated August 31, 1993 by and between
                       Rattlesnake Ventures, Inc. and the Registrant

3.1*                   Form of Restated Certificate of Incorporation of the
                       Registrant



                                       43
<PAGE>



3.1.1***               Designation of Preferred Stock

3.2*                   By-Laws

4.1*                   Form of Common Stock Certificate

4.2*                   Form of Warrant to be issued to the Underwriter

4.3*                   Form of Warrant issued to certain individuals in December
                       1994

10.1*                  Lease agreement dated May 12, 1992 between the Registrant
                       and South Norwalk Redevelopment Limited Partnership for
                       the South Norwalk facilities

10.1.1*                Agreement between Breakaway Sono Inc. and the Registrant
                       for the purchase of certain equipment

10.1.2*                Note dated June 11, 1992 from the Registrant to Breakaway
                       Sono, Inc.

10.2*                  Lease Agreement dated April 1, 1994 between Sivad Inc.
                       and the Registrant for the Fairfield facilities

10.2.1*                Purchase Money Leasehold Mortgage between the Registrant
                       and Sivad Inc.

10.3*                  Common Stock Purchase Agreement between the Registrant
                       and Penny Markatos dated November 1, 1993

10.3.1*                Lease Agreement between Penny Markatos and PEN-Z Corp.
                       dated April 1, 1994

10.4*                  Lease Agreement dated March 15, 1993 between the
                       Registrant and Elm City Manufacturing Jewelers Inc. for
                       the Hamden facilities

10.4.1*                Sale Agreement dated August 31, 1993 between the
                       Registrant and Hamden Entertainment Inc.

10.4.2*                Amendment of Promissory Note Agreement dated February 28,
                       1994

10.4.3*                Amendment to Commitment Agreement dated October 31, 1994
                       between the Registrant and Hamden Entertainment Inc.

10.4.4*                Amendment to Promissory Note dated April, 1995

10.5*                  Lease Agreement dated January 24, 1995 for Danbury
                       facility



                                       44
<PAGE>



10.6*                  License Agreement with RC Holdings, Inc. dated April,
                       1995

10.7*                  Form of Employment agreement with William J. Opper dated
                       December 1994

10.8*                  Form of Employment agreement with David Sederholt dated
                       December 1994

10.9*                  Form of Employment Agreement with Peter Markatos dated
                       December 1994

10.10*                 1994 Employee Stock Option Plan

10.11*                 1994 Nonexecutive Directors Stock Option Plan

10.12*                 Form of 12% Convertible Note

10.12.1*               Form of Extension Agreement between the Company and the
                       holders of the 12% Convertible Notes

10.13*                 Form of Warrant issued to holders of 12% Convertible Note

10.14*                 Note dated May 8, 1992 from the Registrant to William J.
                       Opper

10.15*                 Agreement with Berkeley Securities Corporation providing
                       for the cancellation of certain shares

10.16*                 Proposed Debt Restructure

10.16.1*               Series A Note

10.16.2*               Series B Note

10.17*                 Agreement with 1241 Mamaroneck Avenue Corp.

10.17.1*               Form of Proposed Lease for 1241 Mamaroneck Avenue

10.17.2*               Note Extension Agreement

10.18*                 Form of Consulting Agreement to be entered into with
                       Auerbach, Pollak & Richardson, Inc.

10.19*                 Letter of intent with Steve Kalafer for the Flemington
                       facility

10.20*                 Form of 12% Convertible Promissory Note

10.21**                Lease Agreement dated September 12, 1995 with SBX
                       investments, Inc.



                                       45
<PAGE>



10.21.1**              Asset Purchase Agreement dated September 12, 1995 with
                       Twinlittle, Inc. and Twinlittle II, Inc.

10.21.2**              $100,000 principal amount of promissory note to SBX
                       Investments, Inc.

10.22***               Employment Agreement with Stephen A. Stein

10.23***               Lease Agreement with Jack Cioffi Trust ULWT dated April
                       15, 1996 together with Exhibits

10.24***               Form of Series C Note

10.25***               Note Agreement with Guy B. Snowden

10.26***               Option and Escrow Agreement dated August 1996 between CFT
                       Restaurant, Land and Building Group, Rattlesnake of
                       Milford, Inc. et al., together with Asset Sale/Purchase
                       Agreement and related Exhibits thereto

10.27***               First Amendment and Restated Lease between Land and
                       Building Group and Rattlesnake of Milford, Inc.

10.28***               Form of Consulting Agreement among Frank Tummunello,
                       Charter Tummunello, Thomas Dunn and Rattlesnake of
                       Milford, Inc.

10.29***               Agreement of Sale dated August 6, 1996 between Kings
                       Castle Caterers Inc. and Rattlesnake of Bay Ridge, Inc.
                       and certain exhibits

10.30***               Assignment and Assumption Agreement dated August 23, 1994
                       between Holy Cow Restaurant Associates, Inc. and
                       Rattlesnake of 86th Street, Inc.

11.1+                  Securities Purchase Agreement and Warrant between David
                       and Janet Coyle and Rattlesnake Holding Company, Inc.

11.2+                  Commonwealth Underwriting Agreement

11.3+                  Convertible Subordinated Secured 18% Promissory Note
                       dated March 4, 1997, in favor of J.L.B. of Nevada, Inc.

11.4+                  Convertible Subordinated Secured 18% Promissory Note
                       dated March 4, 1997, in favor of Michael Lauer.

11.5+                  Agreement of Sale dated July 16, 1997 between Cattleman
                       Associates LLC and Rattlesnake White Plains, Inc. and
                       certain exhibits.



                                       46
<PAGE>



11.6+                  Agreement of Sale dated May 29, 1997 between Cobra
                       Restaurants Inc. and Rattlesnake of 86th Street, Inc. and
                       certain exhibits

11.7+                  Agreement of Sale dated June 27, 1997 between Anika
                       Restaurant, Inc. and Penn Z. Corp., a wholly owned
                       subsidiary of Rattlesnake Holding Company, and certain
                       exhibits

11.8+                  Reorganization and Stock Exchange Agreement among The
                       Rattlesnake Holding Company, Inc. and Ottomanelli
                       Brothers west, Ltd., Ottomanelli's Cafe Franchising
                       Corp., 34th St. Cafe Associates Inc., Garden state Cafe
                       Corp.

11.9+                  Revised Employment Agreement with Stephen A. Stein

11.10+                 Employment Agreement with Louis R. Malikow

11.11+                 William J. Opper Severance Agreement

11.12+                 David C. Sederholt Severance Agreement

11.13+                 Peter C. Markatos Severance Agreement

11.14+                 Subscription Agreement, Warrant and Promissory Note
                       between JT Partners and Rattlesnake Holding Company, Inc.

11.15+                 Subscription Agreement, Warrant and Promissory Note
                       between Don Winton and Rattlesnake Holding Company, Inc.

11.16+                 Subscription Agreement, Warrant and Promissory Note
                       between Roger Rankin and Rattlesnake Holding Company,
                       Inc.

11.17+                 Subscription Agreement between Guy B. Snowden and
                       Rattlesnake Holding Company, Inc.

11.18+                 Series C Noteholder Extension Agreement between Joseph
                       Mandarino and Rattlesnake Holding Company, Inc.

11.19+                 Series C Noteholder Extension Agreement between Dr.
                       George Jordan and Rattlesnake Holding Company, Inc.

11.20+                 Series C Noteholder Extension Agreement between Fred
                       Meyers and Rattlesnake Holding Company, Inc.

11.21+                 The Ottomanelli Group combined Financial Statements
                       December 31, 1996 and 1995 (With Independent Auditors'
                       Report Thereon)

22***                  Subsidiary List



                                       47
<PAGE>



                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                         THE RATTLESNAKE HOLDING COMPANY, INC.


                         By:/S William J. Opper
                            -----------------------------
                                William J. Opper
                                Chairman of the Board


Dated:   October 31, 1997

     Pursuant to the requirements of the Securities Act of 1933, this Report has
been signed below by the following persons in the capacities and on the dates
indicated:

    Signature                    Capacity                            Date
                                
/S William J. Opper        Chairman of the Board              October 31, 1997
--------------------
William J. Opper


/S Louis R. Malikow        Secretary and Director             October 31, 1997
--------------------       Co-Chief Executive Officer
Louis R. Malikow           (Acting) Principal 
                           Accounting Officer (Acting)



/S Stephan A. Stein        Director                           October 31, 1997
--------------------       Co-Chief Executive Officer
Stephan A. Stein           (Acting)



/S Roger Rankin            Director                           October 31, 1997
--------------------
Roger Rankin



                                       48
<PAGE>












                             THE RATTLESNAKE HOLDING
                         COMPANY, INC. AND SUBSIDIARIES

                        Consolidated Financial Statements

                      June 29, 1997, June 30, 1996 and 1995

                   (With Independent Auditors' Report Thereon)














<PAGE>




                          Independent Auditors' Report


The Board of Directors and Stockholders 
The Rattlesnake Holding Company, Inc.


We have audited the accompanying  consolidated balance sheets of The Rattlesnake
Holding Company, Inc. and subsidiaries as of June 29, 1997 and June 30, 1996 and
the related consolidated statements of operations, stockholders' equity and cash
flows  for the  years  ended  June 29,  1997,  June 30,  1996  and  1995.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of The  Rattlesnake
Holding  Company,  Inc. and  subsidiaries as of June 29, 1997 and June 30, 1996,
and the  results of their  operations  and their cash flows for the years  ended
June 29, 1997,  June 30, 1996 and 1995 in  conformity  with  generally  accepted
accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 2 to the
consolidated  financial  statements,  the Company has suffered  recurring losses
from operations that raise  substantial doubt about its ability to continue as a
going  concern.  Additionally,  a  $425,000  note  payable  associated  with the
acquisition  of a  restaurant  matured on January 2, 1997,  $303,749 of Series C
subordinated notes payable matured on August 6, 1997 and $500,000 of convertible
subordinated  notes payable  matured on September 4, 1997, all of which were not
satisfied.  Approximately  $62,500 of Series C  noteholders  have  extended  the
repayment  date to December 15, 1997.  All of the remaining  obligations  are in
default.  Management of the Company is continuing the implementation of its cost
reduction  plan,  which included the closing  and/or sale of several  restaurant
locations.  On August 21,  1997,  pursuant  to a letter of intent  dated May 30,
1997, the Company  executed a Reorganization  and Stock Exchange  Agreement with
The Ottomanelli Group to merge the two restaurant companies as described in


<PAGE>


                                        2


note 16. Additionally,  on June 2, 1997, the Company executed a letter of intent
with an investment  banking firm for a proposed  $2,000,000 private placement of
convertible  preferred  stock on a "best efforts"  basis. In September 1997, the
Company  completed a $250,000 bridge financing of 10% notes payable which mature
on December 31,  1997.  Management's  plans in regard to these  matters are also
described in note 2. The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.




                                        KPMG PEAT MARWICK LLP


                                        October 17, 1997
                                        Jericho, New York



<PAGE>




             THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                         June 29, 1997 and June 30, 1996

<TABLE>
<CAPTION>
                                     Assets                                        1997            1996
                                     ------                                    ------------    ------------
<S>                                                                            <C>                  <C>    
Current assets:
     Cash                                                                      $     68,022         684,414
     Cash in escrow                                                                    --         1,237,625
     Accounts receivable                                                             13,287          63,659
     Inventory                                                                       42,119         111,312
     Pre-opening costs                                                                 --           107,289
     Prepaid expenses and other current assets                                       23,272         140,490
     Assets held for sale                                                           679,544            --
                                                                               ------------    ------------
                  Total current assets                                              826,244       2,344,789

Property and equipment, net                                                       1,007,092       2,374,848
Intangible assets, net                                                              299,102       1,534,227
Other assets                                                                        129,457         246,288
                                                                               ------------    ------------

                                                                               $  2,261,895       6,500,152
                                                                               ============    ============

                      Liabilities and Stockholders' Equity
                      ------------------------------------

Current liabilities:
     Current maturities of notes payable                                            835,335         576,852
     Accounts payable                                                               280,528         574,889
     Liabilities related to assets held for sale                                  1,133,257            --
     Accrued expenses                                                               357,407         488,204
     Dividends payable                                                              103,818            --
     Other current liabilities                                                      218,220         283,234
                                                                               ------------    ------------
                  Total current liabilities                                       2,928,565       1,923,179

Notes payable, net of current maturities                                            545,006       1,255,723
                                                                               ------------    ------------

                  Total liabilities                                               3,473,571       3,178,902
                                                                               ------------    ------------

Stockholders' equity:
     Preferred stock, Series A, $.10 par value, 5,000,000 shares authorized,
        56,500 and 54,500 issued and outstanding at
        June 29, 1997 and June 30, 1996, respectively                                 5,650           5,450
     Common stock, $.001 par value - 20,000,000 shares authorized,
        2,650,227 and 2,643,734 issued and outstanding, at
        June 29, 1997 and June 30, 1996, respectively                                 2,651           2,644
     Additional paid-in capital                                                  11,072,857      10,704,315
     Accrued dividends                                                             (103,818)           --
     Accumulated deficit                                                        (12,189,016)     (7,391,159)
                                                                               ------------    ------------

                                                                                 (1,211,676)      3,321,250
                                                                               ------------    ------------
                                                                               $  2,261,895       6,500,152
                                                                               ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                       F-4


<PAGE>





             THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                      Consolidated Statements of Operations

                Years ended June 29, 1997, June 30, 1996 and 1995


<TABLE>
<CAPTION>
                                                    Year ended      Year ended       Year ended
                                                     June 29,        June 30,         June 30,
                                                       1997            1996            1995
                                                   ------------    ------------    ------------
<S>                                                <C>                <C>             <C>      
Restaurant sales                                   $  8,265,474       8,755,565       5,340,657
Less:  promotional sales                                413,524         512,756         362,589
                                                   ------------    ------------    ------------

             Net restaurant sales                     7,851,950       8,242,809       4,978,068

Costs and expenses:
     Cost of food and beverage sales                  2,443,860       2,565,905       1,610,680
     Restaurant salaries and fringe benefits          2,792,622       3,109,435       1,804,129
     Occupancy and related expenses                   2,025,198       2,118,444       1,306,469
     Depreciation and amortization expense              726,526         608,260         388,695
                                                   ------------    ------------    ------------

             Total restaurant costs and expenses      7,988,206       8,402,044       5,109,973

Selling, general and administrative                   2,715,293       2,810,433       1,332,237
Amortization of debt issuance costs                        --              --         1,027,751
Loss on closure of restaurant sites                   1,731,842         192,311            --
Interest expense                                        172,886         108,536         264,279
Miscellaneous expenses                                   41,580          12,350           2,199
                                                   ------------    ------------    ------------

             Total expenses                          12,649,807      11,525,674       7,736,439
                                                   ------------    ------------    ------------

             Net loss before extraordinary
                  item                               (4,797,857)     (3,282,865)     (2,758,371)

Extraordinary item:
     Gain on early extinguishment of debt                  --            89,710            --
                                                   ------------    ------------    ------------

             Net loss                              $ (4,797,857)     (3,193,155)     (2,758,371)
                                                   ============    ============    ============

Per share:
     Loss before extraordinary item                       (1.81)          (1.26)          (2.46)
     Extraordinary item                                    --               .03            --
                                                   ------------    ------------    ------------

             Net loss                              $      (1.81)          (1.23)          (2.46)
                                                   ============    ============    ============

Weighted average number of common
     and common equivalent shares
     outstanding                                      2,645,335       2,605,808       1,122,678
                                                   ============    ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                       F-5
                          


<PAGE>



             THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                Years ended June 29, 1997, June 30, 1996 and 1995



<TABLE>
<CAPTION>
                                                                                   Addi-        
                                                                                   tional       
                                        Common        Preferred       Common       paid-in      
                                        shares          stock         stock        capital      
                                       -----------   -----------   -----------   -----------

<S>                                      <C>        <C>                 <C>       <C>      
Balance, June 30, 1994                     905,493   $      --             905     1,866,246

Issuance of stock in connection
     with refinancing of debt               10,000          --              10        54,990
Net proceeds received from Initial
     Public Offering                     1,495,000          --           1,495     6,576,839
Net proceeds received from issuance
     of common stock in connection
     with private placement                 20,570          --              21       253,452
Conversion of debt to equity               127,500          --             128       509,872
Issuance of warrants in connection
     with private placement of debt           --            --            --          18,250
Net loss                                      --            --            --            --   
                                       -----------   -----------   -----------   -----------

Balance, June 30, 1995                   2,558,563          --           2,559     9,279,649

Additional costs from Initial Public
     Offering                                 --            --            --         (43,239)
Issuance of common stock for
     services performed                      2,671          --               3        14,355
Net proceeds received from issuance
     of preferred stock                       --           5,450          --       1,123,632
Conversion of debt to equity                82,500          --              82       329,918
Net loss                                      --            --            --            --   
                                       -----------   -----------   -----------   -----------

Balance, June 30, 1996                   2,643,734         5,450         2,644    10,704,315

Net proceeds received from issuance
     of preferred stock                       --             200          --          49,800
Conversion of debt to equity                 6,493          --               7        24,992
Accrued dividends                             --            --            --            --   
Issuance of warrants for services
     performed                                --            --            --         293,750
Net loss                                      --            --            --            --   
                                       -----------   -----------   -----------   -----------

Balance, June 29, 1997                   2,650,227   $     5,650         2,651    11,072,857
                                       ===========   ===========   ===========   ===========

<CAPTION>
                                                                        Total  
                                                        Accum-          stock- 
                                         Accrued        ulated         holders'
                                        dividends       deficit         equity 
                                       -----------    -----------    -----------
<S>                                       <C>         <C>             <C>        
Balance, June 30, 1994                        --       (1,439,633)       427,518

Issuance of stock in connection
     with refinancing of debt                 --             --           55,000
Net proceeds received from Initial
     Public Offering                          --             --        6,578,334
Net proceeds received from issuance
     of common stock in connection
     with private placement                   --             --          253,473
Conversion of debt to equity                  --             --          510,000
Issuance of warrants in connection
     with private placement of debt           --             --           18,250
Net loss                                      --       (2,758,371)    (2,758,371)
                                       -----------    -----------    -----------

Balance, June 30, 1995                        --       (4,198,004)     5,084,204

Additional costs from Initial Public
     Offering                                 --             --          (43,239)
Issuance of common stock for
     services performed                       --             --           14,358
Net proceeds received from issuance
     of preferred stock                       --             --        1,129,082
Conversion of debt to equity                  --             --          330,000
Net loss                                      --       (3,193,155)    (3,193,155)
                                       -----------    -----------    -----------

Balance, June 30, 1996                        --       (7,391,159)     3,321,250

Net proceeds received from issuance
     of preferred stock                       --             --           50,000
Conversion of debt to equity                  --             --           24,999
Accrued dividends                         (103,818)          --         (103,818)
Issuance of warrants for services
     performed                                --             --          293,750
Net loss                                               (4,797,857)    (4,797,857)
                                       -----------    -----------    -----------

Balance, June 29, 1997                    (103,818)   (12,189,016)    (1,211,676)
                                       ===========    ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-6
<PAGE>



             THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                Years ended June 29, 1997, June 30, 1996 and 1995

<TABLE>
<CAPTION>
                                                                                    Year ended        Year ended        Year ended
                                                                                     June 29,          June 30,          June 30,
                                                                                       1997              1996              1995
                                                                                    -----------       -----------       -----------
<S>                                                                                 <C>                <C>               <C>        
Cash flows from operating activities:
     Net loss                                                                       $(4,797,857)       (3,193,155)       (2,758,371)
     Adjustments to reconcile net loss to net cash provided by
        operating activities:
           Depreciation and amortization                                                797,092           651,597         1,420,314
           Loss from fixed asset disposals                                               26,989              --                --
           Gain on early extinguishment of debt                                            --             (89,710)             --
           Loss on closure of restaurant sites                                        1,850,043           190,965              --
           Valuation warrants issued for services                                       293,750              --                --
           Issuance of stock in connection with debt restructuring                         --              30,000            55,000
           Stock issued for services provided                                              --              14,358              --
           Changes in assets and liabilities, net of acquisition:
               Decrease (increase) in accounts receivable                                50,308           (36,521)          (10,712)
               Decrease (increase) in inventory                                          27,356           (25,013)          (17,897)
               Decrease (increase) in prepaid expenses and other assets                 119,016          (206,384)          (31,445)
               Increase in pre-opening costs                                               --            (169,138)          (21,697)
               (Decrease) increase in accounts payable and
                  accrued expenses                                                     (177,779)         (334,691)        1,178,214
               Increase (decrease) in other current liabilities                         157,016           (34,609)          100,718
                                                                                    -----------       -----------       -----------

                  Net cash used in operating activities                              (1,654,066)       (3,202,301)          (85,876)
                                                                                    -----------       -----------       -----------

Cash flows from investing activities:
     Capital expenditures                                                              (269,237)       (1,769,272)         (314,242)
     Payments for acquisitions of leaseholds and lease costs                           (208,627)         (155,924)         (150,448)
     Purchase of liquor license                                                            --            (150,000)             --
                                                                                    -----------       -----------       -----------

                  Net cash used in investing activities                                (477,864)       (2,075,196)         (464,690)
                                                                                    -----------       -----------       -----------

Cash flows from financing activities:
     Proceeds from IPO                                                                     --           7,260,800              --
     Proceeds from issuance of convertible notes                                        500,000              --             510,000
     Net proceeds from private placement                                                   --                --             383,263
     Net proceeds from cost of issuance of preferred stock                            1,287,625          (108,543)             --
     Proceeds from borrowings                                                              --             100,000           484,250
     Principal repayment of borrowings                                                 (272,087)       (1,275,423)         (141,567)
     IPO costs                                                                             --             (43,239)         (682,466)
                                                                                    -----------       -----------       -----------

                  Net cash provided by financing activities                           1,515,538         5,933,595           553,480
                                                                                    -----------       -----------       -----------

Net (decrease) increase in cash                                                        (616,392)          656,098             2,914

Cash, beginning of period                                                               684,414            28,316            25,402
                                                                                    -----------       -----------       -----------

Cash, end of period                                                                 $     8,022           684,414            28,316
                                                                                    ===========       ===========       ===========

Cash paid during the period for:
     Interest                                                                       $   100,871           221,825            57,686
                                                                                    ===========       ===========       ===========

     Income taxes                                                                   $    31,963            17,015             2,199
                                                                                    ===========       ===========       ===========
</TABLE>



See accompanying notes to consolidated financial statements.

                                      F-7

<PAGE>



             THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                      June 29, 1997, June 30, 1996 and 1995



(1)  Organization and Description of Business

     (a) Description of Business

     As  of  June  29,  1997,  the   Rattlesnake   Holding  Company,   Inc.  and
          subsidiaries (collectively, the Company), operated four restaurants in
          Lynbrook,  New York;  South  Norwalk,  and  Danbury,  Connecticut  and
          Flemington,  New Jersey. The Company closed four of its restaurants as
          follows: Hamden,  Connecticut in January 1996, Fairfield,  Connecticut
          in January  1997,  White  Plains,  New York in March 1997 and Yorktown
          Heights,  New York in June 1997 and had determined that it would close
          the Lynbrook, New York site. On September 17, 1997, the Company closed
          the Lynbrook,  New York restaurant.  The Company acquired a restaurant
          facility in August 1996 which the Company did not open for operations.
          This  facility  was sold in May 1997  (note  4).  Company  restaurants
          feature casual dining utilizing a southwestern theme.

     (b)  Organization

     In  December   1994,   an  amendment  to  the  Company's   Certificate   of
          Incorporation  was  approved  and  adopted  to (i)  effect a  1:2.8077
          reverse split of the Company's  common stock (ii) change the par value
          of the  Company's  common  stock  from $.01 to $.001  per share  (iii)
          increase the  authorized  capital  stock of the Company to  20,000,000
          shares of $.001 par value common stock and  5,000,000  shares of $0.10
          par value preferred  stock,  and (iv) change the Company's fiscal year
          end from  December  31st to June 30th.  In March 1995,  an  additional
          reverse common stock split of 1:2 was approved by the Company's  Board
          of  Directors.   All  references  in  the  accompanying   consolidated
          financial statements and notes thereto relating to share and per share
          data have been adjusted retroactively to reflect the stock splits.

     On  June 29, 1995,  the Company  completed an initial public offering (IPO)
          of 1,300,000 shares of its common stock and 195,000  additional shares
          pursuant  to  the  exercise  of  the  over-allotment   option  by  the
          underwriter  at $5.50 per share.  The net  proceeds  of the  offering,
          after  deducting  underwriters'  commissions  and fees of $986,700 and
          offering costs of $700,705,  were  $6,535,095.  The proceeds from this
          offering  were  to  be  used  for  working   capital,   marketing  and
          advertising,  the  implementation of the Company's  expansion strategy
          and to repay subordinated  debt. The underwriter  received warrants to
          purchase  130,000  shares  of  common  stock at a price of 120% of the
          offering  price for a term of four years  commencing  from the date of
          the offering. Upon the closing of the offering, the Company executed a
          one year consulting agreement, as amended, under which the underwriter
          received $30,000 for providing financial advisory and other consulting
          services.

(2)  Summary of Significant Accounting Policies

     (a)  Basis of Presentation

     The consolidated  financial statements include  the accounts of the Company
          and  its  wholly-owned   subsidiaries.   The  consolidated   financial
          statements  have been  presented  on a  historical  cost basis for the
          consolidated statements of operations.  All significant  inter-company
          balances and transactions have been eliminated in consolidation.


                                                                     (Continued)


                                       F-8


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     The accompanying  consolidated financial statements have been prepared on a
          going concern basis which  contemplates  the realization of assets and
          the  satisfaction  of liabilities and commitments in the normal course
          of  business.  However,  due  to  the  matters  discussed  below,  its
          continuation as a going concern can not be reasonably assured.

     The Company  has incurred  aggregate losses since inception of $12,189,016,
          inclusive  of a net loss in  fiscal  1997 of  $4,797,857.  Based  upon
          interim financial information prepared by management,  the Company has
          continued to incur losses in fiscal  1998.  Additionally,  $303,749 of
          Series C  subordinated  notes  payable  matured on August 6, 1997,  of
          which  noteholders with principal  balances  aggregating  $62,499 have
          extended the repayment date to December 15, 1997,  (note 9),  $500,000
          convertible subordinated notes payable matured September 4, 1997 (note
          9) and a $425,000 note payable  associated  with the  acquisition of a
          restaurant  matured on January 2, 1997 (note 8), all of which were not
          satisfied by the Company and are in default.

     Management of the  Company is  continuing  the  implementation  of its cost
          reduction plan, which addresses the restaurant  operating losses. Such
          plan  included the closing and sale of the Yorktown  Heights and White
          Plains,  New York locations,  as well as the sale of its New York City
          property.  The Company has closed its Fairfield,  Connecticut location
          and is holding this property for sale. In September  1997, the Company
          has closed its Lynbrook,  New York  location.  The Company has reduced
          its work force and is  implementing  other cost  containment  measures
          designed to reduce operating expenses and improve restaurant operating
          performance. The sales of the above mentioned locations were completed
          in the fourth  quarter of fiscal year 1997 and first quarter of fiscal
          year 1998; therefore the Company anticipates recognizing the impact of
          these  reductions in the first and second  quarters of fiscal 1998. On
          August 21,  1997,  pursuant to a letter of intent  dated May 30, 1997,
          the Company  executed a  Reorganization  and Stock Exchange  Agreement
          with The  Ottomanelli  Group to merge the two restaurant  companies as
          described  in note 16.  Additionally,  on June 2,  1997,  the  Company
          executed  a letter of intent  with an  investment  banking  firm for a
          proposed  $2,000,000 private placement of convertible  preferred stock
          on a "best efforts" basis. In September 1997, the Company  completed a
          $250,000  bridge  financing  of 10%  notes  payable  which  mature  on
          December 31, 1997. The Company is also negotiating with an investor to
          refinance the $500,000 convertible notes payable. The Company plans to
          satisfy the $425,000  short term note payable from the proceeds of the
          sale  of  the  building  and  assets  at  the  Fairfield,  Connecticut
          facility.  The Company  may need  additional  capital to further  fund
          operations  and repay  liabilities  until the Company's  plan is fully
          implemented.

     Management believes that the  implementation  of its cost  reduction  plan,
          finalization of the proposed merger with The  Ottomanelli  Group,  and
          proposed  $2,000,000  private  placement  will  enable the  Company to
          achieve  profitable  operations  and restore  liquidity.  However,  no
          assurance can be made regarding the  achievement of the goals outlined
          in the  strategic  plan  as  outlined  above,  or if  such  plans  are
          achieved, that the Company's operations will be profitable.

     (b)  Reporting Periods

     On April 2, 1996,  the Board of  Directors  approved  a  change,  effective
          July 1, 1996, in the  Company's  accounting  reporting  period to a 52
          week  cycle  ending  on the last  Sunday  in  June.  This  change  was
          implemented to establish consistency between the Company's operational
          and accounting reporting periods.


                                                                     (Continued)


                                       F-9


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     (c)  Cash in Escrow

     On June  30,  1996,  the  Company  completed   a  private   placement  of a
          $1,362,500  unit  offering,  consisting  of  54,500  shares  of 7-1/2%
          preferred  stock and 218,000 common stock purchase  warrants (note 9).
          The proceeds of the offering, net of underwriters commissions and fees
          were  $1,212,625.  On June 30, 1996,  these net proceeds and a $25,000
          deposit  previously paid by the Company were held in an escrow account
          by the underwriter on behalf of the Company.  The Company subsequently
          received the proceeds in the first quarter of fiscal 1997.

     (d)  Accounts Receivable

     Accounts  receivable  consist  principally  of bank  credit  card  accounts
          receivable.

     (e)  Inventories

     Inventories consist primarily of restaurant food items and supplies and are
          stated at the lower of cost or market value.  Cost is determined using
          the first-in, first-out method.

     (f)  Pre-Opening Costs

     Certain costs  relating to hiring and  training of  employees  prior to the
          opening of new restaurants are capitalized and amortized over a twelve
          month period commencing upon restaurant opening. At June 30, 1996 such
          costs amounted to $107,289.

     (g)  Net Assets Held for Sale

     Pursuant to a restaurant lease agreement,  the Company exercised its option
          to purchase the facility for $425,000.  This  transaction was financed
          by a shareholder  through a 15%  short-term  note payable (note 8). In
          addition,  the investor  received 50,000 warrants at an exercise price
          equal to the  market  price at the date of the grant.  The  restaurant
          facility at this location was closed on January 4, 1997.  The building
          is currently  being held for sale and is  classified  on the financial
          statements as net asset held for sale,  net of an additional  $100,000
          writedown (note 4).

     At June  29, 1997,  the Company  recorded  $679,544 of  net assets held for
          sale.  This balance  represents  $335,986 of assets which were sold on
          July 16, 1997, $25,000 of assets from a restaurant  facility which was
          closed  September  17,  1997 and  $318,558  relating  to a building as
          discussed above.

     (h)  Property and Equipment

     Property and  equipment  is  stated  at cost.  Depreciation  is  calculated
          primarily on the  straight-line  basis over the estimated useful lives
          of the assets.  Leasehold  improvements are amortized over the shorter
          of the estimated  useful life or the lease term of the related  asset.
          The estimated useful lives are as follows:

               Artifacts                               3 years
               Original small wares                    3 years
               Furniture and fixtures                  5 years
               Restaurant and office equipment         7 years
               Leasehold improvements               3-15 years
               Building                               40 years

                                                                     (Continued)


                                      F-10


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     (i)  Intangible Assets

     Intangible  assets   consist   principally   of  costs  to  acquire  leased
          facilities.  These  costs are  amortized  over the life of the related
          lease, generally 3 to 15 years.  Accumulated  amortization at June 29,
          1997 and  June  30,  1996 was  $107,950  and  $401,114,  respectively.
          Amortization expense was $201,377, $227,847 and $150,480 for the years
          ended June 29, 1997, June 30, 1996 and June 30, 1995, respectively. In
          connection with the closing of the Fairfield,  White Plains,  Yorktown
          Heights,  Lynbrook and 86th Street  locations,  the Company  wrote off
          approximately  $1,239,000 in leasehold costs,  organization costs, and
          lease costs,  net of  accumulated  amortization  of $494,541 in fiscal
          1997.  In  connection  with the  closing of the Hamden  location,  the
          Company wrote off  approximately  $65,000 in leasehold  costs,  net of
          accumulated amortization of $21,672 in fiscal 1996.

     (j)  Other Assets

     The Company   utilizes  an  outside  service  to  provide   financing   and
          promotional  activities.  The costs  relating to these  activities are
          capitalized  and are being  amortized over the repayment  period.  The
          Company  also   capitalized   deferred  costs  relating  to  potential
          Rattlesnake locations under negotiation.

     (k)  Financial Instruments

     Management of the  Company  believes  that the book  value of its  monetary
          assets and liabilities, exclusive of long-term debt, approximates fair
          value  as a  result  of the  short-term  nature  of  such  assets  and
          liabilities. Management further believes that the fair market value of
          long-term debt does not differ materially from carrying value.

     (l)  Reclassification

     Certain  reclassifications  of prior  period  balances  have  been  made to
          conform with the fiscal 1997 presentation.

     (m)  Use of Estimates

     The preparation  of  financial  statements  in  conformity  with  generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  effect  the  reported  amount  of  assets  and
          liabilities,  and disclosure of contingent  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 those estimates.

     (n)  Accounting  for the  Impairment  of Long-Lived  Assets and  Long-Lived
          Assets to be Disposed Of

     Effective  July  1,  1996,  the  Company  adopted  Statement  of  Financial
          Accounting Standards (SFAS) No.121,  "Accounting for the Impairment of
          Long-Lived  Assets and for Long-Lived  Assets to be Disposed Of." SFAS
          No.121 requires,  among other things,  that long-lived assets held and
          used by an  entity  be  reviewed  for  impairment  whenever  events or
          changes in circumstances indicate that the carrying amount of an asset
          may not be  recoverable.  The  adoption of SFAS No.121 on July 1, 1996
          did not have a material impact on the Company's consolidated financial
          position or results of operations (note 4).

                                                                     (Continued)


                                      F-11


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     (o)  Accounting for Stock-Based Compensation

     Effective July 1, 1996,  the Company  adopted SFAS No.123  "Accounting  for
          Stock-Based  Compensation",  which  encourages,  but does not require,
          companies  to  record  compensation  cost  for  stock-based   employee
          compensation  plans at fair value.  The Company has chosen to continue
          to account for stock-based  compensation under the existing accounting
          rules  contained  in  Accounting   Principles   Board  Opinion  No.25,
          "Accounting   for   Stock   Issued   to   Employees",    and   related
          interpretations,   but  has  provided   disclosures   of   stock-based
          compensation  expense  determined  under the fair value  provisions of
          SFAS No.123.

(3)  Restaurant Acquisition

     On  August 7,  1996,  the Company  signed a purchase and sale agreement for
          $388,000  for a  restaurant  location on 86th Street in New York City.
          Included in the  purchase  price was the lease and certain  furniture,
          fixtures and equipment. The Company did not open this location and the
          restaurant  was sold in May 1997 for total  consideration  aggregating
          $289,387. The Company remains a guarantor of the lease.

     On August 6, 1996, the  Company  entered into two agreements for the option
          to lease  restaurant  locations  in  Bayridge,  New York and  Milford,
          Connecticut.  The  Company  allowed  both  options to expire in fiscal
          1997.

(4)  Closure of Restaurant Sites

     In fiscal  year 1996, the  Board of Directors authorized the closing of the
          Rattlesnake   Southwestern   Grill   Restaurant   located  in  Hamden,
          Connecticut. The facility was closed on January 7, 1996. A majority of
          the fixed assets at the facility  were removed to be utilized at other
          existing or new  facilities.  All remaining fixed assets and leasehold
          improvements  have been abandoned and all intangible  assets have been
          written off. A loss of $192,311, relating to the closing of the Hamden
          location, was recorded in fiscal 1996.

     In fiscal  1997,  the  Board  of  Directors  authorized  the closing of the
          Rattlesnake   Southwestern  Grill  Restaurant  located  in  Fairfield,
          Connecticut.  The  facility  was closed on January 4, 1997.  The fixed
          assets,  leasehold  improvements  and intangibles at the facility have
          been  written  off.  The  building  is  reflected  at  its   estimated
          realizable  value  and is  currently  accounted  for in the  financial
          statements  in "net  assets  held for  sale."  A net loss of  $394,941
          relating  to the closing of the  Fairfield  location  was  recorded in
          fiscal 1997.

     In fiscal  1997,  the  Board of  Directors  authorized  the closing  of the
          Rattlesnake Southwestern Grill Restaurant located in White Plains, New
          York.  The  facility  was closed on March 1, 1997 and sold on July 16,
          1997. The Company  recorded a loss of $224,135  related to the closing
          of this location in 1997.  The Company sold all of the assets of White
          Plains except for cash, receivables and certain items specified in the
          Asset  Purchase  Agreement  in  exchange  for a release  from its note
          payable to the landlord of $276,499,  the  purchaser's  assumption  of
          food credits and other miscellaneous liabilities totaling $39,017, and
          the  receipt of a $23,500  note  receivable  from the  purchaser.  The
          facility was sold to a group which includes the Company's  Chairman of
          the Board.



                                                                     (Continued)


                                      F-12


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     In fiscal  1997,  the  Board  of  Directors  authorized  the closing of the
          Rattlesnake Southwestern Grill Restaurant located in Yorktown Heights,
          New York. The facility was closed on June 9, 1997 and sold on June 27,
          1997. The purchaser assumed the remaining  outstanding  balance of the
          notes payable to the landlord and the related lease obligation.  A net
          loss of  $362,091,  relating  to the closing of the  Yorktown  Heights
          location, was recorded in fiscal 1997.

     The Restaurant location on 86th  Street in New York was never opened and on
          May 29, 1997 the Company  sold the fixed  assets and  transferred  its
          interest  in the  lease  at  that  location  for  total  consideration
          aggregating  $289,387.  The Company  continues to guarantee  the lease
          obligation.  A net  loss of  $306,456,  relating  the sale of the 86th
          Street location, was recorded in fiscal 1997.

     In fiscal 1997, the  Board  of Directors  authorized the disposition of the
          Rattlesnake  Southwestern  Grill Restaurant  located in Lynbrook,  New
          York. On September 17, 1997,  the Company  closed the  restaurant  and
          wrote-off the related assets to its estimated  realizable value. A net
          loss of $374,852 relating to the closing of this location was recorded
          in fiscal 1997.

     At June 29, 1997,  consistent  with the Board's approval for the closure of
          the  above-mentioned  locations,  the assets held for sale and related
          liabilities  have  been  reclassified  as  "assets  held for sale" and
          "liabilities  related to assets held for sale". The accompanying  June
          29, 1997 consolidated balance sheet includes the following components:


                   Fairfield restaurant facility            $  318,558
                   White Plains restaurant facility            335,986
                   Lynbrook equipment                           25,000
                                                           -----------
                      Assets held for sale                     679,544
                                                           -----------
                   Notes payable                               702,914
                   Accounts payable                            185,555
                   Accrued expenses                             47,759
                   Other current liabilities                   197,029
                                                           -----------
                      Liabilities related to assets        
                         held for sale                      $1,133,257
                                                            ==========
                                  





                                                                     (Continued)


                                      F-13


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


(5)  Property and Equipment

     Property and equipment consists of the following:

                                             June 29,1997    June 30, 1996
                                             ------------    -------------
                                                             
           Leasehold improvements            $   783,415         1,410,404
           Restaurant and office equipment       457,378           918,787
           Furniture and fixtures                211,320           494,876
           Original smallwares                    66,144            73,562
           Artifacts                              24,114            23,952
                                             -----------         ---------
                                               1,542,371         2,921,581

           Less accumulated depreciation                     
              and amortization                  (535,279)         (546,733)
                                             -----------         ---------

                                             $ 1,007,092         2,374,848
                                             ===========         =========
                                                             
     Related depreciation and amortization expenses were $478,611,  $334,695 and
          $200,592  for the year ended June 29,  1997,  June 30,  1996 and 1995,
          respectively.  Accumulated  depreciation  and amortization of $490,065
          and $125,662 relating to the disposal of fixed assets at the locations
          which were closed (note 4).

(6)  Other Assets

     Other assets consist of the following:

                                                   June 29,   June 30,
                                                     1997       1996
                                                  --------    -------
                      Promotional meal programs   $ 71,071    132,058
                      Deposits                      47,779     96,737
                      Loans receivable              10,607     17,493
                                                  --------    -------
                                                  $129,457    246,288
                                                  ========    =======

(7) Capital Structure

    The Company's capital structure is as follows:

                                                               Shares issued
                                                              and outstanding
                                                              ---------------
                                                Shares      June 29,    June 30,
     Security                   Par value     authorized      1997       1996
     --------                   ---------     ----------      ----       ----

Common stock                $.001 per share   20,000,000   2,650,227   2,643,734
Preferred stock, Series A    $.10 per share    5,000,000      56,500      54,500



                                                                     (Continued)


                                      F-14


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     The  Company amended its Certificate of  Incorporation  in December 1994 to
          increase the  authorized  capital stock and effect a 1:2.8077  reverse
          stock split.  In March 1995,  an additional  1:2 reverse  common stock
          split was approved by the Company's Board of Directors.

     The Company's  preferred  stock  bears a dividend  rate of 7-1/2% per annum
          payable  semi-annually  in arrears on May 15 and  November  15 of each
          year  commencing  November 15, 1996. The shares are convertible at any
          time, one year after issuance into common stock at a conversion  price
          equal the lesser of (i) 120% of the average of the last  reported sale
          price  of the  common  stock  for  the  10  trading  days  immediately
          preceding the first closing of the  offering,  or $4.50,  whichever is
          lower;  or (ii) 85% of the average of the last  reported sale price of
          the common stock for the 10 trading  days  immediately  preceding  the
          first   anniversary   of  the  first   closing,   subject  to  certain
          anti-dilution adjustments. The Board of Directors has the authority to
          establish  the  specific  provisions  of the  preferred  stock,  i.e.,
          liquidation rights, dividend parameters, at the date of issuance.

     The preferred  stock is  redeemable  only  at the  option  of the  Company,
          commencing  one year from the date of  issuance,  based upon the sales
          price  of the  Company's  common  stock.  The  preferred  stock  has a
          liquidation  preference of $24.50 per share, together with accrued and
          unpaid  dividends.  The  Board  of  Directors  has  the  authority  to
          establish  the  specific  provisions  of the  preferred  stock,  i.e.,
          liquidation rights, dividend parameters, at the date of issuance.

     To date,  the  Board of Directors have not declared any dividends, although
          cumulative  dividends relating to the preferred stock of $103,818 have
          been accrued in the June 29, 1997 consolidated balance sheet.

(8)  Notes Payable

     Notes payable consists of the following:

                                                          June 29,     June 30,
                                                            1997         1996
                                                            ----         ----
Series A subordinated  notes payable due
  August 6, 1996,  with interest at 9%
  converted to Series C notes                             $  2,089       525,000

Series B  convertible  subordinated  notes
  payable  due July 7, 2000 with interest
  at 9%,  convertible at $3.85 per share
  (including $58,338 held by a related party)              500,000       525,000

Note payable to shareholder relating to the
  acquisition of Pen-Z Corp., payable in
  monthly payments of $2,700 at June 30, 1996
  with interest at 1% over prime (9.25%
  at June 30, 1996).  The Company was released
  from this debt in fiscal year 1997 as a result
  of the sale of this location (note 4)                        225       289,227

Series C subordinated  notes payable due
  August 6, 1997,  with interest at 15%
  (including $58,338 held by a related party)              303,749          --

Convertible subordinated notes payable due
  September 4, 1997, with interest at 18%                  500,000          --

                                                                     (Continued)


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


                                                          June 29,     June 30,
                                                            1997         1996
                                                            ----         ----

Note payable to related party relating to
  the acquisition of the Fairfield building,
  due January 2, 1997 with interest at 15%              $  425,000          --

Note payable to a related party, due in
  monthly installments of $1,270, including
  principal and interest at 18% through
  February 1998                                              9,505        21,799

Note payable to a  stockholder  relating  to
  purchase  of  furniture  and equipment for
  the Penz Corp.,  due in monthly  installments
  of $900 at June 30, 1996 including principal
  and interest at prime plus 1% through
  2009.  The Company was released from this
  debt in fiscal year 1997 as a result of the
  sale of this location (note 4)                               173        96,274

Note payable relating to acquisition of lease,
  due in monthly installments of $2,867,
  including principal and interest
  at 8% through July 2010.  The Company was
  released from this debt subsequent to
  year-end as a result of the sale of
  the location (note 4)                                    277,516       289,206

Notes  payable relating  to  acquisition
  of  lease, due  in  monthly installments
  of $1,666 of  principal plus  interest
  at 1% over prime (9.5% at June 29, 1997
  through September 1, 2000)                                64,998        86,069
                                                        ----------     ---------
                                                         2,083,255     1,832,575
  Less:  Current maturities                                835,335       576,852
  Less:  Liabilities relating to assets
  held for sale                                            702,914          --
                                                        ----------     ---------
                                                        $  545,006     1,255,723
                                                        ==========     =========

Notes payable to shareholders  and other related parties  (Company  officers and
     directors)  were  $551,579 and $523,976 at June 29, 1997 and June 30, 1996,
     respectively.

Maturities of these notes is as follows:

                     Fiscal year ended:
                         1997 and 1998                $1,538,249
                                  1999                    19,992
                                  2000                   519,992
                                  2001                     5,002
                                  2002                      --
                     Thereafter                             --
                                                      ----------

                                                      $2,083,255
                                                      ==========


                                                                     (Continued)


                                      F-16


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


(9)  Financing Arrangements

     Commencing in November 1993, the Company sold through a private placement a
          $1,800,000  unit offering,  with each $25,000 unit consisting of 1,469
          shares  of  common  stock  and  a  $25,000   subordinated   note.  The
          subordinated  notes  mature  in one year  from  the date of  issuance,
          subject to a 180 day extension  period,  exercisable  at the option of
          the Company. The subordinated notes bear interest at 9%, commencing on
          the date of issue, increasing to 11% for the 180 day extension period,
          with all interest payable at the maturity of the  subordinated  notes.
          The  underwriter's  compensation  arrangement  included the receipt of
          82,367 shares of common stock and a 9.33% commission. The value of the
          common  stock  issued  to  the   underwriter   was  determined  by  an
          independent  appraisal,  based  upon  the  value  of the  stock at the
          various dates in which the units were sold,  ranging between $7.40 and
          $12.46 per share.  Debt issuance costs were calculated  based upon the
          relative proportional value of the common stock and subordinated notes
          payable.

     In July 1995,  the  Company redeemed $225,000 of the notes and restructured
          the  remaining  principle  amount  outstanding  of  $1,575,000.   This
          redemption  was partially  funded by a $50,000 note payable  issued in
          June 1995 by the  Company,  with  interest  at 9%,  and repaid in July
          1995,  together with 10,000 shares of common stock,  valued at the IPO
          price of $5.50 per share.  The value of the common  stock was recorded
          as interest expense by the Company.  Each $25,000  principal amount of
          Notes  was  exchanged  as  follows:  (i)  $8,334  paid in  August  and
          September  1995 (the "First  Payment");  and (ii) a 9% $8,333 Series A
          Note (the Series A Notes) due 13 months after the first payment, and a
          9% $8,333  Series B Note (the Series B Notes) due five years after the
          first payment was issued to each  Noteholder  with the First  Payment.
          Each Series B Note is convertible  into common stock  thirteen  months
          after  issuance  at a  conversion  price  equal to 70% of the  initial
          public  offering  price of the  common  stock  sold,  with  piggy-back
          registration rights for the shares underlying the Series B Notes. Each
          Series B Note is redeemable  with 30 days prior written  notice at any
          time after the  closing  bid price of the common  stock is 150% of the
          conversion price for the ten consecutive trading days ending within 15
          days  of  the  date  of  notice  of  redemption.  As a  result  of the
          restructuring  of this debt,  the  related  debt  issuance  costs were
          written off in July 1995. An extraordinary gain of $89,710, net of the
          write-off  of $72,114 debt  issuance  costs was  recognized  in fiscal
          1996.

     In fiscal 1997,  the  Company offered an extension  agreement to the Series
          A  noteholders,  providing  for a one year  extension  of the maturity
          date,  in exchange for an increase in the interest rate from 9% to 15%
          and one warrant for every dollar of indebtedness. The warrants provide
          for exercise prices ranging between $2.50 - $3.00 and expire on August
          6, 2001.  Through October 7, 1996,  noteholders  aggregating  $303,749
          accepted the terms of the  extension  and the  remaining  $221,243 was
          paid in cash.

     During December 1994 and January  1995,  the Company  received  $500,000 in
          proceeds from a new unit offering,  each unit  consisting of a $20,000
          principal amount six-month 12% convertible subordinated note and 3,650
          common stock purchase  warrants  exercisable at $11.80 per share until
          March 1997 (the "Units").  The due date of these notes was extended to
          December 10, 1995 in  consideration  of a reduction of the  conversion
          price and warrant exercise price to $4.00 and $4.50, respectively, and
          an increase in the number of warrants per Unit to 7,300.  The value of
          the  warrants,  $0.10  per  share  was  determined  by an  independent
          appraisal and has been recorded as a debt discount and additional paid
          in  capital.  In  December  1995,  $300,000 of the debt and $30,000 of
          accrued  interest was exchanged into 82,500 shares of common stock and
          the remaining $200,000 was paid.

                                                                     (Continued)


                                      F-17


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     During May and June 1995, the Company issued  $510,000 of 12%  subordinated
          debt which was automatically  converted into shares of Common Stock at
          the rate of $4.00 per share  upon the  effective  date of the  initial
          public offering.

     In  March  1996,  the Company  entered into an agreement with an investment
          banking  firm to sell 200,000  shares of Series A preferred  stock and
          800,000  common  stock  warrants  in a private  placement  for a total
          consideration of $5,000,000.  The preferred stock was valued at $24.50
          per share and each  warrant at $.125 per  warrant.  The  warrants  are
          exercisable  at a price of $7.00 per share  and  expire on August  31,
          2001.  On June 30,  1996,  the  Company  closed  on the sale of 54,500
          shares of the  aforementioned  Series A  preferred  stock and  218,000
          common stock purchase warrants.  The underwriter  received warrants to
          purchase 27,250 shares of common stock at $3.78 per share which expire
          on August 31, 2001. The net proceeds of the offering were  $1,129,082,
          net of  commissions  and  expenses of $233,418.  The  offering  period
          expired on June 30, 1996.

     In July  1996, the  Company sold to an outside investor, through a separate
          offering, an additional 2,000 shares of preferred stock under the same
          terms as noted above.

     On October 10, 1996,  a  letter of intent was executed  with an  investment
          banking  firm to raise a  maximum  of  $3,000,000  through  a  private
          placement to be sold on a "best efforts"  basis.  No funds were raised
          through this placement.

     On March  4,  1997,  the   Company   entered  into  a   private   financing
          arrangement for $500,000 of convertible  subordinated notes. The notes
          are payable on September 4, 1997.  The  principal  amount of the Notes
          may be converted into the Company's common stock at a conversion price
          of $0.75 per share  anytime  before the  repayment of  principal.  The
          notes are  fully  subordinated  to all  "senior  indebtedness"  of the
          Company  and are secured by all the issued and  outstanding  shares of
          the Company's wholly-owned  subsidiaries:  Rattlesnake Ventures, Inc.,
          Rattlesnake-Danbury,    Inc.,    Rattlesnake-Flemington,    Inc.   and
          Rattlesnake-Lynbrook,  Inc. The notes matured on September 4, 1997 and
          were not satisfied by the Company and are in default (note 16).

     On June 2,  1997,   the  Company  executed   a  letter  of  intent  with an
          investment banking firm for a proposed $2,000,000 private placement of
          convertible preferred stock on a "best efforts" basis.

(10) Accrued Expenses and Other Liabilities

     (a)  Accrued Expenses

     Accrued expenses consist of the following:

                                             June 29,            June 30,
                                               1997                1996
                                               ----                ----

Interest payable                             $166,515             94,500
Severance liabilities                          80,696               --
Other                                          57,867            109,604
Accrued payroll                                52,329            284,100
                                             --------            -------

                                             $357,407            488,204
                                             ========            =======



                                                                     (Continued)


                                      F-18


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     (b)  Other Liabilities

     The Company has entered  into  marketing  agreements  whereby  it  receives
          temporary  financing in exchange for participating in discounted price
          meal  programs.  At June 29,  1997 and June  30,  1996,  the  balances
          outstanding   under  this   program  were   $218,220   and   $283,234,
          respectively,   which  are  included  in  other   liabilities  in  the
          accompanying consolidated balance sheets.

(11) Income Taxes

     In February 1992, the Financial Accounting Standards Board issued Statement
          of Financial  Accounting  Standards  (SFAS)  No.109,  "Accounting  for
          Income Taxes".  SFAS 109 requires a change from the deferred method of
          accounting  for  income  taxes  of APB  Opinion  11 to the  asset  and
          liability  method of accounting for income taxes.  Under the asset and
          liability  method,  deferred tax assets and liabilities are recognized
          for future tax  consequences  attributable to differences  between the
          financial   statement   carrying   amounts  of  existing   assets  and
          liabilities and their  respective tax bases and operating loss and tax
          credit  carry  forwards.  Deferred  tax  assets  and  liabilities  are
          measured  using enacted tax rates  expected to apply to taxable income
          in the years in which those  temporary  differences are expected to be
          recovered  or  settled.  Under SFAS 109,  the effect on  deferred  tax
          assets  and  liabilities  of a change  in tax rates is  recognized  in
          income in the period that  includes the  enactment  date.  The Company
          adopted the provisions of SFAS 109 in 1992.

     There was no income tax  expense  for any  period  presented  due to losses
          incurred by the Company.

     The tax effects of  temporary  differences  that  give rise to  significant
          portions of the deferred tax assets and  deferred tax  liabilities  at
          June 29, 1997 and June 30, 1996 are presented below:

                                                         June 29,      June 30,
                                                           1997          1996
                                                           ----          ----
             
             Deferred tax assets:
                Net operating loss carry forward       $4,349,000      2,381,000
                                                       ----------      ---------
                      Total gross deferred tax assets   4,349,000      2,381,000
             
             Less valuation allowance                   4,336,000      2,350,000
                                                       ----------      ---------
                      Net deferred tax assets              13,000         31,000
                                                       ----------      ---------
             
             Deferred tax liabilities:
                Depreciation and amortization              13,000        31,0000
                                                       ----------      ---------
                      Net deferred tax liability           13,000        31,0000
                                                       ----------      ---------
             
                                                       $      --            --
                                                       ==========      =========
             

     The valuation allowance for deferred tax assets as of July 1, 1996 and July
          1, 1995 was $2,350,000 and $1,013,000, respectively. The change in the
          total  valuation  allowance for the years ended June 29, 1997 and June
          30,  1996  and  1995  was   $1,986,000,   $1,337,000   and   $435,000,
          respectively.  In assessing the  realizability of deferred tax assets,
          management considers whether it is more likely than (Continued)


                                      F-19


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


          not that some  portion or all of the  deferred  tax assets will not be
          realized. The ultimate realization of deferred tax assets is dependent
          upon the  generation  of future  taxable  income during the periods in
          which  the net  operating  losses  and  temporary  differences  become
          deductible.  Management  considers projected future taxable income and
          tax planning  strategies in making this assessment.  In order to fully
          realize the  deferred  tax asset,  the  Company  will need to generate
          future taxable income of approximately  $10,873,000.  At June 29, 1997
          and June 30, 1996,  the Company has net operating  loss carry forwards
          for Federal and State income tax purposes of approximately $10,873,000
          and  $5,952,000,  respectively  (the NOL  carry  forwards),  which are
          available to offset  future  taxable  income,  if any,  through  2012.
          Losses for income tax  purposes  for the years ended June 29, 1997 and
          June 30, 1996 and 1995 were approximately  $4,581,000,  $3,308,000 and
          $2,983,000,  respectively. Based upon the limited operating history of
          the Company and losses incurred to date,  management believes that the
          value of the deferred tax asset is impaired and has fully reserved the
          deferred tax asset.

     In accordance with Section 382 of the  Internal  Revenue  Code of 1986,  as
          amended,  as it  applies to the NOL carry  forwards,  a change in more
          than  50%  in  the  beneficial  ownership  of  the  Company  within  a
          three-year  period  (an  "Ownership  Change")  will  place  an  annual
          limitation  on the  Company's  ability to  utilize  its  existing  NOL
          carryforwards to offset United States Federal taxable income in future
          years.  Generally,  such limitation would be equal to the value of the
          Company  as of the  date of the  Ownership  Change  multiplied  by the
          Federal  long-term  tax exempt  interest  rate,  as  published  by the
          Internal  Revenue  Service.  The Company  believes  that an  Ownership
          Change has occurred due to changes in the beneficial  ownership of the
          Company's  Common  Stock  in the  current  three-year  testing  period
          immediately  prior to the initial public  offering and would cause the
          annual  limitations as described  above to apply.  The Company has not
          determined  what the maximum  annual amount of taxable  income is that
          can be reduced by the NOL carryforwards.

(12) Commitments and Contingent Liabilities

     Commitments

     The Company's operations  are  principally  conducted  in leased  premises.
          Remaining lease terms range from  approximately 3 to 9 years.  Certain
          leases contain contingent rental provisions based upon a percentage of
          gross  sales.  As of June 29,  1997,  the Company  has  non-cancelable
          operating lease commitments as follows:

                              1998          $  369,524
                              1999             367,234
                              2000             355,008
                              2001             274,740
                              2002             269,545
                              Thereafter       608,720
                                            ----------

                                            $2,244,771
                                            ==========


     Certain  shareholders  and  directors  have  personally   guaranteed  lease
          payments for two locations.


                                                                     (Continued)


                                      F-20


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     Contingent rental  payments on building  leases are typically made based on
          the  percentage  of gross  sales on the  individual  restaurants  that
          exceed predetermined  levels. The percentage of gross sales to be paid
          and related  gross sales level vary by unit.  There were no contingent
          rental payments in any of the periods presented.

     Rent expense was $930,676, $677,877 and $347,525 for the periods ended June
          29, 1997, June 30, 1996 and 1995, respectively.

     In connection with the sale of preferred stock,  the Company is required to
          pay a 7-1/2%  dividend  payment to the preferred  stockholders.  These
          dividends are payable  semi-annually in arrears on May 15 and November
          15 of each  year  commencing  November  15,  1996.  At June 29,  1997,
          dividends  totaling $103,818 have been accrued but not yet declared or
          paid.

     Pursuant to a leasehold acquisition agreement, the Company paid $65,000 and
          issued a warrant to purchase  30,000  shares of the  Company's  common
          stock at an  exercise  price of $5.00  per  share,  exercisable  until
          October 31, 1997.

     Pursuant to a  restaurant  lease  agreement,  the Company has the option to
          purchase a facility  during the period  January 1995  through  January
          2000 for a purchase price ranging between $1,365,000 to $1,580,000.

     In August 2,  1995,  the  Company  executed   an  agreement  with a  public
          relations  firm  providing for annual  compensation  of $24,000 and an
          option to purchase  20,000 shares of the  Company's  common stock at a
          price of $5.50 per share, exercisable for a five year period.

     The Company  entered  into a  twelve  month  agreement  with an  investment
          banking  firm  commencing  September  1, 1996  which was  subsequently
          revised on October 10, 1996,  under which the investment  banking firm
          will  provide  advisory  services  related to  corporate  finance  and
          mergers and acquisitions.  The investment banking firm will receive an
          initial  retainer of $10,000  and  monthly  payments of $3,000 for the
          first three months, $4,000 for the next four months and $5,000 for the
          remaining  six months and warrants to purchase  125,000  shares of the
          Company's common stock exercisable  within five years at a price equal
          to 120% of the average closing bid price of the Company's common stock
          for the five preceding  days.  The Company has made payments  totaling
          $16,000 and has accrued the remaining $34,000 at June 29, 1997.

     The Company entered into a thirteen  month  agreement  with an  independent
          research firm which will produce  research reports with respect to the
          securities of the Company. In consideration of the firm's services, it
          received  100,000  warrants to purchase the  Company's  common  stock,
          which are  exercisable at amounts ranging from $4.00 - $5.50 per share
          which expire on July 8, 2001.

(13) Employee Benefit Plans

     (a) Stock Option Plan

     In December 1994, the Company adopted the 1994 Employees  Stock Option Plan
          (the  Employees  Plan),  which  provides for the issuance of incentive
          stock  options  (ISO's)  and  non-qualified   options  (Non-ISO's)  to
          officers and key  employees.  Up to 1,000,000  shares of the Company's
          common stock have been reserved for issuance  under the Plan. The Plan
          is currently administered by the Board of

                                                                     (Continued)


                                      F-21


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


          Directors of the Company.  The term of the options is generally  for a
          period  of 5 years.  The  exercise  price  for  non-qualified  options
          outstanding  under the Employees  Plan can be no less that 100% of the
          fair market value,  as defined,  of the Company's  common stock at the
          date of the grant.  For ISO's,  the exercise price can be generally no
          less than the fair market value of the  Company's  common stock at the
          date of the grant, with the exception of any employee who prior to the
          granting of the option,  is a 10% or greater  stockholder  as defined,
          for  which  the  exercise  price  can be no less than 110% of the fair
          market value of the Company's common stock at the date of grant.

     In December 1994,  the  Company  adopted the  non-Executive  Director Stock
          Option Plan (the Director  Plan),  which  provides for the issuance of
          non-ISO's to non-executive  directors,  as defined, and members of any
          advisory  board  established  by the  Company  who are  not  full-time
          employees of the Company.  The Company has reserved 500,000 shares for
          issuance  under the provisions of the Director Plan. The Director Plan
          provides  that  each  non-executive  director  will  automatically  be
          granted an option to purchase  25,000 shares upon joining the Board of
          Directors and 15,000 shares on each December 1st thereafter,  provided
          such  person has served as a  director  for the 12 months  immediately
          prior to such  December  1st. The exercise  price for options  granted
          under the Director  Plan shall be 100% of the fair market value of the
          Common Stock on the date of grant.

     At June 29,  1997,  there  were   73,500  and   295,000  additional  shares
          available  for  grant  under  the   Employees   and  Director   Plans,
          respectively.  The per  share  weighted-average  fair  value  of stock
          options granted during 1997 and 1996 was $0.51 and $1.22, respectively
          for those options whose exercise price equaled the market price of the
          stock on the date of grant  and $.05 and $0,  respectively  for  those
          options whose  exercise  price was above the market price of the stock
          on the date of grant using the Black Scholes option-pricing model with
          the following weighted-average  assumptions:  1997 and 1996 - expected
          dividend yield 0%, risk-free interest rate of between 5.07% and 5.86%,
          an expected life of between  approximately  2.5 - 5 years and expected
          stock volatility of between 38 - 130%.

     The Company  applies APB  Opinion  No.25 in  accounting  for its Plan  and,
          accordingly,   no  compensation  cost  has  been  recognized  for  its
          employees and directors stock options in the financial statements. Had
          the Company  determined  compensation  cost based on the fair value at
          the grant date for its stock options under SFAS No.123,  the Company's
          net income would have been reduced to the pro forma amounts  indicated
          below:

                                                     1997         1996
                                                     ----         ----

               Net loss          As reported   $ (4,797,857)  (3,193,155)
                                 Pro forma       (5,267,816)  (3,403,118)
                                                              
               Loss per share    As reported   $     (1.81)        (1.23)
                                 Pro forma           (1.99)        (1.31)
                                                              
                                                             
     Pro forma net income reflects only options and warrants granted in 1997 and
          1996. Therefore,  the full impact of calculating compensation cost for
          stock  options and warrants  under SFAS No.123 is not reflected in the
          pro forma net income amounts presented above because compensation cost
          for  options  and  warrants  granted  prior to July 1,  1995  were not
          considered.


                                                                     (Continued)


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     Activity in non-ISO's was as follows:

                                                                        Weighted
                                                                        Average
                                           Number      Option Price     Exercise
                                          of Shares     per Share        Price
                                          ---------     ---------        -----

     Options outstanding June 30, 1995     600,000     $     4.50         2.63
     
     Options Granted                       124,000           5.25         3.06
                                           -------     ----------         ----
     
     Options outstanding June 30, 1996     724,000      4.50-5.25         4.25
     
     Options Granted                       396,000      0.25-2.25          .44
     Terminated Options                   (427,000)     .375-5.25         3.21
                                           -------     ----------         ----
     
     Options outstanding June 29, 1997     693,000     $0.25-5.25         3.11
                                           =======     ==========         ====
     

Activity in ISO's was as follows:

                                                                        Weighted
                                                                        Average
                                           Number      Option Price     Exercise
                                          of Shares     per Share        Price
                                          ---------     ---------        -----
     
     Options outstanding June 30, 1995      87,000     $4.50-5.50         2.41
     Options Granted                        78,500      3.50-5.25         2.99
     Terminated Options                    (36,000)          4.50         2.91
                                           -------     ----------         ----
     Options outstanding June 30, 1996     129,500      3.50-5.50         4.14
     Options Granted                        44,000      0.25-2.63         3.53
     Terminated Options                    (70,000)     2.50-5.25         3.62
                                           -------     ----------         ----
     Options outstanding June 29, 1997     103,500     $0.25-5.50         5.35
                                           =======     ==========         ====
                                        

     The Employees   and  Director  Plans  expire  in  December   2004,   unless
          terminated   earlier  by  the  Board  of  Directors  under  conditions
          specified in the respective  Plans.  No options have been exercised as
          of June 29, 1997 and June 30, 1996.

     At June 29, 1997, the  range  of exercise prices and range of the remaining
          contractual  life  of  outstanding  options  was  $0.25  -  $5.50  and
          approximately 2.5 - 4.5 years, respectively.

     At June 29, 1997  and June  30,  1996  and  1995,  the  number  of  options
          exercisable was 653,500,  346,167 and 100,000,  respectively,  and the
          weighted-average  exercise price of those options was $3.40, $4.24 and
          $2.60, respectively.


                                                                     (Continued)


                                      F-23


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     The Company granted 335,000 shares of restricted  warrants to employees and
          directors  during the 1997 fiscal year.  The warrants  were granted on
          June 2, 1997;  200,000 as a result of the separation  agreement signed
          between the Company and the Executive Vice President  (note 13(c)) and
          135,000 shares of options  previously  issued to the Vice President of
          Finance which were terminated as of this date and warrants were issued
          in their place with the  exercise  price equal to the market  price of
          the stock on the date of grant.  The weighted  average grant date fair
          value of the warrants was not material  using the Black Scholes option
          pricing model with  assumptions  utilized  similar to that noted above
          for the options.

     The Company granted 717,992 shares of warrants to non-employees during 1997
          for services  performed.  The total  compensation  cost  recognized in
          fiscal   1997  for   these   stock-based   compensation   awards   was
          approximately  $294,000 using the Black Scholes  option-pricing  model
          with the following assumptions - expected dividend yield 0%, risk-free
          interest rate of 5.25%,  expected  life of 5 years and expected  stock
          volatility of 86%.

     (b)  Employment Agreements

     The Company and  its  Chairman,  President  and  Executive  Vice  President
          (collectively,  the Senior  Management  Group) entered into employment
          agreements in December  1994 for a period  commencing in December 1994
          through December 1997. The agreements provide for annual  compensation
          for the Senior Management Group  collectively of $250,000,  increasing
          by 10% annually,  plus certain other  benefits.  The  agreements  also
          provide for annual  aggregate  incentive  compensation  for the Senior
          Management  Group  based  on  consolidated  pre-tax  earnings  of  the
          Company, as defined, as follows:

                          Pre-tax earnings           Percentage
                          ----------------           ----------

                        $0 - $1,000,000                10.0%
                        $1,000,001 - 2,000,000          7.5%
                        $2,000,001 and over             5.0%


     The agreement also provides that upon a change in control, as defined, that
          all stock options held by the employee become immediately  exercisable
          and that a credit  equivalent  to three  times the  employee's  annual
          compensation be credited against the exercise price of the options.

     The Company and its Vice-Chairman  & Chief  Administration  Officer entered
          into a part-time  employment  agreement in December  1995 for a period
          commencing December 1995 through December 1998. The agreement provides
          for annual  compensation  of $90,000  increasing  10% per annum,  plus
          certain other  benefits.  An additional  $20,000 was paid for services
          rendered  in  fiscal  1996  provided  over  and  above  the  part-time
          agreement.  The  employee is also  entitled to receive a bonus  during
          each year of this agreement, determined by the Board of Directors. The
          Board of Directors and/or the Compensation Committee shall set forth a
          formula for determining the bonus for each year.

     On June 6, 1996, the board of directors authorized  additional compensation
          aggregating $70,000 for the aforementioned executive officers.



                                                                     (Continued)


                                      F-24


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     (c)  Separation Agreements

     On March 15, 1997  an  agreement  was  signed  between the Company and Vice
          Chairman & Chief  Administrative  Officer  which  amended the December
          1995 employment  agreement.  Under the new agreement,  the former Vice
          Chairman & Chief  Administrative  Officer  will accept the position of
          Acting Co-Chief Executive Officer. This agreement waives any base rate
          or annual rate  increases per the previous  agreement and modified the
          term to March 1, 1997 through February 28, 1999. Services are provided
          on a part-time consulting basis. The compensation for the period March
          1, 1997 through February 28, 1999 will be $75,000, plus benefits. This
          agreement  also  included  the grant of an option to purchase  125,000
          shares  of stock at the  closing  price on the date of this  agreement
          ($1-1/16).  The  agreement  also  includes that in the event the stock
          options  previously  granted  under the current  Company  stock option
          plans are repriced for any employee,  the existing stock option grants
          for  the  acting  Co-CEO  will be  repriced  at the  same  time as any
          repricing and under the same terms and conditions.

     On March  15,  1997 an  agreement  was  signed  between  the   Company  and
          Chairman & Chief  Executive  Officer  which  terminated  the  previous
          December 1, 1994 employment  agreement and any and all oral agreements
          relating  to his  employment.  The  agreement  included  payments  for
          expense reimbursement,  accrued and unused vacation,  medical, dental,
          disability  and life  insurance  and  severance  payments,  all unpaid
          amounts  are  accrued  at June  29,  1997.  In  connection  with  this
          agreement,  the Chief Executive Officer's employee stock options shall
          be immediately vested and shall be amended to constitute non-qualified
          employee  stock options and the strike price is reduced to an exercise
          price of $2.00 (note 13).

     On May 29,  1997  an  agreement  was  signed  between  the  Company and the
          Director of the  Corporation  for acceptance of the position of acting
          Co-CEO for up to 150 days.  This  agreement  included  five  months of
          compensation at $5,000 a month and 100,000 warrants at the closing bid
          on the date of this agreement.

     On June 2, 1997  an  agreement  was signed  between the Company & Executive
          Vice  President  which  terminated  the  December  1, 1994  employment
          agreement and any and all oral agreements  relating to his employment.
          The agreement included payments for expense reimbursement, accrued and
          unused vacation,  medical,  dental,  disability and life insurance and
          severance  payments,  all of which is  accrued  at June 29,  1997.  In
          connection with this agreement,  the Executive Vice President's  stock
          options were replaced by a warrant to purchase up to 200,000 shares of
          common  stock  exercisable  at the  closing  bid on the  date  of this
          agreement ($0.25).

     (d)  Other Benefits

     The Company provides, on a contributory  basis,  medical benefits to active
          employees.  The Company does not provide medical benefits to retirees,
          except as disclosed above.

(14) Litigation

     The Company is a defendant in litigation  arising from the normal course of
          its affairs.  Management is of the opinion,  pursuant to the advice of
          counsel,  that settlement,  if any, of the  aforementioned  litigation
          will not have a material  adverse impact on the financial  position or
          results of operations of the Company.

                                                                     (Continued)


                                      F-25


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


(15) Earnings Per Share

     For the  year ended  June 29,  1997 and June 30,  1996 a  weighted  average
          number  of  shares  was  not   calculated  for  options  and  warrants
          outstanding  due to their  anti-dilutive  effect on the  Company's net
          loss per share calculation.

     For the  year ended  June 30,  1995,  weighted  average  common  shares and
          equivalents  outstanding are 1,122,678.  The 12% convertible  notes do
          not meet the  criteria of a common stock  equivalent,  as its yield at
          the time of issuance is greater than the AA corporate bond yield.

(16) Subsequent Events

     On July 25,  1997,  an  agreement  was  signed  between  the   Company  and
          President which terminated the previous December 1, 1994 agreement and
          any and all oral agreements relating to the employment.  The agreement
          included  payments  for  expense  reimbursement,  accrued  and  unused
          vacation, medical, dental, disability and life insurance and severance
          payments. In connection with this agreement,  the President's employee
          stock  options  are  replaced  by a warrant to  purchase up to 150,000
          shares of common  stock  exercisable  at the closing bid price on July
          18, 1997 ($7/16).

     On August 21, 1997, the Company signed a Reorganization  and Stock Exchange
          Agreement (the Agreement) with the Ottomanelli  Group,  which includes
          the following four restaurants and food service  companies  affiliated
          through common  control;  34th Street Cafe  Associates,  Inc.,  Garden
          State  Cafe   Corporation,   Ottomanelli   Brothers  West,   Ltd.  and
          Ottomanelli's  Cafe  Franchising  Corporation.  The Ottomanelli  Group
          Companies  will  contribute  100% of its  outstanding  common stock in
          exchange for 37-1/2% of Rattlesnake  outstanding common stock, as well
          as  common  stock  purchase  warrants  equivalent  to  37-1/2%  of all
          outstanding   potentially  dilutive  securities,   including  options,
          warrants,  preferred  stock and  convertible  debt.  The  agreement is
          cancelable by either party prior to closing under  specified  terms in
          the Agreement.

     The contract also provides for the execution of employment and  non-compete
          agreements by specified Ottomanelli employees and the execution of the
          trademark license agreements.  Additionally, other conditions include:
          Rattlesnake  successfully entering into an agreement with the Series A
          Preferred shareholders to induce into conversion of common stock; that
          specified $500,000 of debt will be converted into equity; the $425,000
          mortgage on the Rattlesnake  Fairfield,  Connecticut  facility will be
          paid or assumed by a third  party;  the  securing of  $150,000  bridge
          financing;  and securing a commitment letter by an investment  banking
          firm of $1.5  million  equity  financing  under  terms and  conditions
          subject to the acceptance of Ottomanelli.

     On September  8, 1997,  the  Company   repriced  warrants  issued  to three
          Series C noteholders with principal  aggregating $62,499 in return for
          extension of the  re-payment  period to December  15, 1997.  If in the
          event  Rattlesnake  does not make payments by the extended date,  each
          will receive an additional 10,000 warrants at the same exercise price.

     On September  17,  1997,  the  Company  received  a  letter   from   NASDAQ
          indicating that the Company would be removed from the NASDAQ Small Cap
          listing at the close of  business  on  September  17,  1997 due to its
          failure to comply with the minimum capital and surplus  requirement of
          $1,000,000 and the $1.00 minimum stock price.

                                                                     (Continued)


                                      F-26


<PAGE>



                THE RATTLESNAKE HOLDING COMPANY, INC. AND SUBSIDIARIES

                 Notes to Consolidated Financial Statements, Continued


     On September  17, 1997,  the  Company  closed its  restaurant  facility  in
          Lynbrook, New York.

     On September 29, 1997, the Company  received  a demand  for payment for the
          $500,000 18%  convertible  notes  payable due  September 4, 1997.  The
          Company is negotiating with an investor to refinance this obligation.

     In September 1997,  the Company  completed  a bridge  financing under which
          it  sold  five  $50,000  units  totaling  $250,000.   Each  full  unit
          consisting of (i) the Company's ten percent (10%)  promissory  note in
          the principal amount of $50,000 (the "Note"),  and (ii) upon repayment
          of the Note,  one  four-year  warrant  for each  dollar  of  financing
          provided  herewith,  at the rate of one warrant  convertible  into one
          share of the  Company's  common  stock at the average bid price on the
          day of the receipt of the  financing.  In the event that the holder of
          the Note elects conversion rather than repayment of the Note, the Note
          shall be automatically  converted into convertible  preferred stock or
          promissory  notes  offered  in  a  private  placement   offering  (the
          "Proposed Private  Placement").  Such conversion shall occur, upon the
          closing of the Proposed Private Placement,  at a price per share equal
          to eighty percent (80%) of the per share  conversion price sold in the
          Proposed  Private  Placement.  In  the  event  that a  closing  of the
          proposed  Private  Placement shall not have occurred prior to December
          31, 1997, the Holder shall be entitled to receive  payment of the Note
          on that date.


                                      F-27