10QSB Quarterly Report

                     SECURITIES AND EXCHANGE COMMISSION
                            Washington, DC 20549

                                 FORM 10-QSB
                                 (Mark One)
            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended March 26, 2001

                                     OR

           [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from ____________ to ____________

                         Commission File No. 1-13818

                         Spencer's Restaurants, Inc.
               (Name of small business issuer in its charter)

               Delaware                                06-1369616
   (State or other jurisdiction of                 (I.R.S. Employer
   incorporation or organization)               Identification Number)

                              106 Federal Road
                              Danbury, CT 06810
             (Address of principal executive offices) (Zip Code)



     Registrant's telephone number, including area code: (203) 798-1390

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 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  [ ]

 66,153,121 Common Shares, par value $.001 per share were outstanding as of
                               March 26, 2001


<PAGE>


                                 FORM 10-QSB

                         Spencer's Restaurants, Inc.

                               March 26, 2001

                                    INDEX

Part I - Financial Information

Condensed Consolidated Balance Sheets as of March 26, 2001
(unaudited) and June 26, 2000 (audited)                                   3

Unaudited Condensed Consolidated Statements of Operations
for the thirteen and thirty nineweeks ended March 26, 2001
and March 27, 2000                                                        4

Unaudited Condensed Consolidated Statement of Cash Flows
for the thirty nine weeks ended March 26, 2001 and March 27, 2000         5

Unaudited Consolidated Statement of Stockholders Equity for
the thirty nine weeks ended March 26, 2001                                6

Notes to Unaudited Condensed Consolidated Financial Statements            7

Management's Discussion and Analysis                                      9

Liquidity                                                                13

Safe Harbor Statement                                                    14

Part II - Other Information

Item 1: Legal Proceedings                                                15

Item 2: Changes in Securities and use of Proceeds                        15

Item 3: Defaults Upon Senior Securities                                  15

Item 4: Submission of Matters Stockholders' vote                         15

Item 5: Other Information                                                15

Item 6: Exhibits and Reports on Form 8-K                                 15

Signatures                                                               16


<PAGE>  2


                SPENCER'S RESTAURANTS, INC. AND SUBSIDIARIES
                    Condensed Consolidated Balance Sheets
        As of March 26, 2001 (unaudited ) and June 26, 2000 (audited)

<TABLE>
<CAPTION>

                                                            UNAUDITED           AUDITED
                                                          March 26, 2001     June 26, 2000

<S>                                                        <C>               <C>
Cash                                                       $    376,363      $    374,507
Accounts Receivable                                              24,578            24,500
Inventory                                                        42,005            47,862
Prepaid Assets                                                  102,639             2,159
                                                           ------------------------------

Total Current Assets                                            545,585           449,028

Property and Equipment, Net                                   2,027,017         2,021,456
Intangable assets, net                                            8,476            13,744
Other assets                                                     14,329            18,776
                                                           ------------------------------

Total Assets                                               $  2,595,407      $  2,503,004
                                                           ==============================

Notes Payable, current portion                             $    216,678      $    258,344
Accounts Payable                                                388,929           486,714
Accrued Expenses                                                319,735           322,673
Dividends Payable                                               456,350           347,904
Other Payables                                                   53,491            77,555
                                                           ------------------------------

Total Current Liabilities                                     1,435,183         1,493,190

Notes Payable Other                                             800,000                 0
                                                           ------------------------------

Total Liabilities                                             2,235,183         1,493,190
                                                           ------------------------------

Par Value-Series B Conv. $0.10; 5,000,000 shares
 authorized; 298,692 shares issued and outstanding
 at 3/26/01; 315,076 shares issued and outstanding
 at 6/26/2000.                                                   29,869            31,507
Par Value-Common Stock $0.001; 400,000,000 shares
 authorized; 66,153,121 shares issued and outstanding
 at 3/26/01; 51,002,981 shares issued and outstanding
 at 6/26/2000.                                                   66,153            51,003

Additional Paid in Capital-Series B                           5,915,662         6,535,088
Additional Paid in Capital-Common                            15,066,218        14,476,583
Accrued Dividends                                              (456,350)         (347,904)
Common Stock Subscribed                                          80,000
Retained Earnings                                           (20,341,329)      (19,736,463)
                                                           ------------------------------

Total Stockholders Equity                                       360,224         1,009,814
                                                           ------------------------------

Total Liabilities and Stockholders Equity                  $  2,595,407      $  2,503,004
                                                           ==============================
</TABLE>

              See accompanying notes to the unaudited condensed
                      consolidated financial statements


<PAGE>  3


                SPENCER'S RESTAURANTS, INC. AND SUBSIDIARIES
          Unaudited Condensed Consolidated Statements of Operations
         Thirteen weeks ended March 26, 2001 and March 27, 2000 and
          Thirty nine weeks ended March 26, 2001 and March 27, 2000

<TABLE>
<CAPTION>

                                                       UNAUDITED                       UNAUDITED
                                                 Thirteen weeks ended:         Thirty nine weeks ended:
                                               26-Mar-01       27-Mar-00       26-Mar-01       27-Mar-00

<S>                                           <C>             <C>             <C>             <C>
Restaurant Sales                              $   841,242     $   893,869     $ 2,747,736     $ 1,775,680
Less Promo Sales                                   14,253          28,058          45,661          51,962
                                              -----------------------------------------------------------
Net Sales                                         826,989         865,811       2,702,075       1,723,718

Costs and Expenses
  Food & Beverage Cost                            293,600         299,778         970,399         613,688
  Salaries Wages & Employee Benefits              306,269         467,100       1,009,250       1,029,164
  Operating Expense                               163,236         244,322         494,215         568,688
  Occupancy                                        26,449          48,082          78,740         103,611
  Depreciation                                     24,874          20,786          74,141          38,357
                                              -----------------------------------------------------------
Total Restaurant Cost and Expense                 814,428       1,080,068       2,626,745       2,353,508
                                              -----------------------------------------------------------

Income (Loss) From Restaurant Operations           12,561        (214,257)         75,330        (629,790)

General & Administrative                          212,559         136,391         686,337         386,271
Loss on Restaurant Closure                              0               0               0          42,800
Total General & Administrative Expense            212,559         136,391         686,337         429,071
                                              -----------------------------------------------------------

Total Loss from operations                       (199,998)       (350,648)       (611,007)     (1,058,861)

Other Expense (Income) Net                         (2,375)              0          (6,840)              0
Interest Expense (Income) Net                      28,333          26,663          48,747          26,663
                                              -----------------------------------------------------------
                                                   25,958          26,663          41,907          26,663
                                              -----------------------------------------------------------

Net Loss Before Extraordinary Item               (225,956)       (377,311)       (652,914)     (1,085,524)

Extraordinary Item
 Gain on Extingushment of Debt                      1,734               0          48,049               0
                                              -----------------------------------------------------------

Net Loss Available to Shareholders               (224,222)       (377,311)       (604,865)     (1,085,524)

Dividends on Preferred Shares                     154,246         178,450         456,349         521,768
                                              -----------------------------------------------------------

Net Loss Available to Common Shareholders        (378,468)       (555,761)     (1,061,214)     (1,607,292)
                                              ===========================================================

Net Loss Per Share:
  Before Extraordinary Item                   $     (0.01)    $     (0.02)    $     (0.02)    $     (0.05)
  Extraordinary item                                    -               -               -               -
                                              -----------------------------------------------------------
  Net Loss Basic And Diluted                  $     (0.01)    $     (0.02)    $     (0.02)    $     (0.05)
                                              ===========================================================

Weighted Average Number Of Common
 Shares Outstanding                            65,958,008      29,979,013      61,042,304      29,979,013
                                              ===========================================================
</TABLE>

              See accompanying notes to the unaudited condensed
                      consolidated financial statements


<PAGE>  4


                SPENCER'S RESTAURANTS, INC. AND SUBSIDIARIES
          Unaudited Condensed Consolidated Statements of Cash Flows
          Thirty nine weeks ended March 26, 2001 and March 27, 2000

<TABLE>
<CAPTION>

                                                                   UNAUDITED          UNAUDITED
                                                                ----------------------------------
                                                                March 26, 2001     March 27, 2000

<S>                                                               <C>               <C>
CASH FLOW FROM OPERATING ACTIVITY
  Adjustments to reconcile net loss to net cash used in
   operating activities:
    Net Income (Loss)                                             $(604,865)        $(1,085,524)
    Depreciation and Amortization                                   109,914              38,357
    Gain on Extinguishment of Debt                                  (48,049)
    Loss on conversion of asset                                           0              42,800
  Stock issued for services preformed                                     0              72,909
  Changes in assets and liabilities:
    Decrease (Increase) In Inventory                                  5,856             (25,126)
    Decrease (Increase) In Accts. Rec.                                  (77)               (329)
    Decrease (Increase) In Prepaid and Other Current Assets         (90,080)            (23,386)
    Decrease (Increase) In intangible assets
    Decrease (Increase) In Other Assets                               4,448
    Increase (Decrease) In Accounts Payable                         (61,201)           (123,618)
    Increase (Decrease) In Accrued Expenses                           8,526
    Increase (Decrease) In Other Payables                           (24,064)            (14,645)
                                                                  -----------------------------

      NET CASH USED IN OPERATING ACTIVITIES                        (699,592)         (1,118,562)
                                                                  -----------------------------

CASH FLOW FROM INVESTING ACTIVITY
  (Increase) Decrease In Property and Equipment                    (110,207)           (663,766)
                                                                  -----------------------------

      NET CASH USED IN INVESTING ACTIVITIES                        (110,207)           (663,766)
                                                                  -----------------------------

CASH FLOW FROM FINANCINIG ACTIVITY
  Increase (Decrease) In Long Term Debt                             800,000
  Principal repayments of Borrowings                                (41,666)
  Proceeds from Common Stock Subscription                            69,600
  Proceeds from Issuance of Preferred Stock                               0              50,000
  Issuance Cost                                                     (16,279)
                                                                  -----------------------------
      NET CASH PROVIDED BY FINANCING ACTIVITIES                     811,655              50,000
                                                                  -----------------------------

  Increase (Decrease) In Cash                                         1,856          (1,732,328)

Cash Beginning                                                      374,507           2,337,675
                                                                  -----------------------------

Cash Ending                                                       $ 376,363         $   605,347
                                                                  =============================

Cash paid during period for interest                              $  65,956         $         -
                                                                  =============================
</TABLE>

              See accompanying notes to the unaudited condensed
                      consolidated financial statements


<PAGE>  5


                SPENCER'S RESTAURANTS, INC. AND SUBSIDIARIES
           Unaudited Consolidated Statement of Stockholders Equity
                   Thirty nine weeks ended March 26, 2001

<TABLE>
<CAPTION>

                                                                                        Preferred     Preferred       Common
                                                              Common        Common       Shares         Stock         Stock
                                                              Shares        Stock       Series B      Series B      Subscribed
                                                              ------        ------      ---------     ---------     ----------

<S>                                                         <C>            <C>           <C>           <C>           <C>
BALANCE, JUNE 26, 2000                                      51,002,981     $ 51,003      315,076       $31,507       $     -
                                                            ----------------------------------------------------------------

Common Stock Subscribed                                                                                               80,000
Conversion of Series B preferred stock to common stock      15,150,140       15,150      (30,300)       (3,030)
                                                            ----------------------------------------------------------------
Issuance of series B preferred stock as dividend                                          13,916         1,392
                                                            ----------------------------------------------------------------
Issuance Cost
Accrued dividends - Series B
Net loss for the thirty-nine weeks ended March 26, 2001
BALANCE, March 26, 2001 (unaudited)                         66,153,121     $ 66,153      298,692       $29,869       $80,000
                                                            ================================================================

<CAPTION>

                                                               Additional                                            Additional
                                                            Paid-in Capital-      Accrued        Accumulated      Paid-in Capital-
                                                            Preferred Stock      Dividends         Deficit          Common Stock
                                                            ---------------      ---------      -----------       ----------------

<S>                                                            <C>               <C>            <C>                 <C>
BALANCE, JUNE 26, 2000                                         $6,535,088        $(347,904)     $(19,736,463)       $14,476,583
                                                               ----------------------------------------------------------------

Common Stock Subscribed
Conversion of Series B preferred stock to common stock           (601,755)                                              589,635
                                                               ----------------------------------------------------------------
Issuance of series B preferred stock as dividend                   (1,392)         347,900
                                                               ----------------------------------------------------------------
Issuance Cost                                                     (16,279)
                                                               ----------------------------------------------------------------
Accrued dividends - Series B                                                      (456,345)
                                                               ----------------------------------------------------------------
Net loss for the thirty-nine weeks ended March 26, 2001                                             (604,865)
                                                               ----------------------------------------------------------------
BALANCE, March 26, 2001 (unaudited)                            $5,915,662        $(456,349)     $(20,341,328)       $15,066,218
                                                               ================================================================
</TABLE>


<PAGE>  6


SPENCER'S RESTAURANTS, INC. AND SUBSIDIARIES: NOTES TO UNAUDITED
 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Consolidated Financial Statements.

      The accompanying unaudited condensed consolidated financial
statements were prepared in accordance with generally accepted accounting
principles and include all adjustments which, in the opinion of management,
are necessary to present fairly the consolidated financial position of the
Company as of March 26, 2001, the consolidated results of operations for
the thirteen and thirty nine weeks ended on March 26, 2001 and March 27,
2000, consolidated statement of cash flows for the thirty nine weeks ended
on March 26, 2001 and March 27, 2000 and the consolidated statement of
stockholders equity for the thirty nine weeks ended on March 26, 2001. In
the opinion of management, all necessary adjustments that were made are of
a normal recurring nature. The balance sheet at June 26, 2000 was derived
from audited financial statements

      Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these consolidated financial statements be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year-end June 26, 2000. The
results of operations for the period ended March 26, 2001 are not
necessarily indicative of the operating results, which may be achieved for
the full year.

2. Basis of Presentation

      Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. All
material intercompany balances and intercompany transactions have been
eliminated. Actual results could differ from those estimates.

      The accompanying unaudited condensed 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, the Company's continuation as a going concern cannot be
reasonably assured.

3. Description of Business

      Spencer's Restaurants, Inc. (formerly known as The Rattlesnake
Holding Company, Inc.), a Delaware corporation (unless the context
otherwise indicates, with its subsidiaries, the "Company"), was formed and
commenced operations in 1993, and effected an initial public offering of
its stock in 1995 to develop, build and operate a chain of casual dining
southwestern restaurants under the name Rattlesnake(r) Southwestern Grill. At
one time, the Company operated a total of 8 restaurants in the New York
metropolitan area. Management was unable to operate the restaurants
profitably, failed to control general and administrative expenses and did
not develop a workable growth strategy. As a consequence, the Company
experienced substantial losses and incurred a significant amount of debt.
In 1997, the Board of Directors elected certain of its members as officers
to take control of operations and replace the existing management pursuant
to its cost reduction plan. The Company then disposed of development
projects and non-performing restaurants, negotiated severance agreements
with the former management, and sharply reduced general and administrative
expenses.

      In fiscal 1999, 106 Federal Road Restaurant Corp., our wholly-owned
subsidiary, purchased the Danbury, Connecticut facility previously closed.
The restaurant has been remodeled and reconfigured to serve as the first
location for our new 200 seat Spencer's Steak and Shrimp restaurant
concept.


<PAGE>  7


      In fiscal 2000, we opened the new Spencer's Steak and Shrimp
restaurant. Through March 26, 2001 its operations have been satisfactory.

      We continue to operate a self-sustaining Rattlesnake(r) Southwestern
Grill in South Norwalk, Connecticut

4. Management Plans

      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
$20,341,329, inclusive of a net loss for the thirty nine weeks ended March
26, 2001 of $604,865 and at March 26, 2001 had a working capital deficit of
$889,598. Additionally, $195,840 of Series B convertible subordinated notes
payable matured on July 7, 2000, $18,749 of Series C subordinated notes
payable matured on August 6, 1997, and a $2,089 Series A subordinated note
payable matured on August 6, 1996, are in default as of March 26, 2001.

      The Company anticipates that it will require additional working
capital to fund operations. The Company believes that it will have
sufficient capital to meet these obligations and implement an expansion
strategy through a secondary stock offering. In addition, in October 2000,
the Company obtained financing on its real estate holdings at 106 Danbury
Road (See Note 6). However there can be no assurance that the Company will
have sufficient capital to support operations and implement its business
plan.

5. Prepaid Assets

      The Company's prepaid assets as of March 26, 2001 are as follows;

<TABLE>

      <S>                                    <C>
      Prepaid insurance                      $ 11,785
      Deferred offering costs                  60,429
      Other                                    27,575
                                             --------
      Total                                  $102,639
</TABLE>

6. Debt

      On October 19, 2000 the Company closed on an $800,000 sale, leaseback
and purchase option (the "Transaction") for its 106 Federal Road property
(the "Property") owned by 106 Federal Road, Inc., a wholly owned subsidiary
of the Company. The Transaction consisted of a sale of the Property to
Mercury Capital Corporation, which in turn leased back the Property to 106
Federal Road, Inc. The Company has the right to purchase back the Property
for $800,000 at a date no earlier than May 1, 2001 and no later than
November 9, 2002. For accounting purposes the Transaction was recorded as a
financing of the property. The note calls for payments of interest only at
14.5% totaling $9,667 per month.

7. Stockholder's Equity

Preferred Stock
---------------

      For the thirteen weeks ended March 26, 2001, 1,420 shares of Series B
preferred stock were converted to 710,210 shares of common stock. For the
thirty nine weeks ended March 26, 2001, 30,300 shares of Series B preferred
stock were converted to 15,150,000 shares of common stock.

      In September 2000, the Company issued 13,916 shares of Series B
preferred stock as payment of dividends declared for the $347,904 of
accrued dividends as of June 26, 2000. Total dividends accrued as of March
26, 2001 are $456,350.


<PAGE>  8


Common Stock
------------

      For the thirty nine weeks ended March 26, 2001, the Company was able
to raise $69,600, net of $10,400 offering costs, in a private placement. At
quarter end the shares had not been issued pending a possible repricing of
the shares.

8. Reclassification

      Reclassification of certain expense captions have been made to the
statement of operations for fiscal quarter and thirty nine weeks ending
March 27, 2000 to conform to the March 26, 2001 presentation. In addition
$244,322 was reclassified from general and administrative to operating
expense for the thirteen weeks ending March 27, 2000 and $568,688 for the
thirty nine weeks ending March 27, 2000.

      The impact of the reclassification did not result in changes to the
balance sheet and consolidated statement of cash flows for the thirty nine
weeks ending March 27, 2000.

9. Litigation

      The Company is defending an action brought by Jack Cioffi Trust, the
landlord of a former Rattlesnake restaurant in Lynbrook New York leased by
a subsidiary of the Company. The action against the Company is based on an
alleged guaranty of the lease payments due from the subsidiary of the
Company. The Company is of the position that the landlord waived the
guarantee at the time of the surrender of the premises in September 1997.
The action seeks the sum of approximately $190,000. On October 2, 2000 the
Company received notification from its attorneys regarding the Cioffi Trust
case indicating the case is Certified, ready for trial. On November 2, 2000
plaintiff filed the Note of Issue and Certificate of Readiness. As of March
26, 2001 a trial date of May 7, 2001 been set. The Company intends to
vigorously defend this action.

10. Subsequent Events

      On March 30, 2001, the Company entered into an agreement to purchase
the assets and take assignment of the lease on an existing restaurant in
Glastonbury, CT. There is no assurance that this acquisition will be
consummated.

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS.

      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 issued in its 10-KSB
report for the fiscal period June 26, 2000.

      This analysis by management contains some forward-looking statements.
When we use the words "anticipate," "believe," "estimate," "expect," and
similar expressions that relate to the Company and its management, they are
intended to identify such forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Our actual results
performance and achievements could differ materially from the results
expressed or implied by these forward-looking statements.

      In connection with its February 1999 Offering the Company was
required to file a registration statement with the Securities and Exchange
Commission. The Company filed a registration statement on August 16, 1999
and July 2000, filed a first amendment to the registration statement.

      On October 19, 2000 the Company closed on an $800,000 sale, leaseback
and purchase option (the "Transaction") for its 106 Federal Road property
(the "Property") owned by 106 Federal Road, Inc., a wholly


<PAGE>  9


owned subsidiary of the Company. The Transaction consisted of a sale of the
Property to Mercury Capital Corporation, which in turn leased back the
Property to 106 Federal Road, Inc. The Company has the right to purchase
back the Property for $800,000 at a date no earlier than May 1, 2001 and no
later than November 9, 2002. For accounting purposes the Transaction was
recorded as a financing of the property. The note calls for payments of
interest only at 14.5% totaling $9,667 per month.

      The Company presently operates a Rattlesnake Southwestern Grill in
South Norwalk, Connecticut and the Spencer's Restaurant in Danbury, CT.
The Company has closed all other restaurants previously owned as of June
30, 1999.

Operating results for the thirteen weeks ended March 26, 2001 as compared
 with the thirteen weeks ended March 27, 2000 are as follows:

      Gross restaurant sales decreased $52,627 or 5.9% to $841,242 for the
thirteen weeks ended March 26, 2001 from $893,869 for the thirteen weeks
ended March 27, 2000. Net restaurant sales decreased $38,822 or 4.5% to
$826,989 for the thirteen weeks ended March 26, 2001 from $865,811 for the
thirteen weeks ended March 27, 2000. These decreases in restaurant sales
are primarily the result of several lost business days due to poor weather
throughout the third quarter of fiscal 2001.

      Promotional sales decreased $13,805 or 49.2% to $14,253 for the
thirteen weeks ended March 26, 2001 from $28,058 for the thirteen weeks
ended March 27, 2000. The decrease is attributable to the commencement of
operations of the new Spencer's restaurant that opened November 3, 1999.
Promotional sales as a percentage of net sales decreased 1.5% to 1.7% from
3.2% in the respective periods

      Cost of food and beverage sales decreased $6,178 or 2.1% to $293,600
for the thirteen weeks ended March 26, 2001 from $299,778 for the thirteen
weeks ended March 27, 2000. Cost of food and beverage as a percentage of
net sales increased .9% to 35.5% from 34.6% in the respective periods. The
percentage increase is attributable to higher commodity prices.

      Restaurant salaries and fringe benefits, which consist of direct
salaries of restaurant managers, hourly employee wages related fringe
benefits and bonuses, decreased $160,831 or 34.4% to $306,269 for the
thirteen weeks ended March 26, 2001 from $467,100 for the thirteen weeks
ended March 27, 2000. Restaurant salaries and fringe benefits as a
percentage of net sales decreased 16.9% to 37.0% from 54.0% in the
respective periods. The decrease, as a percentage, is primarily
attributable to stricter cost control measures and the prior year reporting
of corporate salaries in this line item.

      Operating expense decreased $81,086 or 33.2% to $163,236 for the
thirteen weeks ended March 26, 2001 from $244,322 for the thirteen weeks
ended March 27, 2000. Operating expense as a percentage of net sales
decreased 8.5% to 19.7% from 28.2% in the respective periods, due to cost
reduction measures.

      Occupancy and other related expenses, which include rent and common
area maintenance, decreased $21,633 or 45.0% to $26,449 for the thirteen
weeks ended March 26, 2001 from $48,082 for the thirteen weeks ended March
27, 2000. Occupancy as a percentage of net sales decreased 2.4% to 3.2%
from 5.6% in the respective periods.

      Depreciation and amortization expense increased $4,088 or 19.7% to
$24,874 for the thirteen weeks ended March 26, 2001 from $20,786 for the
thirteen weeks ended March 27, 2000. The increase is attributable to assets
at the new restaurant in Danbury. Depreciation and amortization expense as
a percentage of net sales increased 0.6% to 3.0% from 2.4% in the
respective periods.

      General and administrative expenses which includes, among other
things, legal accounting and professional fees, corporate and training
salaries increased $76,168 or 55.9% to $212,559 for the thirteen weeks
ended March 26, 2001 from $136,391 for the thirteen weeks ended March 27,
2000. The increase is attributable to costs associated with the various
legal matters as well as amortization of loan fees and the
reclassifications as


<PAGE>  10


mentioned in note 8. General and administrative expense as a percentage of
net sales increased 9.9% to 25.7% from 15.8% in the respective periods.

      Other expense (income) net increased $2,375 or 100% to ($2,375) for
the thirteen weeks ended March 26, 2001 from $0 for the thirteen weeks
ended March 27, 2000. Other expense (income) as a percent of net restaurant
sales increased .3% to .3% from 0% in the prior period.

      Interest expense (income) net, increased $1,670 or 6.3% to $28,333
for the thirteen weeks ended March 26, 2001 compared to $26,663 for the
thirteen weeks ended March 27, 2000. Interest expense is for Series B notes
payable due July 2000 that carry interest of 9% per annum and financing of
the 106 Federal Road property, less interest earned on available cash
balances.

      Gain on extinguishment of debt increased $1,734 or 100% to $1,734 for
the thirteen weeks ended March 26, 2001 from $0 for the thirteen weeks
ended March 27, 2000. Gain on extinguishment of debt as a percent of net
restaurant sales increased .2% to .2% from 0.0% in the respective periods.
This is attributable to the write off of certain payables.

      Net Loss available to common shareholders decreased $177,293 or 31.9%
to $378,468 for the thirteen weeks ended March 26, 2001 compared to
$555,761 for the thirteen weeks ended March 27, 2000. Net Loss available to
common shareholders as a percent of net restaurant sales decreased 18.4% to
45.8% from 64.2% in the respective periods.

Operating results for the thirty nine weeks ended March 26, 2001 as compared
 with the thirty nine weeks ended March 27, 2000 are as follows:

      Gross restaurant sales increased $972,056 or 54.7% to $2,747,736 for
the thirty nine weeks ended March 26, 2001 from $1,775,680 for the thirty
nine weeks ended March 27, 2000. Net restaurant sales increased $978,358 or
56.8% to $2,702,075 for the thirty nine weeks ended March 26, 2001 from
$1,723,718 the thirty nine weeks ended March 27, 2000. These increases in
restaurant sales are primarily due to the new Spencer's restaurant, which
opened in November of 1999.

      Promotional sales decreased $6,301 or 12.1% to $45,661 for the thirty
nine weeks ended March 26, 2001 from $51,962 for the thirty nine weeks
ended March 27, 2000. The decrease is attributable to the commencement of
operations of the new Spencer's restaurant that opened November 3, 1999.
Promotional sales as a percentage of net sales decreased 1.3% to 1.7% from
3.0% in the respective periods

      Cost of food and beverage sales increased $356,711 or 58.1% to
$970,399 for the thirty nine weeks ended March 26, 2001 from $613,688 for
the thirty nine weeks ended March 27, 2000. This is due to the addition of
the Danbury location. Cost of food and beverage as a percentage of net
sales increased 0.3% to 35.9% from 35.6% in the respective periods.

      Restaurant salaries and fringe benefits, which consist of direct
salaries of restaurant managers, hourly employee wages related fringe
benefits and bonuses, decreased $19,914 or 1.9% to $1,009,250 for the
thirty nine weeks ended March 26, 2001 from $1,029,164 for the thirty nine
weeks ended March 27, 2000. Restaurant salaries and fringe benefits as a
percentage of net sales decreased 22.4% to 37.4% from 59.8% in the
respective periods. The decrease, as a percentage, is primarily
attributable the prior year reporting of corporate salaries in this line
item and tighter cost control measures in the thirty nine weeks ended March
26, 2001.

      Operating expense decreased $74,473 or 13.1% to $494,215 for the
thirty nine weeks ended March 26, 2001 from $568,688 for the thirty nine
weeks ended March 27, 2000. Operating expense as a percentage of net sales
decreased 14.7% to 18.3% from 33.0% in the respective periods, due to
stricter cost control measures.

      Occupancy and other related expenses, which include rent and common
area maintenance, decreased $24,871 or 24.0% to $78,470 for the thirty nine
weeks ended March 26, 2001 from $103,611 for the thirty nine


<PAGE>  11


weeks ended March 27, 2000. Occupancy as a percentage of net sales decreased
3.1% to 2.9% from 6.0% in the respective periods. The percentage decrease is
due to the additional restaurant sales.

      Depreciation and amortization expense increased $35,784 or 93.3% to
$74,141 for the thirty nine weeks ended March 26, 2001 from $38,357 for the
thirty nine weeks ended March 27, 2000. The increase is attributable to
assets at the new restaurant in Danbury. Depreciation and amortization
expense as a percentage of net sales increased 0.5% to 2.7% from 2.2% in
the respective periods.

      General and administrative expenses which includes, among other
things, legal accounting and professional fees, corporate depreciation and
amortization, corporate and training salaries increased $300,066 or 77.7%
to $686,337 for the thirty nine weeks ended March 26, 2001 from $386,271
for the thirty nine weeks ended March 27, 2000. The increase is
attributable to administrative costs associated with the new restaurant,
loan fee amortization as well as costs associated with the various legal
matters and the reclassifications as mentioned in item 8 (above). General
and administrative expense as a percentage of net sales increased 3.0% to
25.4% from 22.4% in the respective periods. The percentage reduction from
prior year is the result of added sales from the new restaurant.

      Loss on restaurant closure decreased $42,800 or 100% to $0 for the
thirty nine weeks ended March 26, 2001 from $42,800 for the thirty nine
weeks ended March 27, 2000. Loss on restaurant closure as a percent of net
restaurant sales decreased 2.5% to 0% from 2.5% in the respective periods.
This is attributable to the 1999 closing of the Flemington location.

      Other expense (income) net increased $6,840 or 100% to ($6,840) for
the thirty nine weeks ended March 26, 2001 from $0 for the thirty nine
weeks ended March 27, 2000. Other expense (income) as a percent of net
restaurant sales increased .3% to .3% from 0% in the prior period.

      Interest expense (income) net, increased $22,084 or 82.8% to $48,747
for the thirty nine weeks ended March 26, 2001 compared to $26,663 for the
thirty nine weeks ended March 27, 2000. Interest expense as a percentage of
net sales increased .2% to 1.8% from 1.6% in the respective periods.
Interest expense is for Series B notes payable, due July 2000 that carry
interest of 9% per annum and financing of the 106 Federal Road property,
less interest earned on available cash balances.

      Gain on extinguishment of debt increased $48,049 or 100% to $48,049
for the thirty nine weeks ended March 26, 2001 from $0 for the thirty nine
weeks ended March 27, 2000. Gain on extinguishment of debt as a percent of
net restaurant sales increased 1.8% to 1.8% from 0.0% in the respective
periods. This is attributable to the write off of certain payables from a
closed location.

      Net Loss available to common shareholders decreased $546,078 or 34.0%
to $1,061,214 for the thirty nine weeks ended March 26, 2001 compared to
$1,607,292 for the thirty nine weeks ended March 27, 2000. Net Loss
available to Shareholders decreased as a percent of net restaurant sales
decreased 54.0% to 39.3% from 93.3% in the respective periods.

ACCOUNTING STANDARDS RECENTLY ADOPTED

      In June 1998, Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("Statement
133"), was issued and amended by Statement 138 in June, 2000 which is
effective for fiscal years beginning after June 15, 2000. Statement 133
standardizes the accounting for derivative instruments and requires that
all derivative instruments be carried at fair value. The Company adopted
Statement 133 in the first quarter of fiscal 2001 and did not result in any
cumulative effect of a change in accounting principle.


<PAGE>  12


ACCOUNTING STANDARDS TO BE ADOPTED

      During 2000, the Emerging Issues Task Force issued EITF No. 00-14,
"Accounting for Certain Sales Incentives." EITF issue No. 00-14 addresses
the recognition, measurement and statement of earnings classification for
certain sales incentives and will be effective in the fourth quarter of
2001. Due to anticipated additional consideration of EITF No. 00-14 by the
EITF, the Company is currently unable to quantify the impact of adoption.
The Company presently expects that adoption or subsequent application of
EITF No. 00-14 will not have a material effect on its financial position or
results of operation. Upon adoption, prior period amounts will be
reclassified to conform to the new requirements.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

      The Company is not subject to interest rate risk, as substantially all
borrowings are fixed rate obligations. However, the Company has exposure to
commodity risk, including the dependence on the rapid availability of food,
principally steak and shrimp, and fluctuations in price of these commodities.
Although the Company believes that its relationships with suppliers are
satisfactory and that alternative sources are available, the loss of certain
suppliers, or substantial price increases, could have a material adverse
effect on the Company.

YEAR 2000 MODIFICATIONS:

      The Year 2000 Issue was the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may have
recognized a date using "00" as the year 1900 rather than the year 2000,
resulting in possible system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to
process certain transactions, send invoices, or engage in similar normal
business activities.

      The Company did not experience any year 2000 issues.

LIQUIDITY

      The Company has a history of losses, which has depleted its capital
resources. At the present time, and without additional funding, the Company
will have to abandon its plan for the development of the Spencer's concept
through the opening of additional Spencer's restaurants, and will have to
reduce its corporate overhead. The Company is presently seeking additional
equity funding, but there can be no assurance that the same will be
obtained, particularly in a difficult financing environment. See Management
Discussion and Analysis, above.

      The Company has incurred aggregate losses since inception of
$20,341,329, inclusive of a net loss for the thirty nine weeks ended March
26, 2001 of $604,865 and at March 26, 2001 had a working capital deficit of
$889,598. Additionally, $195,840 of Series B convertible subordinated notes
payable matured on July 7, 2000, $18,749 of Series C subordinated notes
payable matured on August 6, 1997, and a $2,089 Series A subordinated note
payable matured on August 6, 1996, are in default as of March 26, 2001.

      On July 2, 1999 the Company sold an additional 2,000 shares of its
Series B Preferred Stock for a value of $50,000 as part of its Offering.

      The preferred shares will be convertible, at the option of the holder
at any time after November 1999, at a conversion price initially equal to
$0.05 per share of common stock. The conversion rate will be reduced by 10%
per month for each month the Company fails to comply with its obligations
to file, and in good faith process, a registration statement.

      Dividends on the Series B Preferred for the first second and third
quarters were accrued at 8% per annum totaling $456,350.


<PAGE>  13


      Dividends were paid in September 2000 in the form of 13,916
additional shares of Series B Preferred Stock.

      Cash flows used in operating activities for the six months ended
March 26, 2001 were ($699,592) as opposed to ($1,118,562) for the same
period in the previous year.

      Cash flows used in investing activities were ($110,207) for the
thirty nine weeks ended March 26, 2001 whereas in March 27, 2000, for the
thirty nine weeks, ($663,766) accounted for the cash flows used in
investing activities. This difference can be attributed to the preparations
of the new restaurant, Spencer's. The Company does not have further
commitments for capital expenditures beyond the completion of the Danbury
location except those normally associated with day-to-day operations.
However, the Company does plan to expand the Spencer's concept and should
that occur, further capital expenditures would be required.

      Cash flows from financing activities were $811,655 for the thirty
nine weeks ended March 26, 2001, whereas for the thirty nine weeks ended
March 27, 2000 cash flows from financing activities were $50,000 due to the
sale of Series B Preferred Stock in July 1999. This reflects funds received
for the sale-leaseback and an equity subscription.

      Given the above, cash during the thirty nine weeks ended March 26,
2001 increased by $1,856 as compared to a decrease of $1,732,328 during the
thirteen weeks ended December 27, 1999. The decrease during 2000 is
attributable to the opening of the Danbury location in fiscal 2000.

      At March 26, 2001, the following obligations are past due and in
default; (i) $195,840 of Series B convertible subordinated notes payable
matured on July 7, 2000; and (ii) $18,750 of Series C subordinated notes
payable, matured in August 1997 and a $2,089 subordinated note payable
matured in August 1996 (the Company has been unable to locate either
noteholder). The Company is currently seeking to restructure the Series B
Preferred notes and/or to exchange the same for equity, although there can
be no assurance of the same.

      At June 26, 2000 the Company reported, in its 10-KSB, a net operating
loss carry forward ("NOL") of $18,290,000; however, due to a greater than
50% change in ownership, the Company's recomputed NOL as of December 25,
2000 is $8,917,137 available to offset future taxable income, if any,
before 2019. According to Internal Revenue Code section 382, as amended, a
change in more than 50% in the beneficial ownership of the Company within a
three year period (an "Ownership Change") places a limit on the Company's
ability to utilize its existing NOL carry forwards to offset taxable income
in current and future periods. The maximum annual amount of taxable income
that can be offset by the NOL is $445,857. If there is no taxable income
this amount can be carried over each year for twenty years.

SAFE HARBOR STATEMENT

      Certain statements in this Form 10-QSB, including information set
forth under "Management's  Discussion and Analysis of Financial Condition
and Results of Operations" constitute  "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Act"). The Company desires to avail itself of certain "safe harbor"
provisions of the Act and is therefore including this special note to
enable the Company to do so. Forward-looking statements included in this
Form 10-QSB or hereafter included in other publicly available documents
filed with the Securities and Exchange Commission, reports to the Company's
stockholders and other publicly available statements issued or released by
the Company involve known and unknown risks, uncertainties, and other
factors which could cause the Company's actual results, performance
(financial or operating) or achievements to differ from the future results,
performance (financial or operating) or achievements expressed or implied
by such forward looking statements. Such future results are based upon
management's best estimates based upon current conditions and the most
recent results of operations. These risks include, but are not limited to,
risks associated with potential acquisitions, successful implementation of
the Company's cost containment plan and new operating strategy, immediate
need for additional capital, competition, and other risks detailed in the
Company's Securities and Exchange


<PAGE>  14


Commission filings, including its Annual Report on Form 10-KSB for the
fiscal year 2000, each of which could adversely affect the Company's business
and the accuracy of the forward looking statements contained herein.


PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

Lynbrook, New York

      The Company is defending an action brought by Jack Cioffi Trust, the
landlord of a former Rattlesnake restaurant in Lynbrook New York leased by
a subsidiary of the Company. The action against the Company is based on an
alleged guaranty of the lease payments due from the subsidiary of the
Company. The Company is of the position that the landlord waived the
guarantee at the time of the surrender of the premises in September 1997.
The action seeks the sum of approximately $190,000. On October 2, 2000 the
Company received notification from its attorneys regarding the Cioffi Trust
case indicating the case is Certified, ready for trial. On November 2, 2000
plaintiff filed the Note of Issue and Certificate of Readiness. As of March
26, 2001 a trial date has been set for May 7, 2001. The Company intends to
vigorously defend this action.

Item 2 - Changes in Securities and Use of Proceeds

      None.

Item 3 - Defaults Upon Senior Securities

      None.

Item 4 - Submission of Matters to a Vote of Stockholders during the quarter
ending March 26, 2001:

      None.

Item 5. - Other Information.

      The Company securities are traded on the NASDAQ Bulletin Board. Due
to the nature of such markets and the "penny stock' rules to which the
common stock trades (Rule 15g-9 promulgated under the SEC Act) there may
not be a liquid trading market in the common stock.

Item 6. - Exhibits and Reports on Forms 8-K.

None.


<PAGE>  15


SIGNATURES

      Pursuant to the requirements 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.

                                       Spencer's Restaurants, Inc.
                                       (Registrant)


April 19, 2001                         By: /s/ Kenneth Berry
                                           ---------------------------
                                           Kenneth Berry
                                           President / CEO

April 19, 2001                         By: /s/ John S. Reuther, Jr.
                                           ---------------------------
                                           John S. Reuther, Jr.
                                           CFO


<PAGE>  16