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 27, 2000

                                       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)

                      The Rattlesnake Holding Company, Inc.
                                  (former Name)

       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

   29,979,013 Common Shares, par value $.001 per share were outstanding as of
                                 March 27, 2000

<PAGE>


                                   FORM 10-QSB

                           Spencer's Restaurants, Inc.

                                 March 27, 2000

                                      INDEX
<TABLE>
<S>                                                                                             <C>





Part I - Financial Information

Condensed Consolidated Balance Sheets as of March 27, 2000  (unaudited)                         3
         and June 30, 1999

Unaudited Condensed Consolidated Statements of Operations for three months
and nine months ended  March 27, 2000 and March 31, 1999                                        4

Unaudited Condensed Consolidated Statements of Cash Flows for nine months ended                 5
       March 27, 2000 and March 31, 1999

Notes to Unaudited Condensed Consolidated Financial Statements                                  6

Management's Discussion and Analysis                                                            9

Liquidity
11

Safe Harbor Statement                                                                           13


Part II - Other Information

Item 1:  Legal Proceedings                                                                      13

Item 2:  Changes in Securities and use of Proceeds                                              14

Item 3:  Defaults Upon Senior Securities                                                        14

Item 4:  Submission of Matters Stockholders' vote                                               14

Item 5:  Other Information                                                                      14

Item 6:  Exhibits and Reports on Form 8-K                                                       14

Signatures                                                                                      14
</TABLE>
<PAGE>


                  SPENCER'S RESTAURANTS, INC. AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                        March 27, 2000 and June 30, 1999
<TABLE>
<S>                                                       <C>                                <C>


                                                              March 27, 2000                  June 30, 1999
ASSETS                                                         Unaudited
Cash                                                      $             605,347              $      2,337,675
Accounts receivable                                                      10,083                         9,754
Inventory                                                                41,814                        16,688
Prepaids and other assets                                                29,082                        11,918
                                                          ---------------------------------------------------
Total current assets                                                    686,326                     2,376,035

Fixed assets, net                                                     2,069,563                     1,445,079
Intangibles, net                                                         10,256                        20,769
Other assets                                                             82,605                        76,383
                                                          ---------------------              ----------------
                                                                      2,162,424                     1,542,231
                                                          ---------------------------------------------------
Total assets                                               $          2,848,750              $      3,918,266
                                                          ===================================================


LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long term debt                       $            258,344                        55,838
Accounts payable                                                        792,973                       689,679
Accrued expenses                                                        451,309                       678,221
Dividends payable                                                       178,450                       198,846
Other current liabilities                                               156,976                       171,621
                                                          ---------------------------------------------------
Total current liabilities                                             1,838,052                     1,794,205

Notes payable, net of current maturities                                      -                       242,504
                                                          ---------------------              ----------------

Total liabilities                                          $          1,838,052                     2,036,709
                                                          ===================================================

Series B Preferred Stock                                                 35,690                        32,856
  $.10 par value,  5,000,000 shares  authorized
  March 27, 2000 and June 30, 1999 and 356,909
  and 328,563  shares issued and  outstanding
  at March 27, 2000 and June 30, 1999, respectively

Common Stock                                                             29,980                        29,980
  $.001 par value, 400,000,000 shares
  authorized; 29,979,013 issued and
  outstanding at March 27, 2000 and June 30, 1999

Additional paid in capital                                           20,986,092                    20,794,657

Accrued dividends                                                      (178,450)                     (198,846)
Accumulated deficit                                                 (19,862,614)                  (18,777,090)
                                                          ----------------------------------------------------
Total stockholders' equity                                            1,010,698                      1,881,557
                                                          ----------------------------------------------------
Total liabilities & stockholders' equity                   $          2,848,750                      3,918,266
                                                          ====================================================


See accompanying notes to the unaudited condensed consolidated financial statements.
</TABLE>
<PAGE>

                  SPENCER'S RESTAURANTS, INC. AND SUBSIDIARIES
            Unaudited Condensed Consolidated Statements of Operations
      Three Months and Nine Months Ended March 27, 2000 and March 31, 1999
<TABLE>
<S>                                           <C>                   <C>                        <C>                  <C>


                                                      Three Months Ended:                             Nine Months Ended:

                                              March 27, 2000        March 31, 1999             March 27, 2000      March 31, 1999

Restaurant sales                             $      893,869        $      322,808             $    1,775,680      $    1,421,073
Less: promotional sales                             (28,058)              (10,548)                   (51,962)            (55,664)
                                               -------------        --------------             --------------      ---------------
Net restaurant sales                                 865,811               312,260                  1,723,718          1,365,409

Cost and expenses:
Cost of food and beverage sales                      299,778                98,763                    613,688            520,759
Restaurant salaries and fringe benefits              467,100               112,429                  1,029,164            560,770
Occupancy and related expenses                        48,082                40,271                    103,611            416,747
Depreciation and amortization                         20,786                13,893                     38,357             36,175
                                              ------------------------------------------------------------------------------------
                                                     835,746               265,356                  1,784,820          1,534,451

Selling, general and administrative                  358,121             1,587,185                    932,367          2,050,405
Loss on closure of restaurant sites and                    -               365,000                     42,800            365,000
 impairment charges

Interest expense, net                                 26,663                65,154                     26,663            196,340
Litigation award                                           -                     -                          -            225,000

Miscellaneous expenses (income)                            -                (2,332)                         -             (1,708)
                                               ----------------------------------------------------------------------------------
                                                     384,784             2,015,007                  1,001,830           2,835,037

                                               -----------------------------------------------------------------------------------
Total expenses                                     1,220,530             2,280,363                  2,786,650           4,369,488

Net loss before income taxes and extraordinary      (354,719)           (1,968,103)                (1,062,932)         (3,004,079)
item

Income taxes                                         (22,592)                    -                    (22,592)                  -
                                               -----------------------------------------------------------------------------------
Net loss before extraordinary item                  (377,311)           (1,968,103)                (1,085,524)         (3,004,079)

Extraordinary item:
Gain on extinguishments of debt                            -               254,360                          -             343,310
                                               -----------------------------------------------------------------------------------
Net loss before preferred dividends                 (377,311)           (1,713,743)                (1,085,524)         (2,660,769)
                                               ===================================================================================
Dividends on preferred shares                       (178,450)                    -                   (521,768)                  -
                                               -----------------------------------------------------------------------------------
Net loss available to common stockholders      $    (557,761)           (1,713,743)                (1,607,292)         (2,660,769)
                                               ===================================================================================
Weighted average number of common shares          29,979,013            21,441,412                 29,979,013          15,609,352
outstanding at 3/27/00 and 3/31/99:            ===================================================================================

Net loss per common share                      $       (0.02)                (0.08)                     (0.05)              (0.17)
                                               ===================================================================================
</TABLE>
<PAGE>



                  SPENCER'S RESTAURANTS, INC. AND SUBSIDIARIES
            Unaudited Condensed Consolidated Statements of Cash Flows
               Nine Months Ended March 27, 2000 and March 31, 1999
<TABLE>
<S>                                                                                  <C>                         <C>


                                                                                      March 27, 2000               March 31, 1999
Cash flows from operating activities:
    Net loss                                                                        $       (1,085,524)          $    (2,660,769)
   Adjustments to reconcile net loss to net cash used in operating activities
            Depreciation and amortization                                                       38,357                    36,175
            Loss on restaurant closure                                                          42,800
            Litigation award                                                                                             225,000
            Gain on the extinguishment of debt                                                       -                  (343,310)
            Issuance of stock for services                                                      72,909                   218,676
            Impairment charge                                                                        -                   365,000
            Valuation of warrants for services                                                       -                 1,093,873
            Stock compensation                                                                       -                   106,077
            Changes in assets and liabilities
                    Increase in accounts receivable                                               (329)                   (5,012)
                    (Increase) decrease in inventory                                           (25,126)                   13,369
                    Increase in prepaid expenses and other assets                              (23,386)                     (978)
                    Decrease in accounts payable and accrued expenses                         (123,618)                 (322,576)
                    (Decrease) increase in other current liabilities                           (14,645)                      108
                                                                                     ------------------          -----------------
Net cash used in operating activities                                                       (1,118,562)                (1,274,367)

Cash flows from investing activities:
       Capital expenditures                                                                   (663,766)                   (26,900)
                                                                                    -------------------         ------------------
Net cash used in investing activities                                                         (663,766)                   (26,900)

Cash flows from financing activities
       Proceeds from issuance of preferred stock                                                50,000                          -
       Proceeds from issuance of convertible notes                                                   -                    150,000
       Proceeds from issuance in common stock                                                        -                    153,500
       Proceeds from issuance of Series B preferred stock, net                                       -                  4,732,624
       Principal repayments from borrowings                                                          -                  (385,831)
                                                                                    ---------------------------------------------
Net cash provided by financing activities                                                       50,000                  4,650,293
                                                                                    ---------------------------------------------
Net (decrease) increase in cash                                                             (1,732,328)                 3,349,026

Cash at beginning of period                                                                  2,337,675                    311,328
                                                                                    -------------------         ------------------
Cash at end of period                                                               $          605,347                  3,660,354
                                                                                   ===============================================
Cash paid during the period for:

       Interest                                                                     $                -                    223,202

       Income taxes                                                                 $           22,592                          -
</TABLE>


            See the  notes to the  unaudited  condensed  consolidated  financial
            statements.
<PAGE>



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


1. Description of Business

     As of March 27, 2000,  Spencer's  Restaurants,  Inc. and subsidiaries ("The
Company") owned and operated two restaurants:  One in South Norwalk, Connecticut
and the other in Danbury,  Connecticut. The South Norwalk location,  Rattlesnake
Ventures Inc., features a casual dining concept with a Southwestern theme.

     The Danbury restaurant, opened on November 3, 1999, is the prototype of the
new Spencer's Restaurants theme.  "Spencer's" specializes in steak,  distinctive
shrimp  dishes  and  various  other   offerings  in  a  casual,   family  dining
environment.

2. Principles of Consolidation.

     The condensed  consolidated  financial  statements  include the accounts of
Spencer's  Restaurants,  Inc. and subsidiaries (the "Company").  All significant
inter-company accounts and transactions have been eliminated in consolidation.

3. 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 27, 2000
and June 30, 1999,  and the results of operations and cash flows for the periods
ended  March 27, 2000 and March 31,  1999.  In the  opinion of  management,  all
necessary adjustments that were made are of a normal recurring nature.

     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 30, 1999.  The results of operations for the period
ended March 27, 2000 are not  necessarily  indicative of the operating  results,
which may be achieved for the full year.

4. 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.  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.

5. Private Placement Offering and Cost Reduction Plan.

     Subsequent  to the  completion of the private  placement in February  1999,
which  effectively  satisfied all short and  long-term  debt that was in default
(see below),  the Company  assembled a new  management  team and developed a new
restaurant  theme  which was  introduced  at the  recently  reacquired  Danbury,
Connecticut  location (as  described in note number one above,  "Description  of
Business").

     Management  believes that the  finalization  of its cost reduction plan and
approximately  $6,000,000 in private placement financing 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 Company's
strategic  plans, or if such plans are achieved,  that the Company's  operations
will be profitable.

On October 27, 1998, the Company  commenced an offering (the  "Offering") of its
Series B Convertible Preferred Shares, $.10 par value. Between February 17, 1999
and  July 2,  1999,  the  Company  sold  approximately  $6,000,000  of  Series B
Preferred Shares pursuant to the Offering and converted approximately $1,350,000
of its debt to Company equity.  During the Offering,  the Company satisfied,  by
payment of cash and/or equity in the form of preferred  and/or common stock, the
following:   (a)  all  outstanding   Series  C  promissory  notes;  (b)  certain
outstanding  Series B promissory  notes;  (c) all outstanding  promissory  notes
related to the now-closed Fairfield facility; and (d) all outstanding promissory
notes from (i) September  1997,  (ii) March through June 1998, and (iii) October
and  November  1998,  effectively  satisfying  all short term and long term debt
which was in default.

     On July 2, 1999 the Company sold an additional 2,000 shares of its Series B
Preferred Stock for $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.

     The Company did file a registration  statement on August 16, 1999 and plans
to file a first amendment during the fourth fiscal quarter 2000.

     The conversion  price is subject to the  adjustments on the terms set forth
in the Certificate of Designation.  The  outstanding  preferred  shares shall be
converted,  with no action  on the part of the  holder,  if,  at any time  after
February  2000,  the common stock into which the same is converted is registered
under the  Securities  Act and the  closing  bid price of the  common  stock for
twenty  consecutive  trading  days is at least four times the  conversion  price
($0.20 based on the initial conversion price of $0.05).

     Holders  of  preferred  shares  are  entitled  to  receive,  semi-annually,
dividends  at the rate of 8% per annum  before  any  dividends  may be paid with
respect to the Common Stock,  which shall be paid in cash or preferred shares at
the  election  of the  Company.  If there is a  failure  to pay  dividends,  the
Placement  Agent,  on behalf of such  holders,  has the right to  designate  one
director to the  Company's  Board.  In addition,  if the Company fails to comply
with its obligations to file and process a Registration Statement,  the dividend
rate will increase to 14% per annum from issuance.

     Dividends  were paid in September  1999 and March 2000 in the form of 7,954
and 13,732 additional shares of Series B Preferred Stock, respectively.

     Pursuant  to the March 1998  agreement  to acquire the  Ottomanelli  Group,
additional  consideration  due  to  anti-dilution  provisions  contained  in the
agreements  in the form of common  stock was  payable to the  Ottomanelli  Group
shareholders as a result of the private placement.  In February 1999,  5,000,000
shares of common stock were issued pursuant to such provisions, as amended.

6. Restaurant Operations.

        See Description of Business in note number one, above.

     In April 1999, 106 Federal Road  Corporation,  a wholly owned subsidiary of
the  Company,   purchased  the  former  Rattlesnake   Restaurant   building  and
accompanying land in Danbury, CT. Federal Road Restaurant  Corporation,  another
wholly owned  subsidiary  of the Company  leases this  building from 106 Federal
Road  Corporation  as the  building has been  renovated  and styled with the new
Spencer's Restaurants theme. This first Spencer's Restaurant opened for business
on November 3, 1999.

     On  September  3, 1999,  the  Company  formally  changed  its name with the
appropriate authorities to Spencer's Restaurants, Inc.
(symbol: "SPST") from The Rattlesnake Holding Company Inc. (symbol: "RTTL")

     In September 1999, the Company finalized its agreement with the landlord of
its  previously  closed  restaurant  in  Flemington,  New Jersey.  The agreement
completely  satisfied all remaining  obligations for past due rents, real estate
taxes,  utilities and outstanding $39,998 note payable. The Company assigned the
liquor  license in  satisfaction  of the note payable and issued 4,660 shares of
Series B Preferred stock with a valuation of $116,500 to complete the settlement
and to  terminate  the lease.  The  Company  incurred a $42,800  loss due to the
finalization of the restaurant closure.

     On December 15,  1999,  the  Company's  contract  with its Chief  Financial
Officer was terminated without payment or further remuneration.

     On December  31, 1999, a contract  scheduled  to expire  October,  2001 for
consulting services being provided the Company was terminated by the consultant.
A new contract,  effective January 10, 2000 and scheduled to expire December 31,
2000, was substituted.

     On January 31, 2000 the Company accepted the resignation of its Senior Vice
President, Nicolo Ottomanelli. Mr. Ottomanelli remains on the Board of Directors
and  provides  consulting  services  to the Company on an as needed  basis.  Mr.
Ottomanelli's contract was terminated effective with the resignation and without
payment or further remuneration.

     On February 9, 2000, at the Annual Shareholders Meeting, the shareholders
approved the 1999 Stock Option Plan and the 1999  Non-Employee  Director's Stock
Option Plan. The shareholders also re-elected to the Board;  Kenneth R. Berry to
a three-year term, Stephen A. Stein to a two-year term and Nicolo Ottomanelli to
a one-year  term.  To date,  employee  stock  options  were  issued to  purchase
2,575,000 of the 25,000,000 shares allocated for the 1999 Stock Option Plan. All
options were granted at fair market value on the day of grant.

7. Litigation

The Company is a  co-defendant  in an action brought by an owner of an apartment
above the South Norwalk  Company  restaurant for negligence per se,  intentional
infliction of emotional  distress,  negligent  infliction of emotional distress,
and violations of the Connecticut  Unfair Trade Practices Act (CUTPA) based upon
alleged excessive noise and rude and/or  threatening  conduct of employees.  The
jury  awarded a verdict in the amount of $625,000  against  various  defendants,
including  the Company`s  former  Chairman on August 5, 1998.  Accordingly,  the
Company has recorded a $625,000  charge in the quarter ended  September 30, 1998
to accrue this  judgment.  On November 20, 1998,  the Court set aside the jury's
verdict as to all counts  against the Company except for  plaintiff's  claim for
negligence  per se  and  accordingly  reduced  the  jury's  award  to  $225,000.
Accordingly,  the Company reduced by $400,000, in the quarter ended December 31,
1998,  the amount of the accrual  recognized in the quarter ended  September 30,
1998. The jury's award is currently on appeal by the Company,  and plaintiff has
appealed the Court's  decision to set aside a portion of the jury's  verdict and
reduce the award.  There are also potential claims of  indemnification  by other
defendants   against  the  Company  in  the  event  the  plaintiff's  appeal  is
successful.

     In July 1999,  a demand  letter was  tendered  to the  Company by the legal
counsel  of  the  former  Chairman   seeking   indemnification   from  potential
liabilities   arising  out  of  this   matter.   This  demand  is  based  on  an
indemnification  provision in an agreement  between the former  Chairman and the
Company.   The  Company   believes   that  there  are  valid   defenses  to  the
indemnification claim.

     Plaintiff's negligence claims in this matter are arguably covered by one or
more  of  the  Company's   insurance   policies.   Farmington  Casualty  Company
("Farmington")  and Insurance  Company of Greater New York  ("GNY"),  two out of
three of the Company`s  insurance  carriers,  retained  counsel to represent the
Company and defended the Company in this case under a reservation of rights. The
third, Public Service Mutual Ins. Co., denied coverage for the claim altogether.
GNY and Farmington  have  continued to prosecute the appeal in this matter,  but
under a reservation of rights.  The Company has advised  Farmington and GNY that
it intends to pursue its rights in an action for damages and declaratory  relief
in the event that the appeal is unsuccessful  and the insurance  carriers refuse
to provide  coverage for  plaintiff's  claims.  GNY and  Farmington  continue to
reserve all rights with respect to coverage.

     Settlement negotiations are ongoing.  However, there can be no assurance of
a satisfactory settlement.

     The  Company  is a  defendant  in an  action  for an  alleged  breach  of a
commercial  lease in which  damages  exceeding  $190,000 are being  sought.  The
Company has disputed this claim and believes that the plaintiff has inadequately
responded  to  the   Company's   demand  for  discovery   and   inspection   and
interrogatories.  A compliance  conference  was adjourned to June 21, 2000.  The
Company is vigorously defending this action.

     The Company is also a party in various  other legal  actions  incidental to
the normal  conduct of its  business.  Management  does not believe they will be
material or will have an adverse effect on the Company's  consolidated financial
position, results of operations or liquidity.

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-K report for the fiscal
period June 30, 1999.

     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.

     Upon the finalization in 1999 of the $6,000,000 Series B Preferred Stock
private  placement  offering,  the Company  completed  its Cost  Reduction  Plan
commenced in fiscal year 1997.

     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.

     The  Company's  new  management   team  of  experienced   industry-specific
personnel has developed a strategy through Company and franchised operation of a
multi-regional chain of mid-priced steakhouse restaurants.

     Operating  results for the quarter and nine months  ended March 27, 2000 as
compared with the quarter and nine months ended March 31, 1999 are as follows:

     Gross  restaurant  sales increased 176.9% to $893,869 for the quarter ended
March 27, 2000 from  $322,808  for quarter  ended March 31,  1999.  For the nine
months ended March 27, 2000 gross restaurant sales increased 25.0% to $1,775,680
from  $1,421,073  for the nine  months  ended  March  31,  2000.  Likewise,  net
restaurant  sales  increased  177.3% to  $865,811  for the  quarter in 2000 from
$312,260 for this same quarter in 1999. For the nine months ended March 27, 2000
net  restaurant  sales  increased  26.2% to $1,723,718  from  $1,365,409.  These
increases in  restaurant  sales for the quarter  ended March 27, 2000 are due to
the new Spencer's  restaurant  opening in November of 1999 and to a 16.3 % sales
increase at the Rattlesnake restaurant.

     Promotional sales increased from $10,548, for the three months ended March
31, 1999 to $28,058 for the quarter ending March 27, 2000.  This 166.0% increase
is  attributable  to  the  commencement  of  operations  of  the  new  Spencer's
restaurant which opened November 3, 1999.  Promotional sales for the nine months
ended March 27, 2000  decreased from $55,664 for the nine months ended March 31,
1999 to $51,962, a 6.7% decrease.

     Cost of food and beverage sales increased as a percentage of net sales from
31.6% for the three months  ended March 31, 1999 to 34.6% for the quarter  ended
March 27, 2000.  The cost of food and beverage  sales  increased to $299,778 for
the three  months  ended March 27, 2000 from  $98,763 for the three months ended
March 31, 1999.  For the nine months ended March 27, 2000,  the cost of food and
beverage  sales  decreased as a percentage  of net sales from 38.1% for the nine
months ended March 31, 1999 to 35.6%. The percentage increase is attributable to
the Spencer's  restaurant  which  features a high quality,  high value menu. The
cost of food and beverage sales  increased to $613,688 for the nine months ended
March 27, 2000 from $520,759 for the nine months ended March 31, 1999.

     Restaurant  salaries and fringe benefits,  which consist of direct salaries
of restaurant  managers,  hourly  employee  wages and related  fringe  benefits,
increased to $467,100  for the three  months ended March 27, 2000 from  $112,429
for the three  months  ended  March 31,  1999.  Restaurant  salaries  and fringe
benefits as a  percentage  of net sales  increased to 53.4% for the three months
ended March 27, 2000 from 36.0% for the three months  ended March 31, 1999.  For
the nine months ended March 27, 2000  restaurant  salaries  and fringe  benefits
increased to $1,029,164  from $560,770 for the nine months ended March 31, 1999.
For the nine months ended March 27, 2000 restaurant salaries and fringe benefits
as a percentage  of net sales  increased to 59.7% from 41.1% for the nine months
ended  March 31,  1999.  This  increase  is  primarily  attributable  to the new
Spencer's  restaurant,  the  preparation  of the staff for the  opening  of such
restaurant and a Manager in Training Program geared toward future expansion.

Occupancy and other related expenses, which include linen, repairs, maintenance,
utilities,  rent,  insurance and other occupancy related expenses,  increased to
$48,082 for the three  months  ended  March 27, 2000 from  $40,271 for the three
months ended March 31, 1999. The increase is due to the  additional  restaurant,
Spencer's.  As a percentage of net restaurant sales,  these costs decreased from
12.9% in the three  months  ended March 31,  1999 to 5.6% for the quarter  ended
March 27,  2000.  For the nine months ended March 27, 2000  occupancy  and other
related  expenses  decreased to $103,611 from $416,747 for the nine months ended
March 31, 1999. As a percentage of net  restaurant  sales these costs  decreased
from 30.5% to 6.0% for the nine  months  ended March 31, 1999 and March 27, 2000
respectively.  The  decrease  in  occupancy  and  other  related  expenses  as a
percentage  of  sales is due the fact the  Company  does not  incur  rent at its
Danbury location as the Company owns the property.

     Depreciation and amortization  expense increased from $13,893 for the three
months  ended March 31,  1999,  to $20,786 for the three  months ended March 27,
2000.  As a  percentage  of net sales,  depreciation  and  amortization  expense
decreased  from 3.3% for the three  months  ended March 31, 1999 to 2.4% for the
three  months  ended  March 27,  2000.  Depreciation  and  amortization  expense
increased  from  $36,175 for the nine months ended March 31, 1999 to $38,357 for
the nine months ended March 27, 2000. As a percentage of net sales, depreciation
and amortization  expense  decreased from 2.6% of net sales to 2.2% of net sales
for the nine months ended March 27, 2000.  The  percentage  reduction from prior
year is the  result of added  sales  from the new  Spencer's  restaurant  opened
November 1999.

     Selling, general and administrative expenses decreased from $1,587,185,  or
508.3% of net sales for the quarter ended March 31, 1999, to $358,121,  or 41.4%
of net sales,  for the three months ended March 27, 2000.  Selling,  general and
administrative  expenses  decreased from  $2,050,405 or 150.2% of net restaurant
sales for the nine  months  ended  March 31,  1999 to  $932,367  or 54.1% of net
restaurant sales for the nine months ended March 27, 2000. Selling,  general and
administrative  expenses in the prior year included costs partially attributable
to the value of a  warrant  issued to a  consultant  pursuant  to the terms of a
consulting  agreement,  $1,075,000,  which was  immediately  exercisable and not
subject to a forfeiture provision.

     The Company  incurred  interest  expense,  net,  for the three months ended
March 27, 2000 and for the nine months ended March 27, 2000 of $26,663  compared
to costs of $65,154 and  $196,340  for the three months ended March 31, 1999 and
the nine  months  ended  March 31, 1999  respectively.  Interest  expense is for
Series B notes payable, due July 2000 that carry interest of 15% per annum.

     The  Company  is a  co-defendant  in an  action  brought  by an owner of an
apartment  above the South Norwalk  Company  restaurant  for  negligence per se,
intentional infliction of emotional distress,  negligent infliction of emotional
distress,  and violations of the Connecticut  Unfair Trade Practices Act (CUTPA)
based  upon  alleged  excessive  noise and rude  and/or  threatening  conduct of
employees.  The jury awarded a verdict in the amount of $625,000 against various
defendants,   including  the  Company's  former  Chairman  on  August  5,  1998.
Accordingly,  the  Company  recorded  a  $625,000  charge in the  quarter  ended
September 30, 1998 to accrue this judgment.  On November 20, 1998, the Court set
aside the jury's  verdict as to all counts  against the  Company  except for the
plaintiff's claim for negligence per se and accordingly reduced the jury's award
to $225,000.  Accordingly, the Company reduced by $400,000, in the quarter ended
December  31, 1998;  the amount of the charge  recognized  in the quarter  ended
September 30, 1998. The jury's award is currently on appeal by the Company,  and
plaintiff has appealed the Court's decision to set aside a portion of the jury's
verdict and reduce the award. There are also potential claims of indemnification
by the other defendants  against the Company in the event the plaintiff's appeal
is successful.

ACCOUNTING STANDARDS TO BE ADOPTED

     Statement of Financial  Accounting  Standards ("SFAS") No.  137,"Accounting
for Derivative Instruments and Hedging Activities Deferral of the Effective Date
of  SFAS  No.  133"  ("Statement  137")  amends  Statement   133"Accounting  for
Derivative  Instruments and Hedging  Activities"  ("Statement  133"),  which was
issued in June 1998 and was to be effective for fiscal quarters  beginning after
June 15, 1999.  Statement 137 defers the effective  date of Statement 133 to all
fiscal  quarters of 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 has not determined
the impact that Statement 133 will have on its consolidated financial statements
and believes that such  determination will not be meaningful until closer to the
date of initial adoption.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The  inherent  risk in market  risk  sensitive  instruments  and  positions
primarily  relates to potential  losses  arising from adverse  changes  interest
rates.  The  Company  is  subject  to market  risk from  exposure  to changes in
interest  rates  based on its  financing  activities.  Although  the Company has
currently   financed  its  operations   through  fixed  rate   preferred   stock
instruments,   future  operations  will  need  to  be  financed  through  either
additional equity or debt instruments. To date, the Company has not entered into
interest rate swap agreements to manage exposure to interest rate fluctuations.

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  problems as related to the Year 2000
Issue nor does the Company  anticipate any latent Y2K as its operations use only
updated  computers  with Y2K compliant  systems.  In sum, the Company's  plan to
prepare for and resolve the Year 2000 Issue  involved the following four phases:
assessment,  remediation,  testing and implementation.  As of December 27, 1999,
the Company has fully  completed  its  assessment  of all internal  systems that
could be  significantly  affected  by the Year 2000.  The  completed  assessment
indicated that most of the Company's significant  information technology systems
will  not be  significantly  affected,  particularly  the  general  ledger,  and
inventory systems.

LIQUIDITY

     The Company has a long  history of losses,  which has  depleted its capital
resources  and  has  resulted  in the  incurrence  of a  significant  amount  of
indebtedness.  Without  additional  funds,  the Company will have to abandon its
long-term  plans  for the  Spencer's  concept  development  and the  opening  of
additional  restaurants,  and  drastically  reduce its corporate  overhead.  The
Company  estimates  that the financing  obtained at the Offering will enable the
Company to affect some expansion and to operate through July 2000.  There can be
no  assurance  that the Company  will have  adequate  resources  after such time
unless it conducts profitable  operations and/or obtains additional financing of
which  there can be no  assurance.  The  Company  continues  to  explore  equity
investments but there is no assurance the Company will be successful.

     The Company has incurred  aggregate  losses since  inception of $19,862,614
inclusive of a net loss for the nine months ended March 27, 2000 of  $1,085,524.
Based upon interim financial information prepared by management, the Company has
continued to incur losses in fiscal 2000.

     Subsequent  to the  completion of the private  placement in February  1999,
which  effectively  satisfied all short and long-term  debt that was in default,
the Company has assembled a new  management  team and developed a new restaurant
theme,  which was  introduced at the recently  reacquired  Danbury,  Connecticut
location (as described in note number one above in "Description of Business").

     On October 27, 1998, the Company  commenced an offering (the "Offering") of
its Series B Convertible  Preferred Shares, $.10 par value. Between February 17,
1999 and July 2, 1999,  the Company sold  approximately  $6,000,000  of Series B
Preferred Shares pursuant to the Offering and converted approximately $1,350,000
of its debt to Company equity.  During the Offering,  the Company satisfied,  by
payment of cash and/or equity in the form of preferred  and/or common stock, the
following:   (a)  all  outstanding   Series  C  promissory  notes;  (b)  certain
outstanding  Series B promissory  notes;  (c) all outstanding  promissory  notes
related to the now-closed Fairfield facility; and (d) all outstanding promissory
notes from (i) September  1997,  (ii) March through June 1998, and (iii) October
and  November  1998,  effectively  satisfying  all short term and long term debt
which was in default.

     In connection with this financing, the holders of 56,500 shares of Series A
Preferred Stock exchanged their holdings for 55,370 shares of Series B Preferred
Stock and waived the payment of accumulated dividends of $259,545.

     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.

     The Company did file a registration  statement on August 16, 1999 and plans
to file an amended registration statement during the 4th quarter.

     The conversion  price is subject to the  adjustments on the terms set forth
in the Certificate of Designation.  The  outstanding  preferred  shares shall be
converted,  with no action  on the part of the  holder,  if,  at any time  after
February  2000,  the common stock into which the same is converted is registered
under the  Securities  Act and the  closing  bid price of the  common  stock for
twenty  consecutive  trading  days is at least four times the  conversion  price
($0.20 based on the initial conversion price of $0.05).

     Holders  of  preferred  shares  are  entitled  to  receive,  semi-annually,
dividends  at the rate of 8% per annum  before  any  dividends  may be paid with
respect to the Common Stock,  which shall be paid in cash or preferred shares at
the  election  of the  Company.  If there is a  failure  to pay  dividends,  the
Placement  Agent,  on behalf of such  holders,  has the right to  designate  one
director to the  Company's  Board.  In addition,  if the Company fails to comply
with its obligations to file and process a Registration Statement,  the dividend
rate will increase to 14% per annum from issuance.

     Dividends for the third quarter were accrued at 8% per annum.

     Dividends  were paid in September  1999 and March 2000 in the form of 7,954
and 13,732 additional shares of Series B Preferred Stock respectively.

     In April 1999, 106 Federal Road  Corporation,  a wholly owned subsidiary of
the  Company,   purchased  the  former  Rattlesnake   Restaurant   building  and
accompanying  land  in  Danbury,  CT.  for  $1,350,000  in  cash.  Federal  Road
Restaurant  Corporation,  another wholly owned  subsidiary of the Company leases
this  building  from 106  Federal  Road  Corporation  as the  building  has been
renovated and styled per the new  Spencer's  Restaurants  theme.  The Company is
pursuing refinancing for this property but there is no assurance when or if this
will occur.  The Company is also seeking to obtain  capital  through the sale of
additional  equity.  Such  financing,  or the  aforesaid  refinancing,  will  be
required for  continued  operations  for the next twelve  months until March 26,
2001.

     Cash flows used in operating activities for the nine months ended March 27,
2000 were  ($1,118,562)  as opposed to  ($1,274,367)  for the same period in the
previous year.

     Cash flows used in investing activities were ($663,766) for the nine months
ended  March 27,  2000  whereas in 1999,  for the first nine  months,  ($26,900)
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 $50,000 for the nine months ended
March 27, 2000 due to the sale of Series B Preferred Stock in July 1999, whereas
in 1999 for the first nine  months  cash flows from  financing  activities  were
$4,650,293.

     Given the  above,  cash  during  the nine  months'  ended  March  27,  2000
decreased by $1,732,328 as compared to a increase of $3,349,026  during the same
nine months in 1999.  The  increase  during  prior year is  attributable  to the
successful sale of approximately six million dollars in Series B stock.

     At March 27, 2000, the following  obligations  are past due and in default;
$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).

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 Commission filings,  including its Annual Report on Form
10-KSB  for the fiscal  year  1999,  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

South Norwalk, Connecticut

     The  Company  is a  co-defendant  in an  action  brought  by an owner of an
apartment  above the South Norwalk  Company  restaurant  for  negligence per se,
intentional infliction of emotional distress,  negligent infliction of emotional
distress,  and violations of the Connecticut  Unfair Trade Practices Act (CUTPA)
Based  upon  alleged  excessive  noise and rude  and/or  threatening  conduct of
employees.  The jury awarded a verdict in the amount of $625,000 against various
defendants,  including  the  Company`s  former  Chairman  on August 5, 1998.  On
November  20,  1998,  the Court set aside the  jury's  verdict  as to all counts
against the  Company  except for  plaintiff's  claim for  negligence  per se and
accordingly reduced the jury's award to $225,000.  The jury's award is currently
on appeal by the Company, and plaintiff has appealed the Court's decision to set
aside a portion of the  jury's  verdict  and  reduce  the award.  There are also
potential claims of  indemnification  by other defendants against the Company in
the event the plaintiff's appeal is successful.

     In July 1999,  a demand  letter was  tendered  to the  Company by the legal
counsel  of  the  former  Chairman   seeking   indemnification   from  potential
liabilities   arising  out  of  this   matter.   This  demand  is  based  on  an
indemnification  provision in an agreement  between the former  Chairman and the
Company.   The  Company   believes   that  there  are  valid   defenses  to  the
indemnification claim.

     Plaintiff's negligence claims in this matter are arguably covered by one or
more  of  the  Company's   insurance   policies.   Farmington  Casualty  Company
("Farmington")  and Insurance  Company of Greater New York  ("GNY"),  two out of
three of the Company`s  insurance  carriers,  retained  counsel to represent the
Company and defended the Company in this case under a reservation of rights. The
third, Public Service Mutual Ins. Co., denied coverage for the claim altogether.
GNY and Farmington  have  continued to prosecute the appeal in this matter,  but
under a reservation of rights.  The Company has advised  Farmington and GNY that
it intends to pursue its rights in an action for damages and declaratory  relief
in the event that the appeal is unsuccessful  and the insurance  carriers refuse
to provide  coverage for  plaintiff's  claims.  GNY and  Farmington  continue to
reserve all rights with respect to coverage.

     Settlement negotiations are ongoing,  however, there can be no assurance of
a satisfactory settlement.

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.  A Compliance  Conference was adjourned  until June 21,
2000. 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 in this quarter.

Item 4 -  Submission  of Matters to a Vote of  Stockholders  during the  quarter
ending March 27, 2000:

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.

     During the quarter ended March 27, 2000, the Company filed no reports on
Form 8-K.

<PAGE>

                                   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)


May 12, 2000               By:  /s/ Kenneth Berry
                                --------------------
                                  Kenneth Berry
                            President and Acting CFO



May 12, 2000               By:  /s/ Henry Zowine
                                --------------------
                                  Henry Zowine
                                Chief Accountant