<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB


(Mark One)
   [X]            QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934

                  For the quarterly period ended December 31, 2000

   [ ]            TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                  ACT

                  For the transition period from        to
                                                 -------   --------

Commission file number  000-28469

                               PET QUARTERS, INC.

        (Exact name of small business issuer as specified in its charter)

           Arkansas                                       62-169-8524
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)


                   720 E. Front Street, Lonoke, Arkansas 72086
                    (Address of principal executive offices)

                                 (501) 676-9222
                           (Issuer's telephone number)

                                       N/A
              (Former name, former address and former fiscal year,
                          if changed since last report)


                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 22,207,757

Transitional Small Business Disclosure Format (Check one): Yes { } No {X}


<PAGE>   2


                         PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

The accompanying balance sheets of Pet Quarters, Inc. and Subsidiaries at
December 31, 2000 and June 30, 2000, the statements of operations and cash flows
for the three and six months ended December 31, 2000 and 1999 have been prepared
by the Company's management and they do not include all information and notes to
the financial statements necessary for a complete presentation of the financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. The financial statements should be read in conjunction with
the financial statements included in the Company's Form 10-K filed with the
Securities and Exchange Commission for year ended June 30, 2000.

Operating results for the quarter ended December 31, 2000 are not necessarily
indicative of the results that can be expected for the year ending June 30,
2001.

                       PET QUARTERS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 December 31         JUNE 30
                                                                     2000              2000
                                                                 ------------      ------------
                                                                 (UNAUDITED)
<S>                                                              <C>               <C>

ASSETS
Current assets:
   Cash                                                          $    225,417      $    164,128
   Accounts receivable                                                139,515           175,608
   Inventories                                                      1,669,785         1,674,002
   Deferred advertising costs                                         588,500           637,425
   Land and building held for sale                                    500,000           500,000
   Prepaid expenses and other current assets                          142,524           151,177
                                                                 ------------      ------------
Total current assets                                                3,265,741         3,302,340

Property, plant and equipment:
     Land                                                                  --                --
     Buildings and improvements                                        33,600            33,600
     Furniture and equipment                                          722,610           596,038
                                                                 ------------      ------------
                                                                      756,210           629,638
Less accumulated depreciation                                        (174,901)         (115,767)
                                                                 ------------      ------------
                                                                      581,309           513,871
Goodwill, net of accumulated amortization of
$4,683,555 and $2,162,156 at December 31, 2000
  and June 30, 2000                                                14,775,051        17,524,514
Intangible assets, net of accumulated amortization                    486,744           506,227
                                                                 ------------      ------------
Total assets                                                     $ 19,108,845      $ 21,846,952
                                                                 ============      ============
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                       2
<PAGE>   3

<TABLE>
<CAPTION>
                                                                           December 31         JUNE 30
                                                                               2000              2000
                                                                           ------------      ------------
                                                                           (UNAUDITED)
<S>                                                                        <C>               <C>

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                        $  2,303,400      $  2,904,205
   Accrued expenses                                                           1,047,199           546,412
   Convertible debenture, net of discount                                       941,044           950,000
   Short-term notes payable                                                   1,695,000                --
   Note payable to related party                                                451,568           615,178
   Current portion of long-term notes and capital leases payable                     --           125,763
                                                                           ------------      ------------
Total current liabilities                                                     6,438,211         5,141,558

Long-term portion of notes and capital leases payable                                --           260,936
                                                                           ------------      ------------
Total liabilities                                                             6,438,211         5,402,494

Stockholders' equity:
   Common stock, $.001 par value per share, 40,000,000 shares
     authorized; 20,844,305 and 18,147,783 shares issued and
     outstanding at December 31 and June 30, 2000                                20,846            18,148
   Convertible preferred stock, $.001 par value per share,
     10,000,000 shares authorized; 34,642 shares issued
     and outstanding at June 30, 2000 and 32,769 shares                              33                35
     outstanding as of December 31, 2000
   Additional paid-in capital                                                35,120,499        33,109,661
   Accumulated deficit                                                      (22,470,744)      (16,586,531)
                                                                           ------------      ------------
                                                                             12,670,634        16,541,313
   Less unamortized stock compensation                                               --           (96,855)
                                                                           ------------      ------------
Total stockholders' equity                                                   12,670,634        16,444,458
                                                                           ------------      ------------
Total liabilities and stockholders' equity                                 $ 19,108,845      $ 21,846,952
                                                                           ============      ============
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                       3
<PAGE>   4

                       PET QUARTERS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED December 31,     SIX MONTHS ENDED DECEMBER 31,

                                            2000              1999              2000              1999
                                        ------------      ------------      ------------      ------------
<S>                                     <C>               <C>               <C>               <C>

Sales                                   $  3,548,401      $  3,688,148      $  7,521,735      $  6,198,900
Cost of sales                              2,552,940         2,434,945         5,368,949         4,113,152
                                        ------------      ------------      ------------      ------------
                                             995,461         1,253,203         2,152,786         2,085,748
Operating expenses and costs:
Selling                                      590,629           596,452         1,438,983           971,901
Administrative and general                 1,400,348         1,470,949         3,369,779         2,113,155
Depreciation and amortization              1,432,154           445,783         2,862,430           757,746
                                        ------------      ------------      ------------      ------------
                                           3,423,131         2,513,184         7,671,192         3,842,802
                                        ------------      ------------      ------------      ------------
Loss from operations                      (2,427,670)       (1,259,981)       (5,518,406)       (1,757,054)

Other income (expense):
Interest expense                            (283,722)         (149,913)         (374,896)         (261,529)
Bridge loan origination fee                                                                       (651,671)
Troubled debt restructuring                                 (1,339,461)                         (1,339,461)
Interest income                                3,905             7,032             9,089             7,032
                                        ------------      ------------      ------------      ------------
                                            (279,817)       (1,482,342)         (365,807)       (2,245,629)
                                        ------------      ------------      ------------      ------------
Loss before income tax benefit            (2,707,487)       (2,742,323)       (5,884,213)       (4,002,683)

Income tax benefit                                --                --                --                --
                                        ------------      ------------      ------------      ------------
Net loss                                $ (2,707,487)     $ (2,742,323)       (5,884,213)       (4,002,683)
                                        ============      ============      ============      ============

Net loss per common share:
Basic                                   $      (0.13)     $      (0.24)     $      (0.30)     $      (0.36)
Diluted                                 $      (0.13)     $      (0.24)     $      (0.30)     $      (0.36)

Basic Shares                              20,501,209        11,399,962        19,541,696        11,050,562
Diluted Shares                            20,501,209        11,399,962        19,541,696        11,050,562
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                       4
<PAGE>   5

                       PET QUARTERS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        SIX MONTHS ENDED December 31

                                                           2000               1999
                                                       ------------      ------------
<S>                                                    <C>               <C>

OPERATING ACTIVITIES
Net (loss)                                             $ (5,884,213)     $ (4,002,683)
Adjustments to reconcile net loss to net cash
  used in operating activities
      Depreciation                                          112,968            59,960
      Amortization of goodwill                            2,749,462           697,514
      Amortization of loan origination fee                       --         1,134,681
      Amortization of discount on convertible                29,478                --
          debentures
      Convertible debt issued                               210,000           626,452
      Amortization of stock compensation                     96,855           237,754
      expense
      Stock issued for services                             249,600            18,420
      Non-cash compensation                                      --            47,813
      Bridge loan default penalty refinanced                     --           230,000
  Changes in operating assets and liabilities,
          net of acquisition:
      Accounts receivable                                    36,093           (88,238)
      Inventories                                             4,217           421,130
      Prepaid expenses and other current assets              57,578          (156,616)
      Accounts payable                                     (600,805)           (8,504)
      Accrued expenses                                      500,787           188,781
      Other assets                                          (35,758)           (7,173)
                                                       ------------      ------------
Net cash used in operating activities                    (2,473,738)         (600,709)

INVESTING ACTIVITIES
Acquisition of Humboldt, net of cash                             --        (4,448,454)
Purchases of property, plant, and equipment                (125,164)          (41,999)
                                                       ------------      ------------
Net cash used in investing activities                      (125,164)       (4,490,453)

FINANCING ACTIVITIES
Proceeds from issuance of common stock                    1,465,500           150,000
Proceeds net of payments from notes payable               1,194,691         5,098,171
Payments on notes payable and capital leases                                  (92,237)
                                                       ------------      ------------
Net cash provided by financing activities                 2,660,191         5,155,934
                                                       ------------      ------------
Net increase (decrease) in cash                              61,289            64,772
Cash at beginning of period                                 164,128            37,726
                                                       ------------      ------------
Cash at end of period                                  $    225,417      $    102,498
                                                       ============      ============

Shares issued for the acquisition of Humboldt
  Industries                                                     --      $  4,600,000
</TABLE>


            See Notes to Condensed Consolidated Financial Statements



                                       5
<PAGE>   6

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF BUSINESS

Pet Quarters, Inc. and subsidiaries (the "Company") was organized under the laws
of the state of Arkansas on May 22, 1997. The Company sells pet supplies to both
retail and wholesale customers through catalogs and e-commerce. In August 1999
the Company purchased Humboldt Industries whose primary business was catalog
sales. As a result of this acquisition, the Company has altered its approach by
combining a traditional catalog company that is migrating its customer base to
the Internet, and expanding its Internet-only customers through the catalog.

THE COMPANY HAS SOLD COMMON STOCK IN OFFERINGS THAT WERE EXEMPT FROM
REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC"). THE COMPANY'S
COMMON STOCK IS CURRENTLY TRADED ON THE OTC BULLETIN BOARD.

BASIS OF PRESENTATION

We have prepared the accompanying condensed consolidated financial statements in
accordance with generally accepted accounting principles for interim financial
statements and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, these financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The interim financial information is
unaudited, but reflects all adjustments consisting only of normal recurring
accruals which are, in our opinion, necessary for a fair presentation of the
results of operations for the interim periods. Our operating results for the
interim periods are not necessarily indicative of the results that may be
expected for us for the entire year because of seasonal and short-term
variations. For further information, you should refer to the consolidated
financial statements and related footnotes included in our Annual Report on Form
10-K for the year ended June 30, 2000.

CONSOLIDATION

The consolidated financial statements include the accounts of all wholly owned
subsidiaries, which include Chartendure Limited, WeRPets.com, Inc., PQ
Acquisition Company, Inc. (the survivor of Humboldt and Maplewood acquisitions),
Wellstone Acquisition Corporation and Allpets.com, Inc.

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

GOING CONCERN UNCERTAINTY

The accompanying consolidated financial statements have been presented in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company has a
significant working capital deficiency and has incurred operating losses since
its formation. Management believes that actions presently being taken will
provide for the Company to continue as a going concern. Such actions may include
but are not limited to utilizing the Equity Line of Credit, a strategic
partnership or acquisition that would provide the Company with the necessary
capital, or sale of certain assets. However, there are no assurances that
management will be able to secure additional equity capital or complete any
other strategic transactions that will permit the Company to meet its current
obligations.

INVENTORIES

Inventories are valued at the lower of cost, principally determined by the
first-in, first-out method, or market. Inventory at December 31, 2000 and 1999,
consists of pet supplies purchased for retail sale.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
depreciable assets, which is from five years for furniture and equipment and
thirty nine years for buildings and improvements. The land and building in
Lonoke, Arkansas is being held for sale. The land and building has been written
down to the expected price and is not currently being depreciated.

INCOME TAXES

The Company provides for income taxes based on the liability method. No benefit
for income taxes has been recorded related to net operating loss carryforwards
as realization of such benefits is doubtful.



                                       6
<PAGE>   7

STOCK-BASED COMPENSATION

The company records stock based compensation using provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees, for the preparation of its basic consolidated financial statements.
Such provisions require the company to recognize compensation cost over the
vesting period for the difference between the quoted market price of an award at
the date of grant and the purchase or exercise price of the shares.

GOODWILL

The excess of acquisition costs over the fair values of net assets acquired in
business combinations treated as purchase transactions ("goodwill") is being
amortized on a straight-line basis over its estimated life, 2 to 5 years
currently. The Company periodically evaluates the existence of goodwill
impairment on the basis of whether the goodwill is fully recoverable from the
projected undiscounted net cash flows of the related business unit. The amount
of goodwill impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds.

INTANGIBLE ASSETS

Intangible assets are amortized on a straight-line basis over their estimated
lives, ranging from 3 to 5 years. Intangible assets at December 31, 2000 and
June 30, 2000, primarily consist of web site development costs and trademarks.

CONCENTRATION OF CREDIT RISK

The Company's services are provided primarily to customers throughout the United
States. The Company receives payment largely by customers' use of credit cards
for internet and catalog sales and, for sales by Humboldt to pet care
professionals and veterinarians, the Company performs ongoing credit evaluations
and generally does not require collateral. Historically, credit losses have been
within management's expectations.

REVENUE RECOGNITION

Revenue from product sales is recognized upon shipment of merchandise, net of an
allowance for estimated customer returns.

SHIPPING AND HANDLING

Fees received from shipping and handling activities are included as revenue.
Costs incurred for shipping and handling are included as a component of cost of
goods sold.

IMPAIRMENT OF ASSETS

The Company accounts for any impairment of its long-lived assets using Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
Under SFAS No. 121, impairment losses are recognized when information indicates
the carrying amount of long-lived assets, identifiable intangibles and goodwill
related to those assets will not be recovered through future operations or sale.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.



                                       7
<PAGE>   8

NOTE 2. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share ("EPS"):

<TABLE>
<CAPTION>
                                                   Three Months Ended                   Six Months Ended
                                                       December 31,                        December 31,
                                                 2000               1999              2000              1999
                                             -------------      ------------      ------------      ------------
<S>                                          <C>                <C>               <C>               <C>

Numerator:
     Net loss and numerator for basic
     and diluted loss per share              $  (2,707,987)     $ (2,742,323)     $ (5,884,213)     $ (4,002,683)
                                             =============      ============      ------------      ------------

Denominator:
     Denominator for basic earning
     per share -- weighted-average
     shares                                     20,501,209        11,399,962        19,541,696        11,050,562
                                             =============      ============      ------------      ------------

     Net effect of dilutive stock
         Options based on the treasury
         Stock method                                   --                --                --                --
     Assumed conversion of 100% of
         Convertible debentures                         --                --                --                --

                                             -------------      ------------      ------------      ------------

     Denominator for diluted earnings
     per share -- adjusted                      20,501,209        11,399,962        19,541,696        11,050,562
                                             =============      ============      ------------      ------------
     weighted-average

Basic loss per share                         $       (0.13)     $      (0.24)     $      (0.30)     $      (0.36)
                                             =============      ============      ------------      ------------

Diluted loss per share                       $       (0.13)     $      (0.24)     $      (0.30)     $      (0.36)
                                             =============      ============      ------------      ------------
</TABLE>

The effect of all potential common shares is anti-dilutive in the calculation of
diluted loss per share and therefore have been excluded from the calculation.

NOTE 3. STOCK-BASED COMPENSATION

The Company's Board of Directors has given approval to the establishment of a
Management Incentive Plan and an Employee Equity Participation Incentive Plan
under which shares of the Company's stock are granted to employees. The shares
are restricted for one year following the date of grant. The Company granted
201,000 shares during the quarter at an exercise price of $0.60 per share,
pursuant to these plans.

NOTE 4. ACQUISITIONS

HUMBOLDT AND MAPLEWOOD

On August 1, 1999, the Company acquired 100% of the outstanding stock of
Humboldt Industries, Inc. and Maplewood Industries, Inc., both of Hazleton,
Pennsylvania, for $4.6 million cash and 1,146,417 shares of the Company's common
stock valued at $4.6 million on the date of the acquisition. The acquisition was
accounted for as a purchase transaction and resulted in the recording of
approximately $8.3 million of goodwill. Goodwill is being amortized over a
five-year life. The acquisition was financed through a Bridge Loan in the amount
of $4.6 million. This bridge loan was extended in November 1999 and subsequently
repaid in February and May 2000.

WELLSTONE ACQUISITION CORPORATION

On March 6, 2000, the Company acquired all of the outstanding stock of Wellstone
Acquisition Corporation ("Wellstone") in exchange for 130,208 shares of the
Company's common stock, valued at $557,453 ($4.28 per share) on the date of
acquisition. In addition, the Company paid professional and legal fees of
$225,000 in conjunction with this transaction.

The acquisition was made pursuant to rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission. This rule allows
nonreporting entities to acquire fully reporting entities and thereby become
fully reporting. The Company made this acquisition in order to become fully
reporting. It was subsequently determined that the Company could not utilize



                                       8
<PAGE>   9

rule 12g-3(a) to become fully reporting. The Company had not identified an
alternative use for Wellstone and has therefore expensed the entire cost of
$782,453 during the quarter ended March 31, 2000 as a component of general and
administrative expense.

WERPETS.COM

On April 27, 2000 the Company acquired WeRPets.com, Inc. for 703,316 shares of
the Company's common stock, valued at $2,461,606 ($3.50 per share) on the date
of acquisition. The acquisition was accounted for as a purchase transaction and
resulted in the recording of approximately $2.5 million of goodwill. Goodwill is
being amortized over a three-year life.

CHARTENDURE

On May 1, 2000 the Company acquired Chartendure, Ltd., a company organized under
the laws of the United Kingdom, for 400,000 shares of the Company's common
stock, valued at $725,000 ($1.81 per share) on the date of acquisition. The
acquisition was accounted for as a purchase transaction and resulted in the
recording of approximately $725,000 of goodwill. Goodwill is being amortized
over a two-year life.

ALLPETS.COM

On May 30, 2000 the Company acquired AllPets.com, Inc. through the exchange of
3,652,785 shares of the Company's common stock and 1,105,250 stock options. The
stock and stock options exchanged were valued based on the closing price of
$1.875 on May 30, 2000, resulting in a purchase price of $8.6 million. The
acquisition was accounted for as a purchase transaction and resulted in the
recording of approximately $7.9 million of goodwill. Goodwill is being amortized
over a three-year life. In addition to the shares exchanged above, the Company
may be required to issue up to 1,189,479 additional shares of common stock if
contingencies related to the achievement of certain stock price appreciation
targets and listing of the Company's stock on the NASDAQ are achieved.

NOTE 5. STOCKHOLDERS' EQUITY

PREFERRED STOCK

The Company is authorized to issue 10,000,000 shares of preferred stock. On May
9, 2000 the Company designated 50,000 share of preferred stock as Series A
Convertible Preferred Stock ("Series A Stock"), the Company subsequently issued
34,642 shares of Series A Stock for total consideration of $3,464,200,
consisting of $2,055,700 in cash and $1,408,500 as payment on the Bridge Loan
(see Note 9). The acquisition of these bridge loan interests effectively retired
an equivalent amount of principal on the bridge loan. The Series A Stock has the
following terms, rights, and privileges:

     a)  Dividends - The holders of the Series A Stock are not entitled to
         receive dividends from the Company.

     b)  Liquidation - Upon any liquidation, dissolution, or winding up of the
         Company, whether voluntary or involuntary, the holders of the Series A
         Stock shall be entitled, before any distribution or payment is made
         upon any shares of any other class of stock of the Company, to be paid
         $100 per share (the purchase price of the Series A Stock).

     c)  Redemption - Subject to certain conditions and one year after the
         initial date of issuance, the Series A Stock may be redeemed (all or
         none) at the Company's option upon the payment in cash of the sum of
         $100 per share.

     d)  Conversion - At any time, holders of the Series A Stock may convert all
         or a portion of those shares into a number of shares of common stock,
         computed by multiplying the number of shares to be converted by $100
         and dividing the result by the conversion price. The conversion price
         is equal to $1.3816. The conversion price may be adjusted from time to
         time to account for any stock splits, stock dividends,
         recapitalizations, mergers, assets sales, or similar events.

A preferred stock deemed dividend in the amount of $3.4 million was recorded for
the quarter ended June 30, 2000 to reflect the intrinsic value of the beneficial
conversion feature available to preferred shareholders and the fair value of the
associated warrants at the date of issuance.



                                       9
<PAGE>   10

NOTE 6. NOTES AND CAPITAL LEASES PAYABLE

<TABLE>
<CAPTION>
                                                                                         December 31
                                                                                             2000            JUNE 30
                                                                                          (Unaudited)         2000
                                                                                         ------------     ------------
<S>                                                                                      <C>                     <C>
Amount outstanding under a line of credit agreement, which expires April 15,
    2001. This loan accrues interest at a variable rate of not less than 10%
    or more than 11%. The Company extended their line of credit agreement
    to April 15, 2001 and a principal reduction of $184,500 is required
    on or before April 15, 2001. Secured by the stock of PQ Acquisition Corp, Inc.       $  1,450,000            $ -0-

Secured note to a Profit Sharing plan with an interest rate of 10%. Interest
   payments are due quarterly and the note matures on November 22, 2001. If all
   interests payments are made on a timely basis, the Company has the option of
   extending the note for an additional year Under the same terms. The note is
   secured with the property and land In Lonoke, Arkansas                                     200,000              -0-

Unsecured note payable to Pine Tree Management Corporation with variable
   interest of prime minus 1% (8.5% at June 30, 2000), interest payable
   quarterly beginning September 10, 1999 with $45,000 principal payment due
   September 15, 2000 and 2001                                                                 45,000           90,000

Capital lease payable to a leasing company due in monthly installments of $5,096
   until May 2003 with no stated interest rate. The lease is guaranteed by a
   stockholder                                                                                    -0-          153,147

Capital lease payable to a leasing company due in monthly installments of
   $3,332 until December 2004 with no stated interest rate. The lease is
   guaranteed by a stockholder                                                                    -0-          143,552
                                                                                         ------------     ------------
                                                                                            1,695,000          386,699
Less current portion                                                                               --          125,763
                                                                                         ------------     ------------
                                                                                         $  1,695,000     $    260,936
                                                                                         ============     ============
</TABLE>

Related party debt totaled $451,568 as of December 31, 2000.

NOTE 7. CONVERTIBLE DEBENTURE

On May 5, 2000, the Company borrowed $1,000,000 pursuant to the terms of a 6%
convertible debenture. The convertible debenture requires the Company to make
quarterly interest payments, beginning August 5, 2000, and the full amount of
the loan is due and payable on November 5, 2000. The debenture is convertible,
at the option of holder, into a minimum of 666,666 shares of the Company's
common stock at a rate of $1.50 per share or 85% of the average price of the
lowest three days during the last twenty-two days prior to notice of the
conversion. The proceeds from the debenture were used to retire the Bridge Loan.
Non-cash interest expense in the amount of $290,000 was recorded at the date of
issuance due to the beneficial conversion feature included in this debenture.

In conjunction with this debenture, the Company initially issued stock purchase
warrants for the purchase of up to 54,237 shares of common stock at an exercise
price of $2.03 per share. Accordingly, $60,000 of the proceeds from the lender
has been allocated to the warrants, based on their estimated fair market value
at issuance. The beneficial conversion feature and stock purchase warrants have
been accounted for as a debt discount on the convertible debentures. The debt
discount is being amortized over the term of the convertible debenture and is
recognized in the Statement of Operations as additional interest expense. In
November 2000, this convertible debenture was extended to May 5, 2001 and its
conversion price was lowered to $1.00. At the same time, 130,000 other warrants
provided to the lender were reduced to $1.00 from $4.65. On January 26, 2001,
the convertible holder converted $117,942 of the debenture into 723,793 shares
of common stock.

NOTE 8. EQUITY LINE OF CREDIT AGREEMENT

On March 15, 2000, the Company entered into an equity line of credit agreement
with Splendid Rock Holdings, Ltd., whereby the Company may sell or "put", from
time to time, up to an aggregate of $25 million of common stock at a price equal
to 85% of the average market price of the common stock as defined by the Line of
Credit Agreement. The maximum dollar amount of shares that may be put is subject
to certain volume and timing restrictions.

Through December 31, 2000, the Company had issued 1,600,000 of shares of common
stock pursuant to this agreement.

In conjunction with this agreement the Company issued to Splendid Rock Holdings,
Inc. warrants to purchase up to 1,320,000 shares of common stock at an average
exercise price of $3.84. As currently structured, the Company will account for



                                       10
<PAGE>   11

the value of the warrants issued ($1,774,000) as a cost of the issuance of
common stock and, accordingly, this is not expected to impact future results of
operations.

NOTE 9. OPERATING SEGMENTS

Prior to the purchase of Humboldt Industries effective August 1, 1999, the
Company operated in one segment - internet sales of pet supplies. Beginning
August 1, 1999, the Company began, through the purchase of Humboldt Industries,
a catalog segment. Information on the operating segments for the three months
ended December 31, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED                   SIX MONTHS ENDED
                                       December 31,                        December 31,
                                  2000              1999              2000              1999
                              ------------      ------------      ------------      ------------
<S>                           <C>               <C>               <C>               <C>

Net Sales:
  Internet                    $    510,015      $    213,923      $    817,640      $    315,206
  Catalog                        3,038,386         3,474,225         6,704,095         5,883,694
                              ------------      ------------      ------------      ------------
  Total                       $  3,548,401      $  3,688,148      $  7,521,735         6,198,900
                              ============      ============      ------------      ------------

Loss from operations:
  Internet                    $ (1,591,512)     $   (939,835)     $ (3,634,443)     $ (1,555,781)
  Catalog                         (836,158)         (320,146)       (1,883,963)     $   (201,273)
                              ------------      ------------
  Total                       $ (2,427,670)     $ (1,259,981)     $ (5,518,406)     $ (1,757,054)
                              ============      ============
</TABLE>

Although the Company sells the same product at the same price to retail
customers through the internet and catalog segments, the means of selling is
different with the internet segment having the potential for a much broader
distribution with far more customers that can be reached through the traditional
catalog distribution. Revenues by geographical location of customer is not
practical to determine.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion and analysis contains some forward-looking statements,
which are based upon our plans, goals, and objectives for Pet Quarters, Inc. and
its management. Such statements are subject to various risks and uncertainties,
including our inability to secure ongoing financing. The most important risk
concerns the cash to operate the businesses of Pet Quarters, Inc. We have
additional loans, some of which are demand loans, which could require additional
infusions of capital. Our longer-term development plans also require additional
capital for completion. Consequently, the reader should consider that such
uncertainties and risks may cause actual results to vary materially from the
stated plans, goals, and objectives outlined below. Unless otherwise indicated,
this discussion covers the period beginning on October 1, 2000 and concluding on
December 31, 2000.

Assets: The total assets as of December 31, 2000 were $19,108,845 as compared to
$21,846,952 as of June 30, 2000. This is an 13% decrease, which reflects the
goodwill that was amortized during the quarter. We had current assets of
$3,265,741 including cash of $225,417, inventories of $1,669,785, prepaid
expenses and deferred advertising costs of $731,024, accounts receivable of
$139,515 and land and building held for sale of $500,000 as of December 31, 2000
as compared to current assets of $3,302,340 including cash of $164,128,
inventories of $1,674,002, prepaid expense of $637,425 and building and land
held for sale of $500,000 as of June 30, 2000. We have listed the facility in
Lonoke, Arkansas for $650,000. The purchase of Humboldt Industries eliminated
the original purpose of the facility, and the Company is prepared to sell the
Lonoke facility.

Goodwill, net of accumulated amortization, was $14,775,051 as of December 31,
2000 as compared to $17,524,514 as of June 30, 2000. The reduction in goodwill
reflects the quarterly amortization of goodwill resulting from the purchase of
Humboldt Industries, WeRPets.com, Chartendure Ltd., and AllPets.com. Goodwill
relates to recent acquisitions and we are amortizing these acquisitions on
schedules that vary between two and five years. We are still developing our
e-commerce strategy and believe the carrying amount of goodwill at December 31,
2000 is appropriate. Management has and will continue to evaluate the
recoverability in accounting for goodwill.

Intangible assets, net of accumulated amortization, in the amount of $486,744 as
of December 31, 2000 include capitalized costs associated with our website as
compared to $506,227 as of June 30, 2000. We anticipate website design and
development costs will continue and will be capitalized in conformity with
Statement of Position (SOP 98-1).

Liabilities and stockholders equity:

Liabilities: Total liabilities of $6,438,211 are reflected as of December 31,
2000 as compared to total liabilities as of $5,402,494 as of June 30, 2000.



                                       11
<PAGE>   12
Current liabilities total $6,438,211 as of December 31, 2000 as compared to
$5,141,558 as of June 30, 2000. They include accounts payable of $2,303,400 as
of December 31, 2000 as compared to $2,904,205 as of June 30, 2000. Accrued
expenses of $1,047,199 as of December 31, 2000 compared with $546,412 as of June
30, 2000. We had notes payable totaling $3,087,612 for the quarter ended
December 31, 2000 including notes payable to related parties and including a
$941,044 debenture, net of discount, which has been extended to May 5, 2001.
This compares to $1,951,877 in notes and capital leases payable as of June 30,
2000. Related party notes in the amount of $329,989 are secured with a
subordinated position on the facility in Lonoke, Arkansas.

Stockholders equity: Common shares increased from 18,147,783 as of June 30, 2000
to 20,844,305, as of December 31, 2000. The increase is the result of the
issuance of an additional 850,000 shares through our equity line of credit and
136,657 shares were issued upon conversion from the Company's Series A
Preferred. Total shareholder equity was $12,670,634 as compared to $16,444,458
as of June 30, 2000. Total liabilities and stockholder's equity was $19,108,845,
as of December 31, 2000 as compared to $21,846,952 on June 30, 2000.

Liquidity and Capital Resources: Recently, we obtained additional loans to
provide for our cash deficiency. We believe accessing the capital markets
through our equity line of credit will be necessary to fund operations over the
near-term; however, given the difficult business environment there is no
assurance the capital needed can be accessed.

Sales: Sales decreased to $3,548,401 for the quarter ended December 31, 2000
from $3,688,148 for the quarter ended December 31, 1999. This is a 4% decrease.
The short-fall resulted from a different catalog mailing schedule from the prior
year Quarter. Internet sales for the December 2000 quarter were $510,015 as
compared to 213,923 in the December 1999 quarter.

Cost of Sales: Cost of sales increased to $2,552,940 as of December 31, 2000 as
compared to $2,434,945 as of December 31, 1999. This is a 5% increase and is
partially the result of our free shipping policy for on-line orders received
through our Allpets.com web site.

Gross margin: Our gross margins declined to 28% for the quarter ended December
31, 2000 as compared to 34% for the same period in 1999. The lower margins are a
direct result of our free shipping policy for on-line orders received through
our Allpets.com web site and an increase in product costs for all divisions.

Selling expenses: Selling expenses of $590,629 for the quarter ended December
31, 2000 and compare with $596,452 for the quarter ended December 31, 1999. The
majority of the selling expenses were attributed to the cost of the catalogs.

Administrative and general expenses increased to $1,400,348 during the quarter
ended December 31, 2000 as compared to $1,470,949 for the quarter ended December
31, 1999. This reflects a 5% decrease. Recently, we have reduced payroll
expenses and believe other reductions will occur during the next several
quarters.

Depreciation and amortization expenses for the quarter were $1,432,154 as
compared to $445,783 in the quarter ended December 31, 2000. The increase is
attributed to the amortizations of goodwill relating to the acquisitions of
WeRPets.com, Chartendure, Ltd., and AllPets.com. These acquisitions were
completed after the end of the December 1999 quarter. The amortizations are
expected to continue for one and one-half to three and one-half more years.

Loss from operations was $2,427,670 as of December 31, 2000 as compared to
$1,259,981 as of December 31, 1999. The largest part of the increase is from the
increased amortization from the acquisitions made during the past year.

Interest expense was $283,722 for the quarter ended December 31, 2000 as
compared to $149,913 for the same period in 1999. This increase is due to
interest costs of $210,000 charged in the second quarter relating to the
beneficial conversion component of extending the convertible debenture.

Income tax benefit: We currently have substantial net operating losses (NOL'S)
from inception through December 31, 2000. At this time, no income tax benefit
has been recognized.

Net loss: We had a $2,707,987 loss for the quarter as compared to a $2,742,323
loss for the quarter ended December 31, 1999. Non-cash items include the
goodwill amortization of Humboldt Industries, WeRPets.com, Chartendure Ltd., and
AllPets.com, depreciation expense, and stock compensation expense and the
interest costs associated with the beneficial conversion component of the
convertible debenture.

Recent Events: Several of our online competitors have announced they are ending
operations. Management believes the online customers of these companies will
search for an alternate provider of online pet supplies and accessories. Our
on-line sales are growing as a percentage of total sales and we anticipate this
trend to continue. We are actively pursuing these new customers, however there
is no assurance that we will be successful in these efforts.

SIX MONTHS ENDED DECEMBER 31, 2000

Sales: Sales for the six-months were $7,521,735 as of December 31, 2000 as
compared to $6,198,900 for the six months ended December 31, 1999. Cost of sales
was $5,368,949 as of December 31, 2000 as compared to $4,113,152 as of June 30,
2000. Gross margin was $2,152,786 at the end of the six months as compared to
$2,085,748 for the same period in 1999.

Operating expenses and costs total $7,671,192 for the six months ended December
31, 2000 as compared to $3,842,802 for the same period in 1999. The increase
partially reflects expenses associated with overhead from the acquisitions made
in the last year. Additionally, the increase in depreciation and amortization
for the six months ended December 31, 2000 as compared to December 31, 1999
reflects a portion of the costs associated with the acquisitions of WeRPets.com,
Chartendure, Ltd., and AllPets.com. Loss from operations was $5,518,406 for the
six months ended December 31, 2000 as compared to a $1,757,054 loss for the
period ended December 31, 1999.

Other income (expense): Total other expense decreased from $2,245,629 as of
December 31, 1999 to $365,807 as of December 31, 2000. The decrease reflects
loan origination fees and charges associated with the bridge loan in the prior
period.

Net Loss: Net loss increased to $5,884,213 for the six months ended December 31,
2000 as compared to $4,002,683 as of December 31, 1999. Net loss per share
decreased from ($0.30) for the six months ended December 31, 2000 as compared to
($0.36) as of December 31, 1999.



                                       12
<PAGE>   13

                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

    Pet Quarters is not currently involved in litigation other than matters
which are routine and incidental to the business.

ITEM 2. CHANGES IN SECURITIES.

    a) There have been no material changes defining the rights of any class of
registered securities. The Company did renegotiate on November 3, 2000 the terms
of a convertible debenture to extend the payment date until May 5, 2001 and
consequently reduce the exercise price of warrants held by the owner of the
debenture.

    b) Common stock issued by the Company during the second period was as
follows:

    (1) 136,657 shares issued upon conversion of the convertible preferred.

    (2) 850,000 shares issued through our equity line of credit.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

         None

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

    The Company has not submitted any matters to the stockholders during this
period.

ITEM 5. OTHER INFORMATION.

    The Company has eliminated several positions in an effort to reduce costs.
Additionally, We are transferring the majority of the positions in our Los
Angeles office to our Pennsylvania facility and have closed the Nashville,
Tennessee office.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     None




                                       13
<PAGE>   14

                                   SIGNATURES

    In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       PET QUARTERS, INC. (Registrant)


Date February 16, 2001                          /s/ Steve Dempsey
    ------------------                 --------------------------------------
                                       Steve Dempsey, President

Date February 16, 2001                          /s/ Gregg Rollins
    ------------------                 --------------------------------------
                                       Gregg Rollins, Chief Financial Officer