<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 March 31, 2000


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

               For the transition period from ________ to________


                        Commission file number__________


                               PET QUARTERS, INC.
        (Exact name of small business issuer as specified in its charter)

<TABLE>

<S>                      <C>                                               <C>   <C>
                         Arkansas                                                62-169-8524
(State or other jurisdiction of incorporation or organization)             (IRS Employer Identification No.)
</TABLE>


                   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 [ ]

<PAGE>   2


                      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: 13,369,613.


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

                         PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

The accompanying balance sheets of Pet Quarters, Inc. and Subsidiary at March
31, 2000 and June 30, 1999, the statements of operations for the three and nine
months ended March 31, 2000 and 1999, and the statements of cash flows for the
nine months ended March 31, 2000 and 1999, have been prepared by the Company's
management in accordance with generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, 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.

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



                                       2
<PAGE>   3



                        PET QUARTERS, INC. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                          MARCH 31            JUNE 30
                                                            2000               1999
                                                        ------------       ------------
                                                         (UNAUDITED)
<S>                                                     <C>                <C>
ASSETS
Current assets:
   Cash                                                 $    113,049       $     37,726
   Accounts receivable                                       349,944              2,654
   Inventories                                             1,564,437             33,783
   Deferred advertising costs                                486,000                 --
   Assets held for sale                                      500,000                 --
   Prepaid expenses and other current assets                   6,665              2,250
                                                        ------------       ------------
Total current assets                                       3,020,095             76,413

Property, plant and equipment:
     Land                                                         --            225,000
     Buildings and improvements                               35,805            708,600
     Furniture and equipment                                 469,867             35,072
                                                        ------------       ------------
                                                             505,672            968,672
Less accumulated depreciation                                (31,616)           (33,185)
                                                        ------------       ------------
                                                             474,056            935,487
Goodwill, net of accumulated amortization of
$1,113,179 at
  March 31, 2000                                           7,200,097                 --
Intangible assets, net of accumulated amortization           158,150             30,385
                                                        ------------       ------------
Total assets                                            $ 10,852,398       $  1,042,285
                                                        ============       ============
</TABLE>

            See Notes to Condensed Consolidated Financial Statements



                                       3
<PAGE>   4




<TABLE>
<CAPTION>
                                                                      MARCH 31            JUNE 30
                                                                        2000               1999
                                                                    ------------       ------------
                                                                    (UNAUDITED)
<S>                                                                 <C>                <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                 $  1,590,248       $    203,394
   Accrued expenses                                                      386,681             12,613
   Short-term notes payable                                               90,000                 --
   Bridge loan payable                                                 3,830,001                 --
   Current portion of notes and capital leases payable                    93,168                 --
   Notes payable to related party                                        690,178            325,000
                                                                    ------------       ------------
Total current liabilities                                              6,680,276            541,007

Long-term portion of notes and capital leases payable                    222,732                 --
                                                                    ------------       ------------
Total liabilities                                                      6,903,008            541,007

Stockholders' equity:
   Common stock, $.001 par value per share, 40,000,000 shares
authorized;
     13,369,613 and 9,800,165 shares issued and outstanding at
March 31,
     2000 and June 30, 1999, respectively                                 13,370              9,800
   Additional paid-in capital                                         13,459,064          2,498,867
   Accumulated deficit                                                (9,323,124)        (1,868,444)
                                                                    ------------       ------------
                                                                       4,149,310            640,223
   Less unamortized stock compensation                                  (199,920)          (138,945)
                                                                    ------------       ------------
Total stockholders' equity                                             3,949,390            501,278
                                                                    ------------       ------------
Total liabilities and stockholders' equity                          $ 10,852,398       $  1,042,285
                                                                    ============       ============
</TABLE>

            See Notes to Condensed Consolidated Financial Statements



                                       4
<PAGE>   5



                        Pet Quarters, Inc. and Subsidiary
                 Condensed Consolidated Statements of Operations
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                  NINE MONTHS ENDED MARCH 31,    THREE MONTHS ENDED MARCH 31,
                                     2000            1999            2000             1999
                                 ------------    ------------    ------------    ------------
<S>                              <C>             <C>             <C>             <C>
Sales                            $  9,873,570    $    204,059    $  3,674,670    $     65,202
Cost of sales                       6,744,788         132,230       2,631,636          42,369
                                 ------------    ------------    ------------    ------------
                                    3,128,782          71,829       1,043,034          22,833
Operating expenses and costs:
Selling                             1,483,788         300,422         511,886          89,890
Administrative and general          5,059,502         271,879       2,946,347         102,777
Depreciation and amortization       1,253,336          28,746         495,590          11,582
                                 ------------    ------------    ------------    ------------
                                    7,796,626         601,047       3,953,823         204,249
                                 ------------    ------------    ------------    ------------
Loss from operations               (4,667,844)       (529,218)     (2,910,789)       (181,416)

Other income (expense):
Interest expense                     (402,737)           (289)       (141,207)             --
Amortization of                      (651,671)             --              --              --
bridge loan origination fee
Troubled debt restructuring        (1,339,461)             --              --              --
expense
Write down of land & building
to estimated net realizable          (400,000)             --        (400,000)
value
Interest income                         7,033           2,950              --            (268)
                                 ------------    ------------    ------------    ------------
                                   (2,786,836)          2,661        (541,207)           (268)
                                 ------------    ------------    ------------    ------------
Loss before income tax benefit     (7,454,680)       (526,557)     (3,451,996)       (181,684)

Income tax benefit                         --              --              --              --
                                 ------------    ------------    ------------    ------------
Net loss                         $ (7,454,680)   $   (526,557)   $ (3,451,996)   $   (181,684)
                                 ============    ============    ============    ============

 Net loss per common share:
 Basic                           $      (0.65)   $      (0.05)   $      (0.28)   $      (0.02)
 Diluted                         $      (0.65)   $      (0.05)   $      (0.28)   $      (0.02)

 Basic Shares                      11,519,146      11,560,000      12,340,531      11,560,000
 Diluted Shares                    12,134,883      11,560,000      13,338,881      11,560,000
</TABLE>

            See Notes to Condensed Consolidated Financial Statements



                                       5
<PAGE>   6



                        Pet Quarters, Inc. and Subsidiary
                 Condensed Consolidated Statements of Cash Flows
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED MARCH 31
                                                                 2000               1999
                                                             ------------       ------------
<S>                                                          <C>                <C>
OPERATING ACTIVITIES
Net (loss)                                                   $ (7,454,680)      $   (526,557)
Adjustments  to reconcile  net loss to net cash
used in
  Expense of operating activities
      Depreciation                                                140,157             28,746
      Amortization of goodwill                                  1,113,179                 --
      convertible debt issued                                     626,452                 --
      Amortization of loan origination fee                      1,134,681                 --
      Amortization of stock compensation                          339,806                 --
expense
      Stock options issued for services                           778,652                 --
      Stock issued for Wellstone                                  557,453                 --
      Non-cash compensation                                        47,813                 --
      Bridge loan default penalty refinanced                      230,000                 --
      Stock issued for services                                    18,420                 --
      Writedown  of building  and land held for                   400,000                 --
sale
  Changes in operating assets and liabilities, net of
        acquisition:
      Accounts receivable                                        (186,975)             1,747
      Inventories                                                 570,873             34,606
      Prepaid expenses and other current assets                  (273,616)                --
      Other assets                                                  3,492                 --
      Accounts payable                                           (104,393)            42,880
      Accrued expenses                                            154,656             (5,010)
                                                             ------------       ------------
Net cash used in operating activities                          (1,904,030)          (423,588)

INVESTING ACTIVITIES
Acquisition of Humboldt, net of cash                           (4,448,454)                --
Purchase and development of web site                             (120,241)                --
Purchases of property, plant, and equipment                      (115,347)           (39,801)
                                                             ------------       ------------
Net cash used in investing activities                          (4,490,453)           (39,801)

FINANCING ACTIVITIES
Proceeds from issuance of common stock                          2,642,605                 --
Proceeds from notes payable and bridge loan                     5,231,850            100,000
Payments on notes payable and capital leases                   (1,211,060)                --
                                                             ------------       ------------
Net cash provided by financing activities                       6,663,395            100,000
                                                             ------------       ------------
Net increase (decrease) in cash                                    75,323           (363,843)
Cash at beginning of period                                        37,726            375,843
                                                             ------------       ------------
Cash at end of period                                        $    113,049       $     12,454
                                                             ============       ============
Shares issued for the acquisition of Humboldt
  Industries                                                 $  4,600,000                 --
</TABLE>

            See Notes to Condensed Consolidated Financial Statements




                                       6
<PAGE>   7



              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF BUSINESS

Pet Quarters, Inc. ("Pet Quarters") and Subsidiary (collectively, the "Company")
was organized under the laws of the state of Arkansas on May 22, 1997, for the
purpose of marketing and selling pet supplies over the Internet. From May 22,
1997 to June 30, 1997, the Company had no operations.

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

In the opinion of management, the unaudited condensed consolidated financial
statements included herein have been prepared on a basis consistent with prior
periods reported consolidated financial statements and include all material
adjustments, consisting of normal recurring adjustments, necessary to fairly
present the information set forth therein.

All significant intercompany balances and transactions have been eliminated.

Certain information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission, although the Company believes that the
disclosures in the unaudited interim financial statements are adequate to ensure
that the information presented is not misleading. The results of operations for
the interim reporting periods presented herein are not necessarily indicative of
any future operating results.

The financial information as of June 30, 1999 is derived from the Company's Form
10-SB for the Fiscal Year Ended June 30, 1999 as filed with the Securities and
Exchange Commission. The interim financial statements presented herein should be
read in conjunction with the financial statements and the notes thereto included
in the Form 10-SB.

CONSOLIDATION

The consolidated financial statements include the accounts of PQ Acquisition
Company, Inc. ("PQ Acquisition") which was organized in August 1999 for the sole
purpose of acting as an intermediate corporation to acquire Humboldt Industries,
Inc. ("Humboldt") and Maplewood Industries, Inc. ("Maplewood") (collectively,
Humboldt and Maplewood shall be referred to as "Humboldt Industries"). PQ
Acquisition currently owns all of the issued and outstanding shares of stock of
Humboldt Industries. All of the stock of PQ Acquisition is owned by Pet
Quarters. The consolidated financial statements also include the accounts of
Wellstone Acquisition Corporation which was acquired on March 6, 2000 (Note 4).

The financial statements include the accounts of the Company and Humboldt
Industries beginning August 1, 1999.

INVENTORIES

Inventories are valued at the lower of cost, principally determined by the
first-in, first-out method, or market. Inventory at March 31, 2000 and June 30,
1999, consists of pet supplies purchased for resale.

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 range from five years for furniture and equipment to
thirty-nine years for buildings and improvements.


                                       7
<PAGE>   8


ASSETS HELD FOR SALE

Assets held for sale at March 31, 2000 represent land and building in Lonoke,
Arkansas. The assets are reflected at the estimated sales price. In March 2000,
the Company recorded a write-down in the carrying value of the land and building
of $400,000.

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.

INTANGIBLE ASSETS

Intangible assets, which include web site development costs, are amortized on a
straight-line basis over their estimated lives, ranging from 3 to 5 years.

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.

IMPAIRMENT OF ASSETS

The Company accounts for any impairment of its long-lived assets using Statement
of Consolidated 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.

NOTE 2. AVERAGE SHARES OUTSTANDING

The following table sets forth the reconciliation of average shares outstanding
for purposes of calculating Basic and Diluted loss per share for the periods
indicated:




                                       8
<PAGE>   9

<TABLE>
<CAPTION>
                                         NINE MONTHS ENDED               THREE MONTHS ENDED
                                              MARCH 31,                      MARCH 31,
                                       2000            1999            2000            1999
                                    ----------      ----------      ----------      ----------
<S>                                 <C>             <C>             <C>             <C>
Average shares outstanding -        11,519,146      11,560,000      12,340,531      11,560,000
Basic
Net effect of dilutive stock
options -
   based on the treasury stock
method                                 615,737              --         998,350              --
                                    ----------      ----------      ----------      ----------
Average shares outstanding -        12,134,883      11,560,000      13,338,881      11,560,000
Diluted                             ==========      ==========      ==========      ==========
</TABLE>


NOTE 3. STOCK-BASED COMPENSATION

The Company's Board of Directors has given approval to the establishment of a
Management 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
and require that the employee remain in continuous employment for a period of
one year from the date of grant unless waived by management and approved by the
board of directors.

In the nine months ended March 31, 2000, the Company granted stock awards to
employees in the amount of 105,000 shares. The Company has waived the employment
period for two employees in the amount of 150,000 shares issued in a prior
period and canceled 10,000 shares previously issued to a former employee.

During the nine months ended March 31, 2000, the Company granted 200,000 options
to a key employee at the fair market value at the date of the grant of $2.97.
These options vest on December 31, 2000 and 2001.

The Company engaged an advisor and granted options to purchase 573,350 shares at
the fair market value at the date of grant of $1.00. These options vest on a
monthly basis beginning in December 1999 and are being allocated for based on
the closing market price of the Company's common stock at each vesting date.

NOTE 4. ACQUISITIONS

Humboldt and Maplewood

On August 1, 1999, the Company acquired 100% of the outstanding stock of
Humboldt Industries and Maplewood Industries, 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. Humboldt is in the pet supply catalog business and
distributes two pet catalogs - Home Pet Shop and the Dog's Outfitter - to retail
and wholesale customers throughout the United States and in selected foreign
markets. The acquisition was accounted for as a purchase transaction. The
purchase price was allocated to assets and liabilities acquired. The allocation
of purchase price results in goodwill in the amount of approximately $8.3
million. Goodwill is amortized over a five year life. The cash paid was financed
through a bridge loan by borrowing $4.6 million from Sun Valley Trust (the
"Trust"). This loan was due in full on October 1, 1999 with an interest rate of
12.5% (the "Bridge Loan"). Some of the investors in the Trust are also employees
of the Company. In conjunction with the Bridge Loan transaction, the Company
issued 153,334 share of Common Stock with an estimated value of $651,671 as
payment for origination of the loan. This origination fee was amortized over the
term of the loan from August 1, 1999 through October 1, 1999. In addition, the
Company issued 4,334 shares of Common Stock with an estimated value of $18,420
for attorney fees associated with the Bridge Loan. The common stock of Humboldt
and Maplewood is pledged as security for the Bridge Loan.

On October 2, 1999, the Company went into default on the $4.6 million Bridge
Loan. This Bridge Loan was extended on November 10, 1999 with key changes from
the original agreement as follows: The interest rate was reduced from 12.5% to
10%, interest in the amount of $204,723 was paid current, penalties in the
amount of $230,000 were added to the principal balance (total principal
$4,830,000), $20,000 in interest payments are due monthly with the remainder to
accrue and be paid upon funding. On November 10, 1999, the Company issued an


                                       9
<PAGE>   10


additional 275,000 restricted shares to the trust at a value equal to the
average market value of $1.756 or $626,452. The terms of the extension required
a partial principal payment of $1,000,000 by February 10, 2000. This payment was
made on February 3, 2000 as required. The remaining principal balance plus
accrued interest will be due in full on May 10, 2000. In addition, as a
condition to the extension of the Bridge Loan, the Company was required to pay
all accrued but unpaid interest and fees in the amount of $204,723 (the
"Interest Payment"). Shareholders Michael D. Parnell and the Matthew J. Hoff
Trust agreed to loan the Company the money to make the Interest Payment. The
loans to make the Interest Payment are due in full on May 10, 2000, together
with interest at the rate of 10% per annum. Alternatively, Mike Parnell and the
Matthew J. Hoff Trust may elect to convert all or any part of the loans into Pet
Quarters common shares at $.50 per share. On January 27, 2000, Mike Parnell and
the Matthew J. Hoff Trust converted the loans to 409,446 shares of Pet Quarters
common stock. The Company expensed the costs associated with these loans in the
second quarter.

On May 9, 2000, the Company retired the bridge note by paying cash of $2,421,500
and converting $1,408,500 of debt into 14,085 shares of $100 par convertible
preferred stock.

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 Pet
Quarters common stock. 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 would not utilize
rule 12g-3(a) to become fully reporting. The Company has not yet 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 7, 2000 the Company entered into an agreement to acquire all of the
outstanding stock of WeRPets.com, Inc. for $38,344 cash and 703,316 shares of
the Company's Common Stock, valued at $2,461,606 at the date of acquisition. The
Acquisition is to be accounted for as a purchase transaction. The purchase price
of $2.5 million has preliminarily been allocated to goodwill and intangibles and
will be amortized over a three year period.

Pro Forma Information

The operations of Humboldt Industries have been consolidated with the operations
of the Company beginning August 1, 1999. The operations of WeRPets.com have been
consolidated with the operations of the Company beginning April 7, 2000. Pro
forma unaudited information, which includes goodwill amortization and bridge
loan interest expense, as if the Humboldt Industries, Maplewood Industries and
the WeRPets.com acquisitions occurred as of July 1, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                            NINE MONTHS ENDED
                                                MARCH 31,
                                         2000               1999
                                     ------------       ------------
<S>                                  <C>                <C>
      Sales                          $ 11,093,619       $
      Cost of sales                    (7,557,504)
      Operating expenses               (9,230,307)
      Other income (expenses)          (2,827,548)
                                     ------------       ------------
      Net loss                       $ (8,521,740)      $
                                     ============       ============
      Basic loss per share           $      (0.69)      $
                                     ============       ============
      Diluted loss per share         $      (0.69)      $
                                     ============       ============
</TABLE>

The above pro forma unaudited information does not purport to be indicative of
the result which actually would have occurred had the acquisition been made at
the beginning of the respective periods.



                                       10
<PAGE>   11


NOTE 5. EQUITY TRANSACTIONS

On January 27, 2000 $204,723 in debt was converted to 409,446 shares of common
stock.

During the three months ended March 31, 2000 the Company issued 700,525 shares
of stock for $1,471,102 under a subscription agreement at an issue price of
$2.10 per share.

On March 15, 2000, the Company signed a $25 million equity line of credit
agreement. Under this agreement, the Company will have the ability to draw cash
for stock every twenty (20) trading days.

On February 23, 2000 the Company entered into a Common Stock and Warrants
Purchase Agreement in the amount of $1,500,000 for 714,285 shares of the
Company's common stock and warrants to purchase 150,000 shares of common stock.
At March 31, 2000, pursuant to the agreement, $500,000 of stock and warrants are
held in escrow and are contingently issuable based upon certain future events.

On March 6, 2000, the Company issued 130,208 shares of stock for the acquisition
of Wellstone.

Subsequent to March 31, 2000, the Company raised $3,463,800 for 34,638 shares
of convertible preferred stock via a Private Placement.

On May 5, 2000, the Company entered into a convertible debenture in the amount
of $1,000,000. This loan accrued interest at a rate of 6%, and is due November
5, 2000. The loan can be converted into 723,798 shares of common stock at any
time.

On April 7, 2000, the Company issued 703,316 share of common stock for the
acquisition of WeRPets.com.

NOTE 6. 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 March 31, 2000 and 1999 and for the nine months ended March 31, 2000 and
1999 is as follows:

<TABLE>
<CAPTION>
                                      NINE MONTHS ENDED                     THREE MONTHS ENDED
                                           MARCH 31,                            MARCH 31,
                                   2000               1999               2000               1999
                               ------------       ------------       ------------       ------------
<S>                            <C>                <C>                <C>                <C>
Net Sales:
  Internet                     $    435,179       $    204,059       $    173,973       $     65,202
  Catalog                         9,438,400                 --          3,500,697                 --
                               ------------       ------------       ------------       ------------
  Total                        $  9,873,570       $    204,059       $  3,674,670       $     65,202
                               ============       ============       ============       ============

Loss from operations:
  Internet                     $ (3,181,252)      $   (529,218)      $ (2,249,924)      $   (181,416)
  Catalog                        (1,486,592)                --           (660,865)                --
                               ------------       ------------       ------------       ------------
  Total                        $ (4,667,844)      $   (529,218)      $ (2,910,789)      $   (181,416)
                               ============       ============       ============       ============
</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.



                                       11
<PAGE>   12








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

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, 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 January 1, 2000 and concluding on
March 31, 2000.

Assets: The total assets as of March 31, 2000 were $10,852,398 as compared to
$1,042,285 from 1999. Most of the increase resulted from the purchase of
Humboldt Industries in August 1999. We had current assets of $3,020,094
including cash of $113,049 and inventories of $1,564,437 as of March 31, 2000 as
compared to current assets of $76,413 including cash of $27,726 and inventories
of $33,783 as of June 30, 1999. As of April 13, 2000 we entered into a real
estate contract to sell the Arkansas facility. These assets are reflected as
Land and Building held for sale in the amount of $500,000. The Company recorded
an expected loan on sale of $400,000 during the quarter.

Long-term fixed assets include land, building and improvements, and furniture
and fixtures. These items total $474,056 net of accumulated depreciation as of
March 31, 2000 as compared to $935,487 net of accumulated depreciation as of
June 30, 1999. On April 14, 2000 we accepted an offer to sell the facility in
Lonoke, Arkansas for $560,000 before expenses and commissions. The purchase of
Humboldt Industries has eliminated the original purpose of the facility and we
believe it is in the best interest of shareholders to increase our cash reserve
or eliminate or reduce any debt outstanding with the sale.

Goodwill, net of accumulated amortization, was $7,200,097 as of March 31, 2000.
The Goodwill reflects the amortization of the Humboldt Industries purchase.
Currently, we are amortizing the purchase on a five-year schedule, which results
in amortization $415,665 quarterly. The amortization of the Goodwill associated
with Humboldt Industries will end in the first fiscal quarter of 2004. There was
no corresponding entry from the prior period.

Intangible assets in the amount of $158,150 include capitalized costs associated
with our website. 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 $6,903,008 are reflected as of March 31, 2000.
Total liabilities as of June 30, 1999 were $541,007.

Current liabilities include accounts payable of $1,590,248 as of March 31, 2000
as compared to $203,394 as of June 30, 1999. Our accrued expenses increased to
$386,681 in the quarter from $12,613 at June 30, 1999. The increases are the
result of the purchase of Humboldt Industries.

We have a note outstanding to the Sun Valley Trust in the amount of $3,830,000
as of March 31, 2000. The original amount of the funds borrowed by Pet Quarters,
Inc. was $4,600,000. The principal balance increased to $4,830,000 in November
1999. The principal was reduced in February 2000 by $1,000,000 payment and the
$3,830,000 remaining balance of the obligation to the Sun Valley Trust was due
in full




                                       12
<PAGE>   13


on May 10, 2000. On May 9, 2000 the remaining balance to the Sun Valley Trust
was retired by the payment of $2,421,500 and the conversion of the remaining
balance to convertible preferred stock.

Demand notes carrying an interest rates from 8% to 9% in the amount of $350,189
are unsecured. In the period ended March 31, 1999 we had $100,000 in unsecured
notes payable. Other demand notes with an interest rate of 10% in the amount of
$429,989 are secured by the facility in Lonoke, Arkansas. We have accepted an
offer to sell this property for $560,000 before commissions and expenses.

The long-term portion of notes and capital leases payable for $222,732 are
secured by telephone hardware and computer equipment in the Pennsylvania
facility.

Stockholders Equity: Common shares increased from 9,800,165 as of June 30, 1999
compared to 13,369,613 as of March 31, 2000. The majority of the increase in
shares outstanding reflects the issuance to investors of private placements
offered by Pet Quarters, Inc, the issuance of shares to purchase Humboldt
Industries, and the granting of shares to Pet Quarters, Inc. officers and
employees. Additional Paid In Capital increased from $498,867 as of June 30,
1999 to $13,459,064 as of March 31, 2000. The Humboldt Industries purchase by
Pet Quarters, Inc. produced the largest part of the increase from 1999 to 2000.
Retained deficit increased to $9,323,124 in March 31, 2000 from $1,868,444 on
June 30, 1999. Total stockholders equity as of March 31, 2000 was $3,949,390 as
compared to $501,278 as of June 30, 1999.

Total liabilities and stockholders equity was $10,852,398 and $1,042,285 as of
March 31, 2000 and June 30, 1999 respectively.

Liquidity and Capital Resources: Recently, we eliminated our debt with the Sun
Valley Trust (bridge loan) on May 9, 2000. Equity was raised to eliminate this
debt through the issuance of 0% convertible preferred in the amount of
$3,300,000 and a $1,000,000 convertible debenture. The convertible debenture has
a maturity date of November 5, 2000, but can be converted into permanent equity
prior to that date at the option of holder. The elimination of the bridge loan
has significantly improved the financial position of Pet Quarters, Inc.

Results of Operations: Three months ended March 31, 2000 as compared to the
three months ended March 31, 1999.

Sales: Sales increased to 3,674,670 for the quarter ended March 31, 2000 from
$65,202 for the quarter ended March 31, 1999. This is a 5,636% increase.

Cost of Sales: CoGS increased to $2,631,636 as of March 31, 2000 from $42,369 as
of March 31, 1999. CoGS were 72% of sales for the quarter ended in 2000 as
compared to 65% for the quarter ended in 1999.

Selling expenses for the quarter ended March 31, 2000 was $511,886 as compared
to $89,890 during the same period in 1999. We believe selling expenses will
increase in fiscal year 2001 as we increase the visibility of our website to
attract new visitors and customers.

Administrative and general expenses increased to $2,946,347 from $102,777 as of
March 31, 2000 and 1999, respectively. This increase includes amortization from
stock and option grants, payroll, and includes expenses for the day-to-day
operations of our business. We believe payroll expenses will continue to
moderately increase as new key employees will be added, but the amortization
costs are anticipated to diminish over time. These costs also include the
purchase of Wellstone Acquisition Corporation, which Pet Quarters, Inc purchased
on March 6, 2000, which is a full reporting corporation. We paid $225,000 and
130,208 shares of Pet Quarters, Inc. common stock totaling $782,483. We




                                       13
<PAGE>   14

believe Wellstone Acquisition can be used as a vehicle to purchase other
companies. At this time Pet Quarters, Inc. has no specific use for the asset.
Wellstone Acquisition Corporation was fully expensed during the quarter.

Depreciation and amortization expenses for the quarter were $495,590 as of March
31, 2000 as compared to $11,582 in the quarter ended March 31,1999. These items
include the five-year amortization of goodwill on the purchase of Humboldt
Industries, which is $415,665 per quarter.

Interest Expense was $141,207 as of March 31, 2000 as compared to $268 during
the same period in 1999. The increase in interest expense is the result of
working capital notes and the Sun Valley Trust (bridge) borrowing, which was
used to purchase Humboldt Industries. This debt carried an interest rate of 10%.
Sun Valley Trust debt in the amount of $3,830,000 was fully retired on May 9,
2000.

Write-down of Building and Land in Arkansas in the amount of $400,000 reflects
the difference in the offer price for the property and the net asset value
previously reflected on Pet Quarters, Inc. financial statements. We do believe
the long-term need for the facility since we purchased Humboldt Industries is
not as important as the cash to be received which can be used for working
capital or to reduce debt.

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

Net Loss: We had a $3,451,996 loss as of March 31, 2000 as compared to $181,684
as of March 31, 1999. Non-cash items included in this loss is the amortization
for stock and option grants, amortization of goodwill for Humboldt Industries
$415,665, depreciation expense and a write-down on the Arkansas facility.

Results of Operations: Nine months ended March 31, 2000 as compared to the nine
months ended March 31, 1999.

Sales for the nine months were $9,873,570 as compared to $204,059 in the years
2000 and 1999, respectively. The sales for 2000 include Humboldt Industries for
eight months and Pet Quarters, Inc. Internet sales for nine months. Catalog
sales for the nine months ended March 31, 2000 were $9,438,400 and Internet
sales were $435,179. Sales for the nine months ended March 31, 1999 was
$204,059. All sales in the period ended 1999 were Internet sales.

Cost of Goods Sold was $6,744,788 for the period ended March 31, 2000 as
compared to $132,230 for the same period in 1999. CoGS was 68% percent of sales
in 2000 and 65% in 1999.

Selling Expenses increased to $1,483,788 in 2000 as compared to $300,422 during
the same period in 1999. The increase was primarily the result of catalog costs
not previously incurred.

General and Administrative expenses were $4,277,049 during the nine months ended
March 31, 2000 as compared to $263,218 during the same period in 1999. This
increase in attributed to the purchase of Humboldt Industries.

Depreciation and Amortization increased to $1,253,336 in 2000 from $28,746 in
the same period in 1999. This increase includes a five-year amortization of
goodwill related to the purchase of Humboldt Industries. Humboldt Industries is
being amortized at $415,665 each quarter.

Interest Expense increased to $402,737 for the nine months ended March 31, 2000
as compared to $289 for the same period in 1999. The increase in attributed to
the debt associated with the purchase of




                                       14
<PAGE>   15

Humboldt Industries through the Sun Valley Trust (bridge loan) and other debt
issued for working capital purposes. The Sun Valley Trust debt was retired in
full on May 9, 2000.

Pet Quarters, Inc. incurred expenses associated with the bridge loan during the
nine month period ended March 31, 2000. Those expenses include loan origination
fees in the amount of $651,671, troubled debt restructuring expense in the
amount of $1,339,461, the purchase of Wellstone Acquisition Corporation in the
amount of $782,453, and the write down of the land and building in Arkansas in
the amount of $400,000. There were no corresponding entries in 1999.

Net Loss for the nine months ended March 31, 2000 was $7,454,680 as compared to
a loss of $526,557 for the same period in 1999. The losses were impacted by
non-cash items including goodwill amortization, stock and option grant
amortization, the expensed bridge loan extension, the beneficial conversion
feature of the convertible note issued during the December 1999 quarter, the
expense associated with the purchase of Wellstone Acquisition and the write-down
of the facility in Arkansas in the amount of $400,000.



                                       15
<PAGE>   16




                          PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

         Pet Quarters is not currently involved in any lawsuits as a plaintiff
or defendant and has no knowledge of any pending legal action.


ITEM 2. CHANGES IN SECURITIES.

         a) There have been no material changes defining the rights of the
common stockholders. At this time, common stock is the only class of security in
Pet Quarters.

         b) Common stock issued by the Company during the third quarter (i.e.,
December 31 to March 31, was as follows:

            (1)   A single accredited investor purchased 380,952 shares and
                  130,000 warrants for $800,000.

            (2)   A single accredited investor purchased 95,238 shares and
                  20,000 warrants for $200,000.

            (3)   Eighteen accredited investors purchased a total of 700,525
                  shares for $1,471,102.

            (4)   The Company issued 130,208 shares and $225,000 to purchase all
                  of the outstanding shares of Wellstone Acquisition Corporation
                  in March of 2000.

            (5)   Two accredited investors each received 204,723 shares of the
                  Company's common stock in January. The stock was issued
                  pursuant to the conversion provisions of two notes which total
                  $204,723. Provisions of the notes allowed the notes to be
                  converted into common stock of the Company at $.50 per share.
                  The note was issued to pay interest on the "bridge loan" when
                  that loan was in default. See Item 3, "Defaults on Senior
                  Securities."



ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

         The Company entered into a loan agreement from the Sun Valley Trust in
August 1999 to purchase Humboldt Industries. Pet Quarters borrowed $4,600,000,
which matured October 1, 1999 (the "Bridge Loan"). The Company was in default on
the Bridge Loan until November 10, 1999, at which time the loan was extended
until February 10, 2000. At that time, a principal payment of $1,000,000 was
required to extend the loan until May 10, 2000. This $1,000,000 payment was made
prior to the February 10, 2000 due date and the loan has been extended until May
10, 2000. As part of the original Bridge Loan agreement, a five percent (5%)
penalty was added to the principal, which increased the Bridge Loan to
$4,830,000. The Bridge Loan is secured by the stock of Humboldt Industries.
Currently, the Bridge Loan is current on all interest and has a balance of
$3,830,000, which is due on May 10, 2000.



                                       16
<PAGE>   17


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.

         None.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

        27     Financial Data Schedule




                                       17
<PAGE>   18



                                   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  May 15, 2000                 /s/ Steve Dempsey
    ----------------               -------------------------------
                                       Steve Dempsey, President


Date  May 15, 2000                 /s/ Gregg Rollins
    ----------------               -------------------------------
                                       Gregg Rollins, Chief Financial Officer






                                       18
<PAGE>   19



                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER        DESCRIPTION
-------        -----------
<S>            <C>
     27        Financial Data Schedule
</TABLE>