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 October 4, 1998

                                       OR

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

                   For the transition period from ____ to ____

                        Commission File Number: 33-95796

                         HARVEST RESTAURANT GROUP, INC.
             (Exact name of registrant as specified in its charter)


             Texas                                                76-0406417
(State or other jurisdiction of                                 (IRS Employer
 incorporation or organization)                              Identification No.)


                          1250 N.E. Loop 410, Suite 335
                            San Antonio, Texas 78209
          (Address of principal executive offices, including zip Code)

                                 (210) 824-2496
                         (Registrant's telephone number)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of the latest  practicable date:

                     4,035,108 shares as of October 30, 1998



<PAGE>

                 HARVEST RESTAURANT GROUP, INC. AND SUBSIDIARIES

                                      INDEX





PART I.  FINANCIAL INFORMATION                                          PAGE NO.
                                                                        --------
     ITEM 1.  Financial Statements

                 Consolidated Balance Sheets -
                 October 4, 1998 and December 28, 1997                       3

                 Consolidated Statements of Operations -
                 Quarter and Three Quarters Ended
                 October 4,1998 and October 5, 1997                          4

                 Consolidated Statements of Cash Flows -
                 Quarter and Three Quarters Ended
                 October 4, 1998 and October 5, 1997                         5


                 Notes to Financial Statements                               6


     ITEM 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations                  10


PART II.  OTHER INFORMATION

     ITEM 1.  Legal Proceedings                                              14

     ITEM 6.  Exhibits and Reports on Form 8-K                               15




     SIGNATURES                                                              15



                                       2
<PAGE>
<TABLE>
<CAPTION>

                     HARVEST RESTAURANT GROUP, INC. AND SUBSIDIARIES
                               Consolidated Balance Sheets


                                                              October 4,    December 28,
                                                                1998            1997
                                                            ------------    ------------
                                                            (Unaudited)
ASSETS
<S>                                                         <C>             <C>         
Current Assets
    Cash                                                    $    154,395    $    774,674
    Cash, restricted                                             910,262         300,000
    Inventories                                                     --            15,345
    Other current assets                                            --            17,400
                                                            ------------    ------------
                  Total Current Assets                         1,064,657       1,107,419

Property and Equipment, net                                      666,692       2,039,052

Other Assets
    Intangible property rights, net of accumulated
       amortization of $237,750 in 1997                             --           161,750
    Deposits                                                     150,000          70,978
    Other assets                                                  80,000         110,406
                                                            ------------    ------------
                                                                 230,000         343,134
                                                            ------------    ------------
                                                            $  1,961,349    $  3,489,605
                                                            ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Accounts payable, trade                                 $    240,097    $    652,817
    Accrued liabilities:
         Real estate disposition costs                           636,000         800,000
         Other accrued liabilities                               160,611         156,460
    Current portion of long-term debt                               --           211,779
                                                            ------------    ------------
                  Total Current Liabilities                    1,036,708       1,821,056

Long-term debt, less current portion                                --            41,963

Stockholders' Equity
    Preferred stock - $1.00 par value                            560,005         515,150
    Common stock - $.01 par value, authorized 10,000,000,
       issued 3,946,081 in 1998 and 2,698,630 in 1997             39,461          26,986
    Additional paid-in capital                                13,920,893      11,902,073
    Accumulated deficit                                      (13,595,718)    (10,817,623)
                                                            ------------    ------------
 Total Stockholders' Equity                                      924,641       1,626,586
                                                            ------------    ------------
                                                            $  1,961,349    $  3,489,605
                                                            ============    ============




See notes to consolidated financial statements (unaudited).


                                            3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                    HARVEST RESTAURANT GROUP, INC. AND SUBSIDIARIES
                                   Consolidated Statements of Operations (Unaudited)




                                                                 Quarter Ended                  Three Quarters Ended
                                                          ----------------------------      ----------------------------
                                                           October 4,       October 5,       October 4,       October 5,
                                                              1998             1997             1998             1997
                                                          -----------      -----------      -----------      -----------

Revenues
<S>                                                       <C>              <C>              <C>              <C>        
     Restaurant operations                                $      --        $   461,243      $   289,440      $ 1,377,607
     Franchise fees                                              --            160,000             --            360,000
                                                          -----------      -----------      -----------      -----------
                                                                 --            621,243          289,440        1,737,607
Costs and Expenses
    Cost of food and paper                                       --            223,102          148,448          699,930
    Salaries and benefits                                        --            170,858          152,572          582,297
    Occupancy and related expenses                               --             67,345           83,672          205,727
    Operating expenses                                           --            136,240          109,839          487,448
    Preopening expenses                                        19,421           74,414           92,046          254,741
    General and administrative expenses                       258,856          724,995          954,363        1,570,146
    Depreciation and amortization                              28,122           71,656          308,521          203,947
    Loss on restaurant closures and other                        --               --          1,204,489             --
    Loss provision for area developer notes receivable           --          1,054,784             --          1,340,807
                                                          -----------      -----------      -----------      -----------
         Total costs and expenses                             306,399        2,523,394        3,053,950        5,345,043
                                                          -----------      -----------      -----------      -----------

Loss from operations                                         (306,399)      (1,902,151)      (2,764,510)      (3,607,436)

Other income (expense)
    Interest income                                              --             16,992            5,069           37,378
    Interest expense                                             --             (3,902)         (18,654)         (15,053)
                                                          -----------      -----------      -----------      -----------
                                                                 --             13,090          (13,585)          22,325
                                                          -----------      -----------      -----------      -----------

Net Loss                                                  $  (306,399)     $(1,889,061)     $(2,778,095)     $(3,585,111)
                                                          ===========      ===========      ===========      ===========


Preferred stock dividends                                    (721,770)        (185,400)      (1,120,861)        (185,400)
Net loss applicable to common shareholders                 (1,028,169)      (2,074,461)      (3,898,956)      (3,770,511)

Basic loss per common share                               $      (.27)     $      (.88)     $     (1.22)     $     (1.61)
                                                          ===========      ===========      ===========      ===========

Weighted average common shares outstanding                  3,849,210        2,368,673        3,192,684        2,346,922
                                                          ===========      ===========      ===========      ===========





See notes to consolidated financial statements (unaudited).


</TABLE>
                                                         4
<PAGE>
<TABLE>
<CAPTION>

                         HARVEST RESTAURANT GROUP, INC. AND SUBSIDIARIES
                        Consolidated Statements of Cash Flows (Unaudited)


                                                                          Three Quarters Ended
                                                                       --------------------------
                                                                        October 4,     October 5,
                                                                           1998           1997
                                                                       -----------    -----------
Operating Activities:
<S>                                                                    <C>            <C>         
    Net loss for the period                                            $(2,778,095)   $(3,585,111)
    Adjustments to reconcile net loss
     to net cash used in operating activities:
       Depreciation and amortization                                       308,521        203,947
       Loss on restaurant closures and other                             1,204,489           --
       Forfeitures of deposits                                              49,033           --
       Loss provision for area developer notes receivable                     --        1,340,807
       Changes in operating assets and liabilities:
         Inventories                                                        15,345         (4,922)
         Other current assets and other assets                              96,688        (25,284)
         Accounts payable and accrued liabilities                         (572,569)       262,360
                                                                       -----------    -----------
              Net cash used in operating activities                     (1,676,588)    (1,808,203)

Investing Activities:
     Purchase of property and equipment                                    (22,814)      (722,802)
     Increase in deposits and other assets                                (183,055)       (35,561)
     Issuance of notes receivable                                             --       (2,877,237)
                                                                       -----------    -----------
              Net cash used in investing activities                       (205,869)    (3,635,600)

Financing Activities:
     Net proceeds from sale of preferred stock and warrants              2,075,750      4,375,536
     Net proceeds from sale of common stock and warrants                      --          568,875
     Proceeds from borrowings                                              225,000         65,000
     Decrease in cash restricted for bank obligations                      200,000        220,000
     Increase in cash restricted under agreement                          (810,262)          --
     Repayments of borrowings                                             (428,310)        (8,272)
                                                                       -----------    -----------
              Net cash provided by financing activities                  1,262,178      5,221,139
                                                                       -----------    -----------

Net decrease in cash                                                      (620,279)      (222,664)

Cash at beginning of year                                                  774,674      1,271,443
                                                                       -----------    -----------

Cash at end of period                                                  $   154,395    $ 1,048,779
                                                                       ===========    ===========


Supplemental disclosure of cash flow information:
     Interest paid                                                     $     7,404    $    15,053
     Income taxes paid                                                        --             --
     Payment of preferred stock dividend in common stock                   345,268           --



See notes to consolidated financial statements (unaudited).


                                               5
</TABLE>

<PAGE>

                 HARVEST RESTAURANT GROUP, INC. AND SUBSIDIARIES
                    Notes to Financial Statements (Unaudited)



NOTE A - ORGANIZATION AND BASIS OF PRESENTATION

Organization

Harvest Restaurant Group, Inc. and its wholly-owned  subsidiaries  ("Harvest" or
the "Company") is an operator and developer of quick service restaurant concepts
operated under the name Harvest Rotisserie and Harvest Food Court. At the end of
fiscal year 1997,  there were 14 Harvest  Rotisserie  restaurants  in operation,
consisting of four  company-owned  restaurants  and ten franchised  restaurants.
During 1998, the Company  significantly  curtailed its operations and all of the
Harvest Rotisserie  restaurants were closed. The Company opened two Harvest Food
Court restaurants in 1998, which were also closed.  The Company currently has no
restaurants in operation.

Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
by the Company in accordance with the instructions to Form 10-QSB.  Accordingly,
certain  information  and  footnote  disclosures  normally  included  in  annual
financial  statements  prepared in accordance with generally accepted accounting
principles  have been omitted.  In the opinion of  management,  all  adjustments
(consisting of normal recurring accruals and adjustments)  considered  necessary
for a fair  presentation  have been made. The statements are subject to year-end
adjustment.  The consolidated results of operations for the three quarters ended
October 4, 1998 may not be  indicative  of the results for the full fiscal year.
For further information,  refer to the Company's audited financial statements as
filed with the Securities  and Exchange  Commission in the Company's Form 10-KSB
for the year ended December 28, 1997.

The accompanying  unaudited consolidated financial statements have been prepared
assuming the Company will continue as a going concern.  The Company has incurred
operating losses since  inception,  and as of October 4, 1998 had an accumulated
deficit of  $13,595,718  and currently has no  restaurants  in operation.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern. In order to continue as a going concern, the Company will need to
develop  or  acquire a  successful  restaurant  concept  and will need to obtain
additional  funds  through  debt or equity  offerings to fund the growth of this
concept.  Additional funding will also be required to pay the Company's existing
obligations. In July 1998, the Company entered into a definitive agreement for a
merger with TRC Acquisition Corporation,  a company which operates a chain of 13
"Rick Tanner's Original Grill" restaurants ("Tanner's").  In connection with the
merger,  the Company has obtained a financing  commitment  for  $6,000,000 to be
used primarily for the expansion of Tanner's restaurants. The Company intends to
focus its future operations on the development of Tanner's restaurants.


                                       6
<PAGE>



NOTE B - FISCAL YEAR

The Company has  adopted a  52/53-week  fiscal year ending on the last Sunday in
December.  The fiscal year is divided into thirteen four-week periods. The first
quarter  consists  of four  periods  and each of the  remaining  three  quarters
consists of three periods,  with the first,  second and third quarters ending 16
weeks, 28 weeks and 40 weeks respectively, into the fiscal year.


NOTE C - SHARE EXCHANGE WITH TRC ACQUISITION CORPORATION

On July 9, 1998,  the Company  signed a  definitive  share  exchange  and merger
agreement  with TRC  Acquisition  Corporation  ("TRC"),  the  operator  of "Rick
Tanner's Original Grill" restaurants  ("Tanner's"),  a twelve-year-old  chain of
full service,  casual dining  restaurants  in Georgia and Alabama.  TRC owns and
operates  eleven  Tanner's  restaurants  in the Atlanta  metropolitan  area, and
franchises  two  additional  Tanner's  restaurants.  The  merger is  subject  to
shareholder  approval and certain  other  contingencies,  including  the Company
obtaining satisfactory  settlement agreements for a majority of its obligations,
accordingly, there can be no assurance that the merger will be completed.

Upon completion of the merger,  the TRC  shareholders  including  holders of all
options and warrants,  will own  approximately 75% of the issued and outstanding
equity  securities  of the Company.  Since the TRC  shareholders  will receive a
substantial majority of the shares of stock of the Company, the transaction will
be  treated  as a  reverse  acquisition  of the  Company  by TRC for  accounting
purposes.  As part of the merger,  the board of directors of the Company will be
increased to six members, with two of the Company's current directors remaining.
The Company intends to relocate its corporate offices to Atlanta,  Georgia to be
in closer proximity with the core Tanner's restaurant operations.

As part of the merger, the Company has entered into a development agreement with
TRC to open up to five Tanner's restaurants under a franchise relationship.  The
Tanner's  restaurant  development  and operations will be managed by TRC under a
separate  management  agreement  with the Company.  Upon the  completion  of the
merger,  the development and management  agreements  would be terminated and any
franchised   restaurants   operated  under  these  agreements  would  revert  to
company-owned  restaurants.  Should the merger not be  completed,  the  Tanner's
restaurants  developed by the Company  would  continue to operate as  franchised
restaurants under an operating agreement with TRC, or the Company has the option
to require TRC to repurchase the restaurants from the Company at the development
cost.


NOTE D - STOCKHOLDERS' EQUITY

On July 9, 1998,  in  connection  with the merger with TRC, the Company  entered
into  a  securities  purchase  agreement  with a  private  investor  group.  The
securities  purchase  agreement  provides  for  the  sale of 600  shares  of the
Company's newly  designated  series C convertible  preferred  stock,  ("Series C
Preferred  Stock") at face value of $10,000 per share, for a total of $6,000,000
of funding,  of which  $4,000,000 was deposited  into escrow.  The 600 shares of
Series C  Preferred  Stock are to be issued in three  separate  closings  of 200
shares  each.  The first  closing  occurred  on July 23,  1998,  with the second
closing to occur upon the  effective  date of the merger,  and the third closing
within thirty days thereafter.  A substantial  portion of the proceeds  received
are held by a subsidiary of the Company, and the use of such funds is restricted
under a management agreement with TRC pending the completion of the merger.


                                       7

<PAGE>



The Series C Preferred Stock is convertible at the option of the holder into the
Company's  common  stock.  The  conversion  rate per  share is equal to  $10,000
divided  by 80% of the  average  bid  price of the  common  stock at the time of
conversion.  Dividends  on the  Series C  Preferred  Stock  accrue at rate of 7%
annually,  payable  in cash or  stock at the time of  conversion.  The  Series C
Preferred  stock is non-voting,  and is ranked junior to the Company's  series A
redeemable convertible preferred stock and on parity with the Company's series B
convertible  preferred  stock.  Each  share of  Series C  Preferred  Stock has a
liquidation preference of $10,000 per share. The terms of the Series C Preferred
stock which allow the  conversion  into common stock at a 20% discount to market
is  considered  a  beneficial  conversion  feature.  The  Company has valued the
undiscounted beneficial conversion feature at $500,000,  which is reflected as a
dividend to the holders of the Series C Preferred Stock. The beneficial dividend
does not affect the number of Series C Preferred Stock shares outstanding or the
number of common  shares  issuable  upon  conversion  or require any  additional
payments to the holders of the Series C Preferred Stock.

In May 1998, the Company sold 11.2 shares of its series B convertible  preferred
stock in a private  transaction  in which the Company  realized  net proceeds of
$97,000.  During  May and  June of 1998,  holders  of the  series B  convertible
preferred  stock  converted  28 shares of their  series B  preferred  stock into
688,980 and 120,892 shares of the Company's common stock and series A redeemable
convertible preferred stock, respectively.


NOTE E - RESTAURANT CLOSURES AND OTHER

In the second  quarter of 1998,  the Company  elected not to extend the property
lease on one of its Harvest  Rotisserie  restaurants  upon its  expiration.  The
Company also decided to  discontinue  operating its two remaining  company-owned
Harvest  Rotisserie  restaurants and planned to convert one of these restaurants
along  with  an  additional   leased   property   into   Tanner's   restaurants.
Subsequently,  the Company and TRC determined that greater opportunities existed
in  concentrating  future  development  solely on  Tanner's  restaurants  in the
southeastern  region of the United  States.  As a result,  the Company  canceled
plans to convert two of its existing  properties  into Tanner's  restaurants and
also cancelled plans to pursue the development of Harvest Food Court restaurants
and closed its two Harvest Food Court restaurants.  The Company intends to focus
its future  operations on the  development  of Tanner's  restaurants  within the
southeastern  region of the United  States and no longer  intends to utilize its
existing restaurant  properties within its future operations.  In light of these
decisions,  management  has reviewed the carrying  amount of certain  long-lived
assets and  concluded  that their  costs will not be  recoverable.  As a result,
certain  charges  totaling  $1,204,489  have been  aggregated  and are  reported
separately  in the  operating  statement  as "Loss on  Restaurant  Closures  and
Other".  Included in these charges are  write-downs  of property,  equipment and
other assets of  $1,212,391  and  write-offs  of  intangible  assets of $92,098,
offset by reductions in the accrued liability for real estate  disposition costs
of $100,000.

All the assets related to the closed restaurants are to be disposed of, with the
exception of one restaurant  property that the Company will sublease.  Assets to
be  disposed  of and held for sale  consist  of land,  building  and  restaurant
equipment  which have been  written  down to net  realizable  value of $591,409,
based on estimated market prices less cost to sell. The assets held for sublease
have been written down to the net present value of the discontinued  future cash
flows expected from the sublease.


                                       8
<PAGE>


NOTE F - CONTINGENCIES

At the end of the Company's fiscal year on December 28, 1997, the Company had 14
Harvest  Rotisserie  restaurants in operation,  four of which were company-owned
restaurants  and ten operated as franchised  stores.  In 1998,  area  developers
closed  all  ten of the  Company's  franchised  Harvest  Rotisserie  restaurants
located in Florida,  Indiana,  North  Carolina,  and  Northern  California.  The
Company also closed all four of its Company-owned Harvest Rotisserie restaurants
and its two Harvest Food Court restaurants, and development plans were ceased at
five other locations.  The Company had entered into long-term real estate leases
for most of its  Company-owned  locations,  and  guaranteed  similar real estate
leases for the franchised locations,  as well as guaranteeing certain promissory
notes and equipment leases connected with three of the franchised locations.

Subsequent to the closing of the restaurants and ceasing of development  efforts
at the other  locations,  the  Company  has  contacted  each of the  lessors and
lenders in order to obtain settlement agreements on the related obligations, and
generally has been successful in reaching settlement agreements. The Company has
evaluated the potential  costs for the full settlement of the real estate leases
and other liabilities and recorded a liability for real estate  disposition cost
at December 28, 1997 of $800,000.  Management believes that the remaining amount
of the  liability  accrual of $636,000 at October 4, 1998 will be  sufficient to
settle all obligations related to the closing of the restaurants.


                                       9

<PAGE>



ITEM 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Forward-looking Statements

     Except for the historical  information  contained  herein,  the matters set
forth in this report are  forward-looking  statements  within the meaning of the
"safe harbor"  provisions  of the Private  Securities  Litigation  Reform Act of
1995. These  forward-looking  statements are subject to risks and  uncertainties
that may cause actual results to differ materially.  These risks are detailed in
the Company's various reports filed with the Securities and Exchange  Commission
and  include,  without  limitation:  the  possible  inability  of the Company to
conclude acceptable  settlement  agreements  relating to its  restaurant-related
liabilities;  risks  associated with the Company's  planned merger with TRC; and
risks of developing new Tanner's restaurants.  These forward-looking  statements
speak only as of the date hereof. The Company disclaims any intent or obligation
to update these forward-looking statements.

Overview

     At the end of the Company's  fiscal year on December 28, 1997,  the Company
had  14  Harvest  Rotisserie  restaurants  in  operation,  four  of  which  were
company-owned restaurants and ten operated as franchised stores. In August 1997,
the Company  engaged a financial  advisor to assist it in  obtaining  additional
capital  to fund the  development  of  additional  restaurants  in its  targeted
markets in order to reach  critical  mass and gain  economic  efficiencies.  The
financing efforts proved unsuccessful,  and in January 1998, due to insufficient
capital  and an  industry  wide  decline in  consumer  acceptance  of the market
segment in which the Harvest concept was positioned,  the Company canceled plans
to further expand the Harvest Rotisserie  restaurants and began to significantly
curtail its  operations.  In the first quarter of 1998,  the Company  closed one
restaurant  and area  developers  closed  all  nine  franchised  restaurants  in
Florida,   Indiana  and  North  Carolina.  The  Company  completed  the  initial
development  of a smaller  multi-branded  restaurant  concept  under the name of
Harvest  Food Court and opened  two units on a  test-marketing  basis in May and
June 1998.

     The  Company  opened  its  first  restaurant  in  January  1994,  and three
additional  Company-owned  restaurants  between November 1996 and February 1997,
and ten franchised  restaurants  were opened between July 1997 and October 1997.
In June 1997 the Company  acquired eight Kenny Rogers  Roasters  restaurants and
assigned  them to three area  developers  for  operation  as Harvest  Rotisserie
franchise  restaurants.  The Company  provided  financing to the area developers
under a secured  loan for the purchase  price,  cost of  conversion  and working
capital.  The Company also had executed  leases for five  additional  restaurant
properties in Texas for future  development as Harvest  Rotisserie  restaurants.
The Company had entered into long-term  real estate leases on the  Company-owned
locations,  and guaranteed similar leases for the franchised locations,  as well
as guaranteed  certain  promissory  notes connected with three of the franchised
locations.

     As of  December  28,  1997,  the  Company  determined  that all of the area
developer  loans were  impaired  and  recorded  a  write-off  of loans  totaling
$3,387,541.  In addition,  the Company  recognized a total charge of  $1,184,656
related to (i) estimated  settlement of real estate leases and other obligations
for the closed  franchise  restaurants  and (ii) costs related to the closure of
one  Company-owned  restaurant  and  cessation  of  development  on  four  other
properties.  The  charge  to  operations  included  the full  impairment  of the
leasehold  property and equipment,  and the recognition of a loss on disposition
of the restaurant location and applicable rent expense.

                                       10
<PAGE>


In the second  quarter of 1998,  the Company  elected not to extend the property
lease on one of its Harvest  Rotisserie  restaurants  upon its  expiration.  The
Company also decided to  discontinue  operating its two remaining  Company-owned
Harvest  Rotisserie  restaurants and planned to convert one of these restaurants
along  with  its  remaining   leased   property   into   Tanner's   restaurants.
Subsequently,  the Company and TRC determined that greater opportunities existed
in  concentrating  future  development  solely on  Tanner's  restaurants  in the
Southeast region of the Untied States.  As a result,  the Company canceled plans
to convert two of its existing  properties  into Tanner's  restaurants  and also
canceled plans to pursue the  development of Harvest Food Court  restaurants and
closed its two Harvest Food Court restaurants.  The Company intends to focus its
future operations on the development of Tanner's  restaurants and will no longer
utilize its existing  restaurant  properties  within its future  operations.  In
light of these  decisions,  the  Company  recognized  certain  charges  totaling
$1,204,489 related to the write-down of property, equipment and other assets and
recognized  write-offs of intangible assets, offset by reductions in the accrued
liability for real estate disposition costs.

     In July 1998, the Company signed a definitive  merger  agreement to acquire
TRC by  merging  TRC with and  into  Hartan,  Inc.  ("Hartan"),  a  wholly-owned
subsidiary of the Company.  Completion  of the merger is subject to  shareholder
approval  and certain  other  contingencies,  including  the  Company  obtaining
satisfactory  settlement  agreements  for a  majority  of  its  obligations.  In
connection with the merger, the Company has obtained a financing  commitment for
$6,000,000 to be used primarily for the expansion of Tanner's  restaurants.  The
Company  intends to focus all its  available  resources  on the  development  of
Tanner's restaurants.

Since July  1998,  the  Company  has had no  restaurants  in  operation  and has
terminated  all its employees  except for two executive  officers.  The Company,
through  Hartan,  has  entered  into a  development  agreement  with TRC to open
Tanner's  restaurants under a franchise  relationship.  The Tanner's  restaurant
development  is managed by TRC under a separate  management  agreement  with the
Company.

                                       11
<PAGE>


Results of Operations - For the Quarter and Three Quarters ended October 4, 1998
compared to the Quarter and Three Quarters ended October 5, 1997.

     Revenues.  The Company had no operating  revenues  during the third quarter
ended  October 4, 1998.  Revenues for the three  quarters  ended October 4, 1998
decreased  83% as  compared to the same period in 1997 due to the closing of all
of the Company's restaurants during the first and second quarters 1998.

     Costs and Expenses. Cost of food and paper was 51.3% of restaurant revenues
for the three  quarters  ended October 4, 1998 as compared to 50.8% for the same
period in 1997,  which is higher than industry  averages for both periods.  Food
and paper costs were negatively affected by higher amounts of wasted food caused
by the lower sales volumes,  and the opening of new  restaurants in 1997,  which
generally have higher costs due to increased  food usage for opening  promotions
and inefficiencies caused by less experience employees.

Salaries,   benefits,   occupancy  and  operating  expenses  include  all  other
restaurant  level operating  expenses,  the major components of which are direct
and indirect  labor,  payroll  taxes and  benefits,  operating  supplies,  rent,
advertising, repairs and maintenance,  utilities, and other occupancy costs. The
combined  total of these  expenses was 120% for the three quarters ended October
4, 1998, as compared to 93% for the same comparable period in 1997.  Substantial
portions   of  these   costs  are  fixed  or   indirectly   variable   and  were
disproportionate to revenues for both periods due to low sales volumes.

Preopening  expenses of $19,421  during the quarter ended October 4, 1998 relate
to initial costs incurred in the development of a franchised Tanner's restaurant
which is being developed by Hartan under a management agreement with TRC.

General and  administrative  expenses  decreased $466,139 or 64% and $615,783 or
39% for the quarter and three quarters ended October 4, 1998,  respectively,  as
compared to the same periods in 1997.  The decreases  reflect the closing of the
Company's  operations  during  1998  and  the  corresponding  reduction  in  its
corporate overhead. The general and administrative  expenses incurred during the
quarter  ended  October 4, 1998 relate  primarily to costs  associated  with the
merger and administrative costs incurred by Hartan related to the development of
a franchised Tanner's restaurant.

Depreciation and amortization decreased $43,534 for the quarter ended October 4,
1998 as compared to the same period in 1997 due to the closing of restaurants in
first and second quarters of 1998.  Depreciation  and amortization for the three
quarters ended October 4, 1998 increased $104,574 as compared to 1997 due to the
additional  restaurants  opened in 1997 and a reduction in the recovery  periods
for some of the Company's assets in 1998.

Loss on restaurant closures and other of $1,204,489 for the three quarters ended
October 4, 1998, relate to charges  recognized by the Company in connection with
the closure of its remaining restaurants in the second quarter of 1998. Included
in this  caption  is  $1,212,391  of charges  for the  write-down  of  property,
equipment  and other  assets  to their  net  realizable  values,  write-offs  of
intangible assets of $92,098,  offset by reductions in the accrued liability for
real estate disposition costs of $100,000.

The Company  recorded a loss  provision for area developer  notes  receivable of
$1,054,784  and  $1,340,807  for the quarter and three quarters ended October 5,
1997 for estimated  loan losses.  The amount of the loss  provision was based on
management's  evaluation of the operating results of the franchised restaurants,
financial position of the area developers, and the sufficiency of the underlying
assets securing the loan.

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<PAGE>


     Net Loss.  The Company  incurred a net loss of $306,399 and  $2,778,095 for
the quarter and three  quarters  ended October 4, 1998 as compared to $1,889,061
and  $3,585,111  for the same periods in 1997.  The decrease in net loss for the
quarter  ended  October 4, 1998  reflects the  discontinuance  of the  Company's
operations in 1998.

     Preferred Stock Dividends. The Company declared dividends totaling $345,268
on the Series A Preferred Stock for the first and second quarters of 1998, which
were paid in 352,278 shares of common stock. Dividends in the amount of $172,252
on the  Series A  Preferred  Stock for the third  quarter  of 1998 have not been
declared and are in arrears.  Preferred  stock  dividends for the three quarters
ended  October  4,  1998 also  reflect  accrued  dividends  of  $103,341  on the
Company's  Series B and Series C Preferred  Stock,  and a beneficial  conversion
feature on the Series C Preferred Stock valued at $500,000 which is reflected as
a dividend to the holders Series C Preferred Stock.

Liquidity and Capital Resources

The Company  has  incurred  losses from  operations  since  inception  and as of
October  4, 1998 the  Company  had an  accumulated  deficit of  $13,595,718  and
working capital of $27,949.  During 1998, all of the Company's  restaurants were
closed,  which raises  substantial doubt about the Company's ability to continue
as a going concern.  Management believes that if the Company is to continue as a
going  concern,  it will need to develop or acquire a  restaurant  concept  with
potential for unit growth and will need to obtain  additional funds through debt
or  equity  offerings  to fund  the  growth  of this  concept  and  settled  its
outstanding obligations.

Since inception, the Company has utilized the funds acquired in equity financing
of its common and preferred stock,  operating leases, vendor credits and certain
borrowings to fund the  development of its restaurants and support its operating
losses and fund general administrative  expenses. The Company used $1,676,588 of
cash in  operations  during  the three  quarters  ended  October  4,  1998,  and
$1,808,203 of cash in operating activities for the same period in 1997.

For the  three  quarters  ended  October  4,  1998,  the  Company  made  minimal
investments  in  property  and  equipment  and  utilized  renovation  allowances
provided  by  landlords  for a  majority  of the  development  costs for the two
Harvest Food Courts restaurants opened and closed during the second quarter. The
Company used $80,000 to purchase  development and franchise  rights for Tanner's
restaurants.

Sources of capital  are  limited to the  Company's  ability to raise  additional
capital from investors, and ultimately achieving profitable operations.  Without
a proven  viable  restaurant  concept,  additional  financing  is  difficult  or
impossible to obtain.

Management considers the merger with TRC as a viable plan to move the Company to
profitability.  In connection with the merger with TRC, the Company has obtained
a financing  commitment  from a private  investor  group for the purchase of 600
shares of the Company's  Series C Preferred Stock for a total of $6,000,000,  of
which $4,000,000 was deposited into escrow. The 600 shares of Series C Preferred
Stock are to be issued in three  separate  closings of 200 shares each.  On July
23,  1998,  the  Company  received  net  proceeds of  $1,978,750  from the first
closing, with the second closing to occur upon the effective date of the merger,
and the third closing  within thirty days  thereafter.  Proceeds from the equity
funding  will be used  primarily  for the  development  of  additional  Tanner's

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<PAGE>


restaurants.  The Company  believes  the  proceeds  from first  closing  will be
sufficient to develop up to five Tanners restaurants,  depending on availability
of lease financing and landlord contribution. The restaurants will operate under
a franchise relationship with TRC until completion of the merger. The restaurant
development and operation will be managed by TRC under separate  agreements with
the  Company.  Upon  the  completion  of the  merger,  the  franchises  will  be
terminated and the restaurants would become  Company-owned  restaurants.  Should
the merger not be completed,  the Tanner's restaurants  developed by the Company
would continue to operate as franchised  restaurants under a operating agreement
with TRC,  or the  Company  has the  option to  require  TRC to  repurchase  the
restaurants from the Company at the development cost.



PART  II - OTHER INFORMATION

ITEM 1.  Legal Proceedings

     On July 6, 1998, the Company was named as a defendant in a lawsuit filed in
Florida, Pinellas County Circuit Court (Case No. 98-03282C119). The plaintiff is
seeking damages for breach of a commercial lease that the Company guaranteed for
a franchisee. The Company believes that this case has been settled in principle.
The  Company is  currently  awaiting  final  approval  from Captec and a federal
bankruptcy court having jurisdiction over the matter.

On July 24,  1998,  the Company was named as a defendant  in a lawsuit  filed in
Texas by  Sysco  Food  Services  in Bexar  County  Court of Law No. 3 (Case  No.
247031).  The plaintiff is seeking $10,003  incurred in connection with the sale
of products on open account  guaranteed by the Company.  No offer for settlement
has been made.

On August 12, 1998,  the Company was named as a defendant in a lawsuit  filed in
Texas by Green Tree Vendor services Co. in Bexar County District Court (Case no.
247317).  The  plaintiff  is  seeking to  recover  damages  of  $38,691  for the
Company's failure to make payments under two equipment  leases.  The case is now
in the discovery phase.

On August 20, 1998,  the Company was named as a defendant in a lawsuit  filed in
Texas by Toufic Khalifa in Bexar County  district Court (Case No.  98-CI-I2200).
Plaintiff  is seeking  damages for breach of  commercial  lease.  The  plaintiff
rejected a  settlement  offer of $35,000,  and the case is now in the  discovery
phase.

In addition,  the Company has  executed  settlement  agreements  for 15 landlord
claims for total  payments  of  $146,622,  of which  $71,056 has been paid as of
October  4,  1998.  A  mortgage  claim  has also been  satisfied  in full by the
proceeds of the sale of real property.



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<PAGE>



ITEM 6.  Exhibits and Reports on Form 8-K

     The Company  filed one report on Form 8-K during the quarter  ended October
4, 1998, which report was dated July 9, 1998. The Form 8-K reported under item 4
(Changes in Registrant's Certifying Accountant) the resignation of the Company's
certifying  accountant.  The Form 8-K also reported  under item 5 (Other Events)
the  execution  of a  definitive  share  exchange  agreement  to merge  with TRC
Acquisition  Corporation,  the execution of a Securities Purchase Agreement with
an investor group for $6,000,000 of equity  funding.  The Company also filed two
amended  Forms on 8-K/A  during  the  quarter  ended  October  4, 1998 to update
information reported under item 4 of the Form 8-K.




                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                          HARVEST RESTAURANT GROUP, INC.


Date: November 18,1998                    By: /s/ William J. Gallagher
     ------------------                      -----------------------------------
                                             William J. Gallagher,
                                             Chairman of the Board and
                                             Chief Executive Officer
                                             (Duly Authorized Signatory)


Date: November 18, 1998                    By: /s/ Joseph Fazzone
     -------------------                      ----------------------------------
                                              Joseph Fazzone
                                              Chief Financial Officer 
                                              (Duly Authorized Signatory)


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