U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

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

                  For the Quarterly Period ended July 11, 1999

                                       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


                         TANNER'S RESTAURANT GROUP, INC.
                         -------------------------------
                 (Name of small business issuer in its charter)


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

                        5500 Oakbrook Parkway, Suite 260
                             Norcross, Georgia 30093
                             -----------------------
          (Address of principal executive offices, including zip code)


                    Issuer's telephone number: (770) 248-2298


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

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date:  8,334,489 shares as of August
23, 1999.

<PAGE>

                                TABLE OF CONTENTS
                                -----------------


                                                                            PAGE
                                                                            ----


PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements...........................................  3
     Item 2. Management's Discussion and Analysis or Plan of Operation......  9

PART II. OTHER INFORMATION

     Item 1. Legal Proceedings.............................................. 15
     Item 2. Changes in Securities and Use of Proceeds...................... 15
     Item 3. Defaults Upon Senior Securities................................ 16
     Item 6. Exhibits and Reports on Form 8-K............................... 16

SIGNATURES.................................................................. 18

EXHIBIT INDEX............................................................... 19



                                        2

<PAGE>
<TABLE>
<CAPTION>

                                     PART I
                              FINANCIAL INFORMATION

Item 1. Financial Statements
----------------------------

Tanner's Restaurant Group, Inc.
Consolidated Balance Sheet

                                                             July 11,      December 27,
                                                               1999           1998
                                                            (Unaudited)
                                                            -----------    -----------
Assets
------
Current assets:
<S>                                                         <C>            <C>
    Cash                                                    $    53,656    $   222,163
    Accounts receivable                                         142,997        130,086
    Inventory                                                   127,025        113,734
    Prepaid expenses                                             39,788         21,989
                                                            -----------    -----------
               Total current assets                             363,466        487,972

Property and equipment, net                                   2,378,915      2,092,698
Intangible assets, net                                        2,954,469      3,119,870
Goodwill, net                                                   971,876      1,002,303
Other assets                                                    144,611        161,252
                                                            -----------    -----------
               Total assets                                 $ 6,813,337    $ 6,864,095
                                                            ===========    ===========

Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
    Accounts payable                                        $ 1,040,034    $ 1,390,697
    Accrued expenses                                          1,606,274      2,254,666
    Current portion of long-term debt                           771,884        882,801
                                                            -----------    -----------
               Total current liabilities                      3,418,192      4,528,164

Long-term debt                                                2,240,362      2,306,884
                                                            -----------    -----------
               Total liabilities                              5,658,554      6,835,048
                                                            -----------    -----------


Commitments and contingencies

Stockholders' equity:
    Preferred stock                                           1,215,152      1,253,822
    Common stock: $.01 par value; authorized 200
        million shares: issued and outstanding 8,334,489
        in 1999 and 8,230,080 in 1998                            83,345         82,301
    Additional paid-in capital                                9,120,555      9,082,929
    Stock subscription receivable                            (1,500,000)    (4,000,000)
    Accumulated deficit                                      (7,764,269)    (6,390,005)
                                                            -----------    -----------
               Total stockholders' equity                     1,154,783         29,047
                                                            -----------    -----------
               Total liabilities and stockholders' equity   $ 6,813,337    $ 6,864,095
                                                            ===========    ===========



                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       3
</TABLE>
<PAGE>


Tanner's Restaurant Group, Inc.
Consolidated Statements of Operations


                                                       For the 12 Weeks Ended
                                                     --------------------------
                                                       July 11,       July 12,
                                                        1999            1998
                                                     (Unaudited)    (Unaudited)
                                                     -----------    -----------
Revenue
-------
     Restaurant sales revenue                        $ 2,183,706    $ 2,474,192
     Catering revenue                                    133,390        146,849
     Franchise and royalty revenue                                       14,267
                                                     -----------    -----------

                Total revenue                          2,317,096      2,635,308
                                                     -----------    -----------


Costs and expenses
------------------
Restaurant and catering operating expenses:
     Food, beverage and paper                            779,647        902,458
     Payroll and benefits                                851,035        916,621
     Depreciation and amortization                       166,380        158,823
     Other operating expenses                            677,900        691,645
                                                     -----------    -----------

                Total restaurant and catering
                  operating expenses                   2,474,962      2,669,547
                                                     -----------    -----------

                Loss from restaurant and
                  catering operations                   (157,866)       (34,239)

General and administrative expenses                      312,040        294,509
                                                     -----------    -----------

                Operating loss                          (469,906)      (328,748)

Other income (expense):
     Other income (expense)                               37,088        (23,924)
     Interest expense                                    (91,065)      (187,343)
                                                     -----------    -----------

                Net loss                             $  (523,883)   $  (540,015)
                                                     ===========    ===========

Basic and diluted loss per share                     $      (.11)   $      (.16)


                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       4
<PAGE>


Tanner's Restaurant Group, Inc.
Consolidated Statements of Operations
                                                       For the 28 Weeks Ended
                                                     --------------------------
                                                      July 11,        July 12,
                                                        1999           1998
                                                     (Unaudited)    (Unaudited)
                                                     -----------    -----------
Revenue
-------
     Restaurant sales revenue                        $ 5,160,558    $ 5,998,475
     Catering revenue                                    264,561        342,803
     Franchise and royalty revenue                           955         50,745
                                                     -----------    -----------

                Total revenue                          5,426,074      6,392,023
                                                     -----------    -----------

Costs and expenses
------------------
Restaurant and catering operating expenses:
     Food, beverage and paper                          1,777,700      2,255,479
     Payroll and benefits                              1,978,982      2,273,890
     Depreciation and amortization                       374,327        361,834
     Other operating expenses                          1,421,342      1,424,063
          Loss on restaurant closings                    300,000
                                                     -----------    -----------

                Total restaurant and catering
                   operating expenses                  5,852,351      6,315,266
                                                     -----------    -----------

                Income (loss) from restaurant
                   and catering operations              (426,277)        76,757

General and administrative expenses                      745,734        691,474
                                                     -----------    -----------

                Operating loss                        (1,172,011)      (614,717)

Other income (expense):
     Other income (expense)                                3,956        (23,576)
     Interest expense                                   (206,209)      (398,889)
                                                     -----------    -----------

                Net loss                             $(1,374,264)   $(1,037,182)
                                                     ===========    ===========

Basic and diluted loss per share                     $      (.26)   $      (.31)



                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       5
<PAGE>
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<CAPTION>


Tanner's Restaurant Group, Inc.
Consolidated Statements of Cash Flows


                                                             For the 28 Weeks Ended
                                                           --------------------------
                                                             July 11,       July 12,
                                                               1999          1998
                                                           (Unaudited)    (Unaudited)
                                                           -----------    -----------
Cash flows from operating activities:
<S>                                                        <C>            <C>
    Net loss                                               $(1,374,264)   $(1,037,182)
    Adjustments to reconcile net loss to net cash
       provided by (used in) operating activities:
         Depreciation and amortization                         374,327        361,834
         Loss on sale of property and equipment                 35,369         12,244
         Loss on restaurant closings                           300,000
         Changes in assets and liabilities:
            Accounts receivable                                  9,089         (5,269)
            Inventory                                          (13,291)         9,572
            Prepaid expenses                                   (17,799)        14,697
            Other assets                                       (17,648)        (5,510)
            Accounts payable                                  (350,663)      (312,727)
            Accrued expenses and other liabilities            (948,392)       461,842
                                                           -----------    -----------
               Net cash used in operating activities        (2,003,272)      (512,567)
                                                           -----------    -----------

Cash flows from investing activities:
    Proceeds from sale of property and equipment                              365,496
    Purchase of property and equipment                        (487,796)      (462,275)
                                                           -----------    -----------
               Net cash used in investing activities          (487,796)       (84,711)
                                                           -----------    -----------

Cash flows from financing activities:
    Cash overdraft                                                           (212,605)
    Repayments of debt                                        (177,439)      (107,079)
    Proceeds from issuance of long-term debt                                1,016,617
    Proceeds from sale of Series D preferred stock           2,500,000
                                                           -----------    -----------
               Net cash provided by financing activities     2,322,561        696,933
                                                           -----------    -----------

Net change in cash and cash equivalents                       (168,507)        99,655
Cash and cash equivalents, beginning of year                   222,163
                                                           -----------    -----------
Cash and cash equivalents, end of period                   $    53,656    $    99,655
                                                           ===========    ===========

Non-cash investing and financing activities:
    Accretion of redeemable TRC preferred stock                           $    76,183
    Dividends on redeemable TRC preferred stock                               150,000
    Sale of equipment for a note                           $    22,000
Supplemental cash flow information:
    Interest paid                                          $   224,260    $   261,522



                  The accompanying notes are an integral part
                   of these consolidated financial statements.

                                        6
</TABLE>
<PAGE>


Tanner's Restaurant Group

Notes to Consolidated Financial Statements (Unaudited)


1.   Basis of Presentation:

          On  January  14,  1999,  Tanner's  Restaurant  Group,  Inc.  ("we"  or
     "Tanner's,"  formerly  known as  Harvest  Restaurant  Group,  Inc.) and TRC
     Acquisition  Corporation ("TRC") completed a forward triangular merger. For
     financial and  accounting  purposes,  the effective  date of the merger was
     December  27,  1998,  and  we  have  prepared  the  consolidated  financial
     statements  assuming the merger closed as of the end of the day on December
     27,  1998.  In the merger,  shareholders  of TRC received a majority of the
     shares of our  outstanding  common stock.  For this reason,  we treated the
     merger  as  a  reverse   acquisition  by  TRC  for   accounting   purposes.
     Consequently,  the consolidated financial statements presented are those of
     TRC rather than Harvest.

2.   Description of Business:

          Tanner's and its wholly owned subsidiaries operate eight casual dining
     restaurants  and franchise two  restaurants  under the name "Rick  Tanner's
     Original  Grill." The  restaurants  specialize in fresh,  convenient  meals
     featuring  rotisserie  chicken  entrees,  barbecued ribs,  chicken fingers,
     hamburgers,  freshly prepared vegetables, salads, and other side dishes. At
     the end of fiscal year 1998, 11  company-owned  restaurants were located in
     the Atlanta,  Georgia  metropolitan area. During the first quarter of 1999,
     we  closed  two  under-performing  restaurants,  resulting  in a charge  to
     earnings of $300,000. During the second quarter, we sold one restaurant to,
     and established a franchise arrangement with, a franchisee. We also operate
     one casual dining seafood  restaurant  under the name "Crabby Bob's Seafood
     Grill," which we opened in May 1999 in suburban Atlanta.  Additionally,  we
     have  entered into an agreement  with Crabby  Bob's  Seafood,  Inc. and its
     parent entities to acquire the assets of two more Crabby Bob's  restaurants
     in California.

          We have prepared the  accompanying  unaudited  consolidated  financial
     statements 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 management's  opinion, we have
     made all  adjustments  (consisting  of  normal  accruals  and  adjustments)
     considered necessary for a fair presentation.  The financial statements are
     subject to year-end adjustment.  The consolidated results of operations for
     the 28 weeks ended July 11, 1999 may not be  indicative  of the results for
     the full  fiscal  year.  For  further  information,  refer  to the  audited
     financial  statements we filed with the SEC in our Form 10-KSB for the year
     ended December 27, 1998.

          The accompanying  unaudited  consolidated  financial statements assume
     that we will continue as a going  concern.  The  significant  net losses we
     have incurred,  our negative working capital position, and our inability to
     generate  significant  positive  cash flows from  operations  significantly
     strain our financial  position.  We have obtained a commitment from a group
     of outside  investors to invest $6,000,000 in us, and, as of July 11, 1999,
     these investors had invested  $4,500,000 under this commitment.  We believe
     that the successful  completion of this financing commitment is critical to
     our  current  plan of  operation.  We expect  that the  $2,500,000  that we
     received  under the  financing  commitment  during  the first half of 1999,
     combined with our cost  containment  and cash flow  management  strategies,
     will  enable  us  to  continue   operations  until  we  receive  the  final
     $1,500,000,  assuming that we receive the  $1,500,000  shortly.  Because we
     believe it is probable that we will receive the final  $1,500,000  shortly,
     the consolidated  financial  statements do not reflect any adjustments that
     will be necessary if we do not receive that $1,500,000.

                                       7
<PAGE>


3.   Earnings Per Share:

          We  calculate  earnings  per share in  accordance  with  Statement  of
     Financial  Accounting Standards ("SFAS") No. 128, Earnings Per Share, which
     requires dual  disclosure of earnings per share,  basic and diluted.  Basic
     earnings  per share equals net  earnings  divided by the  weighted  average
     number of common  shares  outstanding  and does not  include  the  dilutive
     effects of stock options or convertible  securities.  Diluted  earnings per
     share are computed by giving effect to our dilutive stock options, warrants
     and preferred  stock.  We have adjusted the weighted  average common shares
     outstanding  presented below to reflect the 1.57075-to-1  exchange ratio in
     the merger.  Options and  warrants,  which we refer to as potential  common
     stock  equivalents,  are  excluded  from the  diluted  earnings  per  share
     calculations because they are antidilutive,  given that we are operating at
     a net loss.  These  securities  could become  dilutive when our  operations
     result in a net profit.

          The following  table  represents the  calculation of basic and diluted
     earnings per share:
<TABLE>
<CAPTION>

                                                 For the 12 Weeks Ended        For the 28 Weeks Ended
                                               --------------------------    --------------------------
                                                 July 11,       July 12,       July 11,       July 12,
                                                   1999           1998           1999           1998
                                               -----------    -----------    -----------    -----------
<S>                                            <C>            <C>            <C>            <C>
Net loss                                       $  (523,883)   $  (540,015)   $(1,374,264)   $(1,037,182)
Less: Dividends on Series A preferred stock       (138,436)                     (276,872)
      Dividends on Series D preferred stock       (121,035)                     (241,930)
      Dividends on Series E preferred stock       (153,387)                     (290,457)
      Dividends on TRC preferred stock                            (75,000)                     (150,000)
      Accretion on TRC preferred stock                            (33,878)                      (76,183)
                                               -----------    -----------    -----------    -----------
Net loss attributable to common shareholders      (936,741)      (648,893)    (2,183,523)    (1,263,365)

Weighted average common shares outstanding       8,334,489      4,123,219      8,321,635      4,123,219

Basic and diluted loss per share               $      (.11)   $      (.16)   $      (.26)   $      (.31)

</TABLE>


4.   Common Stock Purchase Warrants:

          In  connection  with an agreement to provide  financial  communication
     activities  on our  behalf,  we have  agreed to issue  warrants to purchase
     150,000 shares of our common stock to an outside public relations firm. The
     warrants  will be  exercisable  at the  following  prices:  50,000  will be
     exercisable  at $0.31 per share;  50,000 will be  exercisable  at $0.81 per
     share; and the remaining 50,000 will be exercisable at $1.31 per share. The
     warrants expire May 21, 2004, have full piggyback registration rights (with
     customary  underwriter  "knock-out"  provisions)  and provide for net issue
     exercise. The warrants vest on the following schedule: 50,000 vested on May
     21, 1999, 25,000 vested on August 4, 1999, 25,000 will vest on November 12,
     1999,  25,000 will vest on February 15,  2000,  and 25,000 will vest on May
     15, 2000. If the agreement is terminated after the first three months,  any
     warrants that have not yet vested will be voided.

                                       8
<PAGE>


Item 2. Management's Discussion and Analysis or Plan of Operation
-----------------------------------------------------------------

     Please read the following  discussion in connection  with the  consolidated
financial  statements  and  related  notes to them  included  elsewhere  in this
report.

Overview
--------

     Tanner's  Restaurant  Group,  Inc. ("we" or "Tanner's"),  formerly known as
Harvest  Restaurant  Group,  Inc., was  incorporated in June 1993 under the name
"Clucker's Tex-Mex Venture, Inc."

     On January 14, 1999,  Harvest  Restaurant  Group,  Inc. and TRC Acquisition
Corporation  completed a forward triangular merger. For financial and accounting
purposes,  the effective  date of the merger was December 27, 1998,  and we have
prepared the consolidated  financial statements assuming the merger closed as of
the end of the day on  December  27,  1998.  In the merger,  TRC's  shareholders
received a majority  of the shares of our  outstanding  common  stock.  For this
reason,  we  have  treated  the  merger  as a  reverse  acquisition  by TRC  for
accounting purposes.  Therefore, the consolidated financial statements presented
are those of TRC rather than Harvest.

     As a result of the  merger,  we now own and  franchise  ten "Rick  Tanner's
Original  Grill"  restaurants  formerly  owned and  franchised  by TRC.  All ten
Tanner's  restaurants are located in Georgia - eight are  company-owned  and two
are franchised.  In May 1999, we opened a seafood  restaurant,  also in Georgia,
operating under the name "Crabby Bob's Seafood Grill." Additionally, in May 1999
we entered into an  agreement  with Crabby  Bob's  Seafood,  Inc. and its parent
entities to acquire the assets of two more Crabby Bob's restaurants. Assuming we
receive the $1,500,000 balance under the financing  commitment  described below,
we expect to complete  this  acquisition  in the third  quarter of 1999. In June
1999, upon the expiration of one of our restaurant leases, we sold the assets of
that   restaurant  to  a  franchisee   with  whom  we  established  a  franchise
arrangement.

     Our  restaurants  are  designed  to appeal  to  traditional  casual  dining
customers by offering  large  portions of high quality foods at low prices.  Our
restaurants  are   competitively   positioned   between  home  meal  replacement
restaurants and full bar casual  restaurants  that have less portable foods. The
menu at our Rick Tanner's Original Grill restaurants  features over 40 different
entrees and 11 different  appetizers.  All entrees are prepared  using aged beef
and fresh chicken and seafood,  cooked to order, and served with a choice of two
out of 13 different freshly prepared  vegetables.  Since inception,  over 20% of
our  sales  at  Rick  Tanner's   Original  Grill   restaurants  have  come  from
takeout/take-home  service.  Our Crabby Bob's  restaurant  offers fresh seafood,
crabs, oysters and a full service bar.

     Our growth strategy is to open new company-owned  restaurants,  to increase
sales at existing  restaurants,  to develop and expand our franchising  program,
and to evaluate and  possibly  acquire  complementary  restaurant  concepts.  We
intend to develop  restaurants  both in Atlanta,  to complete our penetration of
the Atlanta  market,  and in southern  California,  where, if our acquisition of
Crabby Bob's is  successful,  we will operate two Crabby Bob's  restaurants.  We
believe we will be able to use existing supervisory,  marketing and distribution
systems in both Atlanta and southern California to facilitate our development in
these areas. Additionally, we may seek to acquire other restaurant concepts that
would   complement  our  existing   business,   allowing  growth  and  improving
profitability. We continue to evaluate our existing restaurant locations and may
close certain  unprofitable  restaurants  as we expand our business  concept and
focus on  achieving  profitability.  We  anticipate  leasing  most of our future
locations.

                                       9
<PAGE>


     A significant  factor in both the  structure  and  completion of the merger
with TRC was a commitment by third party  investors to invest  $6,000,000 in the
new combined  company.  As of July 11, 1999, we had received  $4,500,000 of this
$6,000,000  commitment.  Of the net proceeds of the  remaining  $1,500,000 to be
invested,  we intend to use up to $600,000 as consideration  for the acquisition
of Crabby Bob's and approximately  $550,000 to pay certain liabilities of Crabby
Bob's that we are  assuming  as part of the  acquisition,  including  a $350,000
bridge loan made in March 1999 to the parent  entity of Crabby Bob's by Clyde E.
Culp,  III,  our  Chairman  and Chief  Executive  Officer.  We intend to use the
balance of the net  proceeds  primarily  for  working  capital,  the  payment of
indebtedness,  and general corporate purposes,  including the development of new
company-owned  restaurants,  the  opening of a  franchised  restaurant,  and the
evaluation of opportunities to acquire new restaurant concepts. We cannot assure
you that any of our development or acquisition plans will be successful.

Results of Operations for the 28 Week Period Ended July 11, 1999 Compared to the
28 Week Period Ended July 12, 1998

     Revenues. Total net revenues decreased $965,949, or 15.1%, during the first
two  quarters  (28 weeks)  ended July 11,  1999,  compared to the  corresponding
period of 1998.  This  decrease in sales is  primarily  due to a decline in same
store sales of 17.7%.  Same store sales decreased by $961,953,  partially due to
the leveling of sales at two  restaurants  that opened in the fourth  quarter of
1997. Sales also decreased as a result of the closings of two stores,  offset by
the opening of our Crabby Bob's  restaurant  on May 24,  1999.  Crabby Bob's net
sales through July 11 were $283,801.

     Costs  and  Expenses.  In  general,  costs of  goods  sold  decreased  as a
percentage  of sales  during  the first  two  quarters  of 1999.  This is due to
operational improvements and purchasing efficiencies, and a reduction in coupons
and  promotions,  which decreased from $217,078 to $84,815,  or 60.9%.  Although
these types of  promotions  tend to increase the number of customers  that visit
the restaurant and thereby increase sales, the operating expenses on these sales
are higher than on ordinary sales because the sales have been  discounted  below
the menu price.  This decrease in costs as a percentage of sales is most evident
in food, beverage and paper costs.

     Food, beverage and paper costs were $1,777,700,  or 32.8% of sales, for the
first two quarters of 1999 versus  $2,255,479,  or 35.3% of sales,  for the same
period  in 1998.  Operational  improvements  and  reduced  coupon  and  discount
promotions  caused a 3.0%  decrease  in food costs as a  percentage  of sales at
comparable  stores.  This was offset  somewhat by opening  promotions at our new
Crabby Bob's restaruant.

     Payroll and  benefit  expense was  $1,978,982,  or 36.5% of sales,  for the
first two quarters of 1999 compared to  $2,273,890,  or 35.6% of sales,  for the
same period in 1998.  Labor  costs rose 0.9% due to  increased  competition  for
labor and higher  costs  associated  with the  opening  of our new Crabby  Bob's
restaurant.

     Other  operating  expenses  increased  as a  percentage  of  sales to 26.2%
($1,421,342) for the first two quarters of 1999 from 22.3%  ($1,424,063) for the
same  period  in 1998.  Advertising  expenditures  decreased  by 1.4% of  sales.
Repairs and maintenance  expenses  increased,  while service contracts decreased
due to negotiation of a more favorable pest control contract, for a net increase
of .3% of sales.  Utilities increased by 0.4% of sales, primarily because of the
decrease in sales. Restaurant administration expense increased by 0.7% of sales,
partially due to


                                       10
<PAGE>


an increase in credit card processing  fees. Rent expense  increased by 2.7 % of
sales, primarily due to the sale and leaseback of one restaurant in late June of
1998.  Pre-opening  expenses  increased 1.2% of sales in the first half of 1999,
due to the  development  of our Crabby  Bob's  restaurant.  Development  of this
restaurant  involved the conversion of a  nearly-completed  Tanner's  restaurant
into a Crabby Bob's restaurant,  resulting in a longer  construction period than
usual.  We also had higher  costs at this store due to the travel  expenses  and
payroll costs of training personnel from Crabby Bob's.

     Total  occupancy  costs,  consisting of  depreciation,  rent and restaurant
interest expense,  increased to 11.0% of sales in the first two quarters of 1999
from 8.2% of sales in the first two quarters of 1998.  Again,  this is primarily
due to the sale and leaseback of one  restaurant.  We expect  occupancy costs to
decrease as a percentage of sales as we open more "end-cap"  restaurants located
at the end of strip shopping centers, as opposed to freestanding buildings.

     Depreciation  and  amortization  expense in the first two  quarters of 1999
increased  by 1.2% of sales over the first two  quarters  of 1998,  due to fixed
asset additions at two new stores opened since May of 1998.

     Loss on restaurant  closings of $300,000 for the first half of 1999 relates
to  charges   recognized  in   connection   with  the  closure  of  two  of  our
under-performing  units. Included in this item are charges for the write-down of
property  and  equipment  to  their  net  realizable   values  and  real  estate
disposition costs.

     General and administrative  expenses increased to $745,735 in the first two
quarters of 1999 from $691,474 in the first two quarters of 1998. This is due to
the write-off of costs  associated  with  abandonment  of a potential  site, the
disposal of old warehoused equipment, and the increased cost of corporate office
personnel to support additional growth.

     Other Income (Expense). Interest expense decreased to $206,209 in the first
two quarters of 1999 from  $398,889 in the first two  quarters of 1998.  This is
primarily  attributable  to the  cancellation  of the  debenture  to the  former
president of Tanner's.  Our effective  interest rate  increased to 12.3% for the
first half of 1999.

     Net Loss. We incurred a net loss of  $1,374,264  for the first two quarters
of 1999  compared to $1,037,182  for the same period in 1998.  This increase was
primarily  attributable  to the  $300,000  charge  for store  closings,  and the
additional expenses  associated with the opening of Crabby Bob's restaurant.  We
expect to incur losses in future periods until we expand our base of restaurants
to offset current general and administrative expenses and costs of expansion.

     As we pursue our plans for growth, we expect to see the following trends in
operating  costs.  We expect  that food,  beverage  and paper  costs and payroll
expenses will increase during the first two months of a restaurant's operations.
Pre-opening  expenses are expected to total approximately  $100,000 for each new
restaurant and are expensed as incurred in accordance with Statement of Position
98-5, Reporting on the Costs of Start-up Activities. The majority of pre-opening
costs are incurred in the  accounting  period prior to opening and in the period
that a restaurant opens. If we are able to increase our base of restaurants, the
effects of the  above-mentioned  operating  trends  will  decrease,  and the new
restaurants will have less of an impact on our consolidated results.

                                       11
<PAGE>


Liquidity and Capital Resources
-------------------------------

     Our cash and cash  equivalents  decreased  $168,507  during  the  first two
quarters of 1999. The principal source of funds consisted of $2,500,000 received
from outside investors. The primary uses of funds consisted of

     (a) cash used in  operations  of  $2,003,272,  including  the  payment  and
resolution of current accounts payable and accrued liabilities of $1,299,055,

     (b) the purchase of additional  fixed assets for one new restaurant and the
remodeling of another for $487,796, and

     (c) payment of debt of $177,439.

     We have incurred operating losses since inception, and as of July 11, 1999,
we had an  accumulated  deficit of $7,764,269 and a working  capital  deficit of
$3,054,726.  We are not currently generating sufficient revenues from operations
to  meet  our  cash  requirements.   Because  substantially  all  sales  in  our
restaurants  are for cash,  and  operating  costs are  generally due in 15 to 45
days, we are able to operate with  negative  working  capital.  We have obtained
extended  payment  schedules  with  several of our larger  vendors  allowing for
longer  payment terms.  Additionally,  some of our vendors have agreed to extend
payment terms for obligations we previously incurred.

     In  addition  to  our  other  liabilities,  we  currently  owe a  total  of
approximately  $650,000  to two  lenders,  one of  which  is SECA  VII,  LLC,  a
significant shareholder,  for interim financing loaned in early 1998. One of our
directors,  James R. Walker,  is an equity owner of SECA. The $350,000 SECA loan
matured on July 31, 1999,  thereby  placing us in technical  default of the SECA
loan. The other  unsecured loan,  with an outstanding  balance of  approximately
$300,000,  matures  on our  receipt  of the final  $1,500,000  of the  financing
commitment.  FINOVA  Mezzanine  Capital,  Inc., our senior secured  lender,  has
advised us that any payment of the principal amount on these two loans will be a
default under our outstanding  $2,000,000 loan from FINOVA,  unless we repay the
FINOVA loan in full at the same time. The final $1,500,000 that we are scheduled
to receive  under the financing  commitment  will be  insufficient  to repay the
FINOVA loan, repay the short-term  loans, and provide necessary working capital.
We presently have no arrangement to repay these loans. Therefore, we may default
on the other loan as well, unless we can make other arrangements. We are working
to resolve this  situation.  If we cannot work out an acceptable  arrangement to
extend  the  terms of these  loans,  we may be forced to sell some or all of our
assets,  to relinquish  control of the company,  or to renegotiate  terms of our
outstanding  obligations on terms less favorable to us. Any event of that nature
is likely to have a material adverse effect on us.

     We have not paid dividends on our Series A preferred stock since June 1998,
and we are currently analyzing our alternatives for addressing these arrearages.
The total amount of  dividends in arrears on our Series A preferred  stock as of
June 30,  1999  was  $716,813.  Additionally,  the  total  amount  of  dividends
accumulated  but not paid on our Series D preferred stock and Series E preferred
stock as of July 11, 1999 was  $532,387.  Dividends on our Series D and Series E
preferred  stock are  payable  only on  conversion  of these  shares into common
stock.

                                       12
<PAGE>


     We  opened  one  new  company-owned  restaurant  in  May  1999.  One of our
franchised  restaurants  closed in  February  1999 due to  franchisee  financing
arrangements and location issues. We closed two  under-performing  company-owned
restaurants  in March 1999,  resulting in a charge to earnings of  $300,000.  We
also sold one store to a  franchisee.  In the remainder of 1999, we plan to open
new  company-owned   restaurants  and  a  franchised  restaurant.   Our  capital
requirements to meet this development plan could be as much as $1.2 million.

     On May 11, 1999, we entered into an agreement to acquire  certain assets of
Crabby Bob's.  Crabby Bob's is a restaurant  chain consisting of two restaurants
located in Southern  California that offer fresh seafood,  crabs,  oysters and a
full service bar. We will pay  $600,000 in cash and assume  certain  liabilities
related to the Crabby Bob's  business as  consideration  for the  acquisition of
these restaurants and other assets related to their operation.

     Although  we do not  currently  have  the  capital  resources  to meet  our
development  plan,  outside  investors  invested  $2,500,000 of their $6,000,000
financing commitment in the first half of 1999, after having invested $2,000,000
of the  $6,000,000  commitment  during 1998.  These  investors have committed to
invest the remaining $1,500,000 of the commitment on or before the date on which
the  shares  of common  stock  into  which the  Series D  preferred  shares  are
convertible  are registered  with the SEC, which we expect to occur shortly.  We
plan to meet  our  capital  requirements  for new  restaurant  development,  the
acquisition of Crabby Bob's,  and working  capital through the remainder of this
funding. We may also raise additional funds by borrowing.

     Additionally,  we sold our property on Tezel Road in San Antonio,  Texas on
July 30, 1999. The sale generated approximately $382,000 in net proceeds.  Under
the  terms of a  severance  agreement  that we  entered  into  with  William  J.
Gallagher,  our former chief executive  officer and a former  director,  we were
obligated to apply the proceeds of the sale of the Tezel property to satisfy any
remaining  obligations to Mr.  Gallagher.  We paid Mr. Gallagher  $65,000 out of
these net proceeds, in full satisfaction of our outstanding obligations to him.

Forward-Looking Statements
--------------------------

     This  report  contains  forward-looking  statements  within the  meaning of
Section 27A of the  Securities  Act and Section 21E of the Exchange  Act.  These
statements  appear  in a  number  of  places  in this  report  and  include  all
statements that are not historical facts. Some of the forward-looking statements
relate to our intent, belief or expectations  regarding our strategies and plans
for  operations  and  growth,  including  development  and  construction  of new
restaurants.  Other  forward-looking  statements  relate to trends affecting our
financial condition and results of operations, and our anticipated capital needs
and expenditures.

     Our forward-looking statements are not guarantees of future performance and
involve risks and  uncertainties,  and actual results may differ materially from
those anticipated in the forward-looking statements, as a result of:

     -    an inability to meet our obligations as they become due;
     -    increased competition in the casual dining market;
     -    difficulty attracting and keeping good managers and franchisees;
     -    increased labor, food and other costs;
     -    changes in economic conditions;
     -    the possibility  that we do not close the Crabby Bob's  acquisition as
          we anticipate; and
     -    the possibility  that we will not receive the final  $1,500,000 of our
          $6,000,000 financing commitment.

                                       13
<PAGE>


     In  addition,  the market  price of the common  stock may from time to time
fluctuate widely because of, among other things:

     -    our operating results;
     -    the operating results of other similarly-situated companies;
     -    and changes in the performance of the stock market in general.

     Investors  should review the more detailed  description  of these and other
possible  risks  contained in the "Risk  Factors"  sections of the  registration
statements we file with the SEC under the Securities Act.

Year 2000 Computer Issues
-------------------------

     The "Year 2000 problem" is a general term used to identify  those  computer
problems or applications  that are programmed to use a two-digit field,  instead
of a  four-digit  field,  for the year  component of a date.  Those  programs or
applications that are programmed in this manner, may, for example, recognize the
year  2000  as  the  year  1900;  thus  causing  potential  system  failures  or
miscalculations  that could result in disruptions of normal business operations.
We have  evaluated  our  state  of  readiness,  the  costs  involved  to  become
compliant,  the risks involved,  and our contingency  plans. Our primary uses of
software  systems  are  our  corporate  accounting  and  restaurant   management
software.

     We have  completed an initial  assessment of our core computer  information
systems and are now  undertaking  the  necessary  steps to make our systems Year
2000  compliant.  We believe that the cost to upgrade our  software  will not be
material.  We are currently evaluating and assessing those computer systems that
do not relate to information systems, such as telecommunications, HVAC, and fire
and  safety  systems.  These  typically  include  embedded  technology  such  as
microcontrollers that may be harder to test, and may require repairs or complete
replacement.  We expect to complete this assessment  during the third quarter of
1999.

     We are in the  process  of  contacting  all  significant  vendors  and  our
independent  payroll vendor to verify that those vendors are also addressing the
problem.  We have developed  contingency  plans where necessary.  Some Year 2000
issues that may  adversely  affect our  operations  are beyond our  control.  We
cannot now  estimate  the  potential  adverse  effect  that may result  from the
failure of any of our  vendors to become  Year 2000  compliant.  We  continue to
believe  that  there  will  be  no  direct  material  effect  on  our  operating
performance or results of operations.


                                       14
<PAGE>


PART II-OTHER INFORMATION
-------------------------

Item 1. Legal Proceedings
-------------------------

     We are a named party in the following legal proceedings:

     On June 1, 1998,  Harvest  was named as a defendant  in a lawsuit  filed in
Texas in Nueces  District  Court by Lin Chin Liu Ho and Chi Pen Ho (Case  Number
98-2048-E).  The  plaintiffs  are seeking  damages of  $150,000  for breach of a
commercial lease. This case is set for trial in December 1999.

     On August 12, 1998,  Harvest was named as a defendant in a lawsuit filed in
Texas by Green Tree Vendor Services Co. in Bexar County Court (Case No. 247317).
The plaintiff is seeking to recover damages of $38,691 for Harvest's  failure to
make  payments  under two  equipment  leases.  The  plaintiff  has filed a first
amended  motion for summary  judgment,  which has not yet been set for  hearing.
Settlement  negotiations  are ongoing.  Because the  plaintiff  has not sold the
property, damages are unliquidated.

     On August 20, 1998,  Harvest was named as a defendant in a lawsuit filed in
Texas by Toufic Khalifa in Bexar County  District Court (Case No.  98-CI-12200).
The plaintiff is seeking  damages in the amount of at least  $240,000 for breach
of a commercial lease. The case is now in the discovery phase.

     Before the merger,  Harvest  settled a number of lawsuits  and claims,  and
since the merger, we have settled additional  lawsuits and claims. Some of these
settlements are documented by executed settlement  agreements and releases while
others are not.

     We are also  involved  in other  claims  arising  in the  normal  course of
business.  In our  opinion,  although  the  outcomes  of  any  such  claims  are
uncertain,  taken together they are not likely to have a material adverse effect
on us.


Item 2. Changes in Securities and Use of Proceeds
-------------------------------------------------

     We have issued the following unregistered  securities in reliance on one or
more of the exemptions from registration provided by Sections 3(a)(9), 3(a)(11),
4(2) and 4(6) of the Securities  Act,  Regulation D and Rule 701, as promulgated
by the  SEC  under  the  Securities  Act.  Recipients  of  securities  in  these
transactions   represented   their  intention  to  acquire  the  securities  for
investment  purposes  only and not with a view to or for the sale in  connection
with any distribution thereof, and appropriate legends were affixed to the share
certificates  issued in such  transactions.  We believe that all  recipients  of
these  securities  had  adequate  information  about us,  either  through  their
relationships with us, or through information that we provided to them.

     During May and June 1999 we issued  500  shares of our  Series D  preferred
stock to certain  Series D investors who invested an aggregate of $500,000 in us
during that time period.  Each share of Series D preferred  stock is convertible
into that number of shares of common stock determined by the following  formula:
1,000  divided by 80% of the Market  Value of the common  stock,  where  "Market
Value" is defined as being the five day average  closing bid price of the common
stock for the five  days  prior to the date when the  notice  of  conversion  is
delivered to us.

                                       15
<PAGE>


     As part of the financing  commitment,  we have agreed to issue  warrants to
acquire  100,000  shares  of common  stock to the  Series D  investors  for each
$1,000,000  of Series D preferred  stock issued.  Because the outside  investors
invested $500,000 during May and June, we will issue to them warrants to acquire
50,000 shares of common  stock.  The exercise  price of the warrants,  which are
exercisable for five years, is $2.00 per share. Upon completion of the financing
commitment, we will have issued an aggregate of $9,198,000 of Series D preferred
stock and,  accordingly,  will have issued  warrants to acquire an  aggregate of
919,800 shares of common stock.

     In May we issued  warrants to acquire  150,000 shares of common stock to an
outside public relations firm. The warrants will be exercisable at the following
prices:  50,000  will  be  exercisable  at  $0.31  per  share;  50,000  will  be
exercisable at $0.81 per share;  and the remaining 50,000 will be exercisable at
$1.31  per  share.  The  warrants  expire  May 21,  2004,  have  full  piggyback
registration  rights (with  customary  underwriter  "knock-out"  provisions) and
provide for net issue  exercise.  The warrants vest on the  following  schedule:
50,000 vested on May 21, 1999, 25,000 vested on August 4, 1999, 25,000 will vest
on November  12, 1999,  25,000 will vest on February  15, 2000,  and 25,000 will
vest on May 15, 2000. The warrants are being issued as partial consideration for
the services that the public  relations firm has agreed to provide to us. If our
agreement  with  this firm is  terminated  after the  first  three  months,  any
warrants that have not yet vested will be voided.


Item 3. Defaults Upon Senior Securities
---------------------------------------

     We have not paid dividends on our Series A preferred stock since June 1998,
and we are currently analyzing our alternatives for addressing these arrearages.
The amount of dividends that accrued on the Series A preferred  stock during the
first two  quarters of 1999 was  $276,872.  As of June 30, 1999,  the  aggregate
amount of the dividends in arrears was $716,813.


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


                                       16
<PAGE>


     (a) Exhibit No.    Title
     ---------------    -----

           10.1         Purchase and Sale Agreement,  dated May 11, 1999, by and
                        between  CB  Acquisition,  Inc.  and,  for  purposes  of
                        Section 5.2 of the Purchase and Sale Agreement, Tanner's
                        Restaurant Group,  Inc., and Pacific Ocean  Restaurants,
                        Inc. and Crabby Bob's Seafood, Inc. (1)

            27.1        Financial Data Schedule as of July 11, 1999.

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

            (1) Incorporated  by reference to Exhibit 10.15 to our  Registration
                Statement on Form  SB-2,  Amendment  No. 1, file No.  333-78111,
                filed on July 26, 1999.


     (b) Reports on Form 8-K.
     ------------------------

     On May 26, 1999 we filed a report on Form 8-K to report our  execution of a
Purchase and Sale Agreement, dated May 11, 1999, regarding the purchase, through
our wholly-owned subsidiary,  CB Acquisition,  Inc., of certain of the assets of
two restaurants owned by Crabby Bob's Seafood, Inc.


                                       17
<PAGE>



                                   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.


                                            TANNER'S RESTAURANT GROUP, INC.


Date: August 25, 1999                       By: /s/ Clyde E. Culp, III
                                            ---------------------------
                                            Name:  Clyde E. Culp, III
                                            Title: Chairman of the Board of
                                                   Directors and Chief Executive
                                                   Officer


Date: August 25, 1999                       By: /s/ Timothy R. Robinson
                                            ---------------------------
                                            Name:  Timothy R. Robinson
                                            Title: Chief Financial Officer


                                       18
<PAGE>


                                 EXHIBIT INDEX


     Exhibit No.    Title
     -----------    -----

       10.1         Purchase  and Sale  Agreement,  dated May 11,  1999,  by and
                    between CB  Acquisition,  Inc.  and, for purposes of Section
                    5.2 of the Purchase and Sale Agreement,  Tanner's Restaurant
                    Group, Inc., and Pacific Ocean Restaurants,  Inc. and Crabby
                    Bob's Seafood, Inc. (1)

       27.1         Financial Data Schedule as of July 11, 1999.

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

       (1)  Incorporated by reference  to  Exhibit  10.15  to  our  Registration
            Statement on  Form SB-2, Amendment No. 1, file No. 333-78111,  filed
            on July 26, 1999.


                                       19