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

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

                         Commission File Number 1-13226

                         PHOENIX RESTAURANT GROUP, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)


            GEORGIA                                              58-1861457
-------------------------------                              -------------------
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)


        7373 N. Scottsdale Road
    Suite D-120, Scottsdale AZ 85253                                85253
----------------------------------------                          ----------
(address of principal executive offices)                          (zip code)


                                 (602) 483-7055
              (registrant's telephone number, including area code)


                                DenAmerica Corp.
               ---------------------------------------------------
               Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report

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 [ ]

The  number of shares of the  issuer's  class of common  stock as of the  latest
practicable  date, is as follows:  13,485,277  shares of Common Stock,  $.10 par
value, as of August 13, 1999.
<PAGE>
                         PHOENIX RESTAURANT GROUP, INC.
                           (FORMERLY DENAMERICA CORP.)
                          QUARTERLY REPORT ON FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 1999

                                TABLE OF CONTENTS

                                                                            PAGE
PART I.  FINANCIAL INFORMATION

ITEM 1   Unaudited Financial Statements

         Condensed Consolidated Balance Sheets -
           December 30, 1998 and June 30, 1999..............................   3

         Condensed Consolidated  Statements of Operations - 13-Week Periods
           ended July 1, 1998 and June 30, 1999
           and 26-Week Periods ended July 1, 1998 and June 30, 1999.........   4

         Condensed Consolidated  Statements of Cash Flows - 13-Week Periods
           ended July 1, 1998 and June 30, 1999
           and 26-Week Periods ended July 1, 1998 and June 30, 1999.........   5

         Notes to Condensed Consolidated Financial Statements...............   6

ITEM 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations................................   9

PART II. OTHER INFORMATION..................................................  16

         SIGNATURES.........................................................  17

                                        2
<PAGE>
PART I. FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS

                 PHOENIX RESTAURANT GROUP, INC. AND SUBSIDIARIES
                           (FORMERLY DENAMERICA CORP.)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                       (DOLLARS IN THOUSANDS) (UNAUDITED)

                                                        DECEMBER 30,   JUNE 30,
                                                           1998         1999
                                                         ---------    ---------
                                     ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                              $   2,330    $   4,480
  Receivables                                                2,636        3,165
  Inventories                                                2,917        2,867
  Other current assets                                       5,533        4,667
                                                         ---------    ---------
    Total current assets                                    13,416       15,179
PROPERTY AND EQUIPMENT, net                                 55,648       54,757
INTANGIBLE ASSETS, net                                      50,580       46,986
DEFERRED INCOME TAXES                                        5,578        6,995
OTHER ASSETS                                                 9,285        8,088
                                                         ---------    ---------
TOTAL                                                    $ 134,507    $ 132,005
                                                         =========    =========

                      LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Accounts payable                                       $  18,026    $  15,554
  Accrued compensation                                       5,402        5,344
  Accrued taxes                                              5,089        4,090
  Other current liabilities                                  8,946        9,824
  Current portion of long-term debt                         20,791        6,791
                                                         ---------    ---------
    Total current liabilities                               58,254       41,603
LONG-TERM DEBT, LESS CURRENT PORTION                        72,494       92,922
OTHER LONG-TERM LIABILITIES                                  7,093        6,445
                                                         ---------    ---------
    Total liabilities                                      137,841      140,970
                                                         ---------    ---------
SHAREHOLDERS' DEFICIT
  Preferred stock, $.01 par value; authorized,
    5,000,000 shares; issued and outstanding none
  Common stock $.10 par value; authorized, 40,000,000
    shares; 13,485,277 shares issued and outstanding         1,349        1,349
  Additional paid-in capital                                35,869       35,869
  Accumulated deficit                                      (40,552)     (46,183)
                                                         ---------    ---------
    TOTAL SHAREHOLDERS' DEFICIT                             (3,334)      (8,965)
                                                         ---------    ---------
TOTAL                                                    $ 134,507    $ 132,005
                                                         =========    =========

See accompanying notes to condensed consolidated financial statements

                                        3
<PAGE>
                 PHOENIX RESTAURANT GROUP, INC. AND SUBSIDIARIES
                           (FORMERLY DENAMERICA CORP.)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

<TABLE>
<CAPTION>
                                              13-Week Period Ended      26-Week Period Ended
                                             ----------------------    ----------------------
                                              July 1,     June 30,      July 1,      June 30,
                                               1998         1999         1998         1999
                                             ---------    ---------    ---------    ---------
<S>                                          <C>          <C>          <C>          <C>
RESTAURANT SALES                             $  62,066    $  61,801    $ 134,946    $ 122,742
                                             ---------    ---------    ---------    ---------
RESTAURANT OPERATING EXPENSES:
  Food and beverage costs                       17,100       16,775       37,107       33,238
  Payroll and payroll related costs             20,950       21,341       46,052       42,160
  Depreciation and amortization                  1,943        1,676        3,730        3,361
  Other restaurant operating expenses           17,469       17,425       37,058       34,296
  Charge for impaired assets                        --        3,000           --        3,000
                                             ---------    ---------    ---------    ---------
    Total operating expenses                    57,462       60,217      123,947      116,055
                                             ---------    ---------    ---------    ---------
RESTAURANT OPERATING INCOME                      4,604        1,584       10,999        6,687

ADMINISTRATIVE EXPENSES                          3,030        2,950        6,048        5,781
                                             ---------    ---------    ---------    ---------
OPERATING INCOME (LOSS)                          1,574       (1,366)       4,951          906

INTEREST EXPENSE, net                            3,122        3,389        6,548        5,995
                                             ---------    ---------    ---------    ---------
LOSS BEFORE INCOME TAXES AND
  EXTRAORDINARY ITEMS                           (1,548)      (4,755)      (1,597)      (5,089)

INCOME TAX BENEFIT                                (487)        (596)        (504)        (731)
                                             ---------    ---------    ---------    ---------
LOSS BEFORE EXTRAORDINARY
  ITEMS                                         (1,061)      (4,159)      (1,093)      (4,358)

EXTRAORDINARY ITEMS-(LOSS)/GAIN
  ON EARLY EXTINGUISHMENT OF DEBT
  net of income tax expense/(benefit)
  of $914 and $(686)                                --       (1,273)       1,371       (1,273)
                                             ---------    ---------    ---------    ---------
NET INCOME (LOSS)                            $  (1,061)   $  (5,432)   $     278    $  (5,631)
                                             =========    =========    =========    =========
Basic and diluted income (loss) per share
  Before extraordinary item                  $    (.08)   $    (.31)   $     .08    $    (.32)
                                             =========    =========    =========    =========
  Net income (loss)                          $    (.08)   $    (.39)   $     .02    $    (.41)
                                             =========    =========    =========    =========
Basic and diluted weighted average shares
outstanding
  Basic                                         13,447       13,485       13,447       13,485
  Diluted                                       13,447       13,925       13,447       13,705
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                        4
<PAGE>
                 PHOENIX RESTAURANT GROUP, INC. AND SUBSIDIARIES
                           (FORMERLY DENAMERICA CORP.)
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        13-Week Period Ended    26-Week Period Ended
                                                        --------------------    --------------------
                                                         July 1,    June 30,     July 1,    June 30,
                                                          1998        1999        1998        1999
                                                        --------    --------    --------    --------
<S>                                                     <C>         <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                     $ (1,061)   $ (5,432)   $    278    $ (5,631)
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
      Depreciation and amortization                        1,943       1,676       3,730       3,361
      Amortization of deferred financing costs               245          90         491         181
      Charge for impaired assets                              --       3,000          --       3,000
      Extraordinary items                                     --       1,273      (1,371)      1,273
      Deferred income taxes                                 (487)       (596)       (729)       (731)
      Deferred rent                                           69          (8)        146          53
      Other                                                 (381)       (319)       (189)       (534)
      Changes in operating assets and
        liabilities net of dispositions:
          Receivables                                       (135)       (558)        527        (529)
          Inventories                                         71          99         192          50
          Other current assets                               263         424         669         590
          Accounts payable and accrued liabilities        (3,428)        395      (5,821)       (698)
                                                        --------    --------    --------    --------
        Net cash provided by (used in)
          operating activities                            (2,901)         44      (2,077)        385
                                                        --------    --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                        (443)       (948)     (1,187)     (2,407)
  Purchase of intangibles                                    (61)        (84)        (69)       (120)
  Proceeds from the sale of assets                            --          --      25,900          --
                                                        --------    --------    --------    --------
  Net cash provided by (used in) investing activities       (504)     (1,032)     24,644      (2,527)
                                                        --------    --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES
  Borrowings, net                                          4,738       5,521       3,671       6,378
  Debt issuance costs                                         --      (1,033)         --      (1,033)
  Note receivable collections                              1,621         595       1,715         733
  Principal reductions on long-term obligations           (2,532)       (878)    (27,199)     (1,786)
                                                        --------    --------    --------    --------
        Net cash used in financing activities              3,827       4,205     (21,813)      4,292
                                                        --------    --------    --------    --------
NET CHANGE IN CASH AND CASH
  EQUIVALENTS                                                422       3,217         754       2,150
CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                      1,599       1,263       1,267       2,330
                                                        --------    --------    --------    --------
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD                                                $  2,021    $  4,480    $  2,021    $  4,480
                                                        ========    ========    ========    ========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the period for:
  Interest                                              $  2,187    $  2,191    $  5,233    $  4,064
                                                        ========    ========    ========    ========
</TABLE>

See accompanying notes to condensed consolidated financial statements

                                        5
<PAGE>
                 PHOENIX RESTAURANT GROUP, INC. AND SUBSIDIARIES
                           (FORMERLY DENAMERICA CORP.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

(1) BASIS OF PRESENTATION

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
Phoenix Restaurant Group, Inc. and Subsidiaries (formerly DenAmerica Corp.) (the
"Company")  have been prepared in accordance  with the rules and  regulations of
the Securities and Exchange  Commission  Form 10-Q and do not include all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial  statements.  Effective July 2, 1999, the Company changed
its name from DenAmerica Corp. to Phoenix  Restaurant Group, Inc. In the opinion
of the Company's  management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
However,  these operating results are not necessarily  indicative of the results
expected for the full year. These statements  should be read in conjunction with
the  consolidated  financial  statements  and  notes  thereto  and  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
included in the  Company's  Annual Report on Form 10-K for the fiscal year ended
December  30,  1998.

The Company currently operates 200 family-oriented,  full-service restaurants in
26 states, primarily in the southwestern,  midwestern, western, and southeastern
United States.  The Company owns and operates 101  Black-eyed  Pea  restaurants,
primarily in Texas, Georgia, Arizona,  Oklahoma, and the Washington,  D.C. area.
The Company  also owns and  operates 99 Denny's  restaurants,  which  represents
approximately  5.8% of the  Denny's  system and makes the  Company  the  largest
Denny's  domestic  franchisee in terms of revenue and the number of  restaurants
operated.

(2) 1998 ASSET DIVESTITURES

In  March  1998,  the  Company  completed  the  sale  of 63  Denny's  and  eight
non-branded  restaurants,  of which six were closed, to a Denny's franchisee for
gross proceeds of $28,700. Net cash proceeds of $25.2 million were used to repay
debt  obligations  at a $2,400  discount.  The Company has  included  the $2,400
before-tax  discount as an extraordinary item in the accompanying 1998 financial
statements.

In a separate  transaction  completed in March 1998,  the Company also sold five
Denny's  restaurants  for cash of $700  plus a note in the  principal  amount of
$400. The Company has recorded a gain of approximately $575 on this transaction,
which is included as a partial offset to other restaurant operating expenses.

                                        6
<PAGE>
(3) OTHER MATTERS

On June 30, 1999,  the Company  completed  the initial  phase of a $20.1 million
financing agreement with CNL APF Partners,  LP ("CNL") whereby CNL purchased the
remaining  outstanding  indebtedness  under the Company's existing senior credit
facility and advanced an additional $5.4 million to the Company.  As of June 30,
1999, the Company was in compliance with the terms and conditions of its various
debt agreements.

In conjunction  with the  aforementioned  transaction,  the Company and Denny's,
Inc. entered into an agreement whereby approximately $2.6 million of royalty and
advertising  obligations  were  converted  into  notes  payable.   Approximately
$950,000 of these notes payable will be satisfied  through the cancellation of a
Denny's  development  rights  agreement  and the transfer or assignment of three
restaurant leasehold properties from the Company to Denny's,  Inc. The remaining
note payable of $1.7 million bears interest at 11%, is due in November 2000, and
is secured by the leasehold interests and equipment in four Denny's restaurants.
In  connection  with these  transactions  the Company has  recognized  a gain of
approximately $182,000 which was included in other operating restaurant expenses
in the accompanying financial statements. This transaction has been reflected as
a non-cash transaction in the accompanying statement of cash flows.

As of June 30, 1999, in connection with the CNL transaction described above, the
Company wrote off  approximately  $2.0 million of deferred  financing costs. The
Company has included the $2.0 million before-tax amount as an extraordinary item
in the accompanying financial statements.

During the second quarter of 1999, the Company has  identified  certain  Denny's
restaurants  which may be sold over the next several  quarters.  The Company has
determined  that the carrying value of the assets exceeds the probable  purchase
price  attributable to these  restaurants and has recorded a charge for impaired
goodwill and  intangible  assets of $3.0 million in the  accompanying  financial
statements.

                                        7
<PAGE>
(4) BUSINESS SEGMENTS

The  Company  operates  family-oriented,   full-service  restaurants  under  two
separate concepts,  Black-eyed Pea and Denny's.  The Company owns the Black-eyed
Pea brand and  operates  the Denny's  restaurants  under the terms of  franchise
agreements.  The two  concepts  have  separate  management  teams and  reporting
infrastructures.  The Company's revenue and restaurant  operating income for the
thirteen-week  and twenty six-week  periods ended June 30, 1999 and July 1, 1998
are as follows:

                                        13-WEEK PERIOD        26-WEEK PERIOD
                                         ENDED JUNE 30         ENDED JUNE 30
                                     -------------------    -------------------
REVENUE                                1998       1999        1998       1999
                                     --------   --------    --------   --------
Black-eyed Pea                       $ 35,992   $ 35,288    $ 71,861   $ 70,901
Denny's                                25,988     26,513      62,669     51,841
Non-branded                                86         --         416         --
                                     --------   --------    --------   --------
  Total revenues                     $ 62,066   $ 61,801    $134,946   $122,742
                                     ========   ========    ========   ========

RESTAURANT OPERATING INCOME (LOSS)
Black-eyed Pea                       $  3,200   $  2,504    $  6,800   $  5,946
Denny's                                 1,474      1,898       3,739      3,559
Non-branded                               (70)        --        (115)        --
Charge for impaired assets                 --     (3,000)         --     (3,000)
Gain on sale of assets                     --        182         575        182
                                     --------   --------    --------   --------
  Total restaurant operating income     4,604      1,584      10,999      6,687
  Administrative expenses               3,030      2,950       6,048      5,781
                                     --------   --------    --------   --------
  Total operating income (loss)      $  1,574   $ (1,366)   $  4,951   $    906
                                     ========   ========    ========   ========

                                        8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

In two  separate  transactions  in  March  1998,  the  Company  sold 68  Denny's
restaurants and eight non-branded restaurants to unrelated parties. As a result,
the  operating  results  for the  26-week  period  ending  June 30, 1999 are not
comparable with the 1998 results.

COMPARISON OF RESULTS OF OPERATIONS

         The following table presents, for the periods indicated,  certain items
in the condensed consolidated statements of operations expressed as a percentage
of total restaurant sales.

                                              13-Week              26-Week
                                            Period Ended        Period Ended
                                           ---------------     ---------------
                                           1998      1999      1998      1999
                                           -----     -----     -----     -----
Restaurant Sales                           100.0%    100.0%    100.0%    100.0%
                                           -----     -----     -----     -----
Restaurant operating expenses:
  Food and beverage costs                   27.6      27.1      27.5      27.1
  Payroll and payroll related costs         33.8      34.5      34.1      34.4
  Depreciation and amortization              3.1       2.7       2.8       2.7
  Other restaurant operating expenses       28.1      28.2      27.4      28.0
  Charge for impaired assets                  --       4.9        --       2.4
                                           -----     -----     -----     -----
    Total operating expenses                92.6      97.4      91.8      94.6
                                           -----     -----     -----     -----
Restaurant operating income                  7.4       2.6       8.2       5.4

Administrative expenses                      4.9       4.8       4.5       4.7
                                           -----     -----     -----     -----
Operating income (loss)                      2.5      (2.2)      3.7       0.7

Interest expense                             5.0       5.5       4.9       4.9
                                           -----     -----     -----     -----
Loss before income taxes and
  extraordinary items                       (2.5)     (7.7)     (1.2)     (4.2)

Income tax benefit                          (0.8)     (1.0)     (0.4)     (0.6)
                                           -----     -----     -----     -----
Loss before extraordinary items             (1.7)     (6.7)     (0.8)     (3.6)

Extraordinary items                           --      (2.1)      1.0      (1.0)
                                           -----     -----     -----     -----
Net income (loss)                           (1.7)%    (8.8)%     0.2%     (4.6)%
                                           =====     =====     =====     =====

                                        9
<PAGE>
THIRTEEN-WEEK  PERIOD ENDED JUNE 30, 1999  COMPARED  WITH  THIRTEEN-WEEK  PERIOD
ENDED JULY 1, 1998

     RESTAURANT SALES.  Restaurant sales decreased  $265,000,  or 0.4%, to $61.8
million  for the  thirteen-week  period  ended June 30,  1999 as  compared  with
restaurant  sales of $62.1  million for the  thirteen-week  period ended July 1,
1998. The Company  operated 101 and 104 Black-eyed Pea restaurants in 13 states,
in the second  quarter of 1999 and 1998,  respectively.  For the 13-week  period
ended June 30, 1999,  comparable  Black-eyed Pea same-store sales decreased 3.1%
as compared with the same period in fiscal 1998. The Company operated 99 and 101
Denny's  restaurants  in 18  states  in the  second  quarter  of 1999 and  1998,
respectively.  For the 13-week  period ended June 30, 1999,  comparable  Denny's
same-store sales increased 3.5% as compared with the same period in fiscal 1998.
The overall  decrease is  primarily  attributable  to the  decrease in the total
number of restaurants operated during the respective periods.

     FOOD AND  BEVERAGE  COSTS.  Food and beverage  costs  decreased to 27.1% of
restaurant  sales for the  thirteen-week  period ended June 30, 1999 as compared
with 27.6% of restaurant sales for the thirteen-week  period ended July 1, 1998.
This  decrease  is  primarily  a  result  of  same-store   sales  increases  and
management's ongoing efforts to reduce food costs by implementing more efficient
and cost effective practices in food preparation, as well as favorable commodity
prices.

     PAYROLL AND PAYROLL  RELATED COSTS.  Payroll and payroll related costs were
34.5% of restaurant  sales for the  thirteen-week  period ended June 30, 1999 as
compared with 33.8% of restaurant sales for the thirteen-week  period ended July
1, 1998. This increase was primarily attributable to increased employee benefits
costs and a slight increase in the average hourly wage rates.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization of restaurant
equipment,  leasehold  improvements,  intangible assets,  pre-opening costs, and
other items was $1.7 million for the  thirteen-week  period ended June 30, 1999,
as compared with $1.9 million for the  thirteen-week  period ended July 1, 1998.
This  decrease  of  $267,000  was  primarily  attributable  to a decrease in the
amortization  of store  opening  costs.

     OTHER RESTAURANT  OPERATING EXPENSES.  Other restaurant  operating expenses
were 28.2% of restaurant sales for the thirteen-week  period ended June 30, 1999
as compared with 28.1% of restaurant  sales for the  thirteen-week  period ended
July 1, 1998.  Included in the 1999 results is a gain of $182,000 related to the
transfer of certain  restaurants  to  Denny's,  Inc.  In  addition,  in 1999 the
Company  adopted  Statement  of Position  98-5 which  requires  that the Company
expense preopening costs as they are incurred. Prior to 1999, such expenses were
capitalized  and amortized over a period of one year. As a result of the change,
new store opening costs of approximately $380,000 were expensed when incurred in
the second quarter.  Excluding these items, other restaurant operating expenses,
expressed as a percentage of revenue,  would have been 27.9% and 28.1% in fiscal
1999 and 1998, respectively.

     RESTAURANT OPERATING INCOME.  Restaurant operating income decreased to $1.6
million for the thirteen-week  period ended June 30, 1999, as compared with $4.6
million for the  thirteen-week  period  ended July 1, 1998.  This  decrease  was
principally  the result of the $3.0 million  charge for impaired  assets and the
factors described above.

     ADMINISTRATIVE  EXPENSES.  Administrative  expenses  of $3.0  million  were
comparable for each of the thirteen-week periods ended June 30, 1999 and July 1,
1998.

                                       10
<PAGE>
     INTEREST EXPENSE.  Interest expense was $3.4 million, for the thirteen-week
period ended June 30, 1999 as compared  with $3.1 million for the  thirteen-week
period  ended  July 1,  1998.  The  change  is the  result  of the  decrease  in
outstanding  debt  following  the sale of  certain  restaurants  in 1998 and the
recording  of  approximately  $600,000,  which  represents  the  accrual  of the
compound effect of the interest associated with the Series B Notes.

     INCOME TAX EXPENSE (BENEFIT). The Company recorded an income tax benefit of
approximately  $596,000,  or an effective rate of 12.5%,  for the  thirteen-week
period ended June 30, 1999 and $487,000,  or an effective rate of 31.6%, for the
thirteen-week  period  ended July 1, 1998.  The Company  has not  recorded a tax
benefit associated with the change for impaired assets.

     EXTRAORDINARY  ITEMS.  The  extraordinary  item relates to the expensing of
certain  deferred  financing  costs  associated with the early payoff of certain
debt obligations.

                                       11
<PAGE>
TWENTY-SIX  WEEK PERIOD ENDED JUNE 30, 1999 COMPARED WITH TWENTY-SIX WEEK PERIOD
ENDED JULY 1, 1998

     RESTAURANT  SALES.  Restaurant  sales decreased $12.2 million,  or 9.0%, to
$122.7  million for the  twenty-six  week period ended June 30, 1999 as compared
with  restaurant  sales of $134.9 million for the  twenty-six  week period ended
July 1, 1998.  This decrease was primarily  attributable  to the sale of certain
restaurants  during 1998.  For the  twenty-six  week period ended June 30, 1999,
comparable  same-store sales decreased 1.3% and increased 3.3% for the Company's
Black-eyed Pea and Denny's  restaurants,  respectively as compared with the same
period in fiscal 1998.  The overall  decrease is primarily  attributable  to the
decrease  in the total  number of  restaurants  operated  during the  respective
periods.

     FOOD AND BEVERAGE  COSTS.  Cost of food and beverage  decreased to 27.1% of
restaurant  sales for the twenty-six week period ended June 30, 1999 as compared
with 27.5% of  restaurant  sales for the  twenty-six  week period  ended July 1,
1998, primarily as the result of the sale of restaurants in the first quarter of
1998, same-store sale increases, and management's ongoing efforts to reduce food
costs by  implementing  more  efficient  and  cost-effective  practices  in food
preparation, as well as favorable commodity prices.

     PAYROLL AND PAYROLL  RELATED COSTS.  Payroll and payroll related costs were
34.4% of restaurant  sales for the twenty-six week period ended June 30, 1999 as
compared with 34.1% of  restaurant  sales for the  twenty-six  week period ended
July 1, 1998.  This  increase  was  primarily  attributable  to higher  employee
benefits costs and a slight increase in the average hourly wage rates.

     DEPRECIATION AND AMORTIZATION.  Depreciation and amortization of restaurant
equipment,  leasehold  improvements,  intangible  assets,  pre-opening costs and
other items decreased to 2.7% of restaurant sales for the twenty-six week period
ended June 30, 1999 as compared with 2.8% of restaurant sales for the twenty-six
week  period  ended  July 1,  1998.  The  decrease  of  $369,000  was  primarily
attributable  to a decrease in the  amortization  of store opening costs and the
reduction of depreciation and amortization  associated with the restaurants sold
in March 1998.

     OTHER  RESTAURANT  OPERATING COSTS.  Other restaurant  operating costs were
28.0% of restaurant  sales for the twenty-six week period ended June 30, 1999 as
compared with 27.4% of  restaurant  sales for the  twenty-six  week period ended
July 1, 1998.  Included in the 1999 and 1998  results are gains of $182,000  and
$575,000, respectively relating to the sale of restaurants. In addition, in 1999
the Company  adopted  Statement of Position 98-5 which requires that the Company
expense preopening costs as they are incurred.  Prior to 1999 such expenses were
capitalized  and amortized  over a period of one year. As a result of the change
in accounting principles, new store opening costs of approximately $600,000 were
expensed when incurred in fiscal 1999.  Excluding these items,  other restaurant
operating costs expressed as a percentage of revenue,  would have been 27.6% and
27.9% for 1999 and 1998, respectively.

     RESTAURANT  OPERATING  INCOME.  Restaurant  operating income decreased $4.3
million to $6.7  million for the  twenty-six  week period ended June 30, 1999 as
compared with $11.0 million for the  twenty-six  week period ended July 1, 1998.
This decrease was principally the result of the $3.0 million charge for impaired
assets and the factors described above.

     ADMINISTRATIVE  EXPENSES.  Administrative  expenses  increased  to  4.7% of
restaurant  sales for the twenty-six week period ended June 30, 1999 as compared
with 4.5% of restaurant sales for the twenty-six week period ended July 1, 1998.
This  increase is primarily  attributable  to the decrease in revenue  without a
proportional decrease in administrative expenses.

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<PAGE>
     INTEREST EXPENSE.  Interest expense was $6.0 million, or 4.9% of restaurant
sales,  for the twenty-six week period ended June 30, 1999 as compared with $6.5
million,  or 4.9% of restaurant sales, for the twenty-six week period ended July
1, 1998.  The decrease is the result of the decrease in long-term debt following
the sale of  certain  restaurants  in 1998 and the  recording  of  approximately
$600,000,  which  represents the accrual of the compound  effect of the interest
associated with the Series B Notes.

     INCOME  TAX  BENEFIT.  The  Company  recorded  an  income  tax  benefit  of
approximately  $731,000 or an effective rate of 14.4%,  for the twenty-six  week
period ended June 30, 1999 as compared with income tax benefit of  approximately
$504,000,  or an effective rate of 31.6%,  for the twenty-six  week period ended
July 1, 1998.  The Company has not  recorded a tax benefit  associated  with the
charge for impaired assets.

     EXTRAORDINARY ITEMS. The extraordinary items relate to expensing of certain
deferred  financing  costs  in 1999  and the  gain  associated  with  the  early
extinguishment of debt in 1998.

LIQUIDITY AND CAPITAL RESOURCES

The Company's strategy has been to (i) focus on restaurants that achieve certain
operational and geographic efficiencies; (ii) refinance certain debt obligations
to better match operating cash flows with debt amortization;  and (iii) position
itself  for  growth.  During  the first  quarter of 1998,  the  Company  sold 76
underperforming  restaurants  and used the proceeds form these  transactions  to
repay certain debt  obligations.  The Company  believes that these  transactions
improved its overall  portfolio of operating  restaurants  and has positioned it
for improved operating results in 1999. Excluding the effect of gains from asset
sales of $182,000 and $575,000 in 1999 and 1998, respectively, net cash provided
from  operating  activities  increased from  approximately  $2.1 million used in
operations in fiscal 1998 to $385,000  provided from  operations in fiscal 1999.
In an effort to  continue  to improve  its  operating  asset  base,  the Company
currently is negotiating  letters of intent with  unrelated  parties to purchase
certain  underperforming or closed restaurants.  The Company believes that these
transactions  will be  completed  over the next  several  quarters.  The Company
cannot provide assurance, however, regarding whether it will complete all or any
of these transactions or the timing of any transactions that are completed.

On June 30, 1999,  the Company  completed  the initial  phase of a $20.1 million
financing  agreement  with CNL whereby CNL  purchased  the  approximately  $14.7
million of indebtedness  remaining outstanding under the Company's senior credit
facility and  advanced an  additional  $5.4 million to the Company.  The Company
believes that its current cash resources and expected cash flows from operations
will be sufficient to fund the Company's capital needs during the next 12 months
at its current level of operations,  apart from the capital needs resulting from
additional development of restaurants.

The Company receives  substantially all of its revenue in cash with a relatively
small  amount of  receivables.  Therefore,  like  many  other  companies  in the
restaurant  industry,  the Company operates with a working capital deficit.  The
Company's  working  capital deficit was $26.4 million at June 30, 1999 and $44.8
million at December 30,  1998.  Included in the  December  1998 working  capital
deficit is  approximately  $15.0  million of debt  obligations  under the senior
credit facility which was in default at that time. The Company  anticipates that
it will continue to operate with a working capital deficit.

The Company has historically  satisfied its capital  requirements through credit
facilities  and   sale-leaseback   financings.   The  Company  requires  capital
principally for the development of new restaurants and maintenance  expenditures
on its  existing  restaurants.  Currently,  the Company is in various  stages of

                                       13
<PAGE>
development of nine  Black-eyed Pea  restaurants,  which it expects to open over
the next several  quarters.  The Company estimates that its costs to develop and
open new Black-eyed Pea  restaurants,  excluding real estate and building costs,
will be approximately $350,000 to $450,000 per restaurant.  The Company believes
that its  financing  commitments  will be adequate to meet its  financing  needs
during the remainder of 1999. During the period ended June 30, 1999, the Company
borrowed approximately $800,000 to finance its development activities associated
with new Black-eyed Pea restaurants.

SEASONALITY

The Company's operating results fluctuate from quarter to quarter as a result of
the seasonal nature of the restaurant industry and other factors.  The Company's
restaurant  sales are generally  greater in the second and third fiscal quarters
(April through  September) than in the first and fourth fiscal quarters (October
through March).  Occupancy and other operating  costs,  which remain  relatively
constant, have a disproportionately  negative effect on operating results during
quarters with lower restaurant sales. The Company's working capital requirements
also fluctuate seasonally.

INFLATION

The  Company  does not  believe  that  inflation  has had a  material  effect on
operating  results in past years.  Although  increases  in labor,  food or other
operating costs could  adversely  affect the Company's  operations,  the Company
generally has been able to modify its operating procedures or to increase prices
to offset increases in its operating costs.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products may not function
properly  when  processing  dates  that begin on or after  January 1, 2000.  The
Company  currently is upgrading  its  internal  computer  network to improve its
management information systems in general, as well as to ensure that its systems
will not  malfunction as a result of "Year 2000" issues.  The Company  currently
does not  anticipate  any  material  adverse  effects  related  to the Year 2000
issues.  The Company has identified four primary systems that could be adversely
impacted  by the Year  2000  issue.  These  systems  are (1)  point-of-sale  and
restaurant  back-office  accounting  systems  in  each  of  its  Black-eyed  Pea
restaurants;  (2) point-of-sale and restaurant back-office accounting systems in
each of its Denny's  restaurants;  (3) the Company's internal accounting systems
and software;  and (4) third-party  systems,  including computer systems used by
the Company's food suppliers,  financial  institutions,  credit card processors,
and  utility  companies.  The  Company  is in  the  process  of  converting  the
point-of-sale  and  back-office  accounting  systems at its  Black-eyed  Pea and
Denny's  restaurants.  The Company  currently  anticipates that this conversion,
which includes upgrading existing software,  will be completed by December 1999.
The vendor for the Company's internal  corporate  accounting systems has advised
the  Company  that  it will be able to  modify  those  systems  to be Year  2000
compliant during 1999. The vendor currently is modifying the line code for those
software products.  The Company  previously engaged a third-party  consultant to
evaluate those systems and has retained another third-party consultant to assess
and test the  vendor's  modifications  to the  systems by  September  1999.  The
Company currently  anticipates that its costs to bring its computer systems into
Year 2000  compliance  will not exceed  $250,000.  The Company has obtained Year
2000  compliance  certification  from  all  significant  third-parties  that the
Company depends upon,  including food  suppliers,  financial  institutions,  and
credit card transaction processors.  All significant  third-parties have advised
the Company that their systems are or will be Year 2000  compliant  during 1999.
The  Company  intends to continue to  identify  technology  systems  that may be
subject  to Year 2000 risks and to monitor  and test  those  systems  throughout
1999. The Company  currently does not  anticipate any material  adverse  effects
related to Year 2000 issues.  As of the filing date of this Report,  the Company
has not  developed a  contingency  plan to address Year 2000  issues.  Following

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<PAGE>
completion of the  third-party  assessment and testing of  modifications  to its
internal  accounting  systems,  the Company  will develop  contingency  plans to
address those potential adverse  consequences,  if any,  identified as remaining
with respect to Year 2000 issues.

NEW ACCOUNTING STANDARDS

In April 1998, the American Institute of Certified Public Accountants  ("AICPA")
issued  Statement of Position 98-5 "Reporting the Cost of Start-up  Activities".
This statement requires companies to expense the cost of start-up  activities as
incurred. The Company adopted this statement in fiscal 1998.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging  Activities  ("SFAS No.  133") that is  effective  for fiscal  years
beginning after June 15, 1999. The FASB subsequently  delayed the effective date
of SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. The
delay, published as Statement of Financial Accounting Standards No. 137, applies
to quarterly and annual financial statements.  The Company has not completed the
process of evaluating  the impact that will result form the adoption of SFAS No.
133; however, on a preliminary basis,  management does not believe that eventual
adoption will have a significant impact on the Company's financial statements.

FORWARD LOOKING STATEMENTS

This  Report  on  Form  10-Q  contains  forward-looking  statements,   including
statements regarding the Company's business strategies,  the Company's business,
and the industry in which the Company operates. These forward-looking statements
are based primarily on the Company's expectations and are subject to a number of
risks and uncertainties,  some of which are beyond the Company's control. Actual
results could differ materially from the forward-looking  statements as a result
of  numerous   factors,   including  those  set  forth  in  Item  1  -  "Special
Considerations"  in the Company's Annual Report on Form 10-K for the fiscal year
ended December 30, 1998.

                                       15
<PAGE>
PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Not Applicable

ITEM 2. CHANGES IN SECURITIES

     Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

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

The Company's 1999 Annual Meeting of Shareholders was held on June 29, 1999. The
following  nominees were elected to the Company's Board of Directors to serve as
directors  until the Company's  next annual  meeting of  Shareholders,  or until
their successors are elected and qualified,  or until their earlier  resignation
or removal:

     Nominee                                 Votes in Favor        Votes Against
     -------                                 --------------        -------------
     Jack M. Lloyd                             9,637,608             2,539,058
     William J. Howard                         9,637,608             2,539,058
     William G. Cox                            9,637,608             2,539,058
     Todd S. Brown                             9,637,608             2,539,058
     Fred W. Martin                            9,637,608             2,539,058
     Robert H. Manschot                        9,637,608             2,539,058

The following additional items were voted upon by the Company's shareholders:

     (a)  Proposal to approve an amendment to the Company's Restated Articles of
          Incorporation,  as  amended,  to  change  the name of the  Company  to
          "Phoenix Restaurant Group, Inc."

          Votes in Favor        Opposed        Abstained         Broker Non-Vote
          --------------        -------        ---------         ---------------
            9,792,003           487,700        1,896,963               -0-

     (b)  Proposal  to ratify the  appointment  of  Deloitte & Touche LLP as the
          independent  auditors  of the  Company  for  the  fiscal  year  ending
          December 29, 1999.

          Votes in Favor        Opposed        Abstained         Broker Non-Vote
          --------------        -------        ---------         ---------------
            9,978,603           303,600        1,894,463               -0-

ITEM 5. OTHER INFORMATION

     Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  EXHIBITS.

          27.1 Financial Data Schedule.

     (b)  REPORTS ON FORM 8-K.

          Not applicable.

                                       16
<PAGE>
                                   SIGNATURES

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


                                        PHOENIX RESTAURANT GROUP, INC.

Dated: August 13, 1999                  By: /s/ Todd S. Brown
                                            ------------------------------------
                                            Todd S. Brown
                                            Senior Vice President, Chief
                                            Financial Officer, and Treasurer

                                            (Duly authorized officer of the
                                            registrant, principal financial
                                            and accounting officer)

                                       17