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 September 23, 1996

                                       OR

| |      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 33-66392

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

                        HOULIHAN'S RESTAURANT GROUP, INC.
               Incorporated pursuant to the Laws of Delaware State

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

        Internal Revenue Service - Employer Identification No. 43-0913506

             Two Brush Creek Boulevard, Kansas City, Missouri 64112
                                 (816) 756-2200

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


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  requirements
for the past 90 days. Yes  x  No

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes  x  No

Number of shares of common stock outstanding as of November 7, 1996:  9,998,012

<PAGE>



                HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY

                                      INDEX


                                                                            Page

PART I            FINANCIAL INFORMATION

   Item 1.    Consolidated Financial Statements
                  Consolidated Balance Sheets............................     3
                  Consolidated Statements of Income......................     4
                  Consolidated Statements of Cash Flows..................     5
                  Notes to Consolidated Financial Statements.............     6

   Item 2.    Management's Discussion and Analysis of Financial Condition     9


PART II           OTHER INFORMATION

   Item 6.    Exhibits and Reports on Form 8-K...........................    14

   Signature.............................................................    15

                                        2

<PAGE>

                HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                (Dollars in thousands, except per share amounts)

                                                               Sept.23,  Dec.25,
                                                                 1996     1995
                                                               -------- --------
                                                            (Unaudited)(Audited)
                            ASSETS
Current assets:
   Cash and cash equivalents ................................   $15,395  $10,314
   Receivables ..............................................     1,399    1,661
   Inventories ..............................................     2,244    2,276
   Other current assets .....................................     1,755    2,918
   Deferred income taxes ....................................     3,644    1,401
                                                               -------- --------
       Total current assets .................................    24,437   18,570
Property, equipment and leaseholds, net .....................   105,073  104,521
Reorganization value in excess of amounts allocable to
   identifiable assets, net .................................    59,370   62,108
Deferred debt issuance costs, net ...........................       248      330
Other assets, net ...........................................     5,260    5,487
                                                               -------- --------
       Total assets .........................................  $194,388 $191,016
                                                               ======== ========

             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term debt and capitalized lease
       obligations ..........................................   $57,224  $11,202
   Accounts payable .........................................     6,774    8,811
   Accrued interest .........................................     1,030      676
   Accrued liabilities ......................................    13,953   13,375
                                                               -------- --------
       Total current liabilities ............................    78,981   34,064
Long-term debt, including capitalized lease obligations, less
   current portion ..........................................    26,109   72,779
Other liabilities ...........................................    11,870   10,834
Deferred income taxes .......................................     4,129    3,147
                                                               -------- --------
       Total liabilities ....................................   121,089  120,824
                                                               -------- --------
Stockholders' equity:
   Common stock-par value $.01 per share, 20,000,000 shares
       authorized, 9,998,012 shares issued and outstanding ..       100      100
   Additional paid-in capital ...............................    59,900   59,900
   Retained earnings ........................................    13,299   10,192
                                                               -------- --------
       Total stockholders' equity ...........................    73,299   70,192
                                                               -------- --------
       Total liabilities and stockholders' equity ...........  $194,388 $191,016
                                                               ======== ========

          See accompanying notes to consolidated financial statements.

                                        3

<PAGE>

                HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
                                                                          Quarter Ended                  Thirty-Nine Weeks Ended
                                                                 ------------------------------      ------------------------------
                                                                   Sept. 23,         Sept. 25,         Sept. 23,         Sept. 25,
                                                                     1996              1995              1996              1995
                                                                 ------------      ------------      ------------      ------------
<S>                                                              <C>               <C>               <C>               <C>         
Net sales ..................................................     $     66,821      $     66,330      $    202,019      $    200,749

Cost of sales:
   Food and bar costs ......................................           19,865            19,613            59,260            58,624
   Labor costs .............................................           20,581            21,029            63,391            64,356
   Operating expenses (exclusive of depreciation and
     amortization shown separately) ........................           15,491            15,291            46,877            44,561
                                                                 ------------      ------------      ------------      ------------
       Total cost of sales .................................           55,937            55,933           169,528           167,541
                                                                 ------------      ------------      ------------      ------------
       Gross profit ........................................           10,884            10,397            32,491            33,208
Depreciation and amortization ..............................            3,927             3,792            11,571            11,085
General and administrative expenses ........................            4,140             4,329            12,699            12,408
Loss on disposition of properties, net......................               81                86               285               475
Other (income), net ........................................           (1,189)             (696)           (3,630)           (2,524)
Interest expense ...........................................            1,697             1,932             5,207             6,371
Merger expenses ............................................              147              --                 731              --
                                                                 ------------      ------------      ------------      ------------

       Income before taxes .................................            2,081               954             5,628             5,393
Income tax provision .......................................              682               497             2,521             2,520
                                                                 ------------      ------------      ------------      ------------
       Net income ..........................................     $      1,399      $        457      $      3,107      $      2,873
                                                                 ============      ============      ============      ============


Earnings per common and common equivalent share ............     $       0.14      $       0.05      $       0.31      $       0.29
                                                                 ============      ============      ============      ============

Weighted average common and common
   equivalent shares .......................................       10,078,572         9,998,012        10,042,332         9,998,012
                                                                 ============      ============      ============      ============
</TABLE>


          See accompanying notes to consolidated financial statements.

                                        4

<PAGE>

                HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)

                                                              39 Weeks Ended
                                                           --------------------
                                                           Sept. 23,   Sept. 25,
                                                             1996        1995
                                                           --------    --------
Cash flows from operating activities:
   Net income ..........................................   $  3,107    $  2,873
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation and amortization ...................     11,571      11,085
       Amortization of deferred debt issuance costs ....         82          82
       Loss on disposition of properties, net ..........        285         475
       Deferred income tax benefit .....................     (1,261)       (273)
       Changes in operating assets and liabilities:
         Receivables ...................................        262          31
         Inventories ...................................         32         105
         Other current assets ..........................      1,163         843
         Accounts payable ..............................     (2,037)     (3,557)
         Accrued interest ..............................        354        (983)
         Accrued liabilities ...........................        578      (1,123)
       Other assets ....................................        493         538
       Other liabilities ...............................      1,036       2,305
                                                           --------    --------
         Net cash provided by operating activities .....     15,665      12,401
                                                           --------    --------
Cash flows from investing activities:
   Capital expenditures, excluding capital leases ......    (10,076)     (9,140)
   Proceeds from disposition of properties .............        140         818
                                                           --------    --------
         Net cash used for investing activities ........     (9,936)     (8,322)
                                                           --------    --------
Cash flows from financing activities:
   Net proceeds from issuance of long-term debt,
     excluding capitalized lease obligations ...........      5,000       7,000
   Payments on long-term debt, including capitalized
      lease obligations ................................     (5,648)     (8,525)
                                                           --------    --------
         Net cash used for financing activities ........       (648)     (1,525)
                                                           --------    --------
Net increase in cash and cash equivalents ..............      5,081       2,554
Cash and cash equivalents at beginning of period .......     10,314      10,310
                                                           --------    --------
Cash and cash equivalents at end of period .............   $ 15,395    $ 12,864
                                                           ========    ========

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
   Interest ............................................   $  4,771    $  7,272
                                                           ========    ========
   Income taxes ........................................   $  2,073    $  2,707
                                                           ========    ========

Disclosure of Accounting Policy:
   For  purposes  of the  consolidated  statements  of cash  flows,  the Company
considers all highly liquid debt instruments  purchased with a maturity of three
months or less to be cash equivalents.

          See accompanying notes to consolidated financial statements.

                                        5

<PAGE>

                HOULIHAN'S RESTAURANT GROUP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    For the Quarter Ended September 23, 1996
                                   (Unaudited)


1.       Basis of Presentation

The consolidated  financial statements of Houlihan's  Restaurant Group, Inc. and
subsidiary (the "Company") included in this Form 10-Q have been prepared without
audit  (except that the balance  sheet  information  as of December 25, 1995 has
been derived  from  consolidated  financial  statements  which were  audited) in
accordance  with the  rules  and  regulations  of the  Securities  and  Exchange
Commission.  Certain information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles   have  been  condensed  or  omitted   pursuant  to  such  rules  and
regulations.  The Company believes that the disclosures are adequate to make the
information presented not misleading.  The accompanying  consolidated  financial
statements should be read in conjunction with the audited  financial  statements
and notes thereto  included in the Company's  Annual Report on Form 10-K for the
year ended December 25, 1995.

Company management  believes that the information  furnished herein reflects all
adjustments,  consisting only of normal recurring  adjustments,  necessary for a
fair presentation of the results of the interim periods  presented.  The results
of operations for the interim periods  presented are not necessarily  indicative
of those to be expected for the full year.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

The Company owns and operates full service casual dining  restaurants  under the
names of Houlihan's(R),  Darryl's(R),  Bristol Bar & Grill(sm),  Braxton Seafood
Grill &  Chophouse(R),  Chequers Bar & Grill(sm),  J.  Gilbert's(sm),  Charley's
Place(sm), Phineas(sm) and The Buena Vista(R).

2.       Earnings Per Common and Common Equivalent Share

Earnings  per  common  and  common  equivalent  share are based on the  weighted
average  number of shares  outstanding  and the assumed  exercise of outstanding
dilutive  stock options  issued under the Company's  stock option plans less the
number of treasury  shares  assumed to be purchased  from the proceeds using the
average  market price of the  Company's  common  stock.  At September  23, 1996,
warrants to purchase  up to 47,740  shares of common  stock at a price of $37.92
per share were outstanding.  Additional shares of common stock issuable upon the
exercise of these  warrants have not been  considered in the  calculation as the
effect would be antidilutive.

                                        6

<PAGE>

3.       Long-Term Debt

Long-term debt,  including  capitalized lease  obligations,  is comprised of the
following (in thousands):

                                                   September 23,   December 25,
                                                       1996            1995
                                                   -------------   -------------
Bank debt:
     Term Loan .................................   $      34,612   $      40,112
     Real Estate Loan ..........................          40,000          40,000
     Revolving Credit Loan .....................           6,000           1,000
Capitalized lease obligations ..................           2,721           2,869
                                                   -------------   -------------
                                                          83,333          83,981
Less:  Current portion .........................          57,224          11,202
                                                   -------------   -------------
                                                   $      26,109   $      72,779
                                                   =============   =============

The Company's  bank credit  agreement was amended on November 1, 1996, to revise
certain covenants of the agreement (the "Fourth  Amendment").  Effective for the
third  fiscal  quarter of 1996,  the minimum  fixed  charge  coverage  ratio was
reduced  to 1.8.  Pursuant  to the Third  Amendment  dated  June 24,  1996,  the
aggregate  Revolving Credit Facility  commitment was reduced to $12,500,000 from
$15,000,000  effective  October 1, 1996.  The Company is in compliance  with all
covenants of its bank credit agreement as amended.

The Real Estate Loan and the Revolving  Credit  Facility are scheduled to mature
on March 31, 1997. The Company  intends to refinance its  outstanding  bank debt
prior to its maturity.

4.       Merger Expenses

Merger expenses through  September 23, 1996 consisted  primarily of professional
fees related to the terminated merger of the Company with Zapata Corporation.
See "Subsequent Event".

5.       Contingencies and Commitments

Severance Agreements

In prior years,  the Company entered into agreements with certain officers which
provide for severance  payments in the event the  employment of such officers is
terminated  upon  a  change  of  control  of  the  Company,  as  defined  in the
agreements.  As of  September  23,  1996,  the  contingent  liability  under the
agreements for all participants was approximately $2,300,000.

6.       Subsequent Event

The  Company  entered  into a  merger  agreement  on June 4,  1996  with  Zapata
Corporation  ("Zapata"),  which provided for Zapata's acquisition of the Company
for a combination of cash and stock valued at $8.00 per share. The agreement was
terminated on October 8, 1996 pursuant

                                        7

<PAGE>

to its terms.  The  termination  follows the decision of the  Delaware  Chancery
Court that a vote of 80% of the Zapata stockholders would be required to approve
the merger.  The merger agreement provided that either party could terminate the
agreement if the merger was not consummated by October 1, 1996.

                                        8

<PAGE>

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


The  following  discussion  and  analysis  should  be read in  conjunction  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" presented in the Company's Annual Report on Form 10-K for the fiscal
year ended December 25, 1995.

General

The Company  operates full service casual dining  restaurants  in 23 states.  At
September 23, 1996, it operated 100  restaurants,  including 62  Houlihan's,  28
Darryl's, four upscale Seafood Grills and six Specialty Restaurants comprised of
four  dinnerhouses,  one upscale  steakhouse  and the Buena Vista Cafe.  At that
date,  the Company also  franchised 26 Houlihan's  restaurants in ten states and
the Commonwealth of Puerto Rico.

Results of Operations

The  following  table  sets  forth   information   derived  from  the  Company's
Consolidated Statements of Income expressed as a percentage of net sales.

<TABLE>
                                                          Quarter Ended              Thirty-Nine Weeks Ended
                                                  -----------------------------   -----------------------------
                                                  September 23,   September 25,   September 23,   September 25,
                                                      1996            1995            1996            1995
                                                  -------------   -------------   -------------   -------------
<S>                                                   <C>             <C>             <C>             <C>    
Net sales .................................           100.0 %         100.0 %         100.0 %         100.0 %
Cost of sales:
     Food and bar costs ...................            29.7            29.6            29.3            29.2
     Labor costs ..........................            30.8            31.7            31.4            32.1
     Operating expenses ...................            23.2            23.0            23.2            22.2
                                                  -------------   -------------   -------------   -------------
         Total cost of sales ..............            83.7            84.3            83.9            83.5
                                                  -------------   -------------   -------------   -------------
           Gross profit ...................            16.3            15.7            16.1            16.5
Depreciation and amortization .............             5.9             5.7             5.7             5.5
General and administrative expense ........             6.2             6.5             6.3             6.2
Loss on disposition of properties, net ....             0.1             0.1             0.1             0.2
Other (income), net .......................            (1.7)           (0.9)           (1.7)           (1.3)
Interest expense ..........................             2.5             2.9             2.6             3.2
Merger expenses ...........................             0.2             --              0.4             --          
                                                  -------------   -------------   -------------   -------------
         Income before income taxes .......             3.1             1.4             2.7             2.7
Income tax provision ......................             1.0             0.7             1.2             1.3
                                                  -------------   -------------   -------------   -------------
         Net income .......................             2.1 %           0.7 %           1.5 %           1.4 %
                                                  =============   =============   =============   =============
</TABLE>

Net Sales. Net sales for the third quarter  increased 0.7% from the same quarter
of 1995 and increased 0.6% for the thirty-nine  week period over the same period
of  1995.  The  increase  was  primarily  due to  sales  generated  by nine  new
restaurants  that were opened  during 1995 and 1996 and one Darryl's  restaurant
that was converted to a Specialty Restaurant in 1995. The new

                                        9

<PAGE>

restaurants  included eight  Houlihan's and one Seafood Grill.  The year-to-date
sales increase was also partially due to an increase in comparable sales of 0.9%
in the Seafood  Grills  concept.  However,  sales were  unfavorably  impacted by
inclement  winter weather  during  January and February,  which caused 43 of the
Company's restaurants to close for an average of 1.7 days.  Additionally,  third
quarter sales were affected by inclement weather caused by Hurricane Fran during
September.

"Comparable  restaurants" are restaurants open throughout  fiscal years 1995 and
1996. The increases  (decreases) in comparable restaurant sales, by concept, for
the third  quarter  and  thirty-nine  week  period of 1996  versus  1995 were as
follows:

                              Third Quarter            Thirty-Nine Week Period
                        ------------------------      -------------------------
                        Food       Bar     Total      Food       Bar      Total

Houlihan's .........    (4.1)%    (7.1)%    (4.8)%    (2.8)%    (5.3)%    (3.4)%
Darryl's ...........    (0.4)     (0.4)     (0.4)     (0.5)     (1.0)     (0.6)
Seafood Grills .....    (0.9)      4.0      (0.1)      0.3       3.3       0.9
Specialty ..........    (4.8)      0.2      (3.2)     (5.1)     (3.1)     (4.4)

Total Company ......    (3.0)%    (5.1)%    (3.4)%    (2.1)%    (4.1)%    (2.6)%

Cost of Sales.  Cost of sales as a percentage of net sales decreased  during the
third quarter of 1996 from the same period of 1995 and increased during the 1996
year-to-date  period from the same period of 1995. Cost of sales are composed of
three major items: food and bar costs, labor costs and operating expenses.

Combined  food  and  bar  costs  increased   slightly  during  the  quarter  and
year-to-date  periods  primarily due to cost increases  associated  with the new
menu that was implemented in the Darryl's concept during the first quarter.  The
new  menu,  which  emphasizes  quality  wood-fired  steaks,  was in place in all
Darryl's  restaurants  by April 1996. Due to the shift in the menu mix to higher
priced items such as steak,  food cost for the third quarter was impacted by the
rising cost of beef during the quarter.

Labor costs decreased in both the 1996 quarter and year-to-date  period compared
to the 1995  quarter  and  year-to-date  period due  primarily  to cost  savings
realized from new labor  scheduling  systems that were implemented in a majority
of the Company's  restaurants.  The new systems are currently in place in all of
the Company's Houlihan's and Darryl's restaurants.

Operating  expenses  increased to 23.2% from 23.0% during the third  quarter and
increased to 23.2% from 22.2% during the year-to-date period due to increases in
promotional  expenses.  During the first  three  quarters  of 1996,  the Company
tested various  advertising  promotions in selected markets using radio,  print,
billboard and television.  Additionally,  promotional  expenses increased due to
the  amortization  of costs  associated with the agreement for the right to name
the Tampa Bay Buccaneer football team's stadium "Houlihan's Stadium".


                                       10

<PAGE>

Depreciation and Amortization Expense.  Depreciation and amortization expense as
a percentage of net sales  increased  during the third quarter and  year-to-date
period due to increased  capital  expenditures  from new unit  construction  and
ongoing restaurant renovation and replacements.

General and Administrative  Expenses.  General and administrative  expenses as a
percent  of sales  decreased  to 6.2% from 6.5%  during  the third  quarter  and
increased to 6.3% from 6.2% during the year-to-date  period. The decrease during
the quarter was mostly  attributable to costs incurred in the prior year quarter
related to a debt  registration  filed in July that was later  withdrawn  by the
Company. The increase for the year-to-date period was caused by increasing costs
associated with the continuing rapid growth of the Company's  franchise program,
the most  significant  expense of which related to the training teams associated
with franchise restaurant  openings.  During the 1996 year-to-date period, eight
franchise  Houlihan's  were opened as  compared  to the same period in 1995,  in
which two franchise Houlihan's were opened.

Other Income.  Other income  increased  during the 1996 quarter and year-to-date
period primarily as a result of an increase in franchise revenues over the prior
periods. As of September 23, 1996, the Company franchised 26 restaurants and had
signed  agreements  with  19  franchise  development  groups  providing  for the
development of an aggregate of 78 additional  Houlihan's over a five to six year
period.

Interest   Expense.   Interest  expense   decreased  in  the  1996  quarter  and
year-to-date  period  compared to the same periods in 1995 due to lower interest
rates during the  periods,  as well as a lower  outstanding  debt  balance.  The
average  interest  rate on the  Company's  outstanding  bank  debt  for the 1996
year-to-date period was 7.5% as compared to 9.0% for the same period in 1995.

Merger  Expenses.  Merger  expenses  consisted  primarily of  professional  fees
related to the  terminated  merger of the Company with Zapata  Corporation.  See
"Liquidity and Capital Resources".

Income Taxes.  The effective income tax rate, as a percentage of earnings before
income taxes, was 32.8% for the third quarter of 1996, compared to 52.0% for the
same period of 1995. The year-to-date effective rate was 44.8% in 1996 and 46.7%
in 1995.  The lower  effective  rate for the third  quarter  was a result of the
increase in pretax  income for the period in relation to the fixed  amortization
of the  reorganization  value in excess of  amounts  allocable  to  identifiable
assets.


Liquidity and Capital Resources

The Company relies  principally  upon internally  generated funds to finance its
restaurant  operations and to fund working capital  expenditures.  Historically,
the Company has  operated  with  working  capital  deficiencies.  The  Company's
ability to operate with such deficiencies is due to the nature of the restaurant
business, which does not require significant investments in

                                       11

<PAGE>

accounts receivable or inventories and which generally allows the procurement of
food and supplies on trade credit.  At September 23, 1996,  the Company had cash
and  cash  equivalents  of  $15,395,000  and a  working  capital  deficiency  of
$54,544,000.  The larger than normal  deficiency is the result of an increase in
the Company's current portion of long-term debt.  Current maturities include the
$40,000,000 Real Estate Loan and the $6,000,000  Revolving Credit Loan which are
scheduled to mature on March 31, 1997. Additionally,  the Company is required to
make a $5,500,000  principal payment on September 30, 1996 and March 31, 1997 on
its  outstanding  Term  Loan.  The  Company  expects  to  refinance  all  of its
outstanding bank debt prior to its maturity.

The Company's bank credit agreement  contains various covenants and restrictions
which,  among other  things,  require the  maintenance  of minimum  fixed charge
coverage ratios and interest  coverage ratios.  The Company did not maintain the
required  fixed charge ratio for the third  quarter of 1996 and as a result,  on
November  1, 1996,  the bank  credit  agreement  was  amended to revise  certain
covenants of the  agreement  (the "Fourth  Amendment").  Effective for the third
fiscal quarter of 1996,  the minimum fixed charge  coverage ratio was reduced to
1.8. As a result,  the Company is currently in compliance  with all covenants of
its bank credit agreement as amended. The Company has engaged a bank as agent to
refinance the existing  bank debt.  At this time,  the agent has not secured the
required  commitments to complete the refinancing.  While the Company intends to
complete the refinancing,  there are no assurances that such refinancing will be
obtained  and the  Company  will  continue  to  remain  in  compliance  with all
covenants of its bank credit agreement.

At September  23,  1996,  the Company had  $4,477,000  available to it under the
$15,000,000  Revolving  Credit  Facility,  reduced by $4,523,000 of  outstanding
standby  letters of credit and a $6,000,000  outstanding  loan.  Pursuant to the
Third Amendment to the bank credit  agreement dated June 24, 1996, the aggregate
Revolving  Credit Facility  commitment will be reduced to $12,500,000  effective
October 1, 1996.  Additionally,  on  September  26, 1996,  the Company  borrowed
$1,950,000 on its Revolving Credit Facility.

Capital expenditures for the 1996 year-to-date period totalled $10,076,000.  The
expenditures  were incurred for three new  Houlihan's  and one new Seafood Grill
that were opened  during the  period,  as well as ongoing  remodeling  projects,
normal  restaurant  renovations  and  replacements  and the  installation of new
management information systems in the Company's restaurants, which was completed
in the second  quarter.  The Company  expects to incur capital  expenditures  of
approximately  $3,000,000 for the remainder of 1996, a majority of which will be
used in connection with opening one Specialty  Restaurant.  Management  believes
that cash on hand, funds to be generated  internally from operations and the use
of working  capital  changes  will be  adequate  to meet the  Company's  capital
expenditure requirements for the foreseeable future.

The  Company  entered  into a  merger  agreement  on June 4,  1996  with  Zapata
Corporation  ("Zapata"),  which provided for Zapata's acquisition of the Company
for a combination of cash and stock valued at $8.00 per share. The agreement was
terminated on October 8, 1996 pursuant to its terms. The termination follows the
decision of the Delaware Chancery Court that a vote

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of 80% of the Zapata  stockholders  would be required to approve the merger. The
merger agreement provided that either party could terminate the agreement if the
merger was not consummated by October 1, 1996.

Impact of Inflation

Inflationary  increases in costs,  namely food,  labor and  operating  expenses,
could have a significant  impact on the Company's  operations.  In the past, the
Company has been able to recover  inflationary  cost increases through increased
food and beverage menu prices.  There have been, and there may be in the future,
delays in implementing such menu price increases,  and competitive pressures may
limit the Company's  ability to recover such cost  increases in their  entirety.
Historically,  the effects of inflation have not had a significant impact on the
Company's net income.

A significant  number of the  Company's  employees are paid hourly rates tied to
federal and state  minimum wage and tip credit laws.  An increase in the federal
minimum wage was effective October 1, 1996, and other minimum wage increases are
currently  proposed by various state  governments.  Although the Company has and
will  continue to attempt to pass along any  increased  labor costs through food
and beverage price increases,  there can be no assurance that all such increased
labor  costs can be  reflected  in its prices or that  increased  prices will be
absorbed by consumers  without  diminishing to some degree consumer  spending at
the restaurants.  However, the Company has not experienced to date a significant
reduction  in gross  profit  margins as a result of  changes  in such laws,  and
management  does not  anticipate any related  future  significant  reductions in
gross profit margins.

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                           PART II. OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

(a)  The Exhibits listed on the accompanying  Exhibit Index are filed as part of
     this report.

(b)  No reports on Form 8-K were filed  during the quarter for which this report
     is filed.



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                                    SIGNATURE


Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities  Act of
1934,  the  registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.


                                               HOULIHAN'S RESTAURANT GROUP, INC.
                                              (Registrant)


Date:      November 7, 1996                    By:  /s/ William W. Moreton
      -------------------------                   ------------------------------
                                                  William W. Moreton
                                                  Executive Vice President/Chief
                                                  Financial Officer (Principal
                                                  Financial and Accounting
                                                  Officer)



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                        HOULIHAN'S RESTAURANT GROUP, INC.

                                  EXHIBIT INDEX


Exhibit
  No.                                Description of Exhibit
-------             ------------------------------------------------------------

  10.1              Fourth  Amendment  and  Consent  to Credit  Agreement  among
                    Houlihan's Restaurants,  Inc. and Caisse Nationale De Credit
                    Agricole, New York Branch, as agent, dated November 1, 1996.

  27                Financial Data Schedule (filed with EDGAR version).







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