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

                                   FORM 10-QSB

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

For the quarterly period ended     JUNE 30, 1997

                                       OR

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

For the transaction period from_______________________to________________________

Commission File Number   0 - 23136

                         COUNTRY STAR RESTAURANTS, INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                              62-1536550
(State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                            Identification No.)


              4929 WILSHIRE BLVD., SUITE 428, LOS ANGELES, CA 90010
          (Address of Principal Executive Offices)          (Zip Code)

                                 (213) 634-5588
              (Registrant's telephone number, including area code)

              11150 SANTA MONICA BLVD., SUITE 650, LOS ANGELES, CA 90025 
            (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 Sections 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 common stock outstanding 
   as of August 16, 1997:                                     25,438,690

<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                                      Index

                                                                            Page
                                                                            ----

PART I      -    Financial Information

         Item 1. Financial Statements

                 Condensed Consolidated Balance Sheet at
                      June 30, 1997 (unaudited).............................   3

                 Condensed Consolidated Statements of Operations
                      for the Quarter Ended June 30, 1997
                      and June 30, 1996  (unaudited)........................   5

                 Condensed Consolidated Statements of Cash Flows
                      for the Quarter Ended June 30, 1997
                      and June 30, 1996  (unaudited)........................   7

                 Notes to Condensed Consolidated Financial Statements
                      (unaudited)...........................................   9


         Item 2. Management's Discussion and Analysis of Financial
                      Condition and Results of Operations ..................  12

PART II      -   Other Information

         Item 1. Legal Proceedings..........................................  16

         Item 2. Changes in securities......................................  16

         Item 4. Submission of matter to a vote of security holders ........  16

         Item 6. Exhibits and Reports on Form 8-K...........................  18


SIGNATURES            ......................................................  19


                                       2
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                      Condensed Consolidated Balance Sheet

                                   (Unaudited)

                                                                   June 30, 1997
                                                                   -------------
ASSETS

CURRENT ASSETS
      Cash and cash equivalents                                     $   166,699
      Inventories                                                       324,608
      Prepaid rent                                                      275,175
      Other current assets                                              338,382
                                                                    -----------
           Total current assets                                       1,104,864
                                                                    -----------
PROPERTY AND EQUIPMENT AT COST, net of
       accumulated depreciation of $742,192
      Leasehold improvements                                         14,077,301
      Furniture and equipment                                         1,915,722
      Memorabilia                                                       483,565
      Capital lease                                                     770,188
                                                                    -----------
           Total property and equipment                              17,246,776
                                                                    -----------
OTHER ASSETS                                                            250,912
                                                                    -----------
           Total assets                                             $18,602,552
                                                                    ===========

                                                                    (continued)


                                       3
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                Condensed Consolidated Balance Sheet (continued)

                                   (Unaudited)

                                                                   June 30, 1997
                                                                   -------------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
      Accounts payable                                             $  1,456,614
      Accrued expenses                                                  457,437
                                                                   ------------
           Total current liabilities                                  1,914,051

DEFERRED RENTALS                                                        789,959

CONVERTIBLE DEBT                                                      6,450,000
                                                                   ------------
           Total liabilities                                          9,154,010
                                                                   ------------
MINORITY INTERESTS                                                    1,389,116
                                                                   ------------
STOCKHOLDERS' EQUITY
      Preferred stock, $0.001 par
           value, 2,000,000 shares
           authorized - 6% Cumulative
           Convertible Series A - 0 shares
           issued and outstanding                                          --
      Common stock, $0.001 par value,
           250,000,000 shares authorized,
           23,619,144 shares issued and outstanding                      23,619
      Additional paid-in-capital                                     38,156,860
      Unamortized stock option cost                                    (118,428)
      Accumulated deficit                                           (30,002,625)
                                                                   ------------
           Total stockholders' equity                                 8,059,426
                                                                   ------------
           Total liabilities and stockholders' equity              $ 18,602,552
                                                                   ============

                 See accompanying notes to financial statements


                                       4
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

                                                  For the Quarter Ended June 30,
                                                 -------------------------------
                                                     1997              1996
                                                 ------------      ------------
Revenues                                         $  1,731,401      $  1,077,112
                                                 ------------      ------------
Costs and expenses
        Cost of revenues                              585,709           293,493
        Operating                                   1,647,325         1,001,590
        General and administrative                    813,090           890,737
        Depreciation and amortization                 386,011           117,127
                                                 ------------      ------------
                                                    3,432,135         2,302,947
                                                 ------------      ------------
        Loss from operations                       (1,700,734)       (1,225,835)
Interest (expense) income                            (126,616)          119,436

Minority interests                                    322,280              --
                                                 ------------      ------------
        Loss before extraordinary item             (1,505,070)       (1,106,399)
                                                 ------------      ------------
        Extraordinary gain - settlement                            
        of accounts payable, net of
        income tax of $0                            1,325,986              --
                                                 ------------      ------------
        Net Loss                                 $   (179,084)     $ (1,106,399)
                                                 ============      ============
        INCOME (LOSS) PER SHARE
             Before extraordinary gain                  (0.09)            (0.10)
             Extraordinary gain                          0.08              --
                                                 ------------      ------------
             Net loss                            $      (0.01)     $      (0.10)
                                                 ============      ============
        WEIGHTED AVERAGE NUMBER OF
             SHARES OUTSTANDING                    17,524,080        11,481,108
                                                 ============      ============

                 See accompanying notes to financial statements


                                       5
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                 Condensed Consolidated Statements of Operations
                                   (Unaudited)

                                                     For the Six Months 
                                                        Ended June 30,
                                               ---------------------------------
                                                     1997              1996
                                                 ------------      ------------
Revenues                                         $  3,995,876      $  2,081,302
                                                 ------------      ------------
Costs and expenses
        Cost of revenues                            1,506,143           621,940
        Operating                                   3,739,717         1,773,152
        General and administrative                  2,241,939         1,909,277
        Depreciation and amortization                 771,533           233,803
                                                 ------------      ------------
                                                    8,259,332         4,538,172
                                                 ------------      ------------
        Loss from operations                       (4,263,456)       (2,456,870)

Interest (expense) income                            (194,374)          132,516

Minority interests                                    735,330              --
                                                 ------------      ------------
        Loss before extraordinary item             (3,722,500)       (2,324,354)
                                                 ------------      ------------
        Extraordinary gain - settlement                            
        of accounts payable, net of
        income tax of $0                            1,353,478              --
                                                 ------------      ------------
        Net Loss                                 $ (2,369,022)     $ (2,324,354)
                                                 ============      ============
        INCOME (LOSS) PER SHARE
             Before extraordinary gain                  (0.23)            (0.25)
             Extraordinary gain                          0.08              --
                                                 ------------      ------------
             Net loss                            $      (0.15)     $      (0.25)
                                                 ============      ============
        WEIGHTED AVERAGE NUMBER OF
             SHARES OUTSTANDING                    16,122,392         9,401,786
                                                 ============      ============

                 See accompanying notes to financial statements


                                        6
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)

                                                          For the Quarter 
                                                            Ended June 30,
                                                     ---------------------------
                                                         1997           1996
                                                     ------------    -----------

NET CASH USED IN OPERATING ACTIVITIES                $(1,727,505)   $(1,517,878)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Investment in property and equipment                 (10,445)    (4,124,815)
                                                     -----------    -----------
         Net cash used by investing activities           (10,445)    (4,124,815)
                                                     -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from issuance of common
         and preferred stock                           1,983,999      2,431,500
    Capital lease payments                              (504,711)       (20,649)
                                                     -----------    -----------
         Net cash provided by financing activities     1,479,288      2,410,851
                                                     -----------    -----------

NET (DECREASE) IN CASH                                  (258,662)    (3,231,842)

Cash and cash equivalents, beginning of period           425,361      9,280,429
                                                     -----------    -----------
Cash and cash equivalents, end of period             $   166,699    $ 6,048,587
                                                     ===========    ===========
Supplemental schedule of non-cash
  financing activity:
     Purchase of leased equipment through
     issuance of 600,000 shares of common stock      $   447,462           --
                                                     ===========    ===========

                              See accompanying notes to financial statements


                                       7
<PAGE>

                                      COUNTRY STAR RESTAURANTS, INC.

                             Condensed Consolidated Statements of Cash Flows
                                               (Unaudited)

                                                         For the Six Months 
                                                            Ended June 30,
                                                     ---------------------------
                                                         1997           1996
                                                     -----------    ------------

NET CASH USED IN OPERATING ACTIVITIES                $(2,723,680)   $(2,069,479)

CASH FLOWS FROM INVESTING ACTIVITIES:
    Investment in property and equipment                 (10,445)    (4,630,578)
                                                     -----------    -----------
        Net cash used by investing activities            (10,445)    (4,630,578)
                                                     -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds from issuance of common
        and preferred  stock                           1,991,856      3,028,757
     Proceeds from convertible debt                      500,000           --
     Capital lease payments                             (540,237)       (40,788)
                                                     -----------    -----------
        Net cash provided by financing activities      1,951,619      2,987,969
                                                     -----------    -----------

NET (DECREASE) IN CASH                                  (782,506)    (3,712,088)

Cash and cash equivalents, beginning of period           949,205      9,760,675
                                                     -----------    -----------
Cash and cash equivalents, end of period             $   166,699    $ 6,048,587
                                                     ===========    ===========
Supplemental schedule of non-cash
  financing activity:
    Purchase of leased equipment through
        issuance of 600,000 shares of common stock   $   447,462           --
                                                     ===========    ===========

                 See accompanying notes to financial statements


                                       8
<PAGE>

NOTE A - BASIS OF PRESENTATION

         The accompanying  unaudited condensed consolidated financial statements
         of Country Star  Restaurants,  Inc.  have been  prepared by the Company
         pursuant to the rules and  regulations  of the  Securities and Exchange
         Commission.

         The information  furnished herein reflects all adjustments,  consisting
         of only normal  recurring  accruals and  adjustments  which are, in the
         opinion of management,  necessary to fairly state the operating results
         for  the  respective   periods.   Certain   information   and  footnote
         disclosures  normally included in annual financial  statements prepared
         in accordance with generally accepted  accounting  principles have been
         omitted  pursuant  to such  rules  and  regulations.  The  notes to the
         condensed   consolidated   financial   statements  should  be  read  in
         conjunction  with the notes to the  consolidated  financial  statements
         contained in the Company's  Form 10-KSB for the year ended December 31,
         1996. Company  management  believes that the disclosures are sufficient
         for interim financial reporting purposes.

NOTE B - CAPITAL TRANSACTIONS AND CHANGE IN MANAGEMENT

         On February 12, 1997, the Company entered into a secured loan agreement
         with Dan Rubin  ("Rubin") and Cameron  Capital  Ltd., an  institutional
         investor ("Cameron").

         The  secured  loan  agreement  provided  that  Cameron  had  the  fully
         assignable right to name three (3) members of the Board of Directors of
         the Company and that the Board of  Directors  shall not consist of more
         than five (5)  members.  Cameron  assigned  this  right to Rubin as its
         agent. Immediately after the closing of the secured financing,  Rubin's
         nominees,  Darren Rice,  William Wei and Robert Nardone were elected to
         the Board of Directors of the Company.  The Board then elected Rubin to
         fill the last seat on the Board of Directors.

         The  Board  then  elected  Dan  Rubin as Chief  Executive  Officer  and
         President,  and Robert L.  Davidson as Secretary  of the  Company.  Mr.
         Rubin  assumed  control of day-to-day  operations  of the Company.  Mr.
         Rubin is being compensated at the rate of $20,000 per month, payable in
         cash or common stock of the Company, valued at market value at the time
         of issuance. Mr. Rubin's employment is terminable at will.

         Rubin now owns  warrants  to  acquire  and  convertible  debt  which if
         converted  would allow him to acquire an aggregate of 929,510 shares of
         the  Company's  common  stock.  Upon  exercise  of  such  warrants  and
         conversion of the convertible  debt, Rubin would own 3.7% of the common
         stock of the Company now  outstanding.  None of the other newly elected
         directors  own any shares or  warrants  or other  rights to acquire any
         shares of the Company's common stock.

                                                                     (continued)


                                       9
<PAGE>

NOTE B - CAPITAL TRANSACTIONS AND CHANGE IN MANAGEMENT (continued)

         Under the secured financing agreement, Rubin has made a $3,500,000 line
         of credit loan available to the Company, of which an initial advance of
         $500,000 was committed at closing.  Rubin, in his sole discretion,  may
         make additional  advances to the Company under this line of credit, but
         is not  required to make any such  additional  advances.  All  advances
         under the line of credit  loan bear  interest at the rate of prime plus
         four percent  (4%),  semi-annually  commencing  December 31, 1997.  The
         principal  balances of all line of credit  advances are due and payable
         on October 9, 1999.  In  consideration  for the initial  line of credit
         advance of $500,000,  the Company  issued a warrant to acquire  166,667
         shares of its  common  stock at an  exercise  price of $.625 per share,
         which was the market  value of the  Company's  common stock on February
         12, 1997.

         All  additional  line of credit  advances shall have the same terms and
         conditions  as the  initial  line of  credit  advance.  For  each  such
         additional  advance,  Rubin shall receive one (1) common stock purchase
         warrant for every $3 advanced.  The exercise  price for these  warrants
         shall be $.625 per share. All of the warrants issued or to be issued to
         Rubin  shall be subject  to  adjustment  in the event of stock  splits,
         stock dividends, mergers, consolidations, or similar corporate events.

         Cameron  exchanged its 4,000 shares of Series B  Convertible  Preferred
         Stock of the  Company,  with an  aggregate  liquidation  preference  of
         $4,000,000,  for a  convertible  term note in the  principal  amount of
         $4,000,000.  The  convertible  term note bears  interest at the rate of
         seven percent (7%) per annum, payable semi-annually commencing December
         31, 1997. The principal  balance is due and payable on October 9, 1999.
         Any portion or all of the principal  amount of the note outstanding may
         be converted  into common stock of the Company  commencing  ninety (90)
         days after the date of closing of the financing.  Upon conversion,  the
         Company shall issue that number of shares of its common stock  obtained
         by dividing the principal amount of the loan converted by the lesser of
         (i) $1.33,  or (ii) 80% of the average  closing bid price of the common
         stock for the five (5)  consecutive  trading days preceding the date of
         conversion.  The maximum  number of shares  into which the  convertible
         note may be  converted  shall  not  exceed  3,000,000.  The  conversion
         formula is subject to adjustment  in the event of stock  splits,  stock
         dividends, mergers, consolidations, or similar transactions.

         In  connection  with the  commitment  to make the line of credit  loan,
         Rubin and other  investors in the Company have agreed to settle certain
         claims against the Company for the amount of  $1,950,000,  plus $50,000
         in fees and expenses. The Company has issued its convertible term notes
         in the  aggregate  amount of  $1,950,000  and agreed to pay  $50,000 to
         Rubin  and  these  investors,  in  settlement  of their  claims.  These
         convertible

                                                                     (continued)


                                       10
<PAGE>

NOTE B - CAPITAL TRANSACTIONS AND CHANGE IN MANAGEMENT(continued)

         term notes  contain the same terms and  conditions  as the  convertible
         term  note  issued  to  Cameron,  except  that  the  holders  of  these
         convertible  term notes may exercise  their  conversion  feature at any
         time following the closing.

         The agreements  described above relating to the exchange of Convertible
         Preferred  Stock and the issuance of  convertible  term notes have been
         accounted for effective December 31, 1996 because  substantially all of
         the conditions  precedent to the occurrence of these  transactions  had
         taken place as of that date.

         The line of credit advances by Rubin,  Cameron's  convertible term note
         and the  convertible  term notes issued in settlement of claims are all
         secured by a lien on  substantially  all of the tangible and intangible
         assets of the  Company.  In the event of default,  the secured  parties
         shall  participate  in the proceeds of the  collateral in proportion to
         their outstanding debt.

         In connection with the secured financing  transaction,  Robert Schuster
         ("Schuster"),  Chairman of the Board and Chief Executive Officer of the
         Company,  resigned as Chief Executive Officer and agreed to release the
         Company from all obligations under his Employment Agreement,  including
         severance obligations.  Schuster continued to serve as a Director until
         February 13, 1997

         In  connection  with  the  secured  financing  transaction,  Mr.  Peter
         Feinstein  resigned as Director,  President and Chief Financial Officer
         of the Company and released the Company from all obligations  under his
         Employment Agreement, including severance obligations

NOTE C - EXTRAORDINARY ITEM

         During the three months ended June 30, 1997, the Company  continued the
         process of settling with its creditors that began in March of 1997. The
         Company  has  settled  with  over  300  creditors  as of  June  30,1997
         resulting in a gain of $1,325,986  and $1,353,478 for the three and six
         months ended June 30, 1997, respectively


                                       11
<PAGE>

Item 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Three months ended June 30, 1997 compared to three months ended June 30, 1996

Revenues.

Total  revenues  increased to $1.731 million for the three months ended June 30,
1997,  compared with $1.077 million for the three months ended June 30, 1996, an
increase of $654  thousand or 61%,  primarily due to the opening of Country Star
Las Vegas. Same store revenues  (Hollywood) were  substantially  unchanged,  and
Country Star Atlanta was closed during the three months ended June 30, 1997.

Costs and expenses.

Cost of revenues  increased  from $293  thousand for the three months ended June
30, 1996 to $586  thousand for the three  months  ended June 30,  1997.  Cost of
revenues as a percentage of revenues  increased from 27% to 34% primarily due to
the negative impact of the low revenues of the Las Vegas facility.  Country Star
Atlanta  was  closed on  February  22,  1997,  and  current  plans  call for its
reopening in the fall of 1997.

Operating expenses increased from $1.002 million for the three months ended June
30, 1996 to $1.647 million for the three months ended June 30, 1997,  reflecting
the increase in the number of restaurants  from one to three. As a percentage of
revenues,  operating  expenses  were 93% and 95% for the three months ended June
30, 1996 and 1997 respectively.

General and  administrative  expenses decreased from $891 thousand for the three
months  ended June 30, 1996 to $813  thousand  for the three  months  ended June
30,1997.  As a  percentage  of  revenues,  general and  administrative  expenses
decreased from 83% of revenues to 47% of revenues respectively.

Depreciation and amortization  increased from $117 thousand for the three months
ended June 30, 1996 to $386  thousand  for the three months ended June 30, 1997,
reflecting  the increase in the number of  restaurants  from one to three.  As a
percentage of total revenues,  depreciation and amortization  increased from 11%
to 22%.

Interest  expense  increased from $66 thousand to $128  thousand,  for the three
months ended June 30, 1996 and 1997,  respectively,  reflecting the  convertible
debt financing arrangements entered into on February 12, 1997.

                                                                     (continued)


                                       12
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

Minority  interest  for the  three  months  ended  June 30,  1997  reflects  the
Company's controlling interest of 50.05% in Country Star Las Vegas LLC triggered
by the  opening  of the Las  Vegas  facility  in  July,  1996.  Previously,  the
Company's investment in Las Vegas was accounted for under the cost method.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating  activities  for the three months ended June 30, 1996
and June 30, 1997  increased from $1.518 million to $1.728 million due primarily
to the decrease in Accounts  Payable in 1997.  The company has settled with over
300 creditors during the three months ended June 30, 1997.

Net cash used in  investing  activities  in the three months ended June 30, 1996
and 1997 was $4.125  million  and $10  thousand,  respectively,  reflecting  the
Company's development of the Las Vegas and Atlanta facilities in 1996.

Net cash  provided by financing  activities  for the three months ended June 30,
1996 and June 30, 1997 was $2.411 million and $1.479 million,  respectively, due
primarily  to the net  proceeds  from the  issuance of common  stock in 1996 and
1997.

RESULTS OF OPERATIONS

Six months ended June 30, 1997 compared to six months ended June 30, 1996

Revenues.

Total  revenues  increased  to $3.996  million for the six months ended June 30,
1997,  compared  with $2.081  million for the six months ended June 30, 1996, an
increase of $1.915 million or 92%,  primarily due to the opening of Country Star
Las Vegas. Same store revenues (Hollywood) were substantially unchanged.

Costs and expenses.

Cost of revenues  increased from $622 thousand for the six months ended June 30,
1996 to $1.506 million for the six months ended June 30, 1997.  Cost of revenues
as a  percentage  of revenues  increased  from 30% to 38%  primarily  due to the
negative  impact  of the  unsatisfactory  operations  of the  Atlanta  facility.
Country Star Atlanta was closed on February 22, 1997, and current plans call for
its reopening in the fall of 1997. 
                                                                     (continued)


                                       13
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

Operating  expenses  increased from $1.773 million for the six months ended June
30, 1996 to $3.740  million for the six months ended June 30,  1997,  reflecting
the increase in the number of restaurants  from one to three. As a percentage of
revenues,  operating expenses increased from 85% to 94% for the six months ended
June 30, 1996 and 1997 respectively due primarily to operating difficulties with
Atlanta.

General and  administrative  expenses  increased from $1.909 million for the six
months  ended June 30, 1996 to $2.242  million for the six months ended June 30,
1997. As a percentage of revenues, general and administrative expenses decreased
from 92% of revenues to 56% of revenues.

Depreciation  and  amortization  increased from $234 thousand for the six months
ended June 30, 1996 to $772  thousand  for the six months  ended June 30,  1997,
reflecting  the increase in the number of  restaurants  from one to three.  As a
percentage of total revenues,  depreciation and amortization  increased from 11%
to 19%.

Interest  expense  increased  from $83  thousand to $198  thousand,  for the six
months ended June 30, 1996 and 1997,  respectively  reflecting  the  convertible
debt financing arrangements entered into on February 12, 1997.

Minority  interest for the six months ended June 30, 1997 reflects the Company's
controlling  interest of 50.05% in Country  Star Las Vegas LLC  triggered by the
opening of the Las Vegas  facility  in July,  1996.  Previously,  the  Company's
investment in Las Vegas was accounted for under the cost method.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the six months ended June 30, 1996 and
June 30, 1997  increased  from $2.069 million to $2.724 million due primarily to
the decrease in Accounts  Payable in 1997. The Company has settled with over 300
creditors during the six months ended June 30, 1997.

Net cash used in investing  activities in the six months ended June 30, 1996 and
1997 was $4.631 million and $10 thousand, respectively, reflecting the Company's
development of the Las Vegas and Atlanta facilities in 1996.

                                                                     (continued)


                                       14
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

Net cash provided by financing activities for the six months ended June 30, 1996
and June 30,  1997 was  $2.988  million  and  $1.952  million  respectively  due
primarily  to the net  proceeds  from the  issuance of common  stock in 1996 and
1997, and convertible debt in 1997.

New management  took over the Company on February 12, 1997 and determined that a
major  overhaul of corporate  strategy  was required to deal with the  Company's
financial  problems.  Measures taken by new management include (i) the temporary
closing and planned  reopening of Country Star Atlanta in the fall of 1997, (ii)
the expansion of the "country"  theme,  (iii)  planned  expansion  through joint
ventures and licensing rather than expensive  construction,  and (iv) settlement
with the trade creditors at 40% of the amounts owed.

Management  has also made  operational  changes  to  improve  revenues,  control
operating  costs,  and limit  corporate  overhead.  The positive impact of these
measures  and changes  began to be  realized  in the second  quarter of calendar
1997.  The Company will need to continue to raise  additional  capital before it
can obtain profitability from operations.  Management believes it can raise this
capital  through  private  placements  of equity and the  granting by lenders of
discretionary advances under outstanding lines of credit.


                                       15
<PAGE>

                                     Part II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     On or about April 21, 1997, 3030 Peachtree, LLC ("Landlord"),  the Landlord
of the Company's Atlanta restaurant, commenced an action in the Magistrate Court
of Fulton  County,  Georgia,  regarding  possession  of the Atlanta  restaurant.
Additional  information concerning this litigation is set forth in the Company's
Report on Form 8-K dated April 21, 1997.

ITEM 2. CHANGES IN SECURITIES

     On June 30, 1997, the Company issued warrants to acquire  1,500,000  shares
of its  Common  Stock  at an  exercise  price of $.21  per  share  to a  private
investor.  The  warrants  were  exercised  immediately  and the  Company  issued
1,500,000  shares of its Common  Stock to the  private  investors.  The  Company
received  net  proceeds  from the  exercise  of the  warrants  of  $315,000.  No
commissions or fees were paid by the Company.

     The  issuance  of the  warrants  and of the Common  Stock was  exempt  from
registration  pursuant  to  Section  4 (2) of the  Securities  Act of  1933,  as
amended.

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

     At the Company's  Annual  Meeting of  Stockholders  held June 27, 1997, the
following members were elected to the Board of Directors:

                                    VOTES FOR                VOTES WITHHELD
                                    ---------                --------------
         Dan J. Rubin               14,412,160                   310,065
         Robert A. Nardone          14,360,850                   362,165
         William A. Wei             14,355,693                   366,532
         Darren C. Rice             14,349,460                   372,765


                                                                    (continued)


                                       16
<PAGE>


                                     Part II

                                OTHER INFORMATION
                                   (continued)


         The following proposals were approved at the Company's Annual Meeting:

                                  VOTES            VOTES        VOTES ABSTAINED/
                                   FOR            AGAINST          NOT VOTED
                                   ---            -------          ---------
                                               
1. Ratification of              14,415,708         191,597          103,920
   appointment of                            
   Cacciamatta                               
   Accountancy Corp.                         
   as independent                            
   auditors                                  
                                               
2. Proposal to amend            13,358,183       1,132,830          135,455
   the Company's                               
   Certificate of                              
   Incorporation to                            
   increase the number                         
   of authorized shares                        
   of Common Stock                             
   from 25,000,000                             
   to 250,000,000                              
                                               
3. Proposal to amend            13,476,996       1,139,393          105,830
   the Company's                                 
   Certificate of                                
   Incorporation in                           
   the discretion of
   the Board of
   Directors, to
   effect a 1-for-10
   reverse stock split
   of the outstanding
   shares of Common
   Stock

                                                                     (continued)


                                       17
<PAGE>

                                     Part II

                                OTHER INFORMATION
                                   (continued)

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


     (a) Exhibits        None

     (b) Reports on form 8-K

     On April 21,  1997,  the Company  filed a Report on Form 8-K in  connection
with the legal proceedings by the Atlanta restaurant landlord.

     On May 7, 1997 the Company  filed a report on Form 8-K  regarding  sales of
equity  securities  pursuant to  Regulation  S. The Company  sold the  aggregate
principal  amount  of  $700,000  of its  Convertible  Debt  in  the  transaction
described in the Report.

     On May 28, 1997 the Company filed a report on Form 8-K  regarding  sales of
equity  securities  pursuant to  Regulation  S. The Company  sold the  aggregate
principal  amount  of  $500,000  of its  Convertible  Debt  in  the  transaction
described in the Report.



                                       18
<PAGE>


                                   SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant has duly authorized and caused the undersigned to sign this Report on
the Registrant's behalf.

                                            COUNTRY STAR RESTAURANTS, INC.


                                            By:   /s/  Dan J. Rubin
                                                  ------------------------------
                                                  Dan J. Rubin
                                                  Chief Executive Officer


Dated:  August 19, 1997


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