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    SEPTEMBER 30, 1998
                               -------------------------------------------------

                                       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 BOULEVARD, SUITE # 428, LOS ANGELES, CA 90010
--------------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (323) 634-5588
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                 NOT APPLICABLE
--------------------------------------------------------------------------------
              (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 November  13,
1998:  27,374,293

<PAGE>
<TABLE>
<CAPTION>
                            COUNTRY STAR RESTAURANTS, INC.

                                         INDEX
                                                                                 Page
                                                                                 ----
<S>              <C>                                                             <C>
PART I      -     Financial Information

         Item 1.  Financial Statements

                  Condensed Balance Sheet at
                       September 30, 1998 (unaudited)..........................   3

                  Condensed Statements of Operations
                       for the Quarter Ended September 30, 1998
                       and September 30, 1997  (unaudited).....................   4

                  Condensed Statements of Operations
                       for the Nine Months Ended September 30, 1998
                       and September 30, 1997  (unaudited).....................   5

                  Condensed Statements of Cash Flows
                       for the Quarter Ended September 30, 1998
                       and September 30, 1997  (unaudited).....................   6

                  Condensed Statements of Cash Flows
                       for the Nine Months Ended September 30, 1998
                       and September 30, 1997  (unaudited).....................   7

                  Notes to Condensed Financial Statements
                       (unaudited).............................................   8


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

PART II      -    Other Information

         Item 2.  Changes in Securities........................................  14
         Item 6.  Exhibits and Reports on Form 8-K.............................  15

SIGNATURES        .............................................................  16
</TABLE>

                                          2

<PAGE>
<TABLE>
<CAPTION>

                                      COUNTRY STAR RESTAURANTS, INC.
                                         Condensed Balance Sheet
                                               (Unaudited)

                                                  ASSETS
                                                                                      September 30, 1998
                                                                                      ------------------
CURRENT ASSETS:
<S>                                                                                     <C>         
  Cash and cash equivalents                                                             $     17,430
  Inventories                                                                                130,992
  Prepaid expenses                                                                            41,711
  Other                                                                                       99,835
                                                                                        ------------

    Total current assets                                                                     289,968
                                                                                        ------------

PROPERTY AND EQUIPMENT AT COST, NET OF ACCUMULATED
  DEPRECIATION AND AMORTIZATION OF $993,188:
  Leasehold improvements                                                                   3,259,688
  Furniture and equipment                                                                  1,092,107
  Memorabilia                                                                                291,790
                                                                                        ------------

    TOTAL PROPERTY AND EQUIPMENT                                                           4,643,585
                                                                                        ------------

OTHER                                                                                         90,261
                                                                                        ------------

                                                                                        $  5,023,814
                                                                                        ============

         LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Line of credit                                                                        $  2,332,000
  Accounts payable                                                                           419,335
  Accrued legal settlements                                                                  100,000
  Other accrued expenses                                                                     119,954
                                                                                        ------------

    TOTAL CURRENT LIABILITIES                                                              2,971,289
                                                                                        ------------


STOCKHOLDERS' EQUITY:
  PREFERRED STOCK, $0.001 par value, 2,000,000 shares authorized,
       no shares issued and outstanding                                                           --
  Common stock,  $0.01 par value, 250,000,000 shares authorized,
    11,424,293 shares issued and outstanding                                                 114,243
  ADDITIONAL PAID-IN CAPITAL                                                              48,108,403
  ACCUMULATED DEFICIT                                                                    (46,170,121)
                                                                                        ------------

    NET STOCKHOLDERS' EQUITY                                                               2,052,525
                                                                                        ------------

                                                                                        $  5,023,814
                                                                                        ============

             The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                  3
<PAGE>
                                      COUNTRY STAR RESTAURANTS, INC.
                                    Condensed Statements of Operations
                                               (Unaudited)

<TABLE>
<CAPTION>
                                                                          FOR THE QUARTER ENDED SEPTEMBER 30,
                                                                          -----------------------------------
                                                                               1998             1997
                                                                            -----------      -----------
REVENUES:
<S>                                                                         <C>              <C>        
  Food and beverage                                                         $   898,059      $ 1,217,833
  Merchandise                                                                    22,177           75,193
                                                                            -----------      -----------

                                                                                920,236        1,293,026
                                                                            -----------      -----------
COST AND EXPENSES:
  Cost of revenues:
    Food and beverage                                                           281,213          400,327
    Merchandise                                                                  13,634           75,010
  Labor                                                                         423,079          588,155
  Rent                                                                           82,060          674,847
  Other restaurant operating                                                    162,244          362,015
  Selling, general and administrative                                            60,948          755,938
  Depreciation and amortization                                                 146,699          309,935
  Loss on disposal of assets                                                    114,247               --
                                                                            -----------      -----------

                                                                              1,284,124        3,166,227
                                                                            -----------      -----------

LOSS FROM OPERATIONS                                                           (363,888)      (1,873,201)
                                                                            -----------      -----------

OTHER INCOME (EXPENSE):
  Interest income                                                                    --            1,598
  Interest expense                                                              (79,813)         144,255
                                                                            -----------      -----------

                                                                                (79,813)         145,853
                                                                            -----------      -----------

LOSS BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM                           (443,701)      (1,727,348)

MINORITY INTEREST                                                                    --          371,596
                                                                            -----------      -----------

LOSS BEFORE EXTRAORDINARY ITEM                                                 (443,701)      (1,355,752)

EXTRAORDINARY ITEM - SETTLEMENT OF NOTES PAYABLE, NET OF  0 TAXES                    --          301,161
                                                                            -----------      -----------

NET LOSS                                                                    $  (443,701)     $(1,054,591)
                                                                            ===========      ===========

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:
  Loss before extraordinary item                                            $     (0.05)     $     (0.45)
  Extraordinary item                                                                 --             0.10
                                                                            -----------      -----------

  Net loss per common share                                                 $     (0.05)     $     (0.35)
                                                                            ===========      ===========


BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING                                                  9,651,749        3,041,412
                                                                            ===========      ===========


                The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                    4
<PAGE>

                                      COUNTRY STAR RESTAURANTS, INC.
                                    Condensed Statements of Operations
                                               (Unaudited)
<TABLE>
<CAPTION>

                                                                       FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                                                       ---------------------------------------
                                                                               1998             1997
                                                                           ------------     ------------
<S>                                                                        <C>              <C>         
REVENUES:
  Food and beverage                                                        $  2,848,738     $  4,817,375
  Merchandise                                                                   105,674          471,524
                                                                           ------------     ------------

                                                                              2,954,412        5,288,899
                                                                           ------------     ------------
COST AND EXPENSES:
  Cost of revenues:
    Food and beverage                                                           901,018        1,580,653
    Merchandise                                                                  75,849          398,879
  Labor                                                                       1,353,881        2,183,509
  Rent                                                                          327,686        2,104,455
  Other restaurant operating                                                    568,417        1,076,772
  Selling, general and administrative                                         1,056,787        2,999,826
  Depreciation and amortization                                                 441,746        1,081,466
  Loss on disposal of assets                                                    114,247               --
                                                                           ------------     ------------

                                                                              4,839,631       11,425,560
                                                                           ------------     ------------

LOSS FROM OPERATIONS                                                         (1,885,219)      (6,136,661)
                                                                           ------------     ------------

OTHER INCOME (EXPENSE):
  Interest income                                                                    --            5,654
  Interest expense                                                             (175,182)         (54,174)
  Embedded interest expense                                                    (313,000)      (2,001,786)
                                                                           ------------     ------------

                                                                               (488,182)      (2,050,306)
                                                                           ------------     ------------

LOSS BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM                         (2,373,401)      (8,186,967)

MINORITY INTEREST                                                                    --        1,106,926
                                                                           ------------     ------------

LOSS BEFORE EXTRAORDINARY ITEM                                               (2,373,401)      (7,080,041)

EXTRAORDINARY ITEM - SETTLEMENT OF NOTES PAYABLE, NET OF  0 TAXES             1,527,858        1,654,639
                                                                           ------------     ------------

NET LOSS                                                                   $   (845,543)    $ (5,425,402)
                                                                           ============     ============

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:
  Loss before extraordinary item                                           $      (0.26)    $      (3.40)
  Extraordinary item                                                               0.17             0.80
                                                                           ------------     ------------

  Net loss per common share                                                $      (0.09)    $      (2.60)
                                                                           ============     ============


BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING                                                  9,053,963        2,083,525
                                                                           ============     ============


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

                                                    5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                COUNTRY STAR RESTAURANTS, INC.
                              Condensed Statements of Cash Flows
                                         (Unaudited)

                                                         FOR THE QUARTER ENDED SEPTEMBER 30,
                                                         -----------------------------------
                                                                 1998           1997
                                                             -----------    -----------

<S>                                                          <C>            <C>         
 NET CASH USED IN OPERATING ACTIVITIES                       $  (171,380)   $(1,058,581)
                                                             -----------    -----------


 NET CASH USED IN INVESTING ACTIVITIES                                --             --
                                                             -----------    -----------

Cash flows from financing activities:
  Proceeds from line of credit                                   180,000         95,000
  Payment of note payable                                             --             --
  Net proceeds from issuance of common and preferred stock            --        934,642
  Capital lease payments                                              --             --
                                                             -----------    -----------

 NET CASH PROVIDED BY FINANCING ACTIVITIES                       180,000      1,029,642
                                                             -----------    -----------

Net increase (decrease) in cash                                    8,620        (28,939)

Cash and cash equivalents, beginning of period                     8,810        166,699
                                                             -----------    -----------

Cash and cash equivalents, end of period                     $    17,430    $   137,760
                                                             ===========    ===========


SUPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:

 Common stock issued upon conversion of debt                 $   146,554             --

 Common stock issued upon extinguishment of debt                      --    $    76,578

 Common stock issued upon purchase of equipment                       --    $    50,000

 Common stock issued upon rental discount                             --    $   490,000


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

                                            6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                 COUNTRY STAR RESTAURANTS, INC.
                               Condensed Statements of Cash Flows
                                           (Unaudited)

                                                        FOR THE NINE MONTHS ENDED SEPTEMBER 30,
                                                        ---------------------------------------
                                                                 1998           1997
                                                             -----------    -----------

<S>                                                          <C>            <C>         
 NET CASH USED IN OPERATING ACTIVITIES                       $(1,333,415)   $(3,782,261)
                                                             -----------    -----------


 NET CASH USED IN INVESTING ACTIVITIES                                --        (10,445)
                                                             -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from line of credit                                 1,432,000        595,000
  Payment of note payable                                     (1,300,000)            --
  Net proceeds from issuance of common and preferred stock            --      2,926,498
  Capital lease payments                                              --       (540,237)
                                                             -----------    -----------

 NET CASH PROVIDED BY FINANCING ACTIVITIES                       132,000      2,981,261
                                                             -----------    -----------

Net decrease in cash                                          (1,201,415)      (811,445)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                 1,218,845        949,205
                                                             -----------    -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                     $    17,430    $   137,760
                                                             ===========    ===========

SUPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:

 Common stock issued upon conversion of debt                 $   296,554             --

 Common stock issued upon extinguishment of debt             $   167,500    $    76,578

 Common stock issued upon purchase of leased equipment                --    $   447,462

 Embedded interest relating to convertible debt              $   313,000    $ 2,001,726

 Common stock issued upon purchase of equipment                       --    $    50,000

 Common stock issued upon rental discount                             --    $   490,000


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

                                            7
</TABLE>
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.
                     Notes to Condensed Financial Statements
                                   (Unaudited)

NOTE A  -         BASIS OF PRESENTATION

                  The accompanying  unaudited condensed 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  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,  1997.  Company  management  believes  that  the
                  disclosures  are  sufficient for interim  financial  reporting
                  purposes.


NOTE B  -         EMBEDDED INTEREST EXPENSE

                  Under the credit agreement,  amounts advanced may be converted
                  to common  stock at the lesser of (i)  $13.30,  or (ii) 80% of
                  the average closing bid price of the common stock for the five
                  consecutive  trading days  preceding  the date of  conversion.
                  Accordingly,  the Company recorded  embedded  interest expense
                  for advances made under the line of credit. For the six months
                  ended June 30,  1998,  the  Company  recorded  $313,000 of net
                  embedded interest expense relating to these advances.

                  The board of directors amended the conversion features on July
                  27, 1998 so that the line of credit may be converted to common
                  stock at the  lesser  of (i)  $13.30  per  share,  or (ii) the
                  closing bid price of the common stock on the date prior to the
                  date of conversion.

                                                                     (continued)

                                       8
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.
                Notes to Condensed Financial Statements-Continued
                                   (Unaudited)

NOTE C  -         EXTRAORDINARY ITEM

                  During the first  quarter of 1998,  the  Company  recorded  an
                  extraordinary  gain of $1.53 million on the  extinguishment of
                  its $2,995,358 note payable to Cameron Capital.

                  Under the terms of the Settlement Agreement dated February 18,
                  1998,  Cameron  agreed to dismiss its legal action against the
                  Company  and to accept as payment  in full of its  unconverted
                  debt  $1.3  million  cash  and  670  thousand  shares  of  the
                  Company's  common  stock  with a  market  value  of  $167,500.
                  Cameron does not have any registration  rights with respect to
                  the common stock,  but is eligible to resell  certain  amounts
                  immediately  pursuant to the  provisions of Rule 144 under the
                  Securities Act of 1933.


NOTE D  -         YEAR 2K DISCLOSURE

                  The Company is working to resolve the potential  impact of the
                  year  2000  on  the  ability  of  the  Company's  computerized
                  information systems to accurately process information that may
                  be date-sensitive. The Company has one program that recognizes
                  a date using "00" as the year 1900  rather  than the year 2000
                  that could  result in errors or system  failures.  The Company
                  has not completed its assessment,  but currently believes that
                  costs of  addressing  this  issue  will  not  have a  material
                  adverse impact on the Company's financial position.


                                       9
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

ITEM 2.

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

RESULTS OF OPERATIONS

Three months ended  September 30, 1998 compared to three months ended  September
30, 1997
--------------------------------------------------------------------------------

Revenues.

Total revenues  decreased to $920 thousand for the three months ended  September
30, 1998,  compared with $1.293 million for the three months ended September 30,
1997, a decrease of $373 thousand or 29%. Same store  revenues  decreased 28% in
Hollywood  and 27% in Las Vegas.  The decrease was due to the closing of the Las
Vegas  restaurant,   the  Company's  limited  advertising  budget  and  customer
resistance  to changes in food  preparation  and  presentation.  Steps are being
taken which management believes will increase sales at the Hollywood restaurant.

Costs and expenses.

Cost of  revenues  decreased  from  $475  thousand  for the three  months  ended
September  30, 1997 to $295  thousand for the three months ended  September  30,
1998. Cost of revenues as a percentage of revenues decreased from 37% to 32%.

Operating  expenses  decreased  from $1.625  million for the three  months ended
September  30, 1997 to $667  thousand for the three months ended  September  30,
1998. As a percentage of revenues,  operating  expenses  decreased  from 126% to
73%.

General and  administrative  expenses decreased from $756 thousand for the three
months  ended  September  30, 1997 to 61  thousand  for the three  months  ended
September  30, 1998.  As a percentage  of revenues,  general and  administrative
expenses  decreased  from  58% to  7%.  The  decrease  is  partially  due to the
reduction of the estimated accrued legal settlement to $100,000.

The  decrease  in  cost  of  revenues,   operating   expenses  and  general  and
administrative  expenses were due to the closing of two  restaurants and the new
plans and policies implemented by management.

Depreciation and amortization  decreased from $310 thousand for the three months
ended  September 30, 1997 to $147 thousand for the three months ended  September
30, 1998, reflecting the decrease in the number of buildings owned from three to
one. As a percentage of total revenues,  depreciation and amortization decreased
from 24% to 16%.

                                                                     (continued)

                                       10
<PAGE>
                         COUNTRY STAR RESTAURANTS, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)


Interest expense increased from a $146 thousand dollar income to an $80 thousand
dollar expense,  reflecting  primarily the interest expense  associated with the
convertible debt financing arrangements entered into on February 12, 1997.

Minority  interest for the three months ended  September 30, 1997  reflected 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.  The Company  sold its
interest in Country Star Las Vegas LLC on December 30, 1997,  and entered into a
new  sublease  agreement  directly  between  the  Company  and a nominee  of the
landlord.  The Company is obligated to pay base rent of 50% of monthly  positive
cash flow.  During the three months  ended  September  30,  1998,  the Las Vegas
location did not generate positive cash flow and, therefore,  no rental payments
were made.

The Company closed its Las Vegas  restaurant upon the expiration of its lease on
September 30, 1998.  The Landlord of the  Restaurant was unwilling to extend the
lease  beyond the  scheduled  expiration  date.  As a result of this event,  the
remaining net value of the Las Vegas Restaurant equipment totaling $114 thousand
was written off on September 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by financing  activities for the three months ended  September
30,  1997  and  September  30,  1998  were  $1.030  million  and  $180  thousand
respectively, due primarily to the net proceeds from issuance of common stock in
1997 and borrowing under the convertible debt in 1998.

Net cash used in operating  activities for the three months ended  September 30,
1997 and September 30, 1998  decreased  from $1.059 million to $171 thousand due
primarily  to a decrease in accounts  payable  and the  settlement  with over 75
creditors during the three months ended September 30, 1997.

                                                                     (continued)

                                       11
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

RESULTS OF OPERATIONS

Nine months ended September 30, 1998 compared to nine months ended September 30,
1997
--------------------------------------------------------------------------------

Revenues.

Total revenues  decreased to $2.954 million for the nine months ended  September
30, 1998,  compared with $5.289 million for the nine months ended  September 30,
1997, a decrease of $2.335 million or 44%. Same store revenues  decreased 35% in
Hollywood and 49% in Las Vegas. The decreases were due to the closing of Atlanta
and Las Vegas restaurants, the Company's limited advertising budget and customer
resistance  to changes in food  preparation  and  presentation.  Steps are being
taken which management believes will increase sales at the Hollywood restaurant.

Costs and expenses.

Cost of  revenues  decreased  from  $1.980  million  for the nine  months  ended
September  30, 1997 to $977  thousand  for the nine months ended  September  30,
1998. Cost of revenues as a percentage of revenues decreased from 37% to 33%.

Operating  expenses  decreased  from $5.365  million  for the nine months  ended
September  30, 1997 to $2.250  million for the nine months ended  September  30,
1998. As a percentage of revenues,  operating  expenses  decreased  from 101% to
76%.

General and  administrative  expenses  decreased  from $3.0 million for the nine
months  ended  September  30, 1997 to 1.057  million  for the nine months  ended
September  30, 1998.  As a percentage  of revenues,  general and  administrative
expenses  decreased  from  57% to 36%.  The  decrease  is  partially  due to the
reduction of the estimated accrued legal settlement to $100,000.

The  decrease  in  cost  of  revenues,   operating   expenses  and  general  and
administrative  expenses were due to the closing of two  restaurants and the new
plans and policies implemented by management.

Depreciation and amortization  decreased from $1.081 million for the nine months
ended  September 30, 1997 to $442  thousand for the nine months ended  September
30, 1998, reflecting the decrease in the number of buildings owned from three to
one. As a percentage of total revenues,  depreciation and amortization decreased
from 20% to 15%.

                                                                     (continued)

                                       12
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

Interest  expense  decreased from $2.050  million to $488  thousand,  reflecting
primarily the embedded  interest  expense  associated with the convertible  debt
financing arrangements entered into on February 12, 1997.

Minority  interest for the nine months ended  September  30, 1997  reflected 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.  The Company  sold its
interest in Country Star Las Vegas LLC on December 30, 1997,  and entered into a
new  sublease  agreement  directly  between  the  Company  and a nominee  of the
landlord.  The Company is obligated to pay base rent of 50% of monthly  positive
cash flow.  During the nine  months  ended  September  30,  1998,  the Las Vegas
location did not generate positive cash flow and, therefore,  no rental payments
were made.

The Company closed its Las Vegas  restaurant upon the expiration of its lease on
September 30, 1998.  The Landlord of the  Restaurant was unwilling to extend the
lease  beyond the  scheduled  expiration  date.  As a result of this event,  the
remaining net value of the Las Vegas Restaurant equipment totaling $114 thousand
was written off on September 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by financing  activities  for the nine months ended  September
30,  1997  and  September  30,  1998  were  $2.981  million  and  $132  thousand
respectively,  due  primarily to the net proceeds  from issuance of common stock
and  borrowings  in 1997 and borrowing  under and  repayment of the  convertible
debts in 1998.

Net cash used in operating  activities  for the nine months ended  September 30,
1997 and September 30, 1998  decreased from $3.782 million to $1.333 million due
primarily to the settlement with over 375 creditors during the nine months ended
September 30, 1997.

The  Company  will  need  to  raise  additional  capital  before  it can  attain
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.

                                       13
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                                     PART II

                                OTHER INFORMATION

ITEM 2.           CHANGES IN SECURITIES

                  On  January  31,  1998 the  Company's  convertible  debentures
                  issued  in  October  1997  for  $150,000  were   automatically
                  converted into 461,538 common shares in accordance  with their
                  terms.

                  On  February  12,  1998  the  Company  effected  a one for ten
                  reverse  common stock split.  Accordingly,  all  references to
                  numbers of common shares, except shares authorized, and to per
                  share  information  in  the  financial  statements  have  been
                  adjusted to reflect the reverse  stock split on a  retroactive
                  basis.

                  On February 18, 1998,  the Company  issued  670,000  shares of
                  Common  Stock  to  Cameron  Capital  Ltd.  under a  Settlement
                  Agreement  relating to settlement  of the Company's  long term
                  debt  obligation  to Cameron  and issued  warrants  to acquire
                  43,333  shares of the  Company's  common  stock at an exercise
                  price  of  $6.25  per  share  to an  institutional  lender  in
                  connection with the settlement.

                  The  issuance  of the  warrants  and of the common  stock were
                  exempt  from  registration  pursuant  to  Section 4 (2) of the
                  Securities Act of 1933, as amended.

                  On March  10,  1998 the  National  Association  of  Securities
                  Dealers,  Inc. (the "NASD") delisted the Company's  securities
                  from the  NASDAQ  National  Market  because  of the  Company's
                  failure to meet listing  requirements  concerning  minimum bid
                  price and market value of public float and advised the Company
                  its  securities  may be eligible to trade on the OTC  Bulletin
                  Board. The Company will take all actions reasonably  necessary
                  for there to be an active trading  market for its  outstanding
                  common stock.

                  During  August and September  1998 the holders of  convertible
                  debt of the  Company  in the  aggregate  principal  amount  of
                  $146,554  converted their debt into 2,420,000 shares of common
                  stock.

                  The  convertible  debt holders have  converted  14.750 million
                  shares of common stock after September 30, 1998.

                                                                     (continued)

                                       14
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                                     PART II

                                OTHER INFORMATION
                                   (continued)

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------


         (a)      Exhibits                  None

         (b)      Reports on Form 8-K       None



                                       15
<PAGE>

                         COUNTRY STAR RESTAURANTS, INC.

                                   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, President,
                                             and Chairman of the Board



Dated:  November 18, 1998


                                       16