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


                                   FORM 10-Q


                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


For quarter ended                                        Commission file number
 September 9, 1997                                               0-19907
 -----------------                                               -------


                      LONE STAR STEAKHOUSE & SALOON, INC.
             (Exact name of registrant as specified in its charter)



             Delaware                                          48-1109495
             --------                                          ----------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                            Identification Number)

                          224 East Douglas, Suite 700
                             Wichita, Kansas 67202
              (Address of principal executive offices) (Zip code)

                                 (316) 264-8899
              (Registrant's telephone number, including area code)

          Indicate  by check  mark  whether  the  registrant  (1) has  filed all
documents  and  reports  required  to be  filed  by  Section  13 or 15(d) of the
Securities  Exchange  Act of 1934  during the  preceding  12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. /X/ Yes / /No

          Indicate  the  number of shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

         Class                                   Outstanding at October 7, 1997
         -----                                   ------------------------------
Common Stock, $.01 par value                             41,093,600 shares


<PAGE>

                      LONE STAR STEAKHOUSE & SALOON, INC.

                                     Index

                                                                           Page
                                                                          Number
                                                                          ------

PART I.   FINANCIAL INFORMATION
-------------------------------

Item 1.  Financial Statements

  Condensed Consolidated Balance Sheets
  at September 9, 1997 and December 31, 1996                                2

  Consolidated Statements of Income
  for the twelve weeks ended
  September 9, 1997 and September 3, 1996                                   3

  Consolidated Statements of Income
  for the thirty-six weeks ended
  September 9, 1997 and September 3, 1996                                   4

  Condensed Consolidated Statements of
  Cash Flows for the thirty-six weeks ended
  September 9, 1997 and September 3, 1996                                   5

  Notes to Condensed Consolidated
  Financial Statements                                                      6

Item 2.  Management's Discussion and
          Analysis of Financial Condition
          Results of Operations                                             8

PART II.  OTHER INFORMATION
---------------------------
Items 1 through 5 have been omitted
since the items are either inapplicable or the
answer is negative
Item 6.  Exhibits and Reports on Form 8-K                                  14

PART III.  EXHIBITS
-------------------

11.1        Statement regarding computation of per share earnings
27          Financial Data Schedule


                                      -1-
<PAGE>

                       LONE STAR STEAKHOUSE & SALOON, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                 September 9, 1997         December 31, 1996
                                                                                 -----------------         ------------------
                                           ASSETS

Current assets:
<S>                                                                               <C>                   <C>              
    Cash and cash equivalents                                                     $    150,661,187      $     150,721,286
    Accounts receivable                                                                  2,307,805              2,233,119
    Inventories                                                                          9,011,460              4,728,071
    Pre-opening costs - net                                                              6,593,067              6,250,241
    Deferred income taxes                                                                1,302,270                584,780
    Other current assets                                                                 1,464,303                783,557
                                                                                         -----------          -----------
         Total current assets                                                          171,340,092            165,301,054

Property and equipment, net                                                            402,835,092            350,588,246
Intangible and other assets, net (principally goodwill)                                 29,409,653             26,262,455
                                                                                         -----------          -----------
            Total assets                                                          $    603,584,837      $     542,151,755
                                                                                         ===========          ===========
                            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                              $      8,316,721      $       8,202,116
    Other current liabilities                                                           35,827,809             30,854,934
                                                                                        ------------         ------------
            Total current liabilities                                                   44,144,530             39,057,050


Deferred income taxes                                                                    5,713,308              7,306,978
Other non-current liabilities                                                              195,847                247,510
Minority interest                                                                          150,384                301,384
Stockholders' Equity:
    Preferred stock                                                                              -                      -
    Common stock                                                                           410,857                407,027
    Additional paid-in capital                                                         347,347,670            341,158,492
    Retained earnings                                                                  206,012,367            154,207,532
    Translation adjustment                                                                (390,126)              (534,218)
                                                                                        ------------         ------------
            Total stockholders' equity                                                 553,380,768            495,238,833
                                                                                        ------------         ------------
            Total liabilities and stockholders' equity                            $    603,584,837      $     542,151,755
                                                                                      ============           ============
</TABLE>


                             See accompanying notes.
                                      - 2 -

<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                      For the twelve weeks ended
                                                                          ----------------------------------------------------
                                                                               September 9, 1997          September 3, 1996
                                                                          ----------------------------------------------------

<S>                                                                       <C>                         <C>            
Net sales                                                                 $   135,302,151             $   113,746,124
Costs and expenses:
    Costs of sales                                                             49,286,935                  39,953,800
    Restaurant operating expenses                                              51,324,510                  38,020,727
    Depreciation and amortization                                               6,883,306                   6,894,996
                                                                               ------------                ------------
Restaurant costs and expenses                                                 107,494,751                  84,869,523
                                                                               ------------                ------------
Restaurant operating income                                                    27,807,400                  28,876,601
General and administrative expenses                                             5,089,334                   4,395,194
                                                                               ------------                ------------
Income from operations                                                         22,718,066                  24,481,407

Other income, principally interest                                              1,057,163                   1,073,302
                                                                               ------------                ------------

Income before income taxes and minority interest                               23,775,229                  25,554,709
Provision for income taxes                                                     (8,655,179)                 (9,609,313)
Minority interest                                                                 (64,954)                   (106,924)
                                                                               ------------                ------------
Net income                                                                $    15,055,096             $    15,838,472
                                                                               ============                ============

Primary net income per share                                              $          0.36             $          0.38
                                                                               ============                ============
</TABLE>

                             See accompanying notes.
                                      - 3 -

<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                  For the thirty-six weeks ended
                                                                       ---------------------------------------------------
                                                                           September 9, 1997          September 3, 1996
                                                                       ---------------------------------------------------

<S>                                                                         <C>                        <C>            
Net sales                                                                   $  398,917,647             $   327,889,840
Costs and expenses:
    Costs of sales                                                             142,077,678                 115,732,240
    Restaurant operating expenses                                              143,656,077                 112,077,657
    Depreciation and amortization                                               20,042,025                  19,658,085
                                                                                ------------                ------------
Restaurant costs and expenses                                                  305,775,780                 247,467,982
                                                                                ------------                ------------
Restaurant operating income                                                     93,141,867                  80,421,858
General and administrative expenses                                             14,483,084                  14,294,254
Loss on divestiture of European Joint Venture                                            -                   8,557,176
                                                                                ------------                ------------
Income from operations                                                          78,658,783                  57,570,428

Other income, principally interest                                               3,194,996                   2,428,523
                                                                                ------------                ------------

Income before income taxes and minority interest                                81,853,779                  59,998,951
Provision for income taxes                                                     (29,943,499)                (23,724,998)
Minority interest                                                                 (105,445)                    603,598
                                                                                ------------                ------------
Net income                                                                  $   51,804,835             $    36,877,551
                                                                                ============                ============

Primary net income per share                                                $         1.24             $          0.92
                                                                                ============                ============
</TABLE>


                             See accompanying notes.
                                      - 4 -

<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                     For the thirty-six weeks ended
                                                                         --------------------------------------------------
                                                                              September 9, 1997        September 3, 1996
                                                                         --------------------------------------------------
<S>                                                                           <C>                        <C>           
  Cash flows from operating activities:
    Net income                                                                $   51,804,835             $   36,877,551
    Adjustments to reconcile net income to net cash
       provided by operating activities:
          Depreciation and amortization                                           20,328,094                 19,658,085
          Non-cash loss on divestiture of European Joint Venture                           -                  8,337,176
          Net change in operating assets and liabilities:
            Change in operating assets                                           (12,395,606)                (6,646,607)
            Change in operating liabilities                                        3,261,147                  6,537,352
                                                                                 -----------                 -----------
              Net cash provided by operating activities                           62,998,470                 64,763,557

  Cash flows from investing activities:
    Purchases of property and equipment                                          (65,421,353)               (73,680,097)
    Other                                                                         (3,974,316)                  (298,896)
                                                                                 -----------                 -----------
              Net cash used in investing activities                              (69,395,669)               (73,978,993)

  Cash flows from financing activities:
    Net proceeds from issuance of common stock                                     6,193,008                107,055,662
                                                                                 -----------                 -----------
              Net cash provided by financing activities                            6,193,008                107,055,662

  Effect of exchange rate on cash                                                    144,092                   (335,706)
                                                                                 -----------                 -----------

              Net increase (decrease) in cash and cash equivalents                   (60,099)                97,504,520

  Cash and cash equivalents at beginning of period                               150,721,286                 67,424,884
                                                                                 -----------                 -----------
  Cash and cash equivalents at end of period                                  $  150,661,187             $  164,929,404
                                                                                 ===========                 ===========

  Supplemental disclosure of cash flow information:
    Cash paid for income taxes                                                $   26,295,941             $   14,538,771

</TABLE>










                             See accompanying notes.
                                      - 5 -

<PAGE>

                      LONE STAR STEAKHOUSE & SALOON, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.          Basis of Presentation
            ---------------------


                        The   unaudited   Condensed    Consolidated    Financial
Statements  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 normal  recurring  accruals and
adjustments)  which are,  in the  opinion  of  management,  necessary  to fairly
present the operating results for the respective  periods.  Certain  information
and  footnote  disclosures  normally  presented in annual  financial  statements
prepared in accordance with generally accepted  accounting  principles have been
omitted  pursuant  to such rules and  regulations.  These  financial  statements
should be read in conjunction with the consolidated  financial statements in its
1996 Form 10-K. The results of the twelve weeks ended  September 9, 1997 are not
necessarily  indicative  of the results to be expected  for the full year ending
December 30, 1997.


2.          Stock Options
            -------------

                        During the  thirty-six  week period  ended  September 9,
1997, the Company granted stock options for 3,655,335  shares of Common Stock at
exercise  prices  ranging  from $17.38 to $28.38 per share  pursuant to its 1992
stock option plan for employees. In addition, effective April 24, 1997 the Stock
Option Committee of the Company's Board of Directors repriced the exercise price
of 7,713,201  options at $18.25,  the closing price on that date,  that had been
granted at higher prices prior to that date.


3.          Earnings Per Share
            ------------------


                        Primary earnings per share amounts are computed based on
the weighted  average number of shares actually  outstanding  plus the number of
shares that would be  outstanding  assuming  exercise of dilutive  stock options
which are considered to be common stock  equivalents.  The number of shares that
would be issued  from the  exercise  of stock  options  has been  reduced by the
number of shares that could have been purchased from the proceeds at the average
market price of the company's  stock.  The number of shares  resulting from this
computation  for the twelve weeks ended  September 9, 1997 and September 3, 1996
was 41,881,271 and 41,649,960, respectively. The number of shares resulting from
this  computation for the thirty-six weeks ended September 9, 1997 and September
3, 1996 was  41,738,583  and  39,967,438,  respectively.  For  purposes of fully
diluted  computations,  the  number of  shares  that  would be  issued  from the
exercise of stock  options has been  reduced by the number of shares which could
have been purchased from the proceeds at the market price of the Company's stock
on the last day of the period  because  that price was higher  than the  average
market  prices  during  the  period.  The number of shares  resulting  from this
computation  of fully  diluted  earnings  per share for the twelve  weeks  ended
September  9,  1997  and  September  3,  1996  was   41,882,374  and  41,649,885
respectively.  The number of shares  resulting  from this  computation  of fully
diluted  earnings per share for the thirty-six weeks ended September 9, 1997 and
September 3, 1996 was 41,741,169 and 39,971,237, respectively.

                                      -6-

<PAGE>



                      LONE STAR STEAKHOUSE & SALOON, INC.

4.          Recently Issued Accounting Standards
            ------------------------------------

            In February 1997, the Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting Standards No. 128, "Earnings per Share" ("FAS
128"),   which   specifies  the   computation,   presentation,   and  disclosure
requirements  for  earnings  per  share  with  the  objective  to  simplify  the
computation of earnings per share. FAS 128 is effective for financial statements
for periods  ending  after  December  15, 1997 and  earlier  application  is not
permitted.  After the effective  date, all prior period  earnings per share data
shall be restated to conform with the provisions of FAS 128. The adoption of FAS
128 is not  expected to have a material  impact on the  Company's  earnings  per
share data.

                                      -7-
<PAGE>

                      LONE STAR STEAKHOUSE & SALOON, INC.

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

General

            The following  discussion and analysis should be read in conjunction
with the Financial  Statements and Notes thereto included elsewhere in this Form
10-Q.

            The Company is  continuing  its rapid  expansion  under which it has
opened 260 restaurants  since 1992,  including 42 in the thirty-six  weeks ended
September 9, 1997. As of September 9, 1997 the Company has opened 34 of the 1997
domestic development restaurants.

            Pre-opening costs include labor costs,  costs of hiring and training
personnel and certain other costs relating to opening new  restaurants,  and are
capitalized  and amortized over a 12 month period,  beginning in the period that
the restaurants open.

            The Company is expanding its upper-end  steakhouse  presence,  where
average  checks are $60 or more,  by  developing  the Del Frisco's  Double Eagle
Steak House concept ("Del  Frisco's") in addition to its Lone Star  Steakhouse &
Saloon  restaurants.  The  Company  opened  its third Del  Frisco's  in  Denver,
Colorado in January,  1997 and expects to open one  additional  Del  Frisco's in
1997.

            The Company is also developing its upscale steak restaurant  concept
under the tradename  Sullivan's  Steakhouse.  The average  check per  Sullivan's
Steakhouse  customer is  approximately  $40. The Company  opened two  Sullivan's
Steakhouses in 1996 and expects to develop three or four  additional  Sullivan's
restaurants in 1997.

            Internationally,  the  Company,  through a joint  venture,  operates
twenty-seven  Lone Star Steakhouse & Saloon  restaurants in Australia,  seven of
which opened this year,  and expects to open an additional  two to four units in
1997.








                                      -8-

<PAGE>


                      LONE STAR STEAKHOUSE & SALOON, INC.

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



Results of Operations
            The  following  table sets forth for the periods  indicated  (i) the
percentages which certain items included in the Condensed Consolidated Statement
of Income bear to net sales, and (ii) other selected operating data:

<TABLE>
<CAPTION>
                                                                               Twelve Weeks Ended (1)     Thirty-six Weeks Ended
                                                                            September 9,  September 3,   September 9,   September 3,
                                                                               1997          1996            1997           1996
                                                                            ------------  ------------   ------------   ------------
<S>                                                                          <C>           <C>             <C>           <C>

Income Statement Data:
   Net Sales .............................................................    100.0%        100.0%          100.0%        100.0%
   Costs and expenses:                                                                                                 
      Costs of sales .....................................................     36.4          35.1            35.7          35.3
      Restaurant operating expenses ......................................     37.9          33.4            36.0          34.2
      Depreciation and amortization ......................................      5.1           6.1             5.0           6.0
                                                                              -----         -----           -----         -----


           Restaurant costs and expenses .................................     79.4          74.6            76.7          75.5
                                                                              -----         -----           -----         -----


   Restaurant operating income ...........................................     20.6          25.4            23.3          24.5
   General and administrative expenses ...................................      3.8           3.9             3.6           4.4
   Loss on write-off of European Joint Venture ...........................      --            --              --            2.5
                                                                              -----         -----           -----         -----


   Income from operations ................................................     16.8          21.5            19.7          17.6
   Other income, principally interest and minority interest ..............       .7            .9              .8            .8
                                                                              -----         -----           -----         -----


   Income before provision for income taxes ..............................     17.5          22.4            20.5          18.4
   Provision for income taxes ............................................      6.4           8.5             7.5           7.2
                                                                              -----         -----           -----         -----


   Net income ............................................................     11.1%         13.9%           13.0%         11.2%
                                                                              =====         =====           =====         =====


Restaurant Operating Data: (dollars in thousands)
            Average sales per restaurant on an annualized basis (2) ......   $2,240        $2,528          $2,328        $2,578
            Number of restaurants at end of the period ...................      274           198             274           198
</TABLE>


(1) The Company  operates on a fifty-two or fifty-three  week fiscal year ending
    the last Tuesday in December. The fiscal quarters for the Company consist of
    accounting periods of twelve, twelve, twelve and sixteen or seventeen weeks,
    respectively.

(2) Average sales per restaurant on an annualized basis are computed by dividing
    a  restaurant's  total  sales for full  accounting  periods  open during the
    period by the number of full  accounting  periods open, and  multiplying the
    result by thirteen.


                                      -9-
<PAGE>



                      LONE STAR STEAKHOUSE & SALOON, INC.

                Twelve Weeks Ended September 9, 1997 Compared to
                      Twelve Weeks Ended September 3, 1996


            Net sales  increased  $21,556,000  (19.0%) to  $135,302,000  for the
twelve weeks ended  September 9, 1997  compared to  $113,746,000  for the twelve
weeks ended September 3, 1996, principally  attributable to $26,574,000 in sales
from the 59 new domestic Lone Star  restaurants  opened since September 3, 1996,
reduced by a $5,018,000  decline in the sales from the 180 domestic  restaurants
which  were open at that  date.  Same  store  sales  were down 7.0% in the third
quarter.
            Costs  of  sales,  primarily  food  and  beverages  increased  as  a
percentage  of sales to 36.4% from 35.1% due to  slightly  higher beef prices as
well as some  discounted  menu items and free  appetizers  offered in a national
marketing  campaign.  During these  periods,  the Company  purchased  beef under
contracted  prices which allowed the company to maintain more stable beef costs.
Such contracts will expire after  September,  1997 and as of October 7, 1997 the
contracts have not been extended which may result in higher and fluctuating cost
of sales during periods when the Company purchases beef in the cash market.
            Restaurant  operating  expenses for the twelve weeks ended September
9, 1997 increased $13,304,000 (35.0%) from $38,021,000 in the twelve weeks ended
September 3, 1996 to $51,325,000, and such expenses increased as a percentage of
net sales from 33.4% to 37.9%.  This increase is attributable to introduction of
the costs of the national  marketing  program,  higher  maintenance costs in the
domestic Lone Star restaurants, and the effect of fixed cost components on lower
average restaurant sales.
            Depreciation and amortization decreased $12,000 (0.2%) in the twelve
weeks ended September 9, 1997 over the twelve weeks ended September 3, 1996, and
such  expenses  decreased  as a percentage  of net sales from 6.1% to 5.1%.  The
reduction of capitalized  pre-opening  expenses per unit for 59 new  restaurants
opened since September 1996 versus the restaurants  opened in 1995 and the first
two  quarters  of  1996   resulted  in  a  reduction  of   pre-opening   expense
amortization.   This   improvement   offset  the  additional   depreciation  and
amortization expenses related to the new units opened since September 1996.
            General  and  administrative  expenses  for the twelve  weeks  ended
September 9, 1997 increased $694,000 (15.8%) from the comparable period in 1996,
primarily due to increases in the compensation and number of district  personnel
and  travel  costs  associated  with  opening  units.   Certain  accounting  and
administrative  services  are  contracted  from  Coulter  Enterprises,  Inc.,  a
restaurant  management  services company owned by the Company's  Chairman of the
Board and Chief Executive Officer.  The service agreement provides for specified
accounting  and  administration  services to be provided on a cost  pass-through
basis under which the Company paid a fixed annual charge of $1,272,000,  plus an
additional  fee  of  $416  per  restaurant  per  28-day  accounting  period  and
reimbursement of  out-of-pocket  costs and expenses during the fiscal year ended
December 31, 1996.  The service  agreement  was renewed for fiscal 1997 with the
fixed  annual  charge  increasing  to  $2,010,000  and the per  restaurant,  per
accounting  period fee increasing to $440.  Should the service  agreement not be
renewed in the future,  the Company would incur direct costs for  accounting and
administration,  personnel,  rent and other  costs  associated  with a  separate
office;  however,  the  Company  believes  that such  direct  costs would not be
materially different than the costs under the contractual arrangement.
            The effective  income tax rate for the twelve weeks ended  September
9, 1997 and for the twelve  weeks ended  September  3, 1996 was 36.5% and 37.8%,
respectively.  The decrease in the rate is  primarily  due to a reduction in the
effective state tax rate.

                                      -10-
<PAGE>



                      LONE STAR STEAKHOUSE & SALOON, INC.

              Thirty-six Weeks Ended September 9, 1997 Compared to
                    Thirty-six Weeks Ended September 3, 1996

            Net sales  increased  $71,028,000  (21.7%) to  $398,918,000  for the
thirty-six  weeks  ended  September  9, 1997  compared to  $327,890,000  for the
thirty-six   weeks  ended  September  3,  1996,   principally   attributable  to
$65,482,000 in sales from the 59 new domestic Lone Star restaurants opened since
September  3,  1996,  additional  sales  from the  Sullivan's  and Del  Frisco's
restaurants  opened in 1996 and 1997 and sales from the twelve  additional units
opened in the Australian joint venture.  Same store sales were down 6.5% for the
thirty-six weeks.
            Costs  of  sales,  primarily  food  and  beverages  increased  as  a
percentage  of sales to 35.7% from 35.3% due to  slightly  higher beef prices in
the third  quarter as well as some  discounted  menu  items and free  appetizers
offered in a national  marketing  campaign.  During these  periods,  the Company
purchased  beef under  contracted  prices which  allowed the company to maintain
more stable beef costs. Such contracts will expire after September,  1997 and as
of  October 7, 1997 the  contracts  have not been  extended  which may result in
higher and fluctuating  cost of sales during periods when the company  purchases
beef in the cash market.
            Restaurant   operating  expenses  for  the  thirty-six  weeks  ended
September  9,  1997  increased  $31,578,000  (28.2%)  from  $112,078,000  in the
thirty-six  weeks ended  September 3, 1996 to  $143,656,000,  and such  expenses
increased  as a  percentage  of net  sales  from  34.2% to  36.0%.  Most of this
increase is attributable to the introduction of the national  marketing program,
higher  maintenance costs in the domestic Lone Star restaurants,  and the effect
of fixed cost components on lower average restaurant sales.
            Depreciation  and  amortization  increased  $384,000  (2.0%)  in the
thirty-six  weeks  ended  September  9, 1997  over the  thirty-six  weeks  ended
September 3, 1996, and such expenses decreased as a percentage of net sales from
6.0% to 5.0%. The reduction of capitalized  pre-opening expenses per unit for 59
new restaurants  opened since  September 1996 versus the  restaurants  opened in
1995 and the first  quarter  of 1996  resulted  in a  reduction  of  pre-opening
expense  amortization.  This improvement offset the additional  depreciation and
amortization expenses related to the new units opened since September 1996.
            General and  administrative  expenses for the thirty-six weeks ended
September 9, 1997 increased  $189,000 (1.3%) from the comparable period in 1996,
primarily due to increases in the compensation and number of district  personnel
and travel costs  associated  with opening  units offset by the  elimination  of
expenses of the Company's former European Joint Venture.
            Certain accounting and  administrative  services are contracted from
Coulter Enterprises, Inc., a restaurant management services company owned by the
Company's  Chairman  of the Board  and  Chief  Executive  Officer.  The  service
agreement provides for specified  accounting and  administration  services to be
provided on a cost  pass-through  basis  under  which the  Company  paid a fixed
annual charge of  $1,272,000,  plus an additional fee of $416 per restaurant per
28-day accounting  period and reimbursement of out-of-pocket  costs and expenses
during the fiscal  year ended  December  31,  1996.  The service  agreement  was
renewed for fiscal 1997 with the fixed annual  charge  increasing  to $2,010,000
and the per restaurant, per accounting period fee increasing to $440. Should the
service  agreement not be renewed in the future,  the Company would incur direct
costs  for  accounting  and  administration,  personnel,  rent and  other  costs
associated  with a separate  office;  however,  the Company  believes  that such
direct  costs  would  not be  materially  different  than the  costs  under  the
contractual arrangement.
            Other income,  principally interest,  for the thirty-six weeks ended
September 9, 1997 was $3,195,000, a $766,000 increase from the comparable period
in 1996,  reflecting  increased  interest  income from the investment of the net
proceeds of the 1996 public offering.

                                      -11-
<PAGE>


                       LONE STAR STEAKHOUSE & SALOON, INC.

              Thirty-six Weeks Ended September 9, 1997 Compared to
              Thirty-six Weeks Ended September 3, 1996 (continued)

The effective  income tax rate for the thirty-six  weeks ended September 9, 1997
and  the  thirty-six  weeks  ended  September  3,  1996  was  36.6%  and  39.1%,
respectively.  The  decrease in the rate is primarily  due to certain  losses in
1996  resulting  from the  write-off of the European  Joint Venture that are not
currently available for deduction as well as an increase in 1997 interest income
that is nontaxable  at the federal level and a reduction in the effective  state
tax rate.

Impact of inflation

            The primary  inflationary factors affecting the Company's operations
include  food and  labor  costs.  A large  number  of the  Company's  restaurant
personnel are paid at the federal and state established minimum wage levels and,
accordingly, changes in such wage levels affect the Company's labor costs. Since
the  majority  of hourly  paid  personnel  are tipped  employees  and the recent
minimum  wage  changes  did not  include an  increase  in the cash wage rate for
tipped  employees,   the  impact  of  the  minimum  wage  change  has  not  been
significant.  As  costs  of food and  labor  have  increased,  the  Company  has
historically  been able to offset these  increases  through  economies of scale,
although  there is no  assurance  that  such  offsets  will  continue.  To date,
inflation has not had a material impact on operating margins.

Forward looking statements

            This report contains certain  forward-looking  statements within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, amended.  Stockholders are cautioned
that all  forward-looking  statements  involve risks and uncertainty,  including
without limitation, the ability of the Company to open new restaurants,  general
market  conditions,  competition and pricing.  Although the Company believes the
assumptions  underlying  the  forward-looking  statements  contained  herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements contained in the report will
prove to be accurate.



                                      -12-

<PAGE>



                      LONE STAR STEAKHOUSE & SALOON, INC.



Liquidity and Capital Resources

            The following  table  presents a summary of the Company's cash flows
for each of the thirty-six  weeks ended September 9, 1997 and September 3, 1996.


                                                     Thirty-six weeks ended 
                                                  September 9,     September 3, 
                                                      1997            1996 
                                                  ------------     ------------ 

Net cash provided by operating  activities ...   $  62,998,470    $  64,763,557

Net cash used in  investment activities ......     (69,395,669)     (73,978,993)

Net cash provided by financing activities ....       6,193,008      107,055,662

Net cash increase (decrease) by changes
  in exchange rates ..........................         144,092         (335,706)

Net increase (decrease) in cash ..............         (60,099)      97,504,520

During the  thirty-six  week  period  ended  September  9, 1997,  the  Company's
investment in property and equipment was $65,421,353.

            The Company has opened 260 restaurants in the past five fiscal years
of which 59 opened in 1996 and an  additional  42 opened  during the  thirty-six
weeks ended September 9, 1997. The Company does not have significant receivables
or inventory and receives trade credit based upon negotiated terms in purchasing
food and  supplies.  Because  funds  available  from cash  sales are not  needed
immediately to pay for food and supplies,  or to finance inventory,  they may be
considered as a source of financing for noncurrent capital expenditures.

            At September 9, 1997, the Company had  $150,661,000 in cash and cash
equivalents.  While the  Company  has not  established  a credit  facility,  the
Company  believes  it could  establish  a  facility  on  suitable  terms.  As of
September 9, 1997, the Company had acquired 18 sites for future  development,  5
of which are leased.  In addition,  as of such date the Company had entered into
six contracts to purchase  sites.  The Company was also actively  negotiating to
purchase  or  lease  31  additional   sites.   The  Company  expects  to  expend
approximately  $55,000,000  for new  restaurant  development  costs  through the
remainder of fiscal 1997.


                                      -13-

<PAGE>


                      LONE STAR STEAKHOUSE & SALOON, INC.

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


            (a)   Exhibit   11.1          Computation of Per Share Earnings
                  Exhibit   27            Financial Data Schedule

            (b)   Forms on 8-K............ None





                                      -14-



<PAGE>


                      LONE STAR STEAKHOUSE & SALOON, INC.

                                   SIGNATURES

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

                                    Lone Star Steakhouse & Saloon, Inc.
                                    (Registrant)



                                    /s/ John D. White
                                    ----------------------------------------
                                    Chief Financial and Principal Accounting
                                    Officer, Executive Vice President,
                                    Treasurer and Director