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
         MARCH 23, 1999                                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 April 30, 1999
COMMON STOCK, $.01 PAR VALUE                        35,812,766 SHARES


<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.

                                      INDEX

                                                               PAGE
                                                              NUMBER
PART I.   FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

      CONDENSED CONSOLIDATED BALANCE SHEETS
      AT MARCH 23, 1999 AND DECEMBER 29, 1998                    2

      CONDENSED CONSOLIDATED STATEMENTS OF
      INCOME FOR THE TWELVE WEEKS ENDED
      MARCH 23, 1999 AND MARCH 24, 1998                          3

      CONDENSED CONSOLIDATED STATEMENTS OF
      CASH FLOWS FOR THE TWELVE WEEKS ENDED
      MARCH 23, 1999 AND MARCH 24, 1998                          4

      NOTES TO CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS                                       5

ITEM 2.  MANAGEMENT'S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS                                      7

ITEM 3.  QUANTITATIVE AND QUALITATIVE
      DISCLOSURE ABOUT MARKET RISKS                             13

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


<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                March 23,1999 December 29, 1998
                                                                ------------- -----------------
                 ASSETS

Current assets:
<S>                                                               <C>              <C>      
    Cash and cash equivalents                                     $  64,933        $  89,847
    Inventories                                                      14,398           15,894
    Other current assets                                              6,156            6,565
                                                                  ---------        ---------
         Total current assets                                        85,487          112,306
Property and equipment, net                                         472,035          461,065
Intangible and other assets, net                                     35,095           35,212
                                                                  ---------        ---------
             Total assets                                         $ 592,617        $ 608,583
                                                                  =========        =========
   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                              $  11,786        $  10,545
    Other current liabilities                                        33,122           34,168
                                                                  ---------        ---------
             Total current liabilities                               44,908           44,713


Deferred income taxes                                                12,406           10,429

Other non-current liabilities
Stockholders' Equity:
    Preferred stock                                                    --               --
    Common stock                                                        358              386
    Additional paid-in capital                                      287,542          314,366
    Retained earnings                                               256,303          248,522
    Accumulated other comprehensive income (loss)                    (8,900)          (9,833)
                                                                  ---------        ---------
             Total stockholders' equity                             535,303          553,441
                                                                  ---------        ---------
             Total liabilities and stockholders' equity           $ 592,617        $ 608,583
                                                                  =========        =========
</TABLE>

                             See accompanying notes.

                                      -2-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                           For the twelve weeks ended
                                                         -----------------------------
                                                         March 23, 1999       March 24, 1998
                                                         --------------       --------------
                                                                                (Restated)

<S>                                                      <C>                   <C>      
Net sales                                                $ 139,938             $ 153,514
Costs and expenses:
    Costs of sales                                          50,386                57,215
    Restaurant operating expenses                           61,630                61,234
    Depreciation and amortization                            7,232                 6,179
                                                         ---------             ---------

Restaurant costs and expenses                              119,248               124,628
                                                         ---------             ---------
Restaurant operating income                                 20,690                28,886
General and administrative expenses                          8,289                 5,442
                                                         ---------             ---------
Income from operations                                      12,401                23,444

Other income, principally interest                             247                 1,455
                                                         ---------             ---------

Income before income taxes and minority interest            12,648                24,899
Provision for income taxes                                  (4,867)                8,772
                                                         ---------             ---------
Income before cumulative effect of a change
             in accounting principle                         7,781                16,127
Cumulative effect of change in accounting principle
             (net of income tax)                              --                  (6,904)
                                                         ---------             ----------
Net Income                                               $   7,781             $   9,223
                                                         =========             ==========

Basic earnings per share:
    Income before cumulative effect of a change
             in accounting principle                     $    0.21             $    0.39
    Cumulative effect of change in accounting principle       --                   (0.17)
                                                         ---------             ---------
Basic earnings per share                                 $    0.21             $    0.22
                                                         =========             =========

Diluted earnings per share:
    Income before cumulative effect of a change
             in accounting principle                     $    0.21             $    0.38
    Cumulative effect of change in accounting principle        --                  (0.16)
                                                         ---------             ---------
Diluted earnings per share                               $    0.21             $    0.22
                                                         =========             =========
</TABLE>

                             See accompanying notes.

                                      -3-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                              For the twelve weeks ended
                                                                                      ----------------------------------------------
                                                                                      March 23, 1999                 March 24 1998
                                                                                      ---------------              -----------------
Cash flows from operating activities:
<S>                                                                                   <C>                          <C>      
   Net income                                                                         $  7,781                     $   9,223
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation and amortization                                                   7,232                         6,179
         Cumulative effect of accounting change                                              -                         6,904
         Net change in operating assets and liabilities:
   Change in operating assets                                                            1,948                         1,258
   Change in operating liabilities                                                       2,172                        (3,749)
                                                                                      --------                      -----------
             Net cash provided by operating activities                                  19,133                        19,815

Cash flows from investing activities:
   Purchases of property and equipment                                                 (16,801)                      (17,836)
   Other                                                                                  (408)                       (1,769)
                                                                                      ---------                     -----------
             Net cash used in investing activities                                     (17,209)                      (19,605)

Cash flows from financing activities:
   Net proceeds from issuance of common stock                                               12                           406
   Common stock repurchased and retired                                                (26,864)                            -
                                                                                      ---------                     -----------
             Net cash provided by (used) financing activities                          (26,852)                          406

Effect of exchange rate on cash                                                             14                            66
                                                                                      --------                      -----------

      Net increase (decrease) in cash and cash equivalents                             (24,914)                          682

Cash and cash equivalents at beginning of period                                        89,847                       135,997
                                                                                      --------                      -----------
Cash and cash equivalents at end of period                                            $ 64,933                     $ 136,679
                                                                                      ========                      ===========

Supplemental disclosure of cash flow information:
   Cash paid for income taxes                                                         $  2,713                     $   1,504
</TABLE>


                             See accompanying notes.

                                      -4-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.    BASIS OF PRESENTATION


      The unaudited  condensed  consolidated  financial  statements  include all
adjustments,  consisting  of  normal,  recurring  accruals,  which  the  Company
considers  necessary for a fair  presentation of the financial  position and the
results of operations for the periods presented. The results of the twelve weeks
ended  March  23,  1999 are not  necessarily  indicative  of the  results  to be
expected for the full year ending  December 28, 1999.  This quarterly  report on
Form 10-Q should be read in conjunction with the Company's audited  consolidated
financial statements in its 1998 Form 10-K.

      The 1998 condensed consolidated financial statements have been restated to
reflect the adoption of SOP 98 Reporting the Costs of Start-Up Activities.


2.    COMPREHENSIVE INCOME

      As of  December  31,  1997 the  Company  adopted  Statement  of  Financial
Accounting  Standards 130 (SFAS 130), Reporting  Comprehensive  Income. SFAS 130
established new rules for the reporting comprehensive income and its components;
however,  this  statement  had no  impact  upon  the  Company's  net  income  or
stockholders'  equity.  The statement  requires the Company to report separately
the foreign  currency  translation  adjustments in  stockholders'  equity and to
include the current year adjustments for such amounts in comprehensive income.

Comprehensive income is comprised of the following (in thousands):

                                     FOR THE TWELVE WEEKS ENDED
                                   MARCH 23, 1999     MARCH 24, 1998
                                   --------------     --------------

Net Income                           $7,781           $ 9,223
Foreign currency
 translation adjustments                933             1,756
                                    -------           -------
                                     $8,714           $10,979
                                    =======           =======



3.    EARNINGS PER SHARE


      Basic  earnings  per share  amounts  are  computed  based on the  weighted
average number of shares actually  outstanding.  The number of weighted  average
shares  outstanding  for the twelve week periods  ended March 23, 1999 and March
24, 1998 were 37,513,971 and 41,165,028, respectively.

      For purposes of 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 average market
price of the Company's stock or the price of the Company's stock on the exercise
date if options were exercised during the period presented. The number of shares
resulting  from this  computation  of diluted  earnings per share for the twelve
weeks ended March 23, 1999 and March 24,  1998 was  37,681,381  and  42,235,190,
respectively.

                                      -5-
<PAGE>
4.    ACCOUNTING CHANGE

      In April 1998,  the American  Institute of  Certified  Public  Accountants
issued SOP  98-Reporting the Costs of Start-Up  Activities,  requiring the costs
related to  start-up  activities  be expensed as  incurred.  Prior to 1998,  the
Company  capitalized  certain  pre-opening costs incurred in connection with the
opening of new restaurant  locations.  The Company adopted the provisions of the
SOP in its  financial  statements  for the year ended  December  29,  1998,  and
retroactoively  made it  effective  the  beginning  of 1998.  The  effect of the
adoption  of the SOP  resulted  in a charge  for the  cumulative  effect  of the
accounting  change of $6,904,000,  net of income taxes of $2,922,000  ($0.17 per
share),  to  expense  costs  that had been  capitalized  prior to 1998,  this is
reflected in the restated condensed  consolidated  statements of income and cash
flows for the twelve weeks ended March 23, 1998.

5.     TREASURY STOCK TRANSACTIONS

In 1998 the  Board  of  Directors  authorized  the  Company  to  purchase  up to
5,900,000  shares  of the  Company's  common  stock  in the  open  market  or in
privately negotiated  transactions.  Pursuant to the authorization,  the Company
purchased  2,798,000  shares of its common  stock  during the twelve weeks ended
March 23, 1999 at an average price of $9.60 per share. The Company is accounting
for the purchases using the constructive retirement method of accounting wherein
the  aggregate par value of the stock is charged to the common stock account and
the excess of cost over par value is charged to paid-in capital.

6.     RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998 the FASB  issued  Statement  No.  133 (SFAS  133),  Accounting  for
Derivative  Instruments and Hedging Activities,  which is required to be adopted
in years beginning after June 15, 1999. The Statement  permits early adoption as
of the beginning of any fiscal quarter after its issuance.  The Company  expects
to adopt the new  Statement  effective  December 29, 1999.  The  Statement  will
require the Company to recognize  all  derivatives  on the balance sheet at fair
value.  Derivatives not considered hedges must be adjusted to fair value through
income.  If a  derivative  is a hedge,  depending  on the  nature of the  hedge,
changes in the fair value of the  derivative  will either be offset  against the
change in fair value of the hedged asset,  liability or firm commitment  through
earnings,  or recognized in other comprehensive  income until the hedged item is
recognized in earning.  The ineffective portion of a derivative's change in fair
value  will  be  immediately  recognized  in  earnings.  The  Company  does  not
anticipate the adoption of the Statement  will have a significant  effect on its
results of operations or financial position.

                                      -6-

<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.

      In May 1998 the Company temporarily suspended development of new Lone Star
restaurants  other than  properties  which had been  committed for or were under
construction.     During    1998    the    Company    substantially    completed
remodel/construction  of twelve additional  restaurants  (including one that was
damaged by fire and rebuilt),  and  anticipates  opening all twelve in 1999. The
Company  opened 45 domestic  restaurants  in 1995,  45  restaurants  in 1996, 60
restaurants  in 1997, and two in 1998. As of March 23, 1999, the Company had not
opened any new restaurants,  but had sites for eight additional restaurants, six
of which were  acquired  by  purchase  and two by lease.  The  Company  does not
anticipate that any of the eight sites will be constructed or opened in 1999.

      Although  the Company  believes  considerable  opportunities  exist in the
upscale steakhouse market, the Company has temporarily curtailed the development
of its upscale  steakhouse  concepts.  Future development will be evaluated on a
site- by site basis with no current commitments to open additional upscale units
beyond  the  two Del  Frisco's  restaurants  and  three  Sullivan's  restaurants
scheduled to open in 1999, as described below.

      The Company is currently operating three Del Frisco's  restaurants and has
two additional  restaurants under  construction;  one with approximately  16,000
square feet of space in Rockefeller Plaza in New York City and one in Las Vegas,
Nevada. The Company expects to open both of these restaurants in 1999.

      As  of  March  23,  1999  the  Company  was  operating  twelve  Sullivan's
steakhouse restaurants. In the first quarter of 1999, restaurants were opened in
Denver, Colorado and Palm Desert,  California. The Company expects to open three
more  Sullivan's  restaurants  in  1999 in  Chicago,  Illinois,  Raleigh,  North
Carolina, and Tucson, Arizona.

      Internationally,  there are 41 Lone Star Steakhouse & Saloon  restaurants,
40 in Australia, operated through a joint venture, and one in Guam operated by a
licensee.  Although  there  are  currently  no plans for  further  international
development,  the Company  believes that all of its concepts have  international
development potential.


                                      -7-
<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)
                                                               MARCH 23,             MARCH 24,
                                                                 1999                  1998
                                                                 ----               (Restated)
                                                                                       ----
                                                                   (DOLLARS IN THOUSANDS)

INCOME STATEMENT DATA:
<S>                                                             <C>                  <C>   
      Net Sales                                                 100.0%               100.0%
      Costs and expenses:
            Costs of sales...................................    36.0                 37.3
            Restaurant operating expenses....................    44.0                 39.9
            Depreciation and amortization....................     5.2                  4.0
                                                                -----                -----

                 Restaurant costs and expenses...............    85.2                 81.2
                                                                -----                -----


      Restaurant operating income............................    14.8                 18.8
      General and administrative expenses....................     5.9                  3.5
                                                                -----                -----



      Income from operations.................................     8.9                 15.3
      Other income, principally interest.....................     0.2                  0.9


      Income before provision for income taxes ..............     9.1                 16.2
      Provision for income taxes.............................     3.5                  5.7
                                                                -----                -----


      Income before cumulative effect of change
            in accounting principle .........................     5.6                 10.5
      Cumulative effect of change in accounting principle....       -                 (4.5)
                                                                 -----                -----
      Net Income.............................................     5.6%                 6.0%
                                                                 =====                =====

</TABLE>


RESTAURANT OPERATING DATA:
      Average sales per restaurant on an annualized basis (2)  $1,877   $2,137
      Number of restaurants at end of the period                  324      312


(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 reporting period, and annualizing the result.


                                      -8-

<PAGE>

LONE STAR STEAKHOUSE & SALOON, INC.

TWELVE WEEKS ENDED MARCH 23, 1999 COMPARED TO TWELVE WEEKS ENDED MARCH 24, 1998

      Net sales  decreased  $13,536,000  (8.8%) to  $139,938,000  for the twelve
weeks ended March 23, 1999 compared to  $153,514,000  for the twelve weeks ended
March 24,  1998  principally  attributable  to a decline  in  average  sales per
restaurant  resulting from lower customer counts during the period. The decrease
was partially  offset by additional  sales of $7,619,000 from five new Lone Star
restaurants in Australia, and seven Sullivan's restaurants opened since March of
1998.

      Costs of sales, primarily food and beverages, decreased as a percentage of
sales to 36.0% from 37.3% due primarily to lower beef prices.  During 1999,  the
Company began to purchase beef under contracted prices that cover  approximately
70% of the Company's estimated usage for the remainder of the year.

      Restaurant  operating  expenses  for the twelve weeks ended March 23, 1999
increased  $396,000 from $61,234,000 in the twelve weeks ended March 24, 1998 to
$61,630,000, and increased as a percentage of net sales from 39.9% to 44.0%. The
absolute dollar increase reflects primarily the impact of operating cost for the
twelve new  restaurants  opened since March of 1998, as well as increased  costs
related to certain uninsured claim amounts.  The increases were partially offset
by decreases in labor costs  related to cost control  measures  taken to improve
operating  efficiencies  at the  restaurants  and by a decrease  in  advertising
expenses.  The increase as a percentage  of sales  primarily  reflects the fixed
cost  components of restaurant  operating  expenses on lower average  restaurant
sales experienced in the quarter.

      Depreciation and amortization  increased  $1,053,000 (17.0%) in the twelve
weeks  ended March 23, 1999 over the twelve  weeks  ended  March 24,  1998.  The
increase is attributable  primarily to the twelve restaurants opened since March
1998.

      General  and  administrative  expenses  increased  $2,847,000  (52.3%)  as
compared to 1998.  The  increases in general and  administrative  expenses  were
attributable  primarily to increased legal costs of $157,000,  increased  travel
and recruiting  costs of $1,047,000  related to the  recruitment of new managers
and increased costs of $431,000 related to expenses  incurred in connection with
the  installation of the new  point-of-sale  systems as well as the new database
information  systems.  Various other costs increased as a result of the variable
costs  associated  with the increase in the number of  restaurants  opened since
March 1998.

      Other income,  principally interest,  for the twelve weeks ended March 23,
1999  was  $247,000,  as  compared  to  $1,455,000  in  1998.  The  decrease  is
attributable to reduced funds available for short term investment purposes.

      The  effective  income tax rates for the twelve weeks ended March 23, 1999
and the twelve weeks ended March 24, 1998 were 38.4% and 38.8%, respectively.

      The  cumulative  effect of change in accounting  principle  represents the
effect of adoption of Statement of Position  98-5,  "Reporting on Costs of Start
Up  Activities".   The  adoption  of  this  statement  impacted  accounting  for
pre-opening costs and as a result the Company began to report  pre-opening costs
as a component of restaurant operating expenses effective December 31, 1997. The
cumulative  effect of the change in accounting of  $6,904,000,  net of taxes was
recorded on a one time charge in the first quarter of 1998.

                                      -9-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.


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 personnel are tipped  employees,  minimum wage changes will have
little  effect on labor costs.  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.

YEAR 2000 COMPUTER ISSUE

      The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable  year. Any of the Company's
computer  programs or  hardware  that have  date-sensitive  software or embedded
chips may  recognize  a date  using "00" as the year 1900  rather  than the year
2000.  This  could  result  in  a  system  failure  or  miscalculations  causing
disruptions  of  operations,   including,   a  temporary  inability  to  process
transactions, send invoices, or engage in similar normal business activities.

      The Company has  instituted  a Year 2000  project to prepare its  computer
systems  and  communication  systems  for the Year 2000.  The  project  includes
identification and assessment of all software, hardware and equipment that could
potentially  be affected by the Year 2000 issue and remedial  action and further
testing, if necessary.

      In the  fourth  quarter  of 1998 the  Company  committed  to a program  to
install new  point-of-sale  devices and systems in most of its  restaurants.  In
addition, the Company is installing a new data base information system that will
provide significant enhancements to its capabilities to process and analyze data
provided by the new point-of-sale  systems. The Company expects these systems to
be fully implemented by mid-1999. The hardware and software providers of the new
systems have warranted that the new systems are Year 2000 compliant. The Company
believes  that certain  existing  software,  hardware and  equipment  which will
continue  to be  utilized  with the new  systems  are  substantially  Year  2000
compliant, but will require some modification and replacement;  however, if such
modifications  and replacements are not made, or are not completed  timely,  the
Year  2000  issue  could  have a  significant  impact on the  operations  of the
Company.

      The Company's  plan to resolve the Year 2000 Issue  involves the following
four phases: assessment,  remediation, testing, and implementation. To date, the
Company has fully  completed  its  assessment  of all systems that, it believes,
could be  significantly  affected  by the year 2000.  The  completed  assessment
indicated that certain parts of the Company's significant information technology
systems could be affected,  particularly  the financial  reporting  systems.  In
addition,  the Company is gathering  information  about the year 2000 compliance
status of its  significant  suppliers  and service  providers  and  continues to
monitor their compliance.

      For its information  technology  exposures,  to date the Company estimates
that it is 90%  complete  on the  remediation  phase  and  expects  to  complete
software  reprogramming  and  replacement  no later  than  June 30,  1999.  Once
software is  reprogrammed  or replaced for a system,  the Company begins testing
and  implementation.  These phases run  concurrently for different  systems.  To
date,  the Company has completed 90% of its testing and has  implemented  85% of
its  remediated  systems.  Completion of the testing  phase for all  significant
systems is expected by May



                                      -10-
<PAGE>

15, 1999, with all  recommended  systems fully tested and implemented by May 31,
1999, with 100% completion targeted for July 31, 1999.

      The Company has queried its  significant  suppliers and service  providers
(external  agents) that do not share  information  systems with the Company.  To
date, the Company is not aware of any external agent with a year 2000 issue that
would  materially  impact the Company's  results of  operations,  liquidity,  or
capital resources.  However,  the Company has no means of ensuring that external
agents will be year 2000 ready.  The  inability  of external  agents to complete
their year 2000 resolution  process in a timely fashion could materially  impact
the  Company.   The  effect  of   non-compliance   by  external  agents  is  not
determinable.

      The  Company  will  utilize  both  internal  and  external   resources  to
reprogram,  replace,  test and implement the software and hardware equipment for
year 2000  modifications.  The total cost of the Year 2000 Issue is estimated to
be less than  $100,000  and the Company  expects  that most of the costs will be
expensed.  All costs are being funded through operating cash flow. The projected
costs do not include the costs of the new point-of-sale  devices and systems and
the  costs  of  equipment,  software,  and  installation  of the new  data  base
information system previously discussed.

      Management of the Company believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner.  As noted above, the Company has
not yet completed all  necessary  phases of the Year 2000 project.  In the event
that the Company does not complete any additional  phases,  the Company might be
unable  to  process  transactional  and  financial  reporting  information.   In
addition,  disruptions  in the economy  generally  resulting  from the year 2000
issues could also materially  adversely affect the Company. The Company could be
subject to  litigation  for  computer  systems  product  failure,  for  example,
equipment  shutdown or failure to properly date business records.  The amount of
potential  liability  and lost revenue  cannot be  reasonably  estimated at this
time.

      The Company has contingency plans for certain critical applications and is
working on such plans for others.  These contingency plans involve,  among other
actions,  manual  workarounds,  increasing  inventories,  and adjusting staffing
strategies.


                                      -11-

<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 twelve weeks ended March 23, 1999 and March 24, 1998 (in thousands).

                                                    Twelve weeks ended
                                                   March 23,    March 24,
                                                     1999         1998
                                                     ----         ----
                                                               (Restated)
Net cash  provided  by  operating activities..     $ 19,133     $ 19,815
 Net cash used in investment activities.......      (17,209)     (19,605)
Net cash provided by (used) financing
  activities..................................      (26,852)         406
Effect of exchange rate on cash...............           14           66
                                                   --------     --------
Net increase (decrease) in cash...............     $(24,914)    $    682
                                                   ========     ========

During the twelve week period ended March 23, 1999, the Company's  investment in
property and equipment was $16,801,000.

      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  March  23,  1999,  the  Company  had  $64,933,000  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.  The Company
has entered into three lease  agreements for new  locations.  The Company is not
actively negotiating purchase or lease of additional sites.

      During 1998, the Company's  Board of Directors  authorized the purchase of
up to 5,900,000  shares of the  Company's  common stock from time to time in the
open market or in privately negotiated transactions. During the current year the
Company  has  purchased  2,798,000  shares  at a cost of  $26,864,000  and since
inception  of the program it has  purchased  5,408,000  shares with a cumulative
cost of approximately $63,239,000.

      Beginning  in the fourth  quarter of 1998,  the  Company  began  utilizing
derivative  financial  instruments in the form of commodity futures contracts to
manage market risks and reduce its exposure  resulting from  fluctuations in the
prices  of meat.  The  Company  uses  live  beef  cattle  futures  contracts  to
accomplish its objective.  Realized and unrealized changes in the fair values of
the derivative  instruments  are recognized in income in the period in which the
change occurs.  Realized and unrealized gains and losses for the period have not
been  significant.  As of  March  23,  1999,  the  Company's  exposure  for open
positions in futures contracts was not significant.


                                      -12-

<PAGE>

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.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

           Not applicable.

                                      -13-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (A) EXHIBIT 10.2   EMPLOYMENT AGREEMENT DATED JANUARY 1, 1999 BY AND
                              BETWEEN THE COMPANY AND JOHN D. WHITE

               EXHIBIT 10.6   AMENDMENT TO NON-COMPETITION,  CONFIDENTIALITY AND
                              NON-SOLICITATION AGREEMENT BETWEEN THE COMPANY AND
                              JAMIE B. COULTER DATED JANUARY 1, 1999

               EXHIBIT 10.7   EMPLOYMENT  AGREEMENT DATED JANUARY 1, 1999 BY AND
                              BETWEEN THE COMPANY AND MICHAEL J. ARCHER

               EXHIBIT 10.8   EMPLOYMENT  AGREEMENT DATED JANUARY 1, 1999 BY AND
                              BETWEEN GERALD T. AARON

               EXHIBIT 27     FINANCIAL DATA SCHEDULE

           (B) FORMS ON 8-K   NONE








                                      -14-
<PAGE>
                                   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)

      Date May 7, 1999                  /S/ John D. White
                                        ------------------------------------
                                        John D. White
                                        Chief Financial and Principal Accounting
                                        Officer, Executive Vice President,
                                        Treasurer and Director





                                      -15-