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
         June 17, 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 July 15, 1997
Common Stock, $.01 par value                            41,017,831 shares
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.

                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------
PART I.   FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

      CONDENSED CONSOLIDATED BALANCE SHEETS
      AT JUNE 17, 1997 AND DECEMBER 31, 1996                                  2

      CONDENSED CONSOLIDATED STATEMENTS OF
      INCOME FOR THE TWELVE WEEKS ENDED
      JUNE 17, 1997 AND JUNE 11, 1996                                         3

      CONDENSED CONSOLIDATED STATEMENTS OF
      INCOME FOR THE TWENTY-FOUR WEEKS ENDED
      JUNE 17, 1997 AND JUNE 11, 1996                                         4

      CONDENSED CONSOLIDATED STATEMENTS OF
      CASH FLOWS FOR THE TWENTY-FOUR WEEKS ENDED
      JUNE 17, 1997 AND JUNE 11, 1996                                         5

      NOTES TO CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS                                                    6

ITEM 2.  MANAGEMENT'S DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND
      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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                14

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                    14

PART III.  EXHIBITS

11.1  STATEMENT  REGARDING  COMPUTATION  OF PER SHARE EARNINGS 
99.1 TWELVE MONTH EARNINGS STATEMENT FOR PERIOD ENDED JUNE 17, 1997
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                         June 17, 1997        December 31, 1996
                                                                         -------------        -----------------
                                                                                              
                    ASSETS                                                                    
                                                                                              
<S>                                                                      <C>                    <C>          
Current assets:                                                                               
    Cash and cash equivalents                                            $ 148,450,661          $ 150,721,286
    Accounts receivable                                                      2,330,435              2,233,119
    Inventories                                                              8,816,284              4,728,071
    Pre-opening costs - net                                                  5,602,358              6,250,241
    Deferred income taxes                                                    1,302,270                584,780
    Other current assets                                                     2,960,629                783,557
                                                                         -------------          -------------
         Total current assets                                              169,462,637            165,301,054
                                                                                              
Property and equipment, net                                                382,664,510            350,588,246
Intangible and other assets, net (principally goodwill)                     29,012,754             26,262,455
                                                                         -------------          -------------
            Total assets                                                 $ 581,139,901          $ 542,151,755
                                                                         =============          =============
                    LIABILITIES AND STOCKHOLDERS' EQUITY                                      
                                                                                              
Current liabilities:                                                                          
    Accounts payable                                                     $  10,600,714          $   8,202,116
    Other current liabilities                                               26,070,285             30,854,934
                                                                         -------------          -------------
            Total current liabilities                                       36,670,999             39,057,050
                                                                                              
                                                                                              
Deferred income taxes                                                        6,603,128              7,306,978
Other non-current liabilities                                                  205,451                247,510
Minority interest                                                                5,098                301,384
Stockholders' Equity:                                                                         
    Preferred stock                                                               --                     --
    Common stock                                                               410,173                407,027
    Additional paid-in capital                                             346,424,779            341,158,492
    Retained earnings                                                      190,957,271            154,207,532
    Translation adjustment                                                    (136,998)              (534,218)
                                                                         -------------          -------------
            Total stockholders' equity                                     537,655,225            495,238,833
                                                                         -------------          -------------
            Total liabilities and stockholders' equity                   $ 581,139,901          $ 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
                                                                                           -----------------------------------------
                                                                                            June 17, 1997              June 11, 1996
                                                                                           --------------             --------------

<S>                                                                                        <C>                        <C>          
Net sales                                                                                  $ 133,359,880              $ 107,768,388
Costs and expenses:
    Costs of sales                                                                            46,833,703                 38,194,413
    Restaurant operating expenses                                                             46,941,973                 36,337,967
    Depreciation and amortization                                                              6,728,165                  6,450,059
                                                                                           -------------              -------------
Restaurant costs and expenses                                                                100,503,841                 80,982,439
                                                                                           -------------              -------------
Restaurant operating income                                                                   32,856,039                 26,785,949
General and administrative expenses                                                            4,750,362                  5,233,258
Loss on divestiture of European Joint Venture                                                       --                    8,557,176
                                                                                           -------------              -------------
Income from operations                                                                        28,105,677                 12,995,515

Other income, principally interest                                                             1,151,686                    721,027
                                                                                           -------------              -------------

Income before income taxes and minority interest                                              29,257,363                 13,716,542
Provision for income taxes                                                                   (10,685,532)                (5,931,827)
Minority interest                                                                                (25,608)                   318,281
                                                                                           -------------              -------------
Net income                                                                                 $  18,546,223              $   8,102,996
                                                                                           =============              =============

Primary net income per share                                                               $        0.45              $        0.21
                                                                                           =============              =============
</TABLE>

                             See accompanying notes.
                                      - 3 -
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                   For the twenty-four weeks ended
                                                                                           -----------------------------------------
                                                                                            June 17, 1997              June 11, 1996
                                                                                           --------------             --------------

<S>                                                                                        <C>                        <C>          
Net sales                                                                                  $ 263,615,496              $ 214,143,716
Costs and expenses:
    Costs of sales                                                                            92,790,743                 75,778,440
    Restaurant operating expenses                                                             92,331,567                 74,056,934
    Depreciation and amortization                                                             13,158,719                 12,763,089
                                                                                           -------------              -------------
Restaurant costs and expenses                                                                198,281,029                162,598,463
                                                                                           -------------              -------------
Restaurant operating income                                                                   65,334,467                 51,545,253
General and administrative expenses                                                            9,393,750                  9,899,060
Loss on divestiture of European Joint Venture                                                       --                    8,557,176
                                                                                           -------------              -------------
Income from operations                                                                        55,940,717                 33,089,017

Other income, principally interest                                                             2,137,833                  1,355,221
                                                                                           -------------              -------------

Income before income taxes and minority interest                                              58,078,550                 34,444,238
Provision for income taxes                                                                   (21,288,320)               (14,115,683)
Minority interest                                                                                (40,491)                   710,522
                                                                                           -------------              -------------
Net income                                                                                 $  36,749,739              $  21,039,077
                                                                                           =============              =============

Primary net income per share                                                               $        0.88              $        0.54
                                                                                           =============              =============
</TABLE>
                             See accompanying notes.
                                      -4-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                  For the twenty-four weeks ended
                                                                                              --------------------------------------
                                                                                              June 17, 1997           June 11, 1996
                                                                                              -------------           --------------
  Cash flows from operating activities:
<S>                                                                                           <C>                     <C>          
  Net income                                                                                  $  36,749,739           $  21,039,077
  Adjustments to reconcile net income to net cash
     provided by operating activities:
        Depreciation and amortization                                                            13,289,044              12,763,089
        Non-cash loss on divestiture of European Joint Venture                                         --                 8,337,176
        Net change in operating assets and liabilities:
          Change in operating assets                                                            (10,686,308)             (3,456,724)
          Change in operating liabilities                                                        (3,428,246)              1,447,730
                                                                                              -------------           -------------
            Net cash provided by operating activities                                            35,924,229              40,130,348

Cash flows from investing activities:
  Purchases of property and equipment                                                           (40,612,780)            (47,767,875)
  Other                                                                                          (3,248,727)               (207,906)
                                                                                              -------------           -------------
            Net cash used in investing activities                                               (43,861,507)            (47,975,781)

Cash flows from financing activities:
  Net proceeds from issuance of common stock                                                      5,269,433             102,755,801
                                                                                              -------------           -------------
            Net cash provided by financing activities                                             5,269,433             102,755,801
                                                                                              -------------           -------------
Effect of exchange rate on cash                                                                     397,220                    --


            Net increase (decrease) in cash and cash equivalents                                 (2,270,625)             94,910,368

Cash and cash equivalents at beginning of period                                                150,721,286              67,424,884
                                                                                              -------------           -------------
Cash and cash equivalents at end of period                                                    $ 148,450,661           $ 162,335,252
                                                                                              =============           =============

Supplemental disclosure of cash flow information:
  Cash paid for income taxes                                                                  $  25,820,925           $   9,977,302

</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  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 twenty-four
weeks ended June 17, 1997, are not  necessarily  indicative of the results to be
expected for the full year ending  December 30, 1997.  This quarterly  report on
Form 10-Q should be read in conjunction with the Company's audited  consolidated
financial statements in its 1996 Form 10-K.


2.    STOCK OPTIONS

      During the  twenty-four  week  period  ended June 17,  1997,  the  Company
granted stock options for  3,404,361  shares of Common Stock at exercise  prices
ranging  from $19.63 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 at $18.25,  the closing price on
that date, 7,713,201 shares that had been granted at higher prices prior to this
date.


3.    EARNINGS PER SHARE


      Primary  earnings  per share  amounts are  computed  based on the weighted
average  number of shares  actually  outstanding  plus the 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  June  17,  1997  and June  11,  1996  was  41,555,756  and
39,410,290,  respectively.  The number of shares resulting from this computation
for the  twenty-four  weeks ended June 17, 1997 and June 11, 1996 was 41,565,383
and 39,163,895, 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 June 17,  1997 and June 11,  1996 was  41,982,331  and
39,426,453 respectively. The number of shares resulting from this computation of
fully diluted  earnings per share for the twenty-four  weeks ended June 17, 1997
and June 11, 1996 was 41,604,705 and 39,180,058, 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 36
restaurants  in  1993,  48  restaurants  in 1994,  45  restaurants  in 1995,  45
restaurants  in 1996 and  intends  to open at least 60 Lone  Star  Steakhouse  &
Saloon  restaurants in 1997, all of which are expected to be  Company-owned  and
operated.  As of June 17, 1997 the Company has opened 19 of the 1997 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 two or three 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  $35 to  $40.  The  Company  opened  two  Sullivan's
Steakhouses  in 1996 and expects to develop  four to six  additional  Sullivan's
restaurant in 1997.

      Internationally,   the  Company,   through  a  joint   venture,   operates
twenty-three  Lone Star Steakhouse & Saloon  restaurants in Australia,  three of
which opened this year,  and expects to open an additional six to eight 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)    TWENTY-FOUR WEEKS ENDED
                                                                         JUNE 17,       JUNE 11,      JUNE 17,        JUNE 11,
                                                                          1997           1996          1997            1996
                                                                         -----          -----          -----          ----- 
                                                                                         (DOLLARS IN THOUSANDS)
<S>                                                                      <C>            <C>            <C>            <C>   
INCOME STATEMENT DATA:
      Net Sales                                                          100.0%         100.0%         100.0%         100.0%
      Costs and expenses:
            Costs of sales                                                35.1           35.4           35.2           35.4
            Restaurant operating expenses                                 35.2           33.7           35.0           34.6
            Depreciation and amortization                                  5.1            6.0            5.0            6.0
                                                                         -----          -----          -----          ----- 


                 Restaurant costs and expenses                            75.4           75.1           75.2           76.0
                                                                         -----          -----          -----          ----- 


      Restaurant operating income                                         24.6           24.9           24.8           24.0
      General and administrative expenses                                  3.6            4.9            3.6            4.6
      Loss on write-off of European Joint Venture                           --            7.9             -             3.9
                                                                         -----          -----          -----          ----- 


      Income from operations                                              21.0           12.1           21.2           15.5
      Other income, principally interest and minority interest              .9             .9             .8             .9
                                                                         -----          -----          -----          ----- 


      Income before provision for income taxes                            21.9           13.0           22.0           16.1
      Provision for income taxes                                           8.0            5.5            8.1            6.6
                                                                         -----          -----          -----          ----- 


      Net income                                                          13.9%           7.5%          13.9%           9.8%
                                                                         =====          =====          =====          ===== 


RESTAURANT OPERATING DATA:
      Average sales per restaurant on an annualized basis (2)          $  2,344       $  2,540       $  2,374       $  2,587
      Number of restaurants at end of the period                            255            189            255            189
</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 JUNE 17, 1997 COMPARED TO TWELVE WEEKS ENDED JUNE 11, 1996

      Net sales increased  $25,592,000  (23.7%) to  $133,360,000  for the twelve
weeks ended June 17, 1997  compared to  $107,768,000  for the twelve weeks ended
June 11, 1996  principally  attributable to $25,497,000 in sales from the 52 new
domestic Lone Star restaurants opened since June 1996, additional sales from the
Sullivan's  and Del Frisco's  restaurants  opened in 1996 and and 1997 and sales
from the twelve  additional units opened in the Australian  joint venture.  Same
store sales were down 6.4% in the second quarter.
      Costs of sales,  primarily food and beverages decreased as a percentage of
sales to 35.1%  from  35.4% due to  slightly  lower  beef  prices  and  improved
controls.  During these periods,  the Company  purchased  beef under  contracted
prices  which  allowed  the company to  maintain  more  stable beef costs.  Such
contracts have been extended through September 1997.
      Restaurant  operating  expenses  for the twelve  weeks ended June 17, 1997
increased  $10,604,000  (29.2%) from  $36,338,000 in the twelve weeks ended June
11, 1996 to  $46,942,000,  and such  expenses  increased as a percentage  of net
sales from  33.7% to 35.2%.  Most of this  increase  is  attributable  to higher
building and equipment  maintenance  costs on the domestic Lone Star restaurants
as well as higher labor and occupancy  costs in the  Australian  units,  and the
effect of fixed cost components on lower average restaurant sales.
      Depreciation  and  amortization  increased  $278,000  (4.3%) in the twelve
weeks ended June 17, 1997 over the twelve  weeks ended June 11,  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 52 new restaurants opened since
June 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 June 1996. General and administrative expenses for the twelve
weeks ended June 17, 1997 decreased  $483,000 (9.2%) from the comparable  period
in 1996, primarily due to the elimination of the 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 twelve weeks ended June 17,
1997  was  $1,152,000,  a $431,000 increase  from the comparable period in 1996,
reflecting increased interest income from the investment of the net proceeds of 
the 1996 public offering.
      The effective income tax rate for the twelve weeks ended June 17, 1997 and
the effective income tax rate for the twelve weeks ended June 11, 1996 was 36.6%
and 42.3%,  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.

                                      -10-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.


TWENTY-FOUR WEEKS ENDED JUNE 17, 1997 COMPARED TO TWENTY-FOUR WEEKS ENDED 
JUNE 11, 1996

      Net  sales  increased   $49,471,000   (23.1%)  to  $263,615,000   for  the
twenty-four  weeks  ended  June  17,  1997  compared  to  $214,144,000  for  the
twenty-four weeks ended June 11, 1996 principally attributable to $46,651,000 in
sales from the 52 new  domestic  Lone Star  restaurants  opened since June 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 5.7% for the twenty-four weeks.
      Costs of sales,  primarily food and beverages decreased as a percentage of
sales to 35.1%  from  35.4% due to  slightly  lower  beef  prices  and  improved
controls.  During these periods,  the Company  purchased  beef under  contracted
prices  which  allowed  the company to  maintain  more  stable beef costs.  Such
contracts have now been extended through September 1997.
      Restaurant  operating  expenses for the  twenty-four  weeks ended June 17,
1997 increased  $18,275,000  (24.7%) from  $74,057,000 in the twenty-four  weeks
ended June 11, 1996 to $92,332,000,  and such expenses increased as a percentage
of net sales from  34.6% to 35.0%.  Most of this  increase  is  attributable  to
higher  building  and  equipment  maintenance  costs on the  domestic  Lone Star
restaurants and the effect of fixed cost components on lower average  restaurant
sales.
      Depreciation and amortization increased $396,000 (3.1%) in the twenty-four
weeks ended June 17, 1997 over the  twenty-four  weeks ended June 11, 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 52 new  restaurants
opened  since  June 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 June 1996.  General  and  administrative
expenses for the twenty-four weeks ended June 17, 1997 decreased $505,000 (5.1%)
from the  comparable  period in 1996,  primarily due to the  elimination  of the
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  twenty-four  weeks ended
June 17, 1997  was $2,138,000,  a $783,000  increase from the comparable  period
in  1996,  reflecting  increased  interest income from the investment of the net
proceeds of the 1996 public offering.
      The  effective  income tax rate for the  twenty-four  weeks ended June 17,
1997 and the effective income tax rate for the twenty-four  weeks ended June 11,
1996 was 36.7% and 40.2% 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.

                                      -11-
<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 the recent  minimum wage changes
will have very  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.

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 twenty-four weeks ended June 17, 1997 and June 11, 1996.
<TABLE>
<CAPTION>
                                                                                Twenty-four weeks ended
                                                                           June 17,                   June 11,
                                                                             1997                      1996
                                                                             ----                      ----
<S>                                                                   <C>                          <C>          
Net cash provided by operating activities.......................      $    35,924,229              $  40,130,348
Net cash used in investment activities..........................          (43,861,507)               (47,975,781)
Net cash provided by financing
      activities................................................            5,269,433                102,755,801
Net cash provided by changes in exchange rates..................              397,220                       -
Net increase (decrease) in cash.................................           (2,270,625)                94,910,368
</TABLE>

During the twenty-four week period ended June 17, 1997, the Company's investment
in property and equipment was $40,612,780.

      The Company has opened 241  restaurants  in the past five fiscal  years of
which 48 opened in 1996 and an additional 23 opened during the twenty-four weeks
ended June 17,  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  June  17,  1997,  the  Company  had  $148,451,000  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 June 17,
1997, the Company has acquired 25 sites for future  development,  8 of which are
leased. In addition, as of such date the Company had entered into nine contracts
to purchase  sites.  The Company was also  actively  negotiating  to purchase or
lease  15  additional  sites.  The  Company  expects  to  expend   approximately
$95,000,000 to open new restaurants through the remainder of fiscal 1997.



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

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS.
            On  May  23,  1997,   the  Company   held  its  Annual   Meeting  of
Stockholders(the  "Meeting").  At the meeting the  stockholders  elected John D.
White and H. Gilliland  Nickel to the Board of Directors to serve until the 2000
Annual Meeting of Stockholders and until their successors have been duly elected
and qualified.  As to the newly elected  Directors,  there were 34,448,779 votes
"For" and 675,796 votes "Withheld" for John D. White, and 34,448,779 votes "For"
and  675,796  votes  "Withheld"  for  H.  Gilliland  Nickel.  In  addition,  the
stockholders  ratified  the  appointment  of  Ernst  &  Young  as the  Company's
independent  auditors  for  the  year  ending  December  30,  1997.  As  to  the
ratification of auditors there were 35,235,061 votes "For", 200 votes "Against",
and 5,130 votes "Abstained."


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
             (a) Exhibit   11.1              Computation of Per Share Earnings
                 Exhibit   99.1              Twelve Month Earnings Statement
                 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)

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




                                      -15-