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 16, 1998                                      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 21, 1998
Common Stock, $.01 par value                            39,217,967 shares

<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.

                                      Index

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

Item 1.  Financial Statements

      Condensed Consolidated Balance Sheets
      at June 16, 1998 and December 30, 1997                                  2

      Consolidated Statements of Income
      for the twelve weeks ended
      June 16, 1998 and June 17, 1997                                         3

      Consolidated Statements of Income
      for the twenty-four weeks ended
      June 16, 1998 and June 17, 1997                                         4

      Condensed Consolidated Statements of
      Cash Flows for the twenty-four weeks ended
      June 16, 1998 and June 17, 1997                                         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 3 and Item 6 have been omitted
since the items are either not applicable or the
answer is negative

Item 4. Submission of Matters to a Vote
        of Stockholders                                                      14

Item 5.        Other Information                                             14



                                      -1-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                      Condensed Consolidated Balance Sheets
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                   June 16, 1998              December 30, 1997
                                                                   -------------              -----------------
                       ASSETS

<S>                                                                <C>                         <C>
Current assets:
    Cash and cash equivalents                                      $ 102,443,753               $ 135,996,996
    Inventories                                                       11,362,921                  10,955,361
    Pre-opening costs - net                                            4,815,797                   9,162,642
    Other current assets                                               7,642,573                   6,523,785
                                                                     -----------                 -----------
         Total current assets                                        126,265,044                 162,638,784

Property and equipment, net                                          445,929,793                 429,732,586
Intangible and other assets, net                                      28,030,106                  28,440,560
                                                                     -----------                 -----------
            Total assets                                           $ 600,224,943               $ 620,811,930
                                                                     ===========                 ===========
         LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                               $  10,554,126               $  16,746,604
    Other current liabilities                                         19,748,751                  29,118,934
                                                                    ------------                ------------
            Total current liabilities                                 30,302,877                  45,865,538


Deferred income taxes                                                 11,876,895                   8,619,262
Other non-current liabilities                                            110,526                     158,736
Minority interest                                                              -                      19,927

Stockholders' Equity:
    Preferred stock                                                            -                           -
    Common stock                                                         397,280                     411,562
    Additional paid-in capital                                       325,659,818                 349,607,732
    Retained earnings                                                244,753,636                 223,015,141
    Accumulated other comprehensive income                           (12,876,089)                 (6,885,968)
                                                                     ------------               ------------
            Total stockholders' equity                               557,934,645                 566,148,467
                                                                    ------------                ------------
            Total liabilities and stockholders' equity             $ 600,224,943               $ 620,811,930
                                                                    ============                ============
</TABLE>

                             See accompanying notes.
                                      - 2 -

<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                        Consolidated Statements of Income
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                For the twelve weeks ended
                                                                          ----------------------------------------
                                                                          June 16, 1998              June 17, 1997
                                                                          -------------              -------------

<S>                                                                       <C>                         <C>         
Net sales                                                                 $141,023,159                $133,359,880
Costs and expenses:
    Costs of sales                                                          53,447,707                  46,833,703
    Restaurant operating expenses                                           62,235,739                  46,941,973
    Depreciation and amortization                                            8,520,795                   6,728,165
                                                                          ------------                ------------
Restaurant costs and expenses                                              124,204,241                 100,503,841
                                                                          ------------                ------------
Restaurant operating income                                                 16,818,918                  32,856,039
General and administrative expenses                                          7,589,173                   4,750,362
                                                                          ------------                ------------
Income from operations                                                       9,229,745                  28,105,677

Other income, principally interest                                           1,205,964                   1,151,686
                                                                          ------------                ------------

Income before income taxes and minority interest                            10,435,709                  29,257,363
Provision for income taxes                                                  (3,575,720)                (10,685,532)
Minority interest                                                              167,094                     (25,608)
                                                                          ------------                ------------
Net income                                                                $  7,027,083                $ 18,546,223
                                                                          ============                ============

Basic earnings per share                                                  $       0.17                $       0.45
                                                                          ============                ============
Diluted earnings per share                                                $       0.17                $       0.44
                                                                          ============                ============
</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 16, 1998               June 17, 1997
                                                                        -------------               --------------
<S>                                                                     <C>                        <C>
Net sales                                                               $294,537,013               $ 263,615,496
Costs and expenses:
    Costs of sales                                                       110,662,413                  92,790,743
    Restaurant operating expenses                                        123,135,508                  92,331,567
    Depreciation and amortization                                         17,144,920                  13,158,719
                                                                        ------------                ------------
Restaurant costs and expenses                                            250,942,841                 198,281,029
                                                                        ------------                ------------
Restaurant operating income                                               43,594,172                  65,334,467
General and administrative expenses                                       13,031,284                   9,393,750
                                                                        ------------                ------------
Income from operations                                                    30,562,888                  55,940,717

Other income, principally interest                                         2,743,844                   2,137,833
                                                                        ------------                ------------

Income before income taxes and minority interest                          33,306,732                  58,078,550
Provision for income taxes                                               (11,652,838)                (21,288,320)
Minority interest                                                             84,601                     (40,491)
                                                                        ------------                ------------
Net income                                                              $ 21,738,495               $  36,749,739
                                                                        ============                ============

Basic earnings per share                                                $       0.53               $        0.90
                                                                        ============                ============
Diluted earnings per share                                              $       0.53               $        0.88
                                                                        ============                ============
</TABLE>

                             See accompanying notes.

                                      - 4 -
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                 Condensed Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                     For the twenty-four weeks ended
                                                                                 -------------------------------------------
                                                                                 June 16, 1998                 June 17, 1997
                                                                                 -------------                 -------------
<S>                                                                              <C>                           <C>         
  Cash flows from operating activities:
   Net income                                                                    $ 21,738,495                  $ 36,749,739
   Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization                                                17,331,272                    13,289,044
      Net change in operating assets and liabilities:
       Change in operating assets                                                  (3,110,578)                  (10,686,308)
       Change in operating liabilities                                            (12,353,238)                   (3,428,246)
                                                                                  -----------                   -----------
         Net cash provided by operating activities                                 23,605,951                    35,924,229

  Cash flows from investing activities:
   Purchases of property and equipment                                            (32,504,131)                  (40,612,780)
   Other                                                                             (428,483)                   (3,248,727)
                                                                                  -----------                   -----------
         Net cash used in investing activities                                    (32,932,614)                  (43,861,507)

  Cash flows from financing activities:
   Net proceeds from issuance of common stock                                         996,714                     5,269,433
   Repurchase of Common Stock                                                     (24,958,910)                           -
                                                                                  -----------                   -----------
         Net cash provided by (used in) financing activities                      (23,962,196)                    5,269,433

  Effect of exchange rate on cash                                                    (264,384)                      397,220
                                                                                    -----------                 -----------

         Net decrease in cash and cash equivalents                                (33,553,243)                   (2,270,625)

  Cash and cash equivalents at beginning of period                                135,996,996                   150,721,286
                                                                                  -----------                   -----------
  Cash and cash equivalents at end of period                                     $102,443,753                  $148,450,661
                                                                                  ===========                   ===========

  Supplemental disclosure of cash flow information:
   Cash paid for income taxes                                                    $ 16,662,821                  $ 25,820,925
</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 16, 1998, are not  necessarily  indicative of the results to be
expected for the full year ending  December 29, 1998.  This quarterly  report on
Form 10-Q should be read in conjunction with the Company's audited  consolidated
financial statements in its 1997 Form 10-K.

2.    Stock Options

      During the  twenty-four  week  period  ended June 16,  1998,  the  Company
granted  stock  options for 192,884  shares of Common  Stock at exercise  prices
ranging  from $16.88 to $23.13 per share  pursuant to its 1992 stock option plan
for employees.

3.    Earnings Per Share

      Basic  earnings  per share  amounts  are  computed  based on the  weighted
average  number of shares  outstanding.  The number of weighted  average  shares
outstanding  for the twelve  week  period  ended June 16, 1998 and June 17, 1997
were 40,780,064 and  40,990,069,  respectively.  The number of weighted  average
shares  outstanding for the twenty-four week period ended June 16, 1998 and June
17, 1997 were 40,972,546 and 40,915,203, 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 June 16, 1998, and June 17, 1997,  was  41,059,632  and  41,982,331,
respectively.  The number of shares  resulting from this  computation of diluted
earnings per share for the  twenty-four  weeks ended June 16, 1998, and June 17,
1997, was 41,323,401 and 41,604,705, respectively.

4.    Recently Issued Accounting Standards

      The Accounting  Standards Executive Committee recently issued Statement of
Position 98-5,  Reporting on Costs of Start-up Activities which will require the
Company to expense start-up costs,  including  organizational costs, as incurred
and to  report  the  initial  adoption  as a  cumulative  effect  of a change in
accounting principle as described in APBO No. 20, Accounting Changes, during the
first quarter of its fiscal year 1999. The cumulative effect upon adoption would
result in a one-time  charge to income in an amount  equal to the net book value
of the  Company's  start-up  costs.  A  resulting  benefit of this change is the
discontinuance of amortization expense in subsequent periods.

                                      -6-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.

Recently Issued Accounting Standards - continued

      As of December  31, 1997,  the Company  adopted the  Financial  Accounting
Standards Board Statement 130,  Reporting  Comprehensive  Income.  Statement 130
establishes new rules for the reporting and display of comprehensive  income and
its  components;  however,  the adoption of this  Statement had no impact on the
Company's  net  income or  shareholders'  equity.  Statement  130  requires  the
Company's foreign currency translation adjustments, which prior to adoption were
reported   separately  in  shareholders'   equity,   to  be  included  in  other
comprehensive income.

      During  the twelve  weeks  ended June 16,  1998 and June 17,  1997,  total
comprehensive income amounted to $(719,095) and $19,182,070, respectively.

      During the twenty-four  weeks ended June 16, 1998 and June 17, 1997, total
comprehensive income amounted to $15,748,374 and $37,146,959, respectively.

5.    Treasury Stock

      Pursuant to authorization by the Company's Board of Directors, the Company
purchased  1,490,000  shares of its Common  Stock  during the  twenty-four  week
period ended June 16, 1998 at an average price of $16.75 per share.  The Company
is accounting for this repurchase  using the constructive  retirement  method of
accounting  wherein the aggregate par value of the stock is charged to the stock
account and the excess of cost over par value is charged to paid in capital.

      As of June 16, 1998, the Board of Directors had authorized the purchase of
up to 2 million shares of the Company's Common Stock.

      Subsequent to June 16, 1998, the Board of Directors authorized  purchasing
up to 10% of the then  remaining  outstanding  shares of Common Stock,  totaling
approximately 4 million additional shares.


                                      -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 has  maintained  rapid  expansion  over the past three  fiscal
years during which it opened 45 domestic  restaurants in 1995, 45 restaurants in
1996 and 60 restaurants in 1997. The Company is slowing its  development of Lone
Star  Steakhouse & Saloon  restaurants and expects to open up to 20 locations in
the  fiscal  year  ended  December  29,  1998.  All  units  are  expected  to be
Company-owned  and operated.  As of June 16, 1998, the Company has opened two of
the 1998 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 continuing to develop its upscale steakhouse concepts. The
Company is  currently  operating  three Del  Frisco's  Double  Eagle Steak House
restaurants  where the check average is  approximately  $65. The Company has one
additional Del Frisco's Double Eagle Steak House  restaurant with  approximately
16,000  square  feet of  space in  Rockefeller  Plaza  in New  York  City  under
construction which it expects to open in the fourth quarter of 1998.

      The Company operates a second upscale steak restaurant concept, Sullivan's
Steakhouse,  where the average  check per  customer is  approximately  $50.  The
Company is  operating  six  Sullivan's  Steakhouse  restaurants  and  expects to
develop three to five additional Sullivan's Steakhouse restaurants in 1998.

      Internationally,  the Company,  through a joint venture,  operates 38 Lone
Star  Steakhouse & Saloon  restaurants  in Australia,  five of which opened this
year, and expects to open an additional three to five units in 1998.



                                      -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 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 16,     June 17,         June 16,           June 17,
                                                                           1998         1997            1998               1997
                                                                           ----         ----            ----               ----
                                                                                           (dollars in thousands)

Income Statement Data:
<S>                                                                     <C>             <C>            <C>                 <C>
      Net Sales                                                         100.0%          100.0%         100.0%              100.0%
      Costs and expenses:
            Costs of sales............................................   37.9            35.1           37.6                35.2
            Restaurant operating expenses.............................   44.0            35.2           41.8                35.0
            Depreciation and amortization.............................    6.0             5.1            5.8                 5.0
                                                                        -----           -----          -----               -----

                 Restaurant costs and expenses........................   88.1            75.4           85.2                75.2
                                                                        -----           -----          -----               -----

      Restaurant operating income.....................................   11.9            24.6           14.8                24.8
      General and administrative expenses.............................    5.4             3.6            4.4                 3.6
                                                                        -----           -----          -----               -----
      Income from operations..........................................    6.6            21.0           10.4                21.2
      Other income, principally interest and minority interest........     .9              .9             .9                  .8
                                                                        -----           -----          -----               -----

      Income before provision for income taxes .......................    7.5            21.9           11.3                22.0
      Provision for income taxes......................................    2.5             8.0            3.9                 8.1
                                                                        -----           -----          -----               -----
      Net income .....................................................    5.0%           13.9%           7.4%               13.9%
                                                                        =====           =====          =====               =====


Restaurant Operating Data:
      Average sales per restaurant on an annualized basis (2)          $1,945          $2,344         $2,044              $2,374
      Number of restaurants at end of the period                          316             255            316                 255
</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 16, 1998 Compared to Twelve Weeks Ended June 17, 1997

      Net sales increased $7,663,000 (5.7%) to $141,023,000 for the twelve weeks
ended June 16, 1998,  compared to  $133,360,000  for the twelve weeks ended June
17, 1997,  mostly  attributable to $18,234,000 in sales from the 43 new domestic
Lone Star  restaurants  opened since June 1997,  additional sales from the three
Sullivan's  restaurants  opened since June 1997 and sales from the 15 additional
units opened in the Australian joint venture.  The increase was partially offset
by an 11.2%  decrease in same-store  sales which  resulted  from lower  customer
counts during the quarter while guest check averages remained consistent.

      Costs of sales, primarily food and beverages, increased as a percentage of
sales to 37.9% from 35.1% due to higher beef and produce prices,  and the higher
cost of sales of new entree's  introduced in the fourth  quarter of 1997.  Since
September,  1997,  the Company has not purchased beef under  contracted  prices,
although there may be a possibility of contracting prices in the future.

      Restaurant  operating  expenses  for the twelve weeks ended June 16, 1998,
increased  $15,294,000  (32.6%) from  $46,942,000 in the twelve weeks ended June
17, 1997, to $62,236,000,  and increased as a percentage of net sales from 35.2%
to 44.1%.  This increase is  attributable to higher labor costs and higher costs
for building and equipment maintenance on the domestic Lone Star restaurants and
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  $1,793,000 (26.6%) in the twelve
weeks  ended June 16,  1998,  over the twelve  weeks  ended June 17,  1997,  and
increased as a percentage of net sales from 5.1% to 6.0%. The  additional  fixed
assets  and  capitalized  pre-opening  expenses  for 46 new  restaurants  opened
domestically  as well as 15  restaurants  opened in  Australia  since  June 1997
increased the  depreciation and amortization for the second quarter of 1998 over
the prior year.

      General and  administrative  expenses  for the twelve weeks ended June 16,
1998, increased $2,839,000 (59.8%) from the comparable period in 1997, primarily
due to additional  multi-unit  managers and increased travel expenses associated
with the recertification process and training materials for the management teams
of all domestic Lone Star locations.

      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  $2,010,000,  plus an additional fee of $440 per restaurant per
28-day accounting  period and reimbursement of out-of-pocket  costs and expenses
during the fiscal  year ended  December  30,  1997.  The service  agreement  was
renewed for fiscal 1998 with the fixed annual  charge  increasing  to $3,737,000
and the per restaurant, per accounting period fee increasing to $466. 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 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 16,
1998, was  $1,206,000,  a $54,000  increase from the comparable  period in 1997,
reflecting  an  increase  in  interest  income  from the  investment  of the net
proceeds of the 1996 public offering.

      The  effective  income tax rates for the twelve weeks ended June 16, 1998,
and the twelve weeks ended June 17, 1997 were 33.7% and 36.6%, respectively. The
decrease in the rate is  primarily  due to a reduction  in the tax  liability in
certain states and a higher proportion of tax exempt income (primarily interest)
to total income.


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

Twenty-four  Weeks Ended June 16, 1998 Compared to Twenty-four  Weeks Ended June
17, 1997

      Net  sales  increased   $30,922,000   (11.7%)  to  $294,537,000   for  the
twenty-four  weeks  ended  June  16,  1998,  compared  to  $263,615,000  for the
twenty-four  weeks ended June 17, 1997,  mostly  attributable  to $39,768,000 in
sales from the 43 new  domestic  Lone Star  restaurants  opened since June 1997,
additional  sales from the three Sullivan's  restaurants  opened since June 1997
and sales from the 15 additional  units opened in the Australian  joint venture.
The increase was partially  offset by a 8.2% decrease in same-store  sales which
resulted from lower customer counts during the period while guest check averages
remained consistent.

      Costs of sales, primarily food and beverages, increased as a percentage of
sales to 37.6% from 35.2% due to higher beef and produce prices,  and the higher
cost of sales of new entree's  introduced in the fourth  quarter of 1997.  Since
September,  1997,  the Company has not purchased beef under  contracted  prices,
although there may be a possibility of contracting prices in the future.

      Restaurant  operating  expenses for the  twenty-four  weeks ended June 16,
1998 increased  $30,804,000  (33.4%) from  $92,332,000 in the twenty-four  weeks
ended June 17, 1997, to $123,136,000, and increased as a percentage of net sales
from 35.0% to 41.8%.  This  increase is  attributable  to higher labor costs and
higher costs for building and  equipment  maintenance  on the domestic Lone Star
restaurants  and 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   $3,986,000  (30.3%)  in  the
twenty-four weeks ended June 16, 1998, over the twenty-four weeks ended June 17,
1997,  and  increased  as a  percentage  of net  sales  from  5.0% to 5.8%.  The
additional  fixed  assets  and  capitalized  pre-opening  expenses  for  46  new
restaurants  opened  domestically as well as 15 restaurants  opened in Australia
since June 1997  increased  the  depreciation  and  amortization  for the second
quarter of 1998 over the prior year.

      General and  administrative  expenses for the twenty-four weeks ended June
16,  1998  increased  $3,638,000  (38.7%)  from the  comparable  period in 1997,
primarily due to additional  personnel at the  multi-unit  management  level and
increased  travel  expenses  associated  with the  recertification  process  and
training materials for the management teams of all domestic Lone Star locations.

      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  $2,010,000,  plus an additional fee of $440 per restaurant per
28-day accounting  period and reimbursement of out-of-pocket  costs and expenses
during the fiscal  year ended  December  30,  1997.  The service  agreement  was
renewed for fiscal 1998 with the fixed annual  charge  increasing  to $3,737,000
and the per restaurant, per accounting period fee increasing to $466. 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 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
16, 1998, was  $2,744,000,  a $606,000  increase from the  comparable  period in
1997,  reflecting an increase in interest  income from the investment of the net
proceeds of the 1996 public offering.

      The effective  income tax rates for the  twenty-four  weeks ended June 16,
1998,  and the  twenty-four  weeks  ended June 17,  1997,  were 34.9% and 36.7%,
respectively.  The decrease in the rate is  primarily  due to a reduction in the
tax  liability in certain  states and a higher  proportion  of tax exempt income
(primarily interest) to total income.


                                      -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,  minimum wage changes will have
little effect on labor costs.  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  the  forward-looking  statements  contained in the report will
prove to be accurate.

Year 2000 Compliance

      The  Company  currently  believes  its  essential  processes,  systems and
business functions will be ready for the millennium transition and is taking the
necessary  steps  to  accomplish  this  objective.  The Year  2000  issue is not
anticipated  to have a material  impact on the Company's  results of operations,
financial position or its cash flows.




                                      -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:

<TABLE>
<CAPTION>

                                                                  Twenty-four weeks ended
                                                                June 16,           June 17,
                                                                  1998               1997
                                                           ----------------       -----------
<S>                                                       <C>                  <C>
Net cash provided by operating activities.............    $   23,605,951       $  35,924,229
Net cash used in investment activities................       (32,932,614)        (43,861,507)
Net cash provided (used) by financing
      activities......................................       (23,962,196)          5,269,433
Effect of exchange rate on cash.......................          (264,384)            397,220
Net decrease in cash..................................       (33,553,243)         (2,270,625)
</TABLE>

During the twenty-four week period ended June 16, 1998, the Company's investment
in property and equipment was $32,504,131.

      The Company has opened 241  restaurants  in the past five fiscal  years of
which 60 opened in 1997 and an additional 3 opened during the twenty-four  weeks
ended June 16,  1998.  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  16,  1998,  the  Company  had  $102,444,000  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 16,
1998,  the  Company  has  acquired  14 sites,  and has  entered  into four lease
agreements for future development.  In addition,  the Company had entered into a
commitment  to purchase  one  additional  site.  The  Company was also  actively
negotiating  to purchase or lease 29 additional  sites.  The Company  expects to
expend  approximately  $55,000,000 to open new restaurants through the remainder
of fiscal 1998.



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


Item 4.  Submission of Matters to a Vote of Stockholders

            On May 27, 1998, the Company held its Annual Meeting of Stockholders
(the "Meeting"). At the meeting the stockholders elected Jamie B. Coulter to the
Board of Directors to serve until the 2001 Annual  Meeting of  Stockholders  and
until his successor has been duly elected and qualified. As to the newly elected
Director,  there were  34,241,813  votes "For" and 479,639 votes  "Withheld" for
Jamie B. Coulter.  In addition,  the  stockholders  ratified the  appointment of
Ernst & Young as the Company's independent auditors for the year ending December
29, 1998. As to the  ratification of auditors there were 34,535,436  votes "For"
16,695 votes "Against", and 169,321 votes "Abstained."

Item 5.  Other Information

      Pursuant to recent  amendments  to the proxy  rules  under the  Securities
Exchange Act of 1934, as amended,  the Company's  stockholders are notified that
the deadline for providing the Company timely notice of any stockholder proposal
to be  submitted  outside of the Rule 14a-8  process  for  consideration  at the
Company's 1999 Annual  Meeting of  Stockholders  (the "Annual  Meeting") will be
March 12, 1999. As to all such matters which the Company does not have notice on
or prior to March 12,  1999,  discretionary  authority  shall be  granted to the
designated persons in the Company's proxy statement for the Annual Meeting.

Item 6.  Exhibits and Reports on Form 8-K

             Exhibits:

              (a) Exhibit 27..................Financial Date 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:                                   /s/ John D. White
                                        --------------------------------
                                        John D. White
                                        Chief Financial and Principal Accounting
                                        Officer, Executive Vice President,
                                        Treasurer and Director