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

                                    FORM 10-Q

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

        For quarter ended                                Commission file number
        September 7, 1999                                   0-19907
        -----------------                                   -------


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


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

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

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

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

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

     Class                                      Outstanding at October 22, 1999
Common Stock, $.01 par value                            33,092,668 shares


<PAGE>
                      Lone Star Steakhouse & Saloon, Inc.

                                      Index

                                                                          Page
                                                                         Number
PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

      Condensed Consolidated Balance Sheets
      at September 7, 1999 and December 29, 1998                            2

      Condensed Consolidated Statements of
      Operations for the twelve weeks ended
      September 7, 1999 and September 8, 1998                               3

      Condensed Consolidated Statements of
      Income for the thirty-six weeks ended
      September 7, 1999 and September 8, 1998                               4

      Condensed Consolidated Statements of
      Cash Flows for the thirty-six weeks ended
      September 7, 1999 and September 8, 1998                               5

      Notes to Condensed Consolidated
      Financial Statements                                                  6

Item 2.  Management's Discussion and
      Analysis of Financial Condition and
      Results of Operations                                                 9

Item 3.  Quantitative and Qualitative                                      17
              Disclosure of Market Risk

PART II.  OTHER INFORMATION
Items 1 through 5 have been omitted
since the items are either inapplicable or the
answer is negative

Item 6.  Exhibits and Reports on Form 8-K                                  17


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

<TABLE>
<CAPTION>

                                                            September 7, 1999 December 29, 1998
                                                            ----------------- -----------------

      ASSETS

Current assets:
<S>                                                               <C>         <C>
    Cash and cash equivalents                                     $  71,389   $  89,847
    Inventories                                                      11,876      15,894
    Other current assets                                              4,958       6,565
                                                                ----------- -----------
         Total current assets                                        88,223     112,306

Property and equipment, net                                         449,679     461,065
Intangible and other assets, net                                     33,034      35,212
                                                                ----------- -----------
            Total assets                                          $ 570,936   $ 608,583
                                                                =========== ===========

                            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                              $  10,672   $  10,545
    Other current liabilities                                        28,146      34,168
                                                               ------------   ---------
            Total current liabilities                                38,818      44,713


Deferred income taxes                                                 4,662      10,429
Stockholders' Equity:
    Preferred stock                                                    --          --
    Common stock                                                        345         386
    Additional paid-in capital                                      276,645     314,366
    Retained earnings                                               258,071     248,522
    Accumulated other comprehensive income (loss)                    (7,605)     (9,833)
                                                               ------------   ---------
            Total stockholders' equity                              527,456     553,441
                                                               ------------   ---------
            Total liabilities and stockholders' equity            $ 570,936   $ 608,583
                                                               ============   =========
</TABLE>


                             See accompanying notes.

                                       -2-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.
                 Condensed Consolidated Statements of Operations
                  (In thousands, except for per share amounts)
                                   (Unaudited)

                                      For the twelve weeks ended
                                      ---------------------------
                                   September 7,1999  September 8,1998
                                   ----------------  ----------------
                                                        (Restated)

Net sales                              $134,801         $142,157
Costs and expenses:
    Costs of sales                       47,314           54,329
    Restaurant operating expenses        62,418           68,208
    Depreciation and amortization         7,483            5,973
    Provision for impaired assets        19,365              --
                                   ------------     ------------
Restaurant costs and expenses           136,580          128,510
                                   ------------     ------------
Restaurant operating income (loss)       (1,779)          13,647
General and administrative expenses       7,651            8,113
                                   ------------     ------------
Income (loss) from operations            (9,430)           5,534

Other income, principally interest          639              861
                                   ------------     ------------

Income (loss) before income taxes        (8,791)           6,395
Provision (benefit) for income taxes     (3,475)           2,091
                                   ------------     ------------
Net income (loss)                     $  (5,316)       $   4,304
                                   ============     ============

Basic earnings (loss) per share       $   (0.15)       $    0.11
                                   ============     ============


Diluted earnings (loss) per share     $   (0.15)       $    0.11
                                   ============     ============



                             See accompanying notes.

                                       -3-
<PAGE>

                       LONE STAR STEAKHOUSE & SALOON, INC.
                   Condensed Consolidated Statements of Income
                  (In thousands, except for per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                             For the thirty-six weeks ended
                                                          ---------------------------------
                                                          September 7,1999   September 8,1998
                                                          ----------------   ----------------
                                                                               (Restated)

<S>                                                           <C>             <C>
Net sales                                                     $ 409,492       $ 436,694
Costs and expenses:
    Costs of sales                                              145,504         164,992
    Restaurant operating expenses                               185,135         192,622
    Depreciation and amortization                                21,535          17,567
    Provision for impaired assets                                19,365            --
                                                              ---------       ---------
Restaurant costs and expenses                                   371,539         375,181
                                                              ---------       ---------
Restaurant operating income                                      37,953          61,513
General and administrative expenses                              24,040          21,144
                                                              ---------       ---------
Income from operations                                           13,913          40,369
Other income, principally interest                                1,219           3,689
                                                              ---------       ---------

Income before income taxes                                       15,132          44,058
Provision for income taxes                                        5,583          15,150
                                                              ---------       ---------
Income before cumulative effect of a change
    in accounting principle                                       9,549          28,908
Cumulative effect of change in accounting principle                --            (6,904)
                                                              ---------       ---------
Net income                                                    $   9,549       $  22,004
                                                              =========       =========

Basic earnings per share:
  Income before cumulative effect of a change
      in accounting principle                                 $    0.26       $    0.71
  Cumulative effect of change in accounting principle              --             (0.17)
                                                              ---------       ---------
Basic earnings per share                                      $    0.26       $    0.54
                                                              =========       =========

Diluted earnings per share:
    Income before cumulative effect of a change
         in accounting principle                              $    0.26       $    0.71
    Cumulative effect of change in accounting principle            --             (0.17)
                                                              ---------       ---------
Diluted earnings per share                                    $    0.26       $    0.54
                                                              =========       =========
</TABLE>

                             See accompanying notes.

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

                                                        For the thirty-six weeks ended
                                                       ---------------------------------
                                                       September 7,1999 September 8,1998
                                                       ---------------------------------
                                                                      (Restated)
Cash flows from operating activities:
<S>                                                       <C>         <C>
   Net income                                             $   9,549   $  22,004
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation and amortization                       23,112      17,567
         Provision for impaired assets                       19,365        --
         Cumulative effect of accounting change                --         6,904
         Net change in operating assets and liabilities:
     Change in operating assets                               5,729         (76)
     Change in operating liabilities                        (11,662)     (9,600)
                                                        ----------- -----------
             Net cash provided by operating activities       46,093      36,799

Cash flows from investing activities:
   Purchases of property and equipment                      (26,970)    (46,357)
   Other                                                        148      (1,585)
                                                        ----------- -----------
             Net cash used in investing activities          (26,822)    (47,942)

Cash flows from financing activities:
   Net proceeds from issuance of common stock                    12         997
   Common stock repurchased and retired                     (37,774)    (32,163)
                                                        ----------- -----------
             Net cash used in financing activities          (37,762)    (31,166)

Effect of exchange rate on cash                                  33          (2)
                                                        ----------- -----------

      Net decrease in cash and cash equivalents             (18,458)    (42,311)

Cash and cash equivalents at beginning of period             89,847     135,997
                                                        ----------- -----------
Cash and cash equivalents at end of period                $  71,389   $  93,686
                                                        =========== ===========

Supplemental disclosure of cash flow information:
   Cash paid for income taxes                             $  11,353   $  16,776
</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 thirty-six
weeks ended September 7, 1999 are not  necessarily  indicative of the results to
be expected for the full year ending December 28, 1999. This quarterly report on
Form 10-Q should be read in conjunction with the Company's audited  consolidated
financial statements in its 1998 Form 10-K.

      The 1998 condensed consolidated financial statements have been restated to
reflect the adoption of SOP 98-5 Reporting the Costs of Start-Up Activities.

      Certain   reclassifications   have  been   made  to  the  1998   condensed
consolidated financial statements to conform to the 1999 presentation.

2.          Comprehensive Income

Comprehensive income (loss) is comprised of the following (in thousands):
<TABLE>
<CAPTION>

                                           For the twelve weeks ended               For the thirty-six weeks ended
                                      September  7, 1999   September 8, 1998    September 7, 1999   September 8, 1998
                                      --------------------------------------    -------------------------------------

<S>                                        <C>                 <C>                    <C>              <C>
Net income (loss)                          $(5,316)            $4,304                 $  9,549         $22,004
Foreign currency translation adjustments       679                528                    2,228         ( 5,462)
                                           -------             ------                 --------         --------
Comprehensive income (loss)                $(4,637)            $4,832                 $ 11,777         $16,542
                                           ========            ======                 ========         =======
</TABLE>


3.    Earnings Per Share

      Basic  earnings  per share  amounts  are  computed  based on the  weighted
average  number  of  shares  actually  outstanding.   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 weighted average shares  outstanding for the periods  presented are as
follows (in thousands):
<TABLE>
<CAPTION>

                                                 For the twelve weeks ended          For the thirty-six-weeks ended
                                             September 7, 1999  September 8, 1998    September 7, 1999   September 8, 1998
                                             ------------------------------------    -------------------------------------

<S>                                           <C>                  <C>                      <C>               <C>
Basic average share outstanding               35,395               39,236                   36,241            40,394
Diluted average share outstanding             35,395(a)            39,255                   36,394            40,430
</TABLE>

(a)   Basic and  diluted  shares  outstanding  are the same for the  twelve-week
      period ended September 7, 1999, since the diluted share computations would
      be antidilutive.

                                              -6-
<PAGE>
4.    ACCOUNTING CHANGE

      In April 1998,  the American  Institute of  Certified  Public  Accountants
issued SOP 98-5-Reporting the Costs of Start-Up Activities (the SOP),  requiring
the costs related to start-up activities be expensed as incurred. Prior to 1998,
the Company  capitalized  certain  pre-opening costs incurred in connection with
the opening of new restaurant  locations.  The Company adopted the provisions of
the SOP in its financial  statements  for the year ended  December 29, 1998, and
retroactively  made it  effective  the  beginning  of 1998.  The  effect  of the
adoption  of the SOP  resulted  in a charge  for the  cumulative  effect  of the
accounting change of $6,904, net of income taxes of $2,922 ($0.17 per share), to
expense costs that had been capitalized  prior to 1998. This is reflected in the
restated  condensed  consolidated  statements  of income  and cash flows for the
periods presented in 1998.

5.    PROVISION FOR IMPAIRED ASSETS

In the third  quarter of 1999,  the  Company  recorded an  impairment  charge of
$19,365 reflecting the write-down of certain  under-performing  restaurants.  In
accordance with the provisions of SFAS 121, the Company periodically reviews its
long-lived  assets  which  are held and used in its  restaurant  operations  for
indications of impairment.  Based upon that review, the trends in the operations
of certain  restaurants  indicated that the undiscounted  future cash flows from
their operations would be less than the carrying value of the long-lived  assets
related to the  restaurants.  The charge  reflects  the  difference  between the
carrying  value of the related  restaurant  property and  equipment and the fair
value of the assets based on discounted estimated future cash flows.

6.    TREASURY STOCK TRANSACTIONS

      In August 1999, the Board of Directors  authorized the Company to purchase
up to 3,500,000  shares of the  Company's  common stock in the open market or in
privately   negotiated   transactions.   The  1999  action  along  with  similar
authorizations  in 1998 brings the total shares  authorized  for  repurchase  to
9,400,000  shares.  Pursuant  to  the  authorizations,   the  Company  purchased
4,093,000 shares of its common stock during the thirty-six weeks ended September
7, 1999, at an average price of $9.23 per share.  The Company is accounting  for
the purchases using the constructive retirement method of accounting wherein the
aggregate  par value of the stock is charged to the common stock account and the
excess of cost over par value is charged to paid-in capital.

7.    STOCK OPTIONS

      During the  thirty-six  week period ended  September 7, 1999,  the Company
granted  stock  options for 581,600  shares of Common  Stock at exercise  prices
ranging from $6.69 to $8.38 per share pursuant to its 1992 stock option plan for
employees.

8.    RETIREMENT PLANS

      In August 1999, the Company approved the adoption of two plans, which will
  provide  retirement  benefits to the participants.  The salary reduction plans
  are  provided  through a qualified  401(k) plan and a  non-qualified  deferred
  compensation  plan (the Plans).  Under the Plans,  employees  who meet minimum
  service requirements and elect to participate, may make contributions of their
  annual  salaries  of up to 15% under the  401(k)  plan and up to 20% under the
  deferred  compensation  plan.  The  Company  is  required  to make a  matching
  contribution equal to 50% of the employee's contribution. The Company may make
  additional  contributions  at the  discretion of the Board of  Directors.  The
  Plans are effective beginning October 7, 1999.

                                      -7-
<PAGE>

9.    RECENTLY ISSUED ACCOUNTING STANDARDS

      In June 1998, the FASB issued Statement No. 133 (SFAS 133), Accounting for
Derivative  Instruments and Hedging Activities,  which is required to be adopted
in years  beginning  after June 15, 2000. The Company  expects to adopt SFAS 133
effective  January 2, 2001.  SFAS 133 will require the Company to recognize  all
derivatives  on the balance  sheet at fair  value.  Derivatives  not  considered
hedges must be adjusted  to fair value  through  income.  If a  derivative  is a
hedge,  depending  on the nature of the hedge,  changes in the fair value of the
derivative  will either be offset against the change in fair value of the hedged
asset,  liability or firm commitment  through  earnings,  or recognized in other
comprehensive  income  until the hedged  item is  recognized  in  earnings.  The
ineffective  portion of a derivative's  change in fair value will be immediately
recognized in earnings. The Company does not anticipate the adoption of SFAS 133
will have a  significant  effect  on its  results  of  operations  or  financial
position.





                                      -8-

<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.

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

GENERAL

      The following  discussion and analysis should be read in conjunction  with
the financial statements and notes thereto included elsewhere in this Form 10-Q.

      In May 1998,  the Company  temporarily  suspended  development of new Lone
Star  restaurants  other than  properties  which had been  committed for or were
under   construction.   During  1998,   the  Company   substantially   completed
remodel/construction  of twelve additional  restaurants  (including one that was
damaged  by fire  and  then  rebuilt),  and  anticipates  opening  two of  these
restaurants  in late  1999 and the  remainder  in 2000.  The  Company  opened 45
restaurants  in 1995, 45 restaurants in 1996, 60 restaurants in 1997, and two in
1998. As of September 7, 1999,  the Company had not opened any new  restaurants,
but had development  sites available for eight  additional  restaurants,  six of
which were  acquired in 1999 by purchase and two by lease.  The Company does not
anticipate  that any of the eight sites will be  constructed  or opened in 1999.
During  the second  quarter  of 1999,  the  Company  closed two  underperforming
domestic  Lone  Star  restaurants.  As of  September  7,  1999,  there  were 264
operating domestic Lone Star restaurants.

      Although,  the Company believes  considerable  opportunities  exist in the
upscale steakhouse market, the Company has temporarily curtailed the development
of its upscale  steakhouse  concepts.  Future development will be evaluated on a
site-by-site  basis. There are no current commitments to open additional upscale
units  beyond the two Del Frisco's  restaurants  and one  Sullivan's  restaurant
scheduled to open in the first half of 2000.

      The Company is currently operating three Del Frisco's  restaurants and has
two additional  restaurants under  construction;  one with approximately  16,000
square feet of space in Rockefeller Plaza in New York City and one in Las Vegas,
Nevada.  The Company expects to open both of these restaurants in the first half
of 2000.

      As of September 7, 1999,  the Company was  operating  fourteen  Sullivan's
steakhouse  restaurants.  In  the  first  three  quarters  of  1999,  Sullivan's
steakhouse restaurants were opened in Denver, Colorado; Palm Desert,  California
and Raleigh, North Carolina. The Company expects to open a Sullivan's restaurant
in the first half of 2000 in Tucson, Arizona.

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


                                      -9-
<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 operations bear to net sales, and (ii) other selected operating data:

<TABLE>
<CAPTION>

                                                             Twelve Weeks Ended (1)     Thirty-six Weeks Ended (1)
                                                            September 7,  September 8,  September 7, September 8,
                                                                   1999         1998       1999         1998
                                                                   ----         ----       ----         ----
                                                                           (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                                           35.1        38.2       35.5       37.8
            Restaurant operating expenses                            46.3        48.0       45.2       44.1
            Depreciation and amortization                             5.5         4.2        5.3        4.0
            Provision for impaired assets                            14.4           -        4.7          -
                                                                    -----        ----       ----       ----

                 Restaurant costs and expenses                      101.3        90.4       90.7       85.9
                                                                    -----        ----       ----       ----

      Restaurant operating income (loss)                             (1.3)        9.6        9.3       14.1
      General and administrative expenses                             5.7         5.7        5.9        4.9
                                                                    -----        ----       ----       ----
      Income (loss) from operations                                  (7.0)        3.9        3.4        9.2
      Other income, principally interest                              0.5         0.6        0.3        0.9
                                                                    -----        ----       ----       ----
      Income (loss) before provision for income taxes                (6.5)        4.5        3.7       10.1
      Provision (benefit) for income taxes                           (2.6)        1.5        1.4        3.5
                                                                    -----        ----       ----       ----
      Income before cumulative effect of change
            in accounting principle                                  (3.9)        3.0        2.3        6.6
      Cumulative effect of change in accounting principle               -           -          -       (1.6)
                                                                    -----        ----       ----       ----
      Net income (loss)                                              (3.9)%       3.0%       2.3%       5.0%
                                                                    =====        ====       ====       ====


Restaurant Operating Data:
      Average sales per restaurant on an annualized basis (2)    $  1,810    $  1,955   $  1,830   $  2,031
      Number of restaurants at end of the period                      324         318        324        318
</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 reporting period, and annualizing the result.


                                      -10-

<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.

TWELVE WEEKS ENDED SEPTEMBER 7, 1999 COMPARED TO TWELVE WEEKS ENDED SEPTEMBER 8,
1998
                          (DOLLAR AMOUNTS IN THOUSANDS)

      Net sales  decreased  $7,356 (5.2%) to $134,801 for the twelve weeks ended
September 7, 1999,  compared to $142,157 for the twelve weeks ended September 8,
1998,  principally  attributable  to a decline in average  sales per  restaurant
resulting  from lower  customer  counts  during the  period.  The  decrease  was
partially offset by additional sales of $2,702 from one new Lone Star restaurant
in Australia, and four Sullivan's restaurants opened since September 1998.

      Costs of sales, primarily food and beverages, decreased as a percentage of
sales to 35.1% from 38.2% due  primarily  to  improved  margins as the result of
lower promotional discounting of menu prices and lower beef prices. During 1999,
the  Company  began  to  purchase  beef  under  contracted   prices  that  cover
approximately  70% of the  Company's  estimated  usage for the  remainder of the
year.

      Restaurant operating expenses for the twelve weeks ended September 7, 1999
decreased  $5,790 from  $68,208 in the twelve  weeks ended  September 8, 1998 to
$62,418 and  decreased  as a  percentage  of net sales from 48.0% to 46.3%.  The
decreases were the result of improved operating  efficiencies with reductions in
the costs of hourly  labor,  building and  maintenance  expenses  and  operating
supplies.  In addition,  the fiscal 1998 period  includes the costs  incurred in
connection with a national  advertising  campaign,  which was not renewed during
fiscal 1999. The decreases in fiscal 1999 were offset in part by increased costs
for manager  salaries,  manager  training  expenses and certain  uninsured claim
amounts.

      Depreciation and amortization increased $1,510 (25.3%) in the twelve weeks
ended  September  7, 1999 over the twelve  weeks ended  September  8, 1998.  The
increase is  attributable  primarily to the  restaurants  opened since September
1998 and  depreciation  beginning in fiscal 1999 related to the  installation of
new point-of-sale systems.

      General and  administrative  expenses decreased $462 (5.7%) as compared to
fiscal 1998.  The decrease was  attributable  to  elimination  in fiscal 1999 of
expenses incurred for national advertising production costs and in the reduction
of certain  professional  fees. The reduction of these costs were offset in part
by  increases  in  the  fiscal  1999  period  for  costs   associated  with  the
installation of the new point-of-sale  systems and the new database  information
systems.

      Provision for impaired  assets of $19,365  reflects the charge made in the
twelve   weeks  ended   September   7,  1999  for  the  write  down  of  certain
under-performing  restaurants.  The Company  periodically reviews its long-lived
assets on a store-by-store basis for indications of impairment.

      Other income,  principally interest,  for the twelve weeks ended September
7, 1999 was $639 as compared to $862 in 1998.  The decrease is  attributable  to
reduced funds available for short-term investment purposes.

      The  effective  income tax rates for the twelve  weeks ended  September 7,
1999 and the  twelve  weeks  ended  September  8,  1998 were  39.5%  and  32.7%,
respectively.  The  increase  in the  effective  tax  rate is due  primarily  to
valuation allowances provided related to certain Australian losses.


                                      -11-
<PAGE>
LONE STAR STEAKHOUSE & SALOON, INC.

THIRTY-SIX WEEKS ENDED SEPTEMBER 7, 1999 COMPARED TO THIRTY-SIX WEEKS ENDED
SEPTEMBER 8, 1998
                          (DOLLAR AMOUNTS IN THOUSANDS)

      Net sales  decreased  $27,202 (6.2%) to $409,492 for the thirty-six  weeks
ended  September  7, 1999  compared to $436,694 for the  thirty-six  weeks ended
September 8, 1998,  principally  attributable  to a decline in average sales per
restaurant  resulting from lower customer counts during the period. The decrease
was  partially  offset  by  additional  sales of  $5,429  from one new Lone Star
restaurant in Australia,  and four Sullivan's restaurants opened since September
1998.

      Costs of sales, primarily food and beverages, decreased as a percentage of
sales to 35.5% from 37.8% due  primarily  to  improved  margins as the result of
lower promotional discounting of menu prices and lower beef prices. During 1999,
the  Company  began  to  purchase  beef  under  contracted   prices  that  cover
approximately  70% of the  Company's  estimated  usage for the  remainder of the
year.

      Restaurant  operating expenses for the thirty-six weeks ended September 7,
1999 decreased  $7,487 from $192,622 in the thirty-six  weeks ended September 8,
1998 to  $185,135,  and  increased  as a  percentage  of net sales from 44.1% to
45.2%.  The absolute  dollar amounts  reflect the impact of increased  operating
costs for the new restaurants  opened since September 1998, as well as increased
costs related to manager training  expenses and certain uninsured claim amounts.
The increases were  partially  offset by decreases in hourly labor costs related
to  cost  control  measures  taken  to  improve  operating  efficiencies  at the
restaurants  and by decreases in costs for  operating  supplies and building and
equipment maintenance expenses. In addition, the fiscal 1998 period includes the
costs incurred in connection with a national advertising campaign, which was not
renewed  during  fiscal 1999.  The increase as a percentage  of sales  primarily
reflects the fixed cost  components  of restaurant  operating  expenses on lower
average restaurant sales experienced in the fiscal 1999 period.

      Depreciation and  amortization  increased $3,968 (22.6%) in the thirty-six
weeks ended September 7, 1999 over the thirty-six weeks ended September 8, 1998.
The increase is attributable primarily to the restaurants opened since September
of 1998 and  depreciation  beginning in 1999 related to the  installation of new
point-of-sale systems.

      Provision for impaired  assets of $19,365  reflects the charge made in the
twelve   weeks  ended   September   7,  1999  for  the  write  down  of  certain
under-performing  restaurants.  The Company  periodically reviews its long-lived
assets on a store-by-store basis for indications of impairment.

      General and  administrative  expenses increased $2,896 (13.7%) as compared
to 1998. The increase in general and  administrative  expenses was  attributable
primarily to increased (i) travel costs incurred in connection  with  restaurant
operation  review programs (ii)  recruiting  costs related to the recruitment of
new managers and (iii) costs related to expenses incurred in connection with the
installation  of the new  point-of-sale  systems  as  well  as the new  database
information  systems.  The  increases in general and  administrative  costs were
partially offset by decreases attributable to (i) the elimination in fiscal 1999
of expenses  incurred for  national  advertising  production  costs and (ii) the
reduction of certain professional fees.

      Other  income,  principally  interest,  for  the  thirty-six  weeks  ended
September  7, 1999 was $1,219 as  compared  to $3,689 in 1998.  The  decrease is
attributable to reduced funds available for short-term investment purposes.

      The effective income tax rates for the thirty-six weeks ended September 7,
1999 and the  thirty-six  weeks  ended  September  8, 1998 were 36.9% and 35.7%,
respectively.  The  increase  in the  effective  tax  rate is due  primarily  to
valuation  allowances  provided  in fiscal  1999  related to certain  Australian
losses.


                                      -`2-
<PAGE>

      The  cumulative  effect of change in accounting  principle  represents the
effect of adoption of Statement of Position  98-5,  "Reporting on Costs of Start
Up  Activities".   The  adoption  of  this  statement  impacted  accounting  for
pre-opening costs and as a result the Company began to report  pre-opening costs
as a component of restaurant operating expenses effective December 30, 1997. The
cumulative  effect of the  change in  accounting  of $6,904,  net of taxes,  was
recorded as a one-time charge in the first quarter of 1998.


                                      -13-
<PAGE>

                       LONE STAR STEAKHOUSE & SALOON, INC.


IMPACT OF INFLATION

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

Year 2000 Computer Issue

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

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

      In the  fourth  quarter of 1998,  the  Company  committed  to a program to
install new  point-of-sale  devices and systems in most of its  restaurants.  In
addition, the Company committed to installing a new data base information system
that will provide  significant  enhancements to its  capabilities to process and
analyze data provided by the new point-of-sale  systems.  These systems have now
been fully  implemented.  The hardware and software providers of the new systems
have  warranted  that the new systems are year 2000  compliant.  The Company has
substantially  completed  the  modifications  and  replacement  of its software,
hardware and  equipment  which it will  continue to utilize with the new systems
and believes such systems are substantially year 2000 compliant.

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

      For its information  technology  exposures,  the Company has completed the
remediation and software  reprogramming and replacement phases. Once software is
reprogrammed  or  replaced  for  a  system,   the  Company  begins  testing  and
implementation.  These phases run concurrently for different  systems.  To date,
the Company has completed  its testing and  implemented  100% of its  remediated
systems.  Completion  of the  testing  phase  for all  significant  systems  was
completed in July 1999 and all significant systems have been fully tested.

                                      -14-
<PAGE>

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

      The  Company  has  utilized  both  internal  and  external   resources  to
reprogram,  replace,  test and implement the software and hardware equipment for
year  2000  modifications.  The  total  cost  of the  year  2000  issue  was not
significant and the Company expensed most of the costs. The costs do not include
the  costs  of the new  point-of-sale  devices  and  systems  and the  costs  of
equipment,  software,  and installation of the new data base information  system
previously discussed.

      Management of the Company believes it has an effective program in place to
resolve the year 2000 issue in a timely  manner In the event that the  Company's
efforts  to  prepare  and deal  with the year 2000  issue are not  substantially
successful  in  a  timely  manner,  the  Company  might  be  unable  to  process
transactional and financial reporting information.  In addition,  disruptions in
the economy generally  resulting from the year 2000 issues could also materially
adversely  affect the Company.  The Company could be subject to  litigation  for
computer systems product failure, for example,  equipment shutdown or failure to
properly  date  business  records.  The amount of potential  liability  and lost
revenue cannot be reasonably estimated at this time.

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






                                      -15-
<PAGE>
                       LONE STAR STEAKHOUSE & SALOON, INC.


LIQUIDITY AND CAPITAL RESOURCES (DOLLAR AMOUNTS IN THOUSANDS)

      The following  table  presents a summary of the  Company's  cash flows for
each of the thirty-six weeks ended September 7, 1999 and September 8, 1998.
<TABLE>
<CAPTION>

                                                                    Thirty-six weeks ended
                                                           September 7, 1999   September 8, 1998
                                                                                    (Restated)
<S>                                                         <C>                   <C>
Net cash provided by operating activities..............     $  46,093             $  36,799
Net cash used in investment activities.................       (26,822)              (47,942)
Net cash used in financing activities..................       (37,762)              (31,166)
Effect of exchange rate on cash........................            33                   (27)
                                                            ---------             ---------
Net decrease in cash...................................     $ (18,458)            $ (42,311)
                                                            =========             =========
</TABLE>


      During the thirty-six  week period ended  September 7, 1999, the Company's
investment in property and equipment was $26,970.

      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 a
source of financing for non-current capital expenditures.

      At  September  7,  1999,   the  Company  had  $71,389  in  cash  and  cash
equivalents.  While the  Company  has not  established  a credit  facility,  the
Company believes it could establish a facility on suitable terms. The Company is
not actively negotiating to purchase or lease additional restaurant sites.

            During 1999 and 1998,  the Company's  Board of Directors  authorized
the purchase of up to 9,400,000  shares of the Company's  common stock from time
to time in the open market or in privately negotiated  transactions.  During the
current year,  the Company has purchased  4,093,000  shares at a cost of $37,774
and since  inception  of the program it has  purchased  6,703,000  shares with a
cumulative cost of approximately $74,149.

      In August 1999, the Company approved the adoption of two plans, which will
provide retirement benefits to its participants.  The salary reduction plans are
provided  through  a  qualified   401(k)  plan  and  a  non-qualified   deferred
compensation  plan (the  Plans).  Under the Plans,  employees  who meet  minimum
service  requirements and elect to participate,  may make contributions of their
annual  salaries  of up to 15%  under  the  401(k)  plan and up to 20% under the
deferred  compensation  plan.  The  Company  is  required  to  make  a  matching
contribution equal to 50% of the employee's  contribution.  The Company may make
additional  contributions at the discretion of the Board of Directors. The Plans
are effective beginning October 7, 1999.

      Beginning  in the fourth  quarter of 1998,  the  Company  began  utilizing
derivative  financial  instruments in the form of commodity futures contracts to
manage market risks and reduce its exposure  resulting from  fluctuations in the
prices  of meat.  The  Company  uses  live  beef  cattle  futures  contracts  to
accomplish its objective.  Realized and unrealized changes in the fair values of
the derivative  instruments  are recognized in income in the period in which the
change occurs.  Realized and unrealized gains and losses for the period have not
been  significant.  As of September  7, 1999,  the  Company's  exposure for open
positions in futures contracts was not significant.

                                      -16-
<PAGE>

FORWARD LOOKING STATEMENTS

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

Item 3.    Quantitative and Qualitative Disclosure of Market Risk
             Not applicable


Item 6.    Exhibits and Reports on Form 8-K
             Exhibits:
              (a)  Exhibit 27 .....................Financial Data Schedule

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








                                      -7-
<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:  October 22, 1999                /s/ John D. White
                                        ----------------------------------------
                                        John D. White
                                        Chief Financial and Principal Accounting
                                        Officer, Executive Vice President,
                                        Treasurer and Director











                                      -18-