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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

|/x/                                | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|---------------------------------- | ---------------------------------------------------------------------------------------
|For the period ended June 30, 2001
|/ /                                | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT       

For the transition period from    to

Commission file number0-25366

AUSTINS STEAKS & SALOON, INC.(Exact name of small business issuer as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization) |  | 86-0723400(I.R.S. Employer
Identification No.)
|---------------------------------------------------------------------- |  | ----------------------------------------------

317 Kimball Avenue, N.E.
Roanoke, Virginia 24016(Address of principal executive offices)

(540) 345-3195(Issuer's telephone number)

Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. (1) Yes /x/ No / /

As
of August 4, 2001, there were 12,178,800 shares of the issuer's common stock outstanding.

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AUSTINS STEAKS & SALOON, INC.
Form 10-Q Index
Six Months Ended June 30, 2001

|         |  |                       |  |                                                                                                |  | Page 
|-------- |  | --------------------- |  | ---------------------------------------------------------------------------------------------- |  | -----
|PART I.  |  | FINANCIAL INFORMATION
|         |  | Item 1.               |  | Financial Statements (Unaudited)                                                               |  |      
|         |  |                       |  | Consolidated Balance SheetsJune 30, 2001 and December 31, 2000                                |  | 2    
|         |  |                       |  | Consolidated Statements of OperationsThree Months and Six Months Ended June 30, 2001 and 2000 |  | 3    
|         |  |                       |  | Consolidated Statement of Changes in Stockholders' EquitySix Months Ended June 30, 2001       |  | 4    
|         |  |                       |  | Consolidated Statements of Cash FlowsSix Months Ended June 30, 2001 and 2000                  |  | 5    
|         |  |                       |  | Notes to Consolidated Financial Statements                                                     |  | 6-9  
|         |  | Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations          |  | 10-14
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosure about Market Risk                                      |  | 15   
|PART II. |  | OTHER INFORMATION     |  |                                                                                               
|         |  | Item 1.               |  | Legal Proceedings                                                                              |  | 16   
|         |  | Item 2.               |  | Change in Securities and Use of Proceeds                                                       |  | 16   
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                |  | 16   
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                            |  | 16   
|         |  | Item 5.               |  | Other Information                                                                              |  | 16   
|         |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                               |  | 16   

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PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

AUSTINS STEAKS & SALOON, INC.
Consolidated Balance Sheets
June 30, 2001 and December 31, 2000

|                                                                                                                              |                                                                                                                                     | June 30,
2001
(unaudited) |                            | December 31,
2000
|----------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -------------------------- | -----------------
|Assets                                                                                                                        |                                                                                                                                     |                           |                            |                  
|Current assets:                                                                                                               |                                                                                                                                     |                           |                            |                  
|                                                                                                                              | Cash and cash equivalents                                                                                                           |                           | $                          | 440,932          
|                                                                                                                              | Trade accounts receivable, net of allowance for doubtful accounts of $216,000 in 2001 and $192,465 in 2000                          |                           |                            | 1,174,889        
|                                                                                                                              | Current installments of notes receivable                                                                                            |                           |                            | 90,500           
|                                                                                                                              | Other receivables                                                                                                                   |                           |                            | 706,684          
|                                                                                                                              | Inventories                                                                                                                         |                           |                            | 233,181          
|                                                                                                                              | Prepaid expenses                                                                                                                    |                           |                            | 604,910          
|                                                                                                                              | Income taxes refundable                                                                                                             |                           |                            |                 
|                                                                                                                              | Deferred income taxes                                                                                                               |                           |                            | 287,817          
|                                                                                                                              |                                                                                                                                     |                           |                            |                  
|                                                                                                                              |                                                                                                                                     |                           | Total current assets       |                  
|Notes receivable, less allowance for doubtful accounts of $55,000 in 2001 and $53,535 in 2000, excluding current installments |                                                                                                                                     |                           | 243,791                    |                  
|Property and equipment, net                                                                                                   |                                                                                                                                     |                           | 7,936,935                  |                  
|Franchise royalty contracts, net of accumulated amortization of $4,727,215 in 2001 and $4,409,439 in 2000                     |                                                                                                                                     |                           | 4,727,216                  |                  
|Goodwill, net of accumulated amortization of $2,286,141 in 2001 and $2,058,681 in 2000                                        |                                                                                                                                     |                           | 4,537,661                  |                  
|Favorable lease rights, net of accumulated amortization of $152,686 in 2001 and $106,150 in 2000                              |                                                                                                                                     |                           | 401,147                    |                  
|Financing costs, net of accumulated amortization of $55,165 in 2001 and $47,068 in 2000                                       |                                                                                                                                     |                           | 135,138                    |                  
|Deferred income taxes                                                                                                         |                                                                                                                                     |                           | 999,748                    |                  
|Other assets, net                                                                                                             |                                                                                                                                     |                           | 336,690                    |                  
|                                                                                                                              |                                                                                                                                     |                           |                            |                  
|                                                                                                                              |                                                                                                                                     | $                         | 22,857,239                 |                  
|                                                                                                                              |                                                                                                                                     |                           |                            |                  
|Liabilities and Stockholders' Equity                                                                                          |                                                                                                                                     |                           |                            |                  
|Current liabilities:                                                                                                          |                                                                                                                                     |                           |                            |                  
|                                                                                                                              | Bank overdraft                                                                                                                      |                           | $                          |                 
|                                                                                                                              | Credit line note payable to bank                                                                                                    |                           |                            | 251,258          
|                                                                                                                              | Notes payable                                                                                                                       |                           |                            | 989,168          
|                                                                                                                              | Current installments of long-term debt                                                                                              |                           |                            | 406,041          
|                                                                                                                              | Accounts payable                                                                                                                    |                           |                            | 2,744,359        
|                                                                                                                              | Accrued expenses and other                                                                                                          |                           |                            | 1,002,360        
|                                                                                                                              | Income taxes payable                                                                                                                |                           |                            | 98,504           
|                                                                                                                              |                                                                                                                                     |                           |                            |                  
|                                                                                                                              |                                                                                                                                     |                           | Total current liabilities  |                  
|Long-term debt, excluding current installments                                                                                |                                                                                                                                     |                           | 5,222,476                  |                  
|                                                                                                                              |                                                                                                                                     |                           |                            |                  
|                                                                                                                              |                                                                                                                                     |                           | Total liabilities          |                  
|                                                                                                                              |                                                                                                                                     |                           |                            |                  
|Stockholders' equity:                                                                                                         |                                                                                                                                     |                           |                            |                  
|                                                                                                                              | Common stock; $.01 par value. Authorized 20,000,000 shares; issued and outstanding 12,178,800 shares in 2001 and 12,079,900 in 2000 |                           |                            | 121,788          
|                                                                                                                              | Additional paid-in capital                                                                                                          |                           |                            | 8,699,173        
|                                                                                                                              | Retained earnings                                                                                                                   |                           |                            | 3,322,112        
|                                                                                                                              |                                                                                                                                     |                           |                            |                  
|                                                                                                                              |                                                                                                                                     |                           | Total stockholders' equity |                  
|Commitments and contingencies                                                                                                 |                                                                                                                                     |                           |                            |                  
|                                                                                                                              |                                                                                                                                     |                           |                            |                  
|                                                                                                                              |                                                                                                                                     | $                         | 22,857,239                 |                  
|                                                                                                                              |                                                                                                                                     |                           |                            |                  

See accompanying notes to consolidated financial statements.

2

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AUSTINS STEAKS & SALOON, INC.
Consolidated Statements of Operations
(Unaudited)

|                        |                                 | Three Months Ended June 30,      |           | Six Months Ended June 30, |           
|----------------------- | ------------------------------- | -------------------------------- | --------- | ------------------------- | ----------
|
|
|Revenues:               |                                 |                                  |           |                           |           
|Company-operated stores |                                 | $                                | 8,515,056 |                           | $         
|Franchise operations    |                                 |                                  | 1,454,606 |                           |           
|Other                   |                                 |                                  | 145,390   |                           |           
|                        |                                 |                                  |           |                           |           
|                        |                                 | Total revenues                   |           |                           | 10,115,052
|                        |                                 |                                  |           |                           |           
|Costs and expenses:     |                                 |                                  |           |                           |           
|                        | Cost of company-operated stores |                                  |           | 6,036,665                 |           
|                        | Cost of franchise operations    |                                  |           | 545,579                   |           
|                        | Other cost of operations        |                                  |           | 108,602                   |           
|                        | Restaurant operating expenses   |                                  |           | 1,712,450                 |           
|                        | General and administrative      |                                  |           | 624,857                   |           
|                        | Depreciation and amortization   |                                  |           | 577,392                   |           
|                        |                                 |                                  |           |                           |           
|                        |                                 | Total costs and expenses         |           |                           | 9,605,545 
|                        |                                 |                                  |           |                           |           
|                        |                                 | Income from operations           |           |                           | 509,507   
|Other income (expense): |                                 |                                  |           |                           |           
|                        | Interest expense                |                                  |           | (168,987                  | )         
|                        | Interest income                 |                                  |           | 1,933                     |           
|                        | Other                           |                                  |           | 900                       |           
|                        |                                 |                                  |           |                           |           
|                        |                                 |                                  | (166,154  | )                         |           
|                        |                                 |                                  |           |                           |           
|                        |                                 | Income before income tax expense |           |                           | 343,353   
|Income tax expense      |                                 |                                  | 125,000   |                           |           
|                        |                                 |                                  |           |                           |           
|                        |                                 | Net income                       |           | $                         | 218,353   
|                        |                                 |                                  |           |                           |           
|Earnings per share:     |                                 |                                  |           |                           |           
|                        | Basic                           |                                  |           | .02                       |           
|                        | Diluted                         |                                  |           | .02                       |           

See
accompanying notes to consolidated financial statements.

3

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AUSTINS STEAKS AND SALOON, INC.
Consolidated Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 2001
(Unaudited)

|                            |  | Common Stock |            |  |   |         |  |  
|--------------------------- |  | ------------ | ---------- |  | - | ------- |  | -
|
|
|Balances, December 31, 2000 |  |              | 12,079,900 |  | $ | 120,799 |  | $
|Net income                  |  |              |           |  |   |        |  |  
|Issuance of common stock    |  |              | 98,900     |  |   | 989     |  |  
|                            |  |              |            |  |   |         |  |  
|Balances, June 30, 2001     |  | $            | 12,178,800 |  | $ | 121,788 |  | $
|                            |  |              |            |  |   |         |  |  

See
accompanying notes to consolidated financial statements.

4

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AUSTINS STEAKS & SALOON, INC.
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2001 and 2000
(Unaudited)

|                                                 |                                                                                             | June 30,                                                                                |                          
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------
|
|
|Cash flows from operating activities:            |                                                                                             |                                                                                         |                          
|                                                 | Net income                                                                                  |                                                                                         | $                        
|                                                 | Adjustments to reconcile net income to net cash provided by (used in) operating activities: |                                                                                         |                          
|                                                 |                                                                                             | Depreciation and amortization of property and equipment                                 |                          
|                                                 |                                                                                             | Amortization of franchise royalty contracts, goodwill, financing costs and other assets |                          
|                                                 |                                                                                             | Loss on disposal of fixed assets                                                        |                          
|                                                 |                                                                                             | Provision for bad debts                                                                 |                          
|                                                 |                                                                                             | (Increase) decrease in:                                                                 |                          
|                                                 |                                                                                             |                                                                                         | Trade accounts receivable
|                                                 |                                                                                             |                                                                                         | Notes receivable         
|                                                 |                                                                                             |                                                                                         | Other receivables        
|                                                 |                                                                                             |                                                                                         | Inventories              
|                                                 |                                                                                             |                                                                                         | Prepaid expenses         
|                                                 |                                                                                             |                                                                                         | Other assets             
|                                                 |                                                                                             |                                                                                         | Income taxes refundable  
|                                                 |                                                                                             | Increase (decrease) in:                                                                 |                          
|                                                 |                                                                                             |                                                                                         | Accounts payable         
|                                                 |                                                                                             |                                                                                         | Accrued expenses         
|                                                 |                                                                                             |                                                                                         | Income taxes payable     
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|Cash flows from investing activities:            |                                                                                             |                                                                                         |                          
|                                                 | Additions to property and equipment                                                         |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|Cash flows from financing activities:            |                                                                                             |                                                                                         |                          
|                                                 | Net decrease in bank overdraft                                                              |                                                                                         |                          
|                                                 | Net decrease in credit line note payable                                                    |                                                                                         |                          
|                                                 | Net increase in notes payable                                                               |                                                                                         |                          
|                                                 | Payments on long-term debt and capital leases                                               |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|Cash and cash equivalents at beginning of period |                                                                                             |                                                                                         | 1,467,985                
|                                                 |                                                                                             |                                                                                         |                          
|Cash and cash equivalents at end of period       |                                                                                             | $                                                                                       | 440,932                  
|                                                 |                                                                                             |                                                                                         |                          

See
accompanying notes to consolidated financial statements.

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AUSTINS STEAKS & SALOON, INC.
Notes to Consolidated Financial Statements
June 30, 2001 and 2000
(Unaudited)

(1)  Summary of Significant Accounting Policies



During June 2000, Austins Steaks & Saloon, Inc. ("Austins") negotiated a short-term lease agreement with Franchise Finance
Corporation of America (FFCA). The lease agreement with FFCA was entered into by Western Sizzlin Stores of Virginia (WSSVA), an entity which was formed for the sole purpose of entering into this
agreement. Under the short-term lease agreement, Austins operated 97 restaurant units, owned by FFCA, and was entitled to receive from WSSVA, 3.5 percent of gross sales as a
management fee for operating the restaurants. The restaurants' operating results, including all revenues and expenses, were included in WSSVA's financial statements.

In
Austins' quarterly report on Form 10-QSB for the quarter ended June 30, 2000, Austins included in its consolidated financial statements the management
fees earned under its agreement with WSSVA, and did not consolidate WSSVA's operating results. Subsequent to the original Form 10-QSB filing Austins determined that, based on
Austins' substantive control of WSSVA, the operating results of WSSVA should be consolidated in Austins' consolidated financial statements. The restated quarterly amounts shown below reflect the
consolidation of WSSVA in Austins' consolidated financial statements, including the elimination of the intercompany management fee and the consolidation of all revenues and expenses of the restaurants
managed under the lease agreement with FFCA.

Condensed Consolidated Statements of Operations Data

Three-Months
Ended June 30, 2000

|             |  | Previously Filed |            | Restated
|------------ |  | ---------------- | ---------- | --------
|Net revenues |  | $                | 11,920,918 |         
|Net income   |  | $                | 243,360    |         

Six
Months Ended June 30, 2000

|             |  | Previously Filed |            | Restated
|------------ |  | ---------------- | ---------- | --------
|Net revenues |  | $                | 23,044,356 |         
|Net income   |  | $                | 412,151    |         



The accompanying unaudited consolidated financial statements have been prepared by Austins Steaks & Saloon, Inc. ("Austins" or the "Company") in
accordance with generally accepted accounting principles for interim financial reporting information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the
opinion of management, all
material reclassifications and adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the results of operations, financial position and cash

6

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flows for each period shown, have been included. Operating results for interim periods are not necessarily indicative of the results for the full year. The unaudited consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company's annual consolidated financial statements and notes. For further
information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.



Certain reclassifications have been made to 2000 financial statement amounts to conform to the 2001 presentation.

(2)  Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Stock options for shares of common stock were not included in computing diluted earnings per share
for the three and six-month periods ended June 30, 2001 and 2000 because these effects are anti-dilutive.

The
following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the years indicated:

Income
(Numerator)

Weighted
Average
Shares
(Denominator)

Earnings
Per Share
AmountThree months ended June 30, 2001Net incomebasic and diluted

$
218,353

12,178,800

$
.02Three months ended June 30, 2000Net incomebasic and diluted

$
264,563

12,103,824

$
.02Six months ended June 30, 2001Net incomebasic and diluted

$
403,887

12,129,077

$
.03Six months ended June 30, 2000Net incomebasic and diluted

$
433,354

12,103,824

$
.04


(3)  Reportable Segments

The Company has defined two reportable segments: Company-operated restaurants and franchising and other. The Company-operated restaurant segment consists of
the operations of all Company-operated restaurants and derives its revenues from the operations of "WesterN SizzliN Steakhouse," "Great American Steak & Buffet," "WesterN SizzliN Wood Grill,"
"Quincy's Steakhouse" and "Austins Steaks & Saloon." The franchising and other segment consists of franchise sales and support activities and derives its revenues from sales of franchise and
development rights and collection of royalties from franchisees.

Generally,
the Company evaluates performance and allocates resources based on income from operations before income taxes and eliminations. Administrative and capital costs are
allocated to segments based upon predetermined rates or actual or estimated resource usage. The Company

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accounts for intercompany sales and transfers as if the sales or transfers were with third parties and eliminates the related profit in consolidation.

Reportable
segments are business units that provide different products or services. Separate management of each segment is required because each business unit is subject to different
operational issues and strategies. Through June 30, 2001, all revenues for each business segment were derived from business activities conducted with customers located in the United States. No
single external customer accounted for 10 percent or more of the Company's consolidated revenues.

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The following table summarizes reportable segment information:

|                                   |                       | Three Months
Ended June 30,         |   | Six Months
Ended June 30, |           
|---------------------------------- | --------------------- | ----------------------------------- | - | ------------------------- | ----------
|
|
|Revenues from reportable segments: |                       |                                     |   |                           |           
|                                   | Restaurants           |                                     | $ | 8,515,056                 |           
|                                   | Franchising and other |                                     |   | 1,599,996                 |           
|                                   |                       |                                     |   |                           |           
|                                   |                       | Total revenues                      |   | $                         | 10,115,052
|                                   |                       |                                     |   |                           |           
|Depreciation and amortization:     |                       |                                     |   |                           |           
|                                   | Restaurants           |                                     |   | 389,817                   |           
|                                   | Franchising and other |                                     |   | 187,575                   |           
|                                   |                       |                                     |   |                           |           
|                                   |                       | Total depreciation and amortization |   | $                         | 577,392   
|                                   |                       |                                     |   |                           |           
|Interest expense:                  |                       |                                     |   |                           |           
|                                   | Restaurants           |                                     |   | 135,764                   |           
|                                   | Franchising and other |                                     |   | 33,223                    |           
|                                   |                       |                                     |   |                           |           
|                                   |                       | Total interest expense              |   | $                         | 168,987   
|                                   |                       |                                     |   |                           |           
|Interest income:                   |                       |                                     |   |                           |           
|                                   | Restaurants           |                                     |   | 1,933                     |           
|                                   | Franchising and other |                                     |   |                          |           
|                                   |                       |                                     |   |                           |           
|                                   |                       | Total interest income               |   | $                         | 1,933     
|                                   |                       |                                     |   |                           |           
|Income (loss) before income taxes: |                       |                                     |   |                           |           
|                                   | Restaurants           |                                     |   | (224,265                  | )         
|                                   | Franchising and other |                                     |   | 567,618                   |           
|                                   |                       |                                     |   |                           |           
|                                   |                       | Total income before income taxes    |   | $                         | 343,353   
|                                   |                       |                                     |   |                           |           

|                               |                       | June 30,
2001            |                                     |            |            | June 30,
2000 |  |           
|------------------------------ | --------------------- | ------------------------ | ----------------------------------- | ---------- | ---------- | ------------- |  | ----------
|Gross fixed assets:            |                       |                          |                                     |            |            |               |  |           
|                               | Restaurants           |                          | $                                   | 11,220,355 |            |               |  | 11,810,371
|                               | Franchising and other |                          |                                     | 1,398,117  |            |               |  | 1,465,165 
|                               |                       |                          |                                     |            |            |               |  |           
|                               |                       | Total gross fixed assets |                                     | $          | 12,618,472 |               |  |           
|                               |                       |                          |                                     |            |            |               |  |           
|Expenditures for fixed assets: |                       |                          |                                     |            |            |               |  |           
|                               | Restaurants           |                          | $                                   | 109,159    |            |               |  | 247,522   
|                               | Franchising and other |                          |                                     | 21,992     |            |               |  | 88,739    
|                               |                       |                          |                                     |            |            |               |  |           
|                               |                       |                          | Total expenditures for fixed assets |            | $          | 131,151       |  |           
|                               |                       |                          |                                     |            |            |               |  |           

9

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

Overview

The Company currently operates and franchises a total of 252 restaurants located in 24 states, including 18 company-owned and 234 franchise restaurants. The
restaurants include a family steakhouse concept, a steak and buffet concept, and the casual dining steakhouse concept.

During
June 2000, the Company negotiated a short-term lease agreement with Franchise Finance Corporation of America (FFCA). The lease agreement with FFCA was
entered into by Western Sizzlin Stores of Virginia (WSSVA), an entity which was formed for the sole purpose of entering into this agreement. Under the short-term lease agreement, the
Company leased and operated 97 Quincy Steakhouses, owned by FFCA. The restaurants' operating results, including all revenues and expenses, were included in the Company's consolidated financial
statements for the year ended December 31, 2000. In December 2000, the company closed 44 of the restaurants. Of the 53 restaurants which remained opened at December 31, 2000, 43
restaurants were franchised during the first quarter of 2001, with the remaining 10 restaurants closing during the first quarter of 2001. At the end of the first quarter, no Quincy Steakhouses
remained as company-owned restaurants.

From
time to time, the Company may publish forward-looking statements relating to certain matters, including anticipated financial performance, business prospects, the future opening
of Company-operated and franchised restaurants, anticipated capital expenditures, and other matters. All statements other than statements of historical fact contained in this
Form 10-Q or in any other report of the Company are forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of that safe harbor, the Company notes that a variety of factors, individually or in the aggregate, could cause the Company's actual results and
experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements including, without limitation, the following:the ability of the
Company or its franchises to obtain suitable locations for restaurant development; consumer spending trends and habits; competition in the restaurant segment with respect to price, service, location,
food quality and personnel resources; weather conditions in the Company's operating regions; laws and government regulations; general business and economic conditions; availability of capital; success
of operating initiatives and marketing and promotional efforts; and changes in accounting policies. In addition, the Company disclaims any intent or obligation to update those forward-looking
statements.

Quarter and Year-to-Date Ended June 30, 2001 Compared to Quarter and Year-to-Date Ended June 30, 2000

Results of Operations

Net income for the three and six-month periods ended June 30, 2001 was $218,353 and $403,887 respectively, as compared to net income of
$264,563 for the three months ended June 30, 2000 and net income of $433,354 for the six-month period ended June 30, 2000. The decreases are attributable to a net loss on the
operation of the Quincys units of $123,067 and $164,093 for the three and six month periods ended June 30, 2001, offset by an increase in net income attributed to the Company's increased
franchise system. Without the loss from the Quincys operations, the Company would have shown 29% and 31% increase in net income over the three and six month periods last year.

10

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The following table sets forth for the periods presented the percentage relationship to total revenues of certain items included in the consolidated statements of operations and
certain restaurant data for the periods presented:

|                       |                                 | Three Months
Ended June 30,      |      | Six Months
Ended June 30, |     
|---------------------- | ------------------------------- | -------------------------------- | ---- | ------------------------- | ----
|
|Revenues:              |                                 |                                  |      |                           |     
|                       | Company-operated stores         |                                  | 84.2 | %                         | 90.6
|                       | Franchise royalties and fees    |                                  | 14.4 |                           | 8.7 
|                       | Other sales                     |                                  | 1.4  |                           | 0.7 
|                       |                                 |                                  |      |                           |     
|                       |                                 | Total revenues                   |      | 100.0                     |     
|                       |                                 |                                  |      |                           |     
|Costs and expenses:    |                                 |                                  |      |                           |     
|                       | Cost of company-operated stores |                                  | 59.7 |                           | 66.1
|                       | Cost of franchise operations    |                                  | 5.4  |                           | 3.3 
|                       | Other cost of operations        |                                  | 1.1  |                           | 0.6 
|                       | Restaurant operating expenses   |                                  | 16.9 |                           | 17.3
|                       | General and administrative      |                                  | 6.2  |                           | 5.8 
|                       | Depreciation and amortization   |                                  | 5.7  |                           | 3.6 
|                       |                                 |                                  |      |                           |     
|                       |                                 | Total costs and expenses         |      | 95.0                      |     
|                       |                                 |                                  |      |                           |     
|                       |                                 | Income from operations           |      | 5.0                       |     
|Other income (expense) |                                 | (1.6                             | )    | (0.9                      | )   
|                       |                                 |                                  |      |                           |     
|                       |                                 | Income before income tax expense |      | 3.4                       |     
|Income tax expense     |                                 | 1.2                              |      | 0.9                       |     
|                       |                                 |                                  |      |                           |     
|                       |                                 | Net income                       |      | 2.2                       | %   
|                       |                                 |                                  |      |                           |     

|                                        |                     | Three Months
Ended June 30, |     | Six Months
Ended June 30,
|--------------------------------------- | ------------------- | --------------------------- | --- | -------------------------
|
|Number of Company-operated Restaurants: |                     |                             |     |                          
|                                        | Beginning of period |                             | 21  |                          
|                                        | Opened              |                             |    |                          
|                                        | Closed              |                             | 3   |                          
|                                        |                     |                             |     |                          
|                                        | End of period       |                             | 18  |                          
|                                        |                     |                             |     |                          
|Number of Quincy-operated Restaurants:  |                     |                             |     |                          
|                                        | Beginning of period |                             |    |                          
|                                        | Opened              |                             |    |                          
|                                        | Closed              |                             |    |                          
|                                        | Franchised          |                             |    |                          
|                                        |                     |                             |     |                          
|                                        | End of period       |                             |    |                          
|                                        |                     |                             |     |                          
|Number of U.S. Franchised Restaurants:  |                     |                             |     |                          
|                                        | Beginning of period |                             | 240 |                          
|                                        | Opened              |                             |    |                          
|                                        | Closed              |                             | 6   |                          
|                                        |                     |                             |     |                          
|                                        | End of period       |                             | 234 |                          
|                                        |                     |                             |     |                          

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Revenues

Total revenues decreased 42.3 percent to $10.1 million for the three-months ended June 30, 2001 as compared to $17.5 million for
the comparable three-month period ended June 30, 2000. Revenues for the six-month period ended June 30, 2001 decreased 24.7 percent to $21.6 million from
$28.7 million for the six months ended June 30, 2000.

The
decrease is primarily attributable to the consolidation of the Quincy operations, which had revenues of approximately $1.6 million during the three and six months ended
June 30, 2001 compared to $5.6 million during 2000. The remaining decrease is due to the closings of under performing Company stores, other than Quincy's, or the transfer of company
operations to franchise units during the first six months of 2001.

Franchise
revenues are comparable for the three and six months ended June 30, 2001and 2000. Although the Company's system wide franchise revenues are down $1.2 million
on a comparable store basis, we have more franchised restaurants at the end of June 30, 2001 compared to prior year due largely to the franchise of 43 Quincy units converted to Western Sizzlin
units during the first quarter of 2001.

Costs and Expenses

Cost of company-operated stores, consisting of food, beverage, and employee costs decreased $5.6 million for the three months ended June 30, 2001
from $11.6 million in 2000 to $6.0 million in 2001 and as a percentage of total revenues from 66.1% in 2000, to 59.7% in 2001. Cost of company-operated stores for the six months ended
June 30, 2001 decreased $5.2 million from $18.2 million in 2000 to $13.0 million in 2001. The decreases are primarily due to the consolidation of the Quincy operations
during the fourth quarter of 2000, which had store costs of $1.4 million for the six months ended June 30, 2001 compared to $4.4 million for the same period in the prior year. The
remaining decrease is due to closing of other under performing Company stores,during the quarter ended June 30, 2001.

Cost
of franchise operations decreased $25,367 and $111,819 for the three and six months period ended June 30, 2001 over prior year's comparable periods. The addition of the
Quincy units did not effect these costs. The decrease in these costs is due to the company's efforts in streamlining costs, such as reassigning job duties and job reductions.

Restaurant
operating expenses, which includes utilities, insurance, maintenance, rent and other such costs of the company-operated stores decreased $1.3 million and
$1.2 million for the three and six months ended June 31, 2001 over prior year's comparable period. The majority of the decrease is due to the operation of the Quincy stores during 2000.
Restaurant operating expenses as a percentage of total revenues is comparable for all periods.

General
and administrative expenses decreased by $384,505 and $170,309 for the three and six months ended June 30, 2001 and 2000. The decrease is due to the operation of the
Quincy stores in 2000 as well as the Company's efforts in streamlining costs, such as reassigning job duties and job reductions and the related effect on expenses.

Depreciation
and amortization expenses decreased by $54,311 and $109,527 for the three and six months ended June 30, 2001 compared to prior year due primarily to closings of
under performing company-operated restaurants and retirement of their related long-lived assets which were recorded as of December 31, 2000.

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Other Income (Expense)

Interest expense decreased for the three and six month periods ended June 30, 2001 as compared to 2000 due to a lower average outstanding principal
balance comparing these respective periods. Interest income fluctuates according to the levels of available and investable cash balances. The Company employs a cash management system whereby available
balances are invested on an overnight basis.

The
Company's effective tax rate was approximately 38.4 percent for the six months ended June 30, 2001 and 2000.

Liquidity and Capital Resources

As is customary in the restaurant industry, the Company has operated with negative working capital. Historically, the Company has leased the majority of its
restaurants and through a strategy of controlled growth has financed expansions from operating cash flow, proceeds from the sale of common stock, the utilization of the Company's line of credit and
long-term debt provided by various lenders.

A
reduction in cash and cash equivalents of approximately $1 million was the primary source of cash used to support operating activities during the six month period ended
June 30, 2001. The Company utilizes its existing line of credit to provide additional short-term funding. Management is actively reviewing available financing alternatives to
provide cash for future expansion, restructure existing debt, and provide additional working capital; however, no final agreements have been reached.

Impact of Inflation

The impact of inflation on the costs of food and beverage products, labor and real estate can affect the Company's operations. Over the past few years,
inflation has had a lesser impact on the Company's operations due to the lower rates of inflation in the nation's economy and economic conditions in the Company's market areas.

Management
believes the Company has historically been able to pass on increased costs through certain selected menu price increases and has offset increased costs by increased
productivity and purchasing efficiencies, but there can be no assurance that the Company will be able to do so in the future. Management anticipates that the average cost of restaurant real estate
leases and construction cost could increase in the future which could affect the Company's ability to expand. In addition, mandated health care or additional increases in the federal or state minimum
wages could significantly increase the Company's costs of doing business.

Impact of Recently Issued Accounting Standards

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (Statement) No. 141, Business Combinations,
and Statement No. 142,Goodwill and Other Intangible Assets. Statement 141
specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. Statement 142 will require that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also
require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with
Statement No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.

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The Company is required to adopt the provisions of Statement 141 immediately and Statement 142 effective January 1, 2002. Goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142.

Statement
141 will require upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business
combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company
will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end
of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset
for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative
effect of a change in accounting principle in the first interim period.

In
connection with the transitional goodwill impairment evaluation, Statement 142 will require the Company to perform an assessment of whether there is an indication that goodwill is
impaired as of the date of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of operations.

As
of January 1, 2002, the date of adoption of Statement 142, the Company expects to have unamortized goodwill in the amount of approximately $4.3 million and unamortized
identifiable intangible assets in the amount of approximately $4.9 million, all of which will be subject to the transition provisions of Statements 141 and 142. Because of the extensive effort
needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company's financial statements at the date of this
report, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

The Company does not engage in derivative financial instruments or derivative commodity instruments. As of June 30, 2001, the Company's financial
instruments are not exposed to significant market risk due to foreign currency exchange risk or commodity price risk. However, the Company is exposed to market risk related to interest rates.

The
table below provides information about the Company's debt obligations that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted
average interest rates by expected maturity dates.

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Debt obligations held for other than trading purposes at June 30, 2001 (dollars in thousands):

EXPECTED MATURITY DATE

|                         |                       | 2001 |   | 2002  |   | 2003 |       | 2004 |   | 2005 |   | Thereafter |      | Total |   | Estimated
Fair Value
|------------------------ | --------------------- | ---- | - | ----- | - | ---- | ----- | ---- | - | ---- | - | ---------- | ---- | ----- | - | --------------------
|Credit Line Note Payable |                       |      |   |       |   |      |       |      |   |      |   |            |      |       |   |                     
|                         | Variable Rate         |      |   | 251   |   |      |      |      |   |     |   |            |     |       |   |                    
|                         | Average Interest Rate |      |   | 7.5   | % |      |      |      |   |     |   |            |     |       |   |                    
|Long-term debt           |                       |      |   |       |   |      |       |      |   |      |   |            |      |       |   |                     
|                         | Fixed Rate            |      | $ | 607   |   | $    | 521   |      | $ | 521  |   | $          | 538  |       | $ | 505                 
|                         | Average Interest Rate |      |   | 10.53 | % |      | 10.11 | %    |   | 9.94 | % |            | 9.94 | %     |   | 9.94                
|                         | Variable Rate         |      | $ | 883   |   |      |      |      |   |     |   |            |     |       |   |                    
|                         | Average Interest Rate |      |   | 7.5   | % |      |      |      |   |     |   |            |     |       |   |                    

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PART II. OTHER INFORMATION

Item 1.  Legal ProceedingsN/A

Item 2.  Change in Securities and Use of ProceedsN/A

Item 3.  Defaults Upon Senior SecuritiesN/A

Item 4.  Submission of Matters to a Vote of Security HoldersN/A

Item 5.  Other InformationN/A

Item 6.  Exhibits and Reports on Form 8-K





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SIGNATURES

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

|                      |  | AUSTINS STEAKS & SALOON, INC.
|--------------------- |  | -----------------------------
|Date: August 13, 2001 |  | By:                          

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