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

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FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the period ended September 30, 2001

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
|--- | --------------------------------------------------------------------------------

For the transition period from  to

Commission file number 0-25366

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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)

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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. Yes /x/  No / /

As
of November 12, 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  Nine Months Ended September 30, 2001

|         |  |                       |  |                                                                                                      |  | Page 
|-------- |  | --------------------- |  | ---------------------------------------------------------------------------------------------------- |  | -----
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                     
|         |  | Item 1.               |  | Financial Statements (Unaudited)                                                                     |  |      
|         |  |                       |  | Consolidated Balance SheetsSeptember 30, 2001 and December 31, 2000                                 |  | 2    
|         |  |                       |  | Consolidated Statements of OperationsThree Months and Nine Months Ended September 30, 2001 and 2000 |  | 3    
|         |  |                       |  | Consolidated Statement of Changes in Stockholders' EquityNine Months Ended September 30, 2001       |  | 4    
|         |  |                       |  | Consolidated Statements of Cash FlowsNine Months Ended September 30, 2001 and 2000                  |  | 5    
|         |  |                       |  | Notes to Consolidated Financial Statements                                                           |  | 6-8  
|         |  | Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                |  | 8-13 
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosure about Market Risk                                            |  | 13-14
|PART II. |  | OTHER INFORMATION     |  |                                                                                                     
|         |  | Item 1.               |  | Legal Proceedings                                                                                    |  | 14   
|         |  | Item 2.               |  | Change in Securities and Use of Proceeds                                                             |  | 14   
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                      |  | 14   
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                  |  | 14   
|         |  | Item 5.               |  | Other Information                                                                                    |  | 14   
|         |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                     |  | 14   

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

|                                                                                                                              |                                                                                                                                     | September 30,
2001         |            | December 31,
2000
|----------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | -----------------
|
|Assets                                                                                                                       
|Current assets:                                                                                                               |                                                                                                                                     |                            |            |                  
|                                                                                                                              | Cash and cash equivalents                                                                                                           |                            | $          | 219,102          
|                                                                                                                              | Trade accounts receivable, net of allowance for doubtful accounts of $114,710 in 2001 and $192,465 in 2000                          |                            |            | 1,319,878        
|                                                                                                                              | Current installments of notes receivable                                                                                            |                            |            | 41,785           
|                                                                                                                              | Other receivables                                                                                                                   |                            |            | 362,302          
|                                                                                                                              | Inventories                                                                                                                         |                            |            | 188,626          
|                                                                                                                              | Prepaid expenses                                                                                                                    |                            |            | 569,443          
|                                                                                                                              | Income taxes refundable                                                                                                             |                            |            |                 
|                                                                                                                              | Deferred income taxes                                                                                                               |                            |            | 287,817          
|                                                                                                                              |                                                                                                                                     |                            |            |                  
|                                                                                                                              |                                                                                                                                     | Total current assets       |            |                  
|Notes receivable, less allowance for doubtful accounts of $28,600 in 2001 and $53,535 in 2000, excluding current installments |                                                                                                                                     |                            | 255,214    |                  
|Property and equipment, net                                                                                                   |                                                                                                                                     |                            | 7,830,228  |                  
|Franchise royalty contracts, net of accumulated amortization of $4,884,789 in 2001 and $4,409,439 in 2000                     |                                                                                                                                     |                            | 4,569,642  |                  
|Goodwill, net of accumulated amortization of $2,399,872 in 2001 and $2,058,681 in 2000                                        |                                                                                                                                     |                            | 4,423,930  |                  
|Favorable lease rights, net of accumulated amortization of $175,954 in 2001 and $106,150 in 2000                              |                                                                                                                                     |                            | 377,879    |                  
|Financing costs, net of accumulated amortization of $59,213 in 2001 and $47,068 in 2000                                       |                                                                                                                                     |                            | 131,090    |                  
|Deferred income taxes                                                                                                         |                                                                                                                                     |                            | 999,748    |                  
|Other assets, net                                                                                                             |                                                                                                                                     |                            | 271,928    |                  
|                                                                                                                              |                                                                                                                                     |                            |            |                  
|                                                                                                                              |                                                                                                                                     | $                          | 21,848,612 |                  
|                                                                                                                              |                                                                                                                                     |                            |            |                  
|Liabilities and Stockholders' Equity                                                                                         
|Current liabilities:                                                                                                          |                                                                                                                                     |                            |            |                  
|                                                                                                                              | Bank overdraft                                                                                                                      |                            | $          |                 
|                                                                                                                              | Credit line note payable to bank                                                                                                    |                            |            | 500,000          
|                                                                                                                              | Current installments of long-term debt                                                                                              |                            |            | 780,854          
|                                                                                                                              | Accounts payable                                                                                                                    |                            |            | 2,329,806        
|                                                                                                                              | Accrued expenses and other                                                                                                          |                            |            | 1,158,087        
|                                                                                                                              |                                                                                                                                     |                            |            |                  
|                                                                                                                              |                                                                                                                                     | Total current liabilities  |            |                  
|Long-term debt, excluding current installments                                                                                |                                                                                                                                     |                            | 4,805,454  |                  
|                                                                                                                              |                                                                                                                                     |                            |            |                  
|                                                                                                                              |                                                                                                                                     | 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                                                                                                          |                            |            | 8,699,172        
|                                                                                                                              | Retained earnings                                                                                                                   |                            |            | 3,453,451        
|                                                                                                                              |                                                                                                                                     |                            |            |                  
|                                                                                                                              |                                                                                                                                     | Total stockholders' equity |            |                  
|                                                                                                                              |                                                                                                                                     |                            |            |                  
|Commitments and contingencies                                                                                                 |                                                                                                                                     | $                          | 21,848,612 |                  
|                                                                                                                              |                                                                                                                                     |                            |            |                  

See accompanying notes to consolidated financial statements.

2

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

|                             |                                 | Three Months
Ended September 30, |           | Nine Months
Ended September 30, |          
|---------------------------- | ------------------------------- | -------------------------------- | --------- | ------------------------------- | ---------
|
|Revenues:                    |                                 |                                  |           |                                 |          
|Company-operated stores      |                                 | $                                | 8,089,136 |                                 | $        
|Franchise operations         |                                 |                                  | 1,407,957 |                                 |          
|Other                        |                                 |                                  | 116,313   |                                 |          
|                             |                                 |                                  |           |                                 |          
|                             |                                 | Total revenues                   |           |                                 | 9,613,406
|                             |                                 |                                  |           |                                 |          
|Costs and expenses:          |                                 |                                  |           |                                 |          
|                             | Cost of company-operated stores |                                  |           | 5,573,122                       |          
|                             | Cost of franchise operations    |                                  |           | 600,874                         |          
|                             | Other cost of operations        |                                  |           | 83,755                          |          
|                             | Restaurant operating expenses   |                                  |           | 1,772,044                       |          
|                             | General and administrative      |                                  |           | 701,726                         |          
|                             | Depreciation and amortization   |                                  |           | 589,554                         |          
|                             |                                 |                                  |           |                                 |          
|                             |                                 | Total costs and expenses         |           |                                 | 9,321,075
|                             |                                 |                                  |           |                                 |          
|                             |                                 | Income (loss) from operations    |           |                                 | 292,331  
|Other income (expense):      |                                 |                                  |           |                                 |          
|                             | Interest expense                |                                  |           | (154,229                        | )        
|                             | Interest income                 |                                  |           | 11,366                          |          
|                             | Other                           |                                  |           | 107,631                         |          
|                             |                                 |                                  |           |                                 |          
|                             |                                 |                                  | (35,232   | )                               |          
|                             |                                 |                                  |           |                                 |          
|                             |                                 | Income before income tax expense |           |                                 | 257,099  
|Income tax expense (benefit) |                                 |                                  | 125,760   |                                 |          
|                             |                                 |                                  |           |                                 |          
|                             |                                 | Net income (loss)                |           | $                               | 131,339  
|                             |                                 |                                  |           |                                 |          
|Earnings per share:          |                                 |                                  |           |                                 |          
|                             | Basic                           |                                  |           | .01                             |          
|                             | Diluted                         |                                  |           | .01                             |          

See
accompanying notes to consolidated financial statements

3

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AUSTINS STEAKS & SALOON, INC.  Consolidated Statement of Changes in Stockholders' Equity  Nine Months Ended September 30, 2001  (Unaudited)

|                             |  | Common Stock |            |  |   |         |  |  
|---------------------------- |  | ------------ | ---------- |  | - | ------- |  | -
|
|
|Balances, December 31, 2000  |  |              | 12,079,900 |  | $ | 120,799 |  | $
|Net income                   |  |              |           |  |   |        |  |  
|Issuance of common stock     |  |              | 98,900     |  |   | 989     |  |  
|                             |  |              |            |  |   |         |  |  
|Balances, September 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  Nine Months Ended September 30, 2001 and 2000  (Unaudited)

|                                                 |                                                                                             | September                                                                               |                          
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------
|
|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         
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|Cash flows from investing activities:            |                                                                                             |                                                                                         |                          
|                                                 | Additions to property and equipment                                                         |                                                                                         |                          
|                                                 | Proceeds from fixed asset sales                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|Cash flows from financing activities:            |                                                                                             |                                                                                         |                          
|                                                 | Net decrease in bank overdraft                                                              |                                                                                         |                          
|                                                 | Net increase in credit line note payable                                                    |                                                                                         |                          
|                                                 | Proceeds from long-term debt                                                                |                                                                                         |                          
|                                                 | Payments on long-term debt                                                                  |                                                                                         |                          
|                                                 | Repurchase of common stock                                                                  |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|                                                 |                                                                                             |                                                                                         |                          
|Cash and cash equivalents at beginning of period |                                                                                             |                                                                                         | 1,467,985                
|                                                 |                                                                                             |                                                                                         |                          
|Cash and cash equivalents at end of period       |                                                                                             | $                                                                                       | 219,102                  
|                                                 |                                                                                             |                                                                                         |                          

See
accompanying notes to consolidated financial statements.

5

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

(1) Summary of Significant Accounting Policies

The
accompanying unaudited consolidated financial statements have been prepared by Austins Steaks & Saloon, Inc. ("Austins" or the "Company") in accordance with accounting principles
generally accepted in the United States of American 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 accounting principles generally accepted in the United States of America 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 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 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
nine-month periods ended September 30, 2001and 2000 because these effects are anti-dilutive.

6

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

|                                      |  | Income
(Loss)
(Numerator) |          | Weighted
Average
Shares
(Denominator) |            | Earnings
Per Share
Amount |      
|------------------------------------- |  | ------------------------- | -------- | ------------------------------------- | ---------- | ------------------------- | -----
|Three months ended September 30, 2001 |  |                           |          |                                       |            |                           |      
|Net incomebasic and diluted          |  | $                         | 131,339  |                                       | 12,178,800 |                           | 0.01 
|                                      |  |                           |          |                                       |            |                           |      
|Three months ended September 30, 2000 |  |                           |          |                                       |            |                           |      
|Net lossbasic and diluted            |  | $                         | (287,309 | )                                     | 12,095,936 |                           | (0.02
|                                      |  |                           |          |                                       |            |                           |      
|Nine months ended September 30, 2001  |  |                           |          |                                       |            |                           |      
|Net incomebasic and diluted          |  | $                         | 535,226  |                                       | 12,146,196 |                           | 0.04 
|                                      |  |                           |          |                                       |            |                           |      
|Nine months ended September 30, 2000  |  |                           |          |                                       |            |                           |      
|Net incomebasic and diluted          |  | $                         | 146,046  |                                       | 12,101,195 |                           | 0.01 
|                                      |  |                           |          |                                       |            |                           |      

(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 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 September 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 to the Company's consolidated revenues.

7

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The following table summarizes reportable segment information:

|                                                       |                       | Three Months
Ended September 30,        |   | Nine Months
Ended September 30, |           
|------------------------------------------------------ | --------------------- | --------------------------------------- | - | ------------------------------- | ----------
|
|Revenues from reportable segments:                     |                       |                                         |   |                                 |           
|                                                       | Restaurants           |                                         | $ | 8,089,136                       |           
|                                                       | Franchising and other |                                         |   | 1,524,270                       |           
|                                                       |                       |                                         |   |                                 |           
|                                                       |                       | Total revenues                          |   | $                               | 9,613,406 
|                                                       |                       |                                         |   |                                 |           
|Depreciation and amortization:                         |                       |                                         |   |                                 |           
|                                                       | Restaurants           |                                         |   | 395,839                         |           
|                                                       | Franchising and other |                                         |   | 193,715                         |           
|                                                       |                       |                                         |   |                                 |           
|                                                       |                       | Total depreciation and amortization     |   | $                               | 589,554   
|                                                       |                       |                                         |   |                                 |           
|Interest expense:                                      |                       |                                         |   |                                 |           
|                                                       | Restaurants           |                                         |   | 133,739                         |           
|                                                       | Franchising and other |                                         |   | 20,490                          |           
|                                                       |                       |                                         |   |                                 |           
|                                                       |                       | Total interest expense                  |   | $                               | 154,229   
|                                                       |                       |                                         |   |                                 |           
|Interest income:                                       |                       |                                         |   |                                 |           
|                                                       | Restaurants           |                                         |   | 11,366                          |           
|                                                       | Franchising and other |                                         |   |                                |           
|                                                       |                       |                                         |   |                                 |           
|                                                       |                       | Total interest income                   |   | $                               | 11,366    
|                                                       |                       |                                         |   |                                 |           
|Income (loss) before income taxes:                     |                       |                                         |   |                                 |           
|                                                       | Restaurants           |                                         |   | 36,848                          |           
|                                                       | Franchising and other |                                         |   | 220,251                         |           
|                                                       |                       |                                         |   |                                 |           
|                                                       |                       | Total income (loss) before income taxes |   | $                               | 257,099   
|                                                       |                       |                                         |   |                                 |           
|                                                       |                       | September 30,
2001                      |   |                                 |           
|Gross fixed assets:                                    |                       |                                         |   |                                 |           
|                                                       | Restaurants           |                                         |   | 11,394,028                      |           
|                                                       | Franchising and other |                                         |   | 1,408,862                       |           
|                                                       |                       |                                         |   |                                 |           
|                                                       |                       | Total gross fixed assets                |   | $                               | 12,802,890
|                                                       |                       |                                         |   |                                 |           
|Expenditures for fixed assets (including acquisition): |                       |                                         |   |                                 |           
|                                                       | Restaurants           |                                         |   | 298,656                         |           
|                                                       | Franchising and other |                                         |   | 23,803                          |           
|                                                       |                       |                                         |   |                                 |           
|                                                       |                       | Total expenditures for fixed assets     |   | $                               | 322,459   
|                                                       |                       |                                         |   |                                 |           

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

Overview

The Company currently operates and franchises a total of 242 restaurants located in 24 states, including 18 company-owned and 224 franchise restaurants. The
restaurants include a family steakhouse concept, a steak and buffet concept, and the casual dining steakhouse concept.

8

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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 that remained open 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 the Form 10-Q or in any other
report of the Company are forward-looking statements. The Private Securities Litigation Reform Act of 1995 provided 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.

Results of Operations

Net income (loss) for the three and nine-month periods ended September 30, 2001 was $131,339 and $535,226 respectively, as compared to ($287,309) and $146,046
for the three and nine-month periods ended September 30, 2000, respectively. The Quincy operations had a net loss of approximately ($165,000) for the nine months ended September 30, 2001 compared to
($790,000) and ($770,000) for the three and nine-months ended September 30, 2000.

9

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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
September 30,        |      | Nine Months
Ended
September 30, |     
|--------------------------------------- | ------------------------------- | --------------------------------------- | ---- | ------------------------------- | ----
|
|Revenues:                               |                                 |                                         |      |                                 |     
|                                        | Company-operated stores         |                                         | 84.1 | %                               | 95.2
|                                        | Franchise royalties and fees    |                                         | 14.6 |                                 | 4.4 
|                                        | Other sales                     |                                         | 1.3  |                                 | 0.4 
|                                        |                                 |                                         |      |                                 |     
|                                        |                                 | Total revenues                          |      | 100.0                           |     
|                                        |                                 |                                         |      |                                 |     
|Costs and expenses:                     |                                 |                                         |      |                                 |     
|                                        | Cost of company-operated stores |                                         | 58.0 |                                 | 75.6
|                                        | Cost of franchise operations    |                                         | 6.3  |                                 | 1.7 
|                                        | Other cost of operations        |                                         | 0.9  |                                 | 0.3 
|                                        | Restaurant operating expenses   |                                         | 18.4 |                                 | 11.5
|                                        | General and administrative      |                                         | 7.3  |                                 | 9.2 
|                                        | Depreciation and amortization   |                                         | 6.1  |                                 | 2.0 
|                                        |                                 |                                         |      |                                 |     
|                                        |                                 | Total costs and expenses                |      | 97.0                            |     
|                                        |                                 |                                         |      |                                 |     
|                                        |                                 | Income (loss) from operations           |      | 3.0                             |     
|Other income (expense)                  |                                 | (0.4                                    | )    | (1.1                            | )   
|                                        |                                 |                                         |      |                                 |     
|                                        |                                 | Income (loss) before income tax expense |      | 2.6                             |     
|                                        | Income tax expense (benefit)    |                                         | 1.3  |                                 | (0.5
|                                        |                                 |                                         |      |                                 |     
|                                        |                                 | Net income (loss)                       |      | 1.3                             | %   
|                                        |                                 |                                         |      |                                 |     
|                                        |                                 | Three Months
Ended
September 30,        |      | Nine Months
Ended
September 30, |     
|                                        |                                 | 2001                                    |      | 2000                            |     
|Restaurant Data                         |                                 |                                         |      |                                 |     
|Number of Company-Operated Restaurants: |                                 |                                         |      |                                 |     
|                                        | Beginning of period             |                                         | 18   |                                 | 25  
|                                        | Opened                          |                                         |     |                                 |    
|                                        | Closed                          |                                         |     |                                 |    
|                                        |                                 |                                         |      |                                 |     
|                                        | End of period                   |                                         | 18   |                                 | 25  
|                                        |                                 |                                         |      |                                 |     
|Number of Quincy-operated Restaurants:  |                                 |                                         |      |                                 |     
|                                        | Beginning of period             |                                         |     |                                 | 97  
|                                        | Opened                          |                                         |     |                                 |    
|                                        | Closed                          |                                         |     |                                 | 10  
|                                        | Franchised                      |                                         |     |                                 |    
|                                        |                                 |                                         |      |                                 |     
|                                        | End of period                   |                                         |     |                                 | 87  
|                                        |                                 |                                         |      |                                 |     
|Number of U.S. Franchised Restaurants:  |                                 |                                         |      |                                 |     
|                                        | Beginning of period             |                                         | 234  |                                 | 207 
|                                        | Opened                          |                                         |     |                                 |    
|                                        | Closed                          |                                         | 10   |                                 | 3   
|                                        |                                 |                                         |      |                                 |     
|                                        | End of period                   |                                         | 224  |                                 | 204 
|                                        |                                 |                                         |      |                                 |     

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Revenues

Total revenues decreased 70.1 percent to $9.6 million for the three-months ended September 30, 2001 as compared to $32.2 million for the comparable three-month
period ended September 30, 2000. Revenues for the nine-month period ended September 30, 2001 decreased 48.8 percent to $31.2 million from $60.9 million for the nine months ended September 30, 2000.
The three and nine month decrease over the prior periods is primarily attributable to the consolidation of the Quincy operations in 2000, which had revenue of approximately $20.7 million and $26.4
million for the three and nine months ended September 30, 2000 compared to $1.6 million for the three and nine months ended September 30, 2001.

Franchise
revenues are comparable for the three and nine months ended September 30, 2001 and 2000.

Costs and Expenses

Cost of company-operated stores, consisting of food, beverage, and employee costs decreased $18.8 million for the three months ended September 30, 2001 from
$24.4 million in 2000 to $5.6 million in 2001 and as a percentage of total revenues from 75.6% in 2000, to 58.0% in 2001. For the nine months ended September 30, 2001, the cost of company-operated
stores decreased $24.1 million from $42.6 million in 2000 to $18.5 million in 2001 and as a percentage of total revenues from 69.9% in 2000 to 59.3% in 2001. The decrease is due to the Quincy
operations during 2000. The primary reason for the decrease of these costs as a percentage of total revenues is the costs of the Quincy stores, whose operating margins were significantly less than the
Company's other operated restaurants.

Cost
of franchise operations and other cost of operations increased as a percentage of total revenues to 6.3% and $601,000 for the three months ended September 30, 2001 from 1.7% and
$549,000 in 2000. These costs increased to 5.2% and $1.61 million for the nine months ended September 30, 2001 from 2.7% and $1.67 million in 2000. The addition of the Quincy units did not effect
these costs, but due to the increased sales did effect the percentages. The costs are comparable for the three and nine months ended September 30, 2001 and 2000.

Restaurant
operating expenses, which include utilities, insurance, maintenance, rent and other such costs of the company-operated stores, decreased $1.9 million and $1.1 million for
the three and nine months ended September 30, 2001 over prior year's comparable period. The majority of the decrease is due to the operation of the Quincy stores in 2000. These expenses as a
percentage of total revenues
increased to 18.4% and 18.1% in 2001 compared to 11.5% and 11.1% in 2000 for the three and nine months ended September 30. This increase in percentages is due to the lower total revenues in 2001.

General
and administrative expenses decreased $2.3 million and $4.2 million for the three and nine months ended September 30, 2001 over the respective prior periods. These expenses as
a percentage of total revenue decreased to 7.3% and 6.9% in 2001 compared to 9.2% and 10.5% in 2000 for the three and nine-months ended September 30. The majority of the decrease is due to the
operation of the Quincy stores during 2000.

Depreciation
and amortization expense is slightly less for the three and nine months ended September 30, 2001 compared to 2000 primarily due to closings of under performing
company-operated restaurants and retirement of their related long-lived assets which were recorded as of December 31, 2000.

Other Income (Expense)

Interest expense decreased slightly for the three-month and nine-month periods ended September 30, 2001 due to a lower average principal outstanding balance
comparing the respective periods and to lower interest rates in 2001. Interest income fluctuates according to the levels of available and

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investable cash balances. The Company employs a cash management system whereby available balances are invested on an overnight basis.

Income
tax expense is directly affected by the levels of pretax income. The Company's effective tax rate of approximately 41.4 percent for the nine-months ended September 30, 2001 is
comparable to the annualized rate of 39.3 percent in 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.

Cash
flows used in operating activities were $285,227 in 2001 compared to cash provided by operating activities of $4,780,725 in 2000. For 2001 cash flows used in operations were
primarily due to $4.2 decrease in accounts payable and accrued expenses, offset by net income of $535,000, $1.7 million in depreciation and amortization and $944,000 decrease in income taxes
refundable. For 2000 cash flows provided by operations were primarily due to $4.2 increase in accounts payable and accrued expenses. Net cash used by investing activities of $311,000 in 2001 and
$521,000 in 2000, was primarily for expenditures related to property and equipment. Net cash used by financing activities of $652,000 in 2001 and $2.2 million in 2000, was primarily for repayment of
long-term debt. In 2001, these payments were offset by proceeds from long-term debt of $920,000.

The
Company utilizes its existing line of credit to provide additional short-term funding. Management is 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 had 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

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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.

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 September 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 September 30, 2001 (dollars in thousands):

EXPECTED MATURITY DATE

|                         |                       | 2001 |   | 2002 |   | 2003 |      | 2004 |   | 2005 |   | Thereafter |      | Total |   | Estimated
Fair Value
|------------------------ | --------------------- | ---- | - | ---- | - | ---- | ---- | ---- | - | ---- | - | ---------- | ---- | ----- | - | --------------------
|Credit Line Note Payable |                       |      |   |      |   |      |      |      |   |      |   |            |      |       |   |                     
|                         | Variable Rate         |      |   | 500  |   |      |     |      |   |     |   |            |     |       |   |                    
|                         | Average Interest Rate |      |   | 6.0  | % |      |     |      |   |     |   |            |     |       |   |                    
|Long-term debt           |                       |      |   |      |   |      |      |      |   |      |   |            |      |       |   |                     
|                         | Fixed Rate            |      | $ | 373  |   | $    | 521  |      | $ | 521  |   | $          | 538  |       | $ | 505                 
|                         | Average Interest Rate |      |   | 9.80 | % |      | 9.92 | %    |   | 9.94 | % |            | 9.94 | %     |   | 9.94                
|                         | Variable Rate         |      | $ | 408  |   |      |     |      |   |     |   |            |     |       |   |                    
|                         | Average Interest Rate |      |   | 6.0  | % |      |     |      |   |     |   |            |     |       |   |                    

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: November 14, 2001 |  | By:                          

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