UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   Form 10-QSB

--------------------------------------------------------------------------------


(Mark one)
   XX          QUARTERLY  EPORT  UNDER  SECTION  13  OR  15(d) OF THE SECURITIES
---------      EXCHANGE ACT OF 1934


                       For the quarterly period ended June 30, 2001

               TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  EXCHANGE ACT
---------      OF 1934

                       For the transition period from __________ to __________

--------------------------------------------------------------------------------


                         Commission File Number: 0-27006
                                                 -------

                           Million Dollar Saloon, Inc.
        (Exact name of small business issuer as specified in its charter)

         Nevada                                              13-3428657
----------------------------                        ----------------------------
  (State of incorporation)                            (IRS Employer ID Number)

                    6848 Greenville Avenue, Dallas, TX 75231
                    ----------------------------------------
                    (Address of principal executive offices)

                                 (214) 691-6757
                                 --------------
                           (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. YES X  NO
                                                             ---   ---

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: July 31, 2001: 5,731,778
                                          ------------------------

Transitional Small Business Disclosure Format (check one):    YES      NO X
                                                                  ---    ---



<PAGE>

                           Million Dollar Saloon, Inc.

                 Form 10-QSB for the Quarter ended June 30, 2001

                                Table of Contents


                                                                          Page
                                                                          ----
Part I - Financial Information

  Item 1 Financial Statements                                               3

  Item 2 Management's Discussion and Analysis or Plan of Operation         14


Part II - Other Information

  Item 1 Legal Proceedings                                                 15

  Item 2 Changes in Securities                                             15

  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


Signatures                                                                 16



                                                                               2

<PAGE>
<TABLE>
<CAPTION>


Item 1 - Part 1 - Financial Statements

                  Million Dollar Saloon, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                             June 30, 2001 and 2000

                                   (Unaudited)

                                     Assets
                                     ------
                                                           June 30,       June 30,
                                                             2001           2000
                                                         -----------    -----------
<S>                                                      <C>            <C>
Current Assets
   Cash on hand and in bank                              $   752,071    $   724,421
   Accounts receivable - other                                  --              900
   Prepaid income taxes receivable                            11,022           --
   Inventory                                                  22,923         24,948
   Prepaid expenses                                            4,695         82,841
                                                         -----------    -----------

      Total current assets                                   790,711        833,110
                                                         -----------    -----------


Property and Equipment - At Cost
   Buildings and related improvements                      2,017,514      1,987,514
   Furniture and equipment                                   866,612        856,566
                                                         -----------    -----------
                                                           2,884,126      2,844,080
   Less accumulated depreciation                          (1,763,946)    (1,670,833)
                                                         -----------    -----------
                                                           1,120,180      1,173,247
   Land                                                      741,488        741,488
                                                         -----------    -----------

      Net property and equipment                           1,861,668      1,914,735
                                                         -----------    -----------


Other Assets
   Organization costs, net of accumulated amortization
      of $74,928 and $72,123, respectively                      --            2,805
   Other                                                                      5,475
                                                                        -----------
                                                                              6,225

      Total other assets                                       5,475          9,030
                                                         -----------    -----------

Total Assets                                             $ 2,657,854    $ 2,756,875
                                                         ===========    ===========
</TABLE>

                                  - Continued -

The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                                               3

<PAGE>
<TABLE>
<CAPTION>

                  Million Dollar Saloon, Inc. and Subsidiaries
                     Consolidated Balance Sheets - Continued
                             June 30, 2001 and 2000

                                   (Unaudited)

                      Liabilities and Shareholders' Equity
                      ------------------------------------

                                                                      June 30,     June 30,
                                                                        2001         2000
                                                                     ----------   ----------
<S>                                                                  <C>          <C>
Current Liabilities
   Accounts payable - trade                                          $   18,265   $   16,484
   Accrued liabilities                                                   55,329       81,315
   Federal income taxes payable                                            --         41,843
   Tenant deposits                                                        6,500        6,500
                                                                     ----------   ----------

      Total current liabilities                                          80,094      146,142
                                                                     ----------   ----------


Long-term Liabilities
   Deferred tax liability                                               133,101      139,248
                                                                     ----------   ----------

      Total liabilities                                                 213,195      285,390
                                                                     ----------   ----------


Commitments and Contingencies


Shareholders' Equity
   Preferred stock - $0.001 par value.  5,000,000 shares
      authorized.  None issued and outstanding                             --           --
   Common stock - $0.001 par value.  50,000,000 shares
      authorized.  5,731,778 issued and outstanding, respectively         5,732        5,732
   Additional paid-in capital                                              --           --
   Retained earnings                                                  2,438,927    2,465,753
                                                                     ----------   ----------

      Total shareholders' equity                                      2,444,659    2,471,485
                                                                     ----------   ----------

Total Liabilities and Shareholders' Equity                           $2,657,854   $2,756,875
                                                                     ==========   ==========
</TABLE>



The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                                               4

<PAGE>
<TABLE>
<CAPTION>

                  Million Dollar Saloon, Inc. and Subsidiaries
               Consolidated Statements of Income and Comprehensive
                 Income Six and Three months ended June 30, 2001
                                    and 2000

                                   (Unaudited)

                                       Six months      Six months     Three months    Three months
                                         ended           ended           ended           ended
                                        June 30,        June 30,        June 30,        June 30,
                                           2001            2000            2001            2000
                                      ------------    ------------    ------------    ------------
<S>                                   <C>             <C>             <C>             <C>
Revenues
   Bar and restaurant sales            $ 1,701,277    $  1,976,413    $    826,708    $    975,582
   Rental income                           261,671         340,550         125,775         174,525
                                      ------------    ------------    ------------    ------------
      Total revenues                     1,962,948       2,316,963         952,483       1,150,107
                                      ------------    ------------    ------------    ------------

Cost of Sales - Bar and
   Restaurant Operations                 1,186,897       1,192,441         582,199         575,015
                                      ------------    ------------    ------------    ------------

Gross Profit                               776,051       1,124,522         370,284         575,015
                                      ------------    ------------    ------------    ------------

Operating Expenses
   General and administrative              667,854         761,023         339,848         392,957
   Interest                                   --             2,129            --              --
   Depreciation and amortization            45,697          55,936          22,849          28,759
                                      ------------    ------------    ------------    ------------
      Total operating expenses             713,551         819,088         362,697         421,716
                                      ------------    ------------    ------------    ------------

Income from Operations                      62,500         305,434           7,587         153,376

Other Income (Expenses)
   Interest and other miscellaneous         15,690          18,090           7,204           6,842
                                      ------------    ------------    ------------    ------------

Income before Income Taxes                  78,190         323,524          14,791         160,218

Income tax (expense)
   Currently payable                       (22,119)       (100,000)         (1,581)        (49,425)
   Deferred                                   --              --              --              --
                                      ------------    ------------    ------------    ------------

Net Income                                  56,071         223,524          13,210         110,793

Other comprehensive income                    --              --              --              --
                                      ------------    ------------    ------------    ------------

Comprehensive Income                   $    56,071    $    223,524    $     13,210    $    110,793
                                      ============    ============    ============    ============
</TABLE>

The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                                               5
<PAGE>
<TABLE>
<CAPTION>


                  Million Dollar Saloon, Inc. and Subsidiaries
               Consolidated Statements of Income and Comprehensive
                 Income Six and Three months ended June 30, 2000
                                    and 1999

                                   (Unaudited)

                                 Six months     Six months    Three months  Three months
                                    ended          ended         ended          ended
                                  June 30,       June 30,      June 30,       June 30,
                                     2001           2000          2001           2000
                                ------------   ------------   -----------   ------------
<S>                             <C>            <C>            <C>           <C>

Net Income                      $     56,071   $    223,524   $     13,210   $    110,793

Other comprehensive income              --             --             --             --
                                ------------   ------------   ------------   ------------

Comprehensive Income            $     56,071   $    223,524   $     13,210   $    110,793
                                ============   ============   ============   ============


Earnings per share of common
   stock outstanding computed
   on net income - basic and
   fully diluted                $       0.01   $       0.04           nil   $       0.02
                                ============   ============   ===========   ============

Weighted-average number
   of shares outstanding -
   basic and fully diluted         5,731,778      5,731,778     5,731,778      5,731,778
                                ============   ============   ===========   ============
</TABLE>



                (Remainder of this page left blank intentionally)

The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                                               6

<PAGE>
<TABLE>
<CAPTION>


                  Million Dollar Saloon, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                     Six months ended June 30, 2001 and 2000

                                   (Unaudited)

                                                             Six months    Six months
                                                                ended         ended
                                                               June 30,      June 30,
                                                                2001          2000
                                                             ----------    ----------
<S>                                                          <C>           <C>
Cash Flows from Operating Activities
   Net income                                                $   56,071    $  223,524
   Adjustments to reconcile net income to net cash
     provided by operating activities
       Depreciation and amortization                             45,697        55,936
       (Increase) decrease in
         Accounts receivable - trade and other                    8,737         8,848
         Federal income taxes receivable                         22,119        20,339
         Inventory                                                  (79)        6,714
         Prepaid expenses                                        (4,695)      (82,841)
       Increase (decrease) in
         Accounts payable and other accrued liabilities        (100,670)       20,023
         Income taxes payable                                      --          41,843
                                                             ----------    ----------
Net cash provided by operating activities                        27,180       294,386
                                                             ----------    ----------

Cash Flows from Investing Activities
   Principal collections on note receivable                        --          35,179
   Purchases of property and equipment                           (2,152)      (18,402)
                                                             ----------    ----------
Net cash provided by investing activities                        (2,152)       16,777
                                                             ----------    ----------

Cash Flows from Financing Activities
   Principal payments on long-term notes payable                   --        (139,657)
   Dividends paid                                                  --         (57,318)
                                                             ----------    ----------
Net cash used in financing activities                              --        (196,975)
                                                             ----------    ----------

Increase in Cash and Cash Equivalents                            25,028       114,188

Cash and cash equivalents at beginning of period                727,043       610,233
                                                             ----------    ----------

Cash and cash equivalents at end of period                   $  752,071    $  724,421
                                                             ==========    ==========

Supplemental Disclosures of Interest and Income Taxes Paid
     Interest paid during the period                         $     --      $    2,129
                                                             ==========    ==========
     Income taxes paid                                       $     --      $   37,818
                                                             ==========    ==========
</TABLE>


The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                                               7

<PAGE>

                  Million Dollar Saloon, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements


Note A - Background and Organization

Million Dollar Saloon,  Inc. (MDS) was incorporated  under the laws of the State
of Nevada on September 28, 1987. MDS is a holding company  providing  management
support to its operating  subsidiaries:  Furrh,  Inc., Tempo Tamers,  Inc., Don,
Inc. and Corporation Lex.

Furrh,  Inc.  (Furrh) was  incorporated  under the laws of the State of Texas on
February 25, 1974. Furrh provides  management services to Tempo Tamers, Inc, its
wholly-owned subsidiary.  Tempo Tamers, Inc. (Tempo), was incorporated under the
laws  of  the  State  of  Texas  on  July  3,  1978.  Tempo  operates  an  adult
entertainment  lounge and restaurant facility,  located in Dallas,  Texas, under
the registered trademark and trade name "Million Dollar Saloon(R)".

Don,  Inc.  (Don)  was  incorporated  under  the  laws of the  State of Texas on
November 8, 1973. Don owns and manages  commercial  rental  property  located in
Tarrant County, Texas.

Corporation Lex (Lex) was  incorporated  under the laws of the State of Texas on
November 30, 1984. Lex owns and manages  commercial  rental property  located in
Dallas County, Texas.

These  financial  statements  reflect  the books and  records of Million  Dollar
Saloon, Inc., Furrh, Inc., Tempo Tamers, Inc., Corporation Lex and Don, Inc. for
the three months ended March 31, 2001 and 2000,  respectively.  All  significant
intercompany transactions have been eliminated in combination.  The consolidated
entities are referred to as Company.

During interim periods, the Company follows the accounting policies set forth in
its Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act
of 1934 on Form 10-KSB filed with the U. S. Securities and Exchange  Commission.
The information  presented  herein may not include all  disclosures  required by
generally accepted accounting  principles and the users of financial information
provided for interim  periods should refer to the annual  financial  information
and footnotes  contained in its Annual Report Pursuant to Section 13 or 15(d) of
The  Securities  Exchange Act of 1934 on Form 10-KSB when  reviewing the interim
financial results presented herein.

In the opinion of management,  the accompanying  interim  financial  statements,
prepared in accordance with the instructions for Form 10-QSB,  are unaudited and
contain  all  material   adjustments,   consisting  only  of  normal   recurring
adjustments  necessary to present  fairly the  financial  condition,  results of
operations  and cash flows of the Company  for the  respective  interim  periods
presented.  The  current  period  results  of  operations  are  not  necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 2001.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

                                                                               8
<PAGE>



                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note B - Summary of Significant Accounting Policies

1.     Cash and Cash Equivalents
       -------------------------

       For Statement of Cash Flows purposes,  the Company  considers all cash on
       hand  and in  banks,  including  accounts  in book  overdraft  positions,
       certificates  of  deposit  and  other   highly-liquid   investments  with
       maturities of three months or less, when  purchased,  to be cash and cash
       equivalents.

       Cash overdraft positions may occur from time to time due to the timing of
       making  bank  deposits  and  releasing  checks,  in  accordance  with the
       Company's cash management policies.


2.     Accounts Receivable and Revenue Recognition
       -------------------------------------------

       In the normal course of business, the Company extends unsecured credit to
       virtually all of its tenants  related to rental  property  operations and
       accepts  national  bankcards  as payment  for goods and  services  in its
       lounge and entertainment facility.  Bankcard charges are normally paid by
       the clearing  institution  within three to fourteen days from the date of
       presentation by the Company.  All lease rental payments are either due on
       the first day of the month in  advance  for the month or on the first day
       of the week in arrears for the previous corresponding period. All revenue
       sources are located either in Dallas or Tarrant County, Texas. Because of
       the credit  risk  involved,  management  has  provided an  allowance  for
       doubtful  accounts  which  reflects  its  opinion of  amounts  which will
       eventually   become    uncollectible.    In   the   event   of   complete
       non-performance,  the maximum  exposure  to the  Company is the  recorded
       amount of trade  accounts  receivable  shown on the balance  sheet at the
       date of non-performance.

3.     Inventory
       ---------

       Inventory  consists  of food  and  liquor  consumables  necessary  in the
       operation of Tempo's adult lounge and entertainment facility. These items
       are valued at the lower of cost or market using the  first-in,  first-out
       method of accounting.

4.     Property and Equipment
       ----------------------

       Property  and  equipment  is  recorded  at cost and is  depreciated  on a
       straight-line  basis,  over the estimated useful lives (generally 5 to 40
       years) of the  respective  asset.  Major  additions and  betterments  are
       capitalized  and  depreciated  over  the  estimated  useful  lives of the
       related assets. Maintenance,  repairs, and minor improvements are charged
       to expense as incurred.

5.     Trademark rights
       ----------------

       Amounts paid in  conjunction  with the  acquisition  and retention of the
       trademark  "Million Dollar Saloon(R)" have been capitalized.  The life of
       the  registration is twenty years from its affirmation in 1988 and may be
       extended  as  allowed  by  applicable  law at that  point in  time.  This
       trademark  has been  assigned  Registration  No.  1,509,636  by the U. S.
       Patent and Trademark  Office.  The Company amortizes the trademark over a
       10- year life using the straight-line method.

                                                                               9

<PAGE>

                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note B - Summary of Significant Accounting Policies - Continued

6.     Income Taxes
       ------------

       The Company files a  consolidated  Federal Income Tax return and utilizes
       the asset and  liability  method of  accounting  for  income  taxes.  The
       deferred tax asset and deferred tax liability accounts,  as recorded when
       material  to  the  financial  statements,  are  entirely  the  result  of
       temporary  differences.  No  valuation  allowance  was  provided  against
       deferred tax assets.  Temporary  differences represent differences in the
       recognition  of assets and  liabilities  for tax and financial  reporting
       purposes, primarily accumulated depreciation and amortization.

7.     Earnings per share
       ------------------

       Basic  earnings  (loss) per share is computed by dividing  the net income
       (loss) by the  weighted-average  number  of  shares  of common  stock and
       common stock equivalents  (primarily  outstanding  options and warrants).
       Common stock  equivalents  represent  the dilutive  effect of the assumed
       exercise  of the  outstanding  stock  options  and  warrants,  using  the
       treasury stock method.  The calculation of fully diluted  earnings (loss)
       per share  assumes the  dilutive  effect of the  exercise of  outstanding
       options and  warrants at either the  beginning of the  respective  period
       presented  or the date of issuance,  whichever is later.  As of March 31,
       2001  and  2000,  respectively,  the  Company  has no  outstanding  stock
       warrants,  options or convertible securities which could be considered as
       dilutive for purposes of the loss per share calculation.


Note C - Concentrations of Credit Risk

The Company  maintains its cash accounts in a financial  institution  subject to
insurance coverage issued by the Federal Deposit Insurance  Corporation  (FDIC).
Under FDIC rules,  the Company and its  subsidiaries  are  entitled to aggregate
coverage of $100,000 per account type per  separate  legal entity per  financial
institution. During the three months ended June 30, 2001 and 2000, respectively,
respectively,  the  various  operating  companies  had  deposits  in a financial
institution with credit risk exposures in excess of statutory FDIC coverage. The
Company has  incurred no losses  during 2001 or 2000 as a result of any of these
unsecured situations.


Note D - Property and Equipment

Property and equipment consists of the following at March 31, 2001 and 2000:

                                        2001           2000       Estimated life
                                    -----------    -----------    --------------
Buildings and related improvements    2,017,514      1,987,514    15-40 years
Furniture and equipment                 866,612        856,566    5-10 years
                                    -----------    -----------
                                      2,884,126      2,844,080
Less accumulated depreciation        (1,763,946)    (1,670,833)
                                    -----------    -----------
                                      1,120,180      1,173,247
Land                                    741,488        741,488
                                    -----------    -----------

Net property and equipment          $ 1,861,668    $ 1,914,735
                                    ===========    ===========

Depreciation expense for the six months ended June 30, 2001 and 2000 was $45,697
and $43,702, respectively.

                                                                              10

<PAGE>
<TABLE>
<CAPTION>

                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note E - Income Taxes

The deferred current tax asset and non-current deferred tax liability on June
30, 2001 and 2000, respectively, balance sheet consists of the following:

                                                          June 30,     June 30,
                                                           2001          2000
                                                         ---------    ---------

    Non-current deferred tax liability                   $(133,101)   $(139,248)
                                                         =========    =========

The  non-current  deferred  tax  liability  results  from the usage of statutory
accelerated tax depreciation and amortization methods.

The components of income tax expense (benefit) for the six months ended June 30,
2001 and 2000, respectively, are as follows:


                                                        Six months   Six months
                                                          ended        ended
                                                         June 30,     June 30,
                                                           2001         2000
                                                        ----------   ----------
    Federal:
      Current                                           $   22,119   $  100,000
      Deferred                                                --           --
                                                        ----------   ----------
                                                            22,119      100,000
                                                        ----------   ----------
    State:
      Current                                                 --           --
      Deferred                                                --           --
                                                        ----------   ----------
                                                              --           --
                                                        ----------   ----------
      Total                                             $   22,119   $  100,000
                                                        ==========   ==========

The  Company's  income tax expense  (benefit) for the years ended June 30 , 2001
and 2000,  respectively,  differed from the statutory federal rate of 34 percent
as follows:

                                                             Six months    Six months
                                                               ended         ended
                                                              June 30,      June 30,
                                                                2001          2000
                                                             ----------    ----------
<S>                                                          <C>           <C>
    Statutory rate applied to earnings before income taxes   $   26,585    $  109,998
    Increase (decrease) in income taxes resulting from:
      State income taxes                                           --            --
      Deferred income taxes                                        --            --
      Effect of incremental tax brackets and the
        application of business tax credits                      (4,466)       (9,998)
                                                             ----------    ----------

    Income tax expense                                       $   22,119    $  100,000
                                                             ==========    ==========
</TABLE>



                                                                              11

<PAGE>
<TABLE>
<CAPTION>


                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note F - Capital Stock Transactions

On  March  19,  1998,  the  Company  entered  into a  Stock  Purchase  Agreement
(Agreement)  with an unrelated  individual.  The  Agreement  contained a "second
closing"  clause,  as amended,  whereby the individual may acquire an additional
400,000 shares of restricted,  unregistered common stock at a price of $1.10 per
share on or before the close of  business on October  18,  2004.  As of June 30,
2001, no shares of common stock have been issued in accordance  with the "second
closing" portion of the Agreement.


Note G - Commitments

The Company leases  commercial real estate on long-term  operating  leases.  The
leases require  minimum weekly lease  payments,  plus  reimbursement  for annual
property taxes.  The respective  tenants are responsible for normal  maintenance
and  repairs,  insurance  and other  direct  operating  expenses  related to the
property. As of December 31, 2000, future minimum non-cancellable lease revenues
are as follows:

                                                  Year ending
                                                  December 31,         Amount
                                                  ------------      ------------

                                                      2001          $    689,000
                                                      2002               546,500
                                                      2003               280,500
                                                                    ------------

                                                      Total         $  1,516,000
                                                                    ============

Note H - Segment Information

The  Company  operates  with a  centralized  management  structure  and  has two
identifiable  operating segments:  an adult entertainment  lounge and restaurant
located in Dallas, Texas and commercial rental real estate located in Dallas and
Tarrant  Counties,  Texas.  All  revenues  are  generated  operations  in  these
geographic  areas.  The Company has a relationship  whereby rental revenues from
various entities under the common control of a controlling  shareholder comprise
approximately  13.33% and 14.70% of total revenues for the six months ended June
30, 2001 and 2000, respectively.

                                       Restaurant         Rental        General and
                                        facility       real estate     administrative       Total
                                     --------------   --------------   --------------   --------------
<S>                                  <C>              <C>              <C>              <C>
Six months ended March 31, 2001
   Revenue from external customers   $    1,701,277     $       --      $        --     $    1,701,277
   Revenue from related parties                --            261,671             --            261,671
   Revenue (expenses) from/to
     intercompany sources                  (120,000)         (38,000)         158,000             --
   Interest income                             --              7,499            8,191           15,690
   Interest expense                            --               --               --               --
   Depreciation and amortization             34,746           10,951             --             45,697
   Income tax expense (benefit)             (56,952)          76,286            2,785           22,119
   Segment assets                           300,735        1,993,571          363,548        2,657,854
   Fixed asset expenditures                   2,152             --               --              2,152
</TABLE>


                                                                              12

<PAGE>
<TABLE>
<CAPTION>


                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note H - Segment Information - Continued

                                       Restaurant         Rental        General and
                                        facility       real estate     administrative       Total
                                     --------------   --------------   --------------   --------------
<S>                                  <C>              <C>              <C>              <C>
Six months ended June 30, 1999
   Revenue from external customers   $    1,644,382   $      340,436   $         --     $    1,984,818
   Revenue (expenses) from/to
     intercompany sources                      --               --               --               --
   Interest income                             --              4,098            6,137           10,235
   Interest expense                           1,008           15,291           16,299
   Depreciation and amortization             17,427           34,557            5,648           57,632
   Income tax expense (benefit)             (22,265)         102,235           (1,220)          78,750
   Segment assets                           420,369        1,940,851          476,114        2,837,334
   Fixed asset expenditures                    --              6,714             --              6,714
</TABLE>


                (Remainder of this page left blank intentionally)


                                                                              13

<PAGE>



Part I - Item 2

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

(1)  Results of Operations

Bar and restaurant  operations  decreased by approximately  $275,000 between the
first six months of 2001 as compared to the first six months of 2000.  Total bar
and restaurant  sales for the six months ended June 30, 2001 were  approximately
$1,701,000 as compared to approximately $1,976,000 for the six months ended June
30, 2000.

As discussed in Part II - Legal  Proceedings,  the Company is a  participant  in
litigation  against  the City of  Dallas,  Texas  where  the  Company  and other
operators  of adult  cabarets  within  the City of  Dallas  are  contesting  the
constitutionality of certain provisions of the Dallas Sexually Oriented Business
Ordinance  (the  "Ordinance")  which impacts the Company's and other  operators'
license to do business as an adult cabaret in Dallas. The Company remains of the
opinion that it will prevail on its constitutional claims.

However, as an interim measure, the City of Dallas initiated various enforcement
actions and  on-premises  monitoring  of conduct  within the Company's and other
facilities  which has  negatively  impacted  both  patronage and revenues in all
adult  entertainment  facilities  within the City of Dallas during the first six
months of 2001 and periods subsequent thereto. As of the date of this filing and
pending the ultimate outcome of the pending litigation,  management is unable to
assess the long-term impact of these regulatory actions.

Management's  continues  to direct it's  efforts  towards  customer  service and
increasing sales through effective marketing and advertising methods to maintain
and increase its bar and restaurant patronage and comply with current regulatory
conditions and environment.

The Company's  rental income declined due to a renegotiated  lease with entities
controlled by the Company's controlling shareholder during the first quarter. On
January 30, 2001, the Company's Board of Directors  approved an amendment to the
lease  agreement  covering the property owned by Corporation  Lex. The amendment
provides that  effective  January 1, 2001,  the base rental will be reduced from
$4,750 per week to $1,000 per week. Additionally, the amended lease will provide
that the Company, as Landlord, shall receive 10% of the gross revenues generated
from the business located at the property,  payable quarterly, until termination
of the lease in May 2002. The modification of the lease agreement was the result
of negotiations  between the Company and  representatives  of the tenant, who is
affiliated with the Company's controlling  shareholder.  Such modifications were
requested by the tenant as a result of decreasing revenues of the tenant's adult
cabaret  operation  located on the property.  The tenant had advised the Company
that if the lease was not  modified,  it may be  compelled to close its business
operations.  The tenant is owned by an affiliated  corporation  of Duncan Burch,
who is also an officer and director of the Company.

Cost of sales were relatively constant at approximately $1,187,000 for the first
six months of 2001 as compared  to  approximately  $1,192,000  for the first six
months of 2000. Key areas of management focus are entertainer compensation, food
and beverage costs in the Company's Dallas Texas entertainment  facility.  Gross
profit  percentages  increased to 39.53%  ($776,000) for the first six months of
2001 versus 48.53% ($1,125,000) for the first six months of 2000. Increased cost
controls over purchasing,  inventory  management  protocols and labor management
are continuously monitored to improve gross profit percentages.

General and  administrative  expenses  declined by approximately  $93,000 in the
first six  months of 2001  versus  the first  six  months of 2000.  The  Company
continues  to  experience  relatively  constant  expenditure  levels for general
operating  expenses.  Management  continues to monitor its expenditure levels to
achieve optimum financial results.


                                                                              14

<PAGE>

Net income  before  income  taxes was  approximately  $78,000  for the first six
months of 2001 versus  approximately  $324,000 for the first six months of 2000.
After-tax net income  decreased by  approximately  $168,000  from  approximately
$78,000 for the first six months of 2001 to approximately $224,000 for the first
six months of 2000. The Company experienced  earnings per share of approximately
$0.01  and  $0.04  per  share  for  the  first  six  months  of 2001  and  2000,
respectively.

(2)  Liquidity and Capital Resources

As of June 30, 2001, the Company has working capital of  approximately  $710,617
as compared to  approximately  $611,001 at December  31, 2000 and  approximately
$686,968  at June 30,  2000.  The  Company  achieved  positive  cash  flows from
operations  of  approximately  $27,180  for the first six months of 2001  versus
approximately  $294,386 for the first three months of 2000. The Company's  first
quarter 2000 working capital position was impacted by the payment in full of all
outstanding  long-term  debt  during the first  quarter of 2000.  The  Company's
year-to-date  working  capital  position and cash flow from  operations has been
impacted by the decreased  revenues from the  restructured  lease with an entity
controlled by the Company's controlling shareholder.

The Company has identified no significant  capital  requirements for the current
annual period.  Liquidity requirements mandated by future business expansions or
acquisitions,  if any are specifically identified or undertaken, are not readily
determinable  at this  time as no  substantive  plans  have been  formulated  by
management.

The Company  announced  the  discontinuance  of the payment of  dividends  after
December  31,  1999.  The Company  paid  declared  fourth  quarter  dividends of
approximately  $57,000  during  the  first  quarter  of 2000.  Future  operating
liquidity  is expected to be provided by  continuing  operations.  Additionally,
management  is of the opinion that there is potential  availability  of mortgage
debt and the opportunity for the sale of additional  common stock through either
private placements or secondary offerings.


Part II - Other Information

Item 1 - Legal Proceedings

Case No.  3-00-CV-2500-H;  Adventure Plus, Inc.,  Millennium  Restaurant  Group,
Inc.,  D/B/A  Cabaret  Royale,  et al. v. City of Dallas,  Inc.;  United  States
District Court, Northern District of Texas, Dallas Division

       This is an action where the Company and other operators of adult cabarets
       within the City of Dallas are contesting the constitutionality of certain
       provisions  of the  Dallas  Sexually  Oriented  Business  Ordinance  (the
       "Ordinance")  which impacts the Company's and other operators' license to
       do business as an adult cabaret in Dallas.  The Company is of the opinion
       that it will prevail on its constitutional claims. In January, 2001, as a
       result of a trial setting,  the City of Dallas has agreed to re-write the
       contested  provisions  of the  Ordinance,  so any impact,  if any, on the
       operations of the Company, will not be known such actions are taken later
       in Calendar  2001.  However,  the Company  reasonably  believes  that the
       Ordinance will be amended so as to have no material adverse impact on the
       Company's future  operations.  There can be no assurance that the City of
       Dallas will in fact amend the  Ordinance to an extent that the  Ordinance
       will not have any  material  adverse  effect  on the  Company's  business
       operations  or that in the  future  the City of Dallas  will  modify  the
       Ordinance to such an extent that it will  materially  effect the business
       of the Company.

The  Company  may from time to time be a party to various  other  legal  actions
arising in the ordinary  course of its  business.  The Company is not  currently
involved  in any such  actions  that it  believes  will have a material  adverse
effect on its results of operations or financial condition.

Item 2 - Changes in Securities

   None


                                                                              15

<PAGE>


Item 3 - Defaults on Senior Securities

   None

Item 4 - Submission of Matters to a Vote of Security Holders

       The Company has held no regularly  scheduled,  called or special meetings
       of shareholders during the reporting period.

Item 5 - Other Information

       None

Item 6 - Exhibits and Reports on Form 8-K

       Exhibits - None
       Reports on Form 8-K - None

--------------------------------------------------------------------------------


                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                                     MILLION DOLLAR SALOON, INC.


July    31   , 2001                                    /s/ Dewanna Ross
     --------                                        ---------------------------
                                                                    Dewanna Ross
                                                         Chief Operating Officer
                                                                    and Director



                                                                              16