UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB
--------------------------------------------------------------------------------


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

                For the quarterly period ended September 30, 1998

                  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: November 3, 1998: 6,144,451

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


<PAGE>



                                                                                

                           MILLION DOLLAR SALOON, INC.

              Form 10-QSB for the Quarter ended September 30, 1998

                                Table of Contents


                                                                       Page
                                                                       ----
Part I - Financial Information

  Item 1 Financial Statements                                            3

  Item 2 Management's Discussion and Analysis or Plan of Operation      11


Part II - Other Information

  Item 1 Legal Proceedings                                              14

  Item 2 Changes in Securities                                          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


Signatures                                                              15


                                                                               2
<PAGE>





Part 1 - Item 1 - Financial Statements

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           September 30, 1998 and 1997
                                   (Unaudited)

                                                       ASSETS
                                                       ------
<TABLE>

<S>                                                                            <C>              <C> 

                                                                                    1998             1997
                                                                                -----------     ------------
CURRENT ASSETS
   Cash on hand and in bank                                                     $   730,242      $   266,738
   Note receivable - current portion                                                 22,604           21,011
   Inventory                                                                         14,438           10,743
   Prepaid expenses                                                                  90,682           63,424
                                                                                -----------      -----------

         Total current assets                                                       857,966          361,916
                                                                                -----------      -----------


PROPERTY AND EQUIPMENT
   Buildings and related improvements                                             1,987,513        1,955,132
   Furniture and equipment                                                          791,049          757,111
   Vehicles                                                                          52,728           52,728
                                                                                -----------      -----------
                                                                                  2,831,290        2,764,971
   Less accumulated depreciation                                                 (1,542,662)      (1,455,778)
                                                                                -----------      -----------
                                                                                  1,288,628        1,309,193
   Land                                                                            741,487          741,487
                                                                               -----------      -----------

         Net property and equipment                                               2,030,115        2,050,680
                                                                                -----------      -----------


OTHER ASSETS
   Note receivable - noncurrent portion                                              87,426          111,134
   Accounts receivable from officers,  shareholders and affiliates                  836,107          795,542
   Organization costs, net of accumulated amortization
      of $45,898 and $33,162, respectively                                           14,030           41,766
   Loan costs, net of accumulated amortization of
       $18,964 and $12,642 respectively                                              12,643           18,965
   Deferred tax asset                                                                     -           61,500
   Other                                                                              7,725           23,475
                                                                                -----------      -----------

         Total other assets                                                         972,931        1,052,382
                                                                                -----------      -----------

TOTAL ASSETS                                                                     $3,861,012       $3,464,978
                                                                                ===========      ===========

</TABLE>


                                                    - Continued -


The financial information presented herein has been prepared by management
  without audit by independent certified public accountants.                   3
                                                                              

<PAGE>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS - CONTINUED
                           September 30, 1998 and 1997
                                   (Unaudited)

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
<TABLE>

<S>                                                                                   <C>   


                                                                         1998            1997
                                                                     ----------       ----------
CURRENT LIABILITIES
   Current portion of long-term debt                                 $  122,370       $  122,370
   Accounts payable - trade                                              26,311           20,120
   Accrued liabilities                                                   55,614           24,619
   Dividends payable                                                     61,445           78,280
   Federal income taxes payable                                           8,592                -
   Tenant deposits                                                        6,500           13,325
                                                                     ----------       ----------

         Total current liabilities                                      280,832          258,714
                                                                     ----------       ----------


LONG-TERM LIABILITIES
   Long-term debt, net of current maturities                            255,364          416,756
   Deferred tax liability                                                98,936           94,569
                                                                     ----------       ----------

         Total liabilities                                              635,132          770,039
                                                                     ----------       ----------


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.  6,144,451 and 5,218,500 issued
      and outstanding, respectively.                                      6,143            5,219
   Additional paid-in capital                                           598,965            9,781
   Retained earnings                                                  2,650,772        2,691,186
                                                                     ----------       ----------
                                                                      3,255,880        2,706,186
   Treasury stock - at cost                                             (30,000)         (11,247)
                                                                     ----------       ----------

         Total shareholders= equity                                   2,225,880        2,694,939
                                                                     ----------       ----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $3,861,012       $3,464,978
                                                                     ==========       ==========

</TABLE>
The financial information presented herein has been prepared by management
  without audit by independent certified public accountants.                   4


<PAGE>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
             Nine and Three months ended September 30, 1998 and 1997
                                   (Unaudited)
<TABLE>


<S>                                                                  <C>               <C>            <C> 


                                                  Nine months         Nine months      Three months   Three months
                                                     ended               ended             ended           ended
                                                 September 30,       September 30,     September 30,  September 30,
                                                     1998                1997              1998            1997
REVENUES
   Bar and restaurant sales                        $2,549,190         $2,605,627        $  900,535        $832,859
   Rental income                                      378,579            330,417           139,524         109,805
                                                   ----------         ----------        ----------      ----------
      Total revenues                                2,927,769          2,936,044         1,040,059         942,664
                                                   ----------         ----------        ----------      ----------

COST OF SALES - BAR AND
   RESTAURANT OPERATIONS                            1,504,252          1,507,790           517,504         467,275
                                                   ----------         ----------        ----------      ----------

GROSS PROFIT                                        1,423,517          1,428,254           522,555         475,389
                                                   ----------         ----------        ----------      ----------

OPERATING EXPENSES
   General and administrative expenses                972,561            782,376           299,908         262,046
   Interest expense                                    36,904             49,976            11,295          15,637
   Depreciation and amortization                       83,074             87,110            27,692          28,328
                                                   ----------         ----------        ----------      ----------
      Total operating expenses                      1,092,539            919,462           338,895         306,011
                                                   ----------         ----------        ----------      ----------

INCOME FROM OPERATIONS                                330,978            508,792           183,660         169,378

OTHER INCOME (EXPENSES)
   Interest and other miscellaneous                    45,086             38,035            15,923          18,016
   Gain on sale of fixed assets                             -             48,499                 -               -
                                                   ----------         ----------        ----------      ----------

INCOME BEFORE
   INCOME TAXES                                       376,064            595,326           199,583         187,394

INCOME TAX (EXPENSE) BENEFIT
   Currently payable                                 (128,159)          (125,000)          (69,070)        (28,300)
   Deferred                                                 -                  -                 -               -
                                                   ----------         ----------        ----------      ---------- 

NET INCOME                                         $  247,905         $  470,326        $  130,513        $159,094
                                                   ==========         ==========        ==========      ==========

Earnings per share of
   common stock outstanding                             $0.04              $0.09             $0.02           $0.03
                                                         ====               ====              ====            ====

Weighted-average number
   of shares outstanding                            5,937,143          5,018,406         6,144,451       5,034,780
                                                   ==========         ==========        ==========      ==========

</TABLE>


The financial information presented erein has been prepared by management
 without audit by independent certified public accountants.                    5


<PAGE>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Nine months ended September 30, 1998 and 1997
                                   (Unaudited)

<TABLE>

<S>                                                                             <C>               <C>  


                                                                                 Nine months      Nine months
                                                                                    ended             ended
                                                                                September 30,     September 30,
                                                                                    1998               1997
                                                                                -------------     -------------
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                                       $247,905          $470,326
   Adjustments to reconcile net income to net cash
      provided by operating activities
         Depreciation and amortization                                                83,074            87,110
         Gain on sale of fixed assets                                                      -           (48,499)
         Common stock issued for consulting fees                                      69,700                 -
         Interest income from shareholders capitalized as principal                  (30,423)          (30,966)
         (Increase) decrease in
            Federal income taxes receivable                                           37,248                 -
            Inventory                                                                  1,659               426
            Prepaid expenses                                                         (17,138)          (25,706)
         Increase (decrease) in
            Accounts payable and other accrued liabilities                            23,730           (29,875)
            Tenant deposits                                                                -             6,825
            Income taxes payable                                                       8,592                 -
                                                                                   ---------         ---------
Net cash provided by operating activities                                            424,347           429,641
                                                                                   ---------         ---------

CASH FLOWS FROM INVESTING ACTIVITIES
   Principal collections on note receivable                                           18,016            15,085
   Net proceeds from sale of fixed assets                                                  -           150,374
   Purchases of property and equipment                                               (66,319)           (1,731)
                                                                                   ---------         ---------
Net cash used in investing activities                                                (48,303)          163,728
                                                                                   ---------         ---------

CASH FLOWS FROM FINANCING ACTIVITIES
   Private placement of common stock                                                 530,000                 -
   Principal payments on notes payable                                              (120,426)         (132,257)
   Purchase of treasury stock                                                        (30,000)          (11,247)
   Dividends paid                                                                   (175,328)         (450,983)
                                                                                   ---------         ---------
Net cash used in financing activities                                                204,246          (594,487)
                                                                                   ---------         ---------

INCREASE IN CASH AND CASH EQUIVALENTS                                                580,290            (1,118)
Cash and cash equivalents at beginning of period                                     149,952           267,856
                                                                                   ---------         ---------
Cash and cash equivalents at end of period                                          $730,242          $266,738
                                                                                   =========         =========

</TABLE>


                                                    - Continued -


The financial information presented erein has been prepared by management
 without audit by independent certified public accountants.                    6



<PAGE>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                  Nine months ended September 30, 1998 and 1997
                                   (Unaudited)

                                                 Nine months        Nine months
                                                    ended              ended
                                                 September 30,     September 30,
                                                    1998               1997
                                                 -------------     -------------
SUPPLEMENTAL DISCLOSURES OF
   INTEREST AND INCOME TAXES PAID

      Interest paid during the period             $36,904            $49,976
                                                   ======             ======
      Income taxes paid (refunded)                $82,319            $125,000
                                                   ======             =======


SUPPLEMENTAL SCHEDULE OF NON-CASH
   INVESTING AND FINANCING ACTIVITIES

      Declaration of third quarter
         dividend at $0.01 and $0.015
         per share, respectively                  $61,445            $78,279
                                                   ======             ======













The financial information presented erein has been prepared by management
 without audit by independent certified public accountants.                    7


<PAGE>



                                                                                

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                          Notes to Financial Statements


Note 1 - Basis of Presentation

Million Dollar Saloon,  Inc.  (Company) was  incorporated  under the laws of the
State of Nevada on September 28, 1987.  These financial  statements  reflect the
books and  records of Million  Dollar  Saloon,  Inc.  (Nevada),  Million  Dollar
Saloon, Inc. (Texas),  Furrh, Inc., Tempo Tamers, Inc., Corporation Lex and Don,
Inc.  for the  periods  ended  September  30, 1998 and 1997,  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  Securities and Exchange  Commission.  The
accompanying  financial  statements do not include all  disclosures  required by
generally  accepted  accounting  principles.   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, 1998.

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.


Note 2 - Summary of Significant Accounting Policies

a) Accounting principles adopted and pending adoption

   In June 1997, the Financial  Accounting Standards Board released Statement of
   Financial  Accounting  Standards No. 130, AReporting  Comprehensive  Income@,
   (SFAS130)   which   established   standards  for  reporting  and   displaying
   comprehensive  income  and its  components  (revenues,  expenses,  gains  and
   losses)  in a full  set of  general  purpose  financial  statements.  SFAS130
   requires that all items that are required to be recognized  under  accounting
   standards as  components of  comprehensive  income be reported in a financial
   statement  that is  displayed  with the same  prominence  as other  financial
   statements.  SFAS130 was effective for periods  beginning  after December 15,
   1997.  The  Company  does not have any items  which  would be  required to be
   presented in this separate  statement and experienced no material impact from
   this change in presentation of its consolidated financial statements.

                                                                               8


<PAGE>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                    Notes to Financial Statements - Continued


Note 2 - Summary of Significant Accounting Policies - Continued

a) Accounting principles adopted and pending adoption - continued

   In June 1997, the Financial  Accounting Standards Board released Statement of
   Financial  Accounting  Standards No. 131,  ADisclosures  About Segments of an
   Enterprise and Related  Information@,  (SFAS131)  which  establishes  revised
   standards for the method in which public  business  enterprises are to report
   information about operating segments in their annual financial statements and
   requires those  enterprises to report  selected  information  about operating
   segments in interim financial reports issued to shareholders.  This statement
   also revises the related disclosures about products and services,  geographic
   areas and major customers.  SFAS131  replaces the Aindustry  segment@ concept
   established  in  Statement  of  Financial  Accounting  Standard No. 14 with a
   Amanagement  approach@  concept  as  the  basis  for  identifying  reportable
   segments.  SFAS131 is effective for financial  statements  for annual periods
   beginning  after December 31, 1997 and for interim  periods  presented  after
   December 31, 1998.  The Company  does not  anticipate a material  impact from
   this  change  in  disclosure   presentation  in  its  consolidated  financial
   statements upon adoption of this standard.


Note 3 - Property and equipment

   During the first  quarter of 1997,  the Company  sold a rental  property  for
   gross cash  proceeds of  approximately  $149,474,  net of closing  costs, and
   recognized a gain of approximately $48,499.


Note 4 - Common stock transactions

On March 19, 1998, the Company sold 530,000  shares of restricted,  unregistered
common stock to an individual under a Stock Purchase Agreement  (Agreement) at a
price of $1.00 per  share for total  proceeds  to the  Company  of$530,000.  The
Agreement also contains a Asecond  closing@  clause whereby the individual  will
acquire an  additional  400,000  shares of equivalent  restricted,  unregistered
common  stock at $1.10 per share for gross  proceeds of  $440,000,  on or before
July 15, 1998. As of September 30, 1998 and through the date of this filing,  no
additional shares of common stock have been sold under this Agreement.

Further,  the  Company  has  granted  the  individual  the option to purchase an
additional 1,000,000 shares of restricted,  unregistered common stock at a price
of $1.25 per share on or before February 28, 1999. The option  expiration may be
accelerated  if the  Company=s  common  stock is traded on the NASDAQ  Small-Cap
Market or other  national  exchange  and the closing bid price equals or exceeds
$1.75 per share for 10 consecutive trading days (Trading Period). In this event,
the expiration date of the option shall be the 90th day after the Trading Period
and the Company must notify the individual of the acceleration in writing.

                                                                               9


<PAGE>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                    Notes to Financial Statements - Continued


Note 4 - Common stock transactions - Continued

On March 19, 1998, concurrent with the Stock Purchase Agreement discussed above,
the Company entered into a Consulting  Agreement with a separate  individual for
consulting,  advisory and management services to be performed as directed by the
Company=s Board of Directors.  The Consulting Agreement is for a term of one (1)
year and may be  terminated  by either party with ten (10) days written  notice.
The  compensation   for  the  Consulting   Agreement  was  paid  in  restricted,
unregistered  common stock of the Company as follows:  150,000 shares as payment
for consulting,  advisory and management services to be performed as directed by
the Company=s Board of Directors and an additional 55,000 shares upon receipt of
the $530,000  discussed above. An additional 45,000 shares will be issued to the
consultant upon receipt of the $440,000 due on or before July 15, 1998.

The Company,  upon  execution  of the  Consulting  Agreement  and receipt of the
$530,000 related to the Stock Purchase Agreement,  issued the respective 150,000
and  55,000  shares  due  under  the terms of the  Consulting  Agreement.  These
transactions  were  valued at  approximately  $0.34 per share,  or an  aggregate
$69,700,  which approximated the Afair value@ of the Company=s  restricted stock
issued on the transaction date.




                (Remainder of this page left blank intentionally)











                                                                              10


<PAGE>


Part I - Item 2

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


Caution Regarding Forward-Looking Information

This  quarterly   report  contains   certain   forward-looking   statements  and
information relating to the Company that are based on the beliefs of the Company
or management as well as assumptions made by and information currently available
to  the  Company  or  management.   When  used  in  this  document,   the  words
"anticipate,"   "believe,"   "estimate,"   "expect"  and  "intend"  and  similar
expressions,  as they relate to the Company or its  management,  are intended to
identify forward-looking statements. Such statements reflect the current view of
the  Company   regarding  future  events  and  are  subject  to  certain  risks,
uncertainties  and  assumptions,  including the risks and  uncertainties  noted.
Should  one or more of  these  risks or  uncertainties  materialize,  or  should
underlying assumptions prove incorrect,  actual results may vary materially from
those  described  herein  as  anticipated,   believed,  estimated,  expected  or
intended. In each instance,  forward-looking information should be considered in
light of the accompanying meaningful cautionary statements herein.


Period ended September 30, 1998 as compared to the Period ended 
September 30, 1997

Results of Operations

Bar  and   restaurant   operations   declined  by   approximately   $56,000  (or
approximately 2.0%) between the nine months of 1998 and the first nine months of
1997.  The  July  to  September  quarter  increased  approximately  $68,000  (or
approximately  8.1%) in the third  quarter 1998 compared to the third quarter of
1997.  Total bar and  restaurant  sales for the  year-to-date  1998  period were
approximately  $2,549,000 as compared to  approximately  $2,606,000 for the 1997
period.  This decline was due to seasonal  fluctuations  in patronage,  which is
dependent upon convention and visitor activity and other uncontrollable  factors
in the Dallas-Ft.  Worth Metroplex geographic area. Additionally,  rental income
increased  by  approximately  $48,000  for the  first  nine  months in 1998 from
approximately  $330,000  for the  first  nine  months  of 1997 to  approximately
$379,000 for the first nine months of 1998.  This increase in rental revenues is
related to the renewal of a lease on one of the Company=s properties.

The Company  continues to seek effective  marketing and  advertising  methods to
maintain and increase its bar and restaurant patronage.

Cost of sales decreased by approximately  $4,000 during the first nine months of
1998 as compared to the same expenses for the same period in 1997. This decrease
reflects  the effect of the  related  declines in bar and  restaurant  revenues.
Gross profit  percentages  profiled  relatively  consistently  at 48.62% for the
first nine months of 1998 versus 48.65% for the first nine months of 1997.

General and administrative  expenses increased by approximately  $173,000 in the
first nine months of 1998 versus the first six months of 1997.  Included in this
increase is a non-cash  charge of $69,700 as  compensation  under the Consulting
Agreement to Steve Wheeler,  increased legal and  professional  fees incurred by
management  related to  preliminary  investigations  of potential  merger and/or
acquisition   candidates  and  development  of  overall  corporate   operational
strategies  and other  broad  based  increases  in  general  corporate  overhead
expenses.  As of this filing,  management has not identified any suitable merger

                                                                              11

<PAGE>

or  acquisition  candidates  as a result  of their  preliminary  investigations.
Further,  management  continues  to monitor  its  expenditure  levels to achieve
optimum financial results.

Net income before  income taxes,  excluding the gain on the sale of fixed assets
of approximately  $48,000, was approximately  $547,000 for the first nine months
of 1997  versus  approximately  $376,000  for the  first  nine  months  of 1998.
After-tax net income has declined by approximately  $222,000  yielding  earnings
per share of approximately  $0.04 per share for the first nine months of 1998 as
compared to approximately $0.09 per share for the first nine months of 1997.


(3)   Liquidity

As of  September  30,  1998,  the Company has working  capital of  approximately
$577,000  as  compared  to  approximately  $17,000  at  December  31,  1997  and
approximately $103,000 at September 30, 1998. The Company achieved positive cash
flows from  operations  of  approximately  $424,000 for the first nine months of
1998  versus  approximately  $430,000  for the first  nine  months of 1997.  The
Company=s  working  capital  position  was  greatly  enhanced  by the receipt of
approximately  $530,000 in proceeds related to the sale of approximately 530,000
shares of restricted, unregistered common stock on March 19, 1998.

The Company has identified no significant  capital  requirements for the current
annual  period.  However,  the Company  has  incurred  approximately  $66,000 in
capitalized  expenditures  related to repairs and  renovations  on the Company=s
properties.  Any liquidity requirements which may be required 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 Stock Purchase Agreement  specifically details and limits the utilization of
the $530,000 received as follows:1)  potential  acquisition of a similar bar and
restaurant  operation in Denver,  Colorado;  2) expansion and  renovation of the
Company=s existing Dallas, Texas bar and restaurant operation;  3) expansion and
renovation of property owned by the Company which is under lease to an unrelated
third party and which lease  expires  during 1998;  4)  acquisition  of treasury
stock and 5) other corporate expenses related to strategic planning.  As of this
filing,  the  Company  has no  definitive  agreements  to  acquire or expand any
properties.

The Company  anticipates the continuance of dividend  payments in future periods
and paid  approximately  $175,000  during the first  three  quarters of 1998 and
declared a dividend of approximately $61,400 to be paid in the fourth quarter of
1998.  Future  operating  liquidity,  debt  service and  dividend  payments  are
expected to be sustained from continuing operations. Additionally, management is
of the opinion that there is additional  potential  availability  of incremental
mortgage  debt and the  opportunity  for the  sale of  additional  common  stock
through either private placements or secondary offerings.


Period ended September 30, 1997 as compared to the Period ended 
September 30, 1996.

Results of Operations

Bar and restaurant operations increased by approximately  $132,000 for the first
nine months of 1997 as  compared  to the first nine  months of 1996.  During the
second quarter of 1997,  management instituted new controls over bar inventories
and the Company experienced  increased traffic due to the completion and opening
of a new mass  transit  rail  station  near the  Company's  adult  entertainment
operation.  This  increase  was  mitigated  by lower  convention  traffic in the
Dallas-Ft.  Worth  Metroplex  during this time  period,  which is one of the key
factors  contributing to the Company's patronage factors.  Additionally,  due to

                                                                              12

<PAGE>

scheduled   increases,   the  Company   experienced  higher  rental  incomes  of
approximately  $17,000 during this quarter as compared to the same period in the
prior year.

Cost of sales increased by approximately $27,000 during the first nine months of
1997 as compared to the same expenses for the same period in 1996. This increase
is related to increased  sales  impacting  variable  costs related to consumable
inventories,  supplies and related  State excise taxes,  principally  during the
second quarter.  Gross profit  percentages  increased  slightly to 48.7% for the
first nine months of 1997 versus  46.9% for the first nine months of 1996.  This
increase relates  directly to the new management  controls over bar inventories.
These cost versus sales  relationships  are  anticipated by management to remain
stable for the remainder of 1997.

General and administrative  expenses  increased by approximately  $50,000 in the
first nine months of 1997 versus the first nine  months of 1996.  This  increase
relates to increases in advertising and marketing expenses to offset the decline
in convention and meeting driven traffic and increase locally derived  patronage
and increased legal and accounting fees related to preliminary investigations of
potential merger and/or acquisition  candidates.  The Company has not identified
any suitable  merger or  acquisition  candidates as a result of the  preliminary
investigations.  Management  continues  to  monitor  its  expenditure  levels to
achieve optimum financial results.

Net income before  income taxes,  excluding the gain on the sale of fixed assets
of approximately  $48,000, was approximately  $547,000 for the first nine months
of 1997  versus  approximately  $462,000  for the  first  nine  months  of 1996.
After-tax net income has increased by approximately  $79,000  yielding  earnings
per share of approximately  $0.09 per share for the first nine months of 1997 as
compared to approximately $0.08 per share for the first nine months of 1996.

Liquidity and Capital Resources

As of  September  30,  1997,  the Company has working  capital of  approximately
$103,000 as compared to $112,000 at  September  30, 1996.  The Company  achieved
positive cash flows from operations of approximately $430,000 for the first nine
months of 1997 versus approximately $511,000 for the first nine months of 1996.

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   anticipates  the  continuance  of  dividend   payments  and  paid
approximately  $451,000  through  the first nine  months of 1997 and  declared a
dividend  of  approximately  $78,000 to be paid in the  fourth  quarter of 1997.
Future operating  liquidity,  debt service and dividend payments are expected to
be sustained  from  continuing  operations.  Additionally,  management is of the
opinion that there is additional potential  availability of incremental mortgage
debt and the opportunity for the sale of additional  common stock through either
private placements or secondary offerings.



                (Remainder of this page left blank intentionally)






                                                                              13

<PAGE>


Part II - Other Information

Item 1 - Legal Proceedings

   None

Item 2 - Changes in Securities

   None

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

   None










                                                                              14


<PAGE>


                                                     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.




November    4   , 1998                                 /s/ Nina J. Furrh
         -------                             -----------------------------------
                                                                   Nina J. Furrh
                                                          President and Director



November    4   , 1998                               /s/ Ronald W. Johnston
         -------                             -----------------------------------
                                                              Ronald W. Johnston
                                            Chief Financial Officer and Director





                                                                              15