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, 2000

                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: October 27, 2000: 5,731,778

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


<PAGE>



                  Million Dollar Saloon, Inc. and Subsidiaries

              Form 10-QSB for the Quarter ended September 30, 2000

                                Table of Contents

                                                                            Page
                                                                            ----

Part I - Financial Information

  Item 1   Financial Statements                                               3

  Item 2   Management's Discussion and Analysis or Plan of Operation         15


Part II - Other Information

  Item 1   Legal Proceedings                                                 16

  Item 2   Changes in Securities                                             16

  Item 3   Defaults Upon Senior Securities                                   16

  Item 4   Submission of Matters to a Vote of Security Holders               16

  Item 5   Other Information                                                 16

  Item 6   Exhibits and Reports on Form 8-K                                  16


Signatures                                                                   16





                                                                               2

<PAGE>


S. W. HATFIELD, CPA
certified public accountants

Member:    American Institute of Certified Public Accountants
               SEC Practice Section
               Information Technology Section
           Texas Society of Certified Public Accountants

Item 1 - Part 1 - Financial Statements

                           Accountant's Review Report
                           --------------------------

Board of Directors and Shareholders
Million Dollar Saloon, Inc.

We have reviewed the accompanying  consolidated balance sheets of Million Dollar
Saloon,  Inc. (a Nevada  corporation)  and Subsidiaries as of September 30, 2000
and  1999  and  the   accompanying   consolidated   statements   of  income  and
comprehensive  income for the nine and three months ended September 30, 2000 and
1999 and the  consolidated  statements  of cash flows for the nine months  ended
September  30,  2000 and  1999.  These  consolidated  financial  statements  are
prepared in accordance with the instructions  for Form 10-QSB,  as issued by the
U. S. Securities and Exchange Commission, and are the sole responsibility of the
Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression on an opinion  regarding the financial  statements  taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the accompanying  consolidated financial statements for them to be in
conformity with generally accepted accounting principles.

                                                      S. W. HATFIELD, CPA
Dallas, Texas
October 27, 2000

                      Use our past to assist your future sm

P. O. Box 820395                               9002 Green Oaks Circle, 2nd Floor
Dallas, Texas  75382-0395                               Dallas, Texas 75243-7212
214-342-9635 (voice)                                          (fax) 214-342-9601
800-244-0639                                                      SWHCPA@aol.com
                                        3

<PAGE>

<TABLE>

<CAPTION>

                  Million Dollar Saloon, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                           September 30, 2000 and 1999

                                   (Unaudited)

                                     Assets
                                     ------
                                                             2000           1999
                                                         -----------    -----------
<S>                                                      <C>            <C>
Current Assets
   Cash on hand and in bank                              $   863,477    $   705,012
   Note receivable - current portion                            --           24,480
   Inventory                                                  26,951         14,387
   Prepaid expenses and other                                 99,471         34,870
                                                         -----------    -----------

      Total current assets                                   989,899        778,749
                                                         -----------    -----------


Property and Equipment - At Cost
   Buildings and related improvements                      2,017,514      1,987,514
   Furniture and equipment                                   856,566        822,149
                                                         -----------    -----------
                                                           2,874,080      2,809,663
   Less accumulated depreciation                          (1,690,424)    (1,596,986)
                                                         -----------    -----------
                                                           1,183,656      1,212,677
   Land                                                      741,487        741,487
                                                         -----------    -----------

      Net property and equipment                           1,925,143      1,954,164
                                                         -----------    -----------


Other Assets
   Note receivable - noncurrent portion                         --           63,772
   Organization costs, net of accumulated amortization
      of $74,928 and $60,884, respectively                      --           14,044
   Loan costs, net of accumulated amortization of
       $31,607 and $25,285 respectively                         --            6,322
   Other                                                       6,225          6,975
                                                         -----------    -----------

      Total other assets                                       6,225         91,113
                                                         -----------    -----------

Total Assets                                             $ 2,921,267    $ 2,824,026
                                                         ===========    ===========

</TABLE>

                                  - Continued -

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

                                                                               4

<PAGE>

<TABLE>

<CAPTION>

                  Million Dollar Saloon, Inc. and Subsidiaries
                     Consolidated Balance Sheets - Continued
                           September 30, 2000 and 1999

                                   (Unaudited)

                      Liabilities and Shareholders' Equity
                      ------------------------------------
                                                                        2000         1999
                                                                     ----------   ----------
<S>                                                                  <C>          <C>
Current Liabilities
   Current portion of long-term debt                                 $     --     $  181,905
   Accounts payable - trade                                              21,059       23,568
   Accrued liabilities                                                   80,629       59,194
   Dividends payable                                                       --         57,318
   Federal income taxes payable                                          79,855        3,527
   Tenant deposits                                                        6,500        6,500
                                                                     ----------   ----------

      Total current liabilities                                         188,043      332,012
                                                                     ----------   ----------


Long-Term Liabilities
   Long-term debt, net of current maturities                               --          2,513
   Deferred tax liability                                               139,248      125,057
                                                                     ----------   ----------

      Total Liabilities                                                 327,291      459,582
                                                                     ----------   ----------


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
   Retained earnings                                                  2,588,244    2,358,712
                                                                     ----------   ----------

      Total Shareholders' Equity                                      2,593,976    2,364,444
                                                                     ----------   ----------

Total Liabilities and Shareholders' Equity                           $2,921,267   $2,824,026
                                                                     ==========   ==========

</TABLE>

The  financial  information  presented  herein has been  prepared by  management
without audit by independent  certified  public  accountants.  See  Accountant's
Review Report.
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

             Nine and Three months ended September 30, 2000 and 1999

                                   (Unaudited)

                                         Nine months    Nine months   Three months   Three months
                                            ended          ended          ended          ended
                                        September 30,  September 30,  September 30,  September 30,
                                             2000           1999           2000           1999
                                         -----------    -----------    -----------    -----------
<S>                                      <C>            <C>            <C>            <C>
Revenues
   Bar and restaurant sales              $ 2,991,784    $ 2,448,838    $ 1,015,371    $   804,456
   Rental income                             515,075        514,961        174,525        174,525
                                         -----------    -----------    -----------    -----------
      Total revenues                       3,506,859      2,963,799      1,189,896        978,981
                                         -----------    -----------    -----------    -----------

Cost of Sales - Bar and
   Restaurant Operations                   1,811,941      1,479,889        619,500        463,252
                                         -----------    -----------    -----------    -----------

Gross Profit                               1,694,918      1,483,910        570,396        515,729
                                         -----------    -----------    -----------    -----------

Operating Expenses
   General and administrative expenses     1,139,501      1,063,030        378,478        390,124
   Interest expense                            2,129         19,645           --            3,346
   Depreciation and amortization              78,334         77,582         22,398         19,950
                                         -----------    -----------    -----------    -----------
      Total operating expenses             1,219,964      1,160,257        400,876        413,420
                                         -----------    -----------    -----------    -----------

Income from Operations                       474,954        323,653        169,520        102,309

Other Income (Expenses)
   Interest and other miscellaneous           26,811         14,973          8,721          4,738
   Gain on sale of fixed assets                 --             (691)          --             (691)
                                         -----------    -----------    -----------    -----------

Income before Income Taxes                   501,765        337,935        178,241        106,356

Income Tax (Expense)
   Currently payable                        (155,750)       (95,180)       (55,750)       (16,430)
   Deferred                                     --             --             --             --
                                         -----------    -----------    -----------    -----------

Net Income                                   346,015        242,755        122,491         89,926

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

Comprehensive Income                     $   346,015    $   242,755    $   122,491    $    89,926
                                         ===========    ===========    ===========    ===========

Earnings per share of common
   stock outstanding computed
   on net income - basic and
   fully diluted                         $      0.06    $      0.04    $      0.02    $      0.02
                                         ===========    ===========    ===========    ===========

Weighted-average number
   of shares outstanding                   5,731,778      5,731,778      5,731,778      5,731,778
                                         ===========    ===========    ===========    ===========

</TABLE>


The  financial  information  presented  herein has been  prepared by  management
without audit by independent  certified  public  accountants.  See  Accountant's
Review Report.
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
                  Nine months ended September 30, 2000 and 1999

                                   (Unaudited)

                                                            Nine months     Nine months
                                                               ended           ended
                                                           September 30,   September 30,
                                                               2000            1999
                                                           -------------   -------------
<S>                                                        <C>             <C>
Cash Flows from Operating Activities
   Net income                                                $ 346,015       $ 242,755
   Adjustments to reconcile net income to net cash
      provided by operating activities
         Depreciation and amortization                          78,334          77,582
         Loss on sale of fixed assets                             --               691
         (Increase) decrease in
            Accounts receivable - trade                          8,848           6,671
            Federal income taxes receivable                     20,339          91,653
            Inventory                                            4,711           4,017
            Prepaid expenses                                   (98,571)         21,590
         Increase (decrease) in
            Accounts payable and other accrued liabilities      23,912          (3,432)
            Income taxes payable                                79,855           3,527
                                                             ---------       ---------
Net cash provided by operating activities                      463,443         445,054
                                                             ---------       ---------

Cash Flows from Investing Activities
   Principal collections on note receivable                     35,179          15,995
   Purchases of property and equipment                         (48,403)        (26,615)
                                                             ---------       ---------
Net cash used in investing activities                          (13,224)        (10,620)
                                                             ---------       ---------

Cash Flows from Financing Activities
   Principal payments on notes payable                        (139,657)       (131,544)
   Dividends paid                                              (57,318)       (172,695)
                                                             ---------       ---------
Net cash used in financing activities                         (196,975)       (304,239)
                                                             ---------       ---------

Increase in Cash and Cash Equivalents                          253,244         130,195

Cash and cash equivalents at beginning of period               610,233         574,817
                                                             ---------       ---------

Cash and cash equivalents at end of period                   $ 863,477       $ 705,012
                                                             =========       =========

Supplemental Disclosures of Interest
   and Income Taxes Paid
      Interest paid during the period                        $   2,129       $  19,645
                                                             =========       =========
      Income taxes paid (refunded)                           $  55,556       $    --
                                                             =========       =========

Supplemental Schedule of Non-Cash
   Investing and Financing Activities
   Declaration of 1999 third quarter
      dividend at $0.01 per share                            $    --         $  57,318
                                                             =========       =========

</TABLE>

The  financial  information  presented  herein has been  prepared by  management
without audit by independent  certified  public  accountants.  See  Accountant's
Review Report.
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 nine and three months ended September 30, 2000 and 1999,  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, 2000.

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  September  30, 2000 and 1999,  the
      Company has no issued and outstanding securities, options or warrants that
      would be deemed potentially dilutive in the current and future periods.

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  regulations,  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 nine months ended September 30, 2000 and 1999,
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 2000 and 1999 as a result of any of these
unsecured situations.

Note D - Note Receivable

Note receivable as of September 30, 2000 and 1999, respectively, is as follows:

                                                             2000      1999
                                                           -------   -------
$220,000 note receivable from an unrelated
   individual for the sale of real estate.  Interest
   at 8.00%.  Payable in monthly installments
   of approximately $2,669, including interest.
   Final payment due in July 2002.  Collateralized
   by real estate and improvements located in
   Dallas County, Texas.                                   $  --     $88,252





                                                                              10

<PAGE>

                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note D - Note Receivable - Continued

                                                          2000         1999
                                                         --------     --------
$35,179 note receivable from an unrelated
   individual for the sale of real estate.  Interest
   at 9.50%.  Payable in monthly installments
   of approximately $2,665, including interest.
   Final payment due in February 2001.  Collateral-
   ized by real estate and improvements located in
   Dallas County, Texas.  Paid in full in May 2000.          --           --
                                                         --------     --------

Total notes receivable                                       --         88,252
     Less current portion                                    --        (24,480)
                                                         --------     --------

     Noncurrent portion                                  $   --       $ 63,772
                                                         ========     ========


Note E - Property and Equipment

Property and equipment consists of the following at September 30, 2000 and 1999:

                                             2000        1999     Estimated life
                                          ----------  ----------  --------------

   Buildings and related improvements     $2,017,514  $1,987,514    15-40 years
   Furniture and equipment                   856,566     822,149     5-10 years
                                          ----------  ----------

                                           2,874,080   2,809,663
   Less accumulated depreciation          (1,690,424) (1,596,986)
                                          ----------  ----------

                                           1,183,656   1,212,677
   Land                                      741,487     741,487
                                          ----------  ----------

   Net property and equipment             $1,925,143  $1,954,164
                                          ==========  ==========

Depreciation  expense for the nine months ended  September 30, 2000 and 1999 was
$72,518 and $61,601, respectively.



                                                                              11

<PAGE>

                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued

Note F -Long-Term Debt

Long-term  debt  consists  of the  following  at  September  30,  2000 and 1999,
respectively:

                                                         2000          1999
                                                       ---------     ---------
$750,000 note payable to a bank.  Interest
   at 11.0%.  Payable in monthly installments
   of approximately $16,369, including
   interest.  Final payment due in September
   2000.  Collateralized by real estate and
   improvements located in Dallas and
   Tarrant Counties, Texas.  Paid in full
   during the first quarter of 2000.                   $       -     $ 184,418
                                                       ---------     ---------

                                                               -       184,418
      Less current portion                                     -      (181,905)
                                                       ---------     ---------

      Long-term portion                                $       -     $   2,513
                                                       =========     =========


Note H - Income Taxes

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

                                                    September 30,  September 30,
                                                        2000           1999
                                                    -------------  -------------

              Non-current deferred tax liability      $(139,248)     $(125,057)
                                                      =========      =========


The  components  of income  tax  expense  (benefit)  for the nine  months  ended
September 30, 2000 and 1999, respectively, are as follows:

                                                    September 30,  September 30,
                                                        2000           1999
                                                    -------------  -------------
                  Federal:
                    Current                           $ 155,750      $  95,180
                    Deferred                                  -              -
                                                      ---------      ---------
                                                        155,750         95,180
                                                      ---------      ---------
                  State:
                    Current                                   -              -
                    Deferred                                  -              -
                                                      ---------      ---------
                                                              -              -
                                                      ---------      ---------
                  Total                               $ 155,750      $  95,180
                                                      =========      =========


                                                                              12

<PAGE>

<TABLE>

<CAPTION>

                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note H - Income Taxes - Continued

The Company's  income tax expense  (benefit) for the nine months ended September
30, 2000 and 1999, respectively,  differed from the statutory federal rate of 34
percent as follows:

                                                         September 30, September 30,
                                                            2000          1999
                                                         ------------  ------------
<S>                                                      <C>           <C>
Statutory rate applied to earnings before income taxes     $170,600      $114,898
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           (14,850)      (19,718)
                                                           --------      --------

Income tax expense                                         $155,750      $ 95,180
                                                           ========      ========

</TABLE>

Note I - Capital 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 "second  closing" clause whereby the individual  would
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. On October 18, 1999,  the Company's  Board of Directors  modified
and amended the "second  closing" clause whereby the purchaser may purchase from
time to time any or all of the 400,000 shares of common stock at $1.10 per share
and  extended  the  exercise  period  until the close of business on October 18,
2004.  As of September 30, 2000, no shares of common stock have been sold by the
Company pursuant to the "second closing" portion of the Agreement.

Note J - Commitments

The  Company  leases  commercial  real  estate  to  entities   controlled  by  a
controlling  shareholder  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,
1999, future minimum non-cancellable lease revenues are as follows:

                                                     Year ending
                                                     December 31,     Amount
                                                     ------------   ----------
                                                         2000       $  689,000
                                                         2001          689,000
                                                         2002          546,500
                                                         2003          280,500
                                                                    ----------
                                                         Total      $2,205,000
                                                                    ==========



                                                                              13

<PAGE>

<TABLE>

<CAPTION>

                  Million Dollar Saloon, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements - Continued


Note K - 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  14.69% and 17.38% of total  revenues  for the nine  months  ended
September 30, 2000 and 1999, respectively.

                                        Restaurant       Rental     General and
                                         facility     real estate  administrative     Total
                                       -----------    -----------  --------------  -----------
<S>                                    <C>            <C>          <C>             <C>
Nine months ended September 30, 2000
------------------------------------
   Revenue from external customers     $ 2,991,784    $      --     $      --      $ 2,991,784
   Revenue from related parties               --          515,075          --          515,075
   Revenue (expenses) from/to
     intercompany sources                 (180,000)       180,000          --             --
   Interest income                            --              440        26,371         26,811
   Interest expense                           --             --           2,129          2,129
   Depreciation and amortization            19,404         51,398         7,532         78,334
   Income tax expense (benefit)            (10,558)       163,345         2,963        155,750
   Segment assets                          260,504      2,310,434       350,329      2,921,267
   Fixed asset expenditures                 48,403           --            --           48,403


Nine months ended September 30, 1999
------------------------------------
   Revenue from external customers     $ 2,448,838    $   514,961   $      --      $ 2,963,799
   Revenue (expenses) from/to
     intercompany sources                     --             --            --             --
   Interest income                            --            5,358         9,615         14,973
   Interest expense                         (1,593)          --          21,238         19,645
   Depreciation and amortization            24,680         44,429         8,473         77,582
   Income tax expense (benefit)            (16,790)       112,972        (1,002)        95,180
   Segment assets                          419,023      1,939,850       465,153      2,824,026
   Fixed asset expenditures                 19,901          6,714          --           26,615


</TABLE>

                (Remainder of this page left blank intentionally)



                                                                              14

<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  increased by approximately  $543,000 between the
first nine months of 2000 as  compared  to the first nine months of 1999.  Total
bar and  restaurant  sales for the 2000 nine  month  period  were  approximately
$2,992,000  as  compared  to  approximately  $2,449,000  for the 1999 nine month
period.  The  increase  was due to  management's  refocused  efforts in customer
service and  increasing  sales  subsequent  to the 2000 change in control of the
Company.  The Company  continues to seek  effective  marketing  and  advertising
methods to maintain and increase its bar and restaurant patronage.

Cost of sales increased by  approximately  $332,000 during the first nine months
of 2000 as  compared  to the same  expenses  for the same  period in 1999.  This
increase is a result of increases in entertainer  compensation  and other direct
costs related to the approximate  $543,000 increase in revenues in the Company's
Dallas  Texas  entertainment  facility.  Gross profit  percentages  decreased to
48.33% for the first nine months of 2000 versus 50.68% for the first nine months
of 1999. Increased cost controls over purchasing, inventory management protocols
and  labor  management  are  continuously  monitored  to  improve  gross  profit
percentages.

General and administrative  expenses  increased by approximately  $60,000 in the
first nine months of 2000 versus the first nine  months of 1999.  This  increase
principally  relates  to  increased   advertising  expenses  and  administrative
compensation  caused by the 2000 change in control of the  Company.  The Company
continues to experience relatively constant expenditure levels for other general
operating  expenses.  Management  continues to monitor its expenditure levels to
achieve optimum financial results.

Net income  before  income taxes was  approximately  $502,000 for the first nine
months of 2000 versus approximately  $338,000 for the first nine months of 1999.
After-tax net income  increased by  approximately  $103,000  from  approximately
$243,000  for the first nine months of 1999 to  approximately  $346,000  for the
first  nine  months  of 2000.  The  Company  experienced  earnings  per share of
approximately  $0.06 and $0.04 per share for the first  nine  months of 2000 and
1999, respectively.

(2)  Liquidity

As of  September  30,  2000,  the Company has working  capital of  approximately
$802,000  as  compared  to  approximately  $421,000  at  December  31,  1999 and
approximately $447,000 at September 30, 1999. The Company achieved positive cash
flows from  operations  of  approximately  $463,000 for the first nine months of
2000  versus  approximately  $445,000  for the first  nine  months of 1999.  The
Company's  working  capital  position was impacted by the payment in full of all
outstanding  long-term  debt during the first quarter of 2000 and the collection
of the outstanding note receivable in May 2000.

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  discontinued  the  declaration and payment of dividends for periods
ending after December 31, 1999.  The Company paid the declared  dividend for the
fourth  quarter of 1999 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.

                                                                              15

<PAGE>

(3)  Year 2000 Considerations

The Year 2000 (Y2K) date change was believed to affect  virtually  all computers
and  organizations.   The  Company  undertook  a  comprehensive  review  of  its
information  systems,  including  personal  computers,  software and  peripheral
devices, and its general  communications systems during 1999. The Company has no
direct electronic links with any customer or supplier.

The costs associated with the Y2K date change compliance did not have a material
effect  on the  Company's  financial  position  or its  results  of  operations.
However, as the Year 2000 progresses,  there can be no assurance that all of the
Company's  systems,  and the systems of its  suppliers,  shippers,  customers or
other external business partners will continue to function adequately.

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

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

                                   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.

October    27   , 2000                                  /s/ Dewanna Ross
        --------                         ---------------------------------------
                                                                    Dewanna Ross
                                            Chief Operating Officer and Director


October    27   , 2000                                  /s/ Ronald W. Johnston
        --------                         ---------------------------------------
                                                              Ronald W. Johnston
                                                         Chief Financial Officer





                                                                              16