================================================================================
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934 FOR THE
                       FISCAL YEAR ENDED DECEMBER 31, 1998

                         Commission File Number: 0-27006

                           MILLION DOLLAR SALOON, INC.
                 (Name of Small Business Issuer in Its Charter

                                                               13-3428657
           Nevada                                             (IRS Employer
  (State of Incorporation)                                Identification No.)


                             6848 Greenville Avenue
                               Dallas, Texas 75231
          (Address of Principal Executive Offices, including Zip Code)

                                 (214) 691-6757
                (Issuer's Telephone Number, Including Area Code)


Securities registered under Section 12(b) of the Exchange Act:


                                                      Name of Each Exchange
         Title of Each Class                           on which Registered
         -------------------                          ---------------------
          N/A                                                  N/A

         Securities registered pursuant to 12(g) of the Exchange Act:

                               Title of Each Class
                               -------------------
                          Common Stock, $.001 par value

         Check whether the issuer (i) 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 issuer was required to file such reports),  and (ii) has
been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

         Check if  disclosure  of  delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of the  issuer's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]

         The issuer's  revenues for the fiscal year ended December 31, 1998 were
$3,664,188. The aggregate market value of common stock held by non-affiliates of
the  issuer  at March 1,  1999,  based  upon the  closing  bid  price on The OTC
Electronic  Bulletin  Board on said date, was  $1,508,598.  As of March 1, 1999,
there were 5,731,778 shares of the issuer's common stock outstanding.

                       Documents Incorporated by Reference
         No documents,  other than certain  exhibits,  have been incorporated by
reference into this report.

================================================================================

<PAGE>

<TABLE>

<CAPTION>

                                TABLE OF CONTENTS

                                                                                        PAGE
                                                                                        ----
<S>                                                                             <C>      <C>

PART I....................................................................................3

         ITEM 1.  DESCRIPTION OF BUSINESS.................................................3

         ITEM 2.  PROPERTIES..............................................................8

         ITEM 3.  LEGAL PROCEEDINGS.......................................................9

         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS....................10

PART II..................................................................................10

         ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS................................................................10

         ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..............11

         ITEM 7.  FINANCIAL STATEMENTS...................................................14

         ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE....................................14

PART III.................................................................................14

         ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                  PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.............14

         ITEM 10.  EXECUTIVE COMPENSATION................................................15

         ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.............................................................16

         ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................17

         ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K......................................17

</TABLE>







                                      -2-

<PAGE>


                                     PART I

CAUTION REGARDING FORWARD-LOOKING INFORMATION

         This annual 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.

ITEM 1.  DESCRIPTION OF BUSINESS

General

         Million  Dollar  Saloon  Inc. (the  "Company") was  incorporated  under
the laws of the State of Nevada on  September  28,  1987.  The Company  provides
management support and conducts its business operations through its wholly-owned
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.  ("Tempo"),  its wholly-owned  subsidiary.  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 Saloon7."

         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.

         Unless otherwise indicated,  the "Company" refers to the Company,  each
of its wholly-owned subsidiaries and Tempo.

         The Company is based in Dallas,  Texas and currently  conducts business
in two distinct areas:

               Owning and operating an adult cabaret.

               Owning and managing income producing commercial real estate.

Adult Cabaret






                                      -3-

<PAGE>


         General. The Company, through Tempo, owns and operates an adult cabaret
under  the name "The  Million  Dollar  Saloon,"  which is its  primary  business
operation.  The  Million  Dollar  Saloon  opened  in 1982  with  the  intent  of
establishing a sophisticated  entertainment  environment focused on attracting a
professional  clientele.  To enhance the club's appeal to its target market, The
Million Dollar Saloon offers restaurant and first-class bar service conducive to
attracting  businessmen  and  out-of-town  convention  clientele.   The  Company
continues to explore the expansion of the adult cabaret  segment of its business
by  establishing  additional  Million  Dollar Saloons or acquiring and operating
similar  facilities  in  selected  cities.  As of the  date of this  report,  no
specific locations have been identified.

         Female  Entertainment.  The  entertainers  at The Million Dollar Saloon
must follow  management's  policy of high personal  appearance  and  personality
standards.  A performer's physical appearance and her ability to present herself
attractively and to converse  intelligently  with customers is very important to
management.  Management insists that the performers at The Million Dollar Saloon
be  experienced  dancers.  The  performers  dance on the main  stage or on small
stages  throughout the club. While their  performances  include topless dancing,
management  insists that  performers  wear elegant  attire when not dancing,  as
opposed to being scantily  dressed as in many other adult  cabarets.  Management
never  allows  full  nudity in the club.  Management  provides  performers  with
guidelines  for the manner of dress,  hairstyle,  makeup and  general  demeanor.
Guidelines are imposed to maintain a high standard of professionalism  among the
performers  and to ensure  that  they  always  maintain  a  pleasant,  congenial
demeanor.   Further,   management  evaluates  each  performer's  appearance  and
performance  on a  nightly  basis  and  advises  them if  their  dress,  makeup,
hairstyle, general appearance or demeanor does not meet the Company's standards.
Though these  policies have the effect of limiting the number of performers  who
are permitted to dance at The Million Dollar Saloon,  the Company  believes that
its policy of  maintaining  these high  standards  is in its best  interest  for
long-term market position. Entertainers who have performed at The Million Dollar
Saloon have been featured in various leading men's entertainment magazines.

         Compliance Policies.  The Company's management has a policy of ensuring
that its  business is carried on in  conformity  with  local,  state and federal
laws. In particular,  the Company's management has a "no tolerance" policy as to
illegal  drug use in or around  the  premises.  Posters  placed  throughout  the
nightclub  reinforce  this  policy as do  periodic  unannounced  searches of the
entertainer's  lockers.  Entertainers and waitresses who arrive for work are not
allowed to leave the premises  without the  permission  of  management.  Once an
entertainer does leave the premises,  she is not allowed to return to work until
the next day.  Management  continually  monitors the  behavior of  entertainers,
waitresses  and  customers  to ensure that  proper  standards  of  behavior  are
observed.  The Company's  management has the power to levy fines on entertainers
for breaches of the Company's  rules. In the event an entertainer is fined three
times by management,  the entertainer is barred from future  performances at The
Million Dollar Saloon.

         Management also reviews all credit card charges made by customers while
at The Million Dollar  Saloon.  Specifically,  the Company's  policy is that all
credit card charges  must be  approved,  in writing,  by  management  before any
charges are accepted.  Management of the club is particularly  trained to review
credit card  charges to ensure that the only credit card  charges  approved  for
payment are for food, drink and entertainment at The Million Dollar Saloon.

         Food and Drink.  The Company believes a key to the success of a premier
adult  cabaret  is a  quality,  first-class  bar  and  restaurant  operation  to
complement its adult entertainment. The Company's restaurant operation is a full
service  operation which provides  business lunch buffets and a full-scale lunch
and dinner menu service offering hot and cold appetizers, salads, seafood, steak
and other  entrees.  A variety of premier  wines are offered to  compliment  any
customer's lunch or dinner  selection.  The Company employs a full-time  Service
Manager who is in charge of  recruiting  and  training a  professional  waitress
staff and ensuring that each customer receives prompt and courteous service. The
Company also employs a Chef and a Bar  Manager.  The Bar Manager is  responsible
for stocking, inventory control, and scheduling of bar staff.




                                      -4-

<PAGE>

         Controls.  Operational  and  accounting  controls are  essential to the
successful operation of a cash intensive nightclub and bar business. The Company
separates  management  personnel  from all cash  handling.  The  Company  uses a
combination of accounting and physical  inventory control mechanisms to ensure a
high  level  of  integrity  in  its  accounting  practices.   Computers  play  a
significant  role in capturing and analyzing a variety of information to provide
management with the information  necessary to efficiently manage and control the
nightclub.  Management  personnel  reconcile  deposits  of cash and credit  card
receipts  each  day to a daily  income  report.  Daily  computer  reports  alert
management of any variances from expected  financial results based on historical
norms.

        Atmosphere.  The Million  Dollar Saloon  maintains an elegant  European
atmosphere through its Italian decor and other customer related  amenities.  The
furniture and  furnishings in The Million Dollar Saloon create the feeling of an
upscale  restaurant.  The club offers a gourmet menu,  two cigar humidors and an
extensive  champagne and wine list.  The sound system design  provides a quality
sound at levels so conversation  can take place.  The Million Dollar Saloon also
provides a state-of-the-art light show and employs a sound and light engineer to
upgrade,  monitor,  and  maintain  the  sound  and  light  systems.   Management
constantly  monitors  the  environment  of The Million  Dollar  Saloon for music
selection, customer service, appearance, and ambience.

         VIP Area.  To  emphasize  service  for the  upper-end  of the  business
market, the Company maintains a VIP mezzanine  encompassing the upstairs area of
The Million Dollar Saloon  facility.  The VIP area is opened to individuals  who
pay  an  increased  daily  admission  charge  or  purchase  annual  or  lifetime
memberships.  The VIP area  provides  a higher  level of luxury in its decor and
more personalized  services. The VIP area consists of approximately 1,800 square
feet for food and  entertainment  purposes  and has an occupancy of 100 persons.
Catering to the upscale VIP customer,  this area includes "The  Champagne  Room"
accessible for an additional  fee. The downstairs  club and dining area consists
of  approximately   4,500  square  feet  for  entertainment   purposes  and  can
accommodate  250 persons.  The lower level also offers "The Blue Room",  an area
for bachelor and other private parties.

         Advertising  and Promotion.  The Company's  marketing  philosophy is to
portray The Million Dollar Saloon as a premiere adult cabaret  providing  female
entertainment in a sophisticated,  discreet  environment for its patrons.  Hotel
publications,  local radio,  cable  television,  newspapers,  billboards,  and a
variety of promotional  campaigns ensure that the public  recognizes The Million
Dollar Saloon name.

Future Expansion

         The Company has not determined  the precise  locations or nature of its
future expansion, but it believes, based upon its experience, that opportunities
for expansion  exist  primarily in the Southwest  United  States.  Management is
presently  researching  the  gaming  and  theatrical  production  industries  as
possible areas for expansion.  The Company may expand through the acquisition of
sports  bars and  casual  clubs that would not use the  trademark  "The  Million
Dollar  Saloon."  In  determining  which  cities may be suitable  locations  for
expansion, a variety of factors will be considered,  including,  but not limited
to, the current  regulatory  environment,  the  availability of sites located in
high traffic  commercial  areas  suitable for  conversion to The Million  Dollar
Saloon style cabarets or sports bars or casual clubs,  potential  competition in
the area, current market conditions and profitability of other adult cabarets in
the city.









                                      -5-

<PAGE>


Competition

         The adult  entertainment  nightclub industry is highly competitive with
respect  to  price,   service,   location,   and  the   professionalism  of  its
entertainment.  The Million Dollar Saloon competes with many locally-owned adult
cabarets in Dallas,  Texas,  certain of which may enjoy  recognition that equals
that of The  Million  Dollar  Saloon.  While  there  may be  local  governmental
restrictions on the location of a so-called "sexually oriented business",  there
are no barriers to entry into the adult cabaret  market.  There are in excess of
30 adult cabarets located in the Dallas,  Texas metropolitan area of which three
are in direct  competition with the Million Dollar Saloon.  The Company believes
that the  combination of its existing name  recognition  and its distinctive and
unique  entertainment  environment will allow the Company to effectively compete
within this industry.

Governmental Regulations

       The  Company  is  subject  to  various  federal,  state and local  laws
affecting its business activities.  In Texas, the authority to issue a permit to
sell alcoholic  beverages is governed by the Texas Alcoholic Beverage Commission
("TABC").  The TABC has the authority,  in its discretion,  to issue appropriate
permits.  The Company  presently  holds a Mixed Beverage Permit and a Late Hours
Permit (the  "Permits").  These Permits are subject to annual renewal,  provided
the Company has complied with all rules and  regulations  governing the permits.
Renewal of a permit is subject  to protest by a law  enforcement  agency or by a
member  of the  public.  In case of  protest,  the TABC may hold a  hearing  for
interested parties to express their views. The TABC has the authority after such
hearing not to issue a renewal of the protested  alcoholic  beverage permit. The
Company has never been the subject of a protest  hearing  against the renewal of
its Permits.  Other states may have similar laws that may limit the availability
of a permit to sell  alcoholic  beverages or which may provide for suspension or
revocation  of a permit to sell  alcoholic  beverages in certain  circumstances.
Prior  to  expanding  into any new  market,  the  Company  will  take all  steps
necessary to ensure  compliance with all licensing and regulatory  requirements.
The Company has not lost or been denied a permit by the TABC.

         Various groups have  increasingly  advocated  certain  restrictions  on
"happy hour" and other promotions  involving  alcoholic  beverages.  The Company
believes its  entertainment  value,  admittance  charge  beginning  after normal
"happy  hours" and its policies of not  discounting  drink prices are  effective
tools in promoting its business.  The Company cannot predict whether  additional
restrictions  on the promotion of sales of alcoholic  beverages will be adopted,
or if adopted, the effect of such restrictions on its business.

         Beyond various regulatory  requirements affecting the sale of alcoholic
beverages,  the location of an adult cabaret is subject to  restriction  by city
ordinance.  In Dallas, the Company is subject to "The Sexually Oriented Business
Ordinance" (the "Ordinance")  which contains  prohibitions on the location of an
adult  cabaret.  The  prohibitions  deal  generally  with distance from schools,
churches,  and other sexually oriented businesses and contain restrictions based
on the  percentage of residences  within the immediate  vicinity of the sexually
oriented  business.   The  granting  of  a  Sexually  Oriented  Business  Permit
("Business  Permit") is not subject to discretion;  the Business  Permit must be
granted if the proposed  operation  satisfies the requirements of the Ordinance.
The Company has held a Business Permit since passage of the city ordinance.  The
Business  Permit  is  valid  for a  period  of  one  year  and is  renewable  by
application of the permit holder subject to a hearing.  The Company has received
positive support at such hearings from business associations, nearby businesses,
and  residential  neighbors.  The Company has not lost or been denied a Business
Permit.

Employees and Independent Contractors

         As of December 31,  1998,  the Company had  approximately  70 full-time
employees,  of which 12 were in management  positions,  including  corporate and
administrative operations and approximately 58 were engaged in food and beverage
service,   including   bartenders   and   waitresses.    Entertainers   numbered
approximately  130 full and  part  time.  None of the  Company's  employees  are
represented  by a union and the Company  considers its employee  relations to be
good.



                                      -6-

<PAGE>

         In  contrast  to  prevailing  industry  treatment  of  entertainers  as
independent  contractors,  the Company  classifies its entertainers as employees
for both  federal  income  tax  purposes  and  compliance  with  the Fair  Labor
Standards  Act. By  classifying  its  entertainers  as employees  subject to the
income tax  withholding  provisions  of the Internal  Revenue Code and under the
Federal Insurance  Contributions  Act and the Federal  Unemployment Tax Act, the
Company  avoids the  imposition  of  penalties  for  failure to comply with such
requirements.

Insurance

         The Company  maintains  insurance in amounts it considers  adequate for
personal injury and property damage.  The Company does maintain  personal injury
liquor  liability  insurance  because the  Company  may be exposed to  potential
liabilities  that may be imposed  pursuant to the Texas  "Dram Shop"  statute or
similar "Dram Shop" statutes or common law theories of liability in other states
where the Company may expand.  The Texas "Dram Shop"  statute  provides a person
injured  by  an  intoxicated  person  the  right  to  recover  damages  from  an
establishment  that wrongfully  served alcoholic  beverages to such person if it
was apparent to the server that the  individual  being sold,  served or provided
with an  alcoholic  beverage  was  obviously  intoxicated  to the extent that he
presented a clear  danger to himself  and others.  An employer is not liable for
the actions of its  employee  who  wrongfully  serves an  individual  if (i) the
employer  requires its employees to attend a seller training program approved by
the TABC; (ii) the employee has actually attended such a training  program;  and
(iii) the  employer has not directly or  indirectly  encouraged  the employee to
violate the law. It is the policy of the Company to require  that all servers of
alcohol,  including management,  be certified every two years as servers under a
training program approved by the TABC. Certification gives statutory immunity to
the  sellers of alcohol  from damage  caused to third  parties by those who have
consumed  alcoholic  beverages  at  such  establishment  pursuant  to the  Texas
Alcoholic Beverage Code.

Income Producing Commercial Real Estate

         The Company owns three income producing  commercial  properties,  which
house adult entertainment nightclubs in the Dallas-Fort Worth geographic region.
One facility is Company operated,  The Million Dollar Saloon,  and the other two
are subject to long-term  lease  agreements  and  operated by other  third-party
operators.

         The  Company-operated  Million Dollar Saloon is located in North Dallas
and consists of a 9,750 square foot building  located on an  approximate  25,500
square foot tract of land fronting a major traffic artery. The property is owned
by Furrh and is subject to a lien also  covering the other leased  properties in
connection with a $750,000  long-term note payable to a bank dated September 22,
1995.  See  "Properties"  and  Note  F to  the  Company's  Financial  Statements
beginning on page F-1 hereof.

         The  remaining  two  properties  are  leased to  unrelated  independent
operators which also operate adult  entertainment  nightclubs in the facilities.
All of the properties are  stand-alone  structures  and,  accordingly,  are 100%
occupied with a single  tenant and, at the present time,  are not subject to any
plans  for  renovation,   remodeling  or  other  significant  improvement.   All
properties are physically located in geographic areas suitable for their current
use.  There exist similar  properties  which could be similarly used in the same
geographic area as the subject  properties.  The effective  rentals vary between
locations because of desirability and  attractiveness  of locations.  Management
believes that all of its  properties are  adequately  covered by insurance.  See
"Properties."

         The  Company may pursue  additional  purchases  of rental real  estate.
Management  believes  that the benefits of adding income  producing  real estate
without the expansion of management will provide  additional income and increase
the asset base of the Company.





                                      -7-

<PAGE>


Risk Factors

         Certain  of the  statements  contained  in this  Annual  Report on Form
10-KSB are forward looking statements that involve risks and uncertainties. Such
statements  are subject to important  factors that could cause actual results to
differ materially, including the following risk factors:

         Risk of Adult Cabaret Operations.  The adult entertainment,  restaurant
and bar industry is a volatile  industry.  The industry tends to be sensitive to
the general  local  economy.  When local  economic  conditions  are  prosperous,
entertainment  industry  revenues  increase,  conversely,  when  local  economic
conditions are unfavorable,  entertainment industry revenues decline.  Customers
who frequent adult cabarets generally follow trends in personal preferences. The
Company continuously  monitors trends in its customers' tastes and entertainment
preferences so that, if necessary,  it can change its operations and services to
accommodate the changes in trends. Any significant  decline in general corporate
conditions or the economy that affect  consumer  spending  could have a material
adverse effect on the Company's business and financial condition.

         Risk  of  Inadequate  Financial  Controls.  A  significant  part of the
revenues earned by the Company  through its adult  nightclub  operations will be
collected  in cash by full  and  part-time  employees.  Comprehensive  financial
controls are required to minimize the potential loss of revenue through theft or
misappropriation  of cash. To the extent that these  controls are not structured
or executed properly,  significant cash revenues could be lost and profitability
of  the  Company  impaired.   The  Company  believes  that  it  has  implemented
significant  cash  controls and is utilizing a  combination  of  accounting  and
physical  inventory control devices to deter theft and to ensure a high level of
security within its accounting practices and procedures.

         Competition  Within  the  Industry.  The  adult  cabaret  entertainment
business is highly competitive with respect to price, service,  location and the
professionalism  of entertainment.  The Million Dollar Saloon competes in Dallas
with a number of  locally-owned  adult  cabarets,  some of whose names may enjoy
recognition that equals that of The Million Dollar Saloon.  Although the Company
believes  that  due to its  strategic  location  it  will  be  able  to  compete
successfully with other local adult cabarets, there can be no assurance that the
Company will be able to maintain its high level of name recognition and prestige
within the  marketplace.  The Company's  success  depends on  maintaining a high
quality  of  female   entertainers   and  waitresses.   Competition  for  female
entertainers  in the  adult  entertainment  business  is  intense.  The  lack of
availability of quality,  personable,  attractive  entertainers or the Company's
inability to attract and retain other key employees,  such as kitchen  personnel
and bartenders, could adversely affect the business of the Company.

         Management   of  Growth.   For  the  Company  to  expand  its  business
operations,  it must  continue  to  improve  and  expand  the  expertise  of its
personnel and must attract, train and manage qualified managers and employees to
oversee and manage the expanded  operations.  The Company  intends to expand its
existing  business  operations  by opening  additional  adult  cabarets in other
metropolitan  areas. The opening of additional cabarets will subject the Company
to a variety of risks associated with rapidly growing companies.  In particular,
the Company's growth may place a significant  strain on its accounting  systems,
internal  controls,  and  oversight  of  its  day-to-day  operations.   Although
management  intends to ensure that its internal controls remain adequate to meet
the  demands of further  growth,  there can be no  assurance  that its  systems,
controls or personnel will be sufficient to meet these demands.  Inadequacies in
these  areas could have a material  adverse  effect on the  Company's  business,
financial condition and results of operations.

         Permits  Relating  to the Sale of Alcohol  and  Operation  of  Sexually
Oriented  Business.  While the  Company  has never been the subject of a protest
hearing  against the renewal of either its TABC  Permits or its Dallas  Business
Permit,  there can be no assurance  that such a protest could not be made in the
future,  nor can there be any  assurance  that the TABC  Permits  or the  Dallas
Business  Permit  would be granted in the event such a protest  was made.  Other
states may have  similar  laws which may limit the  availability  of a permit to
sell alcoholic beverages or operate a sexually oriented business.  The temporary
or  permanent  suspension  or  revocations  of the TABC  Permits  or the  Dallas
Business  Permit or the inability to obtain permits in areas of expansion  would
have a material adverse effect on the revenues,  financial condition and results
of operations of the Company.



                                      -8-

<PAGE>


         Limitations  on Protection of Service  Marks.  Rights of the Company to
the trade name "The Million Dollar Saloon" were purchased. There is no assurance
that  the   Company   will  be  able  to   protect   its  trade  name  to  deter
misappropriation of its protected  intellectual property rights.  Litigation may
be necessary in the future to protect the  Company's  rights from  infringement,
which may be costly and time  consuming.  The loss of the right to use the trade
name "Million Dollar Saloon" would have a material adverse effect on the Company
and its business operations.

ITEM 2.  PROPERTIES

         The Company maintains its corporate office at 6848 Greenville Avenue in
Dallas,  Texas. The corporate office is comprised of approximately  2,700 square
feet and is subject to a monthly  rental payment of  approximately  $3,500 under
the terms of a lease  agreement  which  expires  on August  31,  1999.  Based on
current local market conditions and available information,  management is of the
belief that it will either be able to renew the existing  lease upon  expiration
or relocate to a comparable location at a comparable cost.

         The Company owns three  facilities  which operate as adult  cabarets in
the  Dallas-Fort  Worth  geographic  region.  One facility,  the Million  Dollar
Saloon,  is Company  operated while the other two are subject to long-term lease
agreements and operated by unrelated third-party operators.

         The Million  Dollar Saloon is located in North Dallas and consists of a
9,750 square foot building located on an approximate 25,500 square foot tract of
land fronting a major traffic artery.

         The  remaining  two  properties  are  leased to  unrelated  independent
operators  which also operate  adult  cabarets in these  facilities.  All of the
properties are stand-alone structures and, accordingly, are 100% occupied with a
single  tenant  and,  at the  present  time,  are not  subject  to any plans for
renovation,  remodeling or other  significant  improvement.  All  properties are
physically located in geographic areas suitable for their current use. The lease
rental  amounts  are based  upon the  location  and  physical  condition  of the
respective property.

         The  following  is a summary of the  terms,  conditions  and  operating
parameters of the two properties being leased from the Company:


                                Location/Address
                             ---------------------------------------------------
                             3021 Northwest Highway       3601 State Highway 157
                                  Dallas, Texas             Fort Worth, Texas
Square footage                                                             
   Building                          8,550                          4,850
   Real estate tract                37,162                         60,398
Mortgages                             (1)                             (1)
Lease expiration                   May 2002                      August 2003
Scheduled rentals         $4,250 per week through 5/25/99                 
                              $4,750 per week from
                            5/26/99 through 5/23/02            $8,500 per week

Effective annual rental        
  per square foot 
(total lease term)                  $24.33                          $91.13

Gross book basis
 (including land)                 $1,206,829                      $150,447

Net book basis 
 (including land)                  $971,905                        $72,320

Federal income tax basis                   
 (excluding land)                  $675,343                        $150,447


                                      -9-

<PAGE>

                                Location/Address                                
                             ---------------------------------------------------
                             3021 Northwest Highway      3601 State Highway 157
                                  Dallas, Texas            Fort Worth, Texas   

Depreciation method and 
life                              SL-19 yrs.                  ACRS-15 yrs.

Ad valorem tax rate per $100
 of valuation                        $2.54                       $3.31

1998 Ad valorem taxes               $9,745                       $7,312

(1)  Both  properties  are  subject  to a lien  incurred  in  connection  with a
     $750,000  long-term  note payable to a bank dated  September 22, 1995.  The
     note bears  interest  at 11.0% and is payable  in monthly  installments  of
     approximately  $16,369,  including  interest.  The final  payment is due in
     September 2000. The note may be prepaid at any time and any prepayment must
     be accompanied by a "yield  maintenance fee" equal to 1% if prepaid between
     September 1, 1998 and August 31, 1999. At December 31, 1998, the balance of
     this  mortgage  was  $310,504.  See  Footnote G to  Consolidated  Financial
     Statements.

ITEM 3.  LEGAL PROCEEDINGS

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

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

         During the first  quarter of fiscal  1999,  the Company held its annual
shareholders meeting. Of the Company's 5,761,778 shares of common stock entitled
to vote at the  meeting,  3,412,931  shares  were  represented  at the  meeting,
approximately  60% of the  outstanding  shares  entitled to vote.  The following
matters were submitted to a vote of the  shareholders  through  solicitation  of
proxies or otherwise:

                                                  ---------   -------    -------
                                                     For      Against    Abstain
Election of Board of Directors

     Nina J. Furrh                                3,412,631      300        0

     Ronald W. Johnston                           3,412,731      200        0

     Sharon Furrh                                 3,412,731      200        0

     Dewanna Ross                                 3,412,831      100        0

Appointment of S.W. Hatfield + Associates as                            
     Auditors for 1998                            3,412,771      135       25

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         As of December 31, 1998, the Company had  approximately  693 holders of
record of its Common Stock.  Outstanding  shares of the  Company's  Common Stock
totaled  5,731,778.   The  Company's  transfer  agent  is  Securities   Transfer
Corporation, Dallas, Texas.

                                      -10-

<PAGE>


         The Company's Common Stock began trading on The OTC Electronic Bulletin
Board under symbol "MLDS" on January 29, 1996.  The  following  table sets forth
the  quarterly  average high and low closing bid prices per share for the Common
Stock.

                        
            Fiscal Year Ended                Common Stock
            December 31, 1997             --------------------
            -----------------              High       Low
                                           ----       ---
             First Quarter                $1.50      $0.88
            Second Quarter                $2.00      $1.00
             Third Quarter                $1.25      $1.06
            Fourth Quarter                $1.06      $0.75


           December 31, 1998
           -----------------
             First Quarter                $0.75      $0.63
            Second Quarter                $0.66      $0.31
             Third Quarter                $0.63      $0.31
            Fourth Quarter                $0.50      $0.28


           December 31, 1999
           -----------------
             First Quarter                         
        (through March 1, 1999)           $0.53      $0.38

         The source for the high and low closing bids quotations is the National
Quotation Bureau, Inc. and does not reflect inter-dealer prices, such quotations
are without retail  mark-ups,  mark-downs or commissions,  and may not represent
actual transactions and have not been adjusted for stock dividends or splits.

         During each quarter of 1998 and 1997, the Company's  Board of Director
declared a per share cash dividend as follows:

                                          
                 Period                     1998       1997

             First Quarter                 $0.010     $0.040
            Second Quarter                  0.010      0.020
             Third Quarter                  0.010      0.015
            Fourth Quarter                  0.010      0.010
                                            -----      -----
            Total per share                $0.040     $0.085
                                            =====      =====

         Total  dividends  declared  during  1998  and  1997  was  approximately
$241,351 and $433,054, respectively.










                                      -11-

<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Caution Regarding Forward-looking Information

         This annual 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.

         The  following  discussion  should  be read  in  conjunction  with  the
accompanying  consolidated financial statements and notes thereto,  beginning on
page F-1 herein.

Results of Operations

         Year ended  December  31, 1998 as compared to year ended  December  31,
1997. Bar and restaurant  operations were relatively consistent at approximately
$3.12 million in 1998 compared to approximately  $3.11 million in Calendar 1997.
The  Company's  adult  entertainment  lounge and  restaurant  continues  to be a
destination  of  choice  for  visitors  to the  Dallas-Ft.  Worth  Metroplex  in
conjunction with various  convention and athletic events.  Further,  the Company
enjoys a quality reputation in the local market for local patronage.

         In August 1998, the Company obtained a new five-year lease agreement on
the commercial rental property located on Highway 157 in Fort Worth,  Texas. The
new lease  provides that the weekly rental  payment to the Company will increase
from $4,225 per week to $8,500 per week for the five-year term of the lease.

         Cost of sales  increased by  approximately  $90,000 from  approximately
$1.71 million in 1997 to  approximately  $1.81 million in 1998.  The increase is
related to an  approximately  $113,400  increase in direct  labor as a result of
normal  operating  increases  in these  costs and was  offset by an  approximate
$19,000  cost  savings in  purchases  of  inventories,  consumable  supplies and
related State excise taxes. The Company  experienced gross profit percentages of
approximately  52.1% in 1997 and  approximately  50.7% in 1998.  The  Company is
exploring all possible  opportunities to return its gross profit  percentages to
those experienced in the previous year.

         General and administrative expenses increased by approximately $304,000
from  approximately  $1.3 million in 1997 to approximately $1.6 million in 1998.
Of this increase, the Company experienced approximately $168,000 in professional
and consulting fees related to the acquisition of additional capital in 1998 and
the exploration of possible business expansion opportunities.  Additionally, the
Company  experienced  an  increase  of  approximately  $62,000  in  general  and
administrative   compensation   and  payroll  taxes  for  the  Company's  entire
operations.  Further, the Company experienced an approximate $79,000 increase in
general  operating  expenses which were a result of additional  advertising  and
general  inflationary  increases  in the  cost  of  goods  and  services  in the
Dallas-Ft. Worth Metroplex. The Company monitors all expenses on a monthly basis
to control costs and optimize its operations.

         Income from operations in 1998 was  approximately  $254,000 as compared
to  approximately  $559,000 in 1997. The Company  realized  income before income
taxes of  approximately  $234,000  in 1998 and  approximately  $660,000 in 1997.
Included in the Company's financial  statements is a one-time gain from the sale
of real estate in Calendar 1997 of  approximately  $48,000 and a one-time charge
to operations of approximately $40,000 for the forgiveness of related party debt
in excess of the agreed upon value of the common stock taken for the  retirement
of debt in 1998.  Neither  of these  events are  anticipated  to recur in future



                                      -12-

<PAGE>

periods.  In  conjunction  with the  retirement of the related  party debt,  the
Company  experienced  a reduction of interest  income of  approximately  $32,000
between 1998 and 1997. It is anticipated  that interest income in future periods
will fluctuate depending on the amount of surplus cash reserves that the Company
may or may not have available for investment.

         The  Company  had  earnings  per share  (both  basic and fully diluted)
of approximately $0.02 in 1998 and approximately $0.08 in 1997.

         As a general rule, the bar and restaurant  operations  decrease  during
the  summer  months  of June,  July  and  August  due to the lack of  convention
activity  in  Dallas,  Texas  and the  availability  of other  recreational  and
vacation  activity by the  patronage.  No  significant  financial  impact on the
operations is caused by this repetitive seasonal decline.

         Year ended  December  31, 1997 as compared to year ended  December  31,
1996. Bar and restaurant operations increased by approximately  $100,000 for the
year ended  December  31, 1997 as compared to the year ended  December 31, 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 geographic  region during 1977, which is one of the key
factors  contributing to the Company's patronage factors.  Additionally,  due to
scheduled   increases,   the  Company   experienced  higher  rental  incomes  of
approximately $10,000 during 1997 as compared to 1996.

         Cost  of  sales  increased  by  approximately  $24,000  during  1997 as
compared to 1996. This increase is related to increased sales impacting variable
costs  related to  consumable  inventories,  supplies  and related  State excise
taxes.  Gross  profit  percentages  increased  slightly to 52.1% for 1997 versus
49.9% for 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 future periods.

         General and administrative  expenses increased by approximately $36,000
during 1997 versus 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  $48,500,  was  approximately  $659,600 for 1997 versus
approximately   $523,600  for  1996.  After-tax  net  income  has  decreased  by
approximately $84,000 as a direct result of the utilization of all net operating
loss and  business tax credit  carryforwards  on the  Company's  1997 income tax
calculation.  Overall earnings per share of  approximately  $0.08 per share were
achieved for 1997 as compared to approximately $0.10 per share for 1996.

Liquidity and Capital Resources

         Year ended  December  31, 1998 as compared to year ended  December  31,
1997. As of December 31, 1998, the Company had working capital of  approximately
$440,500 as compared to  approximately  $17,400 as of  December  31,  1997.  The
Company  continues to experience  positive cash flows from operations.  Net cash
flow from operating activities was approximately $372,000 in 1998 as compared to
approximately $430,000 in 1997.

         The Company has  identified no  significant  capital  requirements  for
1999,  other  than  normal  repair and  replacement  activity  at the  Company's
commercial rental properties and the adult  entertainment  lounge and restaurant
facility.  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.


                                      -13-

<PAGE>

         The Company  anticipates the continuance of dividend  payments and paid
approximately $238,000 during 1998, including  approximately $54,000 declared in
the fourth  quarter of 1997.  Further,  the  Company  declared a fourth  quarter
dividend in 1998 of approximately $57,000 which was paid in January 1999.

         Year ended  December  31, 1997 as compared to year ended  December  31,
1996. As of December 31, 1997, the Company had working capital of  approximately
$17,400 as compared to  $(52,600) at December  31,  1996.  The Company  achieved
positive cash flows from  operations of  approximately  $430,000 for 1997 versus
approximately $580,000 for 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 $529,000 during 1997, including  approximately $78,000 declared in
the fourth  quarter of 1996.  Further,  the  Company  declared a fourth  quarter
dividend in 1997 of approximately $54,000 which was paid in January 1998.

         General. 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.

         The Company treats and has  consistently  treated all  entertainers  as
employees  whereas  other  similar  facilities  may or may  have  treated  their
entertainers as independent contractors. Management believes that as a result of
its initial and continuing  policies and procedures,  there is an  insignificant
risk to both future operations and profitability for any potential assessment of
payroll and related  taxes in the future by regulatory  authorities  which would
have  potentially a very  significant  financial and  operational  impact if the
Company treated all entertainers as independent contractors.

Year 2000 Considerations

         The Year 2000 (Y2K) date  change is believed  to affect  virtually  all
computers and organizations.  The Company has undertaken a comprehensive  review
of  its  information  systems,   including  personal  computers,   software  and
peripheral devices, and its general  communications  systems. The Company has no
direct electronic links with any customer or supplier. In addition,  the Company
has held discussions with certain of its software  suppliers with respect to the
Y2K date change.  While the Company has not completed its detailed review,  as a
preliminary  assessment,  the Company believes,  as of the date of this filing ,
that it will not be  required to modify or replace  significant  portions of its
software and any such  modifications  or  replacements  are, or will be, readily
available.  The Company anticipates that it will complete its detailed review by
March 31, 1999 and complete any modifications,  upgrades or replacements  during
the second quarter of 1999.

         The Company is also planning to hold  discussions  with its significant
suppliers,  shippers,  customers and other external business partners related to
their readiness for the Y2K date change.

         The  Company  does not  expect the costs  associated  with the Y2K date
change  compliance to have a material  effect on its  financial  position or its
results of operations. There can be no assurance until January 1, 2000, however,
that all of the Company's systems,  and the systems of its suppliers,  shippers,
customers or other external business partners will function adequately.


                                      -14-

<PAGE>


ITEM 7.  FINANCIAL STATEMENTS

         The required  items are presented as a separate  section of this report
beginning on Page F-1.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

         There  have been no changes  in  accountants  since 1995 nor have there
been any disagreements  with accountants on any matter of accounting  principles
or practices, financial statement disclosure, or auditing scope or procedure.

                                    PART III

ITEM 9. DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS AND CONTROL PERSONS; 
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         The following table sets forth certain  information about the directors
and executive officers of the Company.  All directors of the Company hold office
until the next annual meeting of  stockholders  or until their  successors  have
been elected and qualified. Executive officers of the Company are elected by the
Board of Directors to hold office until their respective  successors are elected
and qualified.

       
      Name                    Age     Position(s)
      ----                    ---     -----------
      Nina J. Furrh           63      Chief Executive Officer, Chairman of the 
                                      Board, President and Director
      
      Dewanna Ross            43      Chief Operating Officer, Vice President of
                                      Operations, Secretary, Treasurer and
                                      Director
      
      Ronald W. Johnston      45      Chief Financial Officer, Vice President 
                                      of Finance and Director
      
      Sharon Furrh            50      Vice President of Planning and Development
                                      and Director
      
         Nina Furrh  has served  as  President  of  the  Furrh  family  business
interests since 1989. Mrs. Furrh became involved in the daily  operations of The
Million Dollar Saloon in September 1992.  Mrs. Furrh has served as President and
a director of the Company since 1995. In February 1998, she was elected as Chief
Executive Officer and Chairman of the Board.

         Dewanna Ross has served as administrative  manager for the Furrh family
of companies  since 1976.  Ms. Ross is  responsible  for the  development of the
corporate  procedures,  including  the hiring and  training of  corporate staff.
Ms. Ross has also served as an officer and  operator of a private club and as an
officer  of other  businesses.  Ms.  Ross has been  employed  by the  Company in
various  capacities  since  1995.  In  February  1998,  she was elected as Chief
Operating Officer of the Company.

         Ronald W.  Johnston, CPA, has served as a director of the Company since
September 1995 and Chief  Financial  Officer since 1996. Mr. Johnston has been a
certified public accountant in private practice in Dallas, Texas and a principal
of his own firm since 1990. Mr.  Johnston's  current firm serves a wide range of
business and individual clients.  Mr. Johnston currently serves as a director of
Crash Rescue Equipment Services, Inc. in Dallas, Texas.

         Sharon Furrh has been involved as a design  consultant  for The Million
Dollar Saloon, in both its original construction and in subsequent  remodelings.
Additionally, Sharon Furrh is responsible for advertising, promotions and public
relations  for the  Company.  Mrs.  Furrh has been  employed  by the  Company in
various capacities since 1995.




                                      -15-

<PAGE>


Compliance with Section 16(a) of the Exchange Act

         Section  16(a) of the Exchange Act  requires the  Company's  directors,
executive  officers  and persons  who own more than ten percent of a  registered
class of the  Company's  equity  securities  ("10%  holders"),  to file with the
Securities and Exchange  Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity  securities  of
the Company. Directors,  officers and 10% holders are required by SEC regulation
to furnish the Company  with copies of all of the  Section  16(a)  reports  they
file.

         Based solely on a review of reports furnished to the Company or written
representatives  from the Company's  directors and executive officers during the
fiscal year ended  December 31,  1998,  all Section  16(a)  filing  requirements
applicable  to its  directors,  officers  and 10%  holders  for such  year  were
complied with.

ITEM 10.  EXECUTIVE COMPENSATION

         The  following  Summary  Compensation  Table sets forth,  for the years
indicated,  all cash  compensation  paid,  distributed  or accrued for services,
including  salary and bonus amounts,  rendered in all capacities for the Company
to its  President  and Chief  Executive  Officer.  No  executive  officer of the
Company  received  remuneration  in excess of  $100,000  during  the  referenced
periods. All other compensation related tables required to be reported have been
omitted as there has been no  applicable  compensation  awarded to, earned by or
paid to any of the Company's executive officers in any fiscal year to be covered
by such tables.

<TABLE>

<CAPTION>
                           Summary Compensation Table

                                      Annual Compensation        Long-Term Compensation
                                      --------------------------------------------------
                                                                  Awards                   Payouts
                                                                ---------                 ---------   
                                                      Other      Restricted   Securities                  All
                                        Salary/       Annual       Stock      Underlying     LTIP        Other
Name/Title                     Year      Bonus     Compensation    Awards    Options/SARs   Payouts   Compensation
----------                     ----     ------     ------------  ----------  ------------   -------   ------------
<S>                                                                               <C>        <C>         <C>   
Nina Furrh, President and      1998     $9,000          NA           NA           NA          NA              $ -0-
Chief Executive Officer(1)     1997      $ -0-          NA           NA           NA          NA              $ -0-
Bjorn Heyerdahl, Chief         1998      $ -0-          NA           NA           NA          NA         $13,340(2)
   Executive Officer(1)        1997      $ -0-          NA           NA           NA          NA         $13,340(2)
--------------------------
</TABLE>

(1)  Ms.  Furrh  became  Chief  Executive  Officer  in  February  1998  upon the
     resignation of Mr. Heyerdahl as Chief Executive Officer.
(2)  Represents  payment of an auto lease by the  Company for the benefit of Mr.
     Heyerdahl.

Director Compensation

         The  Company  does  not  currently  pay a  director  fee for  attending
scheduled and special  meetings of the Board of Directors.  The Company pays the
expenses of all of its directors in attending board meetings.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain  information as of March 1, 1999
relating  to the  beneficial  ownership  of shares  of Common  Stock by (i) each
person who owns  beneficially  more than 5% of the outstanding  shares of Common
Stock,  (ii) each director of the Company,  (iii) each executive  officer of the
Company,  and (iv) all  executive  officers  and  directors  of the Company as a
group.

       

                                      -16-


<PAGE>

<TABLE>

                                 Name(1)                           Number of           Percentage of
                                                                     Shares         Common Stock Owned
<S>                                                                 <C>                     <C>
       
       Nina J. Furrh(2)(3)(4)...................................    2,004,073(5)            35.0%
       Bjorn Heyerdahl(2).......................................      460,001                8.0%
       Sharon Furrh, as Trustee for The Joshua Barrett           
        Furrh Trust(6)..........................................      266,227                4.6%
       Dewanna Ross(7)..........................................      107,050(8)             1.9%
       Ronald W. Johnston(9)....................................        1,987                 *
       Steve Wheeler(10)........................................      571,176                9.9%
       Linda Weaver.............................................      500,000(11)            8.7%
       J.M. Tibbals as Trustee for The Irrevocable Equity        
        Trust No. 1(12).........................................      451,558                7.8%
       Officers and Directors as a group (4 persons)............    2,379,337(13)           41.5%
       -------------------
*Less than 1%
</TABLE>

(1)  Unless  otherwise  indicated,  the  persons  listed  have sole  voting  and
     investment powers with respect to all such shares.
(2)  The  mailing  address  for  such  shareholder  is  c/o  the  Company,  6848
     Greenville Ave., Dallas, Texas 75231.
(3)  Nina J. Furrh is the  Executrix of the Estate of Donald G. Furrh which owns
     180,776 shares.  Mrs. Furrh has the power to vote the shares of the Company
     owned by the Estate of Donald G. Furrh.
(4)  Nina J. Furrh is the President,  Chief Executive  Officer and a director of
     the Company.
(5)  Includes  the 180,776  shares of Common Stock owned by the Estate of Donald
     G. Furrh.
(6)  Sharon  Furrh is the Vice  President  of  Planning  and  Development  and a
     director of the Company and has the  authority  to vote the shares owned by
     The Joshua Barrett Furrh Trust.
(7)  Dewanna Ross is the Chief Operating Officer,  Vice President of Operations,
     Secretary, Treasurer and a director of the Company.
(8)  Includes  4,000  shares  owned  by Ms.  Ross  and  103,050  shares  held in
     custodian  accounts  for the benefit of Travis  Weaver,  Jackson M. Weaver,
     Solon Weaver and Joshua B. Furrh. Ms. Ross disclaims any ownership interest
     in the 103,050 shares held in custodian accounts,  but she does have voting
     authority of such shares.
(9)  Mr. Johnston is the Chief Financial Officer,  Vice President of Finance and
     a director of the Company.
(10) The mailing address for Mr. Wheeler is 2152 West Northwest  Highway,  Suite
     118, Dallas, Texas 75220.
(11) Additionally,  Mrs.  Weaver has agreed to purchase from the Company 400,000
     shares of the Common Stock for $1.10 per share.  If the option is exercised
     and the additional  400,000 shares are purchased by Mrs. Weaver,  she would
     own 900,000  shares or  approximately  15.7% of the  outstanding  shares of
     Common Stock of the Company.  The mailing  address for Linda Weaver is 2152
     West Northwest Highway, Suite 118, Dallas, Texas 75220.
(12) The mailing  address  for The  Irrevocable  Equity  Trust No. 1 is c/o J.M.
     Tibbals, Arter & Hadden, 1717 Main Street, Suite 4100, Dallas, Texas 75201.
(13) Includes  180,776  shares of Common  Stock owned by the Estate of Donald G.
     Furrh over which Nina J. Furrh has voting  power,  266,227  shares owned by
     the  Joshua  Barrett  Trust over which  Sharon  Furrh has voting  power and
     103,050 shares held in various  custodian  accounts over which Dewanna Ross
     has voting power.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       None.






                                      -17-

<PAGE>

<TABLE>
<CAPTION>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Financial Statements and Exhibits                                                       Page
     ---------------------------------                                                       ----
<S>                                                                             <C>         <C>
1.   Financial  Statements.  The following financial statements are submitted as
     part of this report:

         Independent Auditor's Report                                                         F-3
         Balance Sheets - December 31, 1998 and 1997                                          F-4
         Statements of Operations - Years Ended December 31, 1998 and 1997                    F-6
         Statements of Stockholders' Equity - Years Ended December 31, 1998 and 1997          F-7
         Statement of Cash Flows - Years Ended December 31, 1998 and 1997                     F-8
         Notes to Financial Statements                                                       F-10
</TABLE>

2.   Exhibits
 
         Exhibit
         Number                       Description
         -------    ------------------------------------------------------------
          2.1*      Stock  Purchase  Agreement  dated  August  23,  1995  by and
                    between Art Beroff and Bjorn Heyerdahl.
                    
          2.2*      Stock  Purchase  Agreement  dated  August  23,  1995  by and
                    between  Joseph  MacDonald,  Goodheart  Ventures,  Inc., and
                    Bjorn Heyerdahl.

          2.3*      Stock  Purchase  Agreement  dated  September  7, 1995 by and
                    among Million Dollar Saloon, Inc., Goodheart Ventures, Inc.,
                    and certain individuals.

          2.4*      Addendum and Modification to Stock Purchase  Agreement dated
                    September  19, 1995,  by and among  Million  Dollar  Saloon,
                    Inc., Goodheart Ventures, Inc., and certain individuals.

          2.5*      Stock  Exchange  Agreement  dated  September  7, 1995 by and
                    among Million Dollar Saloon, Inc., Goodheart Ventures, Inc.,
                    and J.M. Tibbals,  Trustee for Irrevocable  Equity Trust No.
                    1.

          2.6*      Addendum and Modification to Stock Exchange  Agreement dated
                    September  19, 1995,  by and among  Million  Dollar  Saloon,
                    Inc.,  Goodheart Ventures,  Inc., and J.M. Tibbals,  Trustee
                    for Irrevocable Equity Trust No. 1.

          2.7*      Agreement  and Plan of Merger  dated  October 5, 1995 by and
                    between  Million Dollar Saloon,  Inc., a Texas  corporation,
                    and Goodheart Ventures, Inc., a Nevada corporation.

          2.8**     Addendum and  Modification to Stock Purchase  Agreement made
                    and entered into the 7th day of September  1995 by and among
                    Million Dollar Saloon, Inc.,  Goodheart Ventures,  Inc., and
                    certain individuals dated October 31, 1995.

          3(i)*     Articles  of  Incorporation  of The  Company,  as amended to
                    date.

          3(ii)*    Bylaws of the Company.

          4.1*      Specimen Common Stock Certificate.

          10.1*     Leases of Properties.



                                      -18-

<PAGE>


          10.2*     Promissory  Note for $750,000  with Abrams  Centre  National
                    Bank dated September 22, 1995.

          21.1*     Subsidiaries of the Company.

          27.1      Financial Disclosure Schedule.
----------------- 

* Incorporated by reference to the Company's Form 10-SB filed December 26, 1995.

(b)      Reports on Form 8-K.

         No  reports  on Form 8-K were  filed  during  the  three  months  ended
December 31, 1998.










            (The remainder of this page is left blank intentionally)























                                      -19-

<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 and 15(d) of the  Exchange  Act,  the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 3rd day of March, 1999.

                                        MILLION DOLLAR SALOON, INC.


                                        By: /s/ Nina J. Furrh               
                                            Nina J. Furrh, Chairman of the Board
                                            and President

         Pursuant to the  requirements of the Exchange Act, this report has been
signed  below  by the  following  persons  in the  capacities  and on the  dates
indicated:

<TABLE>

       Signature                            Title                                    Date
       ---------                            -----                                    ---- 
<S>                             <C>                                               <C>

    /s/ Nina J. Furrh           Chief Executive Officer, Chairman of the          March 3, 1999
----------------------------    Board, President and Director
Nina J. Furrh                 

    /s/ Dewanna Ross            Chief Operating Officer, Vice President of        March 3, 1999
----------------------------    Operations, Secretary, Treasurer and Director
Dewanna Ross                  

    /s/ Ronald W. Johnston      Chief Financial Officer, Vice President of        March 3, 1999
----------------------------    Finance and Director
Ronald W. Johnston            

    /s/ Sharon Furrh            Vice President of Planning                        March 3, 1999
----------------------------    and Development and Director
Sharon Furrh                                 

</TABLE>







                                      -20-


<PAGE>


           MILLION DOLLAR
            SALOON, INC.
          AND SUBSIDIARIES

        Financial Statements
                 and
          Auditor's Report

     December 31, 1998 and 1997
















                                               S. W. HATFIELD , CPA
                                           certified public accountants

                                       Use our past to assist your future sm







<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                            Page
                                                                            ----

Report of Independent Certified Public Accountants                           F-3

Consolidated Financial Statements

   Consolidated Balance Sheets as of December 31, 1998 and 1997              F-4

   Consolidated Statements of Income and Comprehensive Income
      for the years ended December 31, 1998 and 1997                         F-6

   Consolidated Statements of Changes in Shareholders' Equity
      for the years ended December 31, 1998 and 1997                         F-7

   Consolidated Statements of Cash Flows
      for the years ended December 31, 1998 and 1997                         F-8

   Notes to Consolidated Financial Statements                               F-10





                                                                             F-2

<PAGE>


S. W. HATFIELD, CPA
certified public accountant

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



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Shareholders
Million Dollar Saloon, Inc.

We have audited the consolidated  balance sheets of Million Dollar Saloon,  Inc.
and Subsidiaries (a Nevada corporation and Texas corporations,  respectively) as
of December 31, 1998 and 1997, and the related consolidated statements of income
and comprehensive  income,  changes in shareholders'  equity, and cash flows for
the  years  then  ended.  These  consolidated   financial   statements  are  the
responsibility  of Company's  management.  Our  responsibility  is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit  also  includes  examining,  on a test  basis,  evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Million
Dollar Saloon,  Inc. and  Subsidiaries  as of December 31, 1998 and 1997 and the
results  of its  operations  and its cash  flows  for the  years  then  ended in
conformity with generally accepted accounting principles.




                                           S. W. HATFIELD, CPA
                                          (formerly S. W. HATFIELD + ASSOCIATES)
Dallas, Texas
January 28, 1999










                      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







<PAGE>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1998 and 1997


                                     ASSETS
                                     ------

                                                     1998           1997 
                                                 -----------    -----------
CURRENT ASSETS
   Cash on hand and in bank                      $   574,817    $   149,952
   Note receivable - current portion                  24,480         22,604
   Accounts receivable - trade and other               6,671           --
   Prepaid Federal income taxes receivable            91,653         37,248
   Inventory                                          18,404         16,097
   Prepaid expenses                                   56,460         73,544
                                                 -----------    -----------

      Total current assets                           772,485        299,445
                                                 -----------    -----------


PROPERTY AND EQUIPMENT
   Buildings and related improvements              1,987,515      1,955,132
   Furniture and equipment                           798,373        757,110
   Vehicles                                           52,728         52,728
                                                 -----------    -----------
                                                   2,838,616      2,764,970
   Less accumulated depreciation                  (1,567,904)    (1,475,570)
                                                 -----------    -----------
                                                   1,270,715      1,289,400
   Land                                              741,488        741,488
                                                 -----------    -----------

      Net property and equipment                   2,012,203      2,030,888
                                                 -----------    -----------


OTHER ASSETS
   Note receivable - noncurrent portion               79,767        105,442
   Accounts receivable from officers,
       shareholders and affiliates                      --          805,684
   Organization costs, net of accumulated
      amortization of $49,644 and $34,658,
      respectively                                    25,284         40,270
   Loan costs, net of accumulated amortization
      of $20,545 and 14,222, respectively             11,062         17,384
   Other                                               6,975          7,725
                                                 -----------    -----------

      Total other assets                             123,088        976,505
                                                 -----------    -----------


TOTAL ASSETS                                     $ 2,907,776    $ 3,306,838
                                                 ===========    ===========


                                  - Continued -


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                                                             F-4

<PAGE>

<TABLE>

<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS - CONTINUED
                           December 31, 1998 and 1997


                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                             1998          1997   
                                                           ----------   ----------   
<S>                                                        <C>          <C>

CURRENT LIABILITIES
   Current portion of long-term debt                       $  181,905   $  163,288
   Accounts payable - trade                                    22,443       22,571
   Accrued liabilities                                         63,751       35,622
   Dividends payable                                           57,318       54,095
   Tenant deposits                                              6,500        6,500
                                                           ----------   ----------

      Total current liabilities                               331,917      282,076
                                                           ----------   ----------


LONG-TERM LIABILITIES
   Long-term debt, net of current maturities                  156,419      334,872
   Deferred tax liability                                     125,056       98,936
                                                           ----------   ----------

      Total liabilities                                       613,392      715,884
                                                           ----------   ----------


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 and 5,409,451 issued and
      outstanding, respectively                                 5,732        5,409
   Additional paid-in capital                                    --           --
   Retained earnings                                        2,288,652    2,585,545
                                                           ----------   ----------

      Total shareholders' equity                            2,294,384    2,590,954
                                                           ----------   ----------


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                 $2,907,776   $3,306,838
                                                           ==========   ==========

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                                                             F-5

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                     Years ended December 31, 1998 and 1997


                                                        1998           1997     
                                                    -----------    -----------
REVENUES
   Bar and restaurant sales                         $ 3,111,513    $ 3,119,557
   Rental income                                        552,675        450,227
                                                    -----------    -----------
      Total revenues                                  3,664,188      3,569,784
                                                    -----------    -----------

COST OF SALES - BAR AND
   RESTAURANT OPERATIONS
   Direct labor                                       1,277,734      1,163,949
   Purchases                                            528,338        546,971
                                                    -----------    -----------
      Total cost of sales                             1,806,072      1,710,920
                                                    -----------    -----------

GROSS PROFIT                                          1,858,116      1,858,864
                                                    -----------    -----------

OPERATING EXPENSES
   Salaries, wages and related expenses                 384,878        318,106
   Consulting, management and other
      professional fees                                 311,691        143,206
   Rental expenses, principally taxes                    60,354         67,327
   Interest expense                                      55,938         62,342
   Other operating expenses                             676,407        597,073
   Depreciation and amortization                        114,385        111,729
                                                    -----------    -----------
         Total operating expenses                     1,603,653      1,299,783
                                                    -----------    -----------

INCOME FROM OPERATIONS                                  254,463        559,081

OTHER INCOME (EXPENSES)
   Gain on sale of property and equipment                  --           48,498
   Forgiveness of related party debt, principally
      accrued interest, in excess of agreed upon
      value of common stock taken for repayment         (40,337)          --
   Interest income                                       20,360         52,065
                                                    -----------    -----------

INCOME BEFORE INCOME TAXES                              234,486        659,644

INCOME TAX (EXPENSE)
   Currently payable                                    (68,239)      (173,342)
   Deferred                                             (26,120)       (65,866)
                                                    -----------    -----------

NET INCOME                                              140,127        420,436

OTHER COMPREHENSIVE INCOME                                 --             --
                                                    -----------    -----------

COMPREHENSIVE INCOME                                $   140,127    $   420,436
                                                    ===========    ===========

Earnings per share of common stock
   outstanding, computed on net income -
   basic and fully diluted                          $      0.02    $      0.08
                                                    ===========    ===========
Weighted-average number of shares outstanding         5,901,401      5,073,392
                                                    ===========    ===========

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                                                             F-6

<PAGE>

<TABLE>

<CAPTION>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     Years ended December 31, 1998 and 1997



                                                             Additional                     Total
                                       Common Stock           paid-in        Retained      shareholders'
                                  # shares        Amount      capital        earnings       equity    
                                 ---------    -----------    -----------    -----------    ------------
<S>                              <C>          <C>            <C>            <C>            <C>   

Balances at
   January 1, 1997               5,010,084    $     5,010    $     9,990    $ 2,599,820    $ 2,614,820

Shares issued under terms of
   1996 private placement
   related to selling price
   guarantees                      403,116            403           (403)          --             --

Acquisition and retirement
   of treasury stock                (3,749)            (4)        (9,587)        (1,656)       (11,247)

Dividends declared                    --             --             --         (433,055)      (433,055)

Net income for the year               --             --             --          420,436        420,436
                               -----------    -----------    -----------    -----------    -----------

Balances at
   December 31, 1997             5,409,451          5,409           --        2,585,545      2,590,954

Shares sold under
   private placement               530,000            530        529,470           --          530,000

Shares issued for
   consulting fees                 205,000            205         69,495           --           69,700

Purchase and retirement of
   treasury stock                  (30,000)           (30)       (29,970)          --          (30,000)

Acquisition of common
   stock into treasury as
   payment for amounts
   due from related parties
   and retirement thereof         (382,673)          (382)      (568,995)      (195,969)      (765,346)

Dividends declared                    --             --             --         (241,051)      (241,051)

Net income for the year               --             --             --          140,127        140,127
                               -----------    -----------    -----------    -----------    -----------

Balances at
   December 31, 1998             5,731,778    $     5,732    $      --      $ 2,288,652    $ 2,294,384
                               ===========    ===========    ===========    ===========    ===========

</TABLE>



The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                                                             F-7

<PAGE>

<TABLE>

<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 1998 and 1997


                                                                        1998        1997    
                                                                      ---------    ---------
<S>                                                                   <C>          <C>

CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                         $ 140,127    $ 420,436
   Adjustments to reconcile net income to net cash
      provided by operating activities
         Depreciation and amortization                                  114,385      111,729
         Gain on sale of property and equipment                            --        (48,498)
         Common stock issued for consulting fees                         69,700         --
         Forgiveness of related party debt, principally
            accrued interest, in excess of agreed upon
            value of common stock taken for repayment                    40,337         --
         Interest income from shareholders capitalized as principal        --        (40,564)
         Deferred income taxes                                           26,120       65,866
         (Increase) decrease in
            Accounts receivable - trade                                  (6,671)        --
            Prepaid income taxes                                        (54,405)     (37,248)
            Inventory                                                    (2,307)      (4,928)
            Prepaid expenses                                             17,084      (35,826)
            Deposits and other assets                                      --         15,000
         Increase (decrease) in
            Accounts payable and other accrued liabilities               28,001      (16,422)
                                                                      ---------    ---------
Net cash provided by operating activities                               372,371      429,545
                                                                      ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
   Principal collections on note receivable                              23,799       19,184
   Proceeds from sale of property and equipment                            --        149,374
   Purchases of property and equipment                                  (73,641)      (1,731)
   Cash advances to shareholders and affiliates                            --           (544)
                                                                      ---------    ---------
Net cash used in investing activities                                   (49,842)      (3,962)
                                                                      ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
   Payments on long-term debt                                          (159,836)    (173,223)
   Proceeds from sale of common stock                                   530,000         --
   Purchase of treasury stock                                           (30,000)     (11,247)
   Dividends paid                                                      (237,828)    (529,262)
                                                                      ---------    ---------
Net cash provided by (used in) financing activities                     102,336     (713,732)
                                                                      ---------    ---------

INCREASE IN CASH AND CASH EQUIVALENTS                                   424,865     (117,904)

Cash and cash equivalents at beginning of year                          149,952      267,856
                                                                      ---------    ---------

Cash and cash equivalents at end of year                              $ 574,817    $ 149,952
                                                                      =========    =========


                                  - Continued -

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                                                             F-8

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                     Years ended December 31, 1998 and 1997


                                                                        1998        1997    
                                                                      ---------    --------
SUPPLEMENTAL DISCLOSURES OF
   INTEREST AND INCOME TAXES PAID

      Interest paid on borrowings                                     $  55,938    $ 62,342
                                                                       ========    ========

      Income taxes paid                                               $ 122,644    $210,590
                                                                       ========    ========


SUPPLEMENTAL SCHEDULE OF NON-CASH
   INVESTING AND FINANCING ACTIVITIES

      Declaration of fourth quarter dividend of $0.01
         and $0.01 per share, respectively                             $ 57,218    $ 54,095
                                                                       ========    ========

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                                                             F-9

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1998 and 1997



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 years  ended  December  31,  1998 and 1997,  respectively.  All  significant
intercompany transactions have been eliminated in combination.  The consolidated
entities are referred to as Company.

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 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.


                                                                            F-10

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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.


                                                                            F-11

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



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

   Earnings  per share is computed by  dividing  consolidated  net income by the
   composite  weighted-average  number of shares  of  common  stock  outstanding
   during the year. As of December 31, 1998 and 1997,  the Company has no issued
   and  outstanding  securities,  options  or  warrants  that  would  be  deemed
   potentially dilutive in the current and future periods.

8. Accounting Standards issued and pending adoption
   ------------------------------------------------

   In June 1997, the Financial  Accounting Standards Board released Statement of
   Financial  Accounting  Standards No. 130, "Reporting  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 years  beginning  after  December 15,
   1997.  The Company does not have any components of  comprehensive  income and
   experienced no impact from this change in  presentation  of its  consolidated
   financial statements upon adoption of this standard.

   In June 1997, the Financial  Accounting Standards Board released Statement of
   Financial  Accounting  Standards No. 131,  "Disclosures  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 "industry  segment" concept
   established  in  Statement  of  Financial  Accounting  Standard No. 14 with a
   "management  approach"  concept  as  the  basis  for  identifying  reportable
   segments.  SFAS131 was effective for financial statements for years beginning
   after December 31, 1997 and for interim periods  presented after December 31,
   1998.  The Company did not  experience a material  impact from this change in
   disclosure   presentation  in  its  consolidated  financial  statements  upon
   adoption of this standard.


                                                                            F-12

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



NOTE C - CONCENTRATIONS OF CREDIT RISK

The Company  maintains its cash accounts in a financial  institution  subject to
insurance coverage issued by the Federal Deposit Insurance  Corporation  (FDIC).
Under FDIC rules,  the Company and its  subsidiaries  are  entitled to aggregate
coverage of $100,000 per account type per  separate  legal entity per  financial
institution.  During the year ended  December 31, 1998,  the entity listed below
had credit risk  exposures  in excess of  statutory  FDIC  coverage as described
below.  No entity had any credit risk  exposures  during the year ended December
31, 1997.

                                           Highest     Low        Number of days
                                           exposure    exposure   with exposure
                                           --------    --------   --------------
Year ended December 31, 1998
        Million Dollar Saloon, Inc.        $430,523    $350,523   284

The  Company  has  incurred  no losses  during  1998 as a result of any of these
unsecured situations.


NOTE D - NOTE RECEIVABLE
                                                         1998         1997 
                                                       ---------    ---------   
$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                                 $104,247     $128,046

     Less current portion                                (24,480)     (22,604)
                                                        --------     --------

     Noncurrent portion                                 $ 79,767     $105,442
                                                        ========     ========

Future maturities of the note receivable are as follows:
                                                       Year ending
                                                      December 31,    Amount  
                                                      ------------    -------
                                                            1999      $24,480
                                                            2000       26,512
                                                            2001       28,712
                                                            2002       24,543

                                                           Total     $104,247
                                                                     ========




                                                                            F-13

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



NOTE E - PROPERTY AND EQUIPMENT

<TABLE>

<CAPTION>

Property and equipment consists of the following at December 31, 1998 and 1997:

                                               1998            1997         Estimated life
                                            ----------      ----------      --------------
<S>                                         <C>             <C>             <C>

        Buildings and related improvements  $1,987,515      $1,955,132      15 - 40 years
        Furniture and equipment                798,373         757,110           10 years
        Vehicle                                 52,728          52,728            3 years
                                            ----------      ----------
                                             2,838,616       2,764,970
        Less accumulated depreciation       (1,567,904)     (1,475,570)
                                            ----------      ----------
                                             1,270,715       1,289,400
        Land                                   741,488         741,488
                                            ----------      ----------
        Net property and equipment          $2,012,203      $2,030,888
                                             =========      ==========
</TABLE>

Depreciation  expense for the years ended December 31, 1998 and 1997 was $92,331
and $89,672, respectively.


NOTE F - ADVANCES TO/FROM OFFICERS, SHAREHOLDERS AND AFFILIATES

The Company has, in prior years,  made loans to various  affiliates  aggregating
approximately $805,680 as of December 31, 1997, including accrued interest.

In September  1995,  the balances due from these  affiliates  were  converted to
formal  notes  receivable  bearing  interest at 5.65%.  These  notes  matured in
September  1998 and were  called by the  Company in October  1998.  All  accrued
interest and principal  was payable at maturity.  The notes bore interest at the
statutory  interest rate set by the Internal  Revenue  Service for related party
loans.  Due to the nature of the  respective  receivables,  these  amounts  were
classified in the accompanying financial statements as non-current.

The  notes  were  repayable  in  either  cash or in stock of the  Company  at an
agreed-upon  exchange  rate  of  $2.00  per  share.  As of  December  31,  1997,
management  estimated that both shareholders had adequate  collateral to satisfy
repayment of the debt, including  anticipated accrued interest, at the scheduled
maturity  date. It was the intent of these  shareholders  to liquidate the notes
with cash repayments.

During 1998,  management  discontinued the accrual of interest on these advances
when it  became  apparent  that the  shareholders  were not  going to repay  the
obligations  in cash at the  maturity  date.  The  shareholders  were  unable to
liquidate  their  holdings at a  satisfactory  market price and  tendered  their
holdings  of an  aggregate  382,673  shares  of the  Company's  common  stock in
settlement  of the  outstanding  debts.  The  Company  experienced  a charge  to
operations  approximately  equivalent to the 1997 accrued  interest  income,  or
approximately $40,000, for the differential between the agreed upon value of the
shares  tendered  for  payment  and the  gross  carrying  value of the  debts at
retirement.



                                                                            F-14

<PAGE>

<TABLE>

<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



NOTE G - LONG-TERM DEBT

Long-term  debt  consists  of the  following  at  December  31,  1998 and  1997,
respectively:

                                                                      1998         1997
                                                                   ---------     --------
<S>                                                                  <C>         <C>

$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.                                          $310,504    $462,862

$52,707  installment  note  payable  to a finance
   company.  Payable  in monthly installments of
   approximately $1,111, including interest at
   9.50%.  Final payment due in April 2001.
   Collateralized by a vehicle                                         27,820      35,298
                                                                     ---------   --------

                                                                      338,324     498,160
      Less current portion                                           (181,905)   (163,288)
                                                                     --------    --------

      Long-term portion                                              $156,419    $334,872
                                                                     ========    ========

The  $750,000  note  payable  to a bank  may be  prepaid  at any  time  and  any
prepayment  must be  accompanied  by a "yield  maintenance  fee"  equal to 1% if
prepaid between September 1, 1998 and August 31, 1999.

Current  maturities  of  long-term  maturities  as of  December  31, 1998 are as
follows:

                                                                  Year ending
                                                                  December 31,    Amount  
                                                                  ------------   -------- 
                                                                     1998        $181,905
                                                                     1999         152,059
                                                                     2000           4,360
                                                                                 --------

                                                                     Total       $338,324


</TABLE>


                                                                            F-15

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



NOTE H - INCOME TAXES

The deferred  current tax asset and  non-current  deferred tax  liability on the
December  31,  1998  and  1997,  respectively,  balance  sheet  consists  of the
following:
                                                      December 31,  December 31,
                                                           1998        1997   
                                                         ---------    --------

           Non-current deferred tax liability            $(125,056)   $(98,936)
                                                           =======      ======

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

The components of income tax expense  (benefit) for the years ended December 31,
1998 and 1997, respectively, are as follows:
                                                         1998          1997    
                                                         -------      --------
                  Federal:                        
                    Current                              $68,239      $173,342
                    Deferred                              26,120        65,866
                                                         -------       -------
                                                          94,359       239,208
                                                         -------       -------
                  State:
                    Current                                    -             -
                    Deferred                                   -             -
                                                         -------       -------
                                                               -             -
                                                         -------       -------
                  Total                                  $94,359      $239,208
                                                          ======       =======

The Company's income tax expense (benefit) for the years ended December 31, 1998
and 1997,  respectively,  differed from the statutory federal rate of 34 percent
as follows:
                                                         1998          1997 
                                                         -------      -------- 

Statutory rate applied to earnings before income taxes   $79,725      $224,279
Increase (decrease) in income taxes resulting from:
     State income taxes                                        -             -
     Deferred income taxes                                26,120        65,866
     Effect of incremental tax brackets, application
         of business tax credits and utilization of
         net operating loss carryforwards                (11,486)      (50,937)
                                                          ------        ------

Income tax expense                                       $94,359      $239,208
                                                          ======       =======


                                                                            F-16

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



NOTE H - INCOME TAXES - Continued

Deferred  income tax  expense as of December  31,  1998 and 1997,  respectively,
consists of the following components:
                                                         1998          1997  
                                                         -------      -------  
     Changes in deferred tax assets
       Effect of utilization of net operating loss
         and business tax credit carryforwards           $     -      $61,500
     Changes in deferred tax liabilities
       Effect of differences in book and
         statutory tax depreciation methods               26,120        4,366
                                                          ------       ------

       Changes in deferred income tax accounts           $26,120      $65,866
                                                          ======       ======


NOTE I - CAPITAL STOCK TRANSACTIONS

On September 7, 1995, the shareholders of Furrh,  Inc,  Corporation Lex and Don,
Inc.  collectively  exchanged 100% of the issued and  outstanding  stock in each
corporation for an aggregate 3,925,000 shares of Million Dollar Saloon,  Inc., a
dormant Texas  corporation,  (MDS-TX) owned by the majority  shareholders of the
Company.  The purpose of this  transaction  was to consolidate  the ownership of
Furrh,  Inc. and  Subsidiary,  Corporation  Lex and Don,  Inc. into a single new
company to facilitate the merger with a publicly-held  "shell" corporation.  The
operating  entities of Furrh,  Inc.  and its  subsidiary,  Tempo  Tamers,  Inc.,
Corporation Lex and Don, Inc.  became  wholly-owned  subsidiaries of MDS-TX.  No
cash was paid as consideration for this corporate consolidation.

Also, on September 7, 1995, concurrent with the corporate consolidation,  MDS-TX
sold  under  a  Stock  Purchase  Agreement   approximately   124,900  shares  of
unregistered,   restricted   common  stock  at  $2.00  per  share  to  unrelated
third-party investors (Shareholders) raising $249,800. These stock sale proceeds
were used to retire debts assumed in the acquisition of treasury stock discussed
in the following paragraph.

This Stock Purchase Agreement was amended on October 31, 1995. The Amended Stock
Purchase  Agreement  provides that the Shareholders are limited to selling 1/6th
of their  holdings per month during each 30-day period after the effective  date
of a  Form  SB-2  Registration  Statement  being  filed  by  the  Company.  This
restriction  would  terminate  six (6) months  after the  effective  date of the
Registration Statement.

Further,   the  Amended   Stock   Purchase   Agreement   contains  the  language
"Shareholders  shall have the right to sell 1/6 of the Seller  Shares  that they
own during each  30-day  period  after the  effective  date of the  Registration
Statement in Form SB-2 for six (6) months.  If during any such 30-day period the
[Shareholder]  is  unable to  receive a market  price of $3.00 per share for the
Seller  Shares that they own,  then in such event the Company shall issue to the
[Shareholder] such number of additional shares (the "Additional  Shares") of the
Company's  Common Stock in order for the value of the Seller Shares owned by the
[Shareholder]  that they  attempted to sell during the 30-day period to be equal
to $3.00 per share.  If at any time  during any such  30-day  period the closing
market price of the Company's Common Stock equals or exceeds $3.00 per share for
five consecutive trading days and the [Shareholder] did not elect to sell any or
all of its shares subject to being sold during such period,  then in such event,
the obligation of the Company to issue  Additional  Shares shall terminate as to
those shares." The Amended Stock Purchase  Agreement  further  defines the venue
and methodology for determining the share price and it is the  understanding and
intent of the Company and the  Purchasers  that any  Additional  Shares shall be
issued  as  restricted   and   unregistered,   pursuant  to  Rule  144,  to  the
Shareholder(s).


                                                                            F-17

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



NOTE I - CAPITAL STOCK TRANSACTIONS - Continued

Per the Amended Stock  Purchase  Agreement,  each 30-day period stands alone and
the obligation to issue Additional Shares is not cumulative.  This obligation to
issue Additional  Shares shall expire six (6) months after the effective date of
the Form SB-2 Registration Statement.

During 1997,  the Company issued an additional  403,116 shares of  unregistered,
restricted common stock in final settlement of all obligations under the Amended
Stock Purchase  Agreement without additional  compensation to the Company.  This
transaction was accounted for as a reallocation  of the initial  proceeds of the
Stock Purchase Agreement.

In June 1997 and April 1998,  respectively,  the Company  purchased  and retired
approximately 3,949 and 30,000 shares of issued and outstanding common stock for
approximately  $11,247  and  $30,000.  The  retirement  was  accounted  for as a
reduction in the carrying  value of issued and  outstanding  common stock at its
respective par value, a reduction of additional  paid-in capital and a reduction
of  retained  earnings,  where  appropriate,  in  accordance  with the tenets of
Accounting Principles Board Opinion No. 6.

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  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 December 31, 1998,  the  individual  has not acquired any
additional shares of common stock under the terms of 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.

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  which was 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 "fair value" of the Company's  restricted stock
issued on the transaction date.


                                                                            F-18

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997



NOTE I - CAPITAL STOCK TRANSACTIONS - Continued

On October 31, 1998, the Company took an aggregate  382,673 shares of issued and
outstanding  common  stock from two  shareholders,  who were  former  employees,
affiliates and/or management,  at an agreed-upon value of approximately $765,000
in  satisfaction  of  notes  receivable  aggregating   approximately   $805,000,
including accrued interest through December 31, 1997. The Company  discontinued,
during the first quarter of 1998,  the accrual of interest due to  uncertainties
in the ultimate settlement of this situation at the scheduled maturity date. The
Company experienced a charge to operations  approximately equivalent to the 1997
accrued interest income, or approximately  $40,000, for the differential between
the agreed upon value of the shares  tendered for payment and the gross carrying
value of the debts at  retirement.  The  shares  obtained  by the  Company  were
returned to treasury stock status and were concurrently  retired by the Company.
This treasury stock  retirement was accounted for as a reduction in the carrying
value of issued and outstanding common stock at approximately $383, which equals
the par value of the  shares,  a  reduction  of  additional  paid-in  capital of
approximately  $569,995  and a reduction of retained  earnings of  $195,969,  in
accordance with the tenets of Accounting Principles Board Opinion No. 6.


NOTE J - COMMITMENTS

The Company leases  commercial real estate on long-term  operating  leases.  The
leases require  minimum weekly lease  payments,  plus  reimbursement  for annual
property taxes.  The respective  tenants are responsible for normal  maintenance
and  repairs,  insurance  and other  direct  operating  expenses  related to the
property. As of December 31, 1998, future minimum non-cancellable lease revenues
are as follows:

                                                  Year ending
                                                 December 31,         Amount   
                                                 ------------       ----------
                                                     1999           $  678,000
                                                     2000              689,000
                                                     2001              689,000
                                                     2002              546,500
                                                     2003              280,500
                                                                     ---------

                                                     Total          $2,883,000



                                                                            F-19

<PAGE>

<TABLE>

<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 1998 and 1997


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 common control comprise  approximately 15.0% and 12.6% of
total revenues for 1998 and 1997, respectively.

                                                Restaurant      Rental        General and
                                                 facility      real estate   administrative     Total 
                                                -----------    -----------   -------------- -----------    
<S>                                             <C>            <C>           <C>            <C>

Year ended December 31, 1998
   Revenue from external customers              $ 3,111,513    $   552,675    $      --     $ 3,664,188
   Revenue (expenses) from/to
     intercompany sources                          (240,000)      (360,000)       600,000          --
   Interest income                                     --            9,577         10,783        20,360
   Interest expense                                   5,863           --           50,075        55,938
   Depreciation and amortization                     34,505         21,469         58,411       114,385
   Income tax expense (benefit)                     (21,867)        34,428         81,798        94,359
   Segment assets                                   501,838      2,036,551        369,387     2,907,776
   Fixed asset expenditures                          51,627         22,014           --          73,641

Year ended December 31, 1997
   Revenue from external customers              $ 3,119,532    $   450,227    $        25   $ 3,569,784
   Revenue (expenses) from/to
     intercompany sources                          (440,000)      (244,500)       684,500          --
   Interest income                                   10,211         31,180         10,674        52,065
   Interest expense                                   2,205           --           60,137        62,342
   Depreciation and amortization                     32,145         21,047         58,537       111,729
   Income tax expense (benefit)                      10,590         57,415        171,203       239,208
   Segment assets                                   550,056      1,935,172        821,610     3,306,838
   Fixed asset expenditures                           1,731           --             --           1,731

</TABLE>

                                                                            F-20