AMENDED AND RESTATED

                                     BYLAWS

                                       OF

                           MILLION DOLLAR SALOON, INC.



















<PAGE>



                                TABLE OF CONTENTS


ARTICLE I-- OFFICES

         Section 1.  Registered Office........................................1
         Section 2.  Other Offices............................................1

ARTICLE II-- SHAREHOLDERS

         Section 1.   Place of Meetings.......................................1
         Section 2.  Annual Meeting...........................................1
         Section 3.  List of Shareholders.....................................1
         Section 4.  Special Meetings.........................................2
         Section 5.  Notice...................................................2
         Section 6.  Quorum...................................................2
         Section 7.  Voting...................................................2
         Section 8.  Method of Voting.........................................2
         Section 9.  Record Date..............................................3
         Section 10.  Action by Consent.......................................3
         Section 11.  Shareholder Proposals...................................3
         Section 12.  Nomination of Directors.................................4
         Section 13.  Exclusion of NRS 78.378 to 78.3793......................5

ARTICLE III-- BOARD OF DIRECTORS

         Section 1.  Management...............................................5
         Section 2.  Qualification; Election; Term............................5
         Section 3.  Number...................................................5
         Section 4.  Removal..................................................5
         Section 5.  Vacancies................................................6
         Section 6.  Place of Meetings........................................6
         Section 7.  Annual Meeting...........................................6
         Section 8.  Regular Meetings.........................................6
         Section 9.  Special Meetings.........................................6
         Section 10.  Quorum..................................................6
         Section 11.  Interested Directors....................................6
         Section 12.  Committees..............................................7
         Section 13.  Action by Consent.......................................7
         Section 14.  Compensation of Directors...............................7

ARTICLE IV-- NOTICE

         Section 1.  Form of Notice...........................................7
         Section 2.  Waiver...................................................7



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<PAGE>



ARTICLE V-- OFFICERS AND AGENTS

         Section 1.  In General...............................................8
         Section 2.  Election.................................................8
         Section 3.  Other Officers and Agents................................8
         Section 4.  Compensation.............................................8
         Section 5.  Term of Office and Removal...............................8
         Section 6.  Employment and Other Contracts...........................8
         Section 7.  Chairman of the Board of Directors.......................8
         Section 8.  Chief Executive Officer..................................8
         Section 9.  President................................................9
         Section 10.  Chief Financial Officer.................................9
         Section 11.  Secretary...............................................9
         Section 12.  Bonding.................................................9

ARTICLE VI-- CERTIFICATES REPRESENTING SHARES

         Section 1.  Form of Certificates.....................................9
         Section 2.  Lost Certificates.......................................10
         Section 3.  Transfer of Shares......................................10
         Section 4.  Registered Shareholders.................................10

ARTICLE VII-- GENERAL PROVISIONS

         Section 1.  Dividends...............................................10
         Section 2.  Reserves................................................11
         Section 3.  Telephone and Similar Meetings..........................11
         Section 4.  Books and Records.......................................11
         Section 5.  Fiscal Year.............................................11
         Section 6.  Seal....................................................11
         Section 7.  Advances of Expenses....................................11
         Section 8.  Indemnification.........................................12
         Section 9.  Insurance...............................................12
         Section 10.  Resignation............................................12
         Section 11.  Amendment of Bylaws....................................12
         Section 12.  Invalid Provisions.....................................12
         Section 13.  Relation to the Articles of Incorporation..............13



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<PAGE>



                              AMENDED AND RESTATED

                                     BYLAWS

                                       OF

                           MILLION DOLLAR SALOON, INC.


                                    ARTICLE I

                                     OFFICES

         Section 1.  Registered  Office.  The  registered  office and registered
agent of Million Dollar Saloon, Inc. (the "Corporation") will be as from time to
time set forth in the Corporation's Articles of Incorporation (as may be amended
from time to time) or in any  certificate  filed with the  Secretary of State of
the State of Nevada,  and the appropriate  county Recorder or Recorders,  as the
case may be, to amend such information.

         Section 2. Other Offices. The Corporation may also have offices at such
other  places  both  within  and  without  the  State of  Nevada as the Board of
Directors may from time to time determine or the business of the Corporation may
require.

                                   ARTICLE II

                                  SHAREHOLDERS

         Section 1. Place of Meetings.  All meetings of the shareholders for the
election of Directors will be held at such place, within or without the State of
Nevada, as may be fixed from time to time by the Board of Directors. Meetings of
shareholders for any other purpose may be held at such time and place, within or
without the State of Nevada, as may be stated in the notice of the meeting or in
a duly executed waiver of notice thereof.

         Section 2. Annual Meeting.  An annual meeting of the shareholders  will
be held at such time as may be determined  by the Board of  Directors,  at which
meeting the  shareholders  will elect a Board of  Directors,  and transact  such
other business as may properly be brought before the meeting.

         Section 3. List of Shareholders.  At least ten days before each meeting
of shareholders,  a complete list of the  shareholders  entitled to vote at said
meeting,  arranged in alphabetical  order, with the address of and the number of
voting shares registered in the name of each, will be prepared by the officer or
agent having charge of the stock transfer  books.  Such list will be open to the
examination of any shareholder,  for any purpose germane to the meeting,  during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place  within the city where the meeting is to be held,  which place
will be specified  in the notice of the  meeting,  or if not so specified at the
place where the meeting is to be held.  Such list will be produced and kept open
at the time and place of the meeting during the whole time thereof,  and will be
subject to the inspection of any shareholder who may be present.

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<PAGE>


         Section 4. Special Meetings. Special meetings of the shareholders,  for
any purpose or purposes,  unless  otherwise  prescribed  by law, the Articles of
Incorporation  or these Bylaws,  may be called by the Chairman of the Board, the
Chief Executive Officer, the President or the Board of Directors.

         Section 5. Notice. Written or printed notice stating the place, day and
hour of any meeting of the shareholders  and, in case of a special meeting,  the
purpose or purposes for which the meeting is called,  will be delivered not less
than ten nor more  than  sixty  days  before  the  date of the  meeting,  either
personally or by mail, by or at the direction of the Chairman of the Board,  the
Chief Executive Officer, the President,  the Secretary, or the officer or person
calling  the  meeting,  to each  shareholder  of record  entitled to vote at the
meeting. If mailed, such notice will be deemed to be delivered when deposited in
the United  States  mail,  addressed  to the  shareholder  at his  address as it
appears on the stock transfer  books of the  Corporation,  with postage  thereon
prepaid.

         Section 6. Quorum. At all meetings of the shareholders, the presence in
person  or by proxy of the  holders  of a  majority  of the  shares  issued  and
outstanding  and entitled to vote will be necessary and sufficient to constitute
a quorum for the  transaction of business  except as otherwise  provided by law,
the Certificate of  Incorporation or these Bylaws.  If, however,  such quorum is
not present or represented at any meeting of the shareholders,  the shareholders
entitled to vote thereat,  present in person or represented by proxy,  will have
power to  adjourn  the  meeting  from time to time,  without  notice  other than
announcement at the meeting,  until a quorum is present or  represented.  If the
adjournment  is for more than 30 days, or if after the  adjournment a new record
date is fixed for the adjourned  meeting, a notice of the adjourned meeting will
be given to each shareholder of record entitled to vote at the meeting.  At such
adjourned meeting at which a quorum is present or represented,  any business may
be  transacted  that might have been  transacted  at the  meeting as  originally
notified.

         Section  7.  Voting.  When a quorum is  present  at any  meeting of the
Corporation's shareholders,  the vote of the holders of a majority of the shares
entitled  to vote on,  and voted for or  against,  any  matter  will  decide any
questions brought before such meeting, unless the question is one upon which, by
express  provision of law,  the Articles of  Incorporation  or these  Bylaws,  a
different vote is required, in which case such express provision will govern and
control the decision of such question.  The shareholders present in person or by
proxy at a duly  organized  meeting  may  continue to  transact  business  until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.

         Section  8.   Method  of  Voting.   Each   outstanding   share  of  the
Corporation's  capital stock,  regardless of class, will be entitled to one vote
on each matter submitted to a vote at a meeting of  shareholders,  except to the
extent that the voting  rights of the shares of any class or classes are limited
or denied by the Articles of Incorporation, as amended from time to time. At any
meeting of the shareholders,  every shareholder having the right to vote will be
entitled to vote in person,  or by proxy  appointed by an  instrument in writing
subscribed  by such  shareholder  and  bearing a date not more than three  years
prior to such meeting, unless such instrument provides for a longer period. Each



                                      - 2 -

<PAGE>


proxy will be revocable unless expressly  provided therein to be irrevocable and
if, and only as long as, it is coupled  with an  interest  sufficient  in law to
support an  irrevocable  power.  A proxy may be made  irrevocable  regardless of
whether the interest with which it is coupled is an interest in the stock itself
or an interest in the Corporation  generally.  Such proxy will be filed with the
Secretary of the Corporation  prior to or at the time of the meeting.  Voting on
any question or in any election,  other than for directors, may be by voice vote
or show of  hands  unless  the  presiding  officer  orders,  or any  shareholder
demands, that voting be by written ballot.

         Section 9. Record  Date.  The Board of  Directors  may fix in advance a
record date for the purpose of determining shareholders entitled to notice of or
to vote at a meeting of  shareholders,  which  record  date will not precede the
date upon which the resolution fixing the record date is adopted by the Board of
Directors,  and which  record date will not be less than ten nor more than sixty
days  prior to such  meeting.  In the  absence  of any  action  by the  Board of
Directors, the close of business on the date next preceding the day on which the
notice is given will be the record date,  or, if notice is waived,  the close of
business on the day next  preceding the day on which the meeting is held will be
the record date.

         Section 10.  Action by Consent.  Except as set forth below,  any action
required or permitted by law, the Articles of  Incorporation  or these Bylaws to
be  taken at a  meeting  of the  shareholders  of the  Corporation  may be taken
without a meeting if a consent or consents in writing,  setting forth the action
so taken, is signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and voted
and will be delivered to the Corporation by delivery to its registered office in
Nevada,  its  principal  place  of  business  or an  officer  or  agent  of  the
Corporation having custody of the minute book.

         Section 11.  Shareholder  Proposals.  No proposal by a shareholder made
pursuant  to this  Article  II may be voted  upon at a meeting  of  shareholders
unless such  shareholder  shall have  delivered or mailed in a timely manner (as
set herein) and in writing to the  Secretary  of the  Corporation  (i) notice of
such proposal, (ii) the text of the proposed alteration, amendment or repeal, if
such  proposal  relates to a proposed  change to the  Corporation's  Articles of
Incorporation or Bylaws, (iii) evidence reasonably satisfactory to the Secretary
of the  Corporation  of such  shareholder's  status as such and of the number of
shares  of each  class  of  capital  stock  of the  Corporation  of  which  such
shareholder is the beneficial  owner,  (iv) a list of the names and addresses of
other beneficial  owners of shares of the capital stock of the  Corporation,  if
any, with whom such  shareholder is acting in concert,  and the number of shares
of each class of capital  stock of the  Corporation  beneficially  owned by each
such beneficial owner and (v) an opinion of counsel,  which counsel and the form
and substance of which opinion shall be reasonably  satisfactory to the Board of
Directors of the  Corporation,  to the effect that the Articles of Incorporation
or Bylaws  resulting from the adoption of such proposal would not be in conflict
with the laws of the State of  Nevada,  if such  proposal  relates to a proposed
change to the Corporation's Articles of Incorporation or Bylaws. To be timely in
connection with an annual meeting of  shareholders,  a shareholder's  notice and
other  aforesaid  items  shall be  delivered  to or mailed and  received  at the
principal  executive  offices of the  Corporation  not less than ninety nor more
than  180  days  prior  to  the  earlier  of the  date  of  the  meeting  or the
corresponding  date on which the immediately  preceding year's annual meeting of
shareholders  was held. To be timely in  connection  with the voting on any such
proposal at a special meeting of the  shareholders,  a shareholder's  notice and
other


                                      - 3 -

<PAGE>



aforesaid  items shall be delivered  to or mailed and received at the  principal
executive  offices  of the  Corporation  not less than  forty days nor more than
sixty days prior to the date of such  meeting;  provided,  however,  that in the
event that less than fifty days' notice or prior public  disclosure  of the date
of the special meeting of the shareholders is given or made to the shareholders,
such  shareholder's  notice and other  aforesaid  items to be timely  must be so
received not later than the close of business on the seventh day  following  the
day on which  such  notice of date of the  meeting  was  mailed  or such  public
disclosure  was made.  Within thirty days (or such shorter period that may exist
prior to the date of the meeting)  after such  shareholder  shall have submitted
the aforesaid items, the Secretary and the Board of Directors of the Corporation
shall  respectively  determine  whether  the items to be ruled  upon by them are
reasonably  satisfactory  and shall notify such  shareholder in writing of their
respective  determinations.  If such shareholder fails to submit a required item
in the form or within the time  indicated,  or if the  Secretary or the Board of
Directors of the Corporation  determines that the items to be ruled upon by them
are not reasonably satisfactory,  then such proposal by such shareholder may not
be  voted  upon  by the  shareholders  of the  Corporation  at such  meeting  of
shareholders. The presiding person at each meeting of shareholders shall, if the
facts warrant, determine and declare to the meeting that a proposal was not made
in accordance with the procedure prescribed by these Bylaws, and if he should so
determine,  he shall so declare to the meeting and the defective  proposal shall
be disregarded.  The requirements of this Section 11 shall be in addition to any
other  requirements  imposed by these Bylaws, by the  Corporation's  Articles of
Incorporation or the law.

         Section 12.  Nomination of Directors.  Nominations  for the election of
directors  may be  made by the  Board  of  Directors  or by any  shareholder  (a
"Nominator")  entitled to vote in the election of directors.  Such  nominations,
other  than  those  made by the  Board of  Directors,  shall be made in  writing
pursuant to timely  notice  delivered to or mailed and received by the Secretary
of the  Corporation  as set forth in this Section 10. To be timely in connection
with an annual meeting of shareholders,  a Nominator's notice, setting forth the
name and address of the person to be nominated,  shall be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
ninety  days nor more  than 180  days  prior to the  earlier  of the date of the
meeting or the  corresponding  date on which the  immediately  preceding  year's
annual  meeting of  shareholders  was held. To be timely in connection  with any
election of a director at a special meeting of the  shareholders,  a Nominator's
notice, setting forth the name and address of the person to be nominated,  shall
be delivered to or mailed and received at the principal executive offices of the
Corporation  not later than the close of business on the tenth day following the
day on which  such  notice of date of the  meeting  was  mailed  or such  public
disclosure was made,  whichever first occurs.  At such time, the Nominator shall
also submit written  evidence,  reasonably  satisfactory to the Secretary of the
Corporation,  that the Nominator is a shareholder of the  Corporation  and shall
identify in writing (i) the name and address of the  Nominator,  (ii) the number
of  shares  of each  class of  capital  stock of the  Corporation  of which  the
Nominator  is the  beneficial  owner,  (iii) the name and address of each of the
persons  with whom the  Nominator  is acting in  concert  and (iv) the number of
shares of capital  stock of which each such  person with whom the  Nominator  is
acting in concert is the  beneficial  owner  pursuant to which the nomination or
nominations  are to be made. At such time,  the  Nominator  shall also submit in
writing (i) the  information  with  respect to each such  proposed  nominee that
would be required to be provided  in a proxy  statement  prepared in  accordance
with Regulation 14A under the Securities  Exchange Act of 1934, as amended,  and
(ii) a notarized  affidavit executed by each such proposed nominee to the effect
that, if elected as a member of the Board of  Directors,  he will serve and that
he is eligible for election as a member of the Board of Directors. Within thirty
days (or such


                                      - 4 -

<PAGE>



shorter time period that may exist prior to the date of the  meeting)  after the
Nominator has submitted the aforesaid items to the Secretary of the Corporation,
the Secretary of the  Corporation  shall  determine  whether the evidence of the
Nominator's  status as a  shareholder  submitted by the  Nominator is reasonably
satisfactory and shall notify the Nominator in writing of his determination.  If
the  Secretary of the  Corporation  finds that such  evidence is not  reasonably
satisfactory,  or if the Nominator fails to submit the requisite  information in
the form or within the time indicated,  such nomination shall be ineffective for
the  election at the  meeting at which such person is proposed to be  nominated.
The  presiding  person  at each  meeting  of  shareholders  shall,  if the facts
warrant,  determine and declare to the meeting that a nomination was not made in
accordance with the procedures  prescribed by these bylaws,  and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.  The requirements of this Section 12 shall be in addition to any
other requirements  imposed by these bylaws, by the Articles of Incorporation or
by law.

          Section  13.  Exclusion  of NRS  78.378 to  78.3793.  The  Corporation
expressly  elects not to be governed by the provisions of NRS 78.378 to 78.3793,
inclusive of the Nevada General Corporation Law.

                                   ARTICLE III

                               BOARD OF DIRECTORS

         Section 1. Management. The business and affairs of the Corporation will
be managed by or under the  direction of its Board of Directors who may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law, by the  Articles of  Incorporation  or by these  Bylaws  directed or
required to be exercised or done by the shareholders.

         Section 2. Qualification; Election; Term. None of the Directors need be
a  shareholder  of the  Corporation  or a resident of the State of Nevada.  Each
Director shall hold office until  whichever of the following  occurs first:  his
successor is elected and qualified, his resignation,  his removal from office by
the  shareholders  or his death.  At each annual meeting of  shareholders of the
Corporation,  the successors to the directors  whose term expires at the meeting
shall be elected to hold  office for a term  expiring  at the annual  meeting of
shareholders  held in the following year of their  election.  Directors shall be
elected  by a  plurality  of the  votes  of the  shares  present  in  person  or
represented  by proxy and  entitled to vote on the  election of Directors at any
annual or special  meeting of  shareholders.  Such election  shall be by written
ballot.

         Section 3. Number.  The number of Directors of the Corporation  will be
at least one and not more than nine. The number of Directors  authorized will be
fixed as the Board of Directors may from time to time  designate,  or if no such
designation  has been  made,  the  number of  Directors  will be the same as the
number of members of the initial Board of Directors as set forth in the Articles
of Incorporation.

         Section 4. Removal. Any Director may be removed, only for cause, at any
special  meeting of  shareholders  by the  affirmative  vote of the holders of a
majority of all outstanding voting stock entitled to vote;  provided that notice
of the  intention  to act upon such matter has been given in the notice  calling
such meeting.


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<PAGE>



         Section 5. Vacancies.  Newly created  directorships  resulting from any
increase in the  authorized  number of Directors and any vacancies  occurring in
the   Board   of   Directors   caused   by   death,   resignation,   retirement,
disqualification  or removal from office of any Directors or  otherwise,  may be
filled by the vote of a majority of the  Directors  then in office,  though less
than a quorum,  or a successor or successors may be chosen at a special  meeting
of the  shareholders  called for that purpose,  and each  successor  Director so
chosen will hold office until the next election of Directors or until  whichever
of the following  occurs  first:  his  successor is elected and  qualified,  his
resignation, his removal from office by the shareholders or his death.

         Section  6.  Place of  Meetings.  Meetings  of the Board of  Directors,
regular or  special,  may be held at such place  within or without  the State of
Nevada as may be fixed from time to time by the Board of Directors.

         Section 7.  Annual  Meeting.  The first  meeting of each newly  elected
Board of Directors will be held without further notice immediately following the
annual  meeting  of  shareholders  and at the same  place,  unless by  unanimous
consent, the Directors then elected and serving change such time or place.

         Section 8. Regular Meetings. Regular meetings of the Board of Directors
may be held  without  notice  at such  time and  place  as is from  time to time
determined by resolution of the Board of Directors.

         Section 9. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board,  the Chief Executive  Officer or the
President on oral or written notice to each Director,  given either  personally,
by  telephone,  by telegram or by mail;  special  meetings will be called by the
Chairman of the Board, Chief Executive  Officer,  President or Secretary in like
manner and on like  notice on the written  request of at least three  Directors.
The purpose or purposes of any special  meeting  will be specified in the notice
relating thereto.

         Section  10.  Quorum.  At all  meetings of the Board of  Directors  the
presence of a majority of the number of Directors  fixed by these Bylaws will be
necessary and sufficient to constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority of the Directors  present at any
meeting at which  there is a quorum  will be the act of the Board of  Directors,
except  as may be  otherwise  specifically  provided  by law,  the  Articles  of
Incorporation or these Bylaws.  If a quorum is not present at any meeting of the
Board of Directors,  the Directors  present thereat may adjourn the meeting from
time to time without  notice  other than  announcement  at the meeting,  until a
quorum is present.

         Section 11. Interested  Directors.  No contract or transaction  between
the  Corporation  and one or more of its  Directors or officers,  or between the
Corporation  and  any  other  corporation,  partnership,  association  or  other
organization in which one or more of the Corporation's Directors or officers are
directors  or officers or have a  financial  interest,  will be void or voidable
solely for this reason,  solely because the Director or officer is present at or
participates in the meeting of the Board of Directors or committee  thereof that
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose,  if: (i) the material facts as to his  relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the


                                      - 6 -

<PAGE>



Board of  Directors  or  committee  in good faith  authorizes  the  contract  or
transaction  by  the  affirmative  vote  of  a  majority  of  the  disinterested
Directors,  even though the disinterested  Directors be less than a quorum, (ii)
the material facts as to his  relationship or interest and as to the contract or
transaction  are  disclosed  or are known to the  shareholders  entitled to vote
thereon, and the contract or transaction is specifically  approved in good faith
by vote of the  shareholders  or (iii) the contract or transaction is fair as to
the  Corporation  as of the time it is  authorized,  approved or ratified by the
Board  of  Directors,  a  committee  thereof  or  the  shareholders.  Common  or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee that authorizes the contract
or transaction.

         Section 12.  Committees.  The Board of  Directors  may,  by  resolution
passed by a majority of the entire Board,  designate committees,  each committee
to consist of two or more Directors of the  Corporation,  which  committees will
have such power and authority and will perform such functions as may be provided
in such resolution. Such committee or committees will have such name or names as
may  be  designated  by the  Board  and  will  keep  regular  minutes  of  their
proceedings and report the same to the Board of Directors when required.

         Section 13. Action by Consent.  Any action  required or permitted to be
taken at any meeting of the Board of Directors or any  committee of the Board of
Directors  may be taken  without  such a meeting  if a consent  or  consents  in
writing,  setting forth the action so taken, is signed by all the members of the
Board of Directors or such committee, as the case may be.

         Section 14.  Compensation  of  Directors.  Directors  will receive such
compensation  for their  services and  reimbursement  for their  expenses as the
Board of Directors, by resolution,  may establish;  provided that nothing herein
contained   will  be  construed  to  preclude  any  Director  from  serving  the
Corporation in any other capacity and receiving compensation therefor.

                                   ARTICLE IV

                                     NOTICE

         Section  1.  Form  of  Notice.   Whenever  by  law,   the  Articles  of
Incorporation  or of these  Bylaws,  notice  is to be given to any  Director  or
shareholder,  and no provision is made as to how such notice will be given, such
notice may be given in writing,  by mail,  postage  prepaid,  addressed  to such
Director  or  shareholder  at  such  address  as  appears  on the  books  of the
Corporation. Any notice required or permitted to be given by mail will be deemed
to be given at the time the same is deposited in the United States mails.

         Section 2.  Waiver.  Whenever any notice is required to be given to any
shareholder  or Director of the  Corporation as required by law, the Articles of
Incorporation  or these Bylaws, a waiver thereof in writing signed by the person
or persons  entitled to such notice,  whether before or after the time stated in
such notice,  will be equivalent  to the giving of such notice.  Attendance of a
shareholder or Director at a meeting will  constitute a waiver of notice of such
meeting,  except  where such  shareholder  or  Director  attends for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business  on the  ground  that the  meeting  has not  been  lawfully  called  or
convened.



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                                    ARTICLE V

                               OFFICERS AND AGENTS

         Section 1. In General.  The officers of the Corporation will consist of
a Chief Executive Officer,  President, Chief Financial Officer and Secretary and
such other  officers as shall be elected by the Board of  Directors or the Chief
Executive Officer. Any two or more offices may be held by the same person.

         Section 2. Election. The Board of Directors, at its first meeting after
each annual meeting of shareholders,  will elect the officers, none of whom need
be a member of the Board of Directors.

         Section 3. Other Officers and Agents.  The Board of Directors and Chief
Executive  Officer may also elect and appoint such other  officers and agents as
it or he deems  necessary,  who will be elected and appointed for such terms and
will exercise such powers and perform such duties as may be determined from time
to time by the Board or the Chief Executive Officer.

         Section 4. Compensation. The compensation of all officers and agents of
the Corporation  will be fixed by the Board of Directors or any committee of the
Board, if so authorized by the Board.

         Section 5. Term of Office and Removal.  Each officer of the Corporation
will hold office until his death, his resignation or removal from office, or the
election and qualification of his successor, whichever occurs first. Any officer
or agent  elected or appointed by the Board of Directors or the Chief  Executive
Officer may be removed at any time,  for or without  cause,  by the  affirmative
vote of a majority of the entire Board of Directors or at the  discretion of the
Chief  Executive  Officer  (without  regard  to how the  agent  or  officer  was
elected),  but such removal will not prejudice the contract  rights,  if any, of
the person so  removed.  If the  office of any  officer  becomes  vacant for any
reason, the vacancy may be filled by the Board of Directors or, in the case of a
vacancy  in the  office of  officer  other  than  Chief  Executive  Officer  and
President, such vacancy may be filled by the Chief Executive Officer.

         Section 6. Employment and Other  Contracts.  The Board of Directors may
authorize  any officer or officers or agent or agents to enter into any contract
or  execute  and  deliver  any  instrument  in  the  name  or on  behalf  of the
Corporation,  and  such  authority  may  be  general  or  confined  to  specific
instances.  The Board of  Directors  may,  when it believes  the interest of the
Corporation  will  best  be  served  thereby,   authorize  executive  employment
contracts  that will have terms no longer than ten years and contain  such other
terms and conditions as the Board of Directors deems appropriate. Nothing herein
will limit the  authority  of the Board of  Directors  to  authorize  employment
contracts for shorter terms.

         Section  7.  Chairman  of the  Board  of  Directors.  If the  Board  of
Directors  has elected a Chairman of the Board,  he will preside at all meetings
of the shareholders and the Board of Directors.

         Section 8.  Chief Executive Officer.  The Chief Executive Officer  will
be the chief executive officer of the Corporation and, subject to the control of
the Board of  Directors,  will  supervise  and control all of the  business  and
affairs of the Corporation. The Chief Executive Officer shall have the authority


                                      - 8 -

<PAGE>



to elect any officer of the Corporation  other than the Chief Executive  Officer
or President.  He will, in the absence of the Chairman of the Board,  preside at
all meetings of the shareholders and the Board of Directors. The Chief Executive
Officer  will have all powers and perform  all duties  incident to the office of
Chief  Executive  Officer and will have such other powers and perform such other
duties as the Board of  Directors  may from time to time  prescribe.  During the
absence  or  disability  of the  President,  the Chief  Executive  Officer  will
exercise the powers and perform the duties of President.

         Section  9.  President.  The  President  will have  responsibility  for
oversight of the  Corporation's  operating and  development  activities.  In the
absence or  disability  of the Chief  Executive  Officer and the Chairman of the
Board,  the  President  will  exercise  the powers and perform the duties of the
Chief  Executive  Officer.  The President will render to the Directors  whenever
they may require it an account of the  operating and  development  activities of
the Corporation and will have such other powers and perform such other duties as
the Board of Directors may from time to time prescribe or as the Chief Executive
Officer may from time to time delegate to him.

         Section 10. Chief Financial  Officer.  The Chief Financial Officer will
have principal  responsibility for the financial  operations of the Corporation.
The Chief  Financial  Officer  will render to the  Directors  whenever  they may
require it an account of the operating  results and  financial  condition of the
Corporation and will have such other powers and perform such other duties as the
Board of Directors  may from time to time  prescribe  or as the Chief  Executive
Officer may from time to time delegate to him.

         Section 11.  Secretary.  The Secretary  will attend all meetings of the
shareholders  and record all votes and the minutes of all  proceedings in a book
to be kept for that  purpose.  The  Secretary  will  perform like duties for the
Board of Directors and  committees  thereof when  required.  The Secretary  will
give,  or cause to be given,  notice of all  meetings  of the  shareholders  and
special  meetings of the Board of  Directors.  The  Secretary  will keep in safe
custody the seal of the Corporation. The Secretary will be under the supervision
of the Chief  Executive  Officer.  The Secretary will have such other powers and
perform  such  other  duties  as the  Board of  Directors  may from time to time
prescribe or as the Chief  Executive  Officer may from time to time  delegate to
him.

         Section 12.  Bonding.  The Corporation may secure a bond to protect the
Corporation from loss in the event of defalcation by any of the officers,  which
bond may be in such  form  and  amount  and with  such  surety  as the  Board of
Directors may deem appropriate.

                                   ARTICLE VI

                        CERTIFICATES REPRESENTING SHARES

         Section 1. Form of Certificates.  Certificates,  in such form as may be
determined by the Board of Directors,  representing shares to which shareholders
are entitled will be delivered to each  shareholder.  Such  certificates will be
consecutively  numbered and will be entered in the stock book of the Corporation
as they are issued. Each certificate will state on the face thereof the holder's
name,  the  number,  class of  shares,  and the par  value of such  shares  or a
statement  that such shares are  without  par value.  They will be signed by the
Chief Executive Officer or President and the Secretary or an


                                      - 9 -

<PAGE>



Assistant  Secretary,  and may be sealed with the seal of the  Corporation  or a
facsimile  thereof.  If any certificate is countersigned by a transfer agent, or
an assistant  transfer  agent or registered  by a registrar,  either of which is
other than the Corporation or an employee of the Corporation,  the signatures of
the  Corporation's  officers may be facsimiles.  In case any officer or officers
who have signed,  or whose  facsimile  signature or signatures have been used on
such certificate or  certificates,  ceases to be such officer or officers of the
Corporation,  whether  because of death,  resignation or otherwise,  before such
certificate  or  certificates  have been  delivered  by the  Corporation  or its
agents,  such  certificate or  certificates  may  nevertheless be adopted by the
Corporation  and be issued and  delivered  as though  the person or persons  who
signed  such  certificate  or  certificates  or  whose  facsimile  signature  or
signatures  have been used thereon had not ceased to be such officer or officers
of the Corporation.

         Section 2. Lost Certificates.  The Board of Directors may direct that a
new certificate be issued in place of any certificate  theretofore issued by the
Corporation  alleged  to have  been  lost or  destroyed,  upon the  making of an
affidavit  of that fact by the person  claiming  the  certificate  to be lost or
destroyed.  When  authorizing  such  issue of a new  certificate,  the  Board of
Directors,  in its  discretion  and as a  condition  precedent  to the  issuance
thereof,  may require the owner of such lost or  destroyed  certificate,  or his
legal  representative,  to  advertise  the same in such manner as it may require
and/or to give the  Corporation a bond, in such form, in such sum, and with such
surety or sureties as it may direct as  indemnity  against any claim that may be
made against the  Corporation  with respect to the  certificate  alleged to have
been lost or destroyed.  When a certificate has been lost,  apparently destroyed
or wrongfully  taken,  and the holder of record fails to notify the  Corporation
within a reasonable time after such holder has notice of it, and the Corporation
registers  a  transfer  of the  shares  represented  by the  certificate  before
receiving such  notification,  the holder of record is precluded from making any
claim against the Corporation for the transfer of a new certificate.

         Section 3.  Transfer  of Shares.  Shares of stock will be  transferable
only on the books of the  Corporation by the holder thereof in person or by such
holder's duly  authorized  attorney.  Upon  surrender to the  Corporation or the
transfer  agent of the  Corporation  of a certificate  representing  shares duly
endorsed  or  accompanied  by  proper  evidence  of  succession,  assignment  or
authority to transfer,  it will be the duty of the  Corporation  or the transfer
agent of the  Corporation  to issue a new  certificate  to the  person  entitled
thereto, cancel the old certificate and record the transaction upon its books.

         Section 4. Registered Shareholders. The Corporation will be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly,  will not be bound to recognize any equitable or other
claim to or  interest  in such share or shares on the part of any other  person,
whether  or not it has  express or other  notice  thereof,  except as  otherwise
provided by law.

                                   ARTICLE VII

                               GENERAL PROVISIONS

         Section 1.  Dividends.  Dividends  upon the  outstanding  shares of the
Corporation, subject to the provisions of the Articles of Incorporation, if any,
may be declared  by the Board of  Directors  at any regular or special  meeting.
Dividends  may be declared and paid in cash,  in  property,  or in shares of the
Corporation,  subject to the  provisions of the General  Corporation  Law of the
State of Nevada and the Articles of  Incorporation.  The Board of Directors  may



                                     - 10 -

<PAGE>


fix in  advance  a  record  date for the  purpose  of  determining  shareholders
entitled to receive  payment of any dividend,  such record date will not precede
the date upon which the resolution  fixing the record date is adopted,  and such
record date will not be more than sixty days prior to the  payment  date of such
dividend.  In the absence of any action by the Board of Directors,  the close of
business  on the date upon which the Board of  Directors  adopts the  resolution
declaring such dividend will be the record date.

         Section 2. Reserves. There may be created by resolution of the Board of
Directors out of the surplus of the Corporation  such reserve or reserves as the
Directors  from time to time,  in their  discretion,  deem proper to provide for
contingencies,  or to equalize dividends,  or to repair or maintain any property
of the  Corporation,  or for  such  other  purpose  as the  Directors  may  deem
beneficial to the Corporation,  and the Directors may modify or abolish any such
reserve in the manner in which it was created. Surplus of the Corporation to the
extent so reserved  will not be available  for the payment of dividends or other
distributions by the Corporation.

         Section 3. Telephone and Similar Meetings. Shareholders,  directors and
committee  members may  participate  in and hold meetings by means of conference
telephone or similar communications equipment by which all persons participating
in the  meeting  can hear  each  other.  Participation  in such a  meeting  will
constitute presence in person at the meeting, except where a person participates
in the meeting for the express  purpose of  objecting,  at the  beginning of the
meeting,  to the  transaction of any business on the ground that the meeting has
not been lawfully called or convened.

         Section 4. Books and  Records.  The  Corporation  will keep correct and
complete  books and  records of account and  minutes of the  proceedings  of its
shareholders and Board of Directors,  and will keep at its registered  office or
principal  place  of  business,  or at the  office  of  its  transfer  agent  or
registrar,  a record of its shareholders,  giving the names and addresses of all
shareholders and the number and class of the shares held by each.

         Section 5.  Fiscal  Year.  The fiscal year of the  Corporation  will be
December 31 unless otherwise fixed by resolution of the Board of Directors.

         Section 6. Seal. The  Corporation  may have a seal, and the seal may be
used by  causing  it or a  facsimile  thereof  to be  impressed  or  affixed  or
reproduced or otherwise.  Any officer of the Corporation  will have authority to
affix the seal to any document requiring it.

         Section 7. Advances of Expenses.  The  Corporation  will advance to its
directors  and  officers  expenses  incurred  by them  in  connection  with  any
"Proceeding,"  which term includes any threatened,  pending or completed action,
suit or  proceeding,  whether  brought by or in the right of the  Corporation or
otherwise  and whether of a civil,  criminal,  administrative  or  investigative
nature (including all appeals therefrom),  in which a director or officer may be
or may have been involved as a party or otherwise, by reason of the fact that he
is or was a  director  or officer  of the  Corporation,  by reason of any action
taken by him or of any inaction on his part while  acting as such,  or by reason
of the fact that he is or was  serving at the  request of the  Corporation  as a
director,   officer,   trustee,   employee  or  agent  of  another  corporation,
partnership,  joint venture,  trust,  employee  benefit plan or other enterprise
("Official,"  which term also includes directors and officers of the Corporation
in their  capacities as directors and officers of the  Corporation),  whether or



                                     - 11 -

<PAGE>


not he is  serving  in such  capacity  at the time any  liability  or expense is
incurred;  provided that the Official  undertakes to repay all amounts  advanced
unless:

                  (i) in the case of all Proceedings  other than a Proceeding by
         or in the right of the  Corporation,  the Official  establishes  to the
         satisfaction  of the  disinterested  members of the Board of  Directors
         that he acted in good faith or in a manner he reasonably believed to be
         in or not opposed to the best  interests of the  Corporation  and, with
         respect to any  criminal  proceeding,  that he did not have  reasonable
         cause  to  believe  his  conduct  was   unlawful;   provided  that  the
         termination  of any  such  Proceeding  by  judgment,  order  of  court,
         settlement,  conviction,  or  upon a plea  of  nolo  contendere  or its
         equivalent,  shall not by itself create a presumption as to whether the
         Official  acted in good faith or in a manner he reasonably  believed to
         be in or not opposed to the best interests of the Corporation and, with
         respect to any  criminal  proceeding,  as to whether he had  reasonable
         cause to believe his conduct was unlawful; or

                  (ii) in the  case of a  Proceeding  by or in the  right of the
         Corporation,  the  Official  establishes  to  the  satisfaction  of the
         disinterested  members of the Board of Directors  that he acted in good
         faith or in a manner he reasonably  believed to be in or not opposed to
         the  best  interests  of the  Corporation;  provided  that if in such a
         Proceeding  the  Official is adjudged to be liable to the  Corporation,
         all amounts advanced to the Official for expenses must be repaid except
         to the extent that the court in which such  adjudication was made shall
         determine upon application that despite such  adjudication,  in view of
         all the circumstances,  the Official is fairly and reasonably  entitled
         to indemnity for such expenses as the court may deem proper.

         Section  8.   Indemnification.   The  Corporation  will  indemnify  its
directors  and  officers  to  the  fullest  extent   permitted  by  the  General
Corporation Law of the State of Nevada and may, if and to the extent  authorized
by the Board of Directors, so indemnify such other persons whom it has the power
to  indemnify  against  any  liability,   reasonable  expense  or  other  matter
whatsoever.

         Section 9.  Insurance.  The  Corporation  may at the  discretion of the
Board of Directors  purchase and maintain insurance on behalf of the Corporation
and any person whom it has the power to indemnify  pursuant to law, the Articles
of Incorporation, these Bylaws or otherwise.

         Section 10. Resignation.  Any director,  officer or agent may resign by
giving written notice to the President or the Secretary.  Such  resignation will
take effect at the time specified therein or immediately if no time is specified
therein.  Unless otherwise specified therein, the acceptance of such resignation
will not be necessary to make it effective.

         Section 11. Amendment of Bylaws.  Other than as set forth herein, these
Bylaws may be  altered,  amended,  or  repealed  at any  meeting of the Board of
Directors at which a quorum is present, by the affirmative vote of a majority of
the Directors present at such meeting.

         Section 12.  Invalid  Provisions.  If any part of these  Bylaws is held
invalid or inoperative for any reason,  the remaining  parts, so far as possible
and reasonable, will be valid and operative.


                                     - 12 -

<PAGE>


         Section 13. Relation to the Articles of Incorporation. These Bylaws are
subject to, and governed by, the Articles of Incorporation of the Corporation as
amended from time to time.


                                          Adopted by the Board of Directors and
                                          Effective June 4, 1999



                                          --------------------------------------
                                          Secretary



Article III,  Section 4, Removal,  was amended in its  entirety,  the 9th day of
July,  1999 by the Board of  Directors.  Article III,  Section 4, as amended has
been restated herein.



Nina J. Furrh, President


                                     - 13 -

<PAGE>


                           MILLION DOLLAR SALOON, INC.
                                AND SUBSIDIARIES

                              Financial Statements
                                       and

                                Auditor's Report

                           December 31, 1999 and 1998









                              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-2

Consolidated Financial Statements

   Consolidated Balance Sheets

      as of December 31, 1999 and 1998                                    F-3

   Consolidated Statements of Income and Comprehensive Income

      for the years ended December 31, 1999 and 1998                      F-5

   Consolidated Statements of Changes in Shareholders' Equity

      for the years ended December 31, 1999 and 1998                      F-6

   Consolidated Statements of Cash Flows

      for the years ended December 31, 1999 and 1998                      F-7

   Notes to Consolidated Financial Statements                             F-9





                                                                             F-1


<PAGE>


S. W. HATFIELD, CPA
certified public accountants

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

           Texas Society of Certified Public Accountants

               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, 1999 and 1998, and the related consolidated statements of income
and comprehensive  income,  changes in shareholders'  equity, and cash flows for
each  of the  years  then  ended,  respectively.  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, 1999 and 1998 and the
results  of its  operations  and its  cash  flows  for  the  years  then  ended,
respectively, in conformity with generally accepted accounting principles.

                                                         S. W. HATFIELD, CPA
Dallas, Texas
January 13, 2000

                      Use our past to assist your future sm

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

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998


                                     ASSETS

                                                        1999            1998
                                                    -----------     -----------
Current Assets

   Cash on hand and in bank                          $   610,233    $   574,817
   Note receivable - current portion                      29,912         24,480
   Accounts receivable - trade and other                   9,748          6,671
   Prepaid Federal income taxes receivable                20,339         91,653
   Inventory                                              31,662         18,404
   Prepaid expenses                                         --           56,460
                                                     -----------    -----------

      Total current assets                               701,894        772,485
                                                     -----------    -----------


Property and Equipment - At Cost

   Buildings and related improvements                  1,987,515      1,987,515
   Furniture and equipment                               838,160        798,371
   Vehicles                                                 --           52,728
                                                     -----------    -----------
                                                       2,825,675      2,838,614
   Less accumulated depreciation                      (1,627,129)    (1,567,899)
                                                     -----------    -----------
                                                       1,198,546      1,270,715
   Land                                                  741,488        741,488
                                                     -----------    -----------

      Net property and equipment                       1,940,034      2,012,203
                                                     -----------    -----------


Other Assets

   Note receivable - noncurrent portion                    5,267         79,767
   Organization costs, net of accumulated
      amortization of $64.630 and $49,644,
      respectively                                        10,299         25,284
   Loan costs, net of accumulated amortization
      of $26,866 and $20,545, respectively                 4,741         11,062
   Other                                                   6,225          6,975
                                                     -----------    -----------

      Total other assets                                  26,532        123,088
                                                     -----------    -----------


Total Assets                                         $ 2,668,460    $ 2,907,776
                                                     ===========    ===========


                                  - Continued -

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

                                                                             F-3


<PAGE>

<TABLE>
<CAPTION>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS - CONTINUED

                           December 31, 1999 and 1998


                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                              1999         1998
                                                           ----------   ----------
<S>                                                        <C>          <C>

Current Liabilities
   Current portion of long-term debt                       $  139,657   $  181,905
   Accounts payable - trade                                    10,351       22,443
   Accrued liabilities                                         67,425       63,751
   Dividends payable                                           57,318       57,318
   Tenant deposits                                              6,500        6,500
                                                           ----------   ----------

      Total current liabilities                               281,251      331,917
                                                           ----------   ----------


Long-Term Liabilities
   Long-term debt, net of current maturities                     --        156,419
   Deferred tax liability                                     139,248      125,056
                                                           ----------   ----------

      Total liabilities                                       420,499      613,392
                                                           ----------   ----------


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 5,731,778 issued and
      outstanding, respectively                                 5,732        5,732
   Additional paid-in capital                                    --           --
   Retained earnings                                        2,442,229    2,288,652
                                                           ----------   ----------

      Total shareholders' equity                            2,247,961    2,294,384
                                                           ----------   ----------


Total Liabilities and Shareholders' Equity                 $2,668,460   $2,907,776
                                                           ==========   ==========

</TABLE>


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

                                                                             F-4


<PAGE>

<TABLE>
<CAPTION>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                     Years ended December 31, 1999 and 1998


                                                           1999            1998
                                                        -----------    -----------
<S>                                                     <C>            <C>

Revenues
   Bar and restaurant sales                             $ 2,947,585    $ 3,111,513
   Rental income                                            697,986        552,675
                                                        -----------    -----------
      Total revenues                                      3,645,571      3,664,188
                                                        -----------    -----------

Cost of Sales - Bar and Restaurant Operations
   Direct labor                                           1,244,177      1,277,734
   Purchases                                                542,469        528,338
                                                        -----------    -----------
      Total cost of sales                                 1,786,646      1,806,072
                                                        -----------    -----------

Gross Profit                                              1,858,925      1,858,116
                                                        -----------    -----------

Operating Expenses
   Salaries, wages and related expenses                     499,753        384,878
   Consulting, management and other professional fees       218,652        311,691
   Rental expenses, principally taxes                        65,325         60,354
   Interest expense                                          23,993         55,938
   Other operating expenses                                 685,650        676,407
   Depreciation and amortization                            113,802        114,385
                                                        -----------    -----------
         Total operating expenses                         1,607,175      1,603,653
                                                        -----------    -----------

Income from Operations                                      251,750        254,463

Other Income (Expenses)
   Gain on sale of property and equipment                      (654)          --
   Forgiveness of related party debt, principally
      accrued interest, in excess of agreed upon
      value of common stock taken for repayment                --          (40,337)
   Interest income                                           21,525         20,360
                                                        -----------    -----------

Income before Income Taxes                                  272,621        234,486

Provision for Income Taxes
   Currently payable                                        (74,840)       (68,239)
   Deferred                                                 (14,191)       (26,120)
                                                        -----------    -----------

Net Income                                                  183,590        140,127

Other Comprehensive Income                                     --             --
                                                        -----------    -----------

Comprehensive Income                                    $   183,590    $   140,127
                                                        ===========    ===========

Earnings per share of common stock
   outstanding, computed on net income -
   basic and fully diluted                                    $0.03          $0.02
                                                              =====          =====

Weighted-average number of shares outstanding             5,731,778      5,901,401
                                                        ===========    ===========

</TABLE>


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

                                                                             F-5


<PAGE>

<TABLE>
<CAPTION>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                     Years ended December 31, 1999 and 1998



                                     Common Stock              Additional                    Total
                                -------------------------      paid-in      Retained       shareholders'
                                 # shares        Amount        capital      earnings       equity
                                -----------   -----------    -----------    -----------    -----------
<S>                             <C>          <C>            <C>            <C>             <C>
Balances at
   January 1, 1998              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

Dividends declared                   --             --             --         (230,013)      (230,013)

Net income for the year              --             --             --          183,590        183,590
                              -----------    -----------    -----------    -----------    -----------

Balances at
   December 31, 1999            5,731,778    $     5,732    $      --      $ 2,242,229    $ 2,247,961
                              ===========    ===========    ===========    ===========    ===========

</TABLE>



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 CASH FLOWS

                     Years ended December 31, 1999 and 1998


                                                               1999         1998
                                                             ---------    ---------
<S>                                                          <C>          <C>

CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                $ 183,590    $ 140,127
   Adjustments to reconcile net income to net cash
      provided by operating activities
         Depreciation and amortization                         113,802      114,385
         Gain on sale of property and equipment                    654         --
         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
         Deferred income taxes                                  14,192       26,120
         (Increase) decrease in
            Accounts receivable - trade                         (3,077)      (6,671)
            Prepaid income taxes                                71,314      (54,405)
            Inventory                                          (13,258)      (2,307)
            Prepaid expenses                                    56,460       17,084
         Increase (decrease) in

            Accounts payable and other accrued liabilities      (8,416)      28,001
                                                             ---------    ---------
Net cash provided by operating activities                      415,261      372,371
                                                             ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES

   Principal collections on note receivable                     69,068       23,799
   Proceeds from sale of property and equipment                 19,558         --
   Purchases of property and equipment                         (39,789)     (73,641)
   Cash advances to shareholders and affiliates                   --           --
                                                             ---------    ---------
Net cash used in investing activities                           48,837      (49,842)
                                                             ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
   Payments on long-term debt                                 (198,667)    (159,836)
   Proceeds from sale of common stock                             --        530,000
   Purchase of treasury stock                                     --        (30,000)
   Dividends paid                                             (230,015)    (237,828)
                                                             ---------    ---------
Net cash provided by (used in) financing activities           (428,682)     102,336
                                                             ---------    ---------

INCREASE IN CASH AND CASH EQUIVALENTS                           35,416      424,865

Cash and cash equivalents at beginning of year                 574,817      149,952
                                                             ---------    ---------

Cash and cash equivalents at end of year                     $ 610,233    $ 574,817
                                                             =========    =========
</TABLE>


                                  - Continued -

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

                                                                             F-7


<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                     Years ended December 31, 1999 and 1998


                                                         1999       1998
                                                        --------   --------
SUPPLEMENTAL DISCLOSURES OF
   INTEREST AND INCOME TAXES PAID

      Interest paid on borrowings                       $ 23,993   $ 55,938
                                                        ========   ========

      Income taxes paid                                 $  3,526   $122,644
                                                        ========   ========


SUPPLEMENTAL SCHEDULE OF NON-CASH
   INVESTING AND FINANCING ACTIVITIES

      Declaration of fourth quarter dividend of $0.01
         and $0.01 per share, respectively              $ 57,318   $ 57,318
                                                        ========   ========



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

                                                                             F-8


<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1999 and 1998



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,  1999 and 1998,  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-9


<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



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-10


<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



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, 1999 and 1998,  the Company has no issued
   and  outstanding  securities,  options  or  warrants  that  would  be  deemed
   potentially dilutive in the current and future periods.

NOTE C - CONCENTRATIONS OF CREDIT RISK

The Company  maintains its cash accounts in a financial  institution  subject to
insurance coverage issued by the Federal Deposit Insurance  Corporation  (FDIC).
Under FDIC 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 years ended  December 31, 1999 and 1998,  respectively,
the entity  listed below had credit risk  exposures in excess of statutory  FDIC
coverage as described  below.  No other  entities had any credit risk  exposures
during the years ended December 31, 1999 or 1998.

<TABLE>
<CAPTION>

                                                  Highest          Low             Number of
                                                 exposure        exposure       days with exposure
                                                 --------        --------       ------------------
<S>                                              <C>             <C>                <C>

Year ended December 31, 1999
----------------------------
              Million Dollar Saloon, Inc.        $364,077         $18,760           365

Year ended December 31, 1998
----------------------------
              Million Dollar Saloon, Inc.        $430,537         $350,523          284
</TABLE>

The  Company has  incurred  no losses  during 1999 or 1998 as a result of any of
these unsecured situations.

NOTE D - NOTE RECEIVABLE

                                                            1999         1998
                                                          --------     --------
$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



                                                                            F-11


<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



NOTE D - NOTE RECEIVABLE - Continued
                                                            1999        1998
$35,179 note receivable from an unrelated                ---------    ---------
   individual for the sale of real estate.  Interest
   at 9.50%.  Payable in monthly installments
   of approximately $2,665, including interest.
   Final payment due in February 2001.
   Collateralized by real estate and improvements
   located in Dallas County, Texas                       $  35,179    $    --
                                                         ---------    ---------

                                                            35,179      104,247

  Less current portion                                     (29,912)     (24,480)
                                                         ---------    ---------

  Noncurrent portion                                     $   5,267    $  79,767
                                                         =========    =========

Future maturities of the note receivable are as follows:

                                                          Year ending
                                                         December 31,    Amount
                                                         ------------   --------
                                                             2000        $29,912
                                                             2001          5,267
                                                                          ------

                                                             Total       $35,179
                                                                          ======


NOTE E - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 1999 and 1998:

                                        1999           1998       Estimated life
                                     -----------    -----------   --------------
Buildings and related improvements   $ 1,987,515    $ 1,987,515     15-40 years
Furniture and equipment                  838,160        798,371      5-10 years
Vehicles                                    --           52,728       3 years
                                     -----------    -----------
                                       2,825,675      2,838,614
Less accumulated depreciation         (1,627,129)    (1,567,899)
                                     -----------    -----------
                                       1,198,546      1,270,715
Land                                     741,488        741,488
                                     -----------    -----------

Net property and equipment           $ 1,940,034    $ 2,012,203
                                     ===========    ===========

Depreciation  expense for the years ended December 31, 1999 and 1998 was $91,746
and $92,331, respectively.

                                                                            F-12


<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



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

The  Company,  in prior  years,  made  loans to various  affiliates  aggregating
approximately $805,680 through 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 financial statements as non-current.

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.

NOTE G - LONG-TERM DEBT

Long-term  debt  consists  of the  following  at  December  31,  1999 and  1998,
respectively:

                                                            1999        1998
                                                           -------     -------
$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.                               $139,657    $310,504

$52,707 installment note payable to a finance
   company.  Payable  in monthlyinstallments of
   approximately $1,111, including interest at
   9.50%. Paid in full in July 1999.
   Collateralized by a vehicle                                --        27,820
                                                           -------     -------

                                                           139,657     338,324
      Less current portion                                (139,657)   (181,905)
                                                           -------     -------

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


                                                                            F-13


<PAGE>

<TABLE>
<CAPTION>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



NOTE G - LONG-TERM DEBT - Continued

Current  maturities  of  long-term  maturities  as of  December  31, 1999 are as
follows:
<S>                                                                          <C>              <C>

                                                                             Year ending
                                                                             December 31,      Amount
                                                                             ------------     --------
                                                                                2000          $139,657
                                                                                               -------

                                                                                Total         $139,657
                                                                                               =======


NOTE H - INCOME TAXES

The deferred  current tax asset and  non-current  deferred tax  liability on the
December  31,  1999  and  1998,  respectively,  balance  sheet  consists  of the
following:

                                                                             December 31,     December 31,
                                                                                1999             1998
                                                                             ------------     ------------

                  Non-current deferred tax liability                            $(139,248)    $(125,056)
                                                                                  =======       =======

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,
1999 and 1998, respectively, are as follows:

                                                                                1999          1998
                                                                              ---------      ---------
                  Federal:
                    Current                                                     $74,840       $68,239
                    Deferred                                                     14,191        26,120
                                                                               --------       -------
                                                                                 89,031        94,359
                                                                               --------       -------
                  State:
                    Current                                                        --            --
                    Deferred                                                       --            --
                                                                               --------       -------
                                                                                   --            --
                                                                               --------       -------
                  Total                                                        $89,031        $94,359
                                                                                ======         ======

The Company's income tax expense (benefit) for the years ended December 31, 1999
and 1998,  respectively,  differed from the statutory federal rate of 34 percent
as follows:

                                                                               1999             1998
                                                                              ---------        ---------
Statutory rate applied to earnings before income taxes                         $92,691          $79,725
Increase (decrease) in income taxes resulting from:
     State income taxes                                                          --                --
     Deferred income taxes                                                      14,191           26,120
     Effect of incremental tax brackets and the
         application of business tax credits                                   (17,851)         (11,486)
                                                                                ------           ------

Income tax expense                                                             $89,031          $94,359
                                                                                ======           ======

</TABLE>

                                                                            F-14


<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



NOTE H - INCOME TAXES - Continued

Deferred  income tax  expense as of December  31,  1999 and 1998,  respectively,
consists of the following components:

                                                           1999        1998
                                                          -------     -------
     Changes in deferred tax assets
       Effect of utilization of net operating loss
         and business tax credit carryforwards            $  --       $  --
     Changes in deferred tax liabilities
       Effect of differences in book and
         statutory tax depreciation methods                14,191      26,120
                                                           ------      ------

       Changes in deferred income tax accounts            $14,191     $26,120
                                                           ======      ======


NOTE I - CAPITAL STOCK TRANSACTIONS

In April 1998, the Company purchased and retired  approximately 30,000 shares of
issued and outstanding  common stock for approximately  $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. On October 18, 1999,  the Company's  Board of Directors  modified
and amended the ":second closing" clause whereby the purchaser may purchase from
time to time any or all of the 400,000 shares of common stock at $1.10 per share
and to extend the  exercise  period  until the close of  business on October 18,
2004. As of December 31, 1999,  the  individual  has not purchased any shares of
common stock in accordance with the "second closing" portion of the 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.  This
option expired on February 28, 1999 with no shares being issued.





                                                                            F-15

<PAGE>



                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



NOTE I - CAPITAL STOCK TRANSACTIONS - Continued

On March 19, 1998, concurrent with the Stock Purchase Agreement discussed above,
the Company entered into a Consulting  Agreement with a separate  individual for
consulting,  advisory and management services to be performed as directed by the
Company's Board of Directors.  The Consulting Agreement is for a term of one (1)
year and may be  terminated  by either party with ten (10) days written  notice.
The  compensation   for  the  Consulting   Agreement  was  paid  in  restricted,
unregistered  common stock of the Company as follows:  150,000 shares as payment
for consulting,  advisory and management services to be performed as directed by
the Company's Board of Directors and an additional 55,000 shares upon receipt of
the $530,000  discussed above. An additional 45,000 shares will be issued to the
consultant  upon  receipt of the  $440,000  which was due on or before  July 15,
1998.  This Consulting  Agreement  terminated of its own accord in July 1998 and
the termination was  acknowledged in writing to the Company by the individual in
January 2000.

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.

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, 1999, future minimum non-cancellable lease revenues
are as follows:

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





                                                                            F-16


<PAGE>

<TABLE>
<CAPTION>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



NOTE K - LITIGATION

The  Company  is one of several  defendants  in Cause No.  DV99-02585-L;  Roy D.
Stedham v. The Million Dollar  Saloon,  et al.;  193rd  District  Court,  Dallas
County, Texas which is alleged to be a class action seeking monetary damages for
violation of the Texas  Finance Code  concerning  overcharges  for  purchases of
certain  items  by the  use  of a  credit  card.  The  Company  has  denied  the
allegations and intends to vigorously  contest the claims asserted.  The Company
does not believe  that the  plaintiff/class  will prevail on their  claims.  The
monetary damages sought, plus attorneys' fees, in management's  opinion does not
constitute an amount that is material to the Company.

NOTE L - 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 19.1% and 15.0% of
total revenues for 1999 and 1998, respectively.

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

Year ended December 31, 1999

   Revenue from external customers   $ 2,947,585    $   697,986    $      --      $ 3,645,571
   Revenue (expenses) from/to

     intercompany sources               (240,000)       350,000       (110,000)          --
   Interest income                          --            8,036         13,489         21,525
   Interest expense                       (1,593)          --           25,586         23,993
   Depreciation and amortization          33,390         22,000         58,412        113,802
   Income tax expense (benefit)          (47,413)        43,703         99,473         95,763
   Segment assets                        286,847      2,152,465        222,416      2,661,728
   Fixed asset expenditures               39,789           --             --           39,789

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

</TABLE>



                                                                            F-17


<PAGE>

<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998



NOTE M - SELECTED FINANCIAL DATA (Unaudited)

The following is a summary of the quarterly  results of operations for the years
ended December 31, 1999 and 1998, respectively.

                           Quarter ended  Quarter ended  Quarter ended  Quarter ended  Year ended
                             March 31,     June 30,      September 30,  December 31,   December 31,
                           -------------  -------------  -------------  -------------  -------------
<S>                        <C>            <C>            <C>            <C>            <C>
1999
----
   Restaurant sales        $   855,208    $   789,174    $   804,456    $   498,744    $ 2,947,582
   Rental income               169,911        170,525        174,525        183,025        697,986
   Gross profit                539,021        429,160        515,729        375,015      1,858,925
   Net earnings                115,391         37,438         89,926        (59,165)       183,590
   Basic and fully
     diluted earnings
     per share                    0.02           0.01           0.02          (0.01)          0.03
   Weighted-average
     number of shares
     issued and outstanding  5,731,788      5,731,778      5,731,778      5,731,778      5,731,778

1998
----
   Restaurant sales        $   829,942    $   818,713    $   900,525    $   562,333    $ 3,111,513
   Rental income               125,422        113,633        139,524        174,096        552,675
   Gross profit                490,811        410,151        522,555        434,599      1,858,116
   Net earnings                 63,779         53,613        130,513       (107,778)       140,127
   Basic and fully
     diluted earnings
     per share                    0.01           0.01           0.02          (0.02)          0.02
   Weighted average
     number of shares
     issued and outstanding  5,515,618      6,144,451      6,144,451      5,852,403      5,901,401
</TABLE>



                                                                            F-18