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

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

                                   FORM 10-KSB

                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934 FOR THE
                       FISCAL YEAR ENDED DECEMBER 31, 2000

                         Commission File Number: 0-27006

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

          Nevada                                        13-3428657
 (State of Incorporation)                  (I.R.S. Employer Identification No.)

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

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

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

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

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

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

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

         Check whether the issuer (i) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports),  and (ii) has
been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

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

         The issuer's  revenues for the fiscal year ended December 31, 2000 were
$4,320,797. The aggregate market value of common stock held by non-affiliates of
the  issuer  at March 5,  2001,  based  upon the  closing  bid  price on The OTC
Electronic Bulletin Board on said date, was $419,972. As of March 5, 2001, there
were 5,731,778 shares of the issuer's common stock outstanding.

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

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<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS................................................3
ITEM 2. PROPERTIES.............................................................8
ITEM 3. LEGAL PROCEEDINGS......................................................9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS....................9

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............10
ITEM 7. FINANCIAL STATEMENTS..................................................12
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE..............................................13

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.....................13
ITEM 10. EXECUTIVE COMPENSATION...............................................14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......15
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................16
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................17






                                      -2-

<PAGE>

                                     PART I

CAUTION REGARDING FORWARD-LOOKING INFORMATION

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

ITEM 1.    DESCRIPTION OF BUSINESS

General

         Million Dollar Saloon Inc. (the "Company") was  incorporated  under the
laws of the  State of  Nevada  on  September  28,  1987.  The  Company  provides
management support and conducts its business operations through its wholly-owned
operating  subsidiaries:   Furrh,  Inc.,  Tempo  Tamers,  Inc.,  Don,  Inc.  and
Corporation Lex.

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

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

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

         o        Owning and operating an adult cabaret.

         o        Owning and managing income producing commercial real estate.

Adult Cabaret

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

                                      -3-

<PAGE>

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

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

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

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

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

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

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

                                       -4-
<PAGE>

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

Future Expansion

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

Competition

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

Governmental Regulations

         The  Company  is  subject  to  various  federal,  state and local  laws
affecting its business activities.  In Texas, the authority to issue a permit to
sell alcoholic  beverages is governed by the Texas Alcoholic Beverage Commission
("TABC").  The TABC has the authority,  in its discretion,  to issue appropriate
permits. The Company,  through a management agreement with Tempo Tamers Beverage
Company,  Inc., an affiliated  corporation,  operates its business under a Texas
Mixed Beverage Permit and Late Hours Permit (the  "Permits").  These Permits are
subject to annual renewal,  provided the Company and its affiliated  corporation
have complied with all rules and regulations governing the Permits. Renewal of a
permit is subject to protest by a law  enforcement  agency or by a member of the
public. In case of protest,  the TABC may hold a hearing for interested  parties
to express  their views.  The TABC has the  authority  after such hearing not to
issue a renewal of the protested alcoholic beverage permit.  Neither the Company
nor its  affiliated  corporation  have been the  subject  of a  protest  hearing
against the renewal of its Permits.  Other states may have similar laws that may
limit the  availability  of a permit to sell  alcoholic  beverages  or which may
provide for suspension or revocation of a permit to sell alcoholic  beverages in
certain circumstances.  Prior to expanding into any new market, the Company will
take all steps necessary to ensure  compliance with all licensing and regulatory
requirements.

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


                                       -5-
<PAGE>

         Beyond various regulatory  requirements affecting the sale of alcoholic
beverages,  the location of an adult cabaret is subject to  restriction  by city
ordinance.  In Dallas, the Company is subject to "The Sexually Oriented Business
Ordinance" (the "Ordinance")  which contains  prohibitions on the location of an
adult  cabaret.  The  prohibitions  deal  generally  with distance from schools,
churches,  and other sexually oriented businesses and contain restrictions based
on the  percentage of residences  within the immediate  vicinity of the sexually
oriented  business.   The  granting  of  a  Sexually  Oriented  Business  Permit
("Business  Permit") is not subject to discretion;  the Business  Permit must be
granted if the proposed  operation  satisfies the requirements of the Ordinance.
The Company has held a Business Permit since passage of the city ordinance.  The
Business  Permit  is  valid  for a  period  of  one  year  and is  renewable  by
application  of the permit  holder  subject to a hearing.  The Company and other
corporations  that  operate  adult  cabarets  within  the  City  of  Dallas  are
contesting  the  constitutionality  of certain  sections of the  Ordinance.  See
"Legal Proceedings."

Employees and Independent Contractors

         As of December 31,  2000,  the Company had  approximately  20 full-time
employees,  of which 12 were in management  positions,  including  corporate and
administrative  operations and eight were engaged in food and beverage  service,
including  bartenders  and  waitresses.  The Company also  employed 52 part-time
employees who were engaged in food and beverage service.  Entertainers  numbered
approximately  89 full  and  part  time.  None of the  Company's  employees  are
represented  by a union and the Company  considers its employee  relations to be
good.

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

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

Income Producing Commercial Real Estate

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

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

         The remaining two  properties are leased to affiliates of Duncan Burch,
an officer and director of the Company,  which also operate adult  entertainment
nightclubs in the facilities.  All of the properties are stand-alone  structures
and,  accordingly,  are 100%  occupied  with a single tenant and, at the present
time,  are  not  subject  to any  plans  for  renovation,  remodeling  or  other
significant  improvement.  All properties  are physically  located in geographic
areas suitable for their current use. There exist similar properties which could
be similarly used in the same  geographic  area as the subject  properties.  The
effective   rentals  vary  between   locations   because  of  desirability   and
attractiveness  of  locations.  On  January  30,  2001,  the Board of  Directors
approved an  addendum  to the lease  agreement  covering  one of the  properties
leased to an  affiliate of Duncan  Burch.  Management  believes  that all of its
properties are adequately  covered by insurance.  See  "Properties" and "Certain
Relationships and Related Transactions."

                                      -6-

<PAGE>

Risk Factors

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

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

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

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

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

         Permits  Relating  to the Sale of Alcohol  and  Operation  of  Sexually
Oriented Business. While the Company and its affiliate corporation have obtained
annual renewals of the TABC Permits and Dallas Business Permit,  there can be no
assurance  that the Permits will  continue to be renewed.  Other states may have
similar  laws  which may limit the  availability  of a permit to sell  alcoholic
beverages  or  operate a  sexually  oriented  business.  The  Company  and other
operators  of adult  cabarets  within  the City of  Dallas  are  contesting  the
constitutionality   of  certain  sections  of  the  Dallas  Municipal  Ordinance
regulating  sexually oriented  businesses in Dallas.  The temporary or permanent
suspension or revocations of the TABC Permits or the Dallas  Business  Permit or
the  inability  to obtain  permits in areas of  expansion  would have a material
adverse effect on the revenues, financial condition and results of operations of
the Company. See "Legal Proceedings."

                                      -7-

<PAGE>
<TABLE>
<CAPTION>

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

ITEM 2.    PROPERTIES

         The Company maintains its corporate office at 6848 Greenville Avenue in
Dallas,  Texas. The corporate office is comprised of approximately  2,700 square
feet and is subject to a monthly  rental payment of  approximately  $3,600 under
the terms of a lease  agreement  which  expires  on August  31,  2001.  Based on
current local market conditions and available information,  management is of the
belief that it will either be able to renew the existing  lease upon  expiration
or relocate to a comparable location at a comparable cost.

         The Company owns three  facilities  which operate as adult  cabarets in
the Dallas-Fort  Worth Metroplex.  One facility,  the Million Dollar Saloon,  is
Company  operated while the other two are subject to long-term lease  agreements
and  operated by  affiliates  of Duncan  Burch,  an officer and  director of the
Company.  On January 30, 2001,  the Board of Directors  approved an amendment to
the lease agreement covering the Northwest Highway, Dallas, Texas property which
is leased to an  affiliate  of Duncan  Burch,  an officer  and  director  of the
Company. See "Certain Relationships and Related Transactions."

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

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

         The  following  is a summary of the  terms,  conditions  and  operating
parameters of the two properties  being leased from the Company by affiliates of
Duncan Burch, an officer and director of the Company:

                                                                             Location/Address

                                               ------------------------------------------------------------
                                                   3021 Northwest Highway         3601 State Highway 157
                                                       Dallas, Texas                 Fort Worth, Texas
                                               ----------------------------    ----------------------------
<S>                                            <C>                             <C>
Square footage
   Building                                               8,550                            4,850
   Real estate tract                                      37,162                          60,398
Mortgages                                                  None                            None
Lease expiration                                         May 2002                       August 2003
Scheduled rentals                              $4,750 per week from 5/26/99           $8,500 per week
                                                   through 12/31/00(1)
Effective annual rental per square foot                   $24.33                          $91.13
   (total lease term)
Gross book basis (including land)                       $1,206,829                       $160,447
Net book basis (including land)                          $936,783                         $73,634
Federal income tax basis                                 $118,941                         $20,676
   (excluding land)
Depreciation method and life                            SL-19 yrs.                     ACRS-15 yrs.
Ad valorem tax rate per $100 of valuation                 $2.58                            $3.14

</TABLE>

--------------------
(1)  On January 30, 2001,  the Board of Directors,  with Duncan Burch absent and
     non-voting,  approved an amendment  to the lease  agreement  covering  this
     property.  The amendment  provides that effective January 1, 2001, the base
     rental will be reduced  from  $4,750 per week to an amount  equal to 10% of
     the gross  revenues  generated  from the business  located at the property,
     payable  quarterly,  until  termination  of the lease in May  2002,  with a
     minimum  weekly  payment  of $1,000  which  will be  credited  against  the
     quarterly percentage rent. The minimum rent payment under the amended lease
     agreement  shall not be less than $1,000 per week. The  modification of the
     lease  agreement  was the result of  negotiations  between  the Company and
     representatives  of the tenant.  Such  modifications  were requested by the
     tenant as a result of substantial decreasing revenues of the tenant's adult
     cabaret  operation  located on the  property.  The  tenant  had  previously
     advised the Company that if the lease was not modified, it may be compelled
     to close its business operations and exercise the termination  provision in
     the lease agreement.  The business is owned by an affiliated corporation of
     Duncan  Burch,  an  officer  and  director  of the  Company.  See  "Certain
     Relationships and Related Transactions."

                                      -8-

<PAGE>

ITEM 3.    LEGAL PROCEEDINGS

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

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

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

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

         On December 1, 2000 the Company held its annual  shareholders  meeting.
Of the  Company's  5,731,778  shares of  common  stock  entitled  to vote at the
meeting,  approximately  5,253,372  shares  were  represented  at  the  meeting,
approximately  92% of the  outstanding  shares  entitled to vote.  The following
matters were submitted to a vote of the  shareholders  through  solicitation  of
proxies or otherwise:

                                                 For       Against     Abstain
                                             ----------- ----------- -----------

   Election of Board of Directors
            Nick Mehmeti                      5,247,372     6,000         301
            Duncan Burch                      5,247,372     6,000         101
            Dewanna Ross                      5,247,372     6,000         101

   Appointment of S.W. Hatfield, CPA as
   Auditors for 2000                          5,250,171     2,001       4,001

                                    PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         As of December 31, 2000, the Company had  approximately  400 holders of
record of its Common Stock.  Outstanding  shares of the  Company's  Common Stock
totaled  5,731,778.   The  Company's  transfer  agent  is  Securities   Transfer
Corporation, Dallas, Texas.

                                      -9-

<PAGE>

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

                                                 Common Stock
                    Fiscal Year Ended         ------------------
                    December 31, 1999           High      Low
                 -----------------------      --------  --------
                      First Quarter             $0.56     $0.38
                      Second Quarter            $1.13     $0.41
                      Third Quarter             $0.75     $0.53
                      Fourth Quarter            $0.53     $0.41

                    Fiscal Year Ended
                    December 31, 2000
                 -----------------------
                      First Quarter             $0.97     $0.44
                      Second Quarter            $0.47     $0.34
                      Third Quarter             $0.59     $0.34
                      Fourth Quarter            $0.50     $0.25

                   First Quarter-- 2001
                 (through March 1, 2001)        $0.34     $0.22

         The source for the high and low closing bids quotations is the National
Quotation Bureau, Inc. and does not reflect inter-dealer prices, such quotations
are without retail  mark-ups,  mark-downs or commissions,  and may not represent
actual  transactions  and have not been adjusted for stock  dividends or splits.
The closing bid and ask prices of the  Company's  common  stock on March 5, 2001
were $0.21 and $0.34 per share, respectively.

         During each quarter of 2000 and 1999, the Company's  Board of Directors
declared a per share cash dividend as follows:

                         Period                1999      1998
                 -----------------------      --------  --------
                      First Quarter            $0.010    $0.010
                      Second Quarter            0.010     0.010
                      Third Quarter             0.010     0.010
                      Fourth Quarter            0.010     0.010
                                               ------    ------
                     Total per share           $0.040    $0.040
                                               ======    ======

         Total  dividends  declared  during  1999  and 1998  were  approximately
$230,013  and  $241,051,  respectively.  On  February  28,  2000,  the  Board of
Directors  approved the discontinuance of the payment of a quarterly dividend to
its common stock  holders.  The Company  intends for the  foreseeable  future to
invest its available capital into the expansion of its business operations.

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

Overview

         You should read the following  discussion  and analysis in  conjunction
with audited  consolidated  financial statements included in this annual report.
The following  information  contains  forward-looking  statements.  See "Caution
Regarding Forward-Looking Information" at the beginning of this annual report.

Results of Operations

         Year ended  December  31, 2000 as compared to year ended  December  31,
1999. Bar and restaurant sales increased by  approximately  17% in 2000. Bar and
restaurant sales were $3,540,869 in 2000 compared to $2,947,585 in 1999.  Rental
Income increased from $697,986 in 1999 to $779,928 in 2000. The increase was due
to a one-time  cash  receipt  for the usage of a  right-of-way  easement  on one
parcel of rental property.

                                      -10-

<PAGE>

         Cost  of  sales  increased  by  $392,799  from  $1,786,646  in  1999 to
$2,179,445 in 2000. The increase is related to an approximate  $295,903 increase
in direct labor and an approximate $97,000 increase in purchases of inventories,
consumable  supplies  and related  State  excise  taxes.  These  increases  were
directly  related to the  corresponding  increase in bar and  restaurant  sales,
including  additional  personnel to properly  service the increase in patronage.
The Company  experienced  gross profit  percentages of approximately 51% in 1999
and 49% in 2000.  Management  attributes the decrease in gross profit percentage
to the  increased  direct  labor costs.  The Company is  exploring  all possible
opportunities to increase its gross profit percentages to a level of over 50%.

         General and  administrative  expenses increased from $1,607,175 in 1999
as compared to $1,996,842 in 2000. Of this change,  the Company  experienced  an
increase of  approximately  $363,089 in  salaries,  wages and related  expenses.
Management  attributes this increase to an increase of management's salaries and
bonuses and the employment of Laird Boles as General Management of the Company's
Million Dollar Saloon.  Further,  the Company  experienced an approximate $9,000
increase  in  general  operating  expenses  which  were a result  of  additional
advertising and general inflationary increases in the cost of goods and services
in the  Dallas-Ft.  Worth  Metroplex.  The Company  monitors  all  expenses on a
monthly basis to control costs and optimize its operations.

         For the reasons  discussed  above,  income from  operations in 2000 was
approximately  $144,500  as  compared to  approximately  $252,000  in 1999.  The
Company  realized income before income taxes of  approximately  $273,000 in 1999
and  approximately  $168,000 in 2000.  Interest  income  remained  approximately
$21,000 for 1999 as compared to $24,252 in 2000. It is anticipated that interest
income in future periods will fluctuate  depending on the amount of surplus cash
reserves that the Company may or may not have available for investment.

         The  Company had net income of $140,627 in 2000 as compared to $183,590
in 1999.  Management  attributes  the  decrease  in net  income  as a result  of
increased direct labor costs. The Company had earnings per share (both basic and
fully diluted) of approximately $0.03 in 1999 as compared to $0.02 in 2000.

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

         Year ended  December  31, 1999 as compared to year ended  December  31,
1998. Bar and restaurant  operations were relatively consistent at approximately
$2.95 million in 1999 compared to approximately $3.11 million in 1998.

         Cost of sales  decreased by  approximately  $20,000 from  approximately
$1,806,000  in 1998 to  $1,787,000  in  1999.  The  decrease  is  related  to an
approximate  $33,400  decrease in direct labor and was offset by an  approximate
$13,000  increase in purchases of inventories,  consumable  supplies and related
State  excise  taxes.  The  Company  experienced  gross  profit  percentages  of
approximately  50.7% in 1998 and 1999.  The Company is  exploring  all  possible
opportunities to return its gross profit percentages to those experienced in the
previous year.

         General and  administrative  expenses  were  relatively  consistent  at
$1,604,000  in 1998 as compared to  approximately  $1,607,000  in 1999.  Of this
change,  the  Company  experienced  a  decrease  of  approximately   $93,000  in
professional  and  consulting  fees  related to the  acquisition  of  additional
capital  and the  exploration  of  possible  business  expansion  opportunities.
Additionally,  the Company experienced an increase of approximately  $115,000 in
general and  administrative  compensation  and payroll  taxes for the  Company's
entire  operations.  Further,  the Company  experienced  an  approximate  $9,000
increase  in  general  operating  expenses  which  were a result  of  additional
advertising and general inflationary increases in the cost of goods and services
in the  Dallas-Ft.  Worth  Metroplex.  The Company  monitors  all  expenses on a
monthly basis to control costs and optimize its operations.

         Income from operations in 1999 was  approximately  $252,000 as compared
to  approximately  $254,000 in 1998. The Company  realized  income before income
taxes of  approximately  $273,000  in 1999 and  approximately  $234,000 in 1998.
Interest  income  remained  approximately  $21,000  for  1998  and  1999.  It is
anticipated  that interest income in future periods will fluctuate  depending on
the  amount  of  surplus  cash  reserves  that the  Company  may or may not have
available for investment.

         The Company had  earnings  per share (both basic and fully  diluted) of
approximately $0.02 in 1998 and approximately $0.03 in 1999.

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

                                      -11-

<PAGE>

Liquidity and Capital Resources

         Year ended  December  31, 2000 as compared to year ended  December  31,
1999. As of December 31, 2000, the Company had working capital of  approximately
$611,001 as compared to  approximately  $420,600 as of December  31,  1999.  The
Company  continues to experience  positive cash flows from operations.  Net cash
flow from operating activities was approximately $334,903 in 2000 as compared to
approximately $415,000 in 1999.

         During  2000,  the  Company  retired  all  outstanding  debt and has no
ongoing debt service requirements on either a short-terms or long-term basis for
future periods, as of December 31, 2000.

         The Company has  identified no  significant  capital  requirements  for
2000,  other  than  normal  repair and  replacement  activity  at the  Company's
commercial rental properties and the adult  entertainment  lounge and restaurant
facility.  Liquidity  requirements  mandated by future  business  expansions  or
acquisitions,  if any are specifically identified or undertaken, are not readily
determinable  at this  time as no  substantive  plans  have been  formulated  by
management.

         On February  28, 2000,  the Board of Directors of the Company  approved
the  discontinuance  of the payment of  quarterly  dividends to its common stock
holders.  The Company intends for the foreseeable future to invest its available
capital into the expansion of its business operations.

         Future  operating  liquidity  and  debt  service  are  expected  to  be
sustained from continuing operations. Additionally, management is of the opinion
that there is additional potential availability of incremental mortgage debt and
the opportunity  for the sale of additional  common stock through either private
placements or secondary public offerings.

         Year ended  December  31, 1999 as compared to year ended  December  31,
1998. As of December 31, 1999, the Company had working capital of  approximately
$420,600 as compared to  approximately  $440,500 as of December  31,  1998.  The
Company  continues to experience  positive cash flows from operations.  Net cash
flow from operating activities was approximately $415,000 in 1999 as compared to
approximately $372,000 in 1998.

         The Company has  identified no  significant  capital  requirements  for
2000,  other  than  normal  repair and  replacement  activity  at the  Company's
commercial rental properties and the adult  entertainment  lounge and restaurant
facility.  Liquidity  requirements  mandated by future  business  expansions  or
acquisitions,  if any are specifically identified or undertaken, are not readily
determinable  at this  time as no  substantive  plans  have been  formulated  by
management.

         On February  28, 2000,  the Board of Directors of the Company  approved
the  discontinuance  of the payment of  quarterly  dividends to its common stock
holders.  The Company intends for the foreseeable future to invest its available
capital into the expansion of its business operations. In 1999, the Company paid
approximately $230,013 in dividend payments to its shareholders.

         Future  operating  liquidity  and  debt  service  are  expected  to  be
sustained from continuing operations. Additionally, management is of the opinion
that there is additional potential availability of incremental mortgage debt and
the opportunity  for the sale of additional  common stock through either private
placements or secondary public offerings.

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

ITEM 7.    FINANCIAL STATEMENTS

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

                                      -12-

<PAGE>

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

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

PART III

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

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

      Name       Age           Position with the Company          Director Since
---------------  ---  ------------------------------------------  --------------
Nick Mehmeti(1)  42   President,  Chief Executive Officer, Chief   January 2000
                      Financial Officer and Director
Duncan Burch(1)  42   Executive Vice President and Director        January 2000
Dewanna Ross(2)  44   Chief  Operating  Officer,  Vice President       1995
                      of  Operations,  Secretary,  Treasurer and
                      Director

--------------------
(1)  On January  18,  2000,  Messrs.  Mehmeti and Burch were  initially  elected
     directors of the Company.  On January 19, 2000,  Mr. Mehmeti was elected as
     the  President  and Chief  Executive  Officer and Mr.  Burch was elected as
     Executive  Vice  President of the Company.  Messrs.  Mehmeti and Burch were
     reelected  as  directors  at  the  December  1,  2000  Annual   Meeting  of
     Shareholders.  On March 2, 2001, the Board of Directors elected Mr. Mehmeti
     as Chief  Financial  Officer to replace Mr. Ronald W. Johnston who resigned
     for  personal  reasons  as  the  Company's  Chief  Financial  Officer.  See
     "Security  Ownership and Certain Beneficial Owners and Management - Changes
     of Control."
(2)  On January 19, 2000,  Ms. Ross  resigned as President  and Chief  Executive
     Officer of the Company and was elected as Vice  President of Operations and
     Chief  Operating  Officer.  See "Security  Ownership of Certain  Beneficial
     Owners and Management - Change of Control."

         Nick Mehmeti has served as the  Company's  President,  Chief  Executive
Officer and a director since January 2000 and as the Company's  Chief  Financial
Officer since March 2, 2001. For at least the last fifteen years Mr. Mehmeti and
his  affiliates  have owned and operated  restaurants  and adult cabarets in the
Dallas-Fort  Worth Metroplex.  Mr. Mehmeti will devote as much of his time as is
necessary  to perform his duties as  President,  Chief  Executive  Officer and a
director of the Company.

         Duncan Burch has served as the Company's Executive Vice President and a
director  since  January  2000.  Mr.  Burch and his  affiliates  have  owned and
operated  restaurants and adult cabarets in the Dallas-Fort  Worth Metroplex for
at least the past ten years.  Mr.  Burch  will  devote as much of his time as is
necessary to perform his duties as an officer and a director of the Company.

         Dewanna  Ross has served in various  positions  with the Company  since
1995.  Ms.  Ross has  served as a  director  of the  Company  since  1995 and as
President and Chief  Executive  Officer of the Company from July 1999 to January
2000. In January 2000,  she was elected Vice  President of Operations  and Chief
Operating Officer of the Company. Ms. Ross is responsible for the development of
the corporate  procedures,  including the hiring and training of corporate staff
and the day-to-day  administration of the Company's  operations.  Ms. Ross has a
Bachelor of Arts degree from the University of Texas as Dallas.

Board of Directors and Committee Meetings Attendance

         During the fiscal year ended  December 31, 2000, the Board acted on two
occasions  by written  unanimous  consent of the Board of  Directors  in lieu of
meeting and held an annual meeting of directors in person.  The Company does not
have any  committees.  The  Company  currently  does not pay a director  fee for
attending scheduled and special meetings of the Board of Directors.  The Company
pays expenses of all of the its directors in attending meetings.

                                      -13-

<PAGE>
<TABLE>
<CAPTION>

Compliance with Section 16(a) of the Exchange Act

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

         Based solely on a review of reports furnished to the Company or written
representatives  from the Company's  directors and executive officers during the
fiscal year ended  December 31,  2000,  all Section  16(a)  filing  requirements
applicable  to its  directors,  officers  and 10%  holders  for such  year  were
complied with.

ITEM 10.   EXECUTIVE COMPENSATION

         Duncan  Burch,  Executive  Vice  President and director of the Company,
received  $191,162 as compensation  from the Company during 2000, which included
an $81,162 bonus paid to Mr. Burch in December  2000. Mr. Burch in January 2001,
agreed to reduce his annual salary from $130,000 to $78,000.  No other executive
officer of the Company, except for Nick Mehmeti, received remuneration in excess
of $100,000 during the referenced  periods.  The following Summary  Compensation
Table  sets  forth,  for  the  years  indicated,  all  cash  compensation  paid,
distributed  or  accrued  for  services,  including  salary  and bonus  amounts,
rendered in all capacities for the Company to its President and Chief  Executive
Officer. All other compensation related tables required to be reported have been
omitted as there has been no  applicable  compensation  awarded to, earned by or
paid to any of the Company's executive officers in any fiscal year to be covered
by such tables.

                           Summary Compensation Table

                                              Annual Compensation    Long-Term Compensation
                                            ----------------------- ------------------------
                                                                              Awards          Payouts
                                                                    ------------------------ ---------
                                                          Other     Restricted  Securities                 All
                                             Salary/      Annual       Stock     Underlying    LTIP       Other
            Name/Title                Year    Bonus    Compensation    Awards   Options/SARS  Payouts  Compensation
------------------------------------ ------ ---------- ------------ ----------- ------------ --------- -------------
<S>                                  <C>    <C>        <C>          <C>         <C>           <C>      <C>
Nick  Mehmeti,   President,   Chief   2000   $191,162       NA           NA          NA          NA         $-0-
   Executive Officer(1)
Dewanna  Ross,  President and Chief   2000   $  4,200       NA           NA          NA          NA         $-0-
   Executive Officer(2)               1999   $ 36,400       NA           NA          NA          NA         $-0-
Nina  Furrh,  President  and  Chief   1999   $ 66,000       NA           NA          NA          NA         $-0-
   Executive Officer(3)               1998   $  9,000       NA           NA          NA          NA         $-0-

</TABLE>

--------------------
(1)  Mr.  Mehmeti was employed by the Company during 2000 as President and Chief
     Executive  Officer at an annual salary of $130,000.  In December  2000, Mr.
     Mehmeti and Mr. Duncan Burch each  received a bonus of $81,162.  On January
     30,  2001,  Messrs.  Mehmeti and Burch each agreed to reduce  their  annual
     salary to $78,000.
(2)  Ms. Ross was elected  President and Chief Executive Officer in July 1999 to
     replace Nina Furrh. Subsequently, in January 2000 she resigned as President
     and Chief Executive Officer and was elected as Vice President of Operations
     and Chief Operating  Officer.  The $36,400 paid during 1999 and $4,200 paid
     in 2000 represents Ms. Ross' salary while she served as President and Chief
     Executive Officer.
(3)  Ms. Furrh was elected  President  and Chief  Executive  Officer in February
     1998. In July 1999,  Ms. Furrh  resigned as President  and Chief  Executive
     Officer.

                                      -14-

<PAGE>

Director Compensation

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

Indebtedness of Directors and Senior Officers

         None of the  directors  or officers of the Company or their  respective
associates or affiliates  is indebted to the Company.  However,  the Company has
two lease agreements with corporations  affiliated with Duncan Burch,  Executive
Vice  President  and director of the Company.  See  "Certain  Relationships  and
Related Transactions."

Committees of the Board of Directors and Meeting Attendance

         There are no audit,  compensation  or other  committees of the Board of
Directors of the Company.

Family Relationships

         There are no family  relationships  among the  Company's  directors  or
officers.

Employment Agreements

         On July 9, 1999,  Dewanna Ross, the Company's Chief Operating  Officer,
Vice President of Operations,  Secretary, Treasurer and a director, entered into
an Employment  Agreement with the Company for a term of two years which provides
for a salary of $1,400 per week during the first year of  employment  and $1,500
per week  during  the  second  year of the  Agreement.  Ms.  Ross  served as the
Company's President and Chief Executive Officer from July 1999 to January 2000.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain  information as of March 6, 2000
relating  to the  beneficial  ownership  of shares  of Common  Stock by (i) each
person who owns  beneficially  more than 5% of the outstanding  shares of Common
Stock,  (ii) each director of the Company,  (iii) each executive  officer of the
Company,  and (iv) all  executive  officers  and  directors  of the Company as a
group.

                                                                Percentage of
   Name(1)                                  Number of Shares  Common Stock Owned
   ---------------------------------------  ----------------  ------------------
   Nick Mehmeti(2)........................     2,419,787(3)          39.5%
   Duncan Burch(2)........................     2,075,787(3)          33.9%
   Dewanna Ross(4)........................        34,350(5)            *
   J.M. Tibbals as Trustee for The
     Irrevocable Equity Trust No. 1(6)....       451,558              7.9%
   Officers and Directors as a group
     (3 persons)..........................     4,129,924(7)          67.4%

--------------------
*Less than 1%
(1)  Unless  otherwise  indicated,  the  persons  listed  have sole  voting  and
     investment powers with respect to all such shares.
(2)  Mr. Mehmeti is the President, Chief Executive Officer and a director of the
     Company and Mr. Burch is the Executive Vice President and a director of the
     Company.  The  mailing  address  for  Messrs.  Mehmeti and Burch is c/o the
     Company, 6848 Greenville Ave., Dallas, Texas 75231.
(3)  Includes an option to purchase  400,000  shares of the Common  Stock of the
     Company for $440,000  ($1.10 per share)  which is jointly  owned by Messrs.
     Mehmeti  and  Burch  and may be  exercised  in whole or in part at any time
     until  October  18, 2004 when the option  expires.  See "Change in Control"
     below.
(4)  Dewanna Ross is the Chief Operating Officer,  Vice President of Operations,
     Secretary, Treasurer and a director of the Company.
(5)  Includes  4,000  shares  owned by Ms.  Ross  and  30,350  shares  held in a
     custodian  account for the benefit of Solon Weaver.  Ms. Ross disclaims any
     ownership interest in the 30,350 shares held in the custodian account,  but
     she does have voting authority of such shares.
(6)  The mailing  address  for The  Irrevocable  Equity  Trust No. 1 is c/o J.M.
     Tibbals, Arter & Hadden, 1717 Main Street, Suite 4100, Dallas, Texas 75201.
(7)  Includes  400,000  shares  which are subject to an option  jointly  held by
     Messrs.  Mehmeti and Burch which may be exercised at any time until October
     18, 2004 and 30,350  shares held in a custodian  account over which Dewanna
     Ross has voting power.

                                      -15-

<PAGE>

Change in Control

         On  January  18,  2000,  Nick  Mehmeti  ("Mehmeti")  and  Duncan  Burch
("Burch") acquired in a private transaction 3,351,574 shares of the Common Stock
of the Company from W-W  Investments,  Linda Weaver  ("Weaver"),  Steven Wheeler
("Wheeler"),   Diamond  Production,   L.L.C.,  an  Oklahoma  registered  limited
liability company ("Diamond LLC"), and Diamond Production of Oklahoma,  L.P., an
Oklahoma  limited  partnership  ("Diamond  LP"),  for  $3,854,310.10  ($1.15 per
share).  The 3,351,574  shares of the Company's Common Stock acquired by Mehmeti
and Burch represents  approximately 58.5% of the outstanding 5,731,778 shares of
the Company's Common Stock.  Mehmeti and Burch will each hold 1,675,787 of these
shares. In addition to the purchase of these shares,  Weaver assigned to Mehmeti
and Burch, jointly, an option to purchase an additional 400,000 shares of Common
Stock of the Company for $440,000 or $1.10 per share,  which expires October 18,
2004 (the "Option").  The Option may be exercise at any time until it expires in
whole or in part.

         As part of the  transaction,  the  number  of  members  on the board of
directors of the Company was increased to three.  Michael R. Garrett resigned as
a director  and Mehmeti and Burch were  elected as directors to fill the vacancy
created by the  resignation  of Michael R. Garrett and the newly  created  third
directorship.  On January 19, 2000, Dewanna Ross resigned as President and Chief
Executive officer and was replaced by Mehmeti who was elected to such positions.
Ms.  Ross was  elected  as Vice  President  of  Operations  and Chief  Operating
Officer. Mr. Burch was elected as Executive Vice President of the Company.

         As a result of the acquisition of the 3,351,574 shares of the Company's
Common Stock, Mehmeti beneficially owns directly and indirectly 2,019,787 shares
or approximately  35.2% of the Company's issued and outstanding shares of Common
Stock.  Additionally,  Mehmeti  jointly owns with Burch the Option.  Mehmeti had
previously  acquired  344,000  shares of  Company  Common  Stock in open  market
transactions.  Burch beneficially owns directly and indirectly  1,675,787 shares
or approximately  29.2% of the Company's issued and outstanding shares of Common
Stock. Collectively,  Mehmeti and Burch beneficially own directly and indirectly
3,695,574 shares or approximately  64.5% of the Company's issued and outstanding
shares of Common Stock and jointly own the Option.

         The  purchase  price  of  $3,854,310.10  was  paid to W-W  Investments,
Weaver,  Wheeler,  Diamond LLC and Diamond LP  pro-rata  based on each  entity's
respective interest in the shares sold as follows.  Weaver, Wheeler, Diamond LLC
and  Diamond  LP  received  a cash  payment of  $1,228,517.40.  W-W  Investments
received a cash payment of  $1,787,899.20  and the remaining  $837,893.50 of the
purchase  price due to W-W  Investments  was financed by W-W  Investments.  Such
financing  was  evidenced  by a  promissory  note  executed by Mehmeti and Burch
collectively.  The note  shall be repaid  over a five  year term in sixty  equal
monthly  installments  of principal and interest with the unpaid balance bearing
interest  at a rate of 7 1/2% per annum.  The note is secured by a stock  pledge
agreement  whereby  Mehmeti  and  Burch  have  pledged  1,000,000  shares of the
Company's  Common Stock as collateral  for the  repayment of the note.  The cash
payments described herein were made out of Mehmeti's and Burch's personal funds.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During 2000 there were no material transactions between the Company and
its  officer,  directors  or  shareholders  owning 10% or more of the  Company's
outstanding  shares  of  Common  Stock.  Two of  the  Company's  properties  are
currently leased to affiliates of Duncan Burch, who became an officer,  director
and major  shareholder of the Company in January 2000. See "Item 2.  Properties"
and "Item 11. Security  Ownership of Certain Beneficial Owners and Management --
Changes in Control."

         On January 30, 2001,  the Board of Directors,  with Duncan Burch absent
and  non-voting,  approved an  amendment  to the lease  agreement  covering  the
Northwest  Highway  property.  The amendment  provides that effective January 1,
2001, the base rental will be reduced from $4,750 per week to an amount equal to
10% of the gross revenues  generated from the business  located at the property,
payable  quarterly,  until  termination of the lease in May 2002, with a minimum
weekly payment of $1,000 which will be credited against the quarterly percentage
rent.  The minimum rent payment under the amended lease  agreement  shall not be
less than  $1,000 per week.  The  modification  of the lease  agreement  was the
result of negotiations  between the Company and  representatives  of the tenant.
Such  modifications  were  requested  by the  tenant as a result of  substantial
decreasing  revenues of the  tenant's  adult  cabaret  operation  located on the
property.  The tenant had  previously  advised the Company that if the lease was
not modified,  it may be compelled to close its business operations and exercise
the termination  provision in the lease  agreement.  The business is owned by an
affiliated  corporation of Duncan Burch, an officer and director of the Company.
See "Management."

                                      -16-

<PAGE>

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

(a)      Financial Statements and Exhibits

1.       Financial Statements.  The following financial statements are submitted
         as part of this report:
                                                                            Page
                                                                            ----


           Report of Independent Certified Public Accountants               F-2
           Consolidated Balance Sheets - December 31, 2000 and 1999         F-3
           Consolidated Statements of Income and Comprehensive Income -
                    Years Ended December 31, 2000 and 1999                  F-5
           Consolidated Statements of Changes in Shareholders' Equity -
                    Years Ended December 31, 2000 and 1999                  F-6
           Consolidated Statement of Cash Flows -
                    Years Ended December 31, 2000 and 1999                  F-7
           Notes to Consolidated Financial Statements                       F-8

2.       Exhibits

    Exhibit
    Number                               Description
   ---------      --------------------------------------------------------------
    2.1*          Stock Purchase  Agreement dated August 23, 1995 by and between
                  Art Beroff and Bjorn Heyerdahl.
    2.2*          Stock Purchase  Agreement dated August 23, 1995 by and between
                  Joseph  MacDonald,   Goodheart   Ventures,   Inc.,  and  Bjorn
                  Heyerdahl.
    2.3*          Stock Purchase  Agreement dated September 7, 1995 by and among
                  Million Dollar Saloon,  Inc.,  Goodheart  Ventures,  Inc., and
                  certain individuals.
    2.4*          Addendum and  Modification  to Stock Purchase  Agreement dated
                  September 19, 1995, by and among Million Dollar Saloon,  Inc.,
                  Goodheart Ventures, Inc., and certain individuals.
    2.5*          Stock Exchange  Agreement dated September 7, 1995 by and among
                  Million Dollar Saloon,  Inc.,  Goodheart  Ventures,  Inc., and
                  J.M. Tibbals, Trustee for Irrevocable Equity Trust No. 1.
    2.6*          Addendum and  Modification  to Stock Exchange  Agreement dated
                  September 19, 1995, by and among Million Dollar Saloon,  Inc.,
                  Goodheart  Ventures,  Inc.,  and  J.M.  Tibbals,  Trustee  for
                  Irrevocable Equity Trust No. 1.
    2.7*          Agreement  and Plan of  Merger  dated  October  5, 1995 by and
                  between Million Dollar Saloon, Inc., a Texas corporation,  and
                  Goodheart Ventures, Inc., a Nevada corporation.
    2.8**         Addendum and Modification to Stock Purchase Agreement made and
                  entered  into  the 7th  day of  September  1995  by and  among
                  Million Dollar Saloon,  Inc.,  Goodheart  Ventures,  Inc., and
                  certain individuals dated October 31, 1995.
    3(i)*         Articles of Incorporation of The Company, as amended to date.
    3(ii)*        Bylaws of the Company.
    3(iii)**      Amended and Restated  Bylaws of the Company  effective July 9,
                  1999.
    4.1*          Specimen Common Stock Certificate.
   10.1*          Leases of Properties.
   10.2*          Promissory  Note for $750,000 with Abrams Centre National Bank
                  dated September 22, 1995.
   21.1*          Subsidiaries of the Company.
   27.1           Financial Disclosure Schedule.

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

**   Incorporated by reference to the Company's Annual Report on Form 10-KSB for
     the fiscal year ended December 31, 1999.

(b)      Reports on Form 8-K.

         On December 7, 2000,  the Company filed a Current Report dated December
1, 2000 on Form 8-KSB with the Commission reporting the election of directors at
the annual meeting of shareholders held on December 1, 2000.

                                      -17-

<PAGE>

                                   SIGNATURES

         In  accordance  with  Section  13 and 15(d) of the  Exchange  Act,  the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 19th day of March, 2001.

                            MILLION DOLLAR SALOON, INC.


                            By:  /s/ Nick Mehmeti
                               -------------------------------------------------
                               Nick Mehmeti, President, Chief Executive Officer,
                               Chief Financial Officer and Director


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

        Signature                      Title                           Date

   /s/ Nick Mehmeti     President, Chief Executive Officer,       March 19, 2001
---------------------   Chief Financial Officer and Director
Nick Mehmeti

   /s/ Duncan Burch     Executive Vice President and Director     March 19, 2001
---------------------
Duncan Burch

   /s/ Dewanna Ross     Chief Operating Officer, Vice President   March 19, 2001
---------------------   of Operations, Secretary, Treasurer and
Dewanna Ross            Director




                                      -19-

<PAGE>

                           MILLION DOLLAR SALOON, INC.
                                AND SUBSIDIARIES

                              Financial Statements
                                       and
                                Auditor's Report

                           December 31, 2000 and 1999







                              S. W. HATFIELD , CPA
                          certified public accountants

                      Use our past to assist your futuresm

<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, 2000 and 1999                                  F-3

     Consolidated Statements of Income and Comprehensive Income
         for the years ended December 31, 2000 and 1999                    F-5

     Consolidated Statements of Changes in Shareholders' Equity
         for the years ended December 31, 2000 and 1999                    F-6

     Consolidated Statements of Cash Flows
         for the years ended December 31, 2000 and 1999                    F-7

     Notes to Consolidated Financial Statements                            F-8






                                                                             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, 2000 and 1999, 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, 2000 and 1999 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 19, 2000



                      Use our past to assist your futuresm

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, 2000 and 1999

                                     ASSETS
                                     ------

                                                      2000           1999
                                                  -----------    -----------
Current Assets
    Cash on hand and in bank                      $   727,043    $   610,233
    Note receivable - current portion                    --           29,912
    Accounts receivable - trade and other                --            9,748
    Prepaid Federal income taxes receivable            33,141         20,339
    Inventory                                          22,844         31,662
    Prepaid expenses                                    8,737           --
                                                  -----------    -----------

       Total current assets                           791,765        701,894
                                                  -----------    -----------

Property and Equipment - At Cost
    Buildings and related improvements              2,017,514      1,987,515
    Furniture and equipment                           864,459        838,160
                                                  -----------    -----------
                                                    2,881,973      2,825,675
    Less accumulated depreciation                  (1,718,248)    (1,627,129)
                                                  -----------    -----------
                                                    1,163,725      1,198,546
    Land                                              741,488        741,488
                                                  -----------    -----------

       Net property and equipment                   1,905,213      1,940,034
                                                  -----------    -----------
Other Assets

    Note receivable - noncurrent portion                 --            5,267
    Organization costs, net of accumulated
       amortization of $74,928 and $64,630,
       respectively                                      --           10,299
    Loan costs, net of accumulated amortization
       of $31,607 and $26,866, respectively              --            4,741
    Other                                               5,475          6,225
                                                  -----------    -----------

       Total other assets                               5,475         26,532
                                                  -----------    -----------

Total Assets                                      $ 2,702,453    $ 2,668,460
                                                  ===========    ===========


                                  - 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, 2000 and 1999

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
                                                               2000         1999
                                                            ----------   ----------
<S>                                                         <C>          <C>
Current Liabilities
    Current portion of long-term debt                       $     --     $  139,657
    Accounts payable - trade                                     7,464       10,351
    Accrued liabilities                                        166,800       67,425
    Dividends payable                                             --         57,318
    Tenant deposits                                              6,500        6,500
                                                            ----------   ----------

       Total current liabilities                               180,764      281,251
                                                            ----------   ----------

Long-Term Liabilities
    Long-term debt, net of current maturities                     --           --
    Deferred tax liability                                     133,101      139,248
                                                            ----------   ----------

       Total liabilities                                       313,865      420,499
                                                            ----------   ----------


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                                        2,382,856    2,242,229
                                                            ----------   ----------

       Total shareholders' equity                            2,588,588    2,447,961
                                                            ----------   ----------

Total Liabilities and Shareholders' Equity                  $2,702,453   $2,668,460
                                                            ==========   ==========

</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, 2000 and 1999

                                                             2000           1999
                                                         -----------    -----------
<S>                                                      <C>            <C>
Revenues
    Bar and restaurant sales                             $ 3,540,869    $ 2,947,585
    Rental income                                            779,928        697,986
                                                         -----------    -----------
       Total revenues                                      4,320,797      3,645,571
                                                         -----------    -----------

Cost of Sales - Bar and Restaurant Operations
    Direct labor                                           1,540,080      1,244,177
    Purchases                                                639,365        542,469
                                                         -----------    -----------
       Total cost of sales                                 2,179,445      1,786,646
                                                         -----------    -----------

Gross Profit                                               2,141,352      1,858,925
                                                         -----------    -----------

Operating Expenses
    Salaries, wages and related expenses                     862,842        499,753
    Consulting, management and other professional fees       199,599        218,652
    Rental expenses, principally taxes                        65,420         65,325
    Interest expense                                           2,129         23,993
    Other operating expenses                                 759,944        685,650
    Depreciation and amortization                            106,908        113,802
                                                         -----------    -----------
       Total operating expenses                            1,996,842      1,607,175
                                                         -----------    -----------

Income from Operations                                       144,510        251,750

Other Income (Expenses)
    Gain on sale of property and equipment                      --             (654)
    Interest income and other items                           24,252         21,525
                                                         -----------    -----------

Income before Income Taxes                                   168,762        272,621

Provision for Income Taxes
    Currently payable                                        (34,282)       (74,840)
    Deferred                                                   6,147        (14,191)
                                                         -----------    -----------

Net Income                                                   140,627        183,590

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

Comprehensive Income                                     $   140,627    $   183,590
                                                         ===========    ===========

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

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

</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, 2000 and 1999



                                     Common Stock           Additional                        Total
                             ---------------------------      paid-in       Retained      shareholders'
                               # shares        Amount         capital       earnings         equity
                             ------------   ------------   ------------   ------------    ------------
<S>                          <C>            <C>            <C>            <C>             <C>
Balances at
    January 1, 1999             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

Net income for the year              --             --             --          140,627         140,627
                             ------------   ------------   ------------   ------------    ------------

Balances at
         December 31, 2000      5,731,778   $      5,732   $       --     $  2,382,856    $  2,388,588
                             ============   ============   ============   ============    ============

</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, 2000 and 1999

                                                                 2000         1999
                                                               ---------    ---------
<S>                                                            <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                 $ 140,627    $ 183,590
    Adjustments to reconcile net income to net cash
       provided by operating activities
          Depreciation and amortization                          106,908      113,802
          Gain on sale of property and equipment                    --            654
          Deferred income taxes                                   (6,147)      14,192
          (Increase) decrease in
              Accounts receivable - trade                          1,011       (3,077)
              Prepaid income taxes                               (12,802)      71,314
              Inventory                                            8,818      (13,258)
              Prepaid expenses                                      --         56,450
          Increase (decrease) in
              Accounts payable and other accrued liabilities      96,488       (8,416)
                                                               ---------    ---------

Net cash provided by operating activities                        334,903      415,261
                                                               ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
    Principal collections on note receivable                      35,179       69,068
    Proceeds from sale of property and equipment                    --         19,558
    Purchases of property and equipment                          (56,297)     (39,789)
                                                               ---------    ---------

Net cash used in investing activities                            (21,118)      48,837
                                                               ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
    Payments on long-term debt                                  (139,657)    (198,667)
    Dividends paid                                               (57,318)    (230,015)
                                                               ---------    ---------

Net cash provided by (used in) financing activities             (196,975)    (428,682)
                                                               ---------    ---------

INCREASE IN CASH AND CASH EQUIVALENTS                            116,810       35,416

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

Cash and cash equivalents at end of year                       $ 727,043    $ 610,233
                                                               =========    =========

SUPPLEMENTAL DISCLOSURES OF
    INTEREST AND INCOME TAXES PAID
       Interest paid on borrowings                             $   2,129    $  23,993
                                                               =========    =========
       Income taxes paid                                       $  47,084    $   3,526
                                                               =========    =========

SUPPLEMENTAL SCHEDULE OF NON-CASH
    INVESTING AND FINANCING ACTIVITIES
       Declaration of fourth quarter dividend of
          $0.01 per share                                      $    --      $  57,318
                                                               =========    =========

</TABLE>


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

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2000 and 1999


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,  2000 and 1999,  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-8

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 2000 and 1999


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.

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.

                                                                             F-9

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 2000 and 1999


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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

NOTE C - CONCENTRATIONS OF CREDIT RISK

The Company  maintains its cash accounts in a financial  institution  subject to
insurance coverage issued by the Federal Deposit Insurance  Corporation  (FDIC).
Under FDIC 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, 2000 and 1999,  respectively,
the entity  listed below had credit risk  exposures in excess of statutory  FDIC
coverage as described below.

                                     Highest        Low           Number of
                                    exposure      exposure   days with exposure
                                    ---------    ---------   ------------------
   Year ended December 31, 2000
   ----------------------------
    Million Dollar Saloon, Inc.
       Bank A                       $ 348,804    $  13,804             75
    Tempo Tamers, Inc.
       Bank A                       $  75,886    $      22            171
    Corporation Lex
       Bank A                       $  14,872    $   3,935             27
       Bank B                       $  29,795    $ 100,086            101
    Don, Inc.
       Bank A                       $ 195,323    $   1,020            186

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

The  Company has  incurred no losses  during 2000 and 1999 as a result of any of
these unsecured situations.

NOTE D - NOTE RECEIVABLE

                                                               2000      1999
                                                              -------   -------
 35,179 note receivable from an unrelated individual
    for the sale of real estate. Interest at 9.50%. Payable
    in monthly installments of approximately $2,665,
    including interest.  Final payment due in February 2001.
    Collateralized by real estate and improvements located
    in Dallas County, Texas.  Paid in full in April 2000.     $     -   $35,179
                                                              -------   -------
                                                                    -    35,179
    Less current portion                                            -   (29,912)
                                                              -------   -------

    Noncurrent portion                                        $     -   $ 5,267
                                                              =======   =======


                                                                            F-10

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 2000 and 1999


NOTE E - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 2000 and 1999:

                                           2000         1999      Estimated life
                                        ----------   ----------   --------------
   Buildings and related improvements   $2,017,514   $1,987,515     15-40 years
   Furniture and equipment                 864,459      838,160      5-10 years
                                        ----------   ----------
                                         2,881,973    2,825,675
   Less accumulated depreciation        (1,718,248)  (1,627,129)
                                        ----------   ----------
                                         1,163,725    1,198,546
   Land                                    741,488      741,488
                                        ----------   ----------

   Net property and equipment           $1,905,213   $1,940,034
                                        ==========   ==========

Depreciation  expense for the years ended December 31, 2000 and 1999 was $91,119
and $91,746, respectively.

NOTE F - LONG-TERM DEBT

Long-term  debt  consists  of the  following  at  December  31,  2000 and  1999,
respectively:

                                                              2000      1999
                                                             --------  --------
   $750,000 note payable to a bank.  Interest at 11.0%.      $      -  $139,657
       Payable in monthly installments of approximately
       $16,369, including interest.  Final payment due in
       September 2000.  Collateralized by real estate and
       improvements located in Dallas and Tarrant Counties,
       Texas.  Paid in full in March 2000.
          Less current portion                                      -  (139,657)
                                                             --------  --------

          Long-term portion                                  $      -  $      -
                                                             ========  ========

NOTE G - INCOME TAXES

The deferred  current tax asset and  non-current  deferred tax  liability on the
December  31,  2000  and  1999,  respectively,  balance  sheet  consists  of the
following:

                                                  December 31,   December 31,
                                                       2000           1999
                                                  ------------   ------------
   Non-current deferred tax liability             $   (133,101)  $   (139,248)
                                                  ============   ============

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

                                                                            F-11

<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 2000 and 1999


NOTE G - INCOME TAXES - continued

The components of income tax expense  (benefit) for the years ended December 31,
2000 and 1999, respectively, are as follows:

                                                                        2000        1999
                                                                       --------    --------
<S>                                                                    <C>         <C>
          Federal:
              Current                                                  $ 34,282    $ 74,840
              Deferred                                                   (6,147)     14,191
                                                                       --------    --------
                                                                         28,135      89,031
                                                                       --------    --------

          State:
              Current                                                      --          --
              Deferred                                                     --          --
                                                                       --------    --------
                                                                           --          --
                                                                       --------    --------
          Total                                                        $ 28,135    $ 89,031

The Company's income tax expense (benefit) for the years ended December 31, 2000
and 1999,  respectively,  differed from the statutory federal rate of 34 percent
as follows:

                                                                        1999        1998
                                                                       --------    --------
          Statutory rate applied to earnings before income taxes       $ 57,379    $ 92,691
          Increase (decrease) in income taxes resulting from:
              State income taxes                                           --          --
              Deferred income taxes                                      (6,147)     14,191
              Effect of incremental tax brackets and the
                 application of business tax credits                    (23,097)    (17,851)
                                                                       --------    --------

                   Income tax expense                                  $ 28,135    $ 89,031
                                                                       ========    ========

Deferred  income tax  expense as of  December 31,  2000 and 1999,  respectively,
consists of the following components:

                                                                        2000        1999
                                                                       --------    --------
          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                      (6,147)     14,191
                                                                       --------    --------

                   Changes in deferred income tax accounts             $ (6,147)   $ 14,191
                                                                       ========    ========

</TABLE>

NOTE H - CAPITAL STOCK TRANSACTIONS

On  March  19,  1998,  the  Company  entered  into a  Stock  Purchase  Agreement
(Agreement)  with an unrelated  individual.  The  Agreement  contained a "second
closing"  clause,  as amended,  whereby the individual may acquire an additional
400,000 shares of restricted,  unregistered common stock at a price of $1.10 per
share on or before the close of business on October 18, 2004. As of December 31,
2000, no shares of common stock have been issued in accordance  with the "second
closing" portion of the Agreement.

                                                                            F-12

<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 2000 and 1999


NOTE I - COMMITMENTS

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

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

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

NOTE J - 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 18.1% and 19.1% of
total revenues for 2000 and 1999, respectively.

                                       Restaurant       Rental       General and
                                        Facility     real estate   administrative     Total
                                      -----------    -----------   --------------  -----------
<S>                                   <C>            <C>           <C>             <C>
Year ended December 31, 2000
    Revenue from external customers   $ 3,540,869    $   779,928    $      --      $ 4,320,797
    Revenue (expenses) from/to
       intercompany sources              (240,000)       305,000        (65,000)          --
    Interest income                          --           12,063         17,448         29,511
    Interest expense                         --             --            2,129          2,129
    Depreciation and amortization          32,860         66,517          7,531        106,908
    Income tax expense (benefit)         (114,021)        93,283         48,873         28,135
    Segment assets                        270,727      2,076,369        355,357      2,702,453
    Fixed asset expenditures               56,297           --             --           56,297

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         95,768
    Segment assets                        286,847      2,152,465         22,416      2,661,728
    Fixed asset expenditures               39,789           --             --           39,789

</TABLE>


                                                                            F-13

<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 2000 and 1999


NOTE K - SELECTED FINANCIAL DATA (Unaudited)

The following is a summary of the quarterly  results of operations for the years
ended December 31, 2000 and 1999, 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>
Year ended December 31, 2000
    Restaurant sales            $ 1,000,831    $   975,582    $ 1,015,371     $   549,085    $  3,540,869
    Rental income                   166,025        174,525        174,525         264,853         779,928
    Gross profit                    549,430        575,092        570,396         446,434       2,141,352
    Net earnings                    112,731        110,793        122,491        (205,388)        140,627
    Basic and fully diluted
       earnings per share              0.02           0.02           0.02           (0.04)           0.02
    Weighted-average
       number of shares
       issued and outstanding     5,731,788      5,731,778      5,731,778       5,731,778       5,731,778

Year ended December 31, 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      5,731,788      5,731,788       5,731,788       5,731,788

</TABLE>


                                                                            F-14

<PAGE>

                                  EXHIBIT INDEX

         Exhibit Number               Description
         --------------         ------------------------------------------------

              27.1              Financial Disclosure Schedule