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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, 2001

                         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, 2001 were
$3,458,856. The aggregate market value of common stock held by non-affiliates of
the  issuer at March  25,  2002,  based  upon the  closing  bid price on The OTC
Bulletin  Board on said date of $0.19 per share,  was $380,352.  As of March 25,
2002, 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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                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS................................................1
ITEM 2. PROPERTIES.............................................................6
ITEM 3. LEGAL PROCEEDINGS......................................................7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS....................7
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...............8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..............9
ITEM 7. FINANCIAL STATEMENTS..................................................11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE..............................................11

                                     PART II

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


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                                     PART I

CAUTION REGARDING FORWARD-LOOKING INFORMATION

     Certain  statements  contained in this annual  filing,  including,  without
limitation, statements containing the words "believes", "anticipates", "expects"
and  words  of  similar  import,  constitute  forward-looking  statements.  Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that may cause the actual results,  performance or achievements of
the Company,  or industry  results,  to be materially  different from any future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking statements.

     Such factors include, among others, the following: international,  national
and local  general  economic and market  conditions:  demographic  changes;  the
ability of the Company to sustain, manage or forecast its growth; the ability of
the Company to successfully make and integrate acquisitions; existing government
regulations  and  changes  in,  or  the  failure  to  comply  with,   government
regulations;  adverse publicity;  competition; the loss of significant customers
or suppliers;  fluctuations  and  difficulty in forecasting  operating  results;
changes in business strategy or development  plans;  business  disruptions;  the
ability  to attract  and  retain  qualified  personnel;  the  ability to protect
technology; and other factors referenced in this and previous filings.

     Given these  uncertainties,  readers of this Form 10-KSB and  investors are
cautioned not to place undue reliance on such  forward-looking  statements.  The
Company  disclaims  any  obligation  to update any such  factors or to  publicly
announce the result of any  revisions to any of the  forward-looking  statements
contained herein to reflect future events or developments.

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


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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  for   additional   Million  Dollar  Saloons  or  potential
acquisitions have been identified.

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

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

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


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sound at levels so conversation  can take place.  The Million Dollar Saloon also
provides a state-of-the-art light show and employs a sound and light engineer to
upgrade,  monitor,  and  maintain  the  sound  and  light  systems.   Management
constantly  monitors  the  environment  of The Million  Dollar  Saloon for music
selection, customer service, appearance, and ambience.

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

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

Future Expansion

     The  Company has not  determined  the  precise  locations  or nature of its
future expansion, but it believes, based upon its experience, that opportunities
for expansion  exist  primarily in  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.  Several  of the
competitor adult cabarets are owned by corporations  controlled by or affiliated
with Nick Mehmeti and Duncan Burch,  officers and directors of the Company.  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. The failure of the
Company to obtain a renewal of its Permits would have a material  adverse effect
upon the financial condition of the Company.  Other states may have similar laws
that may limit the availability of a permit to sell alcoholic beverages or which


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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.

     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,  2001,  the  Company had  approximately  22  full-time
employees,  of which 12 were in management  positions,  including  corporate and
administrative  operations  and 10 were  engaged in food and  beverage  service,
including  bartenders  and  waitresses.  The Company also  employed 58 part-time
employees who were engaged in food and beverage service.  Entertainers  numbered
approximately  98 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.

     For all periods  prior to 2001,  the Company  treated all  entertainers  as
employees. During 2001, as a result of certain related court and/or tax rulings,
the Company began  classifying  its  entertainers  as  independent  contractors,
including the issuance of Form 1099s as required by the Internal Revenue Service
and Department of Labor.

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


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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."

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:

     Adult Cabaret  Operations  Are Subject to Local  Economic  Conditions.  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.

     Failure  to  Maintain  Adequate  Financial  Controls  Could  Result in Lost
Revenues.  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.

     Significant   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 may expand its existing business operations
by opening or acquiring  additional adult cabarets in metropolitan areas located
in the  Southwestern  United  States.  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


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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."

     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.  The
Company  occupies  the premises for its  corporate  offices on a  month-to-month
basis.  Based on current  local market  conditions  and  available  information,
management  is of the belief that it will be able to  relocate  to a  comparable
location at a comparable cost if necessary.

     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:


                                       6
<PAGE>
<TABLE>
<CAPTION>


                                                                    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                              $1,000 per week minimum(1)       $8,500 per week
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)                         $919,223                    $69,292
Federal income tax basis                                $84,822                     $20,111
   (excluding land)
Depreciation method and life                           SL-19 yrs.                ACRS-15 yrs.
Ad valorem tax rate per $100 of valuation                $2.73                       $3.15
--------------------
</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  provided that effective January 1, 2001, the base
     rental was 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.  During  2001,  $52,000  of lease
     payments  were received by the Company for this  property.  At December 31,
     2001,  the lessee  owed  $56,866 for accrued  rent for this  property.  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 Company believes that the
     lease for this  property  will be renewed in May 2002 with terms similar to
     the current  terms.  The business is owned by an affiliated  corporation of
     Duncan  Burch,  an  officer  and  director  of the  Company.  See  "Certain
     Relationships and Related Transactions."

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
October 2002.  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 January 10, 2002 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  5,400,356 shares were  represented at the meeting,  approximately
94% of the  outstanding  shares  entitled to vote.  The  following  matters were
submitted  to a vote of the  shareholders  through  solicitation  of  proxies or
otherwise:


                                       7
<PAGE>

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

     Election of Board of Directors
         Nick Mehmeti                              5,371,350   3,313     25,693
         Duncan Burch                              5,371,460   3,203     25,693

     Appointment of S.W. Hatfield, CPA as
         Auditors for 2001                         5,396,412   3,743      201

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     As of December  31,  2001,  the Company  had  approximately  350 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.

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

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

                                      ----------------------------
             Fiscal Year Ended               Common Stock
             December 31, 2001        ----------------------------
                                         High            Low
         ---------------------------  ------------  --------------
               First Quarter             $0.50          $0.20
               Second Quarter            $0.27          $0.15
               Third Quarter             $0.25          $0.14
               Fourth Quarter            $0.30          $0.14


            First Quarter-- 2002
         (through March 25, 2002)        $0.29          $0.15

     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 25, 2002
were $0.19 and $0.19 per share, respectively.

     During each  quarter of 1999 and 1998,  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.


                                       8
<PAGE>


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

Caution Regarding Forward-Looking Statements

     Certain  statements  contained in this annual  filing,  including,  without
limitation, statements containing the words "believes", "anticipates", "expects"
and  words  of  similar  import,  constitute  forward-looking  statements.  Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other factors that may cause the actual results,  performance or achievements of
the Company,  or industry  results,  to be materially  different from any future
results,   performance   or   achievements   expressed   or   implied   by  such
forward-looking statements.

     Such factors include, among others, the following: international,  national
and local  general  economic and market  conditions:  demographic  changes;  the
ability of the Company to sustain, manage or forecast its growth; the ability of
the Company to successfully make and integrate acquisitions; existing government
regulations  and  changes  in,  or  the  failure  to  comply  with,   government
regulations;  adverse publicity;  competition; the loss of significant customers
or suppliers;  fluctuations  and  difficulty in forecasting  operating  results;
changes in business strategy or development  plans;  business  disruptions;  the
ability  to attract  and  retain  qualified  personnel;  the  ability to protect
technology; and other factors referenced in this and previous filings.

     Given these  uncertainties,  readers of this Form 10-KSB and  investors are
cautioned not to place undue reliance on such  forward-looking  statements.  The
Company  disclaims  any  obligation  to update any such  factors or to  publicly
announce the result of any  revisions to any of the  forward-looking  statements
contained herein to reflect future events or developments.

Results of Operations

     Year ended  December 31, 2001 as compared to year ended  December 31, 2000.
Bar and  restaurant  sales  decreased  by  approximately  18% in  2001.  Bar and
restaurant  sales were  $2,888,761 in 2001  compared to $3,540,869 in 2000.  The
decrease in bar and restaurant sales was due to the increased enforcement by the
City of Dallas of its Sexually  Oriented  Business  Ordinance  and the resulting
litigation  between the Company and other Dallas cabaret  operators and the City
of Dallas.  The Sexually  Oriented Business  Ordinance  restricts the attire and
dancing activities at the Company's Million Dollar Saloon, and other local adult
cabarets, which has resulted in a decrease in patron attendance at the Company's
facilities.  Management  is  unable  to  assess  the  long-term  impact  of this
continuing  litigation.  See "Item 3 - Legal  Proceedings." Also, as a result of
the September 11, 2001 tragedy,  customer  attendance  decreased during the last
quarter of fiscal 2001.

     Management's  continues to direct it's efforts towards customer service and
increasing sales through effective marketing and advertising methods to maintain
and increase its bar and restaurant patronage and comply with current regulatory
conditions and environment.

     The  Company's  rental  income  declined  by   approximately   $209,000  to
approximately  $571,000 in 2001 from  approximately  $780,000 in 2000.  The most
significant  factor to this  decrease  was a  renegotiated  lease with  entities
controlled  by Duncan  Burch,  one of the  Company's  controlling  shareholders,
during the first quarter.  On January 30, 2001, the Company's Board of Directors
approved an amendment  to the lease  agreement  covering  the property  owned by
Corporation  Lex, a Company  subsidiary.  The amendment  provides that effective
January 1, 2001,  the base rental will be reduced from $4,750 per week to $1,000
per  week.  Additionally,  the  amended  lease  provided  that the  Company,  as
landlord,  shall receive 10% of the gross  revenues  generated from the business
located at the property,  payable  quarterly,  until termination of the lease in
May 2002. As of December 31, 2001, the Company is due  approximately  $57,000 in
additional rents over and above the required weekly payment as calculated on the
gross sales of the tenant.

     The  modification  of this lease  agreement was the result of  negotiations
between the Company and  representatives  of the tenant,  who is affiliated with
Duncan Burch, one of the Company's  controlling  shareholders and an officer and
director of the Company.  Such  modifications  were requested by the tenant as a
result of decreasing revenues of the tenant's adult cabaret operation located on
the  property.  The tenant had  advised  the  Company  that if the lease was not
modified, it may be compelled to close its business operations.


                                       9
<PAGE>

     Cost of sales experienced decreases to approximately $1,794,000 for 2001 as
compared to  approximately  $2,179,000 for 2000.  During 2001, the Company began
treating all entertainers as independent contractors,  including the maintenance
and issuance of Form 1099, as required by the Internal  Revenue  Service and the
Department of Labor.  This change in employment  policy and treatment  created a
decline in both dance revenues and entertainer  compensation as all table dances
are now negotiated  directly between the entertainer and the Company's  patrons.
Key  areas  of  management  focus  for  cost of sales  expenditure  control  are
principally food and beverage costs.  Gross profit percentages remain relatively
constant at 48.14%  ($1,665,000)  for 2001 versus 49.56%  ($2,141,000) for 2000.
Cost  controls  over  purchasing,   inventory  management  protocols  and  labor
management are continuously monitored to improve gross profit percentages.

     General and administrative expenses were approximately  $1,473,000 for 2001
as  compared  to  approximately  $1,997,000  in 2000.  The  overall  decrease of
approximately  $524,000 was caused by reduced executive compensation and savings
in general operating  expenses as a result of various  operational  controls and
monitoring.  The Company anticipates  relatively constant expenditure levels for
general operating expenses in future periods and management continues to monitor
its expenditure levels to achieve optimum financial results.

     Net income before income taxes was  approximately  $221,000 for 2001 versus
approximately $169,000 for 2000. After-tax net income decreased by approximately
$34,000 from approximately $141,000 for 2000 to approximately $107,000 for 2001.
The Company experienced  earnings per share of approximately $0.02 and $0.02 per
share for 2001 and 2000, respectively.

     As a general  rule,  the  Company's  adult  cabaret  operations  experience
unpredictable  fluctuations as a result of the overall  economic state of the U.
S. economy, visitation levels related to visitor, convention and business travel
levels and impacts  related to the City of Dallas' various  enforcement  actions
and on-premises  monitoring of entertainer  conduct.  Management makes it's best
efforts to timely adjust its expenditure levels to these events as they occur in
order to maintain profitability.

     Year ended  December  31, 2001 as compared to the year ended  December  31,
2000. Bar and restaurant sales were approximately $3,541,000 in 2000 compared to
$2,948,000  in  1999,  for an  increase  of  approximately  17%.  Rental  Income
increased  from $698,000 in 1999 to $780,000 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.

     Cost of sales  increased by $393,000 from  $1,787,000 in 1999 to $2,179,000
in 2000. The increase is related to an approximate  $296,000  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.
During 1999 and 2000, the Company treated all entertainers as employees,  and as
such,  table  dance  revenues  were  reported  as  revenues of the Company and a
corresponding cost of sales expense was recognized for entertainer compensation.
This situation changed during 2001 as previously discussed.

     The Company experienced  relatively  consistent gross profit percentages of
approximately 49% in 2000 and 51% in 1999. Management attributes the decrease in
gross  profit  percentage  to the  increased  direct  labor  costs.  The Company
explored all possible  opportunities to maintain its gross profit percentages to
a level of over 50%.

     General and administrative expenses increased from approximately $1,607,000
in  1999 as  compared  to  $1,997,000  in  2000.  Of this  change,  the  Company
experienced an increase of approximately $363,000 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 Manager 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 expenses 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  $145,000  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


                                       10
<PAGE>

$21,000  for 1999 as  compared  to  $24,000 in 2000.  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 approximately $141,000 in 2000 as compared to
$184,000 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.

Liquidity and Capital Resources

     As of  December  31, 2001 and 2000,  the  Company  had  working  capital of
approximately  $809,000  and  $611,000,  respectively.  Included in the positive
working  capital  balances  is  cash of  approximately  $939,000  and  $727,000,
respectively.  The 2001 balance also includes a trade  accounts  receivable  for
rental income of approximately  $57,000 due from an entity  controlled by Duncan
Burch, a Company shareholder, officer and director.

     The  Company   experienced   positive   cash  flows  from   operations   of
approximately  $215,000 in 2001 and approximately $335,000 in 2000. The decrease
in this area is directly  attributable  to reduced  patronage  in the  Company's
adult cabaret and decreased  rental income amounts from an entity  controlled by
Duncan Burch, a Company shareholder, officer and director.

     The Company has identified no significant  capital  requirements  for 2002,
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.

     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.

     For all periods  prior to 2001,  the Company  treated all  entertainers  as
employees  whereas  other similar  facilities  may or may not have treated their
entertainers  as  independent  contractors.  During 2001, as a result of certain
related court and/or tax rulings, the Company began classifying all entertainers
as independent contractors, including the maintenance and issuance of Form 1099,
as required by the Internal  Revenue  Service and the Department of Labor.  This
change in  employment  policy  and  treatment  created a decline  in both  dance
revenues and  entertainer  compensation  as all table dances are now  negotiated
directly between the entertainer and the Company's patrons. Management is of the
opinion that it's actions, policies and procedures, as predicated on promulgated
court and  administrative  rulings,  will  cause an  insignificant  risk to both
future operations and profitability for any potential  assessment of payroll and
related taxes in the future by regulatory authorities.

ITEM 7. FINANCIAL STATEMENTS

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

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

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


                                       11
<PAGE>
<TABLE>
<CAPTION>

PART II

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
     ---------------   -----   -----------------------------------------   --------------
     <S>               <C>     <C>                                         <C>
     Nick Mehmeti(1)    43     President, Chief Executive Officer, Chief   January 2000
                               Financial Officer and Director
     Duncan Burch(1)    43     Executive Vice President and Director       January 2000
     Dewanna Ross(2)    46     Secretary and Treasurer
--------------------
</TABLE>

(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.  On March 2, 2001,  the Board of
     Directors elected Mr. Mehmeti as Chief Financial Officer.
(2)  Ms. Ross served as Vice President of Operations and Chief Operating Officer
     from  January 19, 2000 to January 10, 2002 and as a director of the Company
     from 1995 to January 10, 2002.

     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,  Chief
Financial 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 served as a director of the Company  from 1995 to January 10,
2002 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 and served in this  capacity  until
January  10,  2002.  She  currently  serves  as the  Secretary-Treasurer  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,  2001,  the Board acted on one
occasion  by  written  unanimous  consent of the Board of  Directors  in lieu of
meeting and held one  meeting.  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.

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,  2001,  all Section  16(a)  filing  requirements
applicable  to its  directors,  officers  and 10%  holders  for such  year  were
complied with.


                                       12
<PAGE>
<TABLE>
<CAPTION>

ITEM 10.          EXECUTIVE COMPENSATION

     Laird  Boles,  who is not an officer or director of the  Company,  received
$225,000  compensation  during 2001. Mr. Bales is primarily  responsible for the
management  of  the  Company's  Million  Dollar  Saloon  and  related  personnel
supervision. No executive officer of the Company received remuneration in excess
of $100,000 during 2001. 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      2001   $84,000         NA            NA            NA           NA         $-0-
   Executive Officer
Nick Mehmeti, President, Chief      2000   $191,162        NA            NA            NA           NA         $-0-
   Executive Officer(1)
Dewanna Ross, President and Chief   2000   $               NA            NA            NA           NA         $-0-
   Executive Officer(2)             1999    4,200          NA            NA            NA           NA         $-0-
                                           $ 36,400
Nina Furrh, President and Chief     1999   $ 66,000        NA            NA            NA           NA         $-0-
   Executive Officer(3)
--------------------

</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  received a bonus of $81,162.  On January  30,  2001,  Mr.  Mehmeti
     agreed to reduce his 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,  a position she held until January 10, 2002.
     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.

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

     Except  as set  forth  in  Item  12 -  Certain  Relationships  and  Related
Transactions,  none  of the  directors  or  officers  of the  Company  or  their
respective  associates or affiliates is indebted to the Company. 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.

                                       13
<PAGE>
<TABLE>
<CAPTION>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth certain  information  as of March 25, 2002
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
     -------------------------------------------------   ----------------   ------------------
     <S>                                                 <C>                <C>
     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%
--------------------
</TABLE>

*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,  Chief  Financial
     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.
(4)  Dewanna Ross is the Secretary and Treasurer 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.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     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. During 2001 the Company received $52,000 in lease payments
for this  property.  At December 31,  2001,  the lessee owed $56,866 for accrued
rent for this property.  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."


                                       14
<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, 2001 and 2000                F-3
     Consolidated Statements of Income and Comprehensive Income -
              Years Ended December 31, 2001 and 2000                         F-4
     Consolidated Statements of Changes in Shareholders' Equity -
              Years Ended December 31, 2001 and 2000                         F-5
     Consolidated Statement of Cash Flows -
              Years Ended December 31, 2001 and 2000                         F-6
     Notes to Consolidated Financial Statements                              F-7

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.
          10.3***   Modification  of Lease  Agreement  dated  January  31,  2001
                    between Corporation Lex and MD II Entertainment, Inc.
          21.1*     Subsidiaries of the Company.
--------------------

*    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.
***  Filed herewith.


                                       15
<PAGE>

(b)  Reports on Form 8-K.

     There  were no  reports  on Form 8-K  filed  with the SEC  during  the last
quarter of fiscal year ended December 31, 2001.




<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 28th day of March, 2002.

                            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 28, 2002
------------------      Chief Financial Officer and Director
Nick Mehmeti

  /s/ Duncan Burch      Executive Vice President and Director     March 28, 2002
------------------
Duncan Burch

                                       16
<PAGE>



                           MILLION DOLLAR SALOON, INC.
                                AND SUBSIDIARIES

                              Financial Statements
                                       and
                                Auditor's Report

                           December 31, 2001 and 2000












                              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 Balance Sheets
         as of December 31, 2001 and 2000                                    F-3

     Consolidated Statements of Income and Comprehensive Income
         for the years ended December 31, 2001 and 2000                      F-4

     Consolidated Statements of Changes in Shareholders' Equity
         for the years ended December 31, 2001 and 2000                      F-5

     Consolidated Statements of Cash Flows
         for the years ended December 31, 2001 and 2000                      F-6

     Notes to Consolidated Financial Statements                              F-7


<PAGE>

S. W. HATFIELD, CPA
certified public accountants

Member: Texas Society of Certified Public Accountants
        Press Club of Dallas


               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, 2001 and 2000, and the related consolidated statements of income
and comprehensive  income,  changes in shareholders'  equity, and cash flows for
each of the two 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 audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  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, 2001 and 2000 and the
results  of its  operations  and its cash  flows for each of the two years  then
ended, respectively, in conformity with generally accepted accounting principles
generally accepted in the United States of America.


                                         S. W. HATFIELD, CPA
Dallas, Texas
January 24, 2002

                      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                             F-2                      SWHCPA@aol.com


<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000

                                                         Year Ended      Year Ended
                                                        December 31,    December 31,
                                                             2001            2000
                                                        ------------    ------------
<S>                                                     <C>             <C>
                                     ASSETS
                                     ------
Current Assets
    Cash on hand and in bank                            $    938,785    $    727,043
    Accounts receivable - trade and other                     56,866            --
    Prepaid Federal income taxes receivable                     --            33,141
    Inventory                                                 19,417          22,844
    Prepaid expenses                                            --             8,737
                                                        ------------    ------------
       Total current assets                                1,015,068         791,765
                                                        ------------    ------------

Property and Equipment - At Cost
    Buildings and related improvements                     2,017,514       2,017,514
    Furniture and equipment                                  867,087         864,459
                                                        ------------    ------------
                                                           2,884,601       2,881,973
    Less accumulated depreciation                         (1,809,613)     (1,718,248)
                                                        ------------    ------------
                                                           1,074,988       1,163,725
    Land                                                     741,488         741,488
                                                        ------------    ------------
       Net property and equipment                          1,816,476       1,905,213
                                                        ------------    ------------

Other Assets                                                   4,725           5,475
                                                        ------------    ------------

Total Assets                                            $  2,836,269    $  2,702,453
                                                        ============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
Current Liabilities
    Accounts payable - trade                            $     12,057    $      7,464
    Accrued liabilities                                      113,070         166,800
    Accrued income taxes payable                              74,400            --
    Tenant deposits                                            6,500           6,500
                                                        ------------    ------------
       Total current liabilities                             206,027         180,764
                                                        ------------    ------------

Long-Term Liabilities
    Deferred tax liability                                   134,524         133,101
                                                        ------------    ------------
       Total liabilities                                     340,551         313,865
                                                        ------------    ------------

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
    Retained earnings                                      2,489,986       2,382,856
                                                        ------------    ------------
       Total shareholders' equity                          2,495,718       2,588,588
                                                        ------------    ------------

Total Liabilities and Shareholders' Equity              $  2,836,269    $  2,702,453
                                                        ============    ============
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
                                                                             F-3

<PAGE>
<TABLE>
<CAPTION>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                     Years ended December 31, 2001 and 2000


                                                          Year Ended      Year Ended
                                                         December 31,    December 31,
                                                              2001            2000
                                                         ------------    ------------
<S>                                                      <C>             <C>
Revenues
    Bar and restaurant sales                             $  2,888,761    $  3,540,869
    Rental income                                             570,095         779,928
                                                         ------------    ------------
       Total revenues                                       3,458,856       4,320,797
                                                         ------------    ------------

Cost of Sales - Bar and Restaurant Operations
    Direct labor                                            1,159,756       1,540,080
    Purchases                                                 633,908         639,365
                                                         ------------    ------------
       Total cost of sales                                  1,793,664       2,179,445
                                                         ------------    ------------

Gross Profit                                                1,665,192       2,141,352
                                                         ------------    ------------

Operating Expenses
    Salaries, wages and related expenses                      503,086         862,842
    Consulting, management and other professional fees        204,906         199,599
    Rental expenses, principally taxes                         67,968          65,420
    Interest expense                                             --             2,129
    Other operating expenses                                  604,896         759,944
    Depreciation and amortization                              92,481         106,908
                                                         ------------    ------------
       Total operating expenses                             1,473,337       1,996,842
                                                         ------------    ------------

Income from Operations                                        191,855         144,510

Other Income (Expenses)
    Interest income and other items                            28,908          24,252
                                                         ------------    ------------

Income before Income Taxes                                    220,763         168,762

Provision for Income Taxes
    Currently payable                                        (112,209)        (34,282)
    Deferred                                                   (1,424)          6,147
                                                         ------------    ------------

Net Income                                                    107,130         140,627

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

Comprehensive Income                                     $    107,130    $    140,627
                                                         ============    ============

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

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-4

<PAGE>


                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     Years ended December 31, 2001 and 2000



                                  Common Stock                         Total
                             -----------------------    Retained   shareholders'
                              # shares      Amount      earnings      equity
                             ----------   ----------   ----------   ----------
Balances at                   5,731,778   $    5,732   $2,242,229   $2,247,961
    January 1, 2000


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


Net income for the year            --           --        107,130      107,130
                             ----------   ----------   ----------   ----------

Balances at
         December 31, 2001    5,731,778   $    5,732   $2,489,986   $2,495,718
                             ==========   ==========   ==========   ==========

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 CASH FLOWS
                     Years ended December 31, 2001 and 2000



                                                             Year Ended     Year Ended
                                                            December 31,   December 31,
                                                                2001            2000
                                                            -----------    ------------
<S>                                                         <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                              $   107,130    $    140,627
    Adjustments to reconcile net income to net cash
       provided by operating activities
         Depreciation and amortization                           92,481         106,908
         Deferred income taxes                                    1,423          (6,147)
         (Increase) decrease in
           Accounts receivable - trade                          (48,129)          1,011
           Prepaid income taxes                                  33,141         (12,802)
           Inventory                                              3,427           8,818
         Increase (decrease) in
           Accounts payable and other accrued liabilities       (49,137)         96,488
           Accrued federal income taxes payable                  74,400            --
                                                            -----------    ------------

Net cash provided by operating activities                       214,736         334,903
                                                            -----------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Principal collections on note receivable                       --            35,179
    Purchases of property and equipment                          (2,994)        (56,297)
                                                            -----------    ------------

Net cash used in investing activities                            (2,994)        (21,118)
                                                            -----------    ------------

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

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

INCREASE IN CASH AND CASH EQUIVALENTS                           211,742         116,810

Cash and cash equivalents at beginning of year                  727,043         610,233
                                                            -----------    ------------

Cash and cash equivalents at end of year                    $   938,785    $    727,043
                                                            ===========    ============

SUPPLEMENTAL DISCLOSURES OF
    INTEREST AND INCOME TAXES PAID
       Interest paid on borrowings                          $      --      $      2,129
                                                            ===========    ============
       Income taxes paid                                    $     4,669    $     47,084
                                                            ===========    ============
</TABLE>

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

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                           December 31, 2001 and 2000


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,  2001 and 2000,  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.

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  cash or  nationally  issued  bankcards  as  payment  for goods and
     services in its adult 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.

     As of December 31, 2000, all lessors of Company rental property,  by virtue
     of a change in control of the Company, are entities controlled by a Company
     shareholder,  officer and  director.  All lease rental  payments are due in
     advance on the first day of the week for that week. All revenue sources are
     located either in Dallas or Tarrant County, Texas.

                                                                             F-7
<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     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.

7.   Earnings per share
     ------------------

     Basic  earnings  (loss) per share is computed  by  dividing  the net income
     (loss) by the weighted-average  number of shares of common stock and common
     stock  equivalents  (primarily  outstanding  options and warrants).  Common
     stock equivalents  represent the dilutive effect of the assumed exercise of
     the  outstanding  stock  options and  warrants,  using the  treasury  stock
     method.  The calculation of fully diluted earnings (loss) per share assumes
     the dilutive effect of the exercise of outstanding  options and warrants at
     either the  beginning  of the  respective  period  presented or the date of
     issuance,   whichever  is  later.   As  of  December  31,  2001  and  2000,
     respectively,  the Company has no outstanding  stock  warrants,  options or
     convertible  securities  which could be considered as dilutive for purposes
     of the loss per share calculation.

                                                                             F-8
<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


NOTE C - CONCENTRATIONS OF CREDIT RISK

The carrying amount of cash,  accounts  receivable,  accounts  payable and notes
payable, as applicable,  approximates fair value due to the short term nature of
these items  and/or the current  interest  rates  payable in relation to current
market conditions.

NOTE D - NOTE RECEIVABLE

The Company  maintains  its cash accounts in financial  institutions  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, 2001 and 2000,  respectively,
each entity listed below had credit risk  exposures in excess of statutory  FDIC
coverage:


                                       Highest     Lowest     Number of days
                                       exposure    Exposure   with exposure
                                       --------    --------   --------------
     Year ended December 31, 2001
     ----------------------------

         Tempo Tamers, Inc.
           Bank A                      $110,213    $  2,956        200

         Don, Inc.
           Bank A                      $ 70,747    $ 14,247         78
           Bank B                      $297,579    $ 45,823        365

         Corporation Lex
           Bank B                      $ 32,065    $ 28,843        365

     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

         Don, Inc.
           Bank A                      $195,323    $  1,020        186
           Bank B                      $297,579    $167,856        101

         Corporation Lex
           Bank A                      $ 14,872    $  3,935         27
           Bank B                      $100,086    $ 29,795        101

The  Company has  incurred  no losses  during 2001 or 2000 as a result of any of
these unsecured situations.

                                                                             F-9
<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


NOTE E - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 2001 and 2000:

                                      December 31,   December 31,     Estimated
                                           2001           2000          life
                                      ------------   ------------   ------------
Buildings and related improvements    $  2,017,514   $  2,017,514   15-40 years
Furniture and equipment                    867,087        864,459    5-10 years
                                      ------------   ------------

                                         2,884,601      2,881,973
Less accumulated depreciation           (1,809,613)    (1,718,248)
                                      ------------   ------------

                                         1,074,988      1,163,725
Land                                       741,488        741,488
                                      ------------   ------------

Net property and equipment            $  1,816,476   $  1,905,213
                                      ============   ============

Depreciation  expense for the years ended December 31, 2001 and 2000 was $91,731
and $91,119, respectively.

NOTE F - INCOME TAXES

The components of income tax expenses (benefit) for the years ended December 31,
2001 and 2000, respectively, are as follows:

                                                    Year ended      Year ended
                                                   December 31,    December 31,
                                                           2001            2000
                                                   ------------    ------------
     Federal:
         Current                                   $    112,209    $     34,282
         Deferred                                        (1,424)         (6,147)
                                                   ------------    ------------
                                                        107,130          28,135
                                                   ------------    ------------

     State:
         Current                                           --              --
         Deferred                                          --              --
                                                   ------------    ------------
                                                           --              --
                                                   ------------    ------------
     Total                                         $    107,130    $     28,135
                                                   ============    ============

The Company's income tax expense (benefit) for the years ended December 31, 2001
and 2000,  respectively,  differed from the statutory federal rate of 34 percent
as follows:

                                                               Year ended      Year ended
                                                              December 31,    December 31,
                                                                   2001            2000
                                                              ------------    ------------
<S>                                                           <C>             <C>
     Statutory rate applied to earnings before income taxes   $     75,059    $     57,379
     Increase (decrease) in income taxes resulting from:
         State income taxes                                           --              --
         Deferred income taxes                                      (1,424)         (6,147)
         Effect of incremental tax brackets and the
           application of business tax credits                      33,495         (23,097)
                                                              ------------    ------------

              Income tax expense                              $    107,130    $     28,135
                                                              ============    ============
</TABLE>

                                                                            F-10
<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000


NOTE F - INCOME TAXES - Continued

The  deferred  current  tax asset and  non-current  deferred  tax  liability  on
December  31,  2001  and  2000,  respectively,  balance  sheet  consists  of the
following:

                                                   December 31,    December 31,
                                                        2001            2000
                                                   ------------    ------------

     Non-current deferred tax liability            $   (134,524)   $   (133,101)
                                                   ------------    ------------

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

NOTE G - CAPITAL STOCK TRANSACTIONS

On  March  19,  1998,  the  Company  entered  into a  Stock  Purchase  Agreement
(Agreement)  with an unrelated  individuFal.  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,
2001, no shares of common stock have been issued in accordance  with the "second
closing" portion of the Agreement.

NOTE H - COMMITMENTS

The Company leases  commercial  real estate to entities  controlled by a Company
shareholder,  officer and director on both short and 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, 2001, future minimum non-cancellable lease revenues
are as follows:

            Year ending
           December 31,        Amount
           ------------     ------------
              2002          $    294,200
              2003               169,750
                            ------------

              Total         $    463,950
                            ============

NOTE I - 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.  As of December 31, 2001 and 2000,  respectively,  all rental
revenues are derived from entities controlled by a Company shareholder,  officer
and director. Approximately 16.5% and 18.1% of total revenues for 2001 and 2000,
respectively, came from related parties.

                                                                            F-11
<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE I - SEGMENT INFORMATION - Continued


                                       Restaurant           Rental        General and
                                        Facility         real estate     administrative       Total
                                      --------------    --------------   --------------   --------------
<S>                                   <C>               <C>              <C>              <C>
Year ended December 31, 2001
    Revenue from external customers   $    2,888,761    $         --     $         --         $ 2,888,761
    Revenue from related parties                --             570,095             --             570,095
    Revenue (expenses) from/to
       intercompany sources                 (240,000)          280,500           40,500              --
    Interest income                             --              11,439           16,978            28,417
    Interest expense                            --                --               --                --
    Depreciation and amortization             33,472            70,448             --              92,481
    Income tax expense (benefit)             (89,621)           84,083          119,171           113,633
    Segment assets                           367,418         2,101,720          367,131         2,836,269
    Fixed asset expenditures                   2,994              --               --               2,994

Year ended December 31, 2000

    Revenue from external customers   $    3,540,869    $         --     $         --         $ 3,540,869
    Revenue from related parties                --             779,928             --             779,928
    Revenue (expenses) from/to
       intercompany sources                 (240,000)          350,000          (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
</TABLE>

                                                                            F-12

<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2001 and 2000

NOTE J - SELECTED FINANCIAL DATA (Unaudited)

The following is a summary of the quarterly  results of operations for the years
ended December 31, 2001 and 2000, 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>
Calendar 2001
    Restaurant sales                $     874,569   $     826,708   $     762,654   $     424,830   $   2,888,761
    Rental income - Related party         135,896         125,775         125,775         182,649         570,095
    Gross profit                          405,767         370,284         428,030         461,111       1,665,192
    Net earnings                           42,861          13,210          37,646          13,413         107,130
    Basic and fully diluted
       earnings per share                    0.01             nil            0.01             nil            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


NOTE J - SELECTED FINANCIAL DATA (Unaudited) - Continued

                                    Quarter ended   Quarter ended   Quarter ended   Quarter ended    Year ended
                                      March 31,        June 30,     September 30,   December 31,    December 31,
                                    -------------   -------------   -------------   -------------   -------------
Calendar 2000
    Restaurant sales                $   1,000,831   $     975,582   $   1,015,371   $     549,085   $   3,540,869
    Rental income - Related party         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

</TABLE>

                                                                            F-13
<PAGE>


                                INDEX TO 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.
          10.3***   Modification  of Lease  Agreement  dated  January  31,  2001
                    between Corporation Lex and MD II Entertainment, Inc.
          21.1*     Subsidiaries of the Company.
--------------------
*    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.
***  Filed herewith.