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, 2002

                         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, 2002 were
$3,791,827. The aggregate market value of common stock held by non-affiliates of
the  issuer at March 14,  2003,  based  upon the  closing  sale price on the OTC
Bulletin  Board on said date of $0.24 per share,  was $480,445.  As of March 17,
2003, there were 5,731,778 shares of the issuer's common stock outstanding.

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

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

PART I

   ITEM 1. DESCRIPTION OF BUSINESS.............................................1
   ITEM 2. PROPERTIES..........................................................7
   ITEM 3. LEGAL PROCEEDINGS...................................................8
   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.................9

PART II

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

PART III

   ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
              COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT...............14
   ITEM 10. EXECUTIVE COMPENSATION............................................15
   ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
               AND RELATED STOCKHOLDER MATTERS................................16
   ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................16
   ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..................................17
   ITEM 14. CONTROLS AND PROCEDURES...........................................18

   INDEX TO EXHIBITS.......................................................IOE-1


















                                     - i -
<PAGE>

                                     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. The Company owns and operates an adult cabaret in Dallas, Texas
and owns and manages two other commercial  properties located in the Dallas-Fort
Worth Metroplex.

         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 the Company's  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.

         The Company's  principal offices are located at 6848 Greenville Avenue,
Dallas,  Texas  75231,  and its  telephone  number  is  (214)  691-6757.  Unless
otherwise  indicated,   the  "Company"  refers  to  the  Company,  each  of  its
wholly-owned subsidiaries and Tempo. The Company's common stock is traded on the
OTC Bulletin Board under the symbol "MLDS".

         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 commercial real estate.


                                       1
<PAGE>

Purchase of Real Estate

         On February 14, 2003, the Company  purchased 6.695 acres of undeveloped
property  located  in  Dallas,  Texas.  The  purchase  price  was  approximately
$2,650,312,  including  closing expenses of approximately  $53,599.  The Company
paid $493,072 cash, which included a $140,000  unsecured,  non-interest  bearing
advance to the Company from Duncan Burch, a controlling shareholder, officer and
director  of the  Company,  and  issued  to the  seller a  one-year  note in the
principal amount of $2,156,713 with 8% annual interest.  The payment of the note
is secured with a lien  against the  property  granted to the note holder by the
Company. The interest on the note is payable monthly  (approximately $14,678 per
month)  beginning  April 1, 2003 with the  principal  amount due and  payable on
February 1, 2004.

         The property is undeveloped  and suitable for  commercial  development.
Although the Company has not  determined  the usage of the land, the Company may
use a  portion  of  the  land  for an  adult  cabaret  and  sell  the  remaining
undeveloped  property to a third party.  The development of the property will be
subject to the  Company  obtaining a  construction  loan.  The Company  does not
currently  know the amount of the loan it will need to develop this  property or
whether  it will be able to  obtain a  sufficient  loan for  development  of the
property or, if obtained, whether the terms of the loan will be favorable to the
Company.

         The  Company  intends to seek  long-term  financing  for the  purchased
property  before the principal  note is due in February  2004. If the Company is
unable to obtain long-term financing,  the Company may have to sell the property
to pay the note. There can be no assurance that the property can be sold for the
total amount of the note.  The sale of the property for less than the  Company's
purchase price will result in a loss which could materially adversely affect the
Company's financial condition and results of operation.

Adult Cabaret

         General. The Company, through Tempo, owns and operates an adult cabaret
under  the name "The  Million  Dollar  Saloon,"  which is its  primary  business
operation.  The  Million  Dollar  Saloon  opened  in 1982  with  the  intent  of
establishing a sophisticated  entertainment  environment focused on attracting a
professional  clientele.  To enhance the club's appeal to its target market, The
Million Dollar Saloon offers restaurant and first-class bar service conducive to
attracting  businessmen  and  out-of-town  convention  clientele.   The  Company
continues to explore the possible  expansion of the adult cabaret segment of its
business by  establishing  additional  Million  Dollar  Saloons or acquiring and
operating  similar  facilities  in  selected  cities.  Although  the  Company in
February 2003  purchased 6.6 acres of  undeveloped  land in Dallas,  Texas,  the
Company  has not  determined  whether  the land  will be  developed  as an adult
cabaret or for other  purposes.  Other than the recent  purchase  of the Dallas,
Texas property, no specific locations for additional Million Dollar Saloons 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.

         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.


                                       2
<PAGE>

         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  management  of a cash  intensive  nightclub  and bar  business.  The
Company separates management personnel from all cash handling.  The Company uses
a  combination  of the  latest in  nightclub-oriented  accounting  software  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 monitor and control the nightclub. Management controls,
restricts and supervises  carefully all management personnel with cash handling.
Management personnel reconcile continuously each day deposits of cash and credit
card receipts to produce a detailed 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  atmosphere
through its Mediterranean decor theme 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 fine wine list. The sound system design provides quality
high-energy  music levels that also permit easy  conversation to 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 its sound and light
systems.  Management  constantly  monitors the environment of The Million Dollar
Saloon  for  appropriate  music  selection,   customer   service,   and  upscale
appearance, and ambience.

         VIP Area. To provide  service for the upper-end of the business  market
segment, the Company maintains a spacious VIP mezzanine  encompassing the entire
upstairs  public 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",  a private  entertainment  space for  bachelor and other
large group activities.

         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 other  promotional  activities  ensure that the public recognizes The
Million Dollar Saloon name.

Future Expansion

         Other than the recent  purchase  of the  Dallas,  Texas  property,  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.


                                       3
<PAGE>

Competition

         The adult  entertainment  nightclub industry is highly competitive with
respect  to  price,   service,   location,   and  the   professionalism  of  its
entertainment.  The Million Dollar Saloon competes with many locally-owned adult
cabarets in Dallas,  Texas,  certain of which may enjoy  recognition that equals
that of The  Million  Dollar  Saloon.  While  there  may be  local  governmental
restrictions on the location of a so-called "sexually oriented business",  there
are no barriers to entry into the adult cabaret  market.  There are in excess of
30 adult cabarets located in the Dallas,  Texas metropolitan area of which three
are in  direct  competition  with the  Million  Dollar  Saloon.  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
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 "Item
3 - Legal Proceedings."

Employees

         As of December 31,  2002,  the Company had  approximately  41 full-time
employees,  of which 13 were in management  positions,  including  corporate and
administrative  operations  and 28 were  engaged in food and  beverage  service,
including  bartenders  and  waitresses.  The Company also employed 127 part-time
employees who were engaged in food and beverage service.  Entertainers  numbered
approximately  97 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.


                                       4
<PAGE>

Insurance

         The Company  maintains  insurance in amounts it considers  adequate for
personal  injury and property  damage.  The Company  maintains  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.

Commercial Real Estate

         The Company owns four  properties in the Dallas-Fort  Worth  Metroplex.
One facility is Company operated,  The Million Dollar Saloon, located in Dallas.
Two of the properties  are leased to affiliates of Duncan Burch,  an officer and
director  of the  Company,  for the  operation  of adult  cabarets.  The  fourth
property  consists of 6.6 acres of  undeveloped  real estate  located in Dallas,
Texas.  The Company has not determined if this property will be developed for an
adult cabaret or for other  purposes.  See "Item 1 -  Description  of Business -
Purchase of Real Estate."

         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  Item 2 -
"Properties."

         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.  The Company's three developed  properties  include  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. The effective rentals vary between locations because of
desirability and  attractiveness of locations.  One of the properties is subject
to a lease which  expires in August  2003.  Another  property is  currently on a
month-to-month  lease.  Management  believes  that  all  of its  properties  are
adequately  covered  by  insurance.  See  "Item 2 -  Properties"  and "Item 12 -
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.


                                       5
<PAGE>

         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 or exceeds 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.

         Company Competes with Businesses  Owned by Directors.  Nick Mehmeti and
Duncan Burch, and their affiliates, own and operate adult cabarets,  restaurants
and sports bars in the Dallas-Fort  Worth  Metroplex.  The Company is engaged in
direct  competition  with the adult cabarets owned by Messrs.  Mehmeti and Burch
for customers and employment of female  entertainers.  The Company believes that
the combination of its existing name  recognition and its distinctive and unique
entertainment  allows it to  effectively  compete  with  these  adult  cabarets.
However,  the  Company is unable to  ascertain  the  effect,  if any,  that such
competition  has had on past and future  revenues  or the  Company's  ability to
attract and retain qualified female entertainers.  Messrs. Mehmeti and Burch are
the sole directors of the Company and its principal shareholders.  See "Item 9 -
Directors,  Executive Officers,  Promoters and Control Persons;  Compliance with
Section 16(a) of the Exchange Act" and "Item 11 - Security  Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters."

         The  Company's  Commercial  Properties  Are Not  Subject  to  Long-Term
Leases;  Rental  Income in the Future May  Continue  to Decline.  The  Company's
rental income has declined from $779,928 in 2000 to $570,095 in 2001 to $524,232
in 2002.  The decline in rental income is primarily the result of  renegotiating
the lease terms for its Northwest  Highway,  Dallas,  Texas  property in January
2001.  The Company  leases two of its  commercial  properties  to  affiliates of
Duncan Burch, an officer, director and principal shareholder of the Company. The
facilities  on  the   properties   are  utilized  for  the  operation  of  adult
entertainment  night clubs. The Fort Worth, Texas property is subject to a lease
which expires in August 2003.  Neither the tenant of the Fort Worth property nor
Duncan Burch has advised the Company  whether  tenant intends to renew the lease
when it expires in August 2003.  There can be no assurance that the Company will
be able to renew the Fort Worth  property  lease,  or obtain a new  tenant  with
terms  similar to the  current  lease.  The  Northwest  Highway,  Dallas,  Texas
property is  currently  on a  month-to-month  lease  arrangement.  Although  the
Company is seeking lease terms that are at least comparable to terms for similar
properties in the  geographic  area,  there can be no assurance that the Company
will be able to renew its leases  with  affiliates  of Mr.  Burch or if renewed,
that the terms of the leases  will be as  favorable  to the  Company as it could
have obtained from an unaffiliated  party.  The failure of the Company to obtain
long-term lease agreements with affiliates of Mr. Burch, or other third parties,
with terms at least comparable to the existing lease  arrangements  could have a
material  adverse  effect  on  the  revenues  of  the  Company.  See  "Item  2 -
Properties"  and  "Item 6 -  Management's  Discussion  and  Analysis  or Plan of
Operation."

         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  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


                                       6
<PAGE>

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 "Item 3 - 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 commercial  properties in the Dallas-Fort  Worth
Metroplex and 6.6 acres of undeveloped  property  located in Dallas,  Texas. The
Million  Dollar  Saloon,  which is  Company  operated,  is located on one of the
Company's  properties.  Two  properties are leased to affiliates of Duncan Burch
for the operation of adult  entertainment  night clubs. Mr. Burch is an officer,
director and  principal  shareholder  of the Company.  One of the  properties is
subject to a  month-to-month  lease.  The other  property is under a lease which
expires  August  2003.  See  "Item  12  -  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 other two commercial  properties are leased to affiliates of Duncan
Burch,  an officer  and  director of the  Company,  for the  operation  of 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. The lease
rental  amounts  are based  upon the  location  and  physical  condition  of the
respective property.

         In October 2002,  Duncan Burch, Nick Mehmeti (officers and directors of
the Company) and certain of their  affiliated  businesses (the "Clubs")  entered
into a Compromise  Settlement  Agreement and Mutual  Releases  (the  "Settlement
Agreement")  with the City of Dallas to settle  pending  litigation,  claims and
disputes  between  the  parties  arising  out of the  operation  of the Clubs in
alleged  violation  of the Dallas City Code,  including  the  Sexually  Oriented
Business  Ordinance.  The  Settlement  Agreement  did not involve the  Company's
Million Dollar Saloon nor did the Settlement  Agreement  affect the operation of
the Million Dollar Saloon.

         However, the Settlement Agreement did affect the usage of the Company's
property located at 3021 Northwest  Highway,  Dallas,  Texas, which is currently
leased on a month-to-month  basis to an affiliate of Duncan Burch. The Northwest
Highway  property is currently  being utilized by lessee for the operation of an
adult cabaret. In accordance with the Settlement Agreement, lessee has agreed to
terminate the operation of the adult cabaret  business at the Northwest  Highway
location by July 31, 2003.

         The Company and its subsidiary,  Lex  Corporation,  the record owner of
the Northwest  Highway property,  signed the Settlement  Agreement for a limited
purpose.  The  Company  and  Corporation  Lex are not  bound by the terms of the
Settlement  Agreement  except that  Corporation Lex has agreed it will not allow
the  Clubs to use the  premises  at its  Northwest  Highway  property,  as or in
support of, a sexually oriented business,  dance hall, business featuring exotic
striptease,   business  featuring   scantily  clad  employees,   individuals  or
performers,  any  business  featuring  individuals,   employees,  licensees,  or
independent  contractors  displaying  specified  anatomical areas or engaging in
specified  sexual  activities,  or  operation  by the Clubs of a business in any
other  manner  circumventing  or  frustrating,  or intending  to  circumvent  or
frustrate the intent of Chapter 41A and 51A of the Dallas City Code. The Company
may  lease  the  Northwest  Highway  premises  for  any  other  lawful  purpose.
Management  of the Company is  currently  considering  various  options for this
property  including leasing the property to a non-sexually  oriented business or
selling the property to a third party.


                                       7
<PAGE>
<TABLE>
<CAPTION>

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

                                                                   Location/Address
                                             ------------------------------------------------------------
                                                 3021 Northwest Highway         3601 State Highway 157
                                                      Dallas, Texas                Fort Worth, Texas
                                             -------------------------------  ---------------------------
<S>                                                       <C>                            <C>
Square footage
   Building                                               8,550                          4,850
   Real estate tract                                     37,162                         60,398
Mortgages                                                 None                           None
Lease expiration                                     Month-to-Month                 August 2003(2)
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)                         $901,662                        $64,949
Federal income tax basis                                 $50,703                        $19,546
   (excluding land)
Depreciation method and life                           SL-19 yrs.                    ACRS-15 yrs.
Ad valorem tax rate per $100 of valuation                 $2.80                          $3.24
</TABLE>
--------------------

(1)      Since  January  1, 2001,  the base  rental has been equal to 10% of the
         gross  revenues  generated  from the business  located at the property,
         payable  quarterly,  with a minimum weekly payment of $1,000 which will
         be credited  against the quarterly  percentage  rent.  The minimum rent
         payment shall not be less than $1,000 per week. During 2002, $52,000 of
         lease  payments  were  received by the Company  for this  property.  At
         December  31,  2002,  the lessee owed $68,528 for accrued rent for this
         property which  included  $53,000 of accrued rent at December 31, 2001.
         The  lease on this  property  expired  May 2002 and is  currently  on a
         month-to-month   basis.   The  business  is  owned  by  an   affiliated
         corporation of Duncan Burch, an officer and director of the Company. As
         a result  of the  Settlement  Agreement  with the City of  Dallas,  the
         Company believes this lease  arrangement will be terminated  within the
         next six months.  Management  of the Company is  currently  considering
         various options for this property  including  leasing the property to a
         non-sexually  oriented  business  or selling  the  property  to a third
         party. See "Item 12 - Certain Relationships and Related Transactions."

(2)      Neither  the tenant of the Fort  Worth  property  nor Duncan  Burch has
         advised the Company  whether  tenant intends to renew the lease when it
         expires  in  August.  See  "Item 1 -  Description  of  Business  - Risk
         Factors;  The Company's Properties Are Not Subject to Long Term Leases;
         Rental Income in the Future May Continue to Decline."

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. As a result of this action, the City
of Dallas  agreed  to and did  amend  some of the  contested  provisions  of the
Ordinance.  However,  the Company is still  contesting  other  provisions of the
Ordinance.  Any impact on the  operations of the Company will not be known until
late in 2003 when the trial court  addresses the remaining  provisions at issue.
Although the Company  reasonably  believes that the Ordinance will be amended or
ruled on by the Court so as to have no material  adverse impact on the Company's
future  operations,  there can be no assurance  that the Ordinance as amended or
ruled on by the Court will not have any material adverse effect on the Company's
business operations.


                                       8
<PAGE>

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

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

         On December 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  5,648,078  shares  were  represented  at  the  meeting,
approximately  98.5% of the  outstanding  shares entitled to vote. The following
matters were submitted to a vote of the  shareholders  through  solicitation  of
proxies or otherwise:

                                                   For       Against    Abstain
                                                 ---------  ---------  ---------
         Election of Board of Directors
                  Nick Mehmeti                   5,636,609      27       38,500
                  Duncan Burch                   5,636,509     127       38,506

         Appointment of S.W. Hatfield, CPA as
         Auditors for 2001                       5,648,077       1       27,058

                                    PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         As of December 31, 2002, the Company had  approximately  820 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
for the past two years:
                                               Common Stock
            Fiscal Year Ended 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

                                               Common Stock
            Fiscal Year Ended December         ------------
                     31, 2002                High         Low
            --------------------------      ------------------
                   First Quarter            $0.29        $0.15
                  Second Quarter            $0.19        $0.12
                   Third Quarter            $0.24        $0.12
                  Fourth Quarter            $0.23        $0.10

               First Quarter -- 2003
              (through March 3, 2003)       $0.27        $0.12

         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 sale price of the Company's common stock on March 14, 2003 was $0.24
per share.

         The Company has not declared a dividend on its common stock since 1999.
The Company intends for the foreseeable  future to invest its available  capital
into the expansion of its business operations.


                                       9
<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, 2002 as compared to year ended  December  31,
2001.

         Bar and restaurant sales increased by approximately  13.1% in 2002. Bar
and restaurant sales were $3,267,595 in 2002 compared to $2,888,761 in 2001. The
increase  was  attributable  to  overall  increases  in  visitor  traffic to the
Dallas-Ft.  Worth  Metroplex  and local  patronage.  The City of  Dallas,  Texas
continues  to actively  pursue  enforcement  of its Sexually  Oriented  Business
Ordinance and litigation  continues 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."

         Management continues to direct its 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  $46,000 to
approximately  $524,000 in 2002 from  approximately  $571,000 in 2001.  The most
significant  factor to this  decrease  was a  renegotiated  lease with  entities
controlled by Duncan Burch, one of the Company's  controlling  shareholders.  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, 2002,
the Company is due approximately  $68,500 in additional rents over and above the
required  weekly  payment as calculated on the gross sales of the tenant.  Since
May 2002, the lessee has been on a month-to-month basis at the same rental rate.

         Cost of sales  experienced  increases to  approximately  $1,992,947 for
2002 as compared to approximately  $1,794,000 for 2001. 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


                                       10
<PAGE>

control are principally food and beverage costs. Gross profit percentages remain
relatively  constant at 47.44 % ($1,799,000) for 2002 versus 48.14% ($1,665,000)
for 2001.  Cost controls over  purchasing,  inventory  management  protocols and
labor management are continuously monitored to improve gross profit percentages.

         General and administrative  expenses were approximately  $1,601,000 for
2002 as compared to  approximately  $1,473,000 in 2001. The overall increase was
directly  attributable  to  increased  legal  expenses  as a result  of  ongoing
litigation and issues related to the City of Dallas Sexually  Oriented  Business
Ordinance.  Further, the Company experienced increases in executive compensation
during the current year. 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.

         During  the fourth  quarter of 2002,  management,  in  connection  with
required  procedural reviews required by Sarbanes-Oxley Act of 2002,  determined
that a formula error was imbedded in a worksheet  used to calculate the deferred
income   taxes   liability   for   future   periods.    This   is   a   non-cash
expenditure/accrual.  As a  result  of  identifying  the  erroneous  calculation
method,  the Company  adjusted the deferred tax liability for future  periods in
the 4th quarter of 2002.  This  resulted in a one-time  charge to  operations of
approximately $154,000.

         Net income  before  income  taxes was  approximately  $198,000 for 2002
versus  approximately  $221,000  for 2001.  After-tax  net income  decreased  by
approximately  $98,000 from  approximately  $107,000  for 2001 to  approximately
$9,000 for 2002.  The Company  experienced  earnings per share of  approximately
$0.00 and $0.02 per share for 2002 and 2001, 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 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 continues to direct its 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


                                       11
<PAGE>

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.

         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.

Liquidity and Capital Resources

         As of December  31, 2002 and 2001,  the Company had working  capital of
approximately  $981,000  and  $809,000,  respectively.  Included in the positive
working  capital  balances  is  cash of  approximately  $783,000  and  $939,000,
respectively.  The 2002 balance also includes a trade  accounts  receivable  for
rental income of approximately  $68,500 due from an entity  controlled by Duncan
Burch,  a Company  shareholder,  officer and director.  During 2002, the Company
moved  invested  cash funds from  money-market  accounts into an investment in a
money market instrument-based mutual funds. This investment is subject to market
fluctuations  in price on a daily  basis and the  Company is at market  risk for
this investment.

         The  Company  experienced   positive  cash  flows  from  operations  of
approximately  $313,000 in 2002 and  approximately  $215,000  in 2001.  The 2002
increase in this area is directly  attributable  to  increased  patronage in the
Company's adult cabaret and is offset by decreased rental income amounts from an
entity controlled by Duncan Burch, a Company shareholder, officer and director.

         The Company's rental income has declined from approximately $779,928 in
2000 to approximately $570,095 in 2001 to approximately $524,232 in 2002.

         The Company  leases two of its  commercial  properties to affiliates of
Duncan Burch, an officer, director and principal shareholder of the Company. The
facilities  on  the   properties   are  utilized  for  the  operation  of  adult
entertainment night clubs.

         The decline in rental income is primarily  the result of  renegotiating
the lease terms for its Northwest  Highway,  Dallas,  Texas  property in January
2001.  Further,  the adult cabaret occupying this property is non-compliant with
the City of Dallas Sexually Oriented  Business  Ordinance and will close on July
1, 2003. It is  anticipated  that the Company will receive no revenues from this
property after that date unless a successor tenant or sublessor is found.


                                       12
<PAGE>

         The Fort Worth,  Texas  property is subject to a lease which expires in
August 2003. Neither the tenant nor Duncan Burch has advised the Company whether
tenant intends to renew the lease when it expires in August 2003.

         There can be no assurance that the Company will be able to obtain terms
similar to the  current  lease or that  tenant  will agree to the terms of a new
lease.  The  Northwest  Highway,  Dallas,  Texas  property  is  currently  on  a
month-to-month  lease  arrangement.  Although the Company is seeking lease terms
that are at least  comparable to terms for similar  properties in the geographic
area,  there  can be no  assurance  that the  Company  will be able to renew its
leases  with Mr.  Burch or if  renewed,  that the terms of the leases will be as
favorable to the Company as it could have obtained from an  unaffiliated  party.
The failure of the Company to obtain  long-term lease agreements with Mr. Burch,
or other third  parties,  with terms at least  comparable to the existing  lease
arrangements will have a material adverse effect on the revenues of the Company.

         On February 14, 2003, the Company  purchased 6.695 acres of undeveloped
property  located  in  Dallas,  Texas.  The  purchase  price  was  approximately
$2,650,312,  including  closing expenses of approximately  $53,599.  The Company
paid $493,072  cash,  which  included a $140,000 loan to the Company from Duncan
Burch,  an  officer  and  director  of the  Company,  and issued to the seller a
one-year note in the principal amount of $2,156,713 with 8% annual interest. The
payment of the note is secured with a lien  against the property  granted to the
note  holder  by the  Company.  The  interest  on the  note is  payable  monthly
(approximately  $14,678 per month)  beginning  April 1, 2003 with the  principal
amount due and payable on February 1, 2004.  The Company will be required to pay
approximately $132,000 during 2002 to service this debt.

         The property is undeveloped  and suitable for  commercial  development.
Although the Company has not  determined  the usage of the land, the Company may
use a  portion  of  the  land  for an  adult  cabaret  and  sell  the  remaining
undeveloped  property to a third party.  The development of the property will be
subject to the  Company  obtaining a  construction  loan.  The Company  does not
currently  know the amount of the loan it will need to develop this  property or
whether  it will be able to  obtain a  sufficient  loan for  development  of the
property or, if obtained, whether the terms of the loan will be favorable to the
Company.

         The  Company  intends to seek  long-term  financing  for the  purchased
property  before the principal  note is due in February  2004. If the Company is
unable to obtain long-term financing,  the Company may have to sell the property
to pay the note. There can be no assurance that the property can be sold for the
total amount of the note.  The sale of the property for less than the  Company's
purchase price will result in a loss which may  materially  impact the Company's
financial condition and results of operations.

         The Company has identified no other  significant  capital  requirements
for 2003,  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.

         The Company knows of no new accounting  releases or pronouncements that
will have any impact upon the Company's financial statements upon adoption.

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.


                                       13
<PAGE>
<TABLE>
<CAPTION>

                                    PART III

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

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

              Name             Age          Position with the Company             Director Since
         ---------------       ---   -----------------------------------------    --------------
<S>      <C>                   <C>   <C>                                          <C>
         Nick Mehmeti(1)       45    President, Chief Executive Officer, Chief     January 2000
                                     Financial Officer and Director
         Duncan Burch(1)       45    Executive Vice President and Director         January 2000
         Dewanna Ross(2)       47    Secretary and Treasurer
</TABLE>
--------------------

(1)      Since  January  19,  2000,  Mr.  Mehmeti  has  served as the  Company's
         President  and Chief  Executive  Officer  and Mr.  Burch has  served as
         Executive Vice President of the Company.  Mr. Mehmeti has served as the
         Company's Chief Financial Officer since March 2001.
(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 has served in various  positions  with the Company  since
1995. Ms. Ross served as a director of the Company from 1995 until January 2002.
She served as  President  and Chief  Executive  Officer of the Company from July
1999 to January  2000.  She served as Vice  President  of  Operations  and Chief
Operating  Officer of the Company from January 19, 2000 to January 10, 2002. She
currently serves as  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  operations  of the  Company's
Million Dollar Saloon.  Ms. Ross has also served as an officer and operator of a
private club and as an officer of other  businesses.  Ms. Ross has a Bachelor of
Arts degree from the University of Texas at Dallas.

         All  officers of the Company  hold office  until the annual  meeting of
directors following the annual meeting of stockholders or until their respective
successors  are duly  elected and  qualified  or their  earlier  resignation  or
removal.

Board of Directors and Committee Meetings Attendance

         During the fiscal  year ended  December  31,  2002,  the Board held one
meeting,  its annual  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.


                                       14
<PAGE>
<TABLE>
<CAPTION>

         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,  2002,  all Section  16(a)  filing  requirements
applicable  to its  directors,  officers  and 10%  holders  for such  year  were
complied with.

ITEM 10. EXECUTIVE COMPENSATION

         Laird Boles, who is not an officer or director of the Company, received
$181,553  compensation  during 2002. Mr. Boles is primarily  responsible for the
management  of  the  Company's  Million  Dollar  Saloon  and  related  personnel
supervision.  During 2002, Duncan Burch, Executive Vice President and a director
of the Company of the Company received  $128,000  compensation  which included a
$50,000 bonus.  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   2002  $128,000(1)       NA           NA           NA          NA         $-0-
   Executive Officer
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(2)
Dewanna Ross, President and      2000   $  4,200         NA           NA           NA          NA         $-0-
   Chief Executive Officer(3)    1999   $ 36,400         NA           NA           NA          NA         $-0-
</TABLE>

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

(1)      Includes a $50,000 bonus.
(2)      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.
(3)      Ms.  Ross was elected  President  and Chief  Executive  Officer in July
         1999. 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 $4,200 paid in 2000 represents Ms. Ross' salary while she served 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
currently  leases two  commercial  properties to  corporations  affiliated  with
Duncan Burch, Executive Vice President and director of the Company. See "Item 12
- 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.


                                       15
<PAGE>
<TABLE>
<CAPTION>

Family Relationships

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

ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

         The following table sets forth certain information as of March 17, 2003
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 Common
         Name(1)                                            Number of Shares      Stock Owned
         ------------------------------------------------  ----------------   --------------------
<S>      <C>                                               <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 February 14, 2003, the Company  purchased 6.695 acres of undeveloped
property  located  in  Dallas,  Texas.  The  purchase  price  was  approximately
$2,650,312,  including  closing expenses of approximately  $53,599.  The Company
paid $493,072 cash, which included a $140,000  unsecured,  non-interest  bearing
advance to the Company from Duncan Burch, a controlling shareholder, officer and
director  of the  Company,  and  issued  to the  seller a  one-year  note in the
principal amount of $2,156,713 with 8% annual interest.  The payment of the note
is secured with a lien  against the  property  granted to the note holder by the
Company. The interest on the note is payable monthly  (approximately $14,678 per
month)  beginning  April 1, 2003 with the  principal  amount due and  payable on
February 1, 2004.

         On January 30, 2001,  the Board of Directors,  with Duncan Burch absent
and  non-voting,  approved an  amendment  to the lease  agreement  covering  the
Company's  Northwest  Highway property  located in Dallas,  Texas. 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 2002


                                       16
<PAGE>

the Company  received  $52,000 in lease payments for this property.  At December
31,  2002,  the lessee owed  $68,528 for accrued  rent for this  property  which
included  $53,000 which was owed at December 31, 2001. 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.  Since
the lease terminated in May 2002, the tenant is on a  month-to-month  basis with
the same lease payments as provided in the modified lease  agreement.  There are
currently  no  negotiations  with the  tenant  for a new  lease  agreement.  The
business is owned by an affiliated  corporation of Duncan Burch,  an officer and
director of the Company. See "Item 9. Directors,  Executive Officers,  Promoters
and Control  Persons;  Compliance  with Section  16(a) of the Exchange  Act" and
"Item 11.  Security  Ownership of Certain  Beneficial  Owners and Management and
Related Stockholder Matters."

         The Company  leases two of its  commercial  properties to affiliates of
Duncan Burch,  a controlling  shareholder,  officer and director of the Company.
During 2002, the Company  received  rental payments of $524,232 from Mr. Burch's
affiliated businesses. See "Item 2 - Properties."

         In October 2002,  Duncan Burch, Nick Mehmeti (officers and directors of
the Company) and certain of their  affiliated  businesses (the "Clubs")  entered
into a Compromise  Settlement  Agreement and Mutual  Releases  (the  "Settlement
Agreement")  with the City of Dallas to settle  pending  litigation,  claims and
disputes  between  the  parties  arising  out of the  operation  of the Clubs in
alleged  violation  of the Dallas City Code,  including  the  Sexually  Oriented
Business  Ordinance.  The  Settlement  Agreement  did not involve the  Company's
Million Dollar Saloon nor did the Settlement  Agreement  affect the operation of
the Million Dollar Saloon.

         However, the Settlement Agreement did affect the usage of the Company's
property located at 3021 Northwest  Highway,  Dallas,  Texas, which is currently
leased on a month-to-month  basis to an affiliate of Duncan Burch. The Northwest
Highway  property is currently  being utilized by lessee for the operation of an
adult cabaret. In accordance with the Settlement Agreement, lessee has agreed to
terminate the operation of the adult cabaret  business at the Northwest  Highway
location by July 31, 2003.

         As a result  of the  Settlement  Agreement,  the  Company  expects  the
month-to-month  lease  arrangement  for the Northwest  Highway  property will be
terminated  within the next six months.  Management  of the Company is currently
considering  various options for this property including leasing the property to
a non-sexually  oriented  business or selling the property to a third party. See
"Item 2. Properties."

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

         The following documents are filed as exhibits with this annual report:

         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.


                                       17
<PAGE>

         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.
         10.4+    Promissory  Note dated  February  14, 2003 (the "Note") in the
                  principal  amount of  $2,156,713.50  payable by the Company to
                  One Stemmons Land Limited  Partnership with interest at 8% per
                  annum,  interest  payable  monthly,  with a  single  principal
                  payment due and payable on February 1, 2004.
         10.5+    Deed of Trust,  dated February 14, 2003, signed by the Company
                  granting a security  interest in 6.6 acres of undeveloped real
                  estate in Dallas, Texas to secure payment of the Note.
         10.6+    Special  Warranty Deed with  Vendor's Lien dated  February 14,
                  2002  relating to 6.6 acres of real estate  located in Dallas,
                  Texas.
         21.1*    Subsidiaries of the Company.
         99.1+    Certification  Pursuant  to  Title  18,  United  States  Code,
                  Section  1350,  as  Adopted  Pursuant  to  Section  906 of the
                  Sarbanes-Oxley Act of 2002.
--------------------
*        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.
***      Incorporated by reference to the Company's Annual Report on Form 10-KSB
         for the fiscal year ended December 31, 2001.
+        Filed herewith.

(b)      Reports on Form 8-K.

         The Company filed a Current Report on Form 8-K with the SEC on December
12, 2002  reporting the results of the Annual  Meeting of  Shareholders  held on
December 10, 2002.

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

ITEM 14. CONTROLS AND PROCEDURES

         Within 90 days prior to the filing  date of this  report,  the  Company
carried out an evaluation,  under the supervision and with the  participation of
the Company's  management,  including the Company's Chief Executive  Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure  controls and procedures.  Based upon that evaluation,  the Company's
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure  controls  and  procedures  are  effective.  Disclosure  controls and


                                       18
<PAGE>

procedures  are  controls  and  procedures  designed to ensure that  information
required  to be  disclosed  in the  Company's  periodic  reports  to the  SEC is
recorded,  processed,  summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.

         There have been no significant changes in our internal controls or in
other factors that could significantly affect internal controls subsequent to
the date we carried out this evaluation.





























                                       19
<PAGE>

                                   SIGNATURES

         In  accordance  with  Section  13 and 15(d) of the  Exchange  Act,  the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 25th day of March, 2003.

                              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 25, 2003
-----------------------    Chief Financial Officer and Director
Nick Mehmeti

   /s/ Duncan Burch        Executive Vice President and Director  March 25, 2003
-----------------------
Duncan Burch























                                       20
<PAGE>

Certifications

         The undersigned,  Nick Mehmeti,  President, Chief Executive Officer and
Chief Financial Officer of Million Dollar Saloon, Inc. (the "Company"),  certify
that:

         1. I have reviewed this annual report on Form 10-KSB of Million  Dollar
Saloon, Inc.;

         2. Based on my  knowledge,  this  annual  report  does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge,  the financial statements and other financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a(14 and 15d-14) for the registrant and have:

                  (a) designed such disclosure controls and procedures to ensure
         that material  information  relating to the  registrant,  including its
         consolidated  subsidiaries,  is made known to us by others within those
         entities, particularly during the period in which this annual report is
         being prepared;

                  (b) evaluated the effectiveness of the registrant's disclosure
         controls and procedures as of a date within 90 days prior to the filing
         date of this annual report (the "Evaluation Date"); and

                  (c) presented in this annual report our conclusions  about the
         effectiveness  of the disclosure  controls and procedures  based on our
         evaluation as of the Evaluation Date;

         5. The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee of the  registrant's  board of directors  (or persons  performing  the
equivalent functions):

                  (a) all significant deficiencies in the design or operation of
         internal controls which could adversely affect the registrant's ability
         to  record,  process,  summarize  and  report  financial  data and have
         identified  for the  registrant's  auditors any material  weaknesses in
         internal controls; and

                  (b)  any  fraud,  whether  or  not  material,   that  involves
         management  or  other  employees  who  have a  significant  role in the
         registrant's internal controls; and

         6. The registrant's  other certifying  officers and I have indicated in
this annual report whether there were significant  changes in internal  controls
or in other facts that could  significantly  affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  March 25, 2003

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





                                       21
<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                            Page
                                                                            ----

Report of Independent Certified Public Accountants                           F-2

Consolidated Financial Statements

   Consolidated Balance Sheets
      as of December 31, 2002 and 2001                                       F-3

   Consolidated Statements of Income and Comprehensive Income
      for the years ended December 31, 2002 and 2001                         F-4

   Consolidated Statements of Changes in Shareholders' Equity
      for the years ended December 31, 2002 and 2001                         F-5

   Consolidated Statements of Cash Flows
      for the years ended December 31, 2002 and 2001                         F-6

   Notes to Consolidated Financial Statements                                F-7




















                                                                             F-1

<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, 2002 and 2001, 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 audits 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, 2002 and 2001 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
March 13, 2003

                       Use our past to assist your future

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

<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2002 and 2001

                                                               December 31,   December 31,
                                                                   002            2001
                                                              ------------    ------------
<S>                                                           <C>             <C>
                                     ASSETS
                                     ------
Current Assets
   Cash on hand and in bank                                   $    783,157    $    938,785
   Marketable securities                                           367,093            --
   Accounts receivable - trade and other                            68,528          56,866
   Prepaid Federal income taxes receivable                           1,500            --
   Inventory                                                        48,087          19,417
   Prepaid expenses                                                 43,743            --
                                                              ------------    ------------
     Total current assets                                        1,312,108       1,015,068
                                                              ------------    ------------

Property and Equipment - At Cost
   Buildings and related improvements                            2,095,914       2,017,514
   Furniture and equipment                                         881,710         867,087
                                                              ------------    ------------
                                                                 2,977,624       2,884,601
   Less accumulated depreciation                                (1,908,244)     (1,809,613)
                                                              ------------    ------------
                                                                 1,069,380       1,074,988
   Land                                                            741,488         741,488
                                                              ------------    ------------
     Net property and equipment                                  1,810,868       1,816,476
                                                              ------------    ------------

Other Assets                                                         1,725           4,725
                                                              ------------    ------------

Total Assets                                                  $  3,124,701    $  2,836,269
                                                              ============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
Current Liabilities
   Accounts payable - trade                                   $    109,836    $     12,057
   Accrued liabilities                                             205,254         113,070
   Accrued income taxes payable                                       --            74,400
   Deferred revenues                                                 9,500            --
   Tenant deposits                                                   6,500           6,500
                                                              ------------    ------------
     Total current liabilities                                     331,090         206,027
                                                              ------------    ------------

Long-Term Liabilities
   Deferred tax liability                                          288,916         134,524
                                                              ------------    ------------
     Total liabilities                                             620,006         340,551
                                                              ------------    ------------

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 shares issued and outstanding, respectively           5,732           5,732
   Retained earnings                                             2,498,963       2,489,986
                                                              ------------    ------------
     Total shareholders' equity                                  2,504,695       2,495,718
                                                              ------------    ------------

Total Liabilities and Shareholders' Equity                    $  3,124,701    $  2,836,269
                                                              ============    ============
</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, 2002 and 2001


                                                        Year ended      Year ended
                                                       December 31,    December 31,
                                                           2002            2001
                                                       ------------    ------------
<S>                                                    <C>             <C>
Revenues
   Bar and restaurant sales                            $  3,267,595    $  2,888,761
   Rental income                                            524,232         570,095
                                                       ------------    ------------
     Total revenues                                       3,791,827       3,458,856
                                                       ------------    ------------

Cost of Sales - Bar and Restaurant Operations
   Direct labor                                           1,340,572       1,159,756
   Purchases                                                652,375         633,908
                                                       ------------    ------------
     Total cost of sales                                  1,992,947       1,793,664
                                                       ------------    ------------

Gross Profit                                              1,798,880       1,665,192
                                                       ------------    ------------

Operating Expenses
   Salaries, wages and related expenses                     591,531         503,086
   Consulting, legal and other professional fees            177,477         204,906
   Rental expenses, principally taxes                        59,075          67,968
   Interest expense                                           3,007            --
   Other operating expenses                                 671,019         604,896
   Depreciation and amortization                             99,013          92,481
                                                       ------------    ------------
       Total operating expenses                           1,601,122       1,473,337
                                                       ------------    ------------

Income from Operations                                      197,758         191,855

Other Income (Expenses)
   Interest income and other                                 21,590          28,908
   Unrealized loss on marketable securities                  (8,867)           --
   Impairment of carrying value on long-term assets          (2,250)           --
                                                       ------------    ------------

Income before Income Taxes                                  208,231         220,763

Provision for Income Taxes
   Currently payable                                        (44,861)       (112,209)
   Deferred                                                (154,393)         (1,424)
                                                       ------------    ------------

Net Income                                                    8,977         107,130

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

Comprehensive Income                                   $      8,977    $    107,130
                                                       ============    ============

Earnings per share of common stock
   outstanding, computed on net income -
   basic and fully diluted                                      nil    $       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>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                     Years ended December 31, 2002 and 2001



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

Balances at January 1, 2001         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

Net income for the year                  --              --             8,977           8,977
                                -------------   -------------   -------------   -------------

Balances at December 31, 2002       5,731,778   $       5,732   $   2,498,963   $   2,504,695
                                =============   =============   =============   =============
</TABLE>




















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

<PAGE>
<TABLE>
<CAPTION>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2002 and 2001


                                                           Year ended      Year ended
                                                          December 31,    December 31,
                                                              2002            2001
                                                          ------------    ------------
<S>                                                       <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                             $      8,977    $    107,130
   Adjustments to reconcile net income to net cash
     provided by operating activities
       Depreciation and amortization                            99,013          92,481
       Unrealized loss on marketable securities                  8,867            --
       Impairment of carrying value on long-term assets          2,250            --
       Deferred income taxes                                   154,393           1,423
       (Increase) decrease in
         Accounts receivable - trade                           (11,662)        (48,129)
         Prepaid income taxes                                   (1,500)         33,141
         Inventory                                             (28,670)          3,427
         Prepaid expenses and other                            (43,743)           --
       Increase (decrease) in
         Accounts payable and other accrued liabilities        189,962         (49,137)
         Deferred revenues                                       9,500            --
         Accrued federal income taxes payable                  (74,400)         74,400
                                                          ------------    ------------

Net cash provided by operating activities                      312,987         214,736
                                                          ------------    ------------


CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of marketable securities                          (375,960)           --
   Purchases of property and equipment                         (92,655)         (2,994)
                                                          ------------    ------------

Net cash used in investing activities                         (468,615)         (2,994)
                                                          ------------    ------------


CASH FLOWS FROM FINANCING ACTIVITIES                              --              --
                                                          ------------    ------------


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              (155,628)        211,742

Cash and cash equivalents at beginning of year                 938,785         727,043
                                                          ------------    ------------

Cash and cash equivalents at end of year                  $    783,157    $    938,785
                                                          ============    ============

SUPPLEMENTAL DISCLOSURES OF
   INTEREST AND INCOME TAXES PAID
     Interest paid                                        $      3,007    $       --
                                                          ============    ============
     Income taxes paid                                    $    120,762    $      4,669
                                                          ============    ============
</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


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.


NOTE B - Preparation of Financial Statements

The  Company  follows  the  accrual  basis  of  accounting  in  accordance  with
accounting principles generally accepted in the United States of America and has
adopted a year-end of December 31.

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America 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.

Management further acknowledges that it is solely responsible for adopting sound
accounting  practices,   establishing  and  maintaining  a  system  of  internal
accounting  control and preventing and detecting  fraud. The Company's system of
internal  accounting  control is designed to assure,  among other items, that 1)
recorded  transactions  are valid; 2) valid  transactions  are recorded;  and 3)
transactions  are  recorded in the proper  period in a timely  manner to produce
financial  statements which present fairly the financial  condition,  results of
operations  and cash  flows of the  Company  for the  respective  periods  being
presented

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,  2002 and 2001,  respectively.  All  significant
intercompany transactions have been eliminated in combination.  The consolidated
entities are referred to as Company.




                                                                             F-7

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE C - 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.   Marketable Securities
     ---------------------

     Investments in the equity  securities of other companies,  including mutual
     fund investments, that have readily determinable fair values (as defined in
     Statement  of  Financial  Accounting  Standards  No. 115,  "Accounting  for
     Certain   Investments  in  Debt  and  Equity  Securities"  (SFAS  115)  are
     classified, at the date of acquisition, into three categories and accounted
     for as follows:

     Trading Securities - Equity securities that are bought and held principally
     for the  purpose  of  selling  them in the near term are  reported  at fair
     value. Unrealized gains and losses are included in earnings.

     Available-for-Sale  Securities - Equity  securities not classified in other
     categories  are reported at fair value,  with  unrealized  gains and losses
     excluded   from   earnings  and   reported  in  a  separate   component  of
     shareholders' equity.

     Held-to-Maturity  Securities - Equity  securities  that the Company has the
     positive  intent and ability to hold to maturity  are reported at amortized
     cost.

     Other  investments that do not have a readily  determinable  fair value are
     recorded at amortized cost.

     The Company  evaluates  the  carrying  value of all  marketable  securities
     classified as  "held-to-maturity"  or "other investments that do not have a
     readily  determinable  fair value" on a quarterly  basis in accordance with
     Statement of Financial  Accounting  Standards No. 144,  "Accounting for the
     Impairment or Disposal of Long- Lived Assets". Any permanent impairment, if
     any, is charged to operations in the quarter in which the  determination of
     impairment is made.

     For  purposes  of  computing   realized  gains  and  losses,  the  specific
     identification method is used.

3.   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.

     Since  December  31,  2000,  all  lessors of Company  rental  property  are
     entities  controlled  by a Company  controlling  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-8

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE C - Summary of Significant Accounting Policies - Continued

3.   Accounts Receivable and Revenue Recognition - 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.

4.   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.

5.   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.

6.   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.

     On December 31, 2002, in accordance with Statement of Financial  Accounting
     Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
     Assets",  Management  reflected  an  impairment  equivalent  to 100% of the
     unamortized  balance  (approximately  $2,250) against the carrying value of
     this asset.

7.   Income Taxes
     ------------

     The Company files a consolidated Federal Income Tax return and utilizes the
     asset and liability method of accounting for income taxes. The deferred tax
     asset and deferred tax liability accounts, as recorded when material to the
     financial statements, are entirely the result of temporary differences.  No
     valuation  allowance was provided  against  deferred tax assets.  Temporary
     differences   represent  differences  in  the  recognition  of  assets  and
     liabilities for tax and financial reporting purposes, primarily accumulated
     depreciation and amortization.


                                                                             F-9

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE C - Summary of Significant Accounting Policies - Continued

8.   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,  2002  and  2001,
     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.


NOTE D - Fair Value of Financial Instruments

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.

Interest  rate risk is the risk  that the  Company's  earnings  are  subject  to
fluctuations  in interest  rates on either  investments  or on debt and is fully
dependent  upon  the  volatility  of  these  rates.  The  Company  does  not use
derivative instruments to moderate its exposure to interest rate risk, if any.

Financial  risk  is  the  risk  that  the  Company's  earnings  are  subject  to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the  volatility  of  these  rates.  The  company  does  not use  derivative
instruments to moderate its exposure to financial risk, if any.


NOTE E - Concentrations of Credit Risk

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, 2002 and 2001,  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, 2002
----------------------------
    Tempo Tamers, Inc.
      Bank A                      $     275,724        $ 74,118              365
    Don, Inc.
      Bank A                      $      80,447        $ 10,231              133
      Bank B                      $     203,061        $ 49,273              365
    Corporation Lex
      Bank B                      $      31,756        $ 33,737              365


                                                                            F-10

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE E - Concentrations of Credit Risk - Continued

                                      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

The  Company has  incurred  no losses  during 2002 or 2001 as a result of any of
these unsecured situations.


NOTE F - Marketable Securities

Marketable  securities as of December 31, 2002 consist entirely of an investment
in a money market instrument- based mutual funds and are summarized as follows:

                                                         Available      Held to
                                           Trading       for sale      Maturity
                                         -----------   -----------   -----------
Aggregate fair value                     $   367,093   $      --     $      --
Gross unrealized holding gains           $      --     $      --     $      --
Gross unrealized holding losses          $     8,867   $      --     $      --
Amortized cost basis                     $   375,960   $      --     $      --

The net  unrealized  holding gains and losses on trading  securities  which have
been included in the statement of operations were  approximately $ 8,867 for the
year ended December 31, 2002.


NOTE G - Property and Equipment

Property and equipment consists of the following at December 31, 2002 and 2001:

                                    December 31,   December 31,
                                         2002           2001      Estimated life
                                    ------------   ------------   --------------

Buildings and related improvements     2,095,914      2,017,514     15-40 years
Furniture and equipment                  881,710        867,087      5-10 years
                                    ------------   ------------
                                       2,977,624      2,884,601
Less accumulated depreciation         (1,908,244)    (1,809,613)
                                    ------------   ------------
                                       1,069,380      1,074,988
Land                                     741,488        741,488
                                    ------------   ------------

Net property and equipment           $ 1,810,868   $  1,816,476
                                    ============   ============


                                                                            F-11
<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE G - Property and Equipment - Continued

Depreciation  expense  for the  years  ended  December  31,  2002  and  2001 was
approximately $98,631 and $91,731, respectively.


NOTE H - Income Taxes

The components of income tax expense  (benefit) for the years ended December 31,
2002 and 2001, respectively, are as follows:

                                                     Year ended     Year ended
                                                    December 31,   December 31,
                                                        2002           2001
                                                    ------------   ------------
     Federal:
       Current                                      $     44,861   $    112,209
       Deferred                                          154,393         (1,424)
                                                    ------------   ------------
                                                         199,254        107,130
                                                    ------------   ------------
     State:
       Current                                              --             --
       Deferred                                             --             --
                                                    ------------   ------------
                                                            --             --
                                                    ------------   ------------

       Total                                        $    199,254   $    107,130
                                                    ============   ============

The Company's income tax expense (benefit) for the years ended December 31, 2002
and 2001,  respectively,  differed from the statutory federal rate of 34 percent
as follows:
<TABLE>
<CAPTION>

                                                               Year ended      Year ended
                                                              December 31,    December 31,
                                                                  2002            2001
                                                              ------------    ------------
     <S>                                                      <C>             <C>
     Statutory rate applied to earnings before income taxes   $     70,799    $     75,059
     Increase (decrease) in income taxes resulting from:
       State income taxes                                             --              --
       Deferred income taxes                                       154,393          (1,424)
       Effect of incremental tax brackets and the
         application of business tax credits                       (25,938)         33,495
                                                              ------------    ------------

     Income tax expense                                       $    199,254    $     28,135
                                                              ============    ============
</TABLE>

The  deferred  current  tax asset and  non-current  deferred  tax  liability  on
December  31,  2002  and  2001,  respectively,  balance  sheet  consists  of the
following:

                                                   December 31,    December 31,
                                                        2002            2001
                                                   ------------    ------------

     Non-current deferred tax liability            $   (288,916)   $   (134,524)
                                                   ============    ============

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



                                                                            F-12

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE I - Capital Stock Transactions

On  March  19,  1998,  the  Company  entered  into a  Stock  Purchase  Agreement
(Agreement)  with an unrelated  individual.  The  Agreement  contained a "second
closing"  clause,  as amended,  whereby the individual may acquire an additional
400,000 shares of restricted,  unregistered common stock at a price of $1.10 per
share on or before the close of business on October 18, 2004. As of December 31,
2002, no shares of common stock have been issued in accordance  with the "second
closing" portion of the Agreement.


NOTE J - 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, 2002, future minimum non-cancellable lease revenues
are as follows:

                                                     Year ending
                                                     December 31,       Amount
                                                     ------------   ------------
                                                         2003       $     69,750
                                                                    ============


NOTE K - Segment Information

The  Company  operates  with a  centralized  management  structure  and  has two
identifiable  operating segments:  an adult entertainment  lounge and restaurant
located in Dallas, Texas and commercial rental real estate located in Dallas and
Tarrant  Counties,  Texas.  All  revenues  are  generated  operations  in  these
geographic  areas.  As of December 31, 2002 and 2001,  respectively,  all rental
revenues  are  derived  from  entities   controlled  by  a  Company  controlling
shareholder,  officer  and  director.  Approximately  13.8%  and  16.5% of total
revenues for 2002 and 2001, respectively, came from related parties.

<TABLE>
<CAPTION>

                                    Restaurant          Rental         General and
                                     facility         real estate     administrative       Total
                                  --------------    --------------    --------------   --------------
<S>                               <C>               <C>               <C>              <C>
Year ended December 31, 2002
----------------------------
Revenue from external customers   $    3,267,595    $         --      $         --     $    3,267,595
Revenue from related parties                --             524,232              --            524,232
Revenue (expenses) from/to
  intercompany sources                  (240,000)         (110,000)          130,000             --
Interest income                              118             6,205            15,267           21,590
Interest expense                            --                --               3,007            3,007
Depreciation and amortization             40,004            59,009              --             99,013
Income tax expense (benefit)             (73,334)          226,263            46,325          199,254
Segment assets                           270,727         2,257,207           596,767        3,124,701
Fixed asset expenditures                  92,655              --                --             92,655


                                                                            F-13

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE K - Segment Information - Continued

                                    Restaurant          Rental         General and
                                     facility         real estate     administrative       Total
                                  --------------    --------------    --------------   --------------
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
</TABLE>


NOTE L - Selected Financial Data (Unaudited)

The following is a summary of the quarterly  results of operations for the years
ended December 31, 2002 and 2001, respectively.

<TABLE>
<CAPTION>

                              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 2002
   Restaurant sales           $     958,171   $     885,288   $     855,893   $     568,243    $   3,267,595
   Rental income-
     Related party            $     148,195   $     138,950   $     137,775   $      99,312    $     524,232
   Gross profit               $     526,702   $     491,085   $     411,713   $     369,880    $   1,798,880
   Net earnings after
     provision for
     income taxes             $     137,032   $     109,886   $         807   $    (238,748)   $       8,977
   Basic and fully diluted
     earnings per share       $        0.02   $        0.02             nil   $       (0.04)             nil
   Weighted average
     number of shares
     issued and outstanding       5,731,788       5,731,788       5,731,788       5,731,788        5,731,788
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 after
     provision for
     income taxes                    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       5,731,778       5,731,778       5,731,778       5,731,778        5,731,778
</TABLE>



                                                                            F-14

<PAGE>

                  MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE L - Subsequent Event

On February 14, 2003, the Company purchased 6.695 acres of undeveloped  property
located in Dallas,  Texas.  The  purchase  price was  approximately  $2,650,312,
including closing expenses of approximately $53,599.

The Company paid $493,072 cash, inclusive of a $140,000 loan to the Company from
Duncan Burch, an officer and director of the Company, and issued to the seller a
one-year note in the principal amount of $2,156,713 with 8% annual interest. The
payment of the note is secured with a lien  against the property  granted to the
note  holder  by the  Company.  The  interest  on the  note is  payable  monthly
(approximately  $14,678 per month)  beginning  April 1, 2003 with the  principal
amount due and payable on February 1, 2004.

The  Company  will be  required  to pay  approximately  $132,000  during 2002 to
service this debt.

The property is undeveloped  and suitable for commercial  development.  Although
the  Company  has not  determined  the usage of the land,  the Company may use a
portion  of the land for an adult  cabaret  and sell the  remaining  undeveloped
property to a third party.  The  development  of the property will be subject to
the Company  obtaining a construction  loan. The Company does not currently know
the amount of the loan it will need to develop this  property or whether it will
be able to obtain a  sufficient  loan for  development  of the  property  or, if
obtained, whether the terms of the loan will be favorable to the Company.

The Company  intends to seek  long-term  financing  for the  purchased  property
before the principal  note is due in February  2004. If the Company is unable to
obtain long-term financing, the Company may have to sell the property to pay the
note.  There can be no  assurance  that the  property  can be sold for the total
amount  of the  note.  The  sale of the  property  for less  than the  Company's
purchase price will result in a loss which may  materially  impact the Company's
future financial condition and results of operations.


                                                                            F-15


<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.
         10.4+    Promissory  Note dated  February  14, 2003 (the "Note") in the
                  principal  amount of  $2,156,713.50  payable by the Company to
                  One Stemmons Land Limited  Partnership with interest at 8% per
                  annum,  interest  payable  monthly,  with a  single  principal
                  payment due and payable on February 1, 2004.
         10.5+    Deed of Trust,  dated February 14, 2003, signed by the Company
                  granting a security  interest in 6.6 acres of undeveloped real
                  estate in Dallas, Texas to secure payment of the Note.
         10.6+    Special  Warranty Deed with  Vendor's Lien dated  February 14,
                  2002  relating to 6.6 acres of real estate  located in Dallas,
                  Texas.
         21.1*    Subsidiaries of the Company.
         99.1+    Certification  Pursuant  to  Title  18,  United  States  Code,
                  Section  1350,  as  Adopted  Pursuant  to  Section  906 of the
                  Sarbanes-Oxley Act of 2002.
--------------------
*        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.
***      Incorporated by reference to the Company's Annual Report on Form 10-KSB
         for the fiscal year ended December 31, 2001.
+        Filed herewith.


                                     IOE-1