MILLION DOLLAR SALOON INC, SB-2/A, 1996-06-18

MILLION DOLLAR SALOON INC
SB-2/A, 1996-06-18
HOTELS & MOTELS

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As filed with the Securities and Exchange Commission on June ___, 1996
Registration No. 333-2664

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------

Amendment No. 1 to
Form SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

MILLION DOLLAR SALOON, INC.
(Name of small business issuer in its charter)

Nevada 6749 13-3428657
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

6848 Greenville Avenue, Dallas, Texas 75231, (214) 691-6757
(Address and telephone number of principal executive offices)

Nina J. Furrh, 6848 Greenville Avenue, Dallas, Texas 75231, (214) 691-6757
(Name, address and telephone number, including area code, of agent for service)

Copies to:
William C. Jones, Esq.
4851 LBJ Freeway, Suite 201
Dallas, Texas 75244
(214) 233-0300

Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.

CALCULATION OF REGISTRATION FEE

Title of each Proposed Proposed
class of Amount maximum maximum Amount of
securities to be to be offering price aggregate registration
registered registered per share offering price fee
- --------------------------------------------------------------------------------

Common Stock
$0.001 par value 878,173 $4.00 $3,512,692 $1,211.27
- --------------------------------------------------------------------------------

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

THE RISK FACTORS SECTION OF THE PROSPECTUS BEGINS ON PAGE 4
OF THE PROSPECTUS.

<PAGE>

Cross Reference Sheet

Items and Caption in Form SB-2

1. Front of Registration Statement Front Cover page of Registration Statement;
and Outside Front Cover Page Outside
of Prospectus Front Cover of Prospecuts

2. Inside Front and Outside Back Inside Front Cover and Outside Back Cover
Cover pages of Prospectus pages of Prospectus

3. Summary of Information and Risk Summary; Risk Factors
Factors

4. Use of Proceeds Not applicable

5. Determination of Offering Price Plan of Distribution

6. Dilution Not Applicable

7. Selling Security - Holders Plan of Distribution

8. Plan of Distribution Outside Front Cover Page of Prospectus;
Description of Securities; Plan of
Distribution

9. Legal Proceedings Legal Proceedings

10. Directors, Executive Officers, Management
Promoters and Control Persons

11. Security Ownership of Certain Security Ownership of Certain Beneficial
Beneficial Owners and Owners and Management
Management

12. Description of Securities Description of Securities

13. Interest of Named Experts Experts
and Counsel

14. Disclosure of Commissioner Indemnification of Directors and Officers
Positionon Indemnification
for Securities Act Liabilities

15. Organization Within Past Five Certain Relationships and Related
Years Transactions

16. Description of Business Description of Business

17. Management's Discussion and Management's Discussion and Analysis
Analysis or Plan of Operation Operation

18. Description of Property Description of Property

19. Certain Relationships and Certain Relationships and Related
Related Transactions Transactions

20. Market for Common Equity and Market for Common Equity
Related Stockholder Matters and Related Stockholder Matters

21. Executive Compensation Executive Compensation

22. Financial Statements Financial Statements

23. Changes In and Disagreements Non Applicable
with Accountants

<PAGE>

878,173 SHARES

MILLION DOLLAR SALOON, INC.

Common Stock
(par value $.01 per share)

All of the 878,173 shares (the "Shares") of Common Stock offered hereby are
being sold by the Selling Stockholders. See "Selling Stockholders." Million
Dollar Saloon, Inc. (the "Company") will not receive any of the proceeds from
the sale of shares by the Selling Stockholders. The Common Stock is traded on
the OTC Bulletin Board under the symbol "MLDS." On __________, 1996, the last
reported sale price of the Common Stock on the ______ was $____ per share.

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

See "Risk Factors" on page 6 for a discussion of certain risk factors which
should be considered in connection with an investment in the Common Stock.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

Estimated Price to Underwriting Discounts and Proceeds to Selling
Public (1) Commissions(2) Shareholders (3)
- --------------------------------------------------------------------------------

Per $4.00 -- $4.00
Share

Total $3,512,692 -- $3,512,692

(1) Estimated.

(2) Selling Shareholders may sell their Shares through broker-dealers. Does not
include the expenses of the offering estimated at $14,711.

(3) The Company will not receive any of the proceeds from the sale of the
shares.

The date of this Prospectus is ___________, 1996.

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the Regional Offices of the
Commission at Seven World Trade Center, 13th Floor, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.

The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus does not contain all of the information set forth in such
Registration Statement. For further information with respect to the Company and
the Common Stock being offered, reference is hereby made to the Registration
Statement and to the exhibits thereto.

<PAGE>

SUMMARY

The Company conducts business in two distinct areas:

[ ] Owning and operating an adult entertainment nightclub in Dallas, Texas
operating as The Million Dollar Saloon; and

[ ] Owning and managing income producing commercial real estate.

The Company's executive offices are located at 6848 Greenville Avenue, Dallas,
Texas 75231, and its telephone number is (214) 691-6757.

Selected Financial Information

The following table sets forth summary financial information as of the dates and
for the periods indicated. The following information should be read in
conjunction with the Company's audited annual financial statements and notes
thereto and the unaudited interim financial statements and notes thereto
presented herein, starting on page F-1.

For the quarter ended For the year ended For the year ended For the year ended
Operating Data March 31, 1996 December 31, 1996 December 31, 1994 December 31, 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues

Bar and restaurant sales $876,278 $2,750,794 $2,488,360 $2,472,142

Real estate rentals $104,205 $ 476,257 $ 478,574 $ 466,755

Cost of sales - Bar and
Restaurant operations $496,242 $1,550,740 $1,393,856 $1,508,684

Operating expenses $278,930 $1,569,904 $1,427,713 $1,497,341

Net income $137,670 $ 111,675 $ 111,592 $ 45,609

Net income per weighted -
average share of common
stock outstanding $ 0.03 $ 0.02 $ 0.02 $ 0.01

Weighted-average number
of shares of common stock
outstanding used in this
computation 5,010,084 4,999,991 4,583,325 4,457,425

Balance Sheet Data

Total assets $3,585,072 $3,531,961 $3,424,335 $4,400,163

Long-term liabilities $ 694,535 $ 713,406 $ 116,861 $ 127,116

Shareholders' equity $2,698,781 $2,551,111 $2,840,636 $3,178,269

</TABLE>

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<PAGE>

RISK FACTORS

The Shares of Common Stock offered hereby are speculative and involve a
high degree of risk. In addition to the other information set forth in this
Prospectus each prospective investor should carefully consider the following
risk factors before making an investment decision.

RISK OF ADULT NIGHTCLUB OPERATIONS

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

CHANGES TO THE INTERNAL REVENUE CODE

Changes to the Internal Revenue Code of 1986 limiting or decreasing the
amounts of entertainment expenses allowed as deductions from income could
adversely affect sales to customers dependent upon corporate expense accounts.
An adverse effect upon the Company's sales could have an adverse affect upon an
investment in the Shares.

RISK OF INADEQUATE FINANCIAL CONTROLS

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

COMPETITION WITHIN THE INDUSTRY

The adult topless club entertainment business is highly competitive with
respect to price, service, location, and the professionalism of entertainment.
The Million Dollar Saloon competes in Dallas with a number of locally-owned
adult cabarets, some of whose names may enjoy recognition that equals that of
The Million Dollar Saloon. Although the Company believes that it will compete
successfully, 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 topless 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.

The Company's inability to compete within the industry or to maintain a
high quality of entertainment could adversely effect an investment in the
Shares.

DEPENDENCE ON AND AVAILABILITY OF MANAGEMENT

The success of the Company is dependent upon the time, talent, and
experience of Nina J. Furrh and Bjorn Heyerdahl. The loss of either s services
could have a material adverse impact on the Company and its business. If either
becomes unavailable or is temporarily disabled, the Company believes that it has
in place management systems and controls that are sufficient to enable it to
operate efficiently and effectively until their return or a replacement could be
found. No assurance can be given by the Company that a replacement could be

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<PAGE>

found if either is unavailable, and, then adversely effect an investment in the
Shares.

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.

It is the intention of the Company to expand its existing business
operations by opening additional topless nightclubs in other metropolitan areas.
The opening of additional topless nightclubs 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

The Company derives a significant portion of its revenues from the sale of
alcoholic beverages. In Texas, the Texas Alcoholic Beverage Commission governs
the authority to issue a permit to sell alcoholic beverages (the "TABC"), which
has the authority, in its discretion, to issue the appropriate permits. The
Company presently holds a Mixed Beverage Permit and a Late Hours Permit (the
"Permits"). These Permits are subject to annual renewal, provided the Company
has complied with all rules and regulations governing the permits. Renewal of a
permit is subject to protest, which a law enforcement agency may make or by a
member of the public. In case of protest, the TABC may hold a hearing when the
views of interested parties are expressed. The TABC has the authority after such
hearing not to issue a renewal of the protested alcoholic beverage permit. While
the Company has never been the subject of a protest hearing against the renewal
of its Permits, there can be no assurance that such a protest could not be made
in the future, nor can there be any assurance that the Permits would be granted
in the event such a protest was made. Other states may have similar laws which
may limit the availability of a permit to sell alcoholic beverages or which may
provide for suspension or revocation of a permit to sell alcoholic beverages in
certain circumstances. The temporary or permanent suspension or revocations of
either of the Permits or the inability to obtain permits in areas of expansion
would have a material adverse effect on the revenues, financial condition and
results of operations of the Company and upon an investment in the Shares.

NECESSARY PERMITS

In Dallas, Texas, and in many other cities, location of a topless cabaret
is subject to restriction by city ordinance. 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 other sexually oriented businesses and from schools
and churches, 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, which is
transferable, is valid for one year and is renewable by application of the
permit holder. The loss of the Business Permit would have a material adverse
effect on the Company's business, financial condition and results of operations
and upon an investment in the Shares.

UNINSURED RISKS

The Company maintains insurance in amounts it considers adequate for
personal injury and property damage to which the business of the Company may be
subject. Because of what the Company deems to be prohibitively expensive premium
costs, however, the Company does not maintain any personal injury liquor
liability insurance. Therefore, the Company may be exposed to potential
uninsured 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

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<PAGE>

establishment that wrongfully served alcoholic beverages to such person if it
were apparent to the server that the individual being sold, served or provided
with an alcoholic beverage was obviously intoxicated to the extent that he
presented a clear danger to himself and others. An employer is not liable for
the actions of its employee who overserves if (i) the employer requires its
employees to attend a seller training program approved by the TABC; (ii) the
employee has actually attended such a training program; and (iii) the employer
has not directly or indirectly encouraged the employee to violate the law. It is
the policy of the Company to require that all servers of alcohol working at the
Company be certified as servers under a training program approved by the TABC,
which certification gives statutory immunity to the sellers of alcohol from
damage caused to third parties by those who have consumed alcoholic beverages at
such establishment pursuant to the Texas Alcoholic Beverage Code. There can be
no assurance, however, that uninsured liabilities may not arise which could have
a material adverse effect on the Company and upon an investment in the Shares.

CONTROL BY MANAGEMENT

Officers and Directors of the Company own approximately 48.44% of the
outstanding Common Stock of the Company. Upon completion of this offering,
management will own approximately 47.44% of the Company's outstanding stock. As
a result, management may be able to control the affairs of the Company for the
foreseeable future.

LIMITATIONS ON PROTECTION OF SERVICE MARKS

Rights of the Company to the trade name "Million Dollar Saloon" were
purchased. No assurance steps taken by the Company to protect its trade name
will be adequate 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 intellectual property rights owned or claimed by the Company could
have a material adverse effect on the Company and upon an investment in the
Shares.

POSSIBLE VOLATILITY OF COMMON STOCK PRICE

Following this offering, the market price of the Common Stock may be highly
volatile. There have been periods of extreme fluctuation in the stock market
that, often, are unrelated to the operating performance of, or announcements
concerning, the Company's of the affected securities. Securities of issuers
having relatively limited capitalization or securities recently issued in a
public offering are particularly susceptible to change based on short-term
trading strategies of certain investors. Accordingly, purchasers may not be able
to resell their Common Stock at or above the public offering price, if at all,
and a purchaser may not be able to liquidate his investment even at a loss
without considerable delay.

PENNY STOCK REGULATIONS

Stocks selling for less than $5.00 per share may be designated as "penny
stocks" and may be subject to certain requirements imposed by Rules 15g-2
through 15g-6 under the Securities Act of 1934, as amended (the "Exchange Act").
Among other things, Rule 15g-3 requires a broker or dealer to advise potential
purchasers of a penny stock of the lowest offer and highest bid quotations for
such stock, and Rule 15g-4 requires a broker or dealer to disclose to the
potential purchaser its compensation in connection with such transaction. Under
Rule 15g-6, a broker or dealer who recommends such securities to persons other
than established customers must make a special written suitability determination
for the purchaser and receive the purchaser's prior agreement to such a
transaction. The effect of these regulations may be to delay transactions in
stocks that are deemed to be penny stocks. The Company believes, however, that
the "penny stock restrictions" will not be applicable to its securities based on
an exemption provided in Rule 3a51-1 under the Exchange Act which provides an
exemption from the penny stock restrictions for securities of issuers that have
tangible net assets in excess of $2,000,000. However, should the Company's
tangible net worth drop below $2,000,000 and should no other exemption be
available, the Company's securities could be subject to the penny stock
restrictions, and sales of the Company's securities by brokers or dealers and
resales by investors likely would be adversely affected.

SHARES ELIGIBLE FOR FUTURE SALE

The Company has outstanding 5,010,084 shares of Common Stock.

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<PAGE>

The shares of Common Stock sold in this offering will be freely tradeable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except for any shares purchased by an
"affiliate" of the Company (in general, a person who has a control relationship
with the Company), which will be subject to limitations of Rule 144 of the
Securities Act ("Rule 144"). After this offering, approximately 3,803,562 shares
of Common Stock outstanding, will be deemed to be "restricted securities" as
that term is defined under Rule 144, in that such shares were issued in private
transactions not involving a public offering. In general, under Rule 144, as
currently in effect, a person, including an affiliate of the Company, who has
beneficially owned restricted securities which have been issued for at least two
years is entitled to sell within any three month period a number of shares that
does not exceed the greater of (i) one percent of the then outstanding shares of
common stock of the Company and (ii) the average weekly trading volume of such
stock during the four calendar weeks preceding the sale. Sales under Rule 144
are subject to certain other requirements, including restrictions relating to
the manner of sale, required notification to the SEC and the availability of
current public information about the Company.

No prediction can be made as to the effect, if any, that sales of shares of
Common Stock or the availability of such shares for sale will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amount of Common Stock may be sold in the public market would likely
have a material adverse effect on prevailing market prices for the Common Stock
and could impair the Company's ability to raise capital through the sale of its
equity securities. See "Plan of Distribution" and "Shares Eligible for Future
Sale".

ANTI-TAKEOVER EFFECTS OF ISSUANCE OF PREFERRED STOCK

The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock, $.01 par value per share, in one or more series, to fix the
number of shares constituting any such series, and to fix the rights and
preferences of the shares constituting any series, without any further vote or
action by the stockholders. The issuance of Preferred Stock by the Board of
Directors could adversely affect the rights of the holders of Common Stock. For
example, such issuance could result in a class of securities outstanding that
would have preferences with respect to voting rights and dividends and in
liquidation over the Common Stock, and could (upon conversion or otherwise)
enjoy all of the rights appurtenant to Common Stock. The Board's authority to
issue Preferred Stock could discourage potential takeover attempts and could
delay or prevent a change in control of the Company through merger, tender
offer, proxy contest or otherwise by making such attempts more difficult to
achieve or more costly. There are no issued and outstanding shares of Preferred
Stock; there are no agreements or understandings for the issuance of Preferred
Stock, and the Board of Directors has no present intention to issue Preferred
Stock.

LIMITATION ON DIRECTOR LIABILITY

The Company's Articles of Incorporation provide, as permitted by governing
Texas law, that a director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, with certain exceptions. These provisions may discourage
stockholders from bringing suit against a director for breach of fiduciary duty
and may reduce the likelihood of derivative litigation brought by stockholders
on behalf of the Company against a director. See "Management - Limitation on
Director's Liability; Indemnification."

DESCRIPTION OF BUSINESS

Business Development

The Company was incorporated in the State of Nevada on September 28, 1987
as Goodheart Ventures, Inc. It completed an offering of its securities in
November 1988. After completion of its offering, the Company sought potential
business ventures through purchase, acquisition or merger. It has been inactive
for more than the past three years and, in 1991, ceased filing reports under the
Exchange Act of 1934.

The Company identified entities owned and/or controlled by the Donald G.
and Nina Furrh family as candidates for merger (the "Merger"). A special meeting
of the Company's shareholders was held on September 22, 1995, pursuant to
notice. At the meeting, the shareholders approved a one-for-twelve reverse split
of the Company's outstanding common shares, the merger agreement with Million
Dollar Saloon, Inc., (MDS-TX), and amendments to the Company's Articles of
Incorporation to authorize a class of preferred stock, a change in the name of
the Company, to limit the liability of

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directors, and to indemnify officers and directors under certain circumstances.
The Merger was completed on October 5, 1995. Before the Merger, the Company
effected the one-for-twelve reverse split of its issued and outstanding shares
of Common Stock. After the Merger, the Company changed its name to "Million
Dollar Saloon, Inc."

MDS-TX was incorporated in the State of Texas on July 1, 1985. It was
dormant until September 7, 1995. On that date, MDS-TX acquired 100% of the
issued and outstanding stock of Furrh, Inc. ("Furrh"), Texas corporation
incorporated February 25, 1974. Furrh owns and manages commercial rental
property located in Dallas County, Texas, and has one subsidiary. The subsidiary
is Tempo Tamers, Inc. ("Tempo"). Tempo, incorporated on July 3, 1978, operates a
lounge and entertainment facility in Dallas, Texas under the registered
trademark and trade name "Million Dollar Saloon". Simultaneously, MDS-TX
acquired 100% of the issued and outstanding stock of Corporation Lex, ("Lex")
and of Don, Inc. ("Don"). Lex, a Texas corporation, incorporated on November 30,
1984, owns and manages commercial rental property located in Dallas County,
Texas. Don, a Texas corporation, incorporated on November 8, 1973, owns and
manages commercial rental property located in Tarrant County, Texas.

As a result of the Merger, Furrh, Lex and Don have become subsidiaries of
the Company. Tempo remains a subsidiary of Furrh.

Business of The Company

General

The following description will refer to the Company's business after the
Merger of MDS-TX into the Company and includes the activities of its
subsidiaries. The Company is based in Dallas and currently conducts business in
two distinct areas:

[ ] Owning and operating an adult entertainment nightclub.

[ ] Owning and managing income producing commercial real estate.

Adult Entertainment Nightclub. The Company owns and operates The Million
Dollar Saloon through Tempo. This club opened in 1982. The Million Dollar Saloon
is a trademarked and recognized name.

The Company is exploring the expansion of the gentlemen club operation
segment of its business by establishing additional Million Dollar Saloons or
acquiring additional facilities in selected cities. No specific locations have
been identified.

Income Producing Commercial Real Estate. The Company owns four income
producing commercial properties, in fee simple estate, which house gentlemen's
clubs in the Dallas-Fort Worth metroplex. Management is of the opinion that all
properties, owned and/or leased are adequately covered by insurance. One
facility is company operated and the other three are subject to long-term lease
agreements and operated by other third-party operators.

The company operated facility is located at 6826 Greenville Avenue in
Dallas, Texas and houses the Million Dollar Saloon. The facility consists of a
9,750 square foot one and two story building located on approximate 25,500
square foot tract of land fronting a major traffic artery in North Central
Dallas. The property is owned by Furrh, a subsidiary, and is subject to a lien
covering three of the four properties incurred in connection with a $750,000
long-term note payable to a bank dated September 22, 1995.

The remaining three properties are leased to unrelated independent
operators which also operate gentlemen's clubs in the facilities. All of the
properties are stand-alone structures and, accordingly, are 100% occupied with a
single tenant and, at the present time, are not subject to any plans for
renovation, remodeling or other significant improvement. All properties are
physically located in geographic areas suitable for their current use. There
exist similar properties which could be similarly used in the same geographic
area as the subject properties. The effective rentals vary between locations
because of desirability and attractiveness of locations.

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<PAGE>

Female Entertainment. The topless entertainers and waitresses 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
performers if their dress, makeup, hairstyle, general appearance or demeanor do
not meet the standards of the Company. Though these policies have the effect of
limiting the number of performers who are permitted to dance or serve as
waitresses at The Million Dollar Saloon, the Company believes that its policy of
maintaining these high standards is in its best interest of long-term market
position. Entertainers who have performed at The Million Dollar Saloon have been
featured in various leading men's entertainment magazines.

Food and Drink. The Company believes a key to the success of a premier
adult nightclub is a quality, first-class bar and restaurant operation to
complement its adult entertainment. 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 employs a Chef and a Bar Manager, who is in charge of ordering,
inventory, and scheduling of bar staff. The Company believes that the operation
of a first class restaurant and the provision of premium wine, liquor and beer
are necessary to the operation of a premier adult cabaret. 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.

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

Atmosphere. The Company maintains a high standard for atmosphere in its
facility and in its decor at The Million Dollar Saloon. The furniture and
furnishings in the club area create the feeling of an upscale restaurant. The
sound system design provides quality sound at levels so conversations can take
place. The Company also provides a companion light show and employs a sound and
light engineer to upgrade, monitor, and maintain the sound and light systems at
The Million Dollar Saloon. Management constantly monitors the environment of The
Million Dollar Saloon for maintenance, music selection, entertainer and waitress
appearance, and all aspects of customer service.

VIP Area. To emphasize service for the upper-end of the business market,
the Company maintains a "VIP" area encompassing the upstairs area of The Million
Dollar Saloon facility. The VIP area opened in 1982 to individuals who pay an
increased daily admission charge or purchase annual or lifetime admission
passes. The VIP area provides a higher level of luxury in its decor and more
personalized services. Current admission pass fees are $500.00 annually and
$1,000.00 for a lifetime. The VIP area consists of approximately 1,800 square
feet for food and entertainment purposes and has an occupancy limit of 100
persons. The downstairs club and dining area consists of approximately 4,500
square feet for entertainment purposes and can accommodate 250 persons. The
Company estimates that there are less than 100 active VIP members who have
purchased annual or lifetime admission passes.

Advertising and Promotion. The Company's marketing philosophy is to portray
The Million Dollar Saloon as a premiere cabaret and providing topless
entertainment in a fun, discreet environment for its customers. Hotel
publications, local radio, cable television, newspapers, billboards, and a
variety of promotional campaigns ensure that the public recognizes The Million
Dollar Saloon name. The Company is a member of local business organizations and
accepted by the Dallas Convention & Visitor's Bureau.

9
<PAGE>

Future Expansion. The Company has not determined the precise locations or
nature of its future expansion, but it believes, based upon its experience, that
opportunities for expansion exist. It is researching the gaming industry and
theatrical production as areas for expansion. It may expand by acquisition of
facilities including sports bars and casual clubs that would not use the
trademark "The Million Dollar Saloon." In determining which cities will be prime
locations, a variety of factors will be considered. The current regulatory
environment will be one such factor. The city must presently permit sale of
alcoholic beverages in a topless cabaret and table dancing. Another factor that
will be considered is the availability of sites. The city must have several
available sites located in high traffic commercial areas suitable for conversion
to The Million Dollar Saloon style cabarets or sports bars or casual clubs. The
Company also will review potential competition in the area and will analyze the
current market conditions and profitability of other adult cabarets in the city.
The existing business climate will be of critical importance.

Competition. The adult topless club entertainment business 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, some of whose names 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 entertainment market. There are
in excess of 30 adult cabarets located in the Dallas area of which two are in
direct competition with 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 the industry.

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

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

Trademarks. "Million Dollar Saloon" is a trademarked and recognized name.
The name was acquired by purchase before opening the Million Dollar Saloon. The
Company is aware of a possible infringement upon the trademark by a facility in
Oklahoma and is considering remedial action if warranted. The possible
infringement has not and is not expected to materially affect operations of the
Company.

10
<PAGE>

Employees and Independent Contractors. As of December 31, 1995, the Company
had approximately 70 full-time employees, of which 12 are in management
positions, including corporate and administrative operations and approximately
58 are engaged in food and beverage service, including bartenders and
waitresses. Entertainers number approximately 130

full time and part time. None of the Company's employees are represented by a
union and the Company considers its employee relations to be good.

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

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

MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

The following discussion should be read in conjunction with the accompanying
financial statements and notes thereto, beginning on page F-1, elsewhere herein.
Further, all discussions relate to the continuing operations of Furrh, Inc.,
Corporation Lex and Don, Inc. as wholly-owned subsidiaries of the Company.

Results of operations
- ---------------------

Year ended December 31, 1995 versus December 31, 1994
- -----------------------------------------------------
The Company derives revenues from two principal sources - bar and restaurant
operations and rents from leases on real property. The Company experienced an
approximate $263,000 increase in gross bar and restaurant revenues to a total of
approximately $2,751,000 during the year December 31, 1995 from approximately
$2,488,000 during the year ended December 31, 1994. This increase is
attributable to increased patronage from local traffic and conventions in the
Dallas-Ft. Worth Metroplex. The Company s real estate rental operations
experienced a revenue decrease of approximately $2,300 from approximately
$478,500 for the year ended December 31, 1994 to approximately $476,200 for the
year ended December 31, 1995. This decrease was caused by financial difficulties
of one tenant. The Company has been able to replace this tenant at identical
lease terms and conditions. The overall net total revenues of the Company
increased slightly from approximately $1,573,000 for the year ended December 31,
1994 to approximately $1,676,000 for the year ended December 31, 1995.

Net bar and restaurant direct operating costs have increased with direct
personnel costs at approximately $1,048,000 versus $878,000 and purchases of
various consumables and supplies at approximately $502,000 versus $515,000 for
the year ended December 31, 1995 and 1994, respectively. During 1995 the Company
changed its method of compensating dancers from a "tip-based" reporting method
to a method whereby dancers are paid a percentage of all reported service
charges collected for individual dances. Under this change in compensation
methodology, the Company will experience increased revenues, which will be
offset by related increases in entertainer compensation. Because of this change,
the Company settles with each entertainer at the end of each daily shift and
advances to the employee the pro-rata estimated net compensation. All

11
<PAGE>

advances are reconciled and cleared during the Company's normal bi-weekly
payroll cycle. At December 31, 1995, the Company experienced an increase of
approximately $46,600 in accounts receivable as a result of these advances.

Overall operating expenses increased from approximately $1,427,700 for the year
ended December 31, 1994 to approximately $1,569,900 for the year ended December
31, 1995. The largest contributors to this increase of approximately $129,000
was an increase in management fees paid to a related party of approximately
$100,000 prior to the merger of the Company and the operating subsidiaries and
an increase in employer payroll taxes related to the change in entertainer
compensation methods. Management fees paid to a related party ceased effective
October 1, 1995 with the merger of the Company and the operating subsidiaries.

Additionally, the reorganization of Furrh, Inc. and its subsidiary, Tempo
Tamers, Inc., Corporation Lex and Don, Inc. with and into MDS-TX and the
subsequent merger with the Company provided a structure whereby the cumulative
net operating loss of Furrh, Inc., as of February 28, 1995, in the amount of
approximately $400,000 became usable beyond a reasonable doubt. As a separate
entity, there was no assurance beyond a reasonable doubt that the net operating
loss carry forward would be utilizable by Furrh, Inc. and its subsidiary, and,
accordingly, the deferred tax asset related to this net operating loss carry
forward was fully reserved. Accordingly upon the consummation of the merger, the
Company retroactively recognized a deferred tax asset, of approximately $76,000
as of December 31, 1995 to reflect the economic effect of the future utilization
of this loss carry forward for income tax purposes.

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

During 1995, the Company advanced an additional approximate $17,500 to officers,
directors and/or shareholders, pre- reverse merger between the operating
companies and Goodheart. No advances are anticipated to be made by the Company
in future periods. In September 1995, the two largest balances due from
shareholders were converted to separate formalized notes bearing interest 5.65%
and mature in September 1997. The notes may be repaid with either cash or the
Company s common stock held by the respective shareholder at an agreed-upon
value of $2.00 per share. Both shareholders have adequate share holdings to
completely retire the debt, plus anticipated accrued interest, at the scheduled
maturity date. It is the intent of these shareholders to liquidate the notes
with cash repayments.

Years ended December 31, 1994 versus December 31, 1993
- ------------------------------------------------------
For the year ended December 31, 1994 as compared to the years ended December 31,
1993 and 1992, respectively, revenues from bar and restaurant operations
increased to approximately $2.49 million from approximately $2.47 million and
approximately $2.38 million, respectively. This increase was driven by a
mid-1993 minimal increase in bar prices, increased convention traffic in the
Dallas area, focusing on improving relationships with taxicab and limousine
services used by visitors to the city and an improvement in operational
management focusing on business promotion and marketing. The overall patronage
of the facility is dependent upon the traffic flow in the facility's
geographical area, continued repeat local customers and continued visitation by
conventioneers and other visitors and the facility's overall reputation as a
"destination of choice". Cost of sales related to bar and restaurant sales was
approximately $1.39 million, $1.50 million and $1.39 million, respectively, for
the years ended December 31, 1994, 1993 and 1992. These costs are controlled
primarily through management monitoring of food and beverage costs and
non-entertainer staffing levels. In order to maintain the appropriate customer
service levels, the daily staffing of entertainers is keyed to the appropriate
day of the week, anticipated customer levels and availability of qualified
entertainers. These attributes are also integral components of the revenue
stream in order to maintain repeat customers and to encourage "word-of-mouth"
advertising to generate additional customer traffic.

Revenues from real estate rentals were approximately $478,000 in 1994 compared
to approximately $467,000 in 1993 and approximately $395,296 in 1992. All leases
are subject to scheduled base rent increases, as defined in each respective
lease agreement, and the payment by the lessor of all related ad valorem taxes
as a component of the rental income amount. All properties are under long-term
lease agreements.

Operating expenses have experienced cumulative improvements in expenditures from
approximately $1.58 million for Calendar 1992 to approximately $1.49 million in
Calendar 1993 to approximately $1.42 million in Calendar 1994. The largest cost
savings have occurred in the areas of taxes and interest related to the rental
real estate. The Company has

12
<PAGE>

constantly strived and succeeded in protesting the valuations placed on its
rental real estate and anticipates that these expenditures should remain stable
or decline further based on the protest efforts. Management has made the
monitoring of non-labor related cost items a target of constant monitoring for
additional cost savings in the future.

Interest income is principally related to advances receivable from related
parties to the Company. All advances receivable outstanding through September 7,
1995 were due upon demand and bore interest at the statutory interest rate set
by the Internal Revenue Service for related party loans. Due to the life of the
respective receivables and absence of a formalized repayment program, these
amounts are classified as non-current.

On January 1, 1994, Furrh, Inc., Corporation Lex and Don, Inc., collectively
declared aggregate dividends of approximately $365,225 which was paid via an
offset against the cash advances to various officers, shareholders and
affiliates. Additionally, on January 1, 1995, certain officers and shareholders
agreed, with the permission of the creditor, to assume a trade account payable
in the amount of approximately $400,000. This assumption was accounted for as an
offset between the trade accounts payable account and the advances due from
officers, shareholders and affiliates account. The effect of these two
transactions lowered the balances eligible for interest income computations and,
accordingly, was directly responsible for the decline in interest income between
the year ended December 31, 1994 and 1993, respectively.

Liquidity and Capital Resources
- -------------------------------

As of December 31, 1995, the Company had negative working capital of
approximately ($32,300) as of December 31, 1995 as compared to ($292,000) as of
December 31, 1994 and approximately ($858,000) as of December 31, 1993. The
Company has achieved positive cash flows from operations of approximately
$167,000 for year ended December 31, 1995, approximately $215,000 for the year
ended December 31, 1994 and approximately $145,000 for the year ended December
31, 1993.

On September 7, 1995, concurrent with the corporate consolidation previously
discussed, MDS-TX sold approximately 124,900 shares of unregistered, restricted
common stock (at $2.00 per share) to unrelated third-party investors raising
$249,800.

On September 22, 1995, MDS-TX obtained a new $750,000 long-term note payable to
a bank in Dallas, Texas. The note bears interest at 11.0% and is payable in 60
equal installments of approximately $16,369, including interest. The final
payment is due in September 2000. The note may be prepaid at any time and any
prepayment must be accompanied by a
yield maintenance fee equal to 4% of the outstanding balance if prepaid prior
to August 31, 1996; 3% if prepaid between September 1, 1996 and August 31, 1997;
2% if prepaid between September 1, 1997 and August 31, 1998; and 1% if prepaid
between September 1, 1997 and August 31, 1999. The proceeds of the loan were
used to retire the $712,000 mortgage note payable, maturing in December 1995,
with a payoff balance of approximately $288,000 and the $105,000 mortgage note
payable, maturing in July 1996, with a payoff balance of approximately $10,000.

On September 22, 1995, MDS-TX and the Estate of Donald G. Furrh (a majority
shareholder of all involved corporations, pre and post reorganization) exchanged
approximately 325,000 of MDS-TX common stock held by the Estate for MDS- TX s
assumption of $650,000 in debts of the Estate (principally inheritance taxes and
related professional fees). Funds available from the new $750,000 note payable
and the proceeds of the stock sales on September 7, 1995 were used to
immediately retire the assumed debt.

Management believes that working capital is not a true indicator of liquidity
due to the cash nature of the bar and restaurant operations whereby all direct
operating revenues and expenses are settled within five (5) working days after
recognition. The positive cash flows from operations has primarily been used, in
prior periods, for the retirement of debt and distributions to shareholders.
Acquisitions of property and equipment has been nominal during the preceding two
Calendar years; approximately $11,000 for Calendar 1994 and approximately
$25,000 for Calendar 1993. It is anticipated that future demands for capital
resources will increase due to routine repairs and maintenance on the
company-operated facility and the exterior and interior remodeling to modernize
and update the overall appearance and atmosphere of the facility to

13
<PAGE>

maintain its quality and reputation within the marketplace. These repairs and
remodeling costs required approximately $82,000 in Calendar 1995. Due to major
freeway construction in the vicinity of the facility, management anticipates
that a remodeled facade will attract additional spontaneous patronage from
increases in traffic caused by freeway diversions. Liquidity requirements
mandated by future business acquisitions or expansions, if any are specifically
identified or undertaken, are not readily determinable at this time as no
substantive plans have been formulated by management. However, management
believes that all necessary cash liquidity will be obtained from existing
operations. Additionally, management is of the opinion that there is additional
potential availability of incremental mortgage debt and the opportunity for the
sale of additional common stock through either private placements or secondary
offerings.

Because of the large volume of cash handled by the bar and restaurant facility
personnel, stringent cash controls have been implemented by the Company. These
procedures have continually evolved since the facility opened in 1982 to take
advantage of improving technologies. Management believes that it will be able to
duplicate the financial controls that exist at the existing facility into future
locations, and that these controls will provide sufficient safeguards to protect
the interests of the Company.

The Company treats and has consistently treated all entertainers as employees
whereas other similar facilities may or may have treated their entertainers as
independent contractors. One of the Company s competitors has been the subject
of litigation related to this issue and has had judgments entered against it by
the U. S. Department of Labor. Management believes that as a result of its
initial and continuing policies and procedures, there is an insignificant risk
to both future operations and profitability for any potential assessment of
payroll and related taxes in the future by regulatory authorities which would
have potentially a very significant financial and operational impact if the
Company treated all entertainers as independent contractors.

DESCRIPTION OF PROPERTY

The Company maintains its corporate offices at 6848 Greenville Avenue in Dallas,
Texas. The offices contain approximately 2,700 square feet and the monthly rent
is approximately $3,500 per month. The lease expires in October 1997. Based on
current local market conditions and available information, management is of the
belief that it will either be able to renew the existing lease upon expiration
or relocate to a comparable location at a comparable cost.

The Company owns four facilities, in fee simple estate, which operate as
gentlemen's clubs in the Dallas-Fort Worth metroplex. Management is of the
opinion that all properties, owned and/or leased are adequately covered by
insurance. One facility is company operated and the other three are subject to
long-term lease agreements and operated by other unrelated third-party
operators.

The company operated facility is located at 6826 Greenville Avenue in Dallas,
Texas. The facility consists of a 9,750 square foot one and two story building
located on approximate 25,500 square foot tract of land fronting a major traffic
artery in North Central Dallas. The property is subject to a lien covering three
of the four properties incurred in connection with a $750,000 long-term note
payable to a bank dated September 22, 1995.

The remaining three properties are leased to unrelated independent operators
which also operate gentlemen's clubs in the facilities. All of the properties
are stand-alone structures and, accordingly, are 100% occupied with a single
tenant and, at the present time, are not subject to any plans for renovation,
remodeling or other significant improvement. All properties are physically
located in geographic areas suitable for their current use. There exist similar
properties which could be similarly used in the same geographic area as the
subject properties. The lease rental amounts are based upon the location and
physical condition of the respective property. The Harry Hines property lessee
experienced financial difficulties during the first nine months of 1995 and has
been replaced with a new lessee under the same lease terms and conditions.

A summary of the terms, conditions and operating parameters of the three leased
properties being operated by third parties as gentlemen's clubs follows:

14
<PAGE>
<TABLE>
<CAPTION>

<S> <C> <C> <C>
Owning entity Corporation Lex Don, Inc. Furrh, Inc.

Location/Address 3021 Northwest Highway 3601 State Highway 157 9736 Harry Hines
Dallas, Texas Fort Worth, Texas Dallas, Texas
Square footage
Building 8,550 4,850 5,900
Total tract 37,162 60,398 20,000

Mortgages (1) (1) $34,791 (2)

Lease expiration May 2002 August 1998 September 2005

Scheduled rentals $4,250 per week $3,250 per week $4,500 per month
through 5/25/99 through 8/15/95 plus 2.50% of $4,750 per
$4,750 per week $3,500 per week gross monthly
from 5/26/99 from 8/16/95 liquor sales
through 5/23/02 through 8/15/98

Effective annual
rental per square
foot (total lease term) $24.33 $32.14 $9.15 (*)

Gross book basis
(including land) $1,232,548 $138,429 $115,000

Net book basis
(including land) $1,033,365 $68,271 $102,500

Federal income
tax basis (excluding
land) $675,342 $128,429 $40,000

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

Ad valorem tax
rate per $100
of valuation $4.20 $3.06 $4.20

1996 Ad valorem
taxes $9,133 $6,595 $4,522

(*) exclusive of the 2.5% of gross liquor sales.
<FN>

<F1> Subject to a lien incurred in connection with a $750,000 long-term note
payable to a bank dated September 22, 1995. This $750,000 long-term note payable
to a bank in Dallas, Texas. The note bears interest at 11.0% and is payable in
monthly installments of approximately $16,369, including interest. The final
payment is due in September 2000. The note may be prepaid at any time and any
prepayment must be accompanied by a yield maintenance fee equal to 4% of the
outstanding balance if prepaid prior to August 31, 1996; 3% if prepaid between
September 1, 1996 and August 31, 1997; 2% if prepaid between September 1, 1997
and August 31, 1998; and 1% if prepaid between September 1, 1997 and August 31,
1999. The proceeds of the loan were used to retire a $712,000 mortgage note
payable with a payoff balance of approximately $288,000 and a $105,000 mortgage
note payable with a payoff balance of approximately $10,000.

<F2>Subject to a lien incurred with a $115,000 long-term mortgage note payable
to two unrelated individuals. The note bears interest at 12.0% and is payable in
monthly installments of approximately $1,380, including interest. The final
payment is due in September 1998. The note may be prepaid at any time without
additional penalties or fees.
</FN>
</TABLE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of June 13, 1996 with
regard to the beneficial ownership of Common Stock by (i) each person known to
the Company to be the beneficial owner of 5% or more of its outstanding Common
Stock, (ii) by the officers, directors and key employees of the Company
individually, and (iii) by the officers and directors as a group.
Number
of Shares
Name Owned Percent
- ---- ----- -------

(i) Estate of Donald G. Furrh 346,883 6.92%
6848 Greenville Avenue
Dallas, Texas 75231

Dona G. Furrh 690,553 13.78%

Joshua Barrett Furrh 522,974 10.44%

(ii) Nina J. Furrh 1,923,490 38.39%
6848 Greenville Avenue
Dallas, Texas 75231

Bjorn Heyerdahl 500,001 9.98%
6848 Greenville Avenue
Dallas, Texas 75231

Dewanna Ross 2,000 .04%
6848 Greenville Avenue
Dallas, Texas 75231

Ronald W. Johnston 1,500 .03%
3828 Peppertree Drive
Carrollton, Texas 75007

(iii) Directors and executive
officers as a group 2,426,990 48.44%

MANAGEMENT
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 shareholders or until their successors have
been elected and qualified. Executive officers of the Company are elected by the
Board of Directors to hold office until their respective successors are elected
and qualified.

Name Age Position(s)
---- --- -----------

Nina Furrh 59 Chairman of the Board and President

Bjorn Heyerdahl 55 Chief Executive Officer and Director

Dewanna Ross 39 Corporate Secretary and Director

Ronald W. Johnston 42 Chief Financial Officer and Director

Sharon Furrh 47 Director

16
<PAGE>

Nina Furrh has served as President of the Furrh family business interests since
1989. Mrs. Furrh became involved in the daily operations of the Million Dollar
Saloon club in September, 1992. Mrs. Furrh directs the Company's other real
estate holdings through Furrh Limited Partnership.

Bjorn Heyerdahl has served as the Business Consultant and Financial Advisor to
the Furrh family and Estate of Donald G. Furrh for the past 5 years. His duties
have included the preparation of Million Dollar Saloon, Inc. to become a public
corporation. Mr. Heyerdahl's prior history is that of C.E.O. and/or Director of
numerous corporations around the world in endeavors as diversified as retail
chain stores, coal/diamond mining, car rental, safari ranches, plantations and
film production.

Dewanna Ross has served as administrative manager for the Company companies
since 1976. Ms. Ross was responsible for the development of the corporate
procedures, including the hiring and training of corporate staff. Ms. Ross has
also served as an officer and operator of a private club and as an officer of
other businesses.

Sharon Furrh, the widow of Donald G. and Nina Furrh's son, has served as
Vice-President of Furrh since 1992. Sharon Furrh has been involved with the
Million Dollar Saloon since its inception in 1982 as a design consultant, both
in original construction and in subsequent remodelings. Additionally, Sharon
Furrh has been responsible for advertising, promotions and public relations for
The Million Dollar Saloon.

Ronald W. Johnston, CPA, has served as a consultant to the Company since
September, 1992. Mr. Johnston has been a certified public accountant in private
practice and a principal of his own firm since 1990. Mr. Johnston's current firm
serves a wide range of business and individual clients. Mr. Johnston currently
serves as a director of Crash Rescue Equipment Services, Inc., Dallas, Texas.

EXECUTIVE COMPENSATION

The Company's Bylaws provide that directors may receive compensation for their
services and reimbursement for their expenses as the Board of Directors may
establish by resolution.
<TABLE>
<CAPTION>

Long Term Compensation
Annual Compensation Awards Payouts
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other
and Annual Restricted
Principal Fees & Compen- Stock Options/ All Other
Position Year Salary Bonus sation Awards SARs(#) Payouts LTIP Compensation
- --------------------------------------------------------------------------------------------------------

Nina Furrh, 1995 $ 66,000 na na na na na na na
President <F1><F2> 1994 $ 66,000 na na na na na na na
1993 $111,000 na na na na na na na
Bjorn Heyerdahl,
Chief Executive Officer<F2>1995 $ 32,000 na na na na na na na

Dewanna Ross, Secretary 1995 $ 41,200 na na na na na na na

<FN>

<F1>The salary of the President is determined by the Board of Directors based on
the cash flow of Furrh and Tempo. In 1994, the Board of Directors reduced the
President's salary to offset increased operating expenses in these two
companies. Mrs. Furrh has also received profit distributions based upon her
ownership interest from Furrh Limited Partnership of $19,800 in 1993; and
$14,850 in 1994; and $ 58,500 in 1995, and distributions based upon here
ownership interest from Don, Inc., a Subchapter S corporation, of $15,000 in
1993, $156,614 in 1994 and $ 3,500 in 1995.

<F2>Mr. Heyerdahl became chief executive officer effective August 23,1995. He
receives a monthly consulting fee of $4,000.
</FN>
</TABLE>

17
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

merger negotiations and his negotiations to become chief executive officer, the
surrender was necessary to balance ownership between the existing pre-merger
shareholders of the Company and the shareholders of MDS-TX.

On September 7, 1995, MDS-TX exchanged 3,925,000 shares of unregistered,
restricted common stock for 100% of the issued and outstanding stock of Furrh
and its subsidiary Tempo, Lex and Don. All entities involved in the exchange
shared common ownership, control, and management. The purpose of this
transaction was to consolidate ownership of the entities prior to the Merger
with the Company.

On September 7, 1995, MDS-TX sold 124,900 shares of unregistered,
restricted common stock to outside third parties for an aggregate $249,800. The
purpose of this transaction was to provide working capital prior to the Merger
with the Company. On October 5, 1995, MDS-TX was merged into the Company.

The parties relied on Section 4(2) of the Securities Act in that such
transactions did not involve a public offering and were thus exempt from the
registration requirements of the Securities Act. No underwriters were used in
connection with the foregoing transactions.

Furrh and its subsidiary, Tempo, Lex and Don collectively paid Furrh
Limited Partnership, an entity related by ownership and management, management
fees of approximately $365,000 and $228,000 for the years ended December 31,
1995 and 1994, respectively. Management fees ceased October 1, 1995 upon
consummation of the Merger.

LEGAL PROCEEDINGS

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

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As of March 18, 1996, the Company had approximately 300 holders of record
of its Common Stock. Outstanding shares of the Company's common stock totalled
5,010,084. The Company's transfer agent is Securities Transfer Corporation,
Dallas, Texas.

The Company's shares began trading January 30, 1996 on the OTC Bulletin Board.

Period Ended High Bid Low Bid
------------ -------- -------

January, 1996 $3.75 $3.37

February, 1996 $4.00 $3.37

March, 1996 $4.12 $3.12

The source for the high and low bids quotations is the OTC Bulletin Board
Research Service and does not reflect inter-dealer prices, such quotations are
without retail mark-up, mark-down or commission, and may not represent actual
transactions.

During the first quarter of 1996, the Company's Board of Directors declared
a cash dividend payable of $0.03 per share for all issued and outstanding shares
of common stock as of the record date of April 1, 1996. The total dividend
payable as of April 1, 1996 amounted to $150,303.

18
<PAGE>

SELLING SHAREHOLDERS

The following table shows the names of the Selling Shareholders and the number
of shares owned and offered by each of them.

Name of Selling Number of Number of Number of Shares
Shareholder Shares Owned Shares Owned Owned After Offering
- --------------------------------------------------------------------------------

Nina J. Furrh,
Chairman of the Board
and President 1,923,490 25,000 1,898,490

Bjorn Heyerdahl,
Chief Executive Officer
and Director 500,001 25,000 475,001

Joshua Furrh,
Beneficial Owner of 5% or
more of the Company's
outstanding stock 522,974 125,247 397,727

Dona G. Furrh,
Beneficial Owner of 5% or
more of the Company's
outstanding stock 690,553 307,426 383,127

Joseph Ronald Horowitz 12,500 12,500(2) -

Charles Douglas Howell 12,500 12,500(2) -

Gary L. & Merle L. Haynie 5,000 5,000 -

Donald F. Fangman 5,000 5,000 -

John Mockovciak 17,500 17,500 -

Richard Foster Lanham, Jr. 12,500 12,500 -

Paula L. & Madeline E.
Colleoni 2,500 2,500 -

True Rhode & Sewell 6,150 6,150 -

Richard Foster Lanham, III 1,000 1,000 -

Honey Sue Lanham 1,000 1,000 -

Susan Joy Holcomb 100 100 -

Beth A. Kelly 100 100 -

Nancy Jean Herrin 50 50 -

Irrevocable Equity
Trust No. 1 187,500 187,500(1) -

N.F.S.C. / FMTC IRA
Rollover fbo
J. Ronald Horowitz (2) 25,000 25,000 -

Jack Cunningham 10,000 10,000 -

Frank D. Waters 2,500 2,500 -

Keith J. Johnston 2,500 2,500 -

Bruce E. Zucker 5,000 5,000 -

Richard G. Goodner IRA
Guarantee & Trust Co., Trustee 1,000 1,000 -

Don Noblit IRA Guarantee & Trust
Co., Trustee 1,000 1,000 -

Shelter Family Trust 1,000 1,000 -

Holey Keyhole 1,000 1,000 -

Ardith Akins 1,000 1,000 -

Paul Akins 500 500 -

Marion O'Dell 200 200 -

Amarita Trust 1,500 1,500 -

Mary Peltier 400 400 -

Emery R. Fisher 1,500 1,500 -

Robert G. Relyea 2,500 2,500 -

Auerbach Albert & Gold, LC 2,250 2,250 -

Martin E. Auerbach 1,500 1,500 -

David W. Auerbach 250 250 -

KM1 General Partnership 6,000 6,000 -

Texas Body Works, Inc. 1,000 1,000 -

Cary F. and Wanda Harris 500 500 -

Ronald W. Johnston,
Chief Financial Officer
and Director 1,500 1,500 -

Stephens Properties 62,500 62,500(1) -
--------- -
878,173

(1)Irrevocable Equity Trust No. 1 and Stephens Properties have agreed to limit
their sales of Shares to an aggregate of 8,000 Shares for each 30 day period.
The limitation shall terminate on September 30, 1997.

(2)Joseph Ronald Horowitz and Charles Douglas Howell have agreed to limit the
sale of their Shares to 1/6 of the Shares offered by them during each 30-day
period after the effective date of this Prospectus. The limitation shall
terminate six months after this Prospectus.

Selling Shareholders other than those noted in footnotes (1) and (2) above have
agreed to limit their sales of Shares to 1/12 of the Shares offered by the
respective Selling Shareholder during each 30-day period after the effective
date of this Prospectus, this limitation shall terminate one year after the
effective date of this Prospectus.

The Company has agreed to repurchase the Shares of certain Selling Shareholders
at a Purchase Price of $3.00 per share if the Selling Shareholders are unable to
publicly sell the Shares within two years from September 1, 1995 or at anytime

20
<PAGE>

within two years from September 1, 1995. If the Selling Shareholders had the
opportunity to obtain a price of $3.00 or more per share either through a public
sale under an effective registration statement or otherwise or in the event of a
merger, acquisition or other business combination, then those Shares which could
have been sold or exchanged for a price of $3.00 or more shall be excluded from
the Company's obligation to repurchase the Shares.

If during any 30-day period J. Ronald Horowitz, Charles D. Howell, N.F.S.C./FMTC
IRA Rollover fbo J. Ronald Horowitz, Irrevocable Equity Trust No. 1, and
Stephens Properties (the "Horowitz Group") are unable to receive a market price
of at least $3.00 per share for the Shares they own, then in such event the
Company shall issue to each of the Horowitz Group such number of additional
Shares (the "Additional Shares") of the Company's Common Stock in order for the
value of the Shares owned by the Horowitz Group, that they attempted to sell
during the 30-day period to be equal to $3.00 per share. If at any time during
any such 30-day period the closing market price of the Company's Common Stock
equals or exceeds $3.00 per share for five consecutive trading days each of the
Horowitz Group did not elect to sell any or all of its Shares subject to being
sold during such period, then in such event, the obligation of the Company to
issue Additional Shares shall terminate as to those Shares. The price per share
of the Additional Shares and the Shares owned by each of the Horowitz Group
shall be valued, as applicable, at the closing bid price per share of the
Company's Common Stock as quoted on the Nasdaq Small-Cap Market or any other
applicable exchange at the close of business on the 30th day of each 30-day
period (or the next business day if the 30th day is Saturday, Sunday or legal
holiday) for six months after the effective date of this Prospectus. The
obligation of the Company to issue Additional Shares to them under the terms of
this paragraph is not cumulative. The obligation of the Company to issue
Additional Shares in accordance with this paragraph shall terminate six (6)
months after the effective date of the Prospectus.

PLAN OF DISTRIBUTION

The sale of the Shares by the Selling Shareholders may be effected from time to
time in transactions (which may include block transactions) in the
over-the-counter market, in negotiated transactions at fixed prices which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, or at negotiated prices. The Selling Shareholders
may effect such transactions by selling Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agent or to whom they sell
as principal, or both. The Selling Shareholders and any broker-dealers that act
in connection with the sale of the Shares hereunder might be deemed to be
underwriters within the meaning of Section 2(11) of the Securities Act of 1933
and any commissions received by them and any profit on the resale of Shares as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.

The Company shall indemnify the Selling Shareholders and each underwriter for
the Selling Shareholders and each person, if any, who controls the underwriter
for the Selling Shareholders and each person, if any, who controls the
underwriter within the meaning of the Securities Act of 1933, from any loss,
claim, damage or liability arising out of or based upon any untrue statements of
a material fact contained in the Registration Statement or any omissions to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except for such statement or omission
based upon information furnished in writing by the Selling Shareholders shall
indemnify the Company and each of its respective officers and directors who has
signed such Registration Statement, each director and each person, if any, who
controls the Company within the meaning of the Securities Act of 1933 against
any loss, claim, damage or liability arising from any such statement or omission
which was made in reliance upon information furnished in writing to the Company
by the Selling Shareholders expressly for use in the Registration Statement.

DESCRIPTION OF SECURITIES
General

The Company's Articles of Incorporation authorize the issuance of 50,000,000
shares of Common Stock, $.001 par value per share and 5,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock").

Common Stock

Each outstanding share of Common Stock is fully paid and non-assessable, and
the holders thereof are entitled to one vote per share at all meetings of
stockholders. All shares of Common Stock are equal to each other with regard to

21
<PAGE>

liquidation rights and dividend rights. The Articles of Incorporation of the
Company deny preemptive rights to purchase any additional shares of Common Stock
and do not provide for cumulative voting in the election of directors. In the
event of liquidation, dissolution or winding up of the Company, holders of the
Common Stock will be entitled to receive on a pro rata basis all the assets of
the Company remaining after satisfaction of all liabilities, subject to the
rights of holders of any Preferred Stock.

The present intent of the Company is to retain earnings sufficient to provide
for the operation and expansion of its business. The Company anticipates the
payment of cash dividends in the foreseeable future. In addition, certain
covenants in the Company's existing or future credit agreements may
contractually limit cash amounts available for dividends on the Common Stock.

Preferred Stock

The Articles of Incorporation provide that Preferred Stock may be issued in
one or more series as may be determined from time to time by the Board of
Directors. All shares of any one series of Preferred Stock will be identical
except as to the date of issue and dates from which dividends on shares of the
series issued on different dates will cumulate, if cumulative. The Articles of
Incorporation grant the Board of Directors the power to authorize the issuance
of one or more series of Preferred Stock, and to fix by resolution or
resolutions providing for the issue of each such series the voting powers (but
no greater than one vote per share), designations, preferences, and relative,
participating, optional, redemption, conversion, exchange or other special
rights, qualifications, limitations or restrictions of such series, and the
number of shares in each series, to the full extent now or hereafter permitted
by law.

It is not contemplated that any shares of Preferred Stock will be issued by
the Company in the foreseeable future, and the Company was organized with this
class of securities authorized to provide flexibility for financing of Company
activities in the future. Since no Preferred Stock has been issued, and the
issuance of the same is not contemplated, it is not possible to know whether
such Preferred Stock, if ever issued, would have preference over the Common
Stock shareholders in the distribution of any assets in the event of a
liquidation.

Anti-Takeover Provisions

The Company's Articles of Incorporation and the Nevada General Corporation Law
(the "NGCL") contain certain provisions that may make the acquisition of control
of the Company by means of a tender offer, open market purchase, proxy fight or
otherwise more difficult.

Business Combinations

The NGCL contains provisions restricting the ability of a corporation to
engage in business combinations with an interested stockholder. In general,
except under certain circumstances, business combinations with interested
stockholders are not permitted for a period of five years following the date
such stockholder became an interested stockholder. The NGCL defines an
interested stockholder, generally, as a person who owns 10% or more of the
outstanding shares of the corporation's voting stock.

In addition, the NGCL generally disallows the exercise of voting rights with
respect to "control shares" of an "issuing corporation" held by an "acquiring
person," unless such voting rights are conferred by a majority vote of the
disinterested stockholders. "Control shares" are the voting shares of an issuing
corporation acquired in connection with the acquisition of a "controlling
interest." "Controlling interest" is defined in terms of threshold levels of
voting share ownership, which thresholds, whenever each may be crossed, trigger
application of the voting bar with respect to the shares newly acquired.

The NGCL also permits directors to resist a change or potential change in
control of the corporation if the directors determine that the change or
potential change is opposed to or not in the best interest of the corporation.

Authorized and Unissued Preferred Stock

The Company has 5,000,000 authorized and not issued shares of Preferred
Stock. The existence of authorized and unissued Preferred Stock may enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain

22
<PAGE>

control of the Company by means of a merger, tender offer, proxy contest or
otherwise. For example, if in the due exercise of its fiduciary obligations, the
Board of Directors were to determine that a takeover proposal is not in the
Company's best interests, the Board of Directors could cause shares of Preferred
Stock to be issued without stockholder approval in one or more private offerings
or other transactions that might dilute the voting or other rights of the
proposed acquirer or insurgent stockholder or stockholder group or create a
substantial voting block in institutional or other hands that might undertake to
support the position of the incumbent Board of Directors. In this regard, the
Articles of Incorporation grant the Board of Directors broad power to establish
the designations, powers, preferences and rights of each series of Preferred
Stock. See " -- Preferred Stock."

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Articles of Incorporation and Bylaws provide that the Company
will indemnify its directors and officers to the fullest extent provided by
Nevada law. In addition, the Articles of Incorporation contain a provision
limiting a director's and officer's liability for monetary damages to the
fullest extent permitted by Nevada law.

Furthermore, Section 78.751 of the NGCL contains provisions relating to
indemnification of officers and directors. Section 78.751(1) provides that a
corporation may indemnify any person who was or is a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except for an action by or in right of the
corporation by reason of the fact that he was a director, officer, employee or
agent of the corporation. In order to indemnify, it must be shown that he acted
in good faith and in a manner he reasonably believed to be in the best interest
of the corporation. Generally, no indemnification may be made where the person
has been determined to be negligent or guilty of misconduct in the performance
of his duty to the corporation.

Section 78.751(2) of the NGCL further allows the corporation to indemnify any
person who was or is a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation, including amounts paid in settlement and attorneys' fees if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter to which a court of competent jurisdiction
has adjudged an officer or director liable to the corporation, unless and only
to the extent that a court of competent jurisdiction determines that in view of
the circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such expenses.

To the extent that a director, officer, employee or agent of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding discussed in the preceding paragraphs, Section 78.751(3) of the NGCL
provides that he must be indemnified by the corporation against expenses,
including attorney's fees, actually and reasonably incurred by him in connection
with the defense.

Except when indemnification is required by a court of competent jurisdiction,
Section 78.751(4) of the NGCL states that the corporation shall only indemnify
upon a determination of (i) the stockholders, (ii) majority vote of the board
that were not parties to the action; (iii) if ordered by a majority vote of a
quorum of directors who were not parties to the action, suit or proceeding, by
independent legal counsel in a written opinion; or (iv) by independent legal
counsel in a written opinion if no quorum of directors who were not parties to
the action may be obtained.

Unless ordered by a court of competent jurisdiction, indemnification may not
be made to or on behalf of any officer or director if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and were material to the cause of action.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such

23
<PAGE>

indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

EXPERTS

The validity of the issuance of the Shares will be passed upon for the Company
by William C. Jones, Attorney, 4851 LBJ Freeway, Suite 201, Dallas, Texas 75244.

The financial statements of the Company at December 31, 1995 and 1994, and for
the years then ended appearing in the Prospectus, have been audited by S.W.
Hatfield + Associates, independent certified public accountants, to the extent
and for the years indicated in their report appearing elsewhere herein and in
the Registration Statement. Such financial statements have been included in
reliance upon such report and upon the authority of that firm as experts in
accounting and auditing.

<PAGE>

FINANCIAL STATEMENTS

Index to Financial Statements, beginning on Page F-1

Audited Financial Statements of Million Dollar Saloon, Inc.
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets
as of December 31, 1995 and 1994 F-2
Consolidated Statements of Income
for the years ended December 31, 1995 and 1994 F-4
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1995 and 1994 F-5
Consolidated Statements of Cash Flows
for the years ended December 31, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-8

Intertim Financial Statements of Million Dollar Saloon, Inc.
Consolidated Balance Sheets
as of March 31, 1996 and December 31, 1995
Consolidated Statements of Income
for the 3 months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flow
for the 3 months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements

<PAGE>

S. W. HATFIELD + ASSOCIATES
certified public accountants

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

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Million Dollar Saloon, Inc.
(formerly Goodheart Ventures, Inc.)

We have audited the consolidated balance sheets of Million Dollar Saloon, Inc.
(formerly Goodheart Ventures, Inc.) and Subsidiaries (a Nevada corporation and
Texas corporations, respectively) as of December 31, 1995 and 1994, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Million
Dollar Saloon, Inc. (formerly Goodheart Ventures, Inc.) and Subsidiaries as of
December 31, 1995 and 1994 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

S. W. HATFIELD + ASSOCIATES
Dallas, Texas
February 16, 1996

Use our past to assist your future sm

P. O. Box 820392 - Dallas, Texas 75382-0392 o 214-342-9635
9236 Church Road, Suite 1040 - Dallas, Texas 75231 o 800-244-0639
214-342-9601 (fax) - [email protected] (e-mail)

F-1
<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994

ASSETS

1995 1994
------- -------
CURRENT ASSETS
Cash on hand and in bank $ 133,374 $ 123,143
Note receivable - current portion 19,660 18,153
Accounts receivable
Trade, net of allowance for doubtful accounts
of $-0- and $-0-, respectively 63,653 16,988
Prepaid Federal income taxes 8,520 6,534
Inventory 9,937 10,005
---------- ----------

Total current assets 235,144 174,823
--------- ----------

PROPERTY AND EQUIPMENT
Buildings and related improvements 1,994,730 1,925,901
Furniture and equipme 755,680 747,924
--------- ----------
2,750,410 2,673,825
Less accumulated depreciation (1,316,679) (1,213,494)
--------- ---------
1,433,731 1,460,331
Land 816,487 816,487
--------- ---------

Net property and equipment 2,250,218 2,276,818
--------- ----------

OTHER ASSETS
Note receivable - noncurrent portion 145,423 163,514
Accounts receivable from officers,
shareholders and affiliates 715,525 697,948
Organization costs, net of accumulated
amortization of $4,688 70,240 -
Loan costs, net of accumulated amortization
of $1,580 30,026 -
Deferred tax asset 76,160 102,000
Other 9,225 9,232
---------- ----------

Total other assets 1,046,599 972,694
--------- ---------

TOTAL ASSETS $3,531,961 $3,424,335
========= =========

- Continued -

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

F-2
<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
CONSOLIDATED BALANCE SHEETS - CONTINUED
December 31, 1995 and 1994

LIABILITIES AND SHAREHOLDERS' EQUITY

1995 1994
------- -------
CURRENT LIABILITIES
Note payable to bank $ - $ 343,300
Current portion of long-term debt 135,911 21,221
Accounts payable
Trade 71,438 20,072
Officers, shareholders and affiliates 2,736 24,972
Accrued liabilities 50,859 50,773
Tenant deposits 6,500 6,500
------------ ------------

Total current liabilities 267,444 466,838
------------ ------------

LONG-TERM LIABILITIES
Long-term debt 623,193 45,061
Deferred tax liability 90,213 71,800
------------ ------------

Total liabilities 980,850 583,699
------------ ------------

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. 4,999,991 issued and outstanding,
respectively. 5,000 5,082
Additional paid-in capital - 204,583
Retained earnings 2,546,111 2,705,971
------------ -----------
2,551,111 2,915,636
Treasury stock - 10 shares of Furrh, Inc. at cost - (75,000)
------------ -----------

Total shareholders' equity 2,551,111 2,840,636
------------ -----------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $3,531,961 $3,424,335
============ ===========

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

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995 and 1994

1995 1994
------------ -----------
REVENUES
Bar and restaurant sales $2,750,794 $2,488,360
Less cost of sales
Salaries, wages and related expenses (1,048,290) (878,435)
Purchases (502,450) (515,421)
--------- ---------
Net bar and restaurant sales 1,200,054 963,458
Rental income 476,257 478,574
--------- ---------

1,676,311 1,573,078

OPERATING EXPENSES
Salaries, wages and related expenses 460,098 423,868
Consulting, management and other
professional fees 386,490 333,118
Taxes expense 53,496 51,207
Interest expense 60,583 46,773
Other operating expenses 497,505 448,089
Depreciation and amortization 111,732 124,658
--------- ---------

Total operating expenses 1,569,904 1,427,713
--------- ---------

INCOME FROM OPERATIONS 106,407 145,365

OTHER INCOME (EXPENSES)
Interest income 43,501 21,098
Write off of investment in plantation - (95,710)
---------- ----------

INCOME BEFORE INCOME TAXES 149,908 70,753

INCOME TAX (EXPENSE) BENEFIT
Currently payable 6,020 (4,361)
Deferred (44,253) 45,200
---------- -----------

NET INCOME $ 111,675 $ 111,592
========== ==========

Earnings per share of common stock outstanding $ 0.02 $ 0.02
========== ==========

Weighted-average number of shares outstanding 4,999,991 4,583,325
========== ==========

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

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY Years ended
December 31, 1995 and 1994
<TABLE>
<CAPTION>

Additional Treasury Total
Common Stock paid-in Retained stock shareholders'
# shares Amount capital earnings at cost equity
-------- ------ ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1,
1994, as reported 9,989,100 $9,989 $182,676 $(93,254) $ - $ 99,411

Effect of 1 for 12
reverse split (9,156,675) (9,157) 9,157 - - -

Effect of reverse merger
with Million Dollar
Saloon, Inc. (Texas) 4,250,000 4,250 12,750 3,098,858 (75,000) 3,040,858

Adjustment for the
cumulative effect of
the ability to utilize
the net operating
loss carry-forwards of Furrh, Inc.
as a result of the reorgan-
ization into Million Dollar
Saloon, Inc. (Texas) - - - 62,000 - 71,592
---------- --------- ---------- ----------- ----------- -----------

Balances at January 1,
1994 as restated 5,082,425 5,082 204,583 3,067,604 (75,000) 3,140,269

Distributions to Furrh
entities shareholders
pre-reverse merger - - - (473,225) - (473,225)

Net income for the year - - - 111,592 - 71,592
---------- -------- ---------- ----------- ----------- -----------

Balances at
December 31, 1994 5,082,425 $5,082 $204,583 $2,705,971 $(75,000) $2,738,636
========== ======== ========== ========== =========== ===========

</TABLE>

- Continued -

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

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY - CONTINUED
Years ended December 31, 1995 and
1994
<TABLE>
<CAPTION>

Additional Treasury Total
Common Stock paid-in Retained stock shareholders'
# shares Amount capital earnings at cost equity
-------- ------ ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1994 5,082,425 $5,082 $204,583 $2,705,971 $(75,000) $2,738,636

Post-reverse merger
putback of common
stock by controlling
shareholder (500,000) (500) 500 - - -

Sale of common stock
Pre- reverse merger to
former controlling
Goodheart shareholder 416,666 417 4,583 - - 5,000
Pre-reverse merger stock
of Million Dollar
Saloon, Inc. (Texas) 125,900 126 250,674 - - 250,800

Purchase and retirement
of treasury stock by
Million Dollar Saloon,
Inc. (Texas) (pre-merger) (325,000) (325) (460,140) (189,535) - (650,000)

Retirement of treasury stock
held by Furrh, Inc. (pre-
reverse merger) - - - (75,000) 75,000 -

Issuance of common stock
for payment of under-
writing and merger costs 200,000 200 199,800 - - 200,000

Offset of underwriting and
merger costs - - (200,000) - - (200,000)

Distributions to Furrh
entities shareholders
pre-reverse merger - - - (7,000) - (7,000)

Net income for the year - - - 111,675 - 213,675
----------- ---------- ------------ ---------- ----------- ------------

Balances at
December 31, 1995 4,999,991 $5,000 $ - $2,546,111 $ - $2,551,111
========== ======= ========= ============ ========== ==========

</TABLE>

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

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995 and 1994

1995 1994
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $111,675 $111,592
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 111,732 124,658
Transitional effect of new accounting standard (115,775) -
Fair market value of building given in
exchange for compensation 3,244 -
Write off of investment in plantation - 95,710
Deferred income taxes 160,028 (45,200)
(Increase) decrease in
Accounts receivable
Trade (46,665) 23,385
Prepaid income taxes (1,986) 10,312
Inventory 68 (2,623)
Loan costs (31,606) -
Organization costs (74,928) -
Deposits and other assets 7 22
Increase (decrease) in
Accounts payable and other
accrued liabilities 51,452 (100,784)
Income taxes payable - (5,717)
---------- ---------
Net cash provided by operating activities 167,246 211,355
---------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Principal collections on note receivable 16,584 16,762
Purchases of property and equipment (82,108) (10,917)
Cash advances to shareholders and affiliates (17,577) -
---------- ---------
Net cash used in investing activities (83,101) 5,845
---------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal funding on new long-term note payable 750,000 -
Net activity on note payable to bank (343,300) (90,000)
Payments on long-term debt (57,178) (19,908)
Repayment of advances from shareholders and affiliates (22,236) (35,618)
Sale of common stock 255,800 -
Purchase of treasury stock (650,000) -
Cash distributions to shareholders - pre merger (7,000) (108,000)
---------- ---------
Net cash used in financing activities (73,914) (253,526)
---------- ---------

INCREASE IN CASH AND CASH EQUIVALENTS 10,231 (36,326)

Cash and cash equivalents at beginning of year 123,143 159,469
---------- ---------

Cash and cash equivalents at end of year $133,374 $ 123,143
========== =========

- Continued -

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

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended December
31, 1995 and 1994

1995 1994
----- ------
SUPPLEMENTAL DISCLOSURES OF
INTEREST AND INCOME TAXES PAID

Interest paid on borrowings $60,583 $46,773
====== ======

Income taxes paid (refunded) $(4,024) $ (234)
====== ======

SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES

Payment of dividend to shareholders through
relief of advances receivable from and
payable to shareholders and affiliates $ - $347,753
======== =======

Transfer of account payable to shareholders
through relief of advances receivable from
shareholders and affiliates $ - $399,940
======== =======

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

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994

NOTE A - BACKGROUND AND ORGANIZATION

Million Dollar Saloon, Inc. (formerly Goodheart Ventures, Inc.) (MDS-NV) was
incorporated under the laws of the State of Nevada on September 28, 1987. MDS-NV
completed a public sale of its securities on November 10, 1988 with the issuance
of 489,100 shares of its common stock. Additionally, MDS-NV issued 2,934,600
warrants to purchase one share of Class A common stock at $0.50 per share and
one share of Class B common stock at $0.75 per share. No warrants were exercised
by their holders and all issued and outstanding warrants have expired.

MDS-NV was formed for the purpose of seeking a suitable merger or acquisition
candidate. MDS-NV's activities have consisted principally of raising capital
and, as such, was a development stage company prior to the transactions
discussed in succeeding paragraphs.

In August 1995, MDS-NV experienced a change in control whereby members of
management of Furrh, Inc. and its wholly-owned subsidiary, Tempo Tamers, Inc.,
Corporation Lex and Don, Inc. became the controlling shareholders of MDS-NV. The
shareholders of all entities then reached an oral agreement with whereby these
companies would become wholly-owned subsidiaries of MDS-NV.

On September 7, 1995, the shareholders of Furrh, Inc., Corporation Lex and Don,
Inc. exchanged 100% of their issued and outstanding stock for a net aggregate
3,925,000 shares of Million Dollar Saloon, Inc., a dormant Texas corporation,
(MDS-TX) owned by the majority shareholders of the respective companies. The
purpose of this transaction was to consolidate the ownership of Furrh, Inc. and
Tempo Tamers, Inc., Corporation Lex and Don, Inc. into a single company to
facilitate the merger with MDS-NV.

MDS-TX merged with and into MDS-NV, which was controlled by members of
management of MDS-TX, effective November 1, 1995. Goodheart Ventures, Inc. also
changed its corporate name to Million Dollar Saloon, Inc. (MDS-NV) on November
1, 1995. Furrh, Inc. and its wholly-owned subsidiary, Tempo Tamers, Inc.,
Corporation Lex and Don, Inc. remain as separate operating entities and are
wholly-owned subsidiaries of MDS- NV.

The combination of Furrh, Inc. and its wholly-owned subsidiary, Tempo Tamers,
Inc., Corporation Lex and Don, Inc. with MDS-TX and the subsequent merger of
MDS-TX with MDS-NV were separately accounted for in accordance with Accounting
Principles Board No. 16 - "Business Combinations", Interpretation #39 for
companies under common control on an "as if pooled" basis. The historical
financial statements of all involved entities have become the historical
consolidated financial statements of MDS-NV.

Furrh, Inc. (Furrh) was incorporated under the laws of the State of Texas on
February 25, 1974. Furrh owns and manages commercial rental property located in
Dallas County, Texas. Furrh's wholly-owned subsidiary, Tempo Tamers, Inc.
(Tempo), was incorporated under the laws of the State of Texas on July 3, 1978.
Tempo operates a lounge and entertainment facility, located in Dallas, Texas,
under the registered trademark and trade name "Million Dollar Saloon(R)".
Additionally, Furrh previously had two other wholly-owned subsidiaries, Don
Investments, Inc. and Tanfastic, Inc. All operations, assets and liabilities of
these two companies were closed and/or liquidated prior to January 1, 1993.
Furrh and Tempo had a February 28 year-end. Concurrent with the previously
discussed consolidation and merger, Furrh and Tempo changed their year-end to
December 31. The amounts utilized in the accompanying financial statements have
been restated to the new year end of December 31.

F-9

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE A - BACKGROUND AND ORGANIZATION - Continued

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. Lex has a December 31 year end.

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. Don has a December 31 year end.

MDS-NV originally had a year-end of August 31. Concurrent with the merger of
MDS-NV and MDS-TX, MDS- NV changed its year-end to December 31 to match that of
its acquired operating companies.

These financial statements reflect the books and records of Million Dollar
Saloon, Inc. (formerly Goodheart Ventures, Inc.) (Nevada), Million Dollar
Saloon, Inc. (Texas), Furrh, Inc., Tempo Tamers, Inc., Corporation Lex and Don,
Inc. for the nine months ended September 30, 1995 and 1994, respectively. All
significant intercompany transactions have been eliminated in combination. The
consolidated entities are referred to as Company.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. Cash and Cash Equivalents
-------------------------

For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, including accounts in book overdraft positions,
certificates of deposit and other highly-liquid investments with maturities
of three months or less, when purchased, to be cash and cash equivalents.

Cash overdraft positions may occur from time to time due to the timing of
making bank deposits and releasing checks, in accordance with the Company's
cash management policies.

2. Accounts Receivable and Revenue Recognition
-------------------------------------------

In the normal course of business, the Company extends unsecured credit to
virtually all of its tenants related to rental property operations and
accepts national bankcards as payment for goods and services in its lounge
and entertainment facility. Bankcard charges are normally paid by the
clearing institution within three to fourteen days from the date of
presentation by the Company. All lease rental payments are either due on
the first day of the month in advance for the month or on the first day of
the week in arrears for the previous corresponding period. All revenue
sources are located either in Dallas or Tarrant County, Texas. Because of
the credit risk involved, management has provided an allowance for doubtful
accounts which reflects its opinion of amounts which will eventually become
uncollectible. In the event of complete non-performance, the maximum
exposure to the Company is the recorded amount of trade accounts receivable
shown on the balance sheet at the date of non-performance.

F-10

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

3. Inventory
---------

Inventory consists of food and liquor consumables necessary in the
operation of Tempo's lounge and entertainment facility. These items are
valued at the lower of cost or market using the first-in, first-out method
of accounting.

4. Property and Equipment
----------------------

Property and equipment is recorded at cost and is depreciated on a
straight-line basis, over the estimated useful lives (generally 10 to 40
years) of the respective asset. Major additions and betterments are
capitalized and depreciated over the remaining estimated useful lives of
the related assets. Maintenance, repairs, and minor improvements are
charged to expense as incurred.

5. Trademark rights
----------------

Amounts paid in conjunction with the acquisition and retention of the
trademark "Million Dollar Saloon(R)" have been capitalized. The life of the
registration is twenty years from its affirmation in 1988 and may be
extended as allowed by applicable law at that point in time. This trademark
has been assigned Registration No. 1,509,636 by the U. S. Patent and
Trademark Office. The Company began to amortize the trademark over the
remaining 13 year life, commencing on October 1, 1995, concurrent with the
aforementioned corporate restructuring.

6. Income Taxes
------------

Pre merger
----------
Furrh and Tempo file a consolidated Federal Income Tax return using a year
end of February 28. Lex files a separate Federal Income Tax return using a
year end of December 31. Don is a "Subchapter S" corporation and,
accordingly, the shareholders of Don are responsible for reporting the
revenues and expenses of this corporation.

Effective January 1, 1992, Furrh and Lex adopted the provisions the
provisions of FASB Statement No. 109 "Accounting for Income Taxes" which
requires the asset and liability method of accounting for income taxes
rather than the deferred method previously required. At December 31, 1994
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, and the anticipated
utilization of net operating loss carryforwards.

Post merger
-----------
Effective September 7, 1995, concurrent with the merger of Furrh, Don and
Lex into MDS-TX, the change in control of these operating companies created
a short-year Federal Income Tax return from the previously noted year end
through September 7, 1995 for Furrh, Tempo and Don. Additionally, Don
forfeited its Subchapter S election, effective September 7, 1995. All
entities except Lex will file a consolidated Federal Income Tax return for
the period September 7, 1995 through December 31, 1995. Lex will file as a
separate entity for Calendar 1995 and it is anticipated will be included in
the consolidated Federal Income Tax return for Calendar 1996 and all future
periods.

F-11

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

6. Income Taxes - continued
------------

Furrh and Tempo have consolidated cumulative net operating losses of
approximately $399,000, as reported on their final consolidated separate
company return for the period ended September 7, 1995, and approximately
$224,000 as of December 31, 1995, for both financial reporting and tax
reporting purposes available to be carried forward to offset future taxable
income. In the event that these operating loss carryforwards are not used,
they will begin to expire in 2008. The capacity to utilize these net
operating loss carryforwards for periods after September 7, 1995, due to
the corporate restructuring and mergers previously discussed, created a
deferred tax asset of approximately $70,000 and $102,000, as of December
31, 1995 and 1994, respectively, utilizing the anticipated marginal
incremental tax rate of 34.0%. Under the requirements of Statement of
Financial Accounting Standards No. 109, the accounting for the reverse
merger on an "as-if-pooled" basis causes the retroactive recognition of the
deferred tax asset in each respective accounting period presented. The
cumulative prior period effect of this adjustment was an increase in
retained earnings as of January 1, 1994 of approximately $62,000. The
respective changes in the deferred tax asset account for the years ended
December 31, 1995 and 1994, respectively, are reflected as a component of
deferred income tax (benefit) expense in the Statement of Income.

Additionally, the forfeiture of its Subchapter S election by Don at
September 7, 1995 created a deferred tax liability of approximately $19,975
utilizing the anticipated marginal incremental tax rate of 34.0%. Per the
requirements of Statement of Financial Accounting Standards No. 109, this
amount is reflected as a component of deferred income tax (benefit) expense
in the Statement of Income for the year ended December 31, 1995.

Further, Furrh, Tempo and Lex have cumulative general business tax credit
carryforwards of approximately $80,700 available to offset future tax
liabilities, which if not used, begin to expire in 2009.

7. Earnings (loss) per share
--------------------------

Earnings (loss) per share is computed by dividing consolidated net income
(loss) by the composite weighted-average number of shares of common stock
outstanding during the year.

8. Pending Accounting Standards not yet adopted
--------------------------------------------

The Company has not adopted Statement of Financial Accounting Standard
Number 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The Company will adopt this standard
for the first quarter of 1996 and anticipates no adverse impact on the
financial statements upon the required implementation of this Standard.

No other issued and unimplemented accounting Standards are either
applicable to the Company or will have a material adverse impact on the
financial statements when implemented.

F-12

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE C - INVESTMENT IN PLANTATION

During 1994, Goodheart Ventures, Inc., in seeking a suitable merger or
acquisition candidate, made an advance of approximately $96,000 towards the
acquisition of a macadamia nut plantation in the Country of Panama. The
acquisition was not completed and/or consummated and the advance was charged off
as a non-operating expense of the Company in 1994.

NOTE D - NOTE RECEIVABLE
1995 1994
------- -------
$220,000 note receivable from an unrelated
individual for the sale of real estate. Interest
at 8.00%. Payable in monthly installments
of approximately $2,669, including interest.
Final payment due in July 2002. Collateralized
by real estate and improvements located in
Dallas County, Texas $165,083 181,667

Less current portion (19,660) (18,153)
-------- --------

Noncurrent portion $145,423 $163,514
======= ========

Future maturities of the note receivable are as follows: Year ending
December 31, Amount
1996 $19,660
1997 21,292
1998 23,059
1999 24,973
2000 27,045
2001-2002 49,054
-------
Total $165,083
========

NOTE E - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 1995 and 1994:

1995 1994 Estimated life
--------- --------- --------------
Buildings and related improvements $1,994,730 $1,925,901 15 - 40 years
Furniture and equipment 755,680 747,924 10 years
--------- ---------
2,750,410 2,673,825
Less accumulated depreciation (1,316,679) (1,213,494)
--------- ---------
1,433,731 1,460,331
Land 816,487 816,487
--------- ---------

Net property and equipment $2,250,218 $2,276,818
========= =========

Depreciation expense for the years ended December 31, 1995 and 1994 was $104,177
and $122,086, respectively.

F-13

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

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

The Company has made net cash advances to various officers, shareholders,
employees and affiliates aggregating approximately $715,500 and $697,000 as of
December 31, 1995 and 1994, respectively and received net advances from
officers, shareholders and affiliates aggregating approximately $2,700 and
$25,000 as of December 31, 1995 and 1994, respectively. All advances receivable
are due upon demand and bear interest at the statutory interest rate set by the
Internal Revenue Service for related party loans. Due to the life of the
respective receivables and absence of a formalized repayment program, these
amounts are classified as non-current.

In September 1995, the two largest balances due from two shareholders were
converted to formal notes receivable bearing interest at 5.65%. These notes
mature in September 1997 and all accrued interest and principal is due at that
time. The notes are repayable in either cash or in stock of the Company at an
agreed-upon exchange rate of $2.00 per share. Both shareholders have adequate
share holdings to completely retire the debt, plus anticipated accrued interest,
at the scheduled maturity date. It is the intent of these shareholders to
liquidate the notes with cash repayments.

During 1994, the Company declared a dividend of approximately $365,225 which was
paid via an offset against the cash advances to various officers, shareholders
and affiliates. Additionally, certain officers and shareholders agreed, with the
permission of the creditor, to assume a trade account payable in the amount of
approximately $400,000. This assumption was accounted for as an offset between
the trade accounts payable account and the advances due from officers,
shareholders and affiliates account.

NOTE G - NOTE PAYABLE TO BANK
1995 1994
-------- --------
$712,300 mortgage loan payable to a bank. Interest
at 11.00%. Payable in monthly installments of
approximately $7,500 plus accrued interest. Unpaid
principal and accrued interest due December 1995.
Collateralized by real estate in Dallas County, Texas $ - $343,300
======= =======

NOTE H - LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1995 and 1994,
respectively:

1995 1994
------- -------
$750,000 note payable to a bank. Interest
at 11.0%. Payable in monthly installments
of approximately $16,369, including
interest. Final payment due in September
2000. Collateralized by real estate and
improvements located in Dallas and
Tarrant Counties, Texas. $721,469 $ -

F-14

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE H - LONG-TERM DEBT - Continued

1995 1994
------- ------
$115,000 mortgage note payable to two individuals.
Interest at 12.00%. Payable in monthly installments
of approximately $1,380, including interest. Final
payment due in September 1998. Collateralized
by real estate in Dallas County, Texas. $ 37,635 $ 48,933

$105,000 mortgage note payable to a financial
institution. Interest at 10.00%. Payable in
monthly installments of approximately $1,013,
including interest. Final payment due in
July 1996. Collateralized by real estate in
Tarrant County, Texas - 27,230
--------- --------

759,104 66,282
Less current portion (135,911) (21,221)
--------- --------

Long-term portion $623,193 $45,061
========= ========

The $750,000 note payable to a bank may be prepaid at any time and any
prepayment must be accompanied by a "yield maintenance fee" equal to 4% of the
outstanding balance if prepaid prior to August 31, 1996; 3% if prepaid between
September 1, 1996 and August 31, 1997; 2% if prepaid between September 1, 1997
and August 31, 1998; and 1% if prepaid between September 1, 1997 and August 31,
1999. The proceeds of this loan were used to retire the $712,000 short-term
mortgage note payable with a payoff balance of approximately $288,000 and the
$105,000 mortgage note payable with a payoff balance of approximately $10,000.

Current maturities of long-term maturities as of December 31, 1995 are as
follows:

Year ending
December 31, Amount
--------------------
1996 $135,911
1997 151,780
1998 158,135
1999 171,085
2000 142,193
-------
Total $759,104
=======

F-15

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE I - INCOME TAXES

As of September 7, 1995, concurrent with the reorganization of Furrh, Inc.,
Corporation Lex and Don, Inc. into MDS-TX, the capacity to utilize the net
operating loss carryforward of Furrh, Inc., incurred through the September 7,
1995 reorganization date became more readily determinable. Accordingly, in
accordance with Financial Accounting Standards Board Statement No. 109, MDS-TX,
upon the acquisition of Furrh, Inc., recognized a deferred tax asset to reflect
the future benefit related to the expected utilization of this net operating
loss carryforward. Further, based upon the accounting for the reverse merger on
an "as-if-pooled" basis causes the retroactive recognition of the deferred tax
asset in each respective accounting period presented. The cumulative prior
period effect of this adjustment was an increase in retained earnings as of
January 1, 1994 of approximately $62,000. The respective changes in the deferred
tax asset account for the years ended December 31, 1995 and 1994, respectively,
are reflected as a component of deferred income tax (benefit) expense in the
Statement of Income.

Additionally, the forfeiture of its Subchapter S election by Don at September 7,
1995 created a deferred tax liability of approximately $19,975 utilizing the
anticipated marginal incremental tax rate of 34.0%. Per the requirements of
Statement of Financial Accounting Standards No. 109, this amount is reflected as
a component of deferred income tax (benefit) expense in the Statement of Income
for the year ended December 31, 1995.

The deferred current tax asset and non-current deferred tax liability on the
December 31, 1995 and 1994, respectively, balance sheet consists of the
following:

December 31, December 31,
1995 1994
-------- ----------

Current deferred tax asset $ - $ -
Current deferred tax liability - -
Valuation allowance for current deferred tax asset - -
--------- ----------

Net current deferred tax asset $ - $ -
======== =========

Non-current deferred tax asset $ 76,160 $ 102,000
Valuation allowance for non-current deferred tax asset - -
-------- ---------
Net non-current deferred tax asset $ 76,160 $ 102,000
======== =========

Non-current deferred tax liability $(90,213) $ (71,800)
======== =========

The deferred tax asset relates to the anticipated future utilization of the
cumulative net operating loss carryforward of Furrh, Inc. and its wholly-owned
subsidiary, Tempo Tamers, Inc. The non-current deferred tax liability results
from the usage of statutory accelerated tax depreciation and amortization
methods.

F-16

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE I - INCOME TAXES - Continued

The components of income tax expense (benefit) for the years ended December 31,
1995 and 1994, respectively, are as follows:
1995 1994
------ ------
Federal:
Current $(6,020) $ 4,361
Deferred 44,253 (45,200)
------ ------
38,233 (40,839)
------ ------
State:
Current - -
Deferred - -
------ ------
- -
------ ------

Total $38,233 $(40,839)
====== ======

The Company's income tax expense (benefit) for the years ended December 31, 1995
and 1994, respectively, differed from the statutory federal rate of 34 percent
as follows:

1995 1994
------ ------
Statutory rate applied to earnings
(loss) before income taxes $37,970 $37,941
Increase (decrease) in income taxes
resulting from:
State income taxes - -
Deferred income taxes 44,253 (45,200)
Effect of incremental tax brackets
and utilization of net operating loss
carryforwards (43,990) (33,580)
------ ------

Income tax expense (benefit) $38,233 $(40,839)
====== ======

Deferred income tax expense (benefit) as of December 31, 1995 and 1994,
respectively, consists of the following components:

1995 1994
------ ------
Changes in deferred tax assets
Effect of utilization of (benefit from)
net operating loss carryforward $25,840 $(40,000)
Changes in deferred tax liabilities
Effect of forfeiture of Subchapter S
status by Don, Inc. 19,323 -
Effect of differences in book and
statutory tax depreciation methods (910) (5,200)
------- -------

Changes in deferred income tax accounts $44,253 $(45,200)
======= =======

F-17

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE J - CAPITAL STOCK TRANSACTIONS

In August 1995, the Board of Directors of Furrh, Inc., prior to the
consolidation of Furrh into MDS-TX, approved the retirement of 10 shares of
Furrh, Inc. treasury stock which was purchased in 1990 for $75,000. This
retirement was accounted for as a reduction in the carrying value of issued and
outstanding common stock at $10, which equals the par value of the shares and a
reduction of retained earnings of $74,990, in accordance with the tenets of
Accounting Principles Board Opinion No. 6.

On September 7, 1995, the shareholders of Furrh, Inc, Corporation Lex and Don,
Inc. collectively exchanged 100% of the issued and outstanding stock in each
corporation for an aggregate 3,925,000 shares of Million Dollar Saloon, Inc., a
dormant Texas corporation, (MDS-TX) owned by the majority shareholders of the
Company. The purpose of this transaction was to consolidate the ownership of
Furrh, Inc. and Subsidiary, Corporation Lex and Don, Inc. into a single new
company to facilitate the merger with a publicly-held "shell" corporation. The
operating entities of Furrh, Inc. and its subsidiary, Tempo Tamers, Inc.,
Corporation Lex and Don, Inc. became wholly-owned subsidiaries of MDS-TX. No
cash was paid as consideration for this corporate consolidation. Concurrent with
the corporate consolidation, MDS-TX sold approximately 124,900 shares of
unregistered, restricted common stock (at $2.00 per share) to unrelated
third-party investors raising $249,800. These stock sale proceeds were used to
retire debts assumed in the acquisition of treasury stock discussed in the
following paragraph.

On September 22, 1995, MDS-TX and the Estate of Don Furrh (a majority
shareholder of all involved corporations, pre- and post-reorganization)
exchanged approximately 325,000 of MDS-TX common stock held by the Estate for
MDS-TX's assumption of $650,000 in debts of the Estate (principally inheritance
taxes and related professional fees). Funds available from the new $750,000 note
payable and the proceeds of the September 7, 1995 stock sales were used to
immediately retire the assumed debt. This treasury stock was immediately retired
by an action of the Board of Directors. This retirement was accounted for as a
reduction in the carrying value of issued and outstanding common stock at $325,
which equals the par value of the shares issued in the combination of Furrh,
Inc. and MDS-TX and a reduction of additional paid-in capital of $649,675, in
accordance with the tenets of Accounting Principles Board Opinion No. 6.

On September 22, 1995, the Shareholders of MDS-NV approved a one-for-twelve
reverse stock split, all share amounts in the accompanying financial statements
reflect the effects of this reverse stock split as of the beginning of the first
period presented.

Also on September 22, 1995, the Shareholders of MDS-NV approved the merger of
MDS-NV with MDS-TX, through the exchange of 4,050,900 post-reverse split shares
of common stock, representing 100% of the issued and outstanding common stock of
MDS-TX, for an equivalent number of shares of MDS-NV.

Concurrent with the merger transaction, the controlling shareholder of MDS-NV
(pre-merger) surrendered 500,000 post-reverse split shares of issued and
outstanding common stock to the company with no compensation given for the
surrender. This transaction was accounted for with an adjustment to the common
stock and additional paid-in capital accounts for the par value of the
surrendered shares.

F-18

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE J - CAPITAL STOCK TRANSACTIONS - Continued

In June 1995, Furrh, Inc. entered into an agreement with a professional
consulting and financial services firm whereby the consultant would assist
Furrh, Inc. with the location of a suitable publicly-owned 'shell' company
merger candidate, raising the requisite equity capital to consummate the merger
and assist the Company in becoming a "fully reporting" company under the
definition of the Securities and Exchange Commission. Furrh, Inc. and the
consultant have agreed that the services provided will be paid with 200,000
shares of post-merger common stock in the resulting public company valued at
$200,000. This transaction is reflected in the accompanying financial statements
and was accounted for as a reduction of paid-in capital as a cost of selling
common stock of MDS-TX for an aggregate $249,800 and the facilitation of merging
MDS-TX into MDS-NV.

NOTE K - COMMITMENTS AND CONTINGENCIES

The Company leases commercial real estate on long-term operating leases. The
leases require minimum monthly or weekly lease payments, plus reimbursement for
annual property taxes. Additionally, certain of the leases also require the
payment of percentage rent based on various percentages of specified gross sales
of the tenant, as defined in the respective lease agreement, in addition to the
fixed minimum lease payments. The respective tenants are responsible for normal
maintenance and repairs, insurance and other direct operating expenses related
to the property.

As of December 31, 1995, future minimum non-cancelable lease revenues are as
follows:

Year ending
December 31, Amount

1996 $461,945
1997 489,800
1998 428,105
1999 275,000
2000 301,000
2001-2005 603,250
Total $2,559,100
=========

NOTE L - NONMONETARY TRANSACTION

In May 1995, Don, Inc. transferred ownership of a small residential property
located in Dallas County, Texas as a final payment in lieu of cash for
compensation to an unrelated third-party upon the termination of services. Don,
Inc. paid approximately $5,500 for the property in January 1979 and the property
had a book value of approximately $3,200, which approximated the fair market
value of the property, at the date of transfer. Accordingly, due to the
condition and location of the transferred property at the date of transference,
the transaction was accounted for at its historical recorded value and Don, Inc.
recognized a charge of approximately $3,200 at the date of transfer.

F-19

<PAGE>

MILLION DOLLAR SALOON, INC. AND SUBSIDIARIES
(formerly Goodheart Ventures, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994

NOTE M - RELATED PARTY TRANSACTIONS

For the years ended December 31, 1995 and 1994, respectively, the Company paid
an aggregate of approximately $365,338 and $228,000 to various entities owned or
controlled by Company shareholders for management fees prior to the
aforementioned reverse merger.

NOTE N - SEGMENT INFORMATION

Selected information relating to the Company's segments for the years ended
December 31, are as follows:

1995 1994
------------ -----------
Revenues
- --------
Bar and restaurant operations $2,750,794 $2,488,360
Rental real estate operations 476,257 478,574
General unallocated corporate matters - -

Operating profit (loss)
- -----------------------
Bar and restaurant operations $ 277,046 $ 319,374
Rental real estate operations (979) 131,083
General unallocated corporate matters (169,060) -

Identifiable assets
- -------------------
Bar and restaurant operations $1,133,315 $1,149,015
Rental real estate operations 1,441,291 1,470,621
General unallocated corporate matters 957,355 804,699

Depreciation and amortization
- -----------------------------
Bar and restaurant operations $ 68,759 $ 64,496
Rental real estate operations 42,973 60,162
General unallocated corporate matters - -

Capital expenditures
- --------------------
Bar and restaurant operations $ 82,108 $ 10,918
Rental real estate operations - -
General unallocated corporate matters - -

Costs and expenses of the segments are specifically identified where possible
and are otherwise allocated.

F-20

<PAGE>

Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995

(unaudited) (audited)
March 31, December 31,
1996 1995
---------- -----------

ASSETS
------

Current assets
Cash on hand and in bank $ 289,008 $ 133,374
Note receivable - current portion 19,660 19,660
Accounts receivable
Trade 50,462 63,653
Prepaid Federal income taxes 6,020 8,520
Inventory 9,539 9,937
----------- ------------

Total current assets 374,689 235,144
----------- ------------

Property and equipment - at cost
Buildings and related improvements 1,995,131 1,994,730
Furniture and equipment 756,731 755,680
----------- ------------
2,751,862 2,750,410
Accumulated depreciation (1,338,438) (1,316,679)
----------- ------------
1,413,424 1,433,731
Land 816,487 816,487
----------- ------------

Net property and equipment 2,229,911 2,250,218
----------- ------------

Other assets
Note receivable - non-current portion 140,675 145,423
Accounts receivable - officers, shareholders
and affiliates 730,372 715,525
Organization costs, net of accumulated
amortization of approximately $8,434 and $4,688,
respectively 66,494 70,240
Loan costs, net of accumulated amortization of
approximately $3,161 and $1,580, respectively 28,446 30,026
Other 14,485 85,385
----------- ------------

Total other assets 980,472 1,046,599
----------- ------------

Total assets $3,585,072 $3,531,961
=========== ============

- Continued -

The financial information included herein has been prepared by management
without audit by independent certified public accountants.

See accompanying notes to financial statements.
F-21

<PAGE>

Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Balance Sheets - Continued
March 31, 1996 and December 31, 1995

(unaudited) (audited)
March 31, December 31,
1996 1995
----------- ------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Current maturities of long-term debt $ 122,369 $ 135,911
Accounts payable
Trade 35,102 71,438
Affiliates and shareholders - 2,736
Accrued liabilities 27,785 50,859
Tenant deposits 6,500 6,500
------------ ------------

Total current liabilities 191,756 267,444
------------ ------------

Long-term liabilities
Note payable, net of current maturities 604,322 623,193
Deferred tax liability 90,213 90,213
------------ ------------

Total liabilities 886,291 980,850
------------ ------------

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. 5,010,084 and 5,000,084 issued and
outstanding, respectively 5,010 5,000
Additional paid-in capital 9,990 -
Retained earnings 2,683,781 2,546,111
----------- ------------

Total shareholders' equity 2,698,781 2,551,111
----------- ------------

Total liabilities and shareholders' equity $3,585,072 $3,531,961
=========== ============

The financial information included herein has been prepared by management
without audit by independent certified public accountants.

See accompanying notes to financial statements.
F-22

<PAGE>

Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Income
Three months ended March 31, 1996 and 1995

(unaudited) (unaudited)
Three months Three months
ended ended
March 31, March 31,
1996 1995
--------- --------

Revenues
Bar and restaurant sales $876,278 $627,619
Less costs of sales (496,242) (343,919)
------- -------
Net bar and restaurant sales 380,036 283,700
Rental revenues 104,205 137,468
------- -------

484,241 421,168
------- -------
Expenses
General and administrative expenses 233,206 320,785
Interest expense 18,639 11,223
Depreciation and amortization 27,085 21,144
------- --------

Total expenses 278,930 353,152
------- -------

Income from operations 205,311 68,016

Other income 3,259 17,789
------- --------

Income before income taxes 208,570 85,805

Income tax (expense) benefit
Currently payable - (2,706)
Deferred (70,900) 75,000
------- --------

Net income $137,670 $158,099
======= =======

Net loss per weighted-average share
of common stock outstanding $ 0.03 $ 0.03
======= =======

Weighted-average number of shares outstanding 5,010,084 5,000,084
======== =========

The financial information included herein has been prepared by management
without audit by independent certified public accountants.

See accompanying notes to financial statements.
F-23

<PAGE>

Million Dollar Saloon, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995

(unaudited) (unaudited)
Three months Three months
ended ended
March 31, March 31,
1996 1995
-------- --------

Cash flows from operating activities
Net income for the period $137,670 $158,099
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 27,085 21,144
Stock issued to pay consulting fees 10,000 -
(Increase) decrease in
Accounts receivable - trade 13,191 (10,583)
Prepaid Federal income taxes receivable 2,500 6,534
Inventory 398 (424)
Deferred tax asset 70,900 (75,000)
Increase (decrease) in
Accounts payable - trade and
other accrued liabilities (59,410) (16,723)
Income taxes payable - 2,706
---------- ----------
Net cash provided by operating activities 202,334 85,753
---------- ----------

Cash flows from investing activities
Principal collections on note receivable 4,748 2,926
Purchases of property and equipment (1,452) (44,842)
---------- ----------
Net cash provided by (used in) investing activities 3,296 (41,916)
---------- ----------

Cash flows from financing activities
Principal payments on notes payable (32,413) (33,327)
Funds advanced by affiliates and shareholders - net (17,583) (24,972)
Proceeds from sale of common stock - 1,500
---------- ----------
Net cash (used in) financing activities (49,996) (56,799)
---------- ----------

Increase (decrease) in cash 155,634 (12,962)

Cash at beginning of period 133,374 123,143
---------- --------

Cash at end of period $289,008 $110,181
========= ========

Supplemental disclosure of interest and income taxes paid
Interest paid for the period $ 3,259 $ 17,789
========= ========

Income taxes paid (refunded) for the period $ (2,500) $ 6,534
========= ========

The financial information included herein has been prepared by management
without audit by independent certified public accountants.

See accompanying notes to financial statements.
F-24

<PAGE>

Million Dollar Saloon, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Note A - Background and organization

The combination of Furrh, Inc. and its wholly-owned subsidiary, Tempo Tamers,
Inc., Corporation Lex and Don, Inc. with MDS-TX and the concurrent merger of
MDS-TX with MDS-NV were separately accounted for in accordance with Accounting
Principles Board No. 16 - "Business Combinations", Interpretation #39 for
companies under common control on an "as if pooled" basis. The historical
financial statements of all involved entities have become the historical
consolidated financial statements of MDS-NV.

F-25

<PAGE>

Million Dollar Saloon, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

Note A - Background and organization - continued

MDS-NV originally had a year-end of August 31. Concurrent with the merger of
MDS-NV and MDS-TX, MDS- NV changed its year-end to December 31 to match that of
its acquired operating companies.

These financial statements reflect the books and records of Million Dollar
Saloon, Inc. (formerly Goodheart Ventures, Inc.) (Nevada), Million Dollar
Saloon, Inc. (Texas), Furrh, Inc., Tempo Tamers, Inc., Corporation Lex and Don,
Inc. for the three months ended March 31, 1996 and 1995, respectively. All
significant intercompany transactions have been eliminated in combination. The
consolidated entities are referred to as Company.

In the opinion of management, the accompanying consolidated financial statements
for the three months ended March 31, 1996 and 1995, respectively, reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition, results of operations and cash flows of
Million Dollar Saloon, Inc. and Subsidiaries.

The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The accompanying unaudited interim financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission for the year ended December 31, 1995. Certain
reclassifications and adjustments may have been made to the interim financial
statements for the comparative period(s) of the prior fiscal year to conform
with the current year presentation. The results of operations for interim
periods are not necessarily indicative of the results to be obtained for the
entire year.

Note B - Capital Stock Transactions

In January 1996, the Company issued approximately 10,000 shares of unregistered,
restricted common stock, valued at approximately $10,000, for fees related to a
consulting agreement.

F-26

<PAGE>

Million Dollar Saloon, Inc. and Subsidiaries

Notes to Consolidated Financial Statements - Continued

Note C - Subsequent events

On March 29, 1996, the Company received a commitment from a bank to loan the
Company $500,000 for working capital purposes. The loan bears interest at 6.50%.
The accrued interest is payable monthly and all unpaid interest and the
principal is due and payable in October 1996. The loan was fully funded by the
Bank on or about April 5, 1996.

The proforma effect of this transaction as of March 31, 1996 is as follows:

Assets
Current $ 874,689
Non-curren 3,210,383
$ 4,085,072
Liabilities
Current $ 691,756
Long-term 694,535
----------
1,386,291
Shareholders' equity 2,698,781
----------
$ 4,085,072
==========

During the first quarter of 1996, the Company's Board of Directors declared a
cash dividend payable of $0.03 per share for all issued and outstanding shares
of common stock as of the record date of April 1, 1996. The total dividend
payable as of April 1, 1996 is approximately $150,300.

F-27

<PAGE>

No dealer, salesman or any other person
has been authorized to give any
information or to make any representation
other than those contained in this
Prospectus in connection with the offering
herein contained, and if given or made,
such information or representation must not
be relied upon as having been authorized by 878,173 Shares
the Company. This Prospectus does not
constitute an offer to sell any security
other than the registered securities to
which it relates, or an offer to or MILLION DOLLAR SALOON, INC.
solicitation of any person in any
jurisdiction in which such offer or
solicitation would be unlawful. Neither Common Stock
the delivery of this Prospectus nor any sale $0.001 par value
made hereunder shall, under any circumstance,
create an implication that there has been no
change in the facts herein set forth since ________________
the date hereof.
PROSPECTUS
----------------------------------- ________________
TABLE OF CONTENTS
Page
Additional Information. . . . . . . . . . 2
Summary . . . . . . . . . . . . . . . . 3
Risk Factors. . . . . . . . . . . . . . . 4
Description of Business . . . . . . . . . 7
Management's Discussion and Analysis _____________, 1996
of Operations . . . . . . . . . . . . .11
Description of Property . . . . . . . . .14
Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . .15
Management. . . . . . . . . . . . . . . .16
Executive Compensation . . . . . . . . .17
Certain Relationships and Related
Transactions. . . . . . . . . . . . . .17
Legal Proceedings . . . . . . . . . . . .18
Market for Common Equity and Related
Stockholder Matters . . . . . . . . . .18
Plan of Distribution. . . . . . . . . . .18
Description of Securities . . . . . . . .21
Indemnification of Directors and
Officers. . . . . . . . . . . . . . . .22
Experts . . . . . . . . . . . . . . . . .23

Index to Financial Statements
and Schedules. . . . . . . . . . . . . 24

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Articles of Incorporation and Bylaws provide that the Company will
indemnify its directors and executive officers and may indemnify its other
officers, employees, and other agents to the fullest extent permitted by Nevada
law.

In addition, the Company's Articles of Incorporation provides that, to the
fullest extent permitted by Nevada law, the Company's directors will not be
liable for monetary damages for breach of the directors fiduciary duty of care
to the Company and its stockholders. This provision in the Certificate of
Incorporation does not eliminate the duty of care, and in appropriate
circumstances, equitable remedies such as an injunction of other forms of
non-monetary relief would remain available under Nevada law. Each director will
be subject to liability for breach of the director's duty of loyalty to the
Company, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for acts or omissions that the director
believes to be contrary to the best interests of the Company or its
stockholders, or any transaction from which the director derived an improper
personal benefit, for acts or omissions that the director believes to be
contrary to the best interests of the Company or its stockholders, or any
transaction from which the director derived an improper personal benefit, for
acts or omissions involving a reckless disregard for the director's duty to the
Company or its stockholders when the director was aware or should have been
aware of a risk of serious injury to the Company or its stockholders, for acts
or omissions that constitute an unexcused pattern of inattention that amounts to
an abdication of the director's duty to the Company or its stockholders, for
improper transactions between the director and the Company and for improper
distributions to stockholders and loans to directors and officers. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environment laws.

ITEM 2. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

SEC registration fee $ 1,211.27
Printing and engraving $ 2,000.00
Accountants fees and expenses $ 2,500.00
Legal fees and expenses $ 5,000.00
Transfer agent's fees and expenses $ 2,000.00
Miscellaneous $ 2,000.00
----------
Total $14,711.27

All expenses except for SEC registration fees are estimated.

The Selling Shareholders will not pay any portion of the foregoing expenses.

ITEM 3. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

1. For purposes of determining any liability under the Securities Act of
1933 (the "Securities Act"), the information omitted from the form or Prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of Prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this Registration Statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers, and controlling persons of the Registrant pursuant to the provisions
described under Item 24 above, or otherwise, the Registrant
<PAGE>

has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless, in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction, the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as requested by the Underwriters to
permit prompt delivery to such purchaser.

3. Registrant will:

(a) File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:

(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) Reflect in the prospectus, any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement; and

(iii)Include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.

(b) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the
securities offered, and the Offering of the securities at that time to
be the initial bona fide Offering.

(c) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the Offering.

(d) For determining any liability under the Securities Act, the Registrant
will treat the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the small business the
Company under Rule 424(b)(1), or (4) or 497(h) under the Securities
Act as part of this Registration Statement as of the time the
Commission declared it effective.

(e) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
Registration Statement for the securities offered in the Registration
Statement, and that Offering of the securities at that time as the
initial bona fide Offering of those securities.

(f) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to
and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X
are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference
in the prospectus to provide such interim financial information.

<PAGE>

ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES

On August 23, 1995, Bjorn Heyerdahl, before he became chief executive officer
and a director of the Company, acquired 12,000,000 shares of the Company's
restricted common stock from shareholders of the Company for a consideration of
$22,166.50. After the reverse split, he surrendered 500,000 shares to the
Company as a result of the merger negotiations and his negotiations to become
chief executive officer, the surrender was necessary to balance ownership
between the existing pre-merger shareholders of the Company and the shareholders
of MDS-TX.

ITEM 5. FINANCIAL STATEMENTS AND EXHIBITS

The following documents are filed as exhibits to this Registration Statement:

*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.

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

*3 (ii) Bylaws of the Company.

*4.1 Specimen Common Stock Certificate.

5.1 Opinion Re Legality

*10.1 Leases of Properties.

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

*21.1 Subsidiaries of the registrant

23.1 Consent of Expert - S.W. Hatfield + Associates

23.2 Consent of Expert - William C. Jones (contained in Exhibit 5.1)

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

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Dallas,
State of Texas on June 13, 1996.

Million Dollar Saloon, Inc.

By: ss:/Nina J. Furrh
-----------------------
Nina J. Furrh, President

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.

(Signature) /s/ Nina J. Furrh (Signature) /s/ Dewanna Ross
---------------------------- ------------------------
(Title) Chairman of the Board (Title) Corporate Secretary
and President and Director
(Date) June 13, 1996 (Date) June 13, 1996

(Signature) /s/ Bjorn Heyerdahl (Signature)/s/ Ronald W. Johnston
----------------------------- --------------------------
(Title) Chief Executive Officer (Title) Chief Financial Officer
and Director and Director
(Date) June 13, 1996 (Date) June 13, 1996

(Signature) /s/ Sharon Furrh
-----------------------------
(Title) Director
(Date) June 13, 1996

<PAGE>

William C. Jones
Attorney
4851 LBJ Freeway
Suite 201
Dallas, Texas 75244

Admitted in Oklahoma Only (214) 233-0300

June 13, 1996

The Board of Directors
Million Dollar Saloon, Inc.
6848 Greenville Avenue
Dallas, Texas 75231

Gentlemen:

As your counsel, I have examined the Registration Statement on Form SB-2
Amendment No. 1 ("Registration Statement"), filed by you with the Securities and
Exchange Commission which relate to the offer and sale of 878,173 shares
("Shares") of your Common Stock, $0.001 par value ("Common Stock") by certain
selling shareholders.

In rendering this opinion, I have examined, among other things, your Articles of
Incorporation, as amended, and amended Bylaws, each as in effect at the date
hereof, and the Registration Statement.

On the basis of the foregoing examination and upon consideration of applicable
law, it is my opinion that the Shares of Common Stock are legally issued, fully
paid and non-assessable.

I hereby consent to the use of my name and the inclusion of this opinion in the
Registration Statement including references to me in the prospectus constituting
a part of the Registration Statement.

Sincerely,

/s/ William C. Jones
- -----------------------
William C. Jones

Oklahoma address: Suite 700, 10 East 3rd Street, Tulsa, Oklahoma 74103

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the use in the Amendment No. 1 to Form SB-2 Registration Statement
Under The Securities Act of 1933 of Million Dollar Saloon, Inc. (a Nevada
corporation) our report dated February 16, 1996 on the financial statements of
Million Dollar Saloon, Inc. as of December 31, 1995 and 1994 and for each of the
years then ended, accompanying the financial statements contained in such
Amendment No. 1 to Form SB-2 Registration Statement Under The Securites Act of
1933, and to the use of our name and the statements with respect to us as
appearing under the heading "Experts".

S. W. HATFIELD + ASSOCIATES
Dallas, Texas
June 13, 1996

<PAGE>