BUTTERWINGS ENTERTAINMENT GROUP INC, S-2/A, 1997-04-25

BUTTERWINGS ENTERTAINMENT GROUP INC
S-2/A, 1997-04-25
EATING PLACES

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As filed with the Securities and Exchange Commission on April 25, 1997
Registration No. 333 -20601
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Butterwings Entertainment Group, Inc.
(Name of Small Business Issuer in its charter)
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Illinois 5812 36-3903024
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)

Douglas E. Van Scoy
2345 Pembroke Ave. 2345 Pembroke Ave. 2345 Pembroke Ave.
Hoffman Estates, Il 60195 Hoffman Estates, Il 60195 Hoffman Estates, Il 60195
(847) 925-1050 (847) 925-1050
(Address and telephone (Address of principal place of (Name, address,
number of principal business or intended principal and telephone number
executive offices) place of business) of agent for service)

Copies to:
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Thomas W. Hughes, Esq.
Maurice J. Bates, Esq. Lisa N. Tyson, Esq.
Maurice J. Bates, L.L.C. Winstead Sechrest & Minick, P.C
8214 Westchester 1201 Elm Street
Suite 500 5400 Renaissance Tower
Dallas, Tx 75225 Dallas, Tx 75270
Phone (214) 692-3566 Phone (214) 745-5400
Fax (214) 987-2091 Fax (214) 745-5390
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Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ____________
If this Form is a post-effective amendment filed pursuant to Rule 462
(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, please check the following box. x
-------------
*Calculation of the Registration Fee appears on the next page.

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.

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(Registration Statement cover page cont'd)

CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price per Unit Aggregate Offering Price Registration Fee
(1) (1)
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Units (2) 1,254,650 $6.50 $8,155,225 $ 2,471.28
Common Stock, $.01 par
value (3) 1,254,650 (3) (3) (3)

Redeemable Series A Common
Stock Purchase Warrants(3) 1,254,650 (3) (3) (3)

Common Stock, $.01 par
value (4) ( 5) 1,254,650 $7.80 $9,786,270
$2,965.53

Underwriters' Warrants (5)(6) 91,000 $.001 $91.00 $0.03

Units Underlying the
Underwriters' Warrants 91,000 $7.80 $702,000 $212.73

Common Stock, $.01 par
value (7) 91,000 (6) (6) (6)

Redeemable Series A Common
Stock Purchase Warrants(7) 91,000 (6) (6) (6)

Common Stock, $.01 par
value (5) (8) 91,000 $7.80 $867,360 $212.73

Total $5,862.30

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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 91,000 Units being offered by Selling Security Holders.
(3) Included in the Units. No additional registration fee is required.
(4) Issuable upon exercise of Redeemable Series A Common Stock Purchase
Warrants.
(5) Pursuant to Rule 416 there are also registered an indeterminate number of
shares of Common Stock, which may be issued pursuant to the anti-dilution
provisions applicable to the Redeemable Series A Common Stock Purchase
Warrants, the Underwriters' Warrants and the Redeemable Series A Common
Stock Purchase Warrants issuable under the Underwriters' Warrants.
(6) Underwriters' Warrants to purchase up to 91,000 Units, consisting of an
aggregate of 91,000 shares of Common Stock and 91,000 Redeemable Series A
Common Stock Purchase Warrants.
(7) Included in the Units Underlying the Underwriters' Warrants. No additional
registration fee is required.
(8) Issuable upon exercise of Redeemable Series A Common Stock Purchase
Warrants underlying the Underwriters' Units.

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Butterwings Entertainment Group, Inc.

Cross - Reference Sheet
showing location in the Prospectus of
Information Required by Items of Form SB-2

Form SB-2 Item Number and Caption Location In Prospectus
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1.Front of Registration Statement and
Outside Front Cover of Prospectus............................Outside Front Cover Page

2.Inside Front and Outside Back Cover
Pages of Prospectus..........................................Inside Front Cover Page;
Outside Back Cover Page;
Additional Information

3. Summary Information and Risk Factors........................Prospectus Summary; Risk Factors
4. Use of Proceeds.............................................Use of Proceeds
5.Determination of Offering Price..............................Outside Front Cover Page; Risk
Factors; Underwriting
6.Dilution.....................................................Dilution
7.Selling Security Holders.....................................Selling Security Holders
8.Plan of Distribution.........................................Outside Front Cover Page; Risk
Factors; Underwriting
9.Legal Proceedings............................................Business and Properties-Legal Proceedings
10.Directors, Executive Officers, Promoters
and Control Persons.........................................Management--Directors and
Executive Officers

11.Security Ownership of Certain Beneficial
Owners and Management.......................................Principal Stockholders
12.Description of Securities...................................Description of Securities
13.Interest of Named Experts and Counsel.......................Experts
14.Disclosure of Commission Position on
Indemnification for
Securities Act Liabilities..................................Underwriting
15.Organization Within Last Five Years.........................Certain Relationship and Related
Transactions
16.Description of Business.....................................Business and Properties
17.Management's Discussion and Analysis
or Plan of Operation........................................Management's Discussion and
Analysis of Financial Condition and
Results of Operations
18.Description of Property.....................................Business and Properties
19.Certain Relationships and Related
Transactions................................................Certain Relationships and
Related Transactions

20.Market for Common Equity and Related
Stockholder Matters.........................................Description of Securities; Risk
Factors - Shares Eligible for Future Sale

21. Executive Compensation.....................................Management--Executive
Compensation
22. Financial Statements.......................................Financial Statements
23. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure.......................................Not Applicable
24.Indemnification of Directors and Officers...................Management
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i
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Subject to Completion, Dated April 25, 1997
PROSPECTUS

Butterwings Entertainment Group, Inc.
1,091,000 Units
Each Unit consisting of One Share of Common Stock and
One Redeemable Series A Common Stock Purchase Warrant
--------------------

Of the 1,091,000 units offered hereby, 1,000,000 are being sold by
Butterwings Entertainment Group, Inc. (the "Company") and 91,000 are being sold
by certain security holders of the Company (the "Selling Security Holders").
Each unit (a "Unit") consists of one share of Common Stock (the "Common Stock")
, $.01 par value per share, and one Redeemable Series A Common Stock Purchase
Warrant (the "Series A Warrants") o f the Company. The Units, together with the
Common Stock and the Series A Warrants included in the Units, are sometimes
referred to collectively as the "Securities." The Common Stock and the Series A
Warrants included in the Units may not be separately traded until ____ 1997[six
months after the date of this prospectus] unless earlier separated upon three
days' prior written notice from National Securities Corporation (the
"Representative") to the Company at the discretion of the Representative. Each
Series A Warrant entitles the holder thereof to purchase one share of Common
Stock at an exercise price of 120% of the offering price per Unit, subject to
adjustment, at any time commencing on ____, 1998 [13 months after the closing of
this Prospectus] until ______, 2002, unless earlier redeemed. The Series A
Warrants are subject to redemption by the Company at a price of $0.05 per Series
A Warrant at any time commencing 13 months after the date of this Prospectus, on
thirty days prior written notice, provided that the closing sale price per share
for the Common Stock has equalled or exceeded 200% of the offering price per
Unit for twenty consecutive trading days within the thirty-day period
immediately preceeding such notice. See "Description of Securities" and
"Underwriting."

Prior to this Offering, there has been no public market for the
Securities, and there can be no assurance that an active market will develop. It
is currently anticipated that the initial public offering price of the Units
will be $6.50 per Unit. See "Underwriting" for information relating to the
factors to be considered in determining the initial public offering price. The
Company intends to apply for listing of the Units, the Common Stock and the
Series A Warrants on the Boston Stock Exchange subject to official notice of
issuance, under the symbols "ETS.U, "ETS" and "ETS.W" respectively and on the
NASDAQ Small Cap Market under the symbols "EATS.U", "EATS" and "EATS.W."

The Company's ability to continue as a going concern may be
dependent upon the successful completion of this offering.

THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION FROM THE PUBLIC OFFERING PRICE. PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER THE SECTIONS ENTITLED "RISK FACTORS"BEGINNING ON PAGE
7 AND "DILUTION" CONCERNING THE COMPANY AND THIS OFFERING.

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

Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company (2) Security
Holders

Per Unit (3) ......... $ $ $ $
Total ................ $ $ $ $

The Securities are being offered, subject to prior sale, when, as and if
delivered to and accepted by the Representative, and subject to approval of
certain legal matters by counsel and other conditions. The Representative
reserves the right to withdraw, cancel or modify the Offering without notice and
to reject any order, in whole or in part. It is expected that delivery of the
certificates representing the Securities will be made against payment therefor
at the offices of National Securities Corporation in Seattle, Washington on or
about _________.

National Securities Corporation

The date of this Prospectus is _______, 1997.

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Prospectus Summary

The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus. The information herein, including share and per share data,
unless otherwise stated, gives effect to (i) a 21,640 -for-one split of the
Common Stock effected in October 1996, (ii) the issuance of 593,945 shares of

Common Stock pursuant to the Exchange Offer described elsewhere in this
Prospectus, (iii) the issuance of 254,008 shares of Common Stock upon the
automatic conversion of outstanding Convertible

Preferred Stock described elsewhere in this Prospectus, and (iv) the
issuance of 91,000 shares of Common Stock included in 91,000 Units to be issued
to the Selling Security Holders, concurrent with the effective date of this
Prospectus. Unless otherwise indicated, the information herein is presented on
the basis that the Underwriters' over-allotment option and the Underwriters'
Warrants are not exercised.

The Company
Butterwings Entertainment Group, Inc. ("Butterwings" or the "Company") is
engaged in the ownership, operation and management of franchised Hooters
restaurants (the "Hooters Restaurants" or the "Restaurants") and Mrs. Fields
cookie stores (the "Mrs. Fields Cookie Stores" or the "Cookie Stores") . The
Company currently owns, operates and manages three Hooters Restaurants in
Madison, Wisconsin and San Diego, California and 13 Mrs. Fields Cookie Stores in
Missouri, Michigan and Minnesota.

The Company opened its first Hooters Restaurant in Madison, Wisconsin in
April 1994. The Company opened three additional Hooters Restaurants, all in San
Diego, California, between October 1994 and May 1995, one of which was
subsequently closed. In December 1995, the Company purchased an existing Mrs.
Fields Cookie Store in Flint, Michigan from Mrs. Fields Development Corporation,
the franchisor of Mrs. Fields Cookie Stores (the "Mrs. Fields Franchisor") and
in January 1996, acquired from an affiliate of the Company six additional
franchised Mrs. Fields Cookie Stores. In October 1996, the Company acquired 100%
of the common stock of Cookie Crumbs, Inc. ("Cookie Crumbs"), which owns six
additional Mrs. Fields Cookie Stores. The Company intends to acquire an
unlimited number of new or existing Mrs. Fields Cookie Stores. It is unlikely
that the Company will open any new Hooters Restaurants and may elect to sell its
existing locations.

The Company's objective is to develop or acquire a significant number of
franchised units to create economies of scale in management, personnel and
administration. To achieve this objective, the Company's strategy will be to (i)
capitalize on the brand name recognition and goodwill associated with the Mrs.
Fields name; (ii) expand the Company's Mrs. Fields operations through the
development of additional franchised units; and (iii) hire and train qualified
management personnel to assure compliance with its obligations, continuity of
management and efficiency of operations. Management of the Company will also
research other concepts to become part of the future strategy of the Company's
ongoing plans for expansion. The Company has had preliminary discussions with a
micro brewery chain with respect to its acquisition by the Company.. No
agreement has been reached and there can be no assurance that the Company will
be able to consummate the transaction or that, if consummated, the micro brewery
chain would be profitable.

The Company was incorporated in Illinois as Butterwings, Inc., in July
1993 and adopted its present name by amendment to its Articles of Incorporation
in October 1996. The Company operates in California through its wholly-owned
subsidiary, Butterwings of California, Inc. ("Butterwings/California") and in
Wisconsin through its wholly-owned subsidiary, Butterwings of Wisconsin,
Inc.("Butterwings/Wisconsin"). The Company's Mrs. Fields Cookie Stores are owned
and operated by the Company and through Cookie Crumbs.

The Company's executive offices are at 2345 Pembroke Avenue, Hoffman
Estates, Illinois, 60195. The telephone number at that location is (847)
925-0925.

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2
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Cancellation of Debt; Conversion of Preferred Stock; Bridge Loan Financing

Exchange of 12% Notes for Stock. Pursuant to an exchange offer dated
January 1997 (the "Exchange Offer"), the Company offered to exchange shares of
its Common Stock for $3,700,000 principal amount of the Company's 12% Notes due
April 2001 (the "Notes"), accrued interest on the Notes of $333,000 through
December 31, 1996, and a 20% premium over the proposed initial public offering
price of $6.50 per Unit for the Units in this Offering. Holders of $2,872,500
principal amount (77.6%) of Notes accepted the Exchange Offer. As a result,
$2,872,500 principal amount of Notes and $344,700 of interest accrued through
March 31, 1997,will be canceled and 593,945 shares of Common Stock will be
issued to the Note holders concurrently with the issuance of Units to investors
in this Offering. The $827,500 of Notes not exchanged will remain outstanding.
See "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Secured Promissory Notes."

Conversion of Preferred Stock: Prior to this Offering, the Company had
outstanding 15,685 shares of its Convertible Preferred Stock. The Convertible
Preferred Stock is automatically convertible into the Company's Common Stock
upon consummation of the first sale of the Company's Common Stock the in an
underwritten public offering pursuant to the Securities Act of 1933. As a result
of this Offering, the Company will issue to the holders of the Convertible
Preferred Stock 254,008 shares of Common Stock concurrently with the
consummation of the Offering. This Prospectus assumes the conversion of the
Convertible Preferred Stock and the issuance of 254,008 shares to the
Convertible Preferred Stock holders. See "Description of Securities -
Convertible Preferred Stock."

Bridge Loan Notes and Warrants: From October through December 1996, the
Company issued

$483,000 of bridge loan notes (the "Bridge Loan Notes") to provide cash for
normal operating expenses and to pay professional fees and expenses in
connection with this Offering. The Bridge Loan Notes are secured promissory
notes bearing interest at the LIBOR rate and are payable at the earlier of nine
months from the date of issuance or the closing of this Offering. As additional
consideration, the Bridge Loan Note holders (the "Bridge Loan holders") received
91,000 warrants to acquire, without additional cost, Units identical to the
Units offered hereby at the time the registration statement of which this
prospectus is a part becomes effective. Such Units are being registered pursuant
to

this registration statement and are included in the Units offered hereby.
See Management's Discussion of Financial Condition and Results of Operations -
Bridge Financing," "Selling Security

Holders" and "Underwriting."

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3
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The Offering

Securities Offered:

By the Company.................. 1,000,000 Units, each Unit consisting
of one share of Common Stock and one
Series A Warrant. See "Description
of Securities."

By the Selling Security Holders. 91,000 Units, each Unit consisting
of one share of Common Stock and one
Series A Warrant. See "Selling Security
Holders" and "Description of Securities.

Series A Warrants................... Each Series A Warrant will entitle the
holder thereof to purchase one share of
Common Stock at an exercise price of
120% of the offering price per Unit in
this Offering, commencing on
_____________________, 1998 [thirteen
months after closing of this Offering]
until _______________, 2002.
The Series A Warrants may not be
separately traded until _______________,
1997 [six months after the date of this
Prospectus], unless earlier separated
upon three days prior written notice by
the Representative to the Company, at
the discretion of the Representative.
The Series A Warrants are redeemable by
the Company at $0.05 per Series A
Warrant at any time commencing thirteen
months after the date of this
Prospectus, on thirty days prior written
notice, provided that the closing sale
price per share for the Common Stock
has equaled or exceeded 200% of the
Offering price per Unit for twenty
consecutive trading days within the
thirty-day period immediately preceding
such notice. See "Description
of Securities."
Common Stock to be Outstanding

after the Offering................. 4,091,000 shares (1)

Series A Warrants to be Outstanding

after the Offering................ 1,091,000 Series A Warrants (1)

Use of Proceeds..................... Development and acquisition of Mrs.
Fields Cookie Stores, expansion into
other concepts, payment of past-due
interest on the 12% Notes, repayment of
the Bridge Loan Notes, working
capital and general corporate purposes.
See "Use of

Proceeds."

Risk Factors........................ THE SECURITIES OFFERED HEREBY ARE
SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND SHOULD NOT BE PURCHASED BY
INVESTORS WHO CANNOT AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. See

"Risk Factors."

Proposed Boston Stock Exchange Symbols

Units............................... ETS.U
Common Stock........................ ETS
Series A Warrants................... ETS.W

Proposed Nasdaq Small Cap Market Symbols
Units............................... EATS.U
Common Stock........................ EATS
Series A Warrants................... EATS.W

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4
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(1) Excludes shares issuable upon the exercise of options and warrants
outstanding upon the date of

this Prospectus or to be issued as follows: (i) 1,091,000 shares issuable
upon the exercise of the Series A Warrants to be sold in this Offering; (ii) up
to 163,650 shares and 163,650 Series A Warrants to purchase 163,650 shares
subject to the Underwriters' over-allotment option; (iii) 109,100 shares and
109,100 Series A Warrants to purchase 109,100 shares subject to the

Underwriters' Warrants; and (iv) 200,000 shares reserved for grant under
the Company's 1996 Stock

Compensation Plan, 100,000 of which have been granted and are exercisable.
See "Management' and "Underwriting."

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5
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Summary Financial Information

The following table sets forth summary income statement data for the fiscal
years ended December 29, 1996, and December 31, 1995 and summary balance sheet
data at December 29, 1996 which

have been derived from the Company's financial statements audited by
McGladrey & Pullen, LLP,

independent auditors, which have been included elsewhere herein. The
following data should be read

in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of

Operations" and the Consolidated Financial Statements and related Notes
thereto appearing elsewhere in this Prospectus.

Income Statement Data:

Fiscal Years Ended
------------------

December 29, 1996 December 31, 1995
----------------- -----------------

Sales $8,551,033 $7,730,956

Operating expenses 8,317,394 7,398,898

General and administrative expenses 996,200 566,918

Write off of franchise fee options 145,000 --

Provision for loss on leased property 927,148 145,000

Loss on impairment of asset -- 159,474

Net (loss) (2,757,259) (1,153,053)

Net (loss) per common share $ (1.23) $ (0.51)

Common shares outstanding (1) 2,250,736 2,250,736

Net (loss) (2) $(2,142,143) $(754,053)

Net (loss) per common share(2) $ (.52) $ (0.18)

Common shares outstnding 4,144,077 4,144,077

Balance Sheet Data:

December 29, 1996
-----------------

Actual As Adjusted (2)
------ ---------------

Current Assets $719,813 $5,777,221

Total Assets 5,506,201 9,648,088

Total current liabilities 5,507,435 1,893,410

Total long-term debt 521,721 521,721

Redeemable Preferred Stock 1,690,000 1,690,000

Stockholders' equity (deficit) $(2,212,955) $5,542,957

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

(1) Based on weighted average number of shares outstanding. See Note 1 to
Consolidated Financial Statements.

(2) To reflect (i) the sale of 1,000,000 Units (including 1,000,000 shares of
Common Stock) offered by the Company at a price of $6.50 per Unit,(ii) the
exchange of 77.6% of the Notes to Common Stock, (iii) the conversion of 100%
of the outstanding Convertible Preferred Stock, and (iv) 91,000 shares of
Common Stock issued to the Selling Security Holders.

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6
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RISK FACTORS

AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN ADDITION TO
THE OTHER INFORMATION SET FORTH IN THE PROSPECTUS BEFORE PURCHASING THE
SECURITIES OFFERED HEREBY.

Limited Operating History; Prior Losses; Going Concern

The Company has a limited operating history upon which investors may
evaluate the Company's performance. For the fiscal years ended December 29, 1996
and December 31, 1995 the Company, on a consolidated basis, incurred net losses
of $2,757,259 and $1,153,674 respectively from the operations of its Hooters
Restaurants and Mrs. Fields Cookie Stores. The Company will continue to incur
significant expenses associated with the development and operation of its Mrs.
Fields Cookie Stores, and the expansion into new concepts, a substantial portion
of which may be incurred before the realization of related revenues. These
expenditures, together with associated early operating expenses, may result in
operating losses until an adequate revenue base is established. There can be no
assurance that the Company will be able to operate profitability in the future.
The ability of the Company to continue as a going concern is dependent upon,
among other things, the successful completion of this Offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 20 to Consolidated Financial Statements.

Risks of Restaurant Industry; Changes in Consumer Preferences,
Economic Conditions and Trends

The Company may elect to sell its existing Hooters Restaurants. As long as
it continues to operate its existing restaurants, it will be subject to the
risks of the restaurant industry. The restaurant industry is generally affected
by changes in consumer preferences, national, regional and local economic
conditions and demographic trends. The performance of individual restaurants may
also be affected by factors such as traffic patterns and the type, number and
location of competing restaurants. Factors such as inflation, increased food,
labor and employee benefit costs and the availability of experienced management
and hourly employees may also adversely affect the restaurant industry in
general and the Company's restaurants in particular. Moreover, by the nature of
its business, the Company will be subject to potential liability from serving
contaminated or improperly prepared food and such liability could adversely
impact the Company's operations. See "Business Competition and Regulation."

Risks of Company's Businesses; Current and Future Profitability

The business of owning and operating Hooters Restaurants and Mrs. Fields
Cookie Stores involves a high degree of risk. The ultimate profitability of the
Company's business will depend upon numerous factors including, without
limitation, the profitability of the Hooters Restaurants and Mrs. Fields Cookie
Stores owned and operated by the Company, which in turn will depend on many
factors over which the Company will have no control, including changes in local,
regional, or national economic conditions, changeable tastes of consumers, food,
labor and energy costs, the availability and cost of suitable sites, fluctuating
interest and insurance rates, state and local regulations and licensing
requirements, the continuing goodwill and reputation associated with the Hooters
Franchisor and Mrs. Fields Franchisor and the ability of the Company to hire and
retain qualified employees, including competent managers for each restaurant and
cookie store. There can be no assurance that any new sites selected will produce
the minimum customer traffic for the Cookie Stores to be economically
successful. If the Company elects to sell its existing Hooters Restaurants,
there can be no assurance that it will be able to find a ready buyer or that an
acceptable price can be obtained. If the Company is able to find a buyer for its
Hooters Restaurants, there can be no assurance that it will be able to sell the
restaurants at a profit and may incur a loss on its investment in the
restaurants

Rights to Open Additional Hooters Restaurants and Mrs. Fields
Cookie Stores; Consequences of Not Meeting Required Time Limits

Pursuant to option addenda entered into between the Company and the
Hooters Franchisor, the Company paid the Hooters Franchisor $10,000 per
restaurant for options to open 13 new restaurants in Wisconsin and California.
Such option fees were to be credited against the $75,000 franchise fee payable
for each new restaurant. Butterwings/Wisconsin entered into a franchise
agreement dated October 31, 1993 and an option addendum thereto pursuant to
which Butterwings/Wisconsin was granted exclusive options to establish and
operate four additional Hooters Restaurants in the cities of Madison and
Milwaukee, Wisconsin by July 31, 1996. Butterwings/California also entered into
a franchise agreement dated October 31, 1993 and an option addendum thereto
pursuant to which Butterwings/California was granted the exclusive right to
operate a Hooters Restaurant in San Diego County and exclusive options to
establish and operate nine additional Hooters Restaurants in San Diego County,
two of which have been exercised. In October 1995, the option addendum was
modified at the request of the Company to reduce the option to establish and

7
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operate Hooters Restaurants in San Diego County by three. Pursuant to such
option, the remaining four Hooters Restaurants in the territory were required to
be open by July 31, 1996.

The Company has been unable to complete the development of such
additional Hooters Restaurants within the time frames set forth in option
addenda to the Hooters franchise agreements and under the terms thereof, the
options have lapsed and the option fees paid by the Company may be retained by
the Hooters Franchisor. The Hooters Franchisor has advised the Company that it
does not intend to renew the option. Furthermore, the Hooters Franchisor has not
consented to this Offering and, under the terms of the franchise agreement with
the Hooters Franchisor, may have the right to terminate the Company's operation
of Hooters Restaurants.

Since it is unlikely that the Company will open additional Hooters
Restaurants, it may elect to sell its existing Hooters Restaurants. The Company
will then be dependent on the operations of its existing and future Mrs. Fields
Cookie Stores owned and to be developed by the Company and expansion into other
fields, including the possible acquisition of a micro brewery chain with which
the Company has had preliminary discussions. There is no definitive agreement
for the acquisition of the micro brewery chain and no assurance can be given
that the acquisition can be or will be made. The Company would probably not be
able to continue as a going concern if it were forced to rely upon its existing
Hooters Restaurants and Mrs. Fields Cookie Stores. To continue as a going
concern, the Company is dependent upon the success of this Offering and the
opening of new Mrs. Fields Cookie Stores and the expansion into other fields.
There are no such obstacles in opening new Mrs. Fields Cookie Stores. See
"Business and Properties-The Hooters Restaurants--Restaurant Locations and
Expansion Plans" and Note 20 to Consolidated Financial Statements.

Risks of Planned Expansion

Successful expansion of the Company's operations will be largely
dependent upon a variety of factors, some of which are currently unknown or
beyond the Company's control, including (i) continuing customer acceptance of
the "Mrs. Fields" cookie store concept, (ii) the ability of the Company's
management to negotiate territories in which to expand the cookie stores, to
identify suitable sites and to negotiate leases at such sites, (iii) timely and
economic development and construction of Mrs. Fields Cookie Stores, (iv) the
hiring of skilled management and other personnel, (v) the ability of the
Company's management to apply its policies and procedures to a much larger
number of cookie stores; (vi) the availability of adequate financing; (vii) the
general ability to successfully manage growth (including monitoring Cookie
Stores, controlling costs, and maintaining effective quality controls); (viii)
the ability of the Company to identify and expand into other areas; and (ix) the
general state of the economy. No market studies regarding the commercial
feasibility of expanding the Company's cookie stores have been conducted, nor
are any such studies planned. There can be no assurance that the Company will be
able to successfully open new cookie stores at the planned rate of expansion, or
at all. While the Company retains the right to pursue other concepts which are
not planned at the date hereof, there can be no assurance that any such new
ventures will be successful. See "Business and Properties - The Hooters
Restaurants" and - "Mrs.

Fields Cookie Stores - Development Option."

Dependence on the Mrs. Fields Franchisor

The Company's success depends in part on the continued success of the
"Mrs. Fields" cookie store concept and on the ability of the franchisor to
identify and react to new trends in their respective industries (including the
development of innovative and popular menu items and pastry products) and to
develop and pursue appropriate marketing strategies in order to maintain and
enhance the name recognition, reputation and market perception of the "Mrs.
Fields" cookie stores. The Company believes that the experience, reputation,
financial strength and franchisee support of the Mrs. Fields Franchisor are
positive factors in the Company's prospects. Adverse publicity or economic
trends or business deterioration with respect to the Mrs. Fields Franchisor or
its failure to support its franchisees, including the Company, could have a
material adverse effect on the Company. However, the future results of
operations of the Mrs. Fields Franchisor and its other franchisees will not
alone assure the success of the Company, which will depend on the effectiveness
of the Company's management, current and future locations of the Company's
cookie stores and the results of operations of those businesses. The Company
reserves the right to expand into new concepts not yet determined or to
eliminate concepts currently operated by the Company at management's discretion.

Requirements of Franchise Agreements; Franchise Fees, Royalties,
Advertising Costs

Although it is unlikely that the Company will open new Hooters Restaurants,
it will continue to be subject to the terms of the Hooters franchise agreement
with respect to its existing Hooters Restaurants as long as the Company
continues to operate these restaurants. The franchise agreements between the
Company and the Hooters Franchisor and the Mrs. Fields Franchisor require the
Company to pay an initial franchise fee with respect to each restaurant and
cookie store opened, to pay royalties based on gross sales of each restaurant
and cookie store location and to spend a percentage of the gross sales of each
Restaurant and Cookie Store on advertising, which may include contributions to
national marketing pools administered by the franchisor. Such amounts must be
paid or expended regardless of the profitability of the Company's restaurants
and cookie stores. As of the date of this Prospectus, the franchise agreement
with the Mrs. Fields Franchisor provides for an initial franchise fee of
$15,000-$25,000 to the Mrs. Fields Franchisor for each Mrs. Fields Cookie Store
opened. Under the applicable franchise agreements, the Company must pay

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royalties on gross sales of 6% to the Hooters Franchisor and up to 6% to the
Mrs. Fields Franchisor. The Company currently contributes a percentage of gross
sales for all of its Hooters Restaurants and certain of its Mrs. Fields Cookie
Stores to the national marketing funds of the franchisors. In addition, the
Company's franchise agreements require the Company to operate its Hooters
Restaurants and Mrs. Fields Cookie Stores in accordance with the requirements
and specifications established by the franchisor relating to interior and
exterior design, decor, furnishings, menu selection, the preparation of food
products, quality of service and general operating procedures, advertising,
maintenance of records and protection of trademarks. Failure of the Company to
satisfy such requirements could result in the loss of the Company's franchise
rights for some or all of its cookie stores as well as the development of
additional restaurants or cookie stores.

Competition
The restaurant and cookie industries are highly competitive with respect
to price, service, food quality and location and are among the highest failure
rates of any industry. There are numerous well-established competitors, some of
which possess substantially greater financial, marketing, personnel and other
resources than the Company. These competitors include national, regional and
local restaurants and chains of restaurants and cookie and pastry retailers. The
Company will face competition in every market that it enters. In addition, other
restaurant and cookie chains with greater financial resources than the Company,
the Hooters Franchisor and the Mrs. Fields Franchisor have similar or competing
operating concepts to that of the Company. As a result of the competition the
Company currently faces, and will continue to face as it expands, there can be
no assurance that the Company will be able to operate profitably in the future.
See "Business - Competition."

Profitability Affected By Changes in Food Costs

The Company's profitability is affected in part by its ability to
anticipate and react to changes in food costs. Various factors beyond the
Company's control, including adverse weather conditions, may affect food costs.
While management has been able to anticipate and react to changing food costs to
date through its purchasing practices and menu price adjustment, there can be no
assurance that it will be able to do so in the future.

Trademarks and Service Marks

Both the "Hooters" and the "Mrs. Fields" service marks have significant
value and are important to the marketing of the Company's Hooters Restaurants
and Mrs. Fields Cookie Stores. Both the Hooters Franchisor and the Mrs. Fields
Franchisor have enforcement policies to investigate possible violations of their
service marks and if such violations are identified they take appropriate action
to preserve and protect their goodwill in their service marks. The Company is
obligated under its franchise agreements with the Hooters Franchisor and the
Mrs. Fields Franchisor to report any such violations to the franchisor. Under
the franchise agreement with the Hooters Franchisor, the Company is required to
cooperate fully with the Hooters Franchisor in defending or settling any such
litigation as determined exclusively by the Hooters Franchisor. Under the
franchise agreement with the Mrs. Fields Franchisor, the Company is required to
render assistance and execute such documents as may be necessary or advisable in
the opinion of the Mrs. Fields Franchisor's legal counsel to protect Mrs. Fields
interest in the trademark. The Mrs. Fields Franchisor is required to indemnify
the Company and to reimburse it for all damages for which it is held liable in
any proceeding arising out of the Company's authorized use of the Mrs. Fields
trademark and for all costs reasonably incurred in defending any claim against
the Company provided it has otherwise complied with the franchise agreement.
There can be no assurance that the Company, the Hooters Franchisor or the Mrs.
Fields Franchisor will be successful in enforcing their rights under their
service marks and preventing others from using such marks or a derivation of
same. The Company is unable to estimate the possible cost of participating in
any legal proceedings relating to the Hooters and Mrs. Fields service marks and
there can be no assurance that such proceedings would not have a substantial
adverse impact on the Company.

Long Term Leases; Restaurant and Cookie Store Closings
The Company leases the sites for its existing Hooters Restaurants and
Mrs. Fields Cookie Stores pursuant to long term, non-cancelable leases or
sub-leases. Future sites for Mrs. Fields Cookie Stores will likely be subject to
similar long term leases. If an existing or future site does not perform at a
profitable level, and the decision is made to close the location, the Company
may nevertheless be obligated to pay rent under the lease. In September 1996,
the Company closed a Hooters Restaurant in San Diego, California. As a result,
the Company surrendered to the landlord leasehold improvements and equipment at
the site and agreed to pay the landlord $4,750 per month through June 30, 2005.
In April 1995, the Company assumed a land lease for a Hooters Restaurant to be
opened in Oceanside, California. Subsequently, the Company decided not to
develop the property and in September 1996, sublet the property at substantially
the same rentals but under terms which could enable the subleasee to terminate
the lease in September 1998, resulting in the Company being liable for the
remaining lease payment of $311,000 through September 2003. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Restaurant Closing," "Business and Properties - The Hooters
Restaurants - Properties" and Notes 10 and 11 to Consolidated Financial
Statements.

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Geographic Concentration of Restaurants and Cookie Stores; Uncertainty
of Market Acceptance

The Company currently operates three Hooters Restaurants, in
Madison, Wisconsin and San

Diego, California and 13 Mrs. Fields Cookie Stores, in the St. Louis, Missouri,
Minneapolis, Minnesota and Lansing/Flint, Michigan areas. The results of
operations may not be indicative of the market acceptance of a larger number of
locations, particularly as the Company expands its Mrs. Fields Cookie Stores
into areas with varied demographic characteristics. There can be no assurance of
the Company's ability to achieve consumer awareness and market acceptance. This
could require substantial efforts and expenditures by the Company, particularly
as the Company seeks to enter into new markets with its existing or new
concepts. Furthermore, since the Company currently operates only three
restaurants and 13 cookie stores, even one unsuccessful restaurant or new cookie
store could have a significant adverse impact on the Company's operations. See
"Business- Expansion Strategy."

Risks Associated With Secured Promissory Notes
Holders of $2,872,500 of Notes accepted the Exchange Offer, and $827,500
principal amount of Notes remain outstanding. The Notes are secured by all of
the Company's assets, are in default with respect to the $99,300 of accrued and
unpaid interest due the Note holders as of March 31, 1997 who did not accept the
Exchange Offer and will require annual interest payments of approximately
$99,300.
The Company intends to use a portion of the proceeds of this Offering to pay
past due interest and cure the default on the outstanding Notes. The ability of
the Company to make timely future payments of principal and interest will depend
on the availability of funds from cash flow or other financing. There can be no
assurance that the Company will be able to make principal and interest payments
on the Notes as such payments come due. Failure to make principal and interest
payments when due may cause an event of default under the terms of the Notes, in
which event the Note holders could accelerate payment of principal and interest
on the Notes and cause a foreclosure and sale of assets sufficient to retire the
indebtedness. The Company will be required to expense in its financial
statements when this Offering becomes effective, the previously unamortized
financing costs related to the Notes (estimated to be approximately $240,000)
and the 20% premium to the Note holders accepting the Exchange Offer (estimated
to be approximately $644,000). See "Cancellation of Debt; Conversion of
Preferred Stock; Bridge Loan Notes and Warrants," "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Risks Associated With Bridge Loan Notes

The Company has allocated approximately $483,000 of the net proceeds of
this Offering to retire the outstanding principal and interest on the Bridge
Loan Notes. The Bridge Loan Notes are subordinate to the Notes and if the
Company is not able to cure the default under the terms of the Notes it will be
prohibited from repaying the Bridge Loan Notes. In the event this Offering is
not successful, the Company would be required to seek alternate sources of
financing, renegotiate the terms of its debt obligations or seek protection from
creditors under the Federal Bankruptcy Code. The fair market value of the Common
Stock underlying the warrants issued to the Bridge Loan Holders (estimated to be
approximately $591,500) is being expensed in the Company's financial statements
over the period from when the Bridge Loan Note proceeds were received to the
expected date of this Offering. See "Cancellation of Debt; Conversion of
Preferred Stock; Bridge Loan Notes and Warrants," Use of Proceeds" and
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Loss of Tax Loss Carry Forwards

As of December 29, 1996, the Company has net operating tax losses of
approximately $2,140,000 which have been or may be utilized by NEMC pursuant to
intercorporate tax allocation practices adopted by the Company and NEMC. Upon
the completion of this Offering, the Company will no longer be eligible for
inclusion in NEMC's consolidated tax return and NEMC will be relieved of any
previous obligation to pay the Company the tax benefit for any tax losses
utilized under the intercorporate tax allocation practices. However, at the
completion of this Offering, the Company will have approximately $1,330,000 of
tax loss carryforwards which can be utilized by the Company until their
expiration in 2011. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 7 to Consolidated Financial
Statements.

Risks Associated With Cookie Crumbs Preferred Stock

There are 16,900 shares of Cookie Crumbs Redeemable Preferred Stock
outstanding (the "Cookie Crumbs Preferred Stock") which require the payment of
annual regular cash dividends of $169,000 and non-cumulative, non-compounded
participating cash dividends not exceeding 8% of the face value of the Preferred
Stock outstanding, equal in the aggregate to 10% of an amount equal to net
income less regular cash dividends. Such Cookie Crumbs Preferred Stock dividends
rank senior to Cookie Crumbs common stock dividends and as at the date hereof
are current. Beginning in February 1998, the Cookie Crumbs Preferred Stock is
redeemable in whole or in part at the option of Cookie Crumbs at 103% of its
face value plus accrued and unpaid regular cash dividends and at the option of
the holders thereof during any fiscal year in which Cookie Crumbs has net income
in excess of regular dividend distributions, including cumulative unpaid regular
dividends, for an amount equal to the liquidation value. Such redemption
obligation of Cookie Crumbs is limited to 25% of its net income as adjusted for
the prior year. All dividends paid on the Cookie Crumbs Preferred stock and any

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redemption of the Cookie Crumbs Preferred Stock at the election of Cookie Crumbs
or the Cookie Crumbs Preferred Stock holders will be paid to the Cookie Crumbs
Preferred Stock holders and not to investors in this Offering and by a like
amount will reduce Cookie Crumbs net income and cash flow available for Cookie
Crumbs operations. If Cookie Crumbs is unable to pay all or a portion of the
regular cash dividend payments on the Cookie Crumbs Preferred Stock, the Company
may be required to advance the amounts required. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

Government Regulation

The restaurant and cookie businesses are subject to various federal,
state and local government regulations, including those relating to the sale of
food and, in the case of restaurants, to alcoholic beverages. While the Company
has not experienced any trouble in obtaining necessary government approvals to
date, difficulty or failure to retain or obtain required licenses or other
regulatory approvals could have an adverse effect on the Company's current or
future operations or delay or prevent the opening of new Mrs. Fields Cookie
Stores. The Company will be subject in certain states to "dram shop" statutes,
which generally provide a person injured by an intoxicated person the right to
recover damages from an establishment that wrongfully served alcoholic beverages
to the intoxicated person. The Company currently operates restaurants in
Wisconsin and California which have statutes similar to "dram shop" statutes.
The Company carries liquor liability coverage as part of its existing
comprehensive general liability insurance in all states in which it operates.
The Company has never been named as a defendant in a lawsuit involving "dram
shop" statutes. However, there can be no assurance that the Company will not be
named as a defendant in such a lawsuit in the future.

Effect of EEOC Decision on Hooters Restaurants

The Equal Employment Opportunity Commission (the "EEOC") issued a
finding in September 1994, that the Hooters Franchisor and all related entities,
including but not limited to Hooters, Inc., Hooters Management Corporation, all
franchisees and licensees of the Hooters Franchisor and any other entity
permitted to operate under the "Hooters" trademark, engaged in employment
discrimination for failing to recruit, hire or assign men into server, bartender
or host positions. In March 1996, the EEOC's general counsel advised that he
would not recommend that the EEOC file a lawsuit against Hooters and that this
procedure terminated the EEOC's consideration of litigation against Hooters. The
Company has been the subject of several charges of employment discrimination
and/or sexual harassment suits in the Milwaukee and San Diego regional offices
of the EEOC and the City of Madison, Wisconsin. Excluding the recent settlement
of a discrimination case for approximately $100,000, none of such charges have
been finally determined to result in damages, liabilities or penalties to the
Company although they may not be finally resolved. In the event that litigation
should be re-instituted by the EEOC or if the Company should not be successful
in defending administrative or court proceedings involving charges of
discrimination in hiring, the Company may be required to implement a gender
neutral hiring policy and to pay money damages to men who were previously
discriminated against by Hooters' hiring practices, the effect of which could
have a substantial adverse impact on the Company's business. See "Business and
Properties - Litigation" and Note 19 to Consolidated Financial Statements.

Possible Need for Additional Financing

The net proceeds of this Offering will be used to develop and acquire
cookie stores, expand into new concepts, pay the past-due interest on the 12%
Notes, retire the Bridge Loan Notes, and for working capital and general
corporate purposes. Management believes that the net proceeds will be sufficient
to satisfy the financial needs of the Company for approximately 12 to 18 months.
However, there can be no assurance that the net proceeds from this Offering,
together with cash generated from other sources, will be sufficient to maintain
operations or finance further development and it may be necessary to obtain
additional financing. The Company has no current arrangements for, or sources
of, additional financing, and there can be no assurance that any such financing
can be obtained on terms acceptable to the Company or at all. To the extent any
additional financing involves the sale of equity securities of the Company,
shareholders of the Company, including purchasers in this Offering, will realize
a reduction in their percentage ownership interest in the Company. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."

Uninsured Losses; Costs and Availability of Insurance

The policy of the Company is to arrange for or acquire comprehensive
casualty and liability insurance in amounts which the Company determines is
sufficient to cover reasonably foreseeable losses and which are required by its
franchise agreements. However, there are certain types of losses (generally of a
catastrophic nature, such as earthquakes, floods and wars) which are
uninsurable, and recent increases in the cost of insurance generally have
resulted in premium rates which make certain losses not economically insurable.
There can be no assurance that the costs of certain insurance coverage which the
Company would otherwise obtain will not increase further and result in the
Company being unable to obtain coverage for certain risks at rates which are

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<PAGE>

economic for the Company. If the Company suffered a loss for which it was not
insured, such loss could have a material adverse effect on the Company's
operations.

Reliance on Management

The Company will depend to a significant extent on the ability of
current management of the Company to oversee operations of its restaurants and
cookie stores. The success of the Company's business will be dependent upon
Messrs. Stephan S. Buckley, Kenneth B. Drost and Douglas E. Van Scoy, executive
officers of the Company and its principal shareholder through New Era Management
Corporation. The Company does not have employment agreements with any executive
officer or employee of the Company. In the event the services of these
individuals should become unavailable to the Company for any reason, the Company
would be required to recruit other qualified personnel to manage and operate the
Company. There can be no assurance that the Company would be able to employ
qualified personnel on terms acceptable to it. See "Management."

Possible Conflicts of Interest With Management
Until October 1, 1996, the Company paid New Era Management Corporation
("NEMC") a company owned by the three officers and principal shareholders of the
Company, its actual cost for office space, accounting, administrative and
computer system services provided by NEMC. On October 1, 1996, the Company began
providing its own accounting, administrative and computer system services using
substantially the same personnel and equipment at approximately the same cost as
incurred in 1996, except for normal increases for cost of living and inflation.
The Company will continue to make monthly rental payments to NEMC of
approximately $5,400, which the Company believes is the fair market value of the
space leased. See "Business and Properties-Properties," "Certain Relationships
and Related Transactions" and Note 8 to Consolidated Financial Statements.

Company's Experience

The ownership and operation of franchised restaurants and cookie stores
is extremely complex and requires specialized management and marketing skills.
The executive management of the Company has limited experience in owning,
operating and managing franchised restaurants and cookie stores or businesses in
the food service industry. The executive officers intend to hire experienced
managers who will supervise the operations of the restaurants and cookie stores.
There can be no assurance, however, that the Company will be successful in
hiring and retaining such qualified personnel. See "Business-Hooters
Restaurants-Restaurant Operations and Management" and "Business-The Cookie
Stores-Store Operations."

No Dividends on Common Stock

Since inception, the Company has not paid, and it has no current plans
to pay, cash dividends on the Common Stock. The Company intends to retain all
earnings to support the Company's operations and future growth. The payment of
any future dividends will be determined by the Board of Directors based upon the
Company's earnings, financial condition and cash requirements, possible
restrictions in future financing agreements, if any, business conditions and
such other factors deemed relevant.
See "Dividend Policy."

Shares Eligible for Future Sale

Future sales of substantial amounts of Common Stock by the present
shareholders of the Company may have the effect of depressing the market price
of the Common Stock. Upon completion of the Offering, there will be 4,091,000
shares of Common Stock outstanding (4,254,650 shares if the Underwriters'
over-allotment option is exercised). The 1,091,000 shares of Common Stock and
1,091,000 Series A Warrants offered hereby will be freely tradable. The
remaining 3,000,000 shares of Common Stock are "restricted securities" as that
term is defined in Rule 144 ("Rule 144") under the Securities Act of 1933 (the
"Securities Act") and under certain circumstances may be sold without
registration pursuant to the provisions of Rule 144. In general, under Rule 144,
a person or persons whose shares are aggregated, and who has satisfied a
one-year holding period may, under certain circumstances sell within any
three-month period a number of restricted securities which does not exceed the
greater of one percent (1%) of the shares outstanding or the average weekly
trading volume during the four calendar weeks preceding the notice of sale
required by Rule 144. In addition, Rule 144 permits, under certain
circumstances, the sale of restricted securities by a person who is not an
affiliate of the Company and has satisfied a two -year holding period without
any quantity limitations. All of the 1,947,603 shares held by New Era Management
Corporation ("NEMC"), the principal shareholder of the Company, have been held
for longer than two years. However, NEMC has agreed with the Underwriters that
it will not sell any of such shares to the public for a period of twenty-four
months from the date hereof without the prior written consent of the
Representative. The shares of Common Stock issued upon conversion of the
Convertible Preferred Stock and the exchange of the 12% Notes will not be
eligible for sale pursuant to Rule 144 for one year from the date hereof. The
Company has agreed with the holders of the shares of Common Stock to be issued
to the Note holders to register such shares upon the request of 50% of such
holders after one year from the date of this Prospectus. See "Underwriting."

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Immediate Substantial Dilution

The current shareholders of the Company have acquired their shares of
Common Stock at a cost per share substantially less than that at which the
Company intends to sell its Common Stock included in the Units offered hereby
Therefore, investors purchasing Securities in this Offering will incur an
immediate and substantial dilution of approximately $5.50 per share or
approximately 85% in their ownership of the Company's Common Stock. See
"Dilution."

Arbitrary Determination of Offering Price

The public offering price for the Units offered hereby will be
determined by negotiation between the Company and the Representative and should
not be assumed to bear any relationship to the Company's asset value, net worth
or other generally accepted criteria of value. Recent history relating to the
market prices of newly public companies indicates that the market price of the
Securities following this Offering may be highly volatile. See "Underwriting."

Effect of Outstanding Series A Warrants and Underwriters' Warrants

Until the date five years following the date of this Prospectus, the
holders of the Series A Warrants and Underwriters' Warrants will have an
opportunity to profit from a rise in the market price of the Common Stock, with
a resulting dilution in the interests of the other shareholders. The Company is
required to register the Securities underlying the Underwriters' Warrants
commencing on the first anniversary date of the effectiveness of the Offering.
The Company is required to keep the registration statement registering the
Securities effective until the fifth anniversary of the effective date of the
Offering. The terms on which the Company might obtain additional financing
during that period may be adversely affected by the existence of the Series A
Warrants and the Underwriters' Warrants. The holders of the Series A Warrants
and the Underwriters' Warrants may exercise the Series A Warrants and
Underwriters' Warrants at a time when the Company might be able to obtain
additional capital through a new offering of securities on terms more favorable
than those provided herein. The Company has agreed to keep the registration
statement registering the Securities current and will file such post-effective
amendments and supplements as may be necessary to maintain the currency of the
registration statement during the period of its use. Such filings could involve
additional expense to the Company at a time when it could not afford such
expenditures and may adversely affect the terms upon which the Company may
obtain financing. See "Description of Securities" and `'Underwriting."

Risk of Redemption of Series A Warrants

Commencing (thirteen months from the date of this Prospectus), the
Company may redeem the Series A Warrants for $0.05 per Warrant, at any time
after the closing bid price of the Common Stock on the Boston Stock Exchange has
equaled or exceeded 200% of the initial offering price of the Units for twenty
consecutive trading days. Notice of redemption of the Series A Warrants could
force the holders thereof: (i) to exercise the Series A Warrants and pay the
exercise price at a time when it may be disadvantageous or difficult for the
holders to do so, (ii) to sell the Series A Warrants at the then current market
price when they might otherwise wish to hold the Series A Warrants, or (iii) to
accept the redemption price, which is likely to be less than the market value of
the Series A Warrants at the time of the redemption. See "Description of
Securities - Series A Warrants."

Investors May be Unable to Exercise Series A Warrants

For the life of the Series A Warrants, the Company will use its best
efforts to maintain an effective registration statement with the Securities and
Exchange Commission (the "Commission") relating to the shares of Common stock
issuable upon exercise of the Series A Warrants. If the Company is unable to
maintain a current registration statement, the Series A Warrant holders would be
unable to exercise the Series A Warrants and the Series A Warrants may become
valueless. Although in this Offering, the Underwriters have agreed to not
knowingly the sell Series A Warrants in any jurisdiction in which they are not
registered or otherwise qualified, a purchaser of the Series A Warrants may
relocate to a jurisdiction in which the shares of Common Stock underlying the
Series A Warrants are not so registered or qualified. In addition, a purchaser
of the Series A Warrants in the open market may reside in a jurisdiction in
which the shares of Common Stock underlying the Series A Warrants are not
registered or qualified. If the Company is unable or chooses not to register or
qualify or maintain the registration or qualification of the shares of Common
Stock underlying the Series A Warrants for sale in all of the states in which
the Series A Warrant holders reside, the Company would not permit such Series A
Warrants to be exercised and Series A Warrant holders in those states may have
no choice but either to sell their Series A Warrants or let them expire.
Prospective investors and other interested persons who wish to know whether or
not shares of Common Stock may be issued upon the exercise of Series A Warrants
by Series A Warrant holders in a particular state should consult with the
securities department of the state in question or send a written inquiry to the
Company. See "Description of Securities - Series A Warrants."

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No Public Market for Securities or Series A Warrants; Disclosure
Relating to Low-Priced Stocks

There is currently no public market for the Units, the Common Stock or
the Series A Warrants, and there can be no assurance that any trading market
will develop at the conclusion of this Offering. Therefore, investors in this
Offering may have difficulty selling their Securities, should they decide to do
so. In addition, if trading markets for the Securities do develop, there can be
no assurance that such markets will continue or that Securities purchased in
this Offering may be sold without incurring a loss. The Company has applied for
listing of the Securities on the Boston Stock Exchange and the NASDAQ Small-Cap
Market upon completion of this Offering. If, at any time, the Securities are not
listed on the Boston Stock Exchange and the NASDAQ Small-Cap Market, the
Company's Securities could become subject to the "penny stock rules" adopted
pursuant to Section 15 (g) of the Securities Exchange Act of 1934. The penny
stock rules apply, among other things, to companies (i) whose securities trade
at less than $5.00 per share, or (ii) which have tangible net worth of less than
$5,000,000 if operating less than three years ($2,000,000 if the company has
been operating for three or more years); or, (iii) average revenues of less than
$6,000,000 for the 3 most recently ended years. Such rules require, among other
things, that brokers who trade "penny stock" to persons other than "established
customers" complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning trading in
the security, including a risk disclosure document and quote information. Many
brokers have decided not to trade "penny stock" because of the requirements of
the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited.

See "Underwriting."

Influence on Voting by Officers and Directors

NEMC, a company controlled by the Company's officers and directors,
currently beneficially owns 90.5% of the Company's outstanding Common Stock.
Upon completion of this Offering, such shareholder will continue to own
beneficially approximately 47.6 % of the Common Stock. As a result, the
Company's officers and directors will continue to be able to substantially
impact the vote on most matters submitted to shareholders, including the
election of directors. See "Principal Stockholders."

Possible Adverse effects of Authorization of Preferred Stock; Change of
Control

The Company's Articles of Incorporation, as amended, authorize the
issuance of up to 100,000 shares of preferred stock. The board of directors,
without further action by the stockholders, is authorized to issue shares of
preferred stock in one or more series and to fix and determine as to any series,
any and all of the relative rights and preferences of shares in each series,
including without limitation, preferences, limitations or relative rights with
respect to redemption rights, conversion rights, voting rights, dividend rights
and preferences on liquidation. The issuance of preferred stock with voting and
conversion rights could materially adversely affect the voting power of the
holders of the Common Stock and may have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plans
to issue any additional shares of preferred stock and the Convertible Preferred
Stock which is currently outstanding will be converted into Common Stock in
connection with this Offering. The Notes also contain a limitation on a change
in control of the Company. See "Description of Securities-Preferred Stock" and
"Management's Discussion of Financial Condition and Results of Operations -
Secured Promissory Notes."

14
<PAGE>

USE OF PROCEEDS

The net proceeds of this Offering are anticipated to be approximately
$5,300,000, after deducting the Underwriters' discount, non-accountable expense
allowance and estimated offering expenses ($6,257,353 if the Underwriters
over-allotment option is exercised in full), assuming, in each case, an initial
public offering price of $6.50 per Unit. No value has been assigned to the
Series A Warrants included in the Units. The Company will not receive any
proceeds from the Units sold by the Selling Security Holders but would receive
an additional $79,853 attributable to the Over-allotment Option on the Selling
Security Holders' Units if the Over-allotment Option is exercised in full. The
Company intends to use the net proceeds of this Offering as follows:

Approximate Approximate
Amount Percent of
Proceeds

Gross Proceeds .................................. $6,500,000

Underwriting discounts & commissions ............ 650,000 10.0%
Offering expenses (1) ........................... 550,000 8.5
---------- -------
Net Proceeds .................................... $5,300,000 18.5%

Development and acquisition of cookie stores .... $4,200,000 64.6%
(2)
Repayment of Bridge Loan Notes (3) .............. 483,000 7.4
Payment of Interest on 12% Notes (4) ............ 99,300 1.5
Working capital and general corporate purpose ... 517,700 8.0
---------- -------
Totals .......................................... $5,300,000 100.0%
========== =======

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

(1) The Company has paid approximately $250,000 of such offering expenses
as of March 31, 1997.

(2) The Company intends to develop or acquire and operate additional Mrs.
Fields Cookie Stores at a cost per location of $200,000 to $300,000 per
cookie store and to expand into other concepts.

(3) Each Bridge Loan Note bears interest at the LIBOR rate and is payable
upon the earlier of nine (9) months from the date of issuance or closing of
the Offering. The proceeds of the debt were used for normal operating
expenses and to pay professional fees and expenses in connection with this
Offering.

(4) Represents accrued and unpaid interest through March 31, 1997, relating
to the Note holders who did not participate in the Exchange Offer.

The foregoing represents the best estimate by the Company of its use of
net proceeds based upon present planning and business conditions. The proposed
application of proceeds is subject to change as market and financial conditions
change. The Company, therefore, has reserved the right to vary its use of
proceeds in response to events which may arise and have not been anticipated.
Management has not definitively identified the uses of the net proceeds which
are allocated to working capital reserves. The net proceeds will ultimately be
applied as business opportunities present themselves.

Pending use, it is anticipated that the proceeds to the Company
resulting from this Offering will be primarily invested in short-term investment
grade obligations or bank certificates of deposit or other money market
instruments. It is anticipated that the net proceeds of this Offering will
satisfy the financial needs of the Company for 12 to 18 months following the
date of this Prospectus. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

15
<PAGE>

DIVIDEND POLICY

16
<PAGE>

DILUTION

As of December 29, 1996, the net tangible book value of the Company,
assuming the exchange of the Notes for Common Stock, the conversion of the
Convertible Preferred Stock and the issuance of Units to the Bridge Loan Note
holders, was ($1,189,228) or ($.38) per share of Common Stock. The net tangible
book value of the Company is the aggregate amount of its tangible assets less
its total liabilities. The net tangible book value per share represents the net
tangible book value of the Company, less total liabilities of the Company,
divided by the number of shares of Common Stock outstanding. The number of
shares outstanding used to calculate the net tangible book value per share takes
into account the 2,152,047 shares currently held by the existing shareholders,
the 593,945 shares to be issued to the Note holders, the 254,008 shares to be
issued to the Convertible Preferred Stock holders and the 91,000 shares to be
issued to the Bridge Loan Note holders. After giving effect to the sale of
1,000,000 Units by the Company (comprised of 1,000,000 shares of Common Stock
and 1,000,000 Series A Warrants) at an assumed offering price per Unit of $6.50,
and the application of the estimated net proceeds therefrom, the pro forma net
tangible book value per share would increase from ($.38) to $1.00. This
represents an immediate increase in net tangible book value of $1.38 per share
to current holders of Common Stock and an immediate dilution of $5.50 per share,
or 85%, to new investors, as illustrated in the following table.

Assumed public offering price per share $6.50

Net tangible book value per share before

this Offering $(.38)

Increase per share attributable to new

investors $1.38
-----

Adjusted net tangible book value per share after $1.00
-----

this Offering

Dilution per share to new investors $5. 50
======

Percentage dilution 85%
==

The following table summarizes (i) the number of shares of Common Stock
purchased from the Company to date, the total consideration paid, and the
average price per share paid by the current Common Stock holders, assuming
conversion of the Convertible Preferred Stock into Common Stock, the exchange of
77.6% of the Notes for Common Stock and issuance of 91,000 Units to the Bridge
Loan holders, and (ii) the number of shares of Common Stock to be purchased from
the Company and the total consideration to be paid by the new investors
purchasing shares of Common Stock in this Offering at an assumed initial public
offering price of $6.50 per share before deduction of the estimated underwriting
discounts and commissions and offering expenses payable by the Company:

Shares Purchased Total Consideration Average
Number Percent Amount Percent Per Share

<S> <C> <C> <C> <C> <C>
Current shareholders ..... 3,091,000 75.6% $ 5,415,700 45.5% $ 1.75
New investors ............ 1,000,000 24.4 6,500,000 54.5 $ 6.50
--------- ---- --------- ---- ----------
Total .............. 4,091,000 100.0% $11,915,700 100.0%
</TABLE>

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

The foregoing table excludes the effect of the exercise of (i) the
Underwriters' over-allotment option, (ii) the Underwriters' Warrants and (iii)
shares reserved for issuance pursuant to the Company's 1996 Stock Compensation
Plan. To the extent that the foregoing options or warrants may be exercised,
there will be further share dilution to investors in this Offering. See "The
Offering," "Risk Factors," "Management-1996 Stock Compensation Plan" and
"Underwriting."

17
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 29, 1996 and as adjusted, to give effect to (i) the sale of the
1,000,000 Units offered at a price of $6.50 per Unit and the application of the
estimated net proceeds therefrom, (ii) the conversion of 100% of the Company's
Convertible Preferred Stock, (iii) the exchange of 77.6% of the 12% Notes to
Common Stock, and (iv) 91,000 shares of Common Stock issued to the Bridge Loan
Note holders.

December 29, December 29,
1996 1996
Actual As Adjusted
------ -----------

Current liabilities:
Current maturities of
long-term debt ............ $4,288,063 $ 932,563
---------- -------
Total current liabilities...... 5,507,435 1,893,410
--------- ---------

Long-term debt:
Long-term debt less
current maturities plus
obligations relating to
closed stores (1).............. 521,721 521,721
------- -------
Redeemable Preferred Stock (2) 1,690,000 1,690,000
--------- ---------

Shareholders' equity (deficit):

Preferred Stock, no par value
27,500 shares authorized, 15,685
shares issued and outstanding and
no shares issued and outstanding,
as adjusted (3) 1,568,500 --

Common Stock, $.01 par value,
10,000,000 shares authorized,
2,152,047 shares issued and
091,000 shares nd 4,
as adjusted (3)tstanding, 21,520 40,910

Capital in excess of par 1,564,979 12,274,729
Unearned compensation expense... (127,000) (127,000)
Accumulated deficit............ (5,240,954) (6,645,682)
----------- -----------
Total stockholders' equity (deficit) (2,212,955) 5,542,957
----------- ---------
Total capitalization $5,506,201 $9,648,088
========== ==========

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

(1) Includes long-term lease obligations related to store closing. See Note 11
to Consolidated Financial Statements.

(2) Issued by Cookie Crumbs which was acquired by the Company in October, 1996.
(3) Excludes shares issuable upon the exercise of options and warrants
outstanding upon the date

of this Prospectus or to be issued as follows:(i) 1,091,000 shares issuable
upon the exercise of the Series A Warrants to be sold in this Offering;
(ii) up to 163,650 shares and 163,650 Series A Warrants to purchase 163,650
shares subject to the Underwriters' over-allotment option; (iii) 109,100
shares and 109,100 Series A Warrants to purchase 109,100 shares subject to
the Underwriters' Warrants; and (iv) 200,000 shares reserved for issuance
under the Company's 1996 Stock Compensation Plan. See "Management" and
"Underwriting."

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations for the Fiscal Year Ended December 29, 1996 Compared to
the Fiscal Year Ended December 31, 1995

At December 29, 1996 thirteen Mrs. Fields Cookie Stores were owned by the
Company. Five cookie stores were purchased in June 1995, six additional cookie
stores were purchased in October, 1995, and two more purchased in December,
1995. During 1996, a cookie store was built and became operational in July and
one cookie store was sold in October, 1996.

During the year ended December 29, 1996 three Hooters Restaurants were open
for the entire period and one restaurant was open a little over eight months
until it was closed in September, 1996. During the corresponding period in 1995,
three restaurants operated for the entire period and one restaurant was opened
in May and operated for approximately eight months.

The Company reported a net loss of $2,757,259 for the year ended December
29, 1996 and a net loss of $1,153,674 for the year ended December 31, 1995.
Significant factors influencing the results of operations include:

Sales were $8,551,033 for the fiscal year ended December 29, 1996 compared
to $7,730,956 for the corresponding period in 1995. This increase of
$820,077 reflects a $2,452,825 increase in sales from the Mrs Fields Cookie
Stores, primarily because the cookie stores were open a full year in 1996,
and a decline in sales of $1,632,748 from the Hooters Restaurants. Same
store sales for the restaurants declined $1,403,437 which management
believes was primarily due to a lack of funds to adequately promote and
advertise the restaurants. Management intends to utilize approximately
$75,000-$100,000 of the net proceeds of this Offering designated as working
capital for advertising and promotion of the restaurants to increase sales.

Cost of products sold was $2,454,078 for the fiscal year ended December 29,
1996 compared to $2,316,341 for the corresponding period in 1995. Cost of
products sold is directly related to sales (approximately 29% of sales in
1996 and 30% of sales in 1995). Cost of products sold for the cookie stores
increased $606,958 in 1996 while cost of products sold for the restaurants
declined $469,221 from 1995 reflecting decreased sales. As a percent of
sales, costs of products sold for the cookie stores are approximately 25%
compared to 31% for the restaurants.

Salaries and benefits were $2,472,022 (approximately 29% of sales) for the
fiscal year ended December 29, 1996 compared to $2,147,595 (approximately
28% of sales) for the corresponding period in 1995. This includes salaries
and wages for all restaurant and cookie store employees. This increase is
primarily due to the cookie stores being in operation for a full year in
1996 compared to a partial year in 1995.

Other operating costs were $2,911,454 for the fiscal year ended December
29, 1996 compared to $2,525,486 for the corresponding period in 1995
reflecting an increase of $385,968. Other operating costs include
promotions, advertising, office supplies, utilities, restaurant supplies,
outside services, rent, insurance, and royalties. Other operating costs from
the cookie stores increased $999,499 in 1996 while other operating costs for
the restaurants declined $613,531 in 1996. The decline in other operating
costs for the restaurants was not in proportion to the sales decline due to
the fixed nature of many of the items included in other operating costs.

Depreciation and amortization increased $223,698 in the fiscal year ended
December 29, 1996, compared to the comparable period in 1995. This increase
is primarily due to the cookie stores being in operation a full year in
1996.

Pre-opening costs declined from $153,334 in the fiscal year ended December
29, 1995 to zero in the comparable period of 1996. The new location added in
1996 did not result in pre-opening costs.

General and administrative expenses were $996,200 for the fiscal year ended
December 29, 1996 compared to $566,918 for the corresponding period in 1995.
General and administrative expenses, which consist of accounting related
costs, professional fees, travel, etc. increased primarily as a result of
the Company's infrastructure needed to support restaurant and cookie store
operations, legal fees and settlement of a lawsuit aggregating $145,000, and
$73,000 of compensation costs relating to stock options and contributed
services of officers.

19
<PAGE>

Franchise fee options of $145,000 were written off in the fiscal year ended
December 29, 1996. This was done due to the uncertainty regarding the
Company's rights to develop additional Hooters restaurants.

Provision for losses on leased property of $927,148 represents management's
estimate of the additional loss ($50,000) to be incurred on leased property
which the Company no longer plans to develop and closing expenses of
$877,148 related to a restaurant location which was closed in September,
1996. See Notes 10 and 11 to Consolidated Financial Statements.

Loss on impairment of asset is attributable to the cookie store that was
sold in October 1996.

Amortization of finance costs increased $206,831 in the fiscal year ended
December 29, 1996 compared to the comparable period in 1995. This increase
is primarily due to the amortization of the bridge loan financing costs and
commissions.

Financial Condition at December 29, 1996 as Compared to December 31, 1995

Cash decreased $240,085 to $534,072 from $774,157 at December 31, 1995. As
reflected in the Consolidated Statements of Cash Flows, this decrease is
primarily attributable to $580,195 used in operating activities and $204,300
used in investing activities partially offset by $544,410 provided by financing
activities. Investing activity consisted primarily of capital expenditures for
the construction of cookie stores. Cash flows from financing activities were
generated by the issuance of preferred stock, proceeds from the bridge loans,
and proceeds from the sale of Common Stock.

Accounts receivable decreased $67,599 to $3,137 at December 29, 1996 as
compared to $70,736 at December 31, 1995. This decrease is primarily due to a
$57,257 receivable from the Mrs. Fields Franchisor at December 31, 1995 which
was repaid in January 1996.

Inventory decreased $20,958 to $118,647 from $139,605 at December 31, 1995.
This decrease is primarily due to the closing of one Hooters Restaurant.

Assets available for sale at December 31, 1995 represents one Mrs. Fields
Cookie Store which was sold in October 1996. See Note 13 to the Consolidated
Financial Statements.

Leasehold improvements increased $126,871 to $1,898,818 from $1,771,947 at
December 31, 1995. This increase is primarily attributable to costs of $137,000
for a cookie store that opened in June 1996, $47,000 for a cookie store that was
remodeled in April, 1996 partially offset by the write-off of assets related to
the restaurant closed in 1996 of $70,000.

Equipment decreased $141,052 to $1,034,568 from $1,175,620 at December 31,
1995. This decrease is primarily due to the write off of assets of $189,000
related to the restaurant closing in September 1996 partially offset by $31,000
of new equipment for the cookie store that began operations in June 1996.

Initial public offering expenses increased to $240,408 at December 29, 1996
from zero at December 31, 1995. This increase is due to costs and expenses
related to this Offering.

Franchise costs, net of accumulated amortization decreased $248,926 to
$497,659 from $746,585 at December 31, 1995. This decrease is primarily due to
write offs of franchise fee options on undeveloped locations of $145,000, assets
of $75,000 written off due to the 1996 restaurant closing, and 1996 amortization
of $28,926.

Finance costs net of accumulated amortization decreased $72,494 to $309,740
at December 29, 1996 from $382,234 at December 31, 1995 due to amortization of
offering costs related to 12% Notes sold in 1994.

Goodwill, net of accumulated amortization decreased $60,430 to $839,242
from $899,672 at December 31, 1995. This decrease is due to 1996 amortization.

Bridge loan financing costs, net of accumulated amortization increased to
$434,646 at December 29, 1996 from zero at December 31, 1995. This increase is
due to bridge loan financing costs incurred during 1996 of $591,500 and
commissions of $49,977 offset by amortization of $206,831. See Note 2 to the
Consolidated Financial Statements.

20
<PAGE>

Current maturities of long-term debt increased $4,228,489 from $59,574 at
December 31, 1995 primarily due to the $3,700,000 of Notes and the Bridge Loan
Note financing of $483,000. The entire amount of the Notes has been classified
as current due to suspension of interest payments in 1996 and the Bridge Loan
Notes are repayable the earlier of this Offering becoming effective or nine
months from date of issuance. See Notes 2 and 18 to Consolidated Financial
Statements.

Due to parent increased $91,463 to $134,469 at December 29, 1996 as
compared to $43,006 at December 31, 1995. These amounts represent amounts due to
NEMC for ongoing rent and accounting services. See Note 8 to Consolidated
Financial Statements.

Accounts payable decreased $71,223 to $390,149 at December 29, 1996 as
compared to $461,372 at December 31, 1995. This decrease is primarily due to a
payable of $66,876 for sales tax at the restaurants at December 31, 1995 which
was paid in the first quarter of 1996.

Accrued liabilities increased $310,957 to $694,754 at December 29, 1996 as
compared to $383,797 at December 31, 1995. This increase reflects the closing of
a restaurant in September 1996, whereby the Company recorded a provision to
provide for the settlement with the landlord and all costs associated with the
closing of the site. The current portion of $157,000 is included in accrued
liabilities and the remaining store closing expenses of $393,000 represents the
long-term portion of the settlement. Accrued liabilities at December 29, 1996
also reflects legal fees and settlement of a lawsuit of approximately $100,000.
See Notes 11 and 19 to Consolidated Financial Statements.

As of December 29, 1996, $1,690,000 of Cookie Crumb's Preferred Stock had
been raised through a private placement. See Note 3 to Consolidated Financial
Statements.

As of December 29, 1996, $1,568,500 had been raised through a private
placement of the Company's Convertible Preferred Stock compared to $1,266,000 at
December 31, 1995. See Note 4 to Consolidated Financial Statements.

Capital in excess of par increased $969,456 to $1,564,979 at December 29,
1996 as compared to $595,523 at December 31, 1995. This increase is due to
$127,956 from the sale of 204,444 shares of Common Stock (see Note 16 to the
Consolidated Financial Statements), $150,000 of stock options granted in
November 1996, $100,000 of contributed services, and $591,500 of bridge loan
warrants See Notes 2,14 and 17 to Consolidated Financial Statements.

Unearned compensation expense increased $127,000 at December 29, 1996 from
zero at December 31, 1995. This amount represents the portion of stock option
compensation which has not been earned. At December 29, 1996, two periods of
compensation expense ($23,000) had been earned. See Note 17 to Consolidated
Financial Statements.

The Company's accumulated deficit was $5,240,954 at December 29, 1996
compared to $2,463,295 at December 31, 1995. The increase is primarily
attributable to the $2,757,259 net loss incurred.

Results of Operations for the Fiscal Year Ended December 31, 1995 Compared to
the Fiscal Year Ended December 25, 1994

At December 31, 1995 thirteen Mrs. Fields Cookie Stores were owned by the
Company. Five cookie stores were purchased in June, 1995, six additional cookie
stores were purchased in October, 1995, and two more purchased in December,
1995. There were no cookie stores open in 1994.

During the fiscal year ended December 31, 1995, three Hooters Restaurants
operated for the entire period and one restaurant was opened in May and operated
for approximately eight months. During 1994, one Hooters Restaurant was open for
eight months, another Hooters Restaurant was open three months, and a third
Hooters Restaurant was open for half a month.

The Company reported a net loss of $1,153,674 for the fiscal year ended
December 31, 1995 and a net loss of $830,663 for the fiscal year ended December
25, 1994. Significant factors influencing the results of operations include:

Sales were $7,730,956 for the fiscal year ended December 31, 1995 compared
to $2,501,273 for the corresponding period in 1994. This increase of
$5,229,683 reflects a full year of operations for three Hooters Restaurants
and a fourth open for half a year. In addition, four cookie stores were open
for six months, one cookie store was open for four months, six were open for
two and one-half months and two more cookie stores were open for one-half
month.

21
<PAGE>

Cost of products sold was $2,316,341 for the fiscal year ended December 31,
1995 compared to $771,374 for the corresponding period in 1994. Cost of
products sold is directly related to sales (approximately 30% of sales in
1995 and 31% of sales in 1994). This increase is due to additional cost of
goods sold of $330,968 for the cookie stores opened in 1995 while cost of
products sold for the restaurants increased $1,213,999 from 1994 reflecting
increased sales. As a percent of sales, costs of products sold for the
cookie stores are approximately 37% compared to 31% for the restaurants.

Salaries and benefits were $2,147,595 (approximately 28% of sales) for the
fiscal year ended December 31, 1995 compared to $615,021(approximately 25%
of sales) for the corresponding period in 1994. These amounts include
salaries and wages for all restaurant and cookie store employees. This
increase is primarily due to the cookie stores being opened in 1995 and a
full year of operations for three Hooters Restaurants and one-half year for
one Hooters Restaurant in 1995 compared to a partial year in 1994 for only
three Hooters restaurants.

Other operating costs were $2,525,486 for the fiscal year ended December
31, 1995 compared to $726,459 for the corresponding period in 1994
reflecting an increase of $1,799,027. Other operating costs include
promotions, advertising, office supplies, utilities, restaurant supplies,
outside services, rent, insurance, and royalties.

Depreciation and amortization increased $206,809 in the fiscal year ended
December 31, 1995, compared to the comparable period in 1994. This increase
reflects thirteen cookie stores being in operation for a partial year
compared to no cookie stores in operation in 1994.Also causing the increase
is a full year of operations for three Hooters Restaurants and one-half a
year of operation for one Hooters Restaurant in 1995 as compared to 1994
with three Hooters Restaurants open for a partial year in 1994.

Pre-opening costs decreased $398,468 to $153,334 in 1995 compared to
$551,802 for 1994. Pre-opening costs are costs incurred in connection with
the opening of new restaurants and are expensed as incurred. These costs
include payroll, hiring and training expenses, advertising and all other non
capitalized costs incurred prior to the opening. The 1995 pre-opening costs
related to the opening of one restaurant. The 1994 pre-opening costs related
to the opening of three restaurants.

General and administrative expenses were $566,918 for the year ended
December 31, 1995 compared to $264,361 for the corresponding period in 1994.
General and administrative expenses, which consist of accounting related
costs, professional fees, travel, etc. increased as a result of the
Company's infrastructure needed to support additional restaurant and cookie
store operations.

Provision for losses on leased property of $145,000 represents management's
estimate of the loss to be incurred on leased property which the Company no
longer plans to develop. See Note 10 to Consolidated Financial Statements.

Loss on impairment of asset in 1995 is attributable to the cookie store
that was sold in October 1996. See Note 13 to Consolidated Financial
Statements.

Amortization of finance costs increased to $72,493 in 1995 compared to
$49,226 for 1994. These costs represent the costs related to the issuance of
the senior notes. These costs are amortized to expense on a straight-line
method over a seven year period coinciding with the life of the Notes. The
1995 expense represents amortization for the entire year while the 1994
expense represents amortization from the date of issuance of the Notes
(April 1994).

Financial Condition at December 31, 1995 as Compared to December 25, 1994

Cash decreased $417,771 to $774,157 from $1,191,928 at December 25, 1994.
As reflected in the Statements of Cash Flows, this decrease is primarily
attributable to $161,193 used in operating activities and $2,749,896 used in
investing activities partially offset by $2,493,318 provided by financing
activities. Investing activity consisted primarily of capital expenditures for
the construction of one Hooters Restaurant and the acquisition of 13 Mrs. Fields
Cookie Stores. Cash flows from financing activities were generated primarily by
the issuance of Convertible Preferred Stock.

The Company received $100,000 during 1995 from a landlord for tenant
improvements. As a result, the receivable from lessor was zero at December 31,
1995.
22
<PAGE>

Accounts receivable increased $61,172 to $70,736 at December 31, 1995 as
compared to $9,564 at December 25, 1994. This increase is primarily due to a
receivable from the Mrs. Fields Franchisor associated with sales from the Flint
Mrs. Fields Cookie Store. Flint sales were deposited in the Mrs. Fields
Franchisor's bank account after the Company purchased the store and before they
had opened their own bank account.

Inventory decreased $41,526 to $139,605 from $181,131 at December 25, 1994.
The decrease reflects management's effort to reduce inventory.

Prepaid expenses increased $53,683 to $55,823 at December 31, 1995 as
compared to $2,140 at December 25, 1994. This increase is primarily due to
prepaid insurance and prepaid rents associated with the Hooters Restaurants.

Assets available for sale at December 31, 1995 represents one Mrs. Fields
Cookie Store which was sold in October 1996. See Note 13 to Consolidated
Financial Statements.

The difference in the number of restaurants and cookie stores open at the
end of each year accounts for the increases in leasehold improvements and
equipment partially offset by the allowance for loss of $145,000 for an
undeveloped leased property which the Company no longer plans to develop.
Leasehold improvements increased $764,532 during 1995 to $1,771,947 at December
31, 1995 as compared to $1,007,415 at December 25, 1994. Equipment increased
$572,056 to $1,175,620 at December 31, 1995 compared to $603,564 at December 24,
1994. See Note 10 to Consolidated Financial Statements.

Franchise costs, net of accumulated amortization increased $340,448 to
$746,585 from $406,137 at December 25, 1994. The increase is primarily due to
franchise fees paid in 1995 partially offset by amortization.

Finance costs net of accumulated amortization decreased $72,493 to $382,234
at December 31, 1995 from $454,727 at December 25, 1994 due to amortization of
offering costs related to the Notes sold in 1994.

Goodwill, increased to $899,672 at December 31, 1995 from zero at December
25, 1994. The Company has classified as goodwill the cost in excess of fair
value of the net assets of the cookie stores acquired in 1995.

Current maturities of long-term debt increased $36,231 from December 25,
1994 primarily due to an equipment lease related to the cookie stores acquired
in 1995.

Accounts payable increased $119,567 to $461,372 at December 31, 1995 as
compared to $341,805 at December 25, 1994. This increase is primarily due to
payables related to additional restaurant and cookie store locations.

Accrued liabilities increased $216,215 to $383,797 at December 31, 1995 as
compared to $167,582 at December 25, 1994. This increase is primarily due to
liabilities related to additional restaurant and cookie store locations and the
Convertible Preferred Stock offering.

As of December 31, 1995, $1,665,000 had been raised through a private
placement of Cookie Crumb's Preferred Stock. See Note 3 to the Consolidated
Financial Statements.

As of December 31, 1995, $1,266,000 had been raised through a private
placement of the Company's Convertible Preferred Stock. See Note 4 to the
Consolidated Financial Statements.

Capital in excess of par increased $67,163 to $595,523 at December 31, 1995
as compared to $528,360 at December 25, 1994. This increase is primarily due to
$50,000 of contributed services. See Note 14 to the Consolidated Financial
Statements.

The Company's accumulated deficit was $2,463,295 at December 31, 1995
compared to $880,663 at December 25, 1994. The increase is primarily
attributable to the $1,153,674 net loss incurred, issuance costs of $200,998
related to Cookie Crumb's Preferred Stock and costs of $212,960 related to the
sale of 12,660 shares of the Company's Preferred Stock.

23
<PAGE>

Liquidity and Capital Resources

The following is a summary of the Company's cash flow for the fiscal years
ended December 29, 1996 and December 31, 1995.

December 29, 1996 December 31, 1995
----------------- -----------------

Net Cash (used in) operating activities $(580,195) $(161,193)

Net Cash (used in) investing activities $(204,300) $(2,749,896)

Net Cash (used in) financing activities $(544,410) $(2,493,318)
--------- -----------

Net (decrease) in cash $(240,085) $(417,771)
========= =========

The Company's cash position decreased $240,085 during the fiscal year ended
December 29,1996 due to cash used in operating activities of $580,195 and cash
used in investing activities of $204,300 partially offset by cash provided by
financing activities of $544,410. Investing activity consisted primarily of
capital expenditures and construction of an additional cookie store. Cash flows
from financing activities were generated by the issuance of the Convertible
Preferred Stock, proceeds from the sale of Common Stock and proceeds from the
Bridge Loan Notes financing partially offset by the payments of long-term debt,
commissions and offering expenses.

The Company's cash position decreased $417,771 during the fiscal year ended
December 31, 1995 due to cash used in operating activities of $161,193 and cash
used in investing activities of $2,749,896 partially offset by cash provided by
financing activities of $2,493,318. Investing activity consisted primarily of
capital expenditures of $2,199,548 for the purchase of Mrs. Fields Cookie Stores
and the opening of a Hooters Restaurant, partially offset by the receipt of
$100,000 from a landlord as reimbursement for leasehold improvements in the
prior year. Cash flows from financing activities were generated primarily from
the issuance of preferred stock.

Future operations will be impacted by management's ability to improve sales
of existing locations and to add new locations or new concepts which maximize
sales opportunities. The Company is investigating ways to improve operating
results through additional advertising and promotions and attracting higher
skilled employees. With respect to existing locations, it may be necessary to
close those locations that do not generate sufficient cash flows as was done for
one location in October 1996. If additional locations are closed, the assets
will be written down and potential liabilities could result from long term lease
payments. Assuming management is successful in selling additional Common Stock,
there can be no assurance that the profitability of existing locations can be
improved and/or that profitable new locations can be obtained or new profitable
concepts identified and acquired.

The Company can operate with minimal or negative working capital. The
Company does not have significant accounts receivable or inventory and receives
several weeks of trade credit based on negotiated terms in purchasing food,
beverage and supplies. The majority of the Company's assets, principally
leaseholds, equipment, franchise fees, and other costs associated with the
opening of new sites, are long term in nature. The Company considers its
operating losses to be related to its initial startup and expansion into new
markets and believes that as the Company gains experience in each of its markets
and locations' operating losses will be diminished. Accordingly, the Company
considers its measurement of liquidity to be in terms of cash flow available for
operating activities and expansion.

The Company has financed its capital expenditures and operating cash
deficiencies primarily with the issue of secured promissory notes, the issue of
preferred stock, allowances received from landlords for restaurant remodeling
costs, and capitalized lease obligations. The Company has leased all of its
restaurant and cookie store locations. The Company's capital requirements relate
principally to the development and acquisition of new locations and, to a lesser
extent, the operations of existing locations.

24
<PAGE>

Restaurant Closing

During the third quarter of 1996, the Company closed a Hooters Restaurant
and entered into an agreement to vacate the lease. Under the terms of the
agreement, the Company surrendered to the landlord all leasehold improvements
and equipment housed at the site and will pay the landlord $4,750 per month from
August 1, 1996 through June 30, 2005. The Company accrued $427,148 in the first
quarter of 1996 and $450,000 in the second quarter of 1996 to provide $327,148
for the write-off of the net book value of the equipment, building improvements,
and franchise fee, $42,000 for miscellaneous expenses associated with closing
the store and vacating the lease and $508,000 for future payments to the
landlord.

Stock Split

In October 1996, the Company effected a 21,640 to 1 Common Stock split.

Sale of Common Stock

During August 1996, the Company issued 204,444 shares of Common Stock to
an independent investor for $130,000 to meet its needs. Such sale occurred prior
to any underwriting commitments in connection with the Company's initial public
offering and was the best price obtainable.

Acquisition of Cookie Crumbs, Inc.

In October 1996, the Company acquired for a nominal amount 100% of the
outstanding common stock of Cookie Crumbs, an Illinois corporation wholly owned
by an officer of the Company and an officer and owner of NEMC. Cookie Crumbs
operates six franchised Mrs. Fields Cookie Stores in Missouri and Michigan.

Since its inception in May 1995, Cookie Crumbs has financed its capital
requirements, which have consisted primarily of the acquisition of six
franchised Mrs. Fields Cookie Stores for approximately $1,300,000 from cash
flows provided from operations and by the issuance of participating redeemable
preferred stock (the "Cookie Crumbs Preferred Stock") for $1,488,252 net of
expenses.

The Cookie Crumbs Preferred Stock has no voting rights and a face value
of $1,690,000. Holders of the shares are entitled to receive, to the extent
declared by the board of directors of Cookie Crumbs, cumulative, non-compounded
10% (regular) dividends and non-cumulative participating dividends not to exceed
8%, equal in the aggregate to 10% of an amount equal to net income less regular
dividends. The Cookie Crumbs Preferred Stock dividends, both regular and
participating, rank senior to common stock dividends. As of the date of
acquisition there are no regular dividends in arrears.

Beginning in February 1998, the shares of Cookie Crumbs Preferred Stock
are redeemable in whole or in part at the option of Cookie Crumbs for an amount
equal to 103% of the face value of the shares plus all accrued and unpaid
dividends ("Liquidation Value"). Similarly, the shares are redeemable beginning
in February 1998, at the option of the shareholders during any fiscal year in
which Cookie Crumbs has net income in excess of required dividend distributions,
including cumulative unpaid regular dividends, for an amount equal to the
Liquidation Value thereof; provided, however, that Cookie Crumbs' obligation for
redemption shall be limited to 25% of its net income (adjusted as aforesaid) for
its prior year.

As of December 29, 1996, Cookie Crumbs had a stockholder's deficit of
$725,518. Accordingly, the Company will be unable to avail itself of the assets
and earnings (if any) of Cookie Crumbs through a common stock dividend until the

stockholder's deficit is alleviated by the accumulation of Cookie Crumbs
earnings and all preferred stock regular dividend arrearages are paid. Further,
if Cookie Crumbs' future earnings are inadequate, the Company may be required to
advance funds for working capital and capital improvement needs.

Secured Promissory Notes

The Notes were issued in May 1994 and mature in April 2001, bear
interest at the rate of 12% annually, are collateralized by all of the assets of
the Company, are entitled to receive 5% of the pre-tax profits of the Company
and may be prepaid at any time at 103% of face value. The Notes rank senior to
all existing and future unsecured indebtedness of the Company but provide that
the Company may issue additional debt instruments for the purpose of opening
additional Hooters Restaurants which debt will rank equal to the Notes. The
Notes contain certain restrictions on the payment of dividends, transactions
with affiliates, the creation of liens on Company assets senior to the Note
holders' security, interest, executive compensation and changes in control of
the Company. The Company is prohibited from entering into a merger,
consolidation or sale of substantially all of its assets unless any such sale of
assets results in the proceeds being reinvested in the development of additional
Hooters Restaurants or in partial payment of the Notes.

25
<PAGE>

On May 1, 1996 payment of interest on the Notes was suspended and at
March 31, 1997, accrued and unpaid interest on the Notes was $344,700. In March
1997, the Exchange Offer was accepted by holders of $2,872,500 principal amount
of Notes. As a result thereof, $2,872,500 principal amount of Notes and $344,700
of accrued interest at March 31,1997, will be canceled upon consummation of this
Offering and the issuance of 593,945 shares of Common Stock to the Note holders
who accepted the Exchange Offer. The balance of $99,300 of unpaid interest on
the Notes will be paid to the remaining Note holders upon approval of the Board
of Directors from the net proceeds of this Offering to cure the default under
the Notes. The $827,500 of Notes not exchanged will remain outstanding. The
Company will be required to make monthly interest payments at an annual rate of
approximately $99,300 until April 1998 and thereafter 36 equal monthly payments
of principal and interest until the Notes are paid in full. The ability of the
Company to make timely future principal and interest payments will depend on the
availability of funds from cash flow or other financing. There can be no
assurance that the Company will be able to make payments on the Notes as such
payments come due. Failure to make payments when due may cause an event of
default under the terms of the Notes, in which event the Note holders could
accelerate payment of principal and interest on the Notes and cause a
foreclosure and sale of assets sufficient to retire the indebtedness. See
"Cancellation of Debt; Conversion of Preferred stock; Bridge Loan Financing" and
Note 2 to Consolidated Financial Statements.

Exchange and repayment of the Notes will relieve the Company of future
annual interest payments of approximately $344,700, principal of $2,872,500, and
additional interest based upon pretax profits. Generally accepted accounting
principles require the Company to expense the previously unamortized finance
costs related to the Notes (estimated to be approximately $240,000) and the 20%
premium to the Note holders accepting the Exchange Offer (estimated to be
$643,000). Accordingly, these amounts will be expensed in the Company's
financial statements in the period in which this Offering is consummated.

Bridge Financing

From October 1996 through December 1996, the Company issued an aggregate
of $483,000 in Bridge Loan Notes to finance working capital needs and costs
associated with this Offering. The Bridge Loan Notes bear interest at the LIBOR
rate and are due upon the earlier of nine months from issuance or the close of
this Offering. The Company will utilize a portion of the net proceeds of this
Offering to repay the Bridge Loan Notes. See "Use of Proceeds."

The Company issued, as additional consideration to the Bridge Loan
lenders, warrants to acquire 91,000 shares of the Company's Common Stock to be
exercised and sold in conjunction with this Offering. In accordance with
generally accepted accounting principles, the fair market value of the stock
(estimated to be $591,500) will be expensed over the period from when the Bridge
Loan Note proceeds were received to the estimated date of this Offering. See
"Selling Security Holders."

Net Operating Loss Carry Forwards

The Company's results are included in NEMC's consolidated tax return.
Intercorporate tax allocation practices adopted by the Company and NEMC provide
that the tax benefit of the Company's losses are reflected in the Company's
financial statements and will be paid to the Company by NEMC under the following
conditions: (a) NEMC has received the benefit of such losses on a consolidated
basis, (b) the Company would otherwise be entitled to such benefits if the
Company were filing a separate tax return, and (c) the Company remains in the
consolidated tax group of NEMC.

As of December 29, 1996 the Company has generated net operating tax
losses of approximately $2,140,000, which have been or may be utilized by NEMC
pursuant to intercorporate tax allocation practices adopted by the Company and
NEMC. As result of this Offering, the Company will lose the benefit of the
$2,140,000 of tax losses because the Company will no longer be eligible for
inclusion in NEMC's consolidated tax return. However, following the completion
of this Offering, the Company will have approximately $1,330,000 of tax losses
which it may utilize until their expiration in 2011.

Going Concern

The ability of the Company to continue as a going concern is dependent
on several factors. The successful completion of this Offering is expected to
position the Company to continue as a going concern and to pursue its business
strategies.

As discussed above, the Company is currently in default of the
provisions of the Notes and unable to service the Notes in accordance with the
original terms. Further, the Bridge Loan Notes are subordinate to the Notes. If
this Offering is unsuccessful, the Company will remain in default on the Notes

and, in accordance with the default provisions, will be prohibited from repaying

the Bridge Loan Notes. In the event this Offering is unsuccessful, the Company
will seek alternate sources of equity or attempt to refinance or renegotiate its
debt obligations or it may be required to seek protection from creditors under
the Federal Bankruptcy Code.

26
<PAGE>

Future Liquidity and Capital Requirements

Management anticipates that upon the completion of this Offering, cash
flows from operating activities will improve significantly due to: (i) a
substantial decrease in interest expense as a result of the Exchange Offer, (ii)
improved results from a planned increase in advertising and promotional activity
in certain markets, (iii) the addition of new Cookie Store locations, and (iv)
the sale of locations whose operating results do not generate adequate returns.

The Company will utilize a portion of the net proceeds of this Offering
to continue expansion of the Company's operations. The Company plans to expend
approximately $4.2 million annually to add additional Cookie Store franchise
locations, existing or new, in each of the next three years. The Company
currently has no commitments for future capital expenditures. Additional
development and expansion will be financed through cash flow from operations and
other forms of financing such as the sale of additional equity (including,
potentially, Common Stock issued in connection with the Underwriter's Warrants
and the Series A Warrants offered hereby), debt securities, capital leases, and
other credit facilities. There can be no assurances that such financing will be
available on terms acceptable or favorable to the Company. See "Use of
Proceeds," "Business and Properties-Restaurant Economics--Development of the
Cookie Stores," and "Litigation."

Seasonality and Quarterly Results
The Company's Mrs. Fields Cookie Stores are located in regional shopping
malls and accordingly generally experience higher revenues and profits during
peak shopping months in the fourth quarter. The Company's Hooters Restaurants
are highly impacted by regional differences in weather, promotional activity and
tourist and convention traffic, The first quarter includes 16 weeks of
operations, compared with 12 weeks for each of the last three quarters.
Consequently, quarter-to-quarter comparisons of the Company's results of
operations may not be meaningful, and results for any quarter are not
necessarily indicative of the actual results for a full fiscal year.

Impact of Inflation

The primary inflationary factors affecting the Company's operations
include food and beverage and labor costs. A large number of the Company's
personnel are paid at the federally established minimum wage level and,
accordingly, changes in such wage level affect the Company's labor costs. The
minimum wage was increased effective October 1, 1996. The Company estimates that
at the current level of operations the increase will increase wages $10,000 in
1996 and $30,000 in 1997. Although food and beverage price increases may offset
the effect of the minimum wage, there can be no assurance that this will be the
case. In addition most of the Company's leases require the Company to pay taxes,

repairs, and utilities, costs which are subject to inflationary pressures. The

Company believes recent low inflation in its principal market areas have
contributed to stable food, beverage, and labor costs in recent years. There is
no assurance that low inflation will continue or that the Company will have the
ability to control costs in the future.

27
<PAGE>

BUSINESS AND PROPERTIES

General
The Company is engaged in the ownership, operation and management of
franchised Hooters Restaurants and Mrs. Fields Cookie Stores. The Company
currently owns, operates and manages three Hooters Restaurants in Madison,
Wisconsin and San Diego, California and 13 Mrs. Fields Cookie Stores in
Missouri, Michigan and Minnesota.

The Company's Hooters Restaurants are franchised businesses which offer
casual dining using a limited, moderately priced menu that features chicken
wings, seafood, salads and sandwich type items. The Company's Mrs. Fields Cookie
Stores are franchised businesses which offer and sell a variety of specially
prepared food items including, but not limited to, cookies, brownies, muffins
and beverages. The Company operates its Restaurants and Cookie Stores pursuant
to specified standards established by the franchisors. The Company believes that
the uniform operating standards of the franchisors facilitate the efficiency of
the Company's Hooters Restaurants and Mrs. Fields Cookie Stores and afford the
Company significant benefits, including the brand-name recognition and goodwill
associated with the franchisors.

The Company opened its first Hooters Restaurant in Madison, Wisconsin in
April 1994. The Company opened three additional Hooters Restaurants, all in San

Diego, California, between September 1994 and May 1995, one of which was

subsequently closed. In December 1995, the Company purchased an existing Mrs.
Fields Cookie Store in Flint, Michigan from the Mrs. Fields Franchisor and in
January 1996, acquired from an affiliate of the Company six additional
franchised Mrs. Fields Cookie Stores. In October 1996, the Company acquired 100%
of the common stock of Cookie Crumbs which owns six additional Mrs. Fields
Cookie Stores. Under its existing agreements with the Mrs. Fields Franchisor,
the Company intends to acquire an unlimited number of new or existing Mrs.

Fields Cookie Stores. It is unlikely that the Company will open any new Hooters
Restaurants and may elect to sell its existing Hooters locations.

The Company's objective is to develop or acquire a significant number of
franchised units in the Mrs. Fields concept and to create economies of scale in
management, personnel and administration. To achieve this objective, the
Company's strategy will be to (i) capitalize on the brand-name recognition and
goodwill associated with the "Mrs. Fields" name; (ii) expand the Company's Mrs.
Fields operations through the development of additional franchised units; and
(iii) hire and train qualified management personnel to assure compliance with
its franchise obligations, continuity of management and efficiency of
operations. Management will also research other concepts which will become part

of the future strategy of the Company's ongoing plans for expansion. In this
connection, the Company has had preliminary discussions with a micro brewery
chain with respect to its acquisition by the Company. No agreement has been
reached and there can be no assurance that the Company will be able to
consummate the transaction or that, if consummated, the micro brewery chain
would be profitable.

THE HOOTERS RESTAURANTS

The Hooters Franchisor

The first Hooters restaurant was opened in Clearwater, Florida in
October 1983 by Hooters, Inc. ("Hooters Florida"). Hooters Florida operates ten
Hooters restaurants in Florida and Illinois. Hooters Florida owns certain
trademarks, service marks and other property, including the name. Pursuant to an
exclusive license agreement dated July 21, 1984 and subsequently amended with
Hooters Florida, the Hooters Franchisor has obtained the right to use on a
perpetual basis certain trademarks, service marks and other property in
connection with the operations of the Hooters restaurants and the "Hooters
System". The "Hooters System" features a distinctive exterior and interior
restaurant design, trade dress, decor and color scheme; uniform standards,
specifications and procedures for operations, procedures for quality control;
training and ongoing operational assistance, and advertising and promotional
programs.

The Hooters Franchisor began franchising the sale of Hooters restaurants
in 1988. As of October 1996, there were 183 operating Hooters restaurants, of
which 126 are operated by franchisees and 57 are operated by the Hooters
Franchisor. During the three year period ended December 31, 1996, 6 franchises
were reacquired by the Hooters Franchisor and were canceled or terminated by the
Hooters Franchisor.

Material Terms of the Hooters Franchise Agreement

Each existing Hooters Restaurant is subject to a franchise agreement with
the Hooters Franchisor. Under the franchise agreement, the franchisee is granted
the right, license and privilege to open and operate a Hooters Restaurant and to
use the Hooters proprietary trademark. The term of the franchise agreement is 20
years with no provision for renewal. The franchisor is obligated to provide an
approved supplier list, a management training program and assistance in training
hourly employees and other assistance, including advertising and promotional
plans, merchandising and marketing advice as may be requested by the franchisee.
28
<PAGE>

The franchisor also must provide all the requirements for a standardized system
for accounting, cost control and inventory control. The franchisee is required
to pay a $75,000 franchise fee upon execution of the franchise agreement, a 6%
royalty fee on gross sales of the restaurant and is required to spend a minimum
of three percent of gross sales of the restaurant on local advertising and
promotion, subject to approval of the franchisor. If the franchisor establishes
a local advertising cooperative within the franchisee's area of operation, the
franchisee must contribute one-third of the foregoing three percent to the local
advertising cooperative. The franchisee must also pay the franchisor a national
advertising fee of one percent of gross sales.

The franchisee is required to purchase equipment, fixtures, furnishings,
signs, supplies and other products and materials required for the operation of
the restaurant solely from suppliers, manufacturers, distributors and other
sources approved by the franchisor. The franchisor has the right to inspect the
premises at any reasonable time to insure that franchisor is in compliance with
the franchise agreement. The franchisee is prohibited from using the premises
for any purpose other than the operation of a Hooters Restaurant and not engage
in any trade or practice that would be harmful to the goodwill or reflect
unfavorably on the reputation of the franchisee or the franchisor. The
franchisee must operate the restaurant strictly in accordance with the
trademarks and manuals provided by the franchisor and keep all confidential
information included in the manual provided to the franchisor relating to the
operation of a Hooters Restaurant. The franchisee must adhere to accounting and
reporting procedures established by the franchisor and must purchase accounting
and reporting equipment as required by the franchisor. The franchisor has the
right to examine the books records and tax returns of the franchisee's business
at any reasonable time. A transfer of ownership in the franchise agreement, or
in the franchisee is subject to approval of the franchisor. This Offering may be
considered a transfer of control of the franchisee which requires the consent of
the Hooters Franchisor. The Hooters Franchisor has not given its consent to this
Offering and, under the terms of the franchise agreement may have the right to
terminate the Company's franchise. In the event of a proposed transfer in
interest in a franchisee, the franchisor shall has the right of first refusal to
purchase the interest so offered on the same terms and conditions offered by the
third party. The franchisee is required to indemnify and hold harmless the
franchisor from all losses and expenses incurred in connection with any action,
suit or proceeding or settlement arising out of the franchisee's construction,
management and operation of the franchised restaurant. In the event of a default
under the franchise agreement on the part of the franchisee, the franchisor may
terminate the franchise agreement and the franchisee's right to operate the
Hooters Restaurant licensed thereunder. The franchisor is not required to
purchase the restaurant but has the right to purchase the assets thereof at the
fair market value as determined by an independent appraiser.

The Hooters Restaurants
General. The Company's Hooters Restaurants offer casual dining using a
limited, moderately-priced menu that features chicken wings, seafood, salads,
and sandwich type items. Although the Company's Hooters Restaurants attract a
variety of patrons, the concept of the restaurant is targeted toward young
working and professional people interested in a beach or neighborhood restaurant
atmosphere.

Design and Layout. The exterior of the Hooters Restaurants developed by
the Company are of a rustic design trimmed with Christmas lights. The Company's
restaurants are located in highly visible and high-traffic commercial areas and
in outdoor "strip mall" locations. The size of the Company's Hooters Restaurants
range from 4,500 to 6,500 square feet. The interior features a 1950s-style
jukebox, business advertising signs, highway-style signs, sports memorabilia
from local or area teams and an open-view grill/food preparation area. The
female waitstaff serves customers wearing cutoff T-shirts, tank tops and orange
jogging shorts. The dining and bar areas seat generally between 140 and 200
people depending upon the size of the restaurant and the layout is flexible,
permitting tables to be rearranged to accommodate customer demand. To complement
the overall design and dining experience, certain of the Company's Hooters
Restaurants provide separate areas with pool tables and outdoor seating.
Television sets throughout the bar area allow customers to watch sporting and
other special events.

Menu and Pricing. The typical menu items in the Company's Hooters
Restaurants include chicken wings, hamburgers, chicken sandwiches, grilled ham
and cheese sandwiches, Philly cheesesteak sandwiches, steak sandwiches, hot
dogs, garden salads, chicken crab legs, oyster roasts, steamed clams, fish
sandwiches, clam chowder, chili and raw oysters. Alcoholic beverages are limited
to beer, wine and champagne.

The average menu prices are $5.50 for sandwiches, $5.25 for 10 chicken
wings, $5.00 for salads and $10.00 for seafood items.

Customers. The Company believes that its Hooters Restaurants generally
appeal to a wide range of customers from throughout the metropolitan areas where
the Restaurants are located. However, the concept of the Restaurant targets
young working and professional people interested in a beach or neighborhood
restaurant atmosphere. The Restaurants compete for customers with casual dining
restaurants operated independently and by national, regional and local chains,
particularly those featuring female sex appeal. The Company's Restaurants are
typically open every day during the hours from 11:00 a.m. to 12:00 midnight

29
<PAGE>

Monday through Thursday, 11:00 a.m. to 1:00 a.m. Friday and Saturday and from
12:00 p.m. to 10:00 p.m. on Sundays, except Thanksgiving and Christmas.

Sales and Marketing. Pursuant to the Company's franchise agreements with
the Hooters Franchisor, the Company is obligated to spend during the term of the
franchise agreements, three percent (3%) of "gross sales" from each Restaurant
on local advertising and promotion endeavors. "Gross sales" includes all revenue
(other than revenues from any sales taxes or other add on taxes collected from
customers) from the sale of all products and performance of services at each
Restaurant, including insurance proceeds and/or condemnation awards for loss of
sales, profit or business. In addition to spending three percent on marketing,
the Company is required to contribute one percent (1%) of "gross sales" of each
of its Hooters Restaurants to a national advertising fund established by the
Hooters Franchisor for advertising and promotion of Hooters restaurants. This
fund is used to maximize general public recognition of the Hooters name.

Generally, each of the Company's Hooters Restaurant is staffed with one
full-time promotions manager who directs the local marketing effort for that
Restaurant. Local marketing consists of a combination of radio and newspaper
advertisements, billboard displays, charity and sports events and local
promotions.

The Company's Hooters Restaurants have a section located near the
entrance which sells merchandise, including "T-shirts," sweat shirts, baseball
caps and other casual clothing bearing the Hooters logo.

Restaurant Locations and Expansion Plans

The Company currently operates three Hooters Restaurants and has paid
the Hooters Franchisor $145,000 (including an additional $65,000 paid for the
Milwaukee, Wisconsin location) for options to open 8 additional Hooters
Restaurants in California and Wisconsin. Under the terms of addenda to the
franchise agreements, the options to open additional restaurants have lapsed and
the Hooters Franchisor has advised the Company that it will not allow the
Company to build additional restaurants under such options. The Company may
therefore elect to sell its existing Hooters Restaurants. If the Company does
not, or is unable to, sell its existing Hooters Restaurants, the Hooters
Franchisor may have the ability under the franchise agreement to terminate the
Company's right to operate the restaurants as Hooters Restaurants, in which case
it will be dependent upon the operations of its existing and future Mrs. Fields
Cookie Stores and expansion into other lines of business. Expansion may include
the acquisition of a micro brewery with which the Company has had preliminary
discussions. There can be no assurance that the Company will consummate the
acquisition of the micro brewery or, if consummated, that the micro brewery will
be profitable. See "Risk Factors Inability to Open Additional Hooters
Restaurants and Mrs. Fields Cookie Stores Within Required Time Limits" and " -
Hooters Franchise Agreements."

30
<PAGE>

The following table sets forth data regarding the Company's existing
restaurant locations.
<TABLE>

======================== -------------- ----------------- --------------- ===============
<CAPTION>

Restaurant Opening Date Annual Basic Approximate Lease
Rent Square Feet Expiration(3)
======================== -------------- ----------------- --------------- ===============
<S> <C> <C> <C> <C>
Madison Restaurant(1) April 1994 $42,497 6,500 sq. ft. October 2003
6654 Mineral Point Road increasing to
Madison, Wisconsin $59,496.
53705

======================== -------------- ----------------- --------------- ===============
Gaslamp Restaurant(2) September $90,000 6,600 sq. ft. September 1999
410 Market Street 1994 increasing to
San Diego, California $105,288.
92101

======================== -------------- ----------------- --------------- ===============
Mission Valley December 1994 $86,580 subject 5,550 sq. ft. November 1999
Restaurant(2) to increase
1400 Cimo De La Reina based on CPI
San Diego, California adjustment.
92108

======================== ============== ================= =============== ===============
</TABLE>

(1) The lessee of this Restaurant is Butterwings of Wisconsin, Inc., a
wholly-owned subsidiary of the Company.
(2) The lessee of these Restaurants is Butterwings of California, Inc., a
wholly-owned subsidiary of the Company. The lease agreement for the Gaslamp
Restaurant is guaranteed by New Era Management Corporation, the principal
shareholder of the Company.

(3) Does not include renewal options. See "--Properties."

Restaurant Economics. The major sources of revenue from the operations
of the Company's Hooters Restaurants are from food and beverage sales. The
Company also realizes revenue from the sale of merchandise, including T-shirts.
For the year ended December 29, 1996, food contributed approximately 61% to
gross sales; beverages contributed approximately 30% to gross sales; and
merchandise contributed approximately 9% to gross sales. The gross profit
percentages on food sales, beverage sales and merchandise sales were
approximately 64%, 74% and 54% respectively, during the same period.

The costs of developing and opening the Company's four Hooters
Restaurants have ranged from $823,308 for the El Cajon Restaurant (which was
closed in September 1996) to $956,413 for the Gaslamp Restaurant, exclusive of
allowances for tenant improvements which were paid by the landlords under
particular lease agreements.

Restaurant Operations and Management

Each of the Company's Hooters Restaurants employs approximately 35-50
part-time female waitstaff who serve food and beverages and approximately 10-20
part-time kitchen staff who are responsible for all food preparation.

Generally, each of the Company's Hooters Restaurants is managed by the
following persons: a general manager, assistant managers, kitchen managers and
promotions managers. The general manager oversees all operational and
administrative aspects of the Company's Hooters Restaurant including food and
beverage service, food preparation and promotions. The general manager also
supervises the kitchen manager, assistant manager and promotions manager.
Currently, the Company's general managers are employees promoted from assistant
general manager positions who generally have had other restaurant experience.
The Company provides management training through classroom seminars sponsored by
the Hooters Franchisor or through an in-store "on the job" training program.

The assistant manager is responsible for customer service, inventory
control, preparation of necessary reports and forms, maintenance and cleaning of
equipment, scheduling labor and compliance with federal wage and labor laws.
Generally, the assistant managers hired by the Company have prior restaurant or
retail experience.

The kitchen manager is responsible for supervising all food preparation
by the kitchen staff. The kitchen manager's duty is to ensure that the methods
of food preparation, weight and dimensions of products served and standards of
cleanliness, health and sanitation conform to the franchisor's standards and
specifications as well as in accordance with all applicable health standards.

The promotions manager's duty is to create and conduct marketing,
advertising and promotional campaigns to promote and exemplify the Hooters
concept. The promotions manager is responsible for preparing promotional
budgets, conducting promotional training sessions, organizing and overseeing the
merchandising of promotional items sold at a Hooters Restaurant. The promotions
manager is also responsible for making direct sales calls, attending community
meetings and meeting with the media.

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Purchasing Operations

The Company's management negotiates directly with suppliers for key food
and beverage products to assure uniform quality and freshness of food products
in its restaurants, and to obtain competitive prices. Food products and related
supplies used by the Company's restaurants are purchased from specified food
producers, independent wholesale food distributors and manufacturers.
See "-Products, Inventory and Equipment."

Competition
The restaurant industry is highly competitive. The Company's Hooters
Restaurants compete with other casual dining restaurants and with restaurants
and bars featuring female sex appeal on the basis of service, quality and
atmosphere, among other factors. Various casual dining restaurants which have
established name brand recognition and revolve around themes, include, among
others: Lone Star Steakhouse & Saloon, Hard Rock Cafe, TGIFridays, Bennigans,
Planet Hollywood, Houlihans and Outback Steakhouse. Many competitors for the
Company's Hooters Restaurants are well established and have substantially
greater financial and other resources than does the Company. The Company's
Hooters Restaurants operate in the casual dining segment of the restaurant
industry. Casual dining generally refers to a type of restaurant that falls in
between fast-food and fine dining establishments and typically feature a full
range of moderately priced foods and full waiter and bar service.

The restaurant industry generally is affected by changes in consumer
tastes, national, regional or local economic conditions, demographic trends,
traffic patterns and the type, number and location of competing restaurants. The
Company believes its ability to compete effectively will continue to depend upon
its ability to offer high quality menu items with superior service in
distinctive dining environments. See "Risk Factors - Risks of Business."

Government Regulations

Approximately 30% of revenues of the Company's Hooters Restaurants are
derived from the sale of beer and wine. The Company is required to operate in
compliance with federal licensing requirements imposed by the Bureau of Alcohol,
Tobacco and Firearms of the United States Department of Treasury, as well as the
licensing requirements of states and municipalities where its restaurants are
located. Failure to comply with federal, state or local regulations could cause
the Company's licenses to be revoked and force it to cease the sale of alcoholic
beverages at its restaurants. Typically licenses must be renewed annually and
may be revoked or suspended for cause at any time. While the Company has not
experienced and does not anticipate any significant problems in renewing
required licenses, permits or approvals, any difficulties, delays or failures in
such renewals would adversely affect the restaurant operations because the
restaurants depend, to a significant extent on the ability to serve alcoholic
beverages. In addition, changes in legislation, regulations or administrative
interpretation of liquor laws in a jurisdiction may prevent or hinder the
Company's operations in that jurisdiction. Management believes the Company is
operating in substantial compliance with applicable laws and regulations
governing its operations. Additionally, the Company may be subject in certain
states to "dram-shop" statutes, which generally provide a person who is injured
by an intoxicated person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated person. The Company
carries liquor liability insurance as part of its comprehensive general
liability insurance in all states in which it operates.

The restaurant and fast food industry is subject to numerous federal,
state and local government regulations, including those relating to the
preparation and sale of food and to building and zoning requirements. The
Company is subject to regulation by air and water pollution control divisions of
the environmental protection agencies of the United States and by the various
states and municipalities in which its Restaurants and Cookie Stores are
located. The Company is also subject to laws governing its relationship with
employees, including minimum wage requirements, overtime, working and safety
conditions and citizenship requirements. Restaurant operating costs are affected
by increases in the minimum hourly wage, unemployment tax rates, sales taxes and
similar matters, such as any government mandated health insurance, over which
the Company has no control. Management believes the Company is operating in
substantial compliance with applicable laws and regulations governing its
operations. See "Business - Government Regulations."

Employees

In connection with its Hooters Restaurants, the Company employs
approximately 133 persons, of which 12 are full-time and 121 are part-time. The
Company believes that relations with its employees are good.

Insurance and Indemnification

The Company's franchise agreements with the Hooters Franchisor and the
lease agreements for the Restaurants require the Company to procure and maintain
an insurance policy insuring against any demand or claim with respect to
personal injury, death or property damage or any loss, liability, or expense

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whatsoever arising or occurring upon or in connection with the restaurants in
amounts as specified in the franchise agreements and the lease agreements. In
addition, the Company is obligated to indemnify and hold harmless the Hooters
Franchisor, Hooters Florida, its corporate affiliates, successors and assigns
and the respective directors, officers, employees, agents and representatives of
each from all losses and expenses incurred in connection with any suit, action
or claim arising out of the Company's renovation, management and operation of
the Restaurants. The Company currently retains a $2,000,000 aggregate liability
policy for each state in hich it has a restaurant or cookie store as well as a
$5,000,000 umbrella policy providing excess liability coverage. In addition, the
Company retains coverage for contents in the amount of $3,125,500. These
policies also provide business interruption coverage for the actual losss
sustained for up to twelve months. The Company also maintains workers
compensation insurance of $500,000 per illness or accident. The umbrella policy
also provides excess coverage above workers compensation limits. The Company
maintains insurance that it believes is adequate to cover its liabilities and
risks.

Products, Inventory and Equipment

The Company is obligated to prepare and offer to patrons certain menu
items prepared and sold by Eastern Foods, Inc., a company which is affiliated
with the Hooters Franchisor. These items include certain salad dressings, the
breading mix for the chicken wings, and the dipping sauce served with the
chicken wings at the Company' Restaurants. The Company has the option of either
purchasing these items from Eastern Foods, Inc. or preparing and making the
items according to the confidential recipes provided by the Hooters Franchisor.

Certain novelty items, such as Hooters waitress dolls and Hooters
calendars, may only be purchased from Hooters Florida or a licensee. A
subsidiary of the Hooters Franchisor, Hooters Magazine, Inc., publishes Hooters
Magazine. The Company may sell the magazine at its Hooters Restaurants. There
are no alternative sources of supply for these merchandise items and the
magazine. Due to exclusive distribution rights of certain beer distributors, all
beer must be purchased from particular suppliers depending on the location of a
particular Hooters Restaurant.

Pursuant to the Company's franchise agreements with the Hooters
Franchisor, the Company is required to maintain in sufficient supply, and use at
all times, only such products, materials and supplies as conform to the Hooters
Franchisor's standards and specifications. In addition, the Hooters Franchisor
will have the right to require that certain equipment, fixtures, non-food
inventory, furnishings, signs, supplies and other products and materials be
purchased from suppliers approved by the Hooters Franchisor. Any purchases of
products from an unapproved supplier is subject to the written consent of the
Hooters Franchisor.

Inventory consists of food, beverages, merchandise and paper products.
In accordance with its franchise agreements with the Hooters Franchisor, the
Company is required to maintain an inventory level sufficient to operate the
Hooters Restaurants at full capacity. Food and supplies are shipped directly to
the Hooters Restaurants. The Company does not maintain a central product
warehouse. The Company believes that alternative sources of inventory items are
available (subject to approval by the Hooters Franchisor) if the Company's
current suppliers are unable to provide adequate quantities of such items. The
Company has not experienced any significant delays in receiving any inventory
items.

Administrative and Accounting Systems

All of the Company's Hooters Restaurants use Panasonic 7500 point of
sale machines. The Panasonic register is widely used in the restaurant industry
and is used and recommended by the Hooters Franchisor. The operational features
of this machine include programmable keyboard with preset pricing, precheck and
bar workstations, unique employee numbers for ringing sales, keylock security,
check tracking and comprehensive reporting (time and attendance reporting, sales
reporting, etc.) The data collected by the register is transmitted daily to the
Company's corporate offices via a modem and prepackaged polling software called
PanPoll. The information polled (sales and hours data) is distributed to
management for review and analysis.

The Company's Hooters Restaurants are supported by a centralized
accounts payable, payroll and accounting department. The Company operates on a
personal computer network and utilizes a variety of prepackaged software
packages. The Company uses the General Ledger and Accounts Payable modules of a
package called MAS90. The Company's fixed assets are maintained by a software
package called BNA and investor related data is tracked by Equinet. Payroll is
prepared by the corporate offices and is processed by an independent payroll
service. The Company also uses Lotus, WordPerfect, Excel and Word. See "Certain
Relationships and Related Transactions" and "Note 8 to Consolidated Financial
Statements."

Hooters Franchise Agreements

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which option fees were to be credited against the $75,000 franchise fee payable
for each new restaurant. Butterwings/Wisconsin entered into a franchise
agreement dated October 31, 1993 and an option addendum thereto pursuant to
which Butterwings/Wisconsin was granted exclusive options to establish and
operate four additional Hooters Restaurants in the cities of Madison and
Milwaukee, Wisconsin by July 31, 1996. Butterwings/California also entered into
a franchise agreement dated October 31, 1993 and an option addendum thereto
pursuant to which Butterwings/California was granted the exclusive right to
operate a Hooters Restaurant in San Diego County and exclusive options to
establish and operate nine additional Hooters Restaurants in San Diego County,
two of which have been exercised. In October 1995, the option addendum was
modified at the request of the Company to reduce the option to establish and
operate Hooters Restaurants in San Diego County by three. Pursuant to such
option, the remaining four Hooters Restaurants in the territory were required to
be open by July 31, 1996.

The Company has been unable to complete the development of such
additional Hooters Restaurants within the time frames set forth in option
addenda to the Hooters franchise agreements and under the terms thereof, the
options have lapsed and the option fees paid by the Company may be retained by
the Hooters Franchisor. The Hooters Franchisor has advised the Company that it
does not intend to renew the options. Because the Hooters Franchisor has not
consented to this Offering, it may have the right to terminate the Company's
franchise to operate the Hooters Restaurants.

Since the Company is unlikely to develop additional Hooters Restaurants,
it may elect to sell its existing Hooters Restaurants. In such event, the
Company will be dependent on the operations of its present and future Mrs.
Fields Cookie Stores owned and to be developed by the Company and may expand
into other fields, including the acquisition of a micro brewery with which the
Company has had preliminary discussions. There is no definitive agreement for
the acquisition of the micro brewery chain and no assurance can be given that
the acquisition can be or will be made. See "-The Hooters
Restaurants--Restaurant Locations and Expansion Plans."

Franchise and Royalty Fees

Pursuant to its franchise agreements with the Hooters Franchisor, the
Company has paid franchise fees in the amount of $75,000 for each of five
Hooters Restaurants (including one Restaurant in Milwaukee, Wisconsin for which
a suitable site was not located) for a total of $375,000. The Company has also
paid $70,000 to secure option rights to develop seven additional Hooters
Restaurants in its Madison and Milwaukee, Wisconsin and San Diego, California
territories. Option fees may be retained by the Hooters Franchisor in the event
the Company's rights under the option addenda are terminated. See "Note 12 to
Consolidated Financial Statements."

During the term of each franchise agreement, the Company is required to
pay monthly to the Hooters Franchisor a continuing royalty fee of six percent
(6%) of the "gross sales" of each of its Hooters Restaurant. "Gross sales"
includes all revenue (other than revenues from any sales taxes or other add on
taxes collected from customers) from the sale of all products and performance of
services at each restaurant including insurance proceeds and/or condemnation
awards for loss of sales, profits or business. See "Summary of Hooters Franchise
Agreements."

Properties

Butterwings/Wisconsin has entered into a lease agreement for its Hooters
Restaurant in Madison, Wisconsin under a noncancelable 10-year lease expiring
October 31, 2003. Butterwings/Wisconsin has the option at the end of the initial
lease term to extend the lease for two additional 5-year periods. The lease
contains escalation clauses which provide for increases in base rental to cover
increases in future operating costs. In connection with the rental of this
property an irrevocable letter of credit in the amount of $83,000 has been
issued by a financial institution on behalf of Butterwings/Wisconsin securing
payment of future rents. The letter of credit is collateralized by an
interest-bearing deposit in the amount of $83,000.

Butterwings/California has entered into a lease agreement for the
Hooters Gaslamp Restaurant in San Diego, California under a noncancelable 5-year
lease expiring September 30, 1999, with the option to extend the lease for three
additional 5-year periods. The initial lease term commenced in September 1994
upon the opening of the Restaurant. The lease agreement has been guaranteed by
NEMC, a principal shareholder of the Company.

Butterwings/California has also entered into a lease agreement for the
Hooters Mission Valley Restaurant in San Diego, California under a noncancelable
5-year lease expiring November 30, 1999, with the option to extend the lease for
three additional 5-year periods. The initial lease term commenced December 1994
upon the opening of the Hooters Restaurant.

Butterwings/California has also entered into a lease agreement for its
Hooters El Cajon Restaurant in San Diego, California under a noncancelable
10-year lease with the option to extend the lease for two additional 5-year
periods. The initial lease term commenced April 1995 and is guaranteed by NEMC.
In September 1996, the Company closed the El Cajon Restaurant and entered into

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an agreement whereby the leasehold improvements and equipment were surrendered
to the landlord and the Company is obligated to pay the landlord $4,750 per
month from August 1, 1996 to June 20, 2005.

See Note 11 to Consolidated Financial Statements.

Effective April 1, 1995, Butterwings/California assumed a land lease for
an additional Hooters Restaurant to be located in Oceanside, California. The
remaining lease term is for 7 years with the option to extend for two additional
five year periods. The right to utilize an existing building located at the site
was also acquired by the Company at a cost of approximately $75,000. In November
1995, the Company decided not to develop this property and in September 1996
entered into a sublease agreement whereby the subleasee will pay substantially
all amounts due under the original lease. However, under certain conditions, the
subleasee can terminate the lease in September 1998, causing the Company to be
liable for the remaining rentals through September 2003, equal to $311,040.If an
existing restaurant does not perform at a profitable level and the decision is
made to close the restaurant, the Company may be obligated to pay rent until
expiration of the lease. This could influence management's decision in deciding
to close an unprofitable location. See "Risk Factors-Long Term Leases;
Restaurant and Cookie Store Closings" and Note 10 to Consolidated Financial
Statements.

The Company utilizes the offices of NEMC in Hoffman Estates, Illinois.
The Company has been paying rent to NEMC of $5,400 per month. The property is
owned by a limited partnership, the general partner of which is an entity
controlled by Messrs. Buckley, Van Scoy and Drost, executive officers of the
Company.

Litigation

The Company in the past has been the subject of several charges of
employment discrimination or sexual harassment suits in administrative
proceedings in the Milwaukee, Wisconsin and San Diego, California offices of the
Equal Employment Opportunity Commission (the "EEOC"). In April 1996, the
Milwaukee office of the EEOC advised the Company that it had determined that it
would not bring a civil action against the Company arising out of a charge of
employment discrimination brought by a male person alleging he had been denied
employment as a "Hooters Girl" in violation of Title VII of the Civil Rights Act
of 1964 ("Title VII") on the basis of his sex but that the complainant had the
right to bring such an action in the United States District Court within 90
days. At the date hereof, the Company has not received notice that any suit has
been filed and management believes that the threat of litigation in this matter
is past.

In March 1996, the San Diego office of the EEOC advised the Company that
the complainant in a similar charge failed to establish a claim but that the
hiring practices of one of the Company's San Diego Restaurants, insofar as they
required that only females be hired for "Hooters Girl" positions, were violative
of Title VII. The Company does not believe that this constitutes a significant
threat of litigation in light of the position taken by the EEOC in the federal
matter discussed below. The Company was also charged in a May 1995 proceeding
brought with the Equal Opportunities Commission ("EOC") of Madison, Wisconsin by
a former employee alleging sexual harassment, hostile work environment and
termination on the basis of sex and retaliation for complaints against sexual
harassment. The Company advised the EOC that it declined to participate in the
administrative process unless the complainant waived her right to sue in federal
court because the law firm representing the complainant had filed an earlier
charge on behalf of a waitress at the same Restaurant and as soon as the 180 day
waiting period had expired filed suit in federal court. At the date hereof no
decision in this matter has been rendered and the Company is unable to predict
its outcome but intends to defend its position vigorously.

In October 1991, the EEOC filed a charge of employment discrimination
against the Hooters Franchisor and all related business entitles generally
referred to as the Hooters restaurant system (collectively "Hooters") including
franchisees, licensees, and any other entity permitted to operate under the
Hooters trademark with unlawful employment practices under Title VII. In
September 1994, the EEOC issued a decision that there was reasonable cause to
believe that Hooters engaged in employment discrimination for failing to
recruit, hire or assign men into server, bartender or host positions. However,
in March 1996, the EEOC advised that the EEOC's general counsel would not
recommend that the EEOC file a lawsuit against Hooters and that this procedure
terminated the EEOC's consideration of litigation against Hooters to challenge
its policies. Accordingly, the Company believes that the likelihood of EEOC
action regarding these policies is remote. However, in the event litigation is
commenced by the EEOC and the EEOC implements its earlier decision, the Company
may be required to implement a gender neutral hiring policy and to pay money
damages to men who were previously discriminated against by Hooter's hiring
practices, the effect of which could have a substantial adverse impact on the
Company's business.

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of all males who, since April 1992, have applied, were deterred from applying,
or may in the future apply for server, bartender or host positions at any
Hooters Restaurant and for certification of defendant class consisting of all
owners of Hooters Restaurants, licensed, sublicensed or whose hiring practices
are determined directly or indirectly by Hooters or its affiliates. As of the
date hereof, neither the Company nor any of its affiliates has been served with
any notice that a defendant class which includes any of them has been certified.
Accordingly ,the Company is unable to predict the outcome of this matter.
However, in the event that a defendant class including the Company or any of its
affiliates is certified, the Company may be required to implement a gender
neutral hiring policy and to pay money damages to persons who were previously
found to have been discriminated against because of Hooters hiring practices,
the effect of both of which could have a substantial adverse impact on the
business of the Company.

In January 1997, a civil action was filed in the United States District
Court for the Northern District of Wisconsin styled: Joanne Lind vs. Butterwings
of Wisconsin, Inc. alleging sexual harassment by a manager of the restaurant
where she was employed and termination of her employment as retaliation for
complaints made by her to management. The complaint seeks compensatory and
punitive damages, pre-and post-judgment interest and attorney's fees. The
Company has denied the material allegations of this complaint and intends to
defend the suit vigorously. The suit is in the discovery stage and it is too
early to predict the outcome in this matter.

THE MRS. FIELDS COOKIE STORES

The Company's Mrs. Fields Cookie Stores are franchised businesses which
offer and sell a variety of specially prepared food items including, but not
limited to, cookies, brownies, muffins and beverages. The Company's Mrs. Fields
Cookies Stores feature (i) a distinctive exterior and interior store design;
(ii) trade dress, decor and color scheme; (iii) uniform standards,
specifications and procedures for operations; (iv) procedures for quality
control; training and ongoing operational assistance; and (v) advertising and
promotional programs. Each store location contains approximately 800 square feet
with red and white decor. Food items range in price from between $1.50 and
$4.00. Each store is typically open every day with hours depending on the
particular location. Each store generally has limited seating capacity and
employs between two and three full-time employees and between four and five
part-time employees.

The Mrs. Fields Franchisor
The Mrs. Fields Franchisor does not directly own or operate any Mrs.
Fields cookies stores and began franchising businesses of the type operated by
the Company in January 1991. Mrs. Fields Cookies ("MFC") or an affiliate of the
Mrs. Fields Franchisor, has operated Mrs. Fields cookie stores since 1977. As of
October 1, 1996, MFC owned a total of 978 Mrs. Fields cookies stores. Mrs.
Fields, Inc. ("MFI"), the sole shareholder of the Mrs. Fields Franchisor, has
entered into various agreements licensing third parties to market the Products
(as defined below) and other products and services using the Marks (as defined
below).

The Mrs. Fields Franchisor owns certain Marks (defined below) used in
connection with the licensing and franchising of specialty retail dessert and
snack food outlets developed by MFI and its affiliates, which offer and sell a
variety of specially prepared food items, such as, but not limited to, cookies,
brownies, muffins and beverages (the "Products"). These dessert and snack food
outlets are known as "Mrs. Fields Cookies Stores" and include stores operated in
a cookie cart or kiosk format. The Mrs. Fields Franchisor grants franchises to
certain qualified persons ("Mrs. Fields Franchisees") for the establishment and
operation of Mrs. Fields Cookies Stores. In connection with these activities,
the Mrs. Fields Franchisor authorizes Mrs. Fields Franchisees to use the
distinctive business formats, systems, methods, procedures, designs, layouts and
specifications (all of which may be improved, further developed or otherwise
modified from time to time) under which Mrs. Fields Cookies Stores operate (the
"System"), as well as certain trade names, trade and service marks, slogans and
commercial symbols, including the trade and service marks "Mrs. Fields" and
"Mrs. Fields Cookies" with which Mrs. Fields Cookies Stores are associated (the
"Marks"). The Mrs. Fields Franchisor offers and sells to qualified persons a
franchise to own and operate a Mrs. Fields cookie store.

Persons interested in acquiring a franchise for a cookie store and the
assets of an existing Mrs. Fields cookie store typically will sign a reservation
letter, reserving the right to purchase the assets of a specific store for a
particular price and agreeing to pay the Mrs. Fields Franchisor a processing fee
of $1,000 per store. Persons interested in acquiring a franchise for a new store
typically will sign a reservation letter agreeing to pay the Mrs. Fields
Franchisor a processing fee of $1,000 per store.

Material Terms of the Franchise Agreement

The Company or Cookie Crumbs is required to enter into a franchise
agreement with the Mrs. Fields Franchisor with respect to each new cookie store
opened or purchased. Under the franchise agreements, the franchisee is granted a
non-exclusive license to operate a Mrs. Fields Cookie Store at a specified
location previously approved by the Mrs. Fields Franchisor. The license is
granted for an initial term of seven years and, provided the franchisee is not
in default, is renewable for two successive five year terms upon 180 days notice
of intent to renew. The franchisee must obtain all leases, licenses and permits
with respect to the prospective cookie store site and construct and develop the

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cookie store in accordance with specifications and plans as to exterior and
interior design, images, layout, signs, color and furnishings provided by the
Mrs. Fields Franchisor. The Mrs. Fields Franchisor provides training to the
franchisee and its store managers prior to opening a new cookie store. The
franchisee must allocate $5,000 for a grand opening advertising and promotion
program for a period of seven days, commencing within 30 days after the opening
of the cookie store. Each cookie store is required to be operated in accordance
with mandatory and suggested specifications, standards and operating procedures
set forth in a confidential operations manual provided by the Mrs. Fields
Franchisor. A non-recurring franchise fee, which may vary from $15,000 to
$25,000, must be paid at the time of execution of the franchise agreement. In
addition, the franchisee must pay a royalty fee of 6% of monthly gross revenues
and furnish monthly bookkeeping and accounting records to the franchisor on
forms prescribed by the franchisor. The franchisor has the right to inspect and
audit the business records, bookkeeping and accounting records at any reasonable
time without notice. The franchisee is required to contribute to a national
marketing fund a percentage of gross revenues (not in excess of 4% during and
after 1997 with respect to existing stores) to promote the goodwill and public
image of Mrs. Fields Cookies Stores. The franchisee is granted a license to use
the Mrs. Fields trade marks and service marks and is authorized to use
confidential information proprietary to the Mrs. Fields Franchisor. The
franchisee must agree to maintain the confidentiality of the confidential
information and not to otherwise use or disclose it to others. The franchisee
must notify the Mrs. Fields Franchsor of any apparent infringement of any trade
or service mark and assist the Mrs. Fields Franchisor in protecting and
maintaining its interest in the trade marks or service marks. The Mrs. Fields
Franchisor agrees to indemnify and reimburse the franchisee for damages for
which the franchisee is held liable in any proceeding arising out of its
authorized use of the trade marks or service marks and for all costs and
expenses reasonably incurred in defending any claim or proceeding in which the
franchisee is named a party, provided it has timely notified the franchisor of
the claim and otherwise complied with the franchise agreement.

The franchisee is prohibited from having an interest in a competitive
business within one mile of the franchised location and from recruiting any
employee, who within the preceding six month period was employed by the Mrs.
Fields Franchisor or any other Mrs. Fields retail outlet. A transfer of
ownership in a Mrs. Fields Cookie Store is subject to the approval of the Mrs.
Fields Franchisor which may not be unreasonably withheld. Because this Offering
may be considered a change in control of the existing Mrs. Fields Cookie Stores
owned by the Company, the Company has obtained the written consent of the Mrs.
Fields Franchisor to this Offering. The franchisor has the right of first
refusal to purchase, with respect to any proposed transfer, any interest in the
franchise agreement or the franchisee at the purchase price contained in any
bona fide offer. The franchise agreement may be terminated by either party upon
the default of the other party which is continuing and not cured within 60 days
of notice of default. In the case of the franchisee's default, the franchisor
may purchase the cookie store assets at the greater of the book value of such
assets or two times the cookie store's cash flow for the two most recently
completed years. The franchise agreement provides for indemnification of the
franchisor against claims, actions, damages, and expenses arising out of a
breach of the agreement, damages to persons injured in the cookie store, product
liability claims or defective manufacturing of Mrs. Fields products by the
franchisor, or the activities of the franchisee, its officers, directors,
employees, agents or contractors. The Mrs. Fields Franchisor is granted a
security interest in the improvements, fixtures, inventory, goods, appliances
and equipment owned by the franchisee and located at the cookie store.

Development of the Cookie Stores

Under the terms of the franchise agreement, the Mrs. Fields Franchisor
provides advice to the Company in locating potential sites for its future Mrs.
Fields Cookie Stores. The final site selection will be subject to the approval
of the Mrs. Fields Franchisor. According to estimates provided by the Mrs.
Fields Franchisor, the initial investment for a cookie store franchise,
including the initial franchise fee, working capital, leasehold improvements,
signs, fixtures, equipment, insurance, inventory and training, but exclusive of
real estate costs, ranges from $161,000 to $270,000, however, the Mrs. Fields
Franchisor cautions that it is not possible to provide an accurate estimate due
to the many variables involved in that the costs may be significantly higher in
the event the assets of an existing cookie store are acquired from the Mrs.
Fields Franchisor.

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The following is a breakdown of the estimated costs on a per store basis:

Initial Franchise Fee.............................. $15,000 - $25,000

Real Estate........................................ Not Determinable Due
to Variables

Fixed Assets, Construction Remodeling,
Leasehold Improvements, Fixtures
and Equipment............................... $125,000 -$200,000

Investment Required to Commence

Operations including opening inventory............. $10,000 - $15,000

Security Deposits and Prepaid Expenses............. $1,000 - $10,000

Working Capital.................................... $10,000 - $20,000

Total Estimated Initial Investment................. $161,000 - $270,000

Development Option

In August 1995, Cookie Crumbs, a wholly-owned subsidiary of the Company,
acquired from the Mrs. Fields Franchisor certain exclusive rights for the
development of five Mrs. Fields Cookie Stores in the state of New Mexico for
$100,000, of which $25,000 was designated to be for the purchase of the
territorial rights as determined by the Mrs. Fields Franchisor and $75,000 was
designated to be for the development fees for the five Cookie Stores. In the
event the Company exercises the development rights granted to Cookie Crumbs, the
Company will enter into an area development agreement with the Mrs. Fields
Franchisor, or alternatively, obtain an assignment of the area development
agreement entered into by Cookie Crumbs. See "Certain Relationships and Related
Transactions."

Store Operations

Each of the Company's Mrs. Fields Cookie Stores are operated under the
supervision of managers who are employees of the Company. Each of the Company's
Cookie Store managers is required to have experience in the business of managing
Mrs. Fields Cookie Stores or similar businesses. In addition, certain management
personnel of the Company are required to attend a management training program
sponsored by the Mrs. Fields Franchisor at a designated Company owned Cookie
Store. The training program is designed to enable management personnel to train
new individuals who the Company expects to manage its Mrs. Fields Cookie Stores.

Each Cookie Store has customized computer software and programs. This
software is provided by the Company to maintain a variety of sales data.

The Cookie Stores are supported by the same accounting systems as the
Company uses in connection with the operation of its Hooters Restaurants. See "
- - The Hooters Restaurants - Administrative and Accounting Systems."

Employees

In connection with its Mrs. Fields Cookie Stores, the Company employs
approximately 165 persons, of which 20 are full time and 145 are part-time.

Competition

Generally, the specialty retail cookie market is a developed market. The
Company's Mrs. Fields Cookie Stores offer a variety of specially prepared food
items, including, but not limited to cookies, brownies, muffins and beverages.
The Company competes with bakeries, other specialty retail cookie stores,
convenience stores, and other facilities owned from time to time by the Mrs.
Fields Franchisor, its affiliates, or others and which offer specialty retail
desserts and snack foods. In addition, the Company competes with other stores
and outlets selling the Products under the Marks or other trademarks or service
marks, as well as other items (such as refrigerated ready-to-cook cookie dough
sold through various retail outlets), owned and operated, from time to time, by
MFI, the Mrs. Fields Franchisor or their affiliates or by franchisees or
licensees of MFI, the franchisor or their affiliates, including, without

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<PAGE>

limitation, Mrs. Fields Cookies Stores (including cookie carts and kiosks), Mrs.
Fields Bakery Stores, Jessica's cookie stores, Famous Chocolate Chip Cookie
Company stores, and in-store retail bakery outlets located in grocery, fast
food, convenience or other stores (such stores and outlets being referred to
generally as "Mrs. Fields Outlets"). The Company also competes with other
individuals and entities in the search for suitable store locations and
operators and employees.

Products, Inventory and Equipment

The recipes, formulations, and specifications for all Products are trade
secrets belonging exclusively to the Mrs. Fields Franchisor. The Mrs. Fields
Franchisor has licensed Van Den Bergh Foods Company ("Van Den Bergh") to
manufacture ready-to-bake dough products and other ready-to-complete Product
mixes following the Mrs. Fields Franchisor's secret recipes, formulations, and
specifications. These products are then sold to Blue Line Distribution ("Blue
Line") under license from the Mrs. Fields Franchisor, for sale and distribution
by Blue Line to Mrs. Fields Cookies Stores and other Mrs. Fields outlets. The
Company purchases all of its Products, with the exception of special Mrs. Fields
coffee blends discussed below, from Blue Line.

Blue Line sells the products described above to all Mrs. Fields Outlets,
and the price charged by Blue Line is the same regardless of whether the
purchaser is a Mrs. Fields Franchisee, one of the Mrs. Fields Franchisor's
affiliates or the Mrs. Fields Franchisor. However, the purchase prices charged
include an estimate for direct costs of manufacture by Van Den Bergh.

The Mrs. Fields Franchisor has licensed Seattle's Best Coffee
("Seattle's") to prepare whole bean and ground roasted coffee and cold coffee
concentrates according to the secret recipes and formulations of the Mrs. Fields
Franchisor. Franchisees must purchase all of their coffee products from
Seattle's or from Blue Line.

The Mrs. Fields Franchisor will not approve anyone other than Van Den
Bergh, Seattle's, or Blue Line to manufacture or supply Products unless the Mrs.
Fields Franchisor terminates its relationship with one of those entities. In
that case, the Mrs. Fields Franchisor has advised the Company that it would
negotiate the terms and conditions for another supplier to manufacture the Mrs.

Fields Products.

The Company purchases all soft goods, such as napkins, paper cups,
cookie tins, and similar items which are a part of the Mrs. Fields System and
which utilize trademarks from Blue Line since Blue Line is the only supplier
licensed to distribute such supplies using the Mrs. Fields Franchisor's
trademarks.

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<PAGE>

MANAGEMENT

Directors and Executive Officers
The following table sets forth certain information regarding the
Company's directors and executive officers.

Name Title Age
Stephan S. Buckley President and Director 38
Kenneth B. Drost Vice President, Secretary and Director 42
Douglas E. Van Scoy Chief Financial Officer and Director 55
Jeffrey A. Pritikin Director 42
Thomas P. Kabat Director 49

Stephan S. Buckley has served as President and Director of the Company
since August 1993. Mr. Buckley has also served as President and Director of
NEMC, the principal shareholder of the Company, since March 1993. Mr. Buckley is
also Chairman of the Board, President and Director of New Era Funding Corp.
("NEFC"), an affiliate of the Company ,which through October 1, 1996, managed
several public limited partnerships originally sponsored by Datronic Rental
Corporation, Schaumburg, Illinois ("Datronic"). Mr. Buckley also is President
and Director of Cookie Crumbs, Inc., a wholly owned subsidiary of the Company
and a franchisee of the Mrs. Fields Franchisor. Prior to his association with
NEMC and NEFC, Mr. Buckley served as a director and Executive Vice
President-Broker Services of Datronic from January, 1987 to March, 1993. Prior
to his association with Datronic, Mr. Buckley was employed by ISFA Corporation,
a securities broker-dealer located in Tampa, Florida, as a Branch Manager from
February, 1985 through January, 1987. From September, 1983 to February, 1985, he
was an Account Executive with Dean Witter Reynolds. Mr. Buckley also served as
an Assistant Branch Manager with Transamerica Financial Services, Inc. from
June, 1982 to September, 1983. Mr. Buckley is the sole shareholder, a registered
principal and an officer and director of ASA Investment Company, an Illinois and
NASD-registered broker-dealer and an Illinois-registered insurance broker. Mr.
Buckley received a Bachelors Degree in Economics from Southern Illinois
University in 1982.

Kenneth B. Drost has served as Vice President, Secretary and Director of
the Company since August 1993. Mr. Drost has also served as Vice President,
Secretary and Director of NEMC since March, 1993. Mr. Drost is also Executive
Vice President, General Counsel and Director of NEFC. Prior to his association
with NEMC and NEFC, Mr. Drost served as general counsel to Datronic from
January, 1992 to March, 1993. Mr. Drost was previously a partner with Siegan
Barbakoff Gomberg & Kane, Ltd. and prior thereto, was a partner with the law
firm of Katten, Muchin & Zavis. Mr. Drost obtained a Bachelor of Arts Degree
from Knox College in 1975 and a J.D. from Hastings College of Law, University of
California in 1978.

Douglas E. Van Scoy has served as Chief Financial Officer and Director
of the Company since August 1993. Mr. Van Scoy has also served as Chief
Financial Officer and Director of NEMC since March, 1993. Mr. Van Scoy is also
Chief Financial Officer and Director of NEFC. Prior to his association with NEMC
and NEFC, Mr. Van Scoy served as Chief Financial Officer of Datronic from
January, 1991 to March, 1993. Prior to that time, Mr. Van Scoy was Chief
Executive Officer of both Oceanica Trading Limited, Ltd., Wheeling, Illinois and
CMV Enterprises, Inc., Wheeling, Illinois from April, 1987 to December, 1990.
From January, 1981 to March, 1987, Mr. Van Scoy was Senior Vice President and
General Auditor of The First National Bank of Chicago, Chicago, Illinois. From
June, 1964 to April, 1976, he was associated with the public accounting firm of
Price Waterhouse, Chicago, Illinois, and from May, 1976 to December, 1980, he
served as a Partner of that firm. Mr. Van Scoy obtained a Bachelors of Business
Administration from the University of Michigan in 1963 and a Masters of Business
Administration from the University of Michigan in 1964. Mr. Van Scoy is a
Certified Public Accountant.

Jeffrey A. Pritikin has served as a Director of the Company since September
1995. Mr. Pritikin has served as an accountant and tax consultant in private
practice since 1985. Mr. Pritikin's practice is concentrated in IRS matters,
business and individual tax preparation services, tax and investment planning.
Since 1993, Mr. Pritikin has also served as President and Director of ARJ
Investments and Management Consultants, Inc., a private company providing
business consulting and investment planning. Mr. Pritikin holds a Bachelor of
Science degree in Accounting from the University of Illinois at Chicago and is
enrolled to practice before the IRS.

Thomas P. Kabat has served as a Director of the Company since September
1995. Since 1985, Mr. Kabat has served as Executive Vice President, Secretary
and Treasurer of Durst Brokerage, Inc., a foodservice brokerage and sales
company. Mr. Kabat has over 24 years experience in the industrial brokerage and
foodservice sales industry having held sales and management positions with
various companies including a company owned by Mr. Kabat which merged with Durst
in 1985. He is a member of the National Food Brokerage Association,
International Food Manufacturers Association, Institute of Food Technologists,
and the Food Ingredients Network Development.

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<PAGE>

Director Compensation. As compensation to outside directors, the Company
plans to pay directors' fees not to exceed $2,500 per quarter, plus expenses.
While not presently finalized, the Company is considering a program wherein up
to one - half of directors' fees may, upon agreement between the Company and the
director, be payable in shares of the Company's Common Stock, based on the value
of the stock on the last day of each quarter. Inside directors will not receive
compensation, but may be reimbursed for expenses.

Executive Compensation. The Company's executive officers have not
received compensation from the Company (excluding Cookie Crumbs) since its
inception. In order for the accompanying Financial Statements to reflect
reasonable compensation levels, a capital contribution has been recorded to
reflect the value of their services rendered. An offsetting amount has been
included in general and administrative expenses in the accompanying Statements
of Operations. The capital contributions were $50,000 for the years ended
December 31, 1995 and December 25, 1994, respectively and $100,000 for the
fiscal year ended December 29, 1996. Upon consummation of this Offering it is
anticipated that the Company's three executive officers will receive salaries at
the rate of $50,000 annually. There are no bonus or other compensation plans
other than the 1996 Stock Compensation Plan.

The following table sets forth summary information concerning
compensation earned by or paid to the President of the Company in his capacity
as Chief Executive Officer of Cookie Crumbs for the fiscal years ended December
31, 1995 and December 29, 1996. No other executive officer was paid a salary and
bonus in excess of $100,000 for services rendered in all capacities to Cookie
Crumbs for the fiscal years 1995 and 1996.

Summary Compensation Table

Long-Term Compensation
Awards
Name and Annual Compensation Securities
Principal Position Year Salary Bonus Underlying Options

Stephan S. Buckley
President 1996 $9,231 -0- -0-
1995 16,154 -0- -0-

1996 Stock Compensation Plan. The Company's 1996 Stock Compensation Plan
(the "Plan") was approved by the Board of Directors and stockholders of the
Company on November 14, 1996 to provide for the grant of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, and options which do not constitute incentive options to officers,
directors, employees and advisors of the Company or a subsidiary of the Company.
A total of 200,000 shares of Common Stock has been authorized and reserved for
issuance under the Plan, subject to adjustment to reflect changes in the
Company's capitalization in the case of a stock split, stock dividend or similar
event. The Plan is administered by the Board of Directors. The Board has the
sole authority to interpret the Plan, to determine the persons to whom options
will be granted, to determine the basis upon which the options will be granted,
and to determine the exercise price, duration and other terms of options to be
granted under the Plan; provided that, (i) the exercise price of each option
granted under the Plan may not be less than the fair market value of the Common
Stock on the day of the grant of the option, (ii) the exercise price must be
paid in cash upon exercise of the option, (iii) no option may be exercisable for
more than 10 years after the date of grant, and (iv) no option is transferable
other than by will or the laws of descent and distribution. No option is
exercisable after an optionee ceases to be employed by the Company or a
subsidiary of the Company, subject to the right of the Board to extend the
exercise period for not more than 90 days following the date of termination of
an optionee's employment. An optionee who was a director or advisor may exercise
his option at any time within 90 days after such optionee's status as a director
or advisor terminates to the extent he was entitled to exercise such option at
the date of termination of his status. If an optionee's employment is terminated
by reason of disability, the Board has the authority to extend the exercise
period for not more than one year following the date of termination of the
optionee's employment or service as an advisor or director. If an optionee dies
and holds options not fully exercised, such options may be exercised in whole or
in part within one year of the optionee's death by the executors or
administrators of the optionee's estate or by the optionee's heirs. The vesting
period, if any, specified for each option will be accelerated upon the
occurrence of a change of control or threatened change of control of the
Company.

The Board of Directors granted 100,000 options under the Plan on
November 14, 1996. Such options are exercisable at $5.00 per share until
November 14, 2006. The following table sets forth information regarding options
granted to the President of the Company during the fiscal year ending December
29, 1996.

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<PAGE>

Option Grants in Current fiscal Year
Individual Grants

% of Total
Number of Options
Securities Granted to
Underlying Employees in Exercise or Base Expiration
Name Options Granted Fiscal Year Price per Share Date
---- --------------- ----------- --------------- ----
Stephan S. Buckley 20,000 25 $5.00 11/14/2006

The following table sets forth information regarding exercised options
and the value of unexercised options held by the President of the Company as of
December 29, 1996.

Aggregated Option Exercises in Current Fiscal Year
and Fiscal Year-End Options

Number of
Securities
Underlying Value of
Unexercised Unexercised
Options at In the Money
Fiscal Options At
Shares Acquired Year-End Fiscal Year-End
Name on Exercise Exercisable Exercisable
---- ----------- ----------- -----------
Stephan S. Buckl -0- 20,000 -0-

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<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In November 1996 the Board of Directors granted stock options under the
1996 Stock Compensation Plan to its officers and directors as follows: Stephan
S. Buckley, President; Kenneth B. Drost, Vice President; and Douglas E. Van Scoy
, Chief Financial Officer, 20,000 each; Jeffrey Pritikin and Thomas A Kabat,
Directors, 10,000 each.

The Company appointed ASA as a consultant to solicit and procure broker
dealers in connection with the private placement of the Notes and Convertible
Preferred Stock during the period 1994 through 1996. ASA did not receive any
direct compensation for its services but was reimbursed for actual out of pocket
expenses. Stephan S. Buckley, President and a director of the Company is the
sole shareholder, an officer and director of ASA. In addition, Clarke
Consulting, an affiliate of Mr. Buckley, provided services to the Company in
connection with the Notes and Convertible Preferred Stock private offerings,
including structuring of the offerings and financial and investor relations
services, for which Clarke Consulting was paid $55,000.

Until October 1, 1996, the Company operated under an informal
arrangement with NEMC pursuant to which NEMC provided office space, accounting,
administrative and computer system services to the Company at NEMC's cost. The
amounts paid for such rent and services for the fiscal years ended December 31,
1995 and December 29, 1996 were $138,524 and $246,619 respectively. On October
1, 1996, the Company began providing its own accounting, administrative and
computer system services using substantially the same personnel and equipment.
The Company expects that the costs for salaries, benefits and payroll taxes,
except for normal increases due to inflation, cost of living and similar
increases, will be substantially similar to 1996. The Company will continue to
make monthly rental payments of approximately $5,400 to NEMC for space for its
corporate offices. All of the outstanding common stock of NEMC is owned equally
by Messrs. Buckley, Drost and Van Scoy officers and directors of the Company.
However, Mr. Buckley owns preferred stock of NEMC which gives him 50% of the
voting power of NEMC. NEMC owned approximately 90% of the Company's outstanding
Common Stock prior to the Offering and will own approximately 48% after the
Offering. See," Business and Properties Properties," Principal Stockholders,"
and Note 8 to Consolidated Financial Statements.

Pursuant to intercorporate tax allocation practices, NEMC was entitled
to include the tax losses attributable to the Company's operations in NEMC's
consolidated tax return for which the Company was to receive credit from NEMC
under certain conditions. As of December 29, 1996, the Company had generated tax
losses of approximately $2,140,000, which have been or are expected to be
utilized by NEMC. Concurrent with this Offering, the Company will no longer be
eligible for inclusion in NEMC's consolidated tax return and NEMC will be
relieved from any obligation to pay the Company the tax benefit attributable to
the Company's tax losses utilized in consolidation. Upon the completion of this
Offering, the Company will have of approximately $1,330,000 of tax loss
carryforwards which can be utilized by the Company until their expiration in
2011. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Net Operating Loss Carryforwards" and Note 7 to
Consolidated Financial Statements.

In October 1996, the Company acquired all of the outstanding common
stock of Cookie Crumbs from Mr. Buckley for $1.00.

In August 1995, Cookie Crumbs acquired certain rights for the
development of five Mrs. Fields Cookie Stores in New Mexico for $100,000. Cookie
Crumbs granted the Company an option to acquire the development rights to the
New Mexico territory which was exercisable upon the payment of $100,000 to
Cookie Crumbs and expires January 2001. Upon exercise of the option, the Company
will acquire an assignment of the area development agreement but will not be
obligated to pay any development fees to the Mrs. Fields Franchisor. At the time
of the transaction, Cookie Crumbs was owned by Mr. Buckley, President and a
director of the Company. Since the Company now owns all of the stock of Cookie
Crumbs, the Company will not be obligated to pay the $100,000 if it elects to
exercise the option.

The Company entered into a separation agreement (the "Separation
Agreement") effective August 1, 1995, with Edmund C. Lipinski ("Lipinski")
pursuant to which: (i) an employment agreement dated September 13, 1993, was
terminated; (ii) the 216,400 -shares of Common Stock of the Company owned by
Lipinski (in which he had no cost basis) was repurchased by the Company for
$1.00, and (iii) the restricted stock agreement dated September 13, 1993 was
terminated. Simultaneously with the execution of the Separation Agreement, the
Company and Lipinski entered into an independent contractor agreement (the
"Agreement") pursuant to which the Company retained the services of Lipinski as
an independent contractor for a five year term to: (i) assist the Company in
identifying and selecting site locations suitable for Hooters Restaurants; (ii)
assist the Company in constructing and developing Hooters Restaurants within the
territories; (iii) consult with and advise the Company regarding operations of
Hooters Restaurants within the territories; and (iv) perform such other and
further services relating to restaurant construction and operation as the

43
<PAGE>

Company shall direct. In consideration for the services to be rendered by
Lipinski, the Company agreed to pay him $8,683.33 per month, plus $5,000 upon
the opening of each of the Company's fifth and sixth Hooters Restaurants.
Lipinski agreed to keep confidential all "proprietary information" ( as defined
in the Agreement ) during term of the Agreement and for a period of two years
after termination thereof. At the time of the Separation Agreement, Mr. Lipinski
was Director of Operations for the Company.

The Company believes that the foregoing transactions were on terms no
less favorable to the Company than could have been obtained from independent
third parties. All future transactions with officers and directors will also be
on terms no less favorable than could be obtained from independent third parties
and will be approved by a majority of the Company's independent, disinterested
directors.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding certain
principal stockholders' beneficial ownership of the Common Stock of the Company
as of the date of this Prospectus and as adjusted to reflect the sale of Units
offered hereby by: (i) each person known by the Company to be the beneficial
owner of more than five percent of the total outstanding shares of Common Stock
of the Company, (ii) each Director or executive officer of the Company, and
(iii) all Directors and executive officers of the Company as a group. Except as
otherwise indicated all persons listed below have record and beneficial
ownership and sole voting power and investment power with respect to their
shares of Common Stock (except to the extent that authority is shared by spouses
under applicable law).

Name of Beneficial Amount Percent of Percent of
Owner Beneficially Ownership Ownership
Owned Prior Prior to the After the
to Offering Offering Offering
----------- -------- --------

New Era Management

Corporation (1)........ 1,947,603 90.5% 47.6%

Jeffrey Steiner (2) 204,444 9.5 5.0

All Officers and Directors

as a group (five persons) 1,947,603 90.5% 52.6%

(1) New Era Management Corp. is owned by Messrs. Stephan S. Buckley, Kenneth B.
Drost and Douglas E. Van Scoy, the executive officers of the Company. The
address of NEMC is 2345 Pembroke Avenue, Hoffman Estates, Illinois 60195.

(2) The address of Mr. Steiner is 6 Cheyne Walk, London, England.

SELLING SECURITY HOLDERS

The table below sets forth the number of Units which are being sold by
the Selling Security Holders who acquired their Units upon automatic exercise of
warrants issued to them as additional consideration in connection with the
issuance of the Bridge Loan Notes. None of the Selling Security Holders are
affiliated with the Company.

Units Beneficially Units to be Number of Units
Owned Prior to this Sold in this Beneficially Owned
Name Offering Offering After this Offering
---- -------- -------- -------------------

Sunset Bridge Fund
# 3, LP.............. 19,600 19,600 -0-

Sagax Fund II Ltd.... 22,400 22,400 -0-

Ken Cattell ......... 7,000 7,000 -0-

Dominic M. Genovese.. 3,500 3,500 -0-

Riad Abou-Mourad..... 3,500 3,500 -0-

John McGinnis........ 35,000 35,000 -0-
------ ------

Total................ 91,000 91,000 -0-
====== ======

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<PAGE>

DESCRIPTION OF SECURITIES

Capital Stock of the Company
The authorized capital stock of the Company presently consists of
10,000,000 shares of Common Stock, $0.01 par value, and 100,000 shares of
Preferred Stock, no par value.

Preferred Stock

The board of directors, without further action by the stockholders, is
authorized to issue up to 100,000 shares of no par value preferred stock in one
or more series and to fix and determine as to any series, any and all of the
relative rights and preferences of shares in each series, including without
limitation, preferences, limitations or relative rights with respect to
redemption rights, conversion rights, voting rights, dividend rights and
preferences on liquidation. The issuance of preferred stock with voting and
conversion rights could have a material adverse affect on the voting power of
the holders of the Common Stock. The issuance of preferred stock could also
decrease the amount of earnings and assets available for distribution to holders
of the Common Shock. In addition, the issuance of preferred stock may have the
effect of delaying, deferring or preventing a change in control of the Company.
The Company has no plans to issue any shares of preferred stock other than the
Convertible Preferred Stock described below.

Convertible Preferred Stock. At the date of this Prospectus the Company
had authorized the issuance of 27,500 shares of convertible preferred stock, the
only series of preferred stock authorized (the "Convertible Preferred Stock"),
of which series 15,685 shares were issued and outstanding. The Convertible
Preferred Stock bears a cumulative, non compounded dividend at a rate of 10% per
annum, payable quarterly on the first day of January, April, July and October.
To the extent not paid, dividends are added to the liquidation value of the
Convertible Preferred Stock until paid. In the event dividends are paid in an
amount less than the full dividend due, they shall be paid pro rata to the
holders of the Convertible Preferred Stock. So long as any shares of Convertible
Preferred Stock are outstanding, the Company will not declare or pay any cash
dividends or distributions on any other class of stock unless all dividends are
current on the Convertible Preferred Stock.

The holders of the Convertible Preferred Stock are entitled to the
Liquidation Value on their shares upon liquidation, dissolution or winding up of
the Company before any distribution or payment is made to holders of any other
class of stock of the Company. The term Liquidation Value is defined as the sum
of $100 plus any unpaid dividends calculated cumulatively on a monthly basis to
the close of business on the most recent dividend payment date. The Convertible
Preferred Stock is protected in the event of any stock splits, reverse stock
splits or distributions of additional shares of capital stock in a fashion
similar to share dividends.

Each share of Convertible Preferred Stock is convertible into Common
Stock of the Company upon the consummation of the first sale of Common Stock by
the Company to underwriters in a public offering of Common Stock registered
under the Securities Act of 1933. The number of shares of Common Stock to be
received by holders of the Convertible Preferred Stock is determined by dividing
the offering price per share of the Convertible Preferred Stock ($100) by 95% of
the offering price per share of the Common Stock in the public offering of the
Common Stock. The Company is required to give notice to the Convertible
Preferred Stockholders of the effective date of the public offering and to
exchange the Convertible Preferred Stock for shares of Common Stock within ten
business days after the effective date of the public offering. The Convertible
Preferred Stock has no voting rights except as provided by the Illinois Business
Cooperation Act which provides for voting as a class upon proposed amendments to
the Articles of Incorporation which would adversely affect an outstanding series
of preferred stock.

As a consequence of this Offering, the Company will be required to issue
254,008 shares of its Common Stock upon the automatic conversion of the
Convertible Preferred Stock and the Convertible Preferred Stock received in
exchange therefor will be canceled.

No dividends have been paid on the Convertible Preferred Stock.

Units

Each Unit consists of one share of Common Stock and one Series A
Warrant. The shares of Common Stock and the Series A Warrants included in the
Units may not be separately traded until _______, 1997 [six months after the
date of this Prospectus] unless earlier separated upon three days prior written
notice from the Representative to the Company.

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<PAGE>

Common Stock

At the date of this Prospectus, there were 3,091,000 shares of Common
Stock outstanding, including 593,945 shares issued to the Note holders, 254,008
shares issued to the Convertible Preferred Stock holders and 91,000 shares
issued to the Bridge Loan Note holders.

The holders of the Common Stock are entitled to share ratably in any
dividends paid on the Common Stock when, as and if declared by the Board of
Directors out of funds legally available therefor. Each holder of Common Stock
is entitled to one vote for each share held of record. The Common Stock is not
entitled to cumulative voting or preemptive rights and is not subject to
redemption. Upon liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in the net assets legally
available for distribution. All outstanding shares of Common Stock are fully
paid and non assessable.

Series A Warrants

The Company has authorized the issuance of Series A Warrants to purchase
1,091,000 shares of Common Stock (not including 163,650 Series A Warrants which
may be issued pursuant to the Underwriters' Over-allotment Option, and 109,100
Underwriters' Warrants) and has reserved an equivalent number of shares of
Common Stock for issuance upon exercise of such Series A Warrants and
Underwriters' Warrants. The following statements are brief summaries of certain
provisions of the Warrant Agreement (defined below). Copies of the Warrant
Agreement may be obtained from the Company or the Warrant Agent (defined below)
and have been filed with the Commission as an exhibit to the Registration
Statement of which this Prospectus is a part.

The Series A Warrants will be issued in registered form under, governed
by, and subject to the terms of a warrant agreement (the "Warrant Agreement")
between the Company and American Stock Transfer & Trust Company as warrant agent
(the "Warrant Agent"). Each Warrant entitles the holder thereof to purchase one
share of Common Stock at an exercise price of 120% of the offering price per
Unit exercisable at any time commencing on ________________________, 199_
[thirteen months after the closing of this Offering], until ______________,
2002, unless earlier redeemed. The Series A Warrants will not become separately
traded until ________________________, 1997 [six months after the date of this
Prospectus] unless earlier separated upon three days prior written notice by the
Representatives to the Company at the discretion of the Representatives. The
Series A Warrants contain provisions that protect the Warrant holders against
dilution by adjustment of the exercise price in certain events, including, but
not limited to stock dividends, stock splits, reclassifications or mergers. A
Warrant holder will not possess any rights as a shareholder of the Company.
Shares of Common Stock, when issued upon the exercise of the Series A Warrants
in accordance with the terms thereof, will be fully paid and non-assessable. No
fractional shares will be issued upon the exercise of the Series A Warrants. The
Company will pay cash in lieu of fractional shares.

The Series A Warrants are subject to redemption by the Company at a
price of $0.05 per Series A Warrant at any time commencing thirteen months after
the date of this Prospectus, on thirty days prior written notice, provided that
the closing sale price per share for the Common Stock has equaled or exceeded
200% of the offering price per Unit for twenty consecutive trading days within
the thirty-day period immediately preceding such notice.

At any time when the Series A Warrants are exercisable, the Company has
agreed to have a current registration statement on file with the Commission and
to effect appropriate qualifications under the laws and regulations of the
states in which the holders of the Series A Warrants reside in order to comply
with applicable laws in connection with the exercise of the Series A Warrants
and the resale of the Common Stock issued upon such exercise. So long as the
Series A Warrants are outstanding, the Company has agreed to file all
post-effective amendments to the Registration Statement required to be filed
under the Securities Act, and to take appropriate action under federal law and
the securities laws of those states where the Series A Warrants were initially
offered to permit the issuance and resale of the Common Stock issuable upon
exercise of the Series A Warrants. However, there can be no assurance that the
Company will be in a position to effect such action under the federal and
applicable state securities laws, and the failure of the Company to effect such
action may cause the exercise of the Series A Warrants and the resale or other
disposition of the Common Stock issued upon such exercise to become unlawful.
The Company may amend the terms of the Series A Warrants, but only by extending
the termination date or lowering the exercise price thereof.
The Company has no present intention of amending such terms.

Bridge Loan Securities

From October through December 1996, the Company sold $483,000 of Bridge
Loan Notes to provide working capital and funds for this offering. The Bridge
Loan Notes are secured promissory notes bearing interest at the LIBOR rate and
are payable at the earlier of nine months from the date of issuance or closing
of this Offering. As additional consideration, the Company issued to the Bridge
Loan Note holders warrants to acquire, without additional cost, Units identical
to the Units offered hereby at the time the registration statement of which this

47
<PAGE>

prospectus is a part becomes effective. The Bridge Loan units are included in
the Units offered hereby. See "Selling Security Holders."

Transfer Agent and Registrar; Warrant Agent

The Transfer Agent and Registrar for the Units, Common Stock and the
Warrant Agent for the Series A Warrants and the Underwriters' Warrants will be
American Stock Transfer & Trust Company, New York.

Reports to Shareholders

The Company intends to furnish its shareholders with annual reports
containing audited financial statements and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.

The Company has agreed, subject to the sale of the Units offered hereby,
that on the date of this Prospectus, it will register its Common Stock and
Series A Warrants under the provisions of Section 12(b) of the Exchange Act, and
that it will use its best efforts to continue to maintain such registration.
Such registration will require the Company to comply with periodic reporting,
proxy solicitation, and certain other requirements of the Exchange Act.

Boston Stock Exchange and NASDAQ Small-Cap Market

The Company is seeking approval for listing of the Units, Common Stock
and the Series A Warrants on the Boston Stock Exchange under the symbols ETS.U,
ETS, and ETS.W and on the NASDAQ Small-Cap Market under the symbols EATS.U, EATS
and EATS.W, respectively.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have 4,091,000 shares
of Common Stock outstanding (4,254,650 shares if the Underwriters'
over-allotment option is exercised in full). Of the 4,091,000 shares of Common
Stock to be outstanding, the 1,091,000 shares to be sold in this Offering
(1,254,650 if the Underwriters' over-allotment option is exercised in full) will
be freely tradable in the public market without restriction under the Securities
Act, except shares purchased by an "affiliate" (as defined in the Securities Act
- - in general, a person who is in a control relationship with the Company) of the
Company. All of the remaining, 3,000,000 shares of Common Stock will be
"restricted shares" within the meaning of the Securities Act and may be publicly
sold only if registered under the Securities Act or sold in accordance with an
exemption from registration, such as those provided by Rule 144 promulgated
under the Securities Act. NEMC, which holds 1,947,603 shares of Common Stock,
has agreed that it will not, without the prior written consent of the
Representative, offer, sell or otherwise dispose of any shares of Common Stock
beneficially owned by it or acquired upon the exercise of stock options by its
principals for a period of two years after closing of this Offering.

In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell restricted shares if at least
one year has passed since the later of the date such shares were acquired from
the Company or any affiliate of the Company. Rule 144 provides that within any
three-month period such person may sell only up to the greater of one percent
(1%) of the then outstanding shares of the Company's Common Stock (approximately
40,000 shares following completion of this Offering) or the average weekly
trading volume in the Company's Common Stock during the four calendar weeks
immediately preceding the date on which the notice of the sale is filed with the
Securities and Exchange Commission. Sales pursuant to Rule 144 are subject to
certain other requirements relating to manner of sale, notice of sale and
availability of current public information. Any person who has not been an
affiliate of the Company for a period of three months preceding a sale of
restricted shares is entitled to sell such shares under Rule 144 without regard
to such limitations if at least two years have passed since the later of the
date such shares were acquired from the Company or any affiliate of the Company.
Shares held by persons who are deemed to be affiliates of the Company are
subject to such volume limitations regardless of how long they have been owned
or how they were acquired. The foregoing is a brief summary of certain
provisions of Rule 144 and is not intended to be a complete description thereof.

The 254,008 shares of Common Stock to be received by the holders of the
Convertible Preferred Stock and the 593,945 shares of Common Stock received by
the Note holders in the Exchange Offer will be restricted shares and will not be
eligible for sale pursuant to Rule 144 for one year from the date of this
Prospectus. The Company, however, has agreed with the holders of the Notes, to
register any shares they received in the Exchange Offer at any time after one
year from the date of this Prospectus upon the request of the holders of at
least 50% of the shares and the Representative has agreed to use its best
efforts to effect a firm commitment underwriting of such shares subject to
favorable market conditions.

48
<PAGE>

Prior to this Offering, there has been no public market for the Common
Stock, and no predictions can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. The sale, or availability for sale, of
substantial amounts of the Common Stock in the public market, including an
underwritten offering, could adversely affect prevailing market prices.

49
<PAGE>

UNDERWRITING

Pursuant to the terms and subject to the conditions contained in the
Underwriting Agreement, the Company and the Selling Security Holders have agreed
to sell on a firm commitment basis to the Underwriters named below, and each of
the Underwriters, for whom National Securities Corporation is acting as the
Representative, have severally agreed to purchase the number of Units set forth
opposite their names in the following table.

Underwriters Number of Units
------------ ---------------

National Securities Corporation

-----------

Total 1,091,000

The Representative has advised the Company that the Underwriters propose
to offer the Units to the public at the initial public offering price per share
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession of not more than $ per Unit, of which $ may be reallowed
to other dealers. After the Offering, the public offering price, concession and
reallowance to dealers may be reduced by the Representative. No such reduction
will change the amount of proceeds to be received by the Company as set forth on
the cover page of this Prospectus.

The Company has granted to the Underwriters an option, exercisable
during the 45-day period after the date of this Prospectus, to purchase up to
163,650 additional Units to cover over-allotments, if any, at the offering price
to the public of the Units subject to this Prospectus less the Underwriting
Discount. To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional Units that the number of Units to be purchased by
it shown in the above table represents as a percentage of the 1,091,000 Units
offered hereby. If purchased, such additional Units will be sold by the
Underwriters on the same terms as those on which the 1,091,000 Units are being
sold.

The Underwriters have the right to offer the Units offered hereby only
through licensed securities dealers in the United States who are members of the
National Association of Securities Dealers, Inc. (the "NASD") and may allow such
dealers such portion of its ten (10%) percent commission as each Underwriter may
determine.

The Underwriters will not confirm sales to any discretionary accounts.

The Company has agreed to pay the Representative a non-accountable
expense allowance of 2.5% of the gross amount of the Units sold ($177,288) upon
the sale of the Units offered) at the closing of the Offering. The Underwriters'
expenses in excess thereof will be paid by the Representative. To the extent
that the expenses of the underwriting are less than that amount, such excess
will be deemed to be additional compensation to the Underwriters.

The Company has agreed to enter into a consulting agreement with the
Representative at a rate of $2,500 per month for a period of 24 months.

For a period of 24 months following the completion of this Offering,
NEMC has agreed to vote its shares for election to the Board of Directors, a
person designated by the Representative and acceptable to the Company. Such
designee will have voting rights, will receive the same compensation as other
outside Directors, will be reimbursed for all out-of-pocket expenses incurred in
attending meetings, and will be indemnified by the Company against all claims,
liabilities, damages, costs and expenses arising out of his or her participation
at Board of Directors meetings.

The Underwriting Agreement provides for indemnification between the
Company and the Underwriters against certain civil liabilities, including
liabilities under the Securities Act. In addition, the Underwriters' Warrants
provide for indemnification among the Company and the holders of the
Underwriters' Warrants and underlying shares against certain civil liabilities,
including liabilities under the Securities Act and the Exchange Act.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company 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 Company of expenses

50
<PAGE>

incurred or paid by a director, officer or controlling person of the Company 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 Company 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.

Underwriters' Warrants

Upon the closing of this Offering, the Company has agreed to sell to the
Underwriters, for nominal consideration, warrants to purchase 10% of the number
of Units offered hereunder (the "Underwriters' Warrants"). The Underwriters'
Warrants are exercisable at 120% of the public offering price per Unit for a
four-year period commencing one year from the effective date of this Offering.
The Underwriters' Warrants may not be sold, transferred, assigned or
hypothecated for a period of one year from the date of this Offering except to
the officers of the Underwriters, their successors and dealers participating in
the Offering and/or the partners or officers of such dealers. The Underwriters'
Warrants will contain anti-dilution provisions providing for appropriate
adjustment of the number of shares subject to the Underwriters' Warrants under
certain circumstances. The holders of the Underwriters' Warrants will have no
voting, dividend or other rights as shareholders of the Company with respect to
shares underlying the Underwriters' Warrants until the Underwriters' Warrants
have been exercised.

The Underwriters' Warrants and the securities issuable thereunder have
been registered under the Securities Act in connection with this Offering;
however, such securities may not be offered for sale except in compliance with
the applicable provisions of the Securities Act. The Company has agreed that,
if, at any time after the first anniversary of the date of this Prospectus but
prior to the fifth anniversary of the date of this Prospectus, it shall cause a
Post-Effective Amendment or a new Registration Statement or an Offering
Statement under Regulation A to be filed with the Securities and Exchange
Commission, the Underwriters shall have the right during the four year period
commencing one year after the date of this Prospectus to include in such
Post-Effective Amendment or new Registration Statement or Offering Statement the
Underwriters' Warrants and/or the securities issuable upon their exercise at no
expense to the Underwriters.

For the exercise period during which the Underwriters' Warrants are
exercisable, the holder or holders will have the opportunity to profit from a
rise in the market value of the Common Stock, with a resulting dilution in the
interest of the other stockholders of the Company. The holder or holders of the
Underwriters' Warrants can be expected to exercise them at a time when the
Company would, in all likelihood, be able to obtain any needed capital from an
offering of its unissued Common Stock on terms more favorable to the Company
than those provided for in the Underwriters' Warrants. Such factors may
adversely affect the terms on which the Company can obtain additional financing.
To the extent that the Underwriters realize any gain from the resale of the
Underwriters' Warrants or the securities issuable thereunder, such gain may be
deemed additional underwriting compensation under the Securities Act.

Determination of Offering Price

Prior to this Offering, there has been no public market for the
securities offered and there can be no assurance that a regular trading market
will develop upon completion of the Offering. Consequently, purchasers of the
Units may not find a ready market for the sale of their securities. The initial
public offering price for the Units will be determined by negotiation between
the Company and the Underwriters. The factors to be considered in determining
the initial public offering price include the Company's revenue growth since its
organization, the industry in which it operates, the Company's business
potential and earnings prospects and the general condition of the securities
markets at the time of the Offering. The initial public offering price does not
necessarily bear any relationship to the Company's assets, book value, net worth
or other recognized objective value.

51
<PAGE>

LEGAL MATTERS

Certain matters with respect to the validity of the securities offered
hereby will be passed upon for the Company by Maurice J. Bates, L.L.C., Dallas,
Texas 75225. Certain legal matters will be passed upon for the Underwriters by
Winstead Sechrest & Minick P. C., Dallas, Texas.

EXPERTS

The Consolidated Financial Statements of Butterwings Entertainment
Group, Inc. and Subsidiaries at December 29, 1996 and December 31, 1995 and for
the fiscal years then ended, appearing in this Prospectus, have been audited by
McGladrey & Pullen, LLP, independent accountants, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given on authority of such firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form SB-2 under the Securities Act
with respect to the Units. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits. For
further information with respect to the Company and the Units, reference is made
to the Registration Statement and the exhibits filed as a part thereof.
Statements made in this Prospectus as to the contents of any contract or any
other document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference to such exhibit. The Registration Statement,
including exhibits thereto, may be inspected without charge at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, NW, Washington, DC 20549 and at the regional offices of the
Commission at 7 World Trade Center, 13th Floor, New York, New York 10048 and at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the
Registration Statement and the exhibits thereto may be obtained from the
Commission at such offices upon payment of prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the
Commission. The address of such Web site is http;// www.sec.gov.

The Company is not presently a reporting company. The Company intends to
register the securities offered hereby under the Securities Exchange Act of
1934, as amended, simultaneously with the effectiveness of the Registration
Statement of which this Prospectus is a part. As a result, the Company will
become a reporting Company.

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as the
Company may determine to be appropriate or as may be required by law.

52
<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL REPORT

DECEMBER 29, 1996

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONTENTS

FINANCIAL STATEMENTS

Independent Auditor's Report............................................. F-1

Consolidated Balance Sheets as of December 29, 1996
and December 31, 1995 .................................................. F-2

Consolidated Statements of Operations for the Fiscal Years Ended
December 29, 1996 and December 31, 1995 ................................ F-4

Consolidated Statement of Stockholders' Equity (Deficit) for the
Fiscal Years Ended December 29, 1996 and December 31, 1995 .............. F-5

Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 29, 1996 and December 31, 1995 ................................ F-6

Notes to the Consolidated Financial Statements .......................... F-8

PRO FORMA FINANCIAL STATEMENTS

Pro Forma Consolidated Balance Sheet as
of December 29, 1996 (Unaudited) ...................................... F-26

Pro Forma Consolidated Statements of Operations
for the Fiscal Year Ended December 29, 1996 (Unaudited) ............... F-28

Pro Forma Consolidated Statements of Operations
for the Fiscal Year Ended December 31, 1995 (Unaudited) .............. F-29

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Butterwings Entertainment Group, Inc. and Subsidiaries
Hoffman Estates, Illinois

We have audited the accompanying consolidated balance sheets of Butterwings
Entertainment Group, Inc. and subsidiaries as of December 29, 1996, and December
31, 1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit 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 financial position of Butterwings

Entertainment Group, Inc. and Subsidiaries as of December 29, 1996 and December
31, 1995, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 20 to the
financial statements, the Company has suffered recurring losses from operations,
is in default on its debt, and its total liabilities exceed its total assets.
This raises substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in Note 20.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

Schaumburg, Illinois /s/McGladrey & Pullen, LLP
March 6, 1997.

F-1

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 29, December 31,
------------ ------------
1996 1995
---- ----
ASSETS

Current Assets
Cash .............................................. $ 534,072 $ 774,157
Accounts receivable ............................... 3,137 70,736
Inventories ....................................... 118,647 139,605
Prepaid expenses .................................. 46,032 55,823
Assets available for sale ......................... -- 62,500
Income tax receivable ............................. 17,925 8,700
---------- ----------

Total current assets .......................... 719,813 1,111,521
---------- ----------

Leasehold Improvements and Equipment
Leasehold improvements ............................ 1,898,818 1,771,947
Equipment ......................................... 1,034,568 1,175,620
---------- ----------
2,933,386 2,947,567

Less accumulated depreciation and amortization ...... 619,141 258,534
---------- ----------
2,314,245 2,689,033
---------- ----------

Deferred Income Taxes ............................... -- 17,150
---------- ----------

Other Assets
Initial public offering expenses .................. 240,408 --
Deposits .......................................... 124,437 126,088
Franchise costs, net of accumulated amortization
of $52,341 and $23,415 respectively ........... 497,659 746,585
Finance costs, net of accumulated amortization
of $194,213 and $121,719, respectively ........ 309,740 382,234
Organization costs, net of accumulated amortization
of $15,859 and $7,035, respectively ........... 26,011 34,835
Goodwill, net of accumulated amortization
of $79,320 and $18,890, respectively .......... 839,242 899,672
Bridge loan financing costs net of
accumulated amortization of $206,831 .......... 434,646 --
---------- ----------

$5,506,201 $6,007,118
========== ==========

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

F-2

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

<TABLE>

CONSOLIDATED BALANCE SHEETS
<CAPTION>

December 29, December 31,
------------ ------------
1996 1995
---- ----

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt ........................ $ 4,288,063 $ 59,574
Due to parent ............................................... 134,469 43,006
Accounts payable ............................................ 390,149 461,372
Accrued liabilities ......................................... 694,754 383,797
Income taxes payable ........................................ -- 17,150
----------- -----------

Total current liabilities ............................... 5,507,435 964,899
----------- -----------

Long-term debt, less current maturities ....................... 128,721 3,959,515
Store closing expense ......................................... 393,000 --
----------- -----------
521,721 3,959,515
----------- -----------

Redeemable Preferred Stock of subsidiary,
$100 par value, 100,000 authorized,
16,900 and 16,650 shares
issued and outstanding, respectively .................... 1,690,000 1,665,000
----------- -----------

Stockholders' Equity (Deficit)
Preferred Stock no par value, 27,500 shares of
10% convertible preferred stock
authorized, 15,685 and 12,660 shares,
issued and outstanding, respectively ................... 1,568,500 1,266,000
Common stock, $0.01 par value, 10,000,000 shares
authorized, 2,152,047 and 1,947,600 shares
issued and outstanding, respectively ................... 21,520 19,476
Capital in excess of par value .............................. 1,564,979 595,523
Unearned compensation expense ............................... (127,000) --
Accumulated deficit ......................................... (5,240,954) (2,463,295)
----------- -----------
(2,212,955) (582,296)
----------- -----------
$ 5,506,201 $ 6,007,118
=========== ===========

</TABLE>

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

F-3

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Fiscal Years Ended
--------------------------
December 29, December 31,
------------ ------------
1996 1995
---- ----

Sales ......................................... $ 8,551,033 $ 7,730,956

Costs and expenses:
Cost of products sold ...................... 2,454,078 2,316,341
Salaries and benefits ...................... 2,472,022 2,147,595
Other operating costs ...................... 2,911,454 2,525,486
Depreciation and amortization .............. 479,840 256,142
Pre-opening costs .......................... -- 153,334
General and administrative expenses ........ 996,200 566,918
Write off of franchise fee options ......... 145,000 --
Provisions for losses on leased
property ................................ 927,148 145,000
Loss on impairment of assets ............... -- 159,474
------------ ------------
Total costs and expenses ................ 10,385,742 8,270,290

Operating (Loss) ........................ (1,834,709) (539,334)
------------ ------------

Financial income (expense):
Interest income ............................ 17,963 25,499
Interest expense ........................... (493,279) (480,958)
Amortization of finance costs .............. (279,324) (72,493)
------------ ------------

(754,640) (527,952)
------------ ------------
Net (Loss) (Income taxes $0 for all
periods presented) before redeemable
preferred stock dividends of
subsidiary ............................. (2,589,349) (1,067,286)
------------ ------------

Redeemable preferred stock dividends of
subsidiary ............................. (167,910) (86,388)
------------ ------------

Net (Loss) .................................... $ (2,757,259) $ (1,153,674)
============ ============

Net (loss) per common share ................... $ (1.23) $ (.51)
============ ============

Weighted average number of
shares outstanding ......................... 2,250,736 2,250,736
============ ============

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

F-4

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>

Unearned Total
Preferred Common Compensation Accumulated Stockholders'
Stock Stock Expense Deficit Equity (Deficit)
----- ----- ------- ------- ----------------

In
Par Excess
Value Of Par
----- ------

<S> <C> <C> <C> <C> <C> <C>
Balance, December 25, 1994 $ - $ 21,640 $ 528,360 $ - $ (880,663) $(330,663)

Issuance of subsidiary
common stock - - 15,000 - - 15,000
Sale of 12,660 shares of
preferred stock 1,266,000 - - - (212,960) 1,053,040
Issuance costs related to
redeemable preferred stock - - - - (200,998) (200,998)
Redemption of 216,400 shares
of common stock - (2,164) 2,163 - - (1)
Contributed services - - 50,000 - - 50,000
Common stock dividends
of subsidiary - - - - (15,000) (15,000)
Net (loss) - - - - (1,153,674) (1,153,674)
----------- ----------- ----------- ----------- ----------- -----------

Balance, December 31, 1995 1,266,000 19,476 595,523 - (2,463,295) (582,296)

Issuance costs related to
redeemable preferred stock - - - - (2,250) (2,250)
Sale of 3,025 shares of
preferred stock 302,500 - - - (18,150) 284,350
Sale of 204,444 shares of common
stock - 2,044 127,956 - - 130,000
Stock options-compensation costs - - 150,000 (127,000) - 23,000
Contributed services - - 100,000 - - 100,000
Bridge loan warrants - - 591,500 - - 591,500
Net (loss) - - - - (2,757,259) (2,757,259)
----------- ----------- ----------- ----------- ----------- -----------

Balance, December 29, 1996 $ 1,568,500 $ 21,520 $ 1,564,979 $ (127,000) $(5,240,954) $(2,212,955)
=========== ========= =========== =========== ============ ============

</TABLE>

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

F-5

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Fiscal Years Ended
--------------------------
December 29, December 31,
------------ ------------
1996 1995
---- ----

Cash Flows from Operating Activities:

Net (loss) .................................... $(2,757,259) $(1,153,674)
Adjustments to reconcile net (loss)
to net cash (used in) operating activities:
Depreciation and amortization .............. 768,596 334,240
Provisions for losses on leased property ... 927,148 145,000
Contributed Services ....................... 100,000 50,000
Write off of franchise fees and options .... 145,000 --
Loss on impairment of asset ................ -- 159,474
Deferred income taxes ...................... -- (17,150)
Compensation expenses - stock options ...... 23,000 --
Changes in operating assets and liabilities:
Accounts receivable ..................... 67,599 (61,172)
Inventories ............................. 20,958 78,531
Prepaid expenses ........................ 9,791 (53,683)
Income tax deposits ..................... 7,925 25
Income taxes payable .................... (17,150) 17,150
Accounts payable ........................ (71,223) 124,604
Accrued liabilities ..................... 103,957 216,215
Due to parent ........................... 91,463 (753)
----------- -----------
Net cash (used in) operating activities ....... (580,195) (161,193)
----------- -----------

Cash Flows from Investing Activities:
Acquisition of stores net of $1,500 of cash
acquired (includes assets available for
sale of $62,500) ........................ -- (2,199,548)
Deposits ................................... 1,652 5,718
Organizational costs ....................... -- (30,032)
Leasehold improvements and equipment ....... (268,452) (591,034)
Franchise costs ............................ -- (35,000)
Collection of receivable from lessor ....... -- 100,000
Disposition of assets available for sale ... 62,500 --
----------- -----------
Net cash (used in) investing activities ....... $ (204,300) $(2,749,896)
----------- -----------

Continued on page F-7

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

F-6

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued from page F-6)

For the Fiscal Years Ended
--------------------------
December 29, December 31,
------------ ------------
1996 1995
---- ----
Cash Flows from Financing Activities:
Borrowing from franchisor ..................... $ -- $ 600,000
Payments on borrowings from franchisor ........ -- (600,000)
Borrowings from sole stockholder .............. 100,000 500,000
Payments on borrowings from sole stockholder .. (100,000) (500,000)
Proceeds from long-term debt .................. -- 25,000
Payments of long-term debt .................... (85,305) (48,723)
Proceeds from sale of common stock ............ 130,000 15,000
Redemption of common stock .................... -- (1)
Proceeds from issuance of preferred
stock, net ................................. 307,100 2,517,042
Proceeds from bridge loans .................... 483,000 --
Bridge loan commissions ....................... (49,977) --
Payments of prepaid initial public offering
expense (240,408) Dividends paid on common
stock of subsidiary ........................ -- (15,000)
----------- -----------
Net cash provided by financing activities ........ 544,410 2,493,318
----------- -----------

Net (decrease) in cash ........................... (240,085) (417,771)
Cash:
Beginning of period ........................... 774,157 1,191,928
----------- -----------
Ending of period .............................. $ 534,072 $ 774,157
=========== ===========

Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest ................................... $ 187,814 $ 480,295
=========== ===========

Supplemental Schedule of Non Cash Investing and
Financing Activity
Capital Lease Obligations
Incurred for Purchase of Equipment ......... $ 203,164
===========

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

F-7

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 1. Nature of Business and Significant Accounting Policies

Butterwings Entertainment Group, Inc. (Butterwings) was formed July 29, 1993,
and incorporated in the State of Illinois. Operations commenced in 1994.
Butterwings is a 90.5% owned subsidiary of New Era Management Corporation
(parent). Butterwings entered into franchise agreements with Hooters of America,
Inc. by which Butterwings received the right to establish and operate
restaurants in Wisconsin and Southern California. During 1994 Butterwings opened
three Hooters restaurants as follows: one in April, one in September and another
in December. A fourth restaurant opened in May, 1995 and was closed in September
1996 (see Note 11). Butterwings also acquired a Mrs.
Fields cookie store in 1995.

On October 18, 1996, Butterwings acquired 100% of the outstanding common stock
of Cookie Crumbs, Inc. (CCI) (wholly owned by a stockholder of Butterwings and
the parent) for $1. The transaction was accounted for as an exchange of common
stock between entities under common control. This resulted in assets being
transferred at historical cost and accounting similar to a pooling. The
consolidated financial statements have been restated to include the results of
operations as if the transaction occurred upon incorporation of CCI. CCI was
formed May 17, 1995, and incorporated in the State of Illinois. CCI was formed
to acquire and operate a minimum of six cookie store facilities which meet the
plans and specifications for franchised Mrs. Fields Cookie Stores in the St.
Louis, Missouri area. In October 1995, CCI acquired six existing franchised Mrs.
Fields cookie stores in Minnesota. These six stores were transferred to
Butterwings at historical cost effective January 1, 1996. Included in the
Statement of Operations are net losses for CCI of $(297,218) and $(211,552) for
the fiscal years ended December 29, 1996 and December 31, 1995, respectively.
There were no adjustments to income.

Significant accounting policies are as follows:

Principles of Consolidation: The financial statements include the accounts and
results of operations of Butterwings and its wholly-owned subsidiaries,
Butterwings of Wisconsin, Butterwings of California and CCI, collectively
referred to as the Company. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Fiscal Year: The Company's fiscal year is the 52/53-week period ending on the
last Sunday in December. The first quarter consists of four, four-week periods
and each of the remaining three quarters consists of the three, four-week
periods, with the first, second, and third quarters ending 16 weeks, 28 weeks,
and 40 weeks, respectively, into the fiscal year.

The financial statements presented for the fiscal years ended December 29, 1996
and December 31, 1995 are comprised of 52 and 53 weeks, respectively.

F-8

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 1. Nature of Business and Significant Accounting Policies(continued)

Concentration of Cash: The Company had approximately $283,000 at two financial
institutions and $533,000 at two financial institutions on deposit at December
29, 1996 and December 31, 1995, respectively.

Inventories: Inventories consisting of food, beverages, and novelty items, are
stated at the lower of cost or market on a first-in, first-out basis. Cost is
determined by the actual invoice price.

Leasehold Improvements and Equipment: Leasehold improvements and equipment are
carried at cost and are depreciated using the straight-line method over the
estimated useful lives of the assets. In general, the assets have the following
lives:

Leasehold improvements over lease term (not to exceed 8 years)
Equipment 3 years used/8 years new

Depreciation of these assets coincides with each restaurant's or store's
commencement of operations or purchase. Amortization on leased assets is
included with depreciation and amortization on owned assets.

Franchise Costs: Franchise costs represent payments made for the rights to
operate either restaurant facilities or cookie stores meeting the plans and
specifications of the respective franchisor. Franchise costs for a restaurant
are amortized to expense using the straight-line method over a 20-year period
commencing with the opening of the restaurant. Franchise costs for a cookie
store are amortized to expense using the straight-line method over a 15-year
period commencing with the purchase of the cookie store.

Finance Costs: Finance costs represent legal, accounting, regulatory and blue
sky expenses, printing costs, expense reimbursements and commissions paid to
brokers in connection with the issuance of Secured Promissory Notes. These costs
are amortized to expense using the straight-line method over a seven-year period
coinciding with the life of the notes.

Organization Costs: Organization costs are one-time costs related to the
formation of Butterwings and its subsidiaries which are being amortized to
expense using the straight-line method over a five-year period commencing with
the opening of the first restaurant or cookie store for each entity.

F-9

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 1. Nature of Business and Significant Accounting Policies (continued)

Goodwill: The Company has classified as goodwill the cost in excess of fair
value of the net assets of the cookie stores acquired in purchase transactions.
Goodwill is being amortized on a straight-line method over 15 years commencing
with the purchase of the stores.

Offering Expenses: Offering expenses incurred by Butterwings in connection with
the issuance of non-redeemable convertible preferred stock have been charged to
accumulated deficit as there is no preferred capital in excess of par value.
Offering expenses incurred by CCI in connection with the issuance of preferred
stock have been charged directly to accumulated deficit because the preferred
stock is redeemable. Offering expenses include legal, accounting, escrow,
regulatory and blue sky expenses, printing costs, expense reimbursements and
commissions paid to brokers.

Impairment of Long Lived Assets: Long lived assets are evaluated for impairment
based on a periodic analysis of cash flows on a location by location basis.

Accounting Estimates: 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 at
the date of the financial statements and the reported amounts of income and
expenses during the reporting year. Actual results could differ from those
estimates.

Financial Instruments: The Company has no financial instruments for which the
carrying value differs from fair value.

Income Taxes: Butterwing's results for the entire year are included in the
parent's consolidated tax return. CCI is not part of the consolidated group for
tax purposes. Intercorporate tax allocation practices adopted by Butterwings and
its parent provide that to the extent the Company has income, taxes related to
such income will be reflected in the Company's financial statements and paid by
the Company. The tax benefit of losses, if any, will be reflected in the
Company's financial statements and paid to the Company by the parent if: a) the
Company would otherwise be entitled to such benefits if it were filing a
separate tax return, b) the parent has received benefit of such losses on a
consolidated basis, and c) the Company continues to be included in the parent's
consolidated tax return. If the Company is no longer part of the parent's
consolidated tax return, then the Company will receive no benefit of its losses
used by the parent on a consolidated tax return basis.

F-10

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 1. Nature of Business and Significant Accounting Policies (continued)

Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.

Stock Compensation: During October 1995, the FASB issued FAS 123, Accounting for
Stock-Based Compensation. FAS 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans (See Note 17) and also
applies to transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees (See Note 2). FAS 123 is effective
for transactions entered into in fiscal years beginning after December 15, 1995.
The Company has adopted the provisions of FAS 123 for non-employee stock
transactions and has elected to apply APB opinion No. 25 for its stock
compensation plan.

Per Share Data: Net (loss) per common share is calculated based on the weighted
average number of shares of common stock outstanding. The weighted average
number of shares has been adjusted to reflect as outstanding, for each period
presented using the treasury stock method at the estimated initial public

offering (IPO) price ($6.50 per share), the 204,444 shares issued in September,
1996 (See Note 16), all shares issuable upon the exercise of stock options
subsequent to December 29, 1996, and bridge loan shares to be issued in
conjunction with the IPO (See Note 2).

Reclassification: Certain items for the 1995 financial statements have been
reclassified to conform with the 1996 presentation.

F-11

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 2. Long-Term Debt

Long-term debt consists of the following at
December 29, December 31,
------------ ------------
1996 1995
---- ----
Secured promissory notes ..................... $3,700,000 $3,700,000 (a)
Bridge loan .................................. 483,000 --
Capitalized equipment leases ................. 233,784 319,089
----------
Total long-term debt .................... 4,416,784 4,019,089
Current maturities ...................... 4,288,063 59,574
----------
Long-term debt, net of current maturities $ 128,721 $3,959,515
========== ==========
(a) Long term at December 31, 1995

Secured Promissory Notes issued in May 1994 mature April 2001, bear interest at
12% per annum, are collateralized by all assets of Butterwings, and until
retired entitle the note holders to receive 5% of the pre-tax profits of
Butterwings (none as of December 29, 1996). The notes provide for monthly
payments of interest only from date of issuance for 48 months and thereafter, 36
equal monthly payments of principal and interest. The Secured Promissory Notes
may be prepaid by Butterwings at any time at a redemption price of 103% of face
value. The notes are secured senior obligations of Butterwings and rank senior
to all existing and future unsecured indebtedness of Butterwings provided,
however, that Butterwings may issue additional debt instruments through private
or public debt offerings for the purpose of opening Hooters restaurant
franchises in which the additional debt will rank equal to the notes. The notes
contain covenants which may limit the incurrence of additional debt, the payment
of dividends, the making of other distributions, and the ability to enter into
certain transactions with affiliates or merge, consolidate or transfer

substantially all of the assets of Butterwings.

On May 1, 1996, payments of interest on the Secured Promissory Notes were
suspended to conserve cash for operating purposes. Per the agency agreement for
the Secured Promissory Notes, an event of default occurs upon failure by
Butterwings to pay interest on the notes when it becomes due and payable and the
continuance of such failure for 90 days. If an event of default occurs and is
continuing, the noteholders' agent by notice to Butterwings, or the noteholders
of at least 25% of the principal amount of the notes by notice to Butterwings
and the agent, may declare the notes and accrued interest to be due and payable
immediately. As of March 6, 1997 Butterwings has not received notice of
acceleration from either the noteholders' agent or the noteholders. The notes
have been classified as current liabilities as of December 29, 1996 and as of
this date, accrued and unpaid interest on these notes is $330,964. (See Note
18.)

F-12

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 2. Long-Term Debt (continued)

From October 1996 through December 1996, the Company has received $483,000 in
bridge loan financing from a group of lenders. These borrowings bear interest at
the LIBOR rate and are due on the earlier of the close of the Company's initial
public offering (IPO) (see Note 18) or nine months from the date of issuance. In
conjunction with this financing, the Company will issue as compensation to the
lender ninety one thousand (91,000) shares of the Company's common stock to be
sold in conjunction with the Company's IPO. The compensation of $591,500 (91,000
shares at $6.50 per share) has been recognized as deferred financing cost and as
additional capital in excess of par value at December 29, 1996. This deferred
charge and other financing costs of $49,977 are being charged to operations over
the estimated life of the bridge loan.

Various equipment with a cost of $376,210 and accumulated amortization of
$78,700 at December 29, 1996 and $33,596 at December 31, 1995 is recorded under
capital leases. The capitalized leases provide for 36 to 60 equal monthly
payments including imputed interest at 12% per annum. Upon maturity, ownership
of the equipment is transferred to the Company. The leases are subordinate to
the Secured Promissory Notes described above. Future lease payments for capital
leases are as follows:

As of
-----
December 29, December 31,
------------ ------------
1996 1995
---- ----

Fiscal years ending:
1996 $ - $ 124,786
1997 128,676 128,670
1998 108,164 94,483
1999 39,400 39,400
---------- ---------
276,240 387,339

Less amount representing interest 42,456 68,250
---------- ---------
$ 233,784 $ 319,089
========== =========

F-13

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 3. CCI Redeemable Preferred Stock Offering

From June 20, 1995 to January 25, 1996, CCI offered through a private placement
a maximum of $4,000,000 of its 10% participating preferred stock at an offering
price of $100 per share exclusively to accredited investors. The redemption
price of the preferred stock equals its par value plus any accrued and unpaid
dividends and can be redeemed at any time after January 31, 1998, at the option
of the Investor during any fiscal year in which CCI under certain conditions has
net income in excess of required dividend distributions, including unpaid
cumulative regular dividends, provided, however, that CCI has no obligation to
apply more than 25% of its net income (adjusted as aforesaid) for its prior
fiscal year towards the redemption of any shares so surrendered for redemption.
Similarly, at any time after January 31, 1998, the preferred stock is
redeemable, in whole or in part, at the option of CCI under certain conditions,
for an amount equal to the redemption value plus 3% of the offering price of
such shares. In the event of a sale of substantially all of the assets and
liquidation of CCI, the liquidation value of the preferred stock is equal to the
redemption price plus, pro rata, 10% of the proceeds from the sale up to 8% of
the par value. Holders of the shares will be entitled to receive, to the extent
declared by CCI's Board of Directors, noncompounded, cumulative dividends in an
amount equal to 10% per annum of the offering price of the shares. In addition,
holders of shares will be entitled to receive, to the extent declared by CCI's
Board of Directors, on a pro rata basis, an additional dividend (Participating
Dividend) in respect of each fiscal year of CCI in an amount equal to 10% of
CCI's net income for such year determined in accordance with generally accepted
accounting principles provided, however, in no event shall the Participating
Dividend, if any, exceed 8% of the Offering Price. The Participating Dividend
shall be noncumulative and noncompounded. The shares have no voting rights.

CCI paid $201,748 of costs and expenses in connection with this offering. A
total of $1,690,000 ($1,488,252 net of expenses) was raised through this
offering.

F-14

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 4. Non-redeemable Preferred Stock Offering

From September 25, 1995 to March 13, 1996, Butterwings sold $1,568,500
($1,337,390 net of offering expenses) of its 10% Convertible Preferred Stock
through a private placement at a price of $100 per share to accredited
investors. The shares are non redeemable and have no voting rights. Holders of
the shares will be entitled to receive, to the extent declared by Butterwings'
Board of Directors, non-compounded, cumulative dividends in an amount equal to
10% per annum on the offering price of the shares. Each share is convertible
into shares of Butterwings' common stock upon the consummation of the first sale
of common stock by Butterwings to underwriters for the account of Butterwings
pursuant to a registration statement under the 1933 Act filed with and declared
effective by the Securities and Exchange Commission (see Note 18). The number of
shares of common stock to be issued to each holder of the preferred stock upon
conversion will be determined by dividing the offering price of the preferred by
an amount equal to 95% of the sale price per share of common stock at the time
of the initial public offering.

Butterwings paid a commission to the selling agent of 6% of the gross proceeds
of each of the shares sold. In addition, expenses of approximately $137,000 were
incurred in connection with this offering.

Note 5. Lease Commitments

The Company leases a number of facilities under non cancelable leases ranging
from four to ten years. Most of these leases contain renewal options which can
extend the lease from ten to fifteen years. Some of these leases contain
escalation clauses to cover future operating cost increases while other leases
provide for a percentage of gross sales in excess of minimum levels. The minimum

levels were not met for the fiscal years ended December 29, 1996 and December
31, 1995.

Several of these leases have been guaranteed by the parent. In
connection with the rental of one facility, an irrevocable letter of credit in
the amount of $83,000 has been issued by a financial institution on behalf of
the Company securing payment of future rent. The letter of credit is
collateralized by an interest-bearing deposit of $83,000. All of the leases
require the Company to pay real estate taxes, insurance and maintenance on the
respective properties.

The leases for the cookie stores also provide the lessor
with the ability to charge an additional percentage rent for general advertising
costs.

F-15

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 5. Lease Commitments (continued)

Future minimum rentals under these leases are as follows:

As of
-----
December 29, December 31,
------------ ------------
1996(a) 1995
------- ----
Fiscal years ending:
1996 $ -- $ 944,564
1997 796,591 984,704
1998 812,996 1,008,148
1999 645,936 814,284
2000 591,485 510,739
Subsequent years 872,442 1,576,785
---------- ----------
$3,719,450 $5,839,224
========== ==========

(a) Excludes amounts related to leased properties discussed in
Notes 10 and 11.

The total rent expense included in the statements of operations is approximately
$1,048,000 and $515,000 for the fiscal years ended December 29, 1996 and
December 31, 1995, respectively.

Note 6. Franchise Agreements

The Company operates under franchise agreements with each franchisor. In
addition to an initial franchise fee for each location, the Company is required
to pay the respective franchisor additional fees for royalties and advertising
based on a percentage of sales. These fees totalled $487,449 and $486,266 for
the fiscal years ended December 29, 1996 and December 31, 1995 respectively. The
franchise agreement also provides that all cookie materials be purchased from
one vendor specified in the agreement.

F-16

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 7. Deferred Income Taxes

The Company accounts for deferred income taxes under the liability method. As
explained in Note 1, the liability method requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary
differences between the reported amounts of assets and liabilities and their tax
bases. The sources of these differences as of December 29, 1996 and December 31,
1995 and the tax effect for each were as follows:

December 29, December 31,
------------ ------------
1996 1995
---- ----
Deferred tax assets:
Loss on impairment of assets ....... $ 279,140 $ 63,790
Other assets ....................... 121,744 142,708
Tax credit carryforwards ........... 95,516 93,897
Accrued expenses ................... 40,000 58,000
Net operating loss carryforwards ... 1,391,030 567,258
----------- -----------

1,927,430 925,653

Valuation allowance ................ (1,805,642) (805,212)
----------- -----------

121,788 120,441
Deferred tax liability:
Leasehold improvements and equipment 121,788 103,291
----------- -----------

$ -- $ 17,150
=========== ===========

No income taxes are reflected on the Statement of Operation for the year ended
December 31, 1995 as they have been eliminated by an increase in the valuation
allowance of approximately $468,000. Reconciliation of income tax expense
computed at the statutory federal income tax rate to the Company's income tax
expense is as follows:

December 29, 1996
-----------------

Computed "expected' tax expense $(880,379)

Increase (decrease) in income taxes resulting from:
Non deductible expenses 30,888
Lower bracket taxes (4,303)
State income taxes, net of federal tax benefit (140,009)
Tax credit generated (15,233)
Valuation allowance 1,000,430
---------
$ 0
============

F-17

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 7. Deferred Income Taxes (continued)

The Company has net operating loss carryforwards of approximately $3,470,000 of
which $2,140,000 have been or are expected to be utilized in the parent's
consolidated tax return. As discussed in Note 1, once the Company's IPO becomes
effective (See Note 18) the Company will receive no benefit from the $2,140,000
of tax losses which have been utilized on a consolidated basis. The remaining
$1,330,000 of net operating loss carryforwards that have not been utilized in
the parent's consolidated tax return may be utilized by the Company until their
expiration in 2011. After the IPO, the net operating loss amount available for
use each year may be limited if ownership changes by more than 50%. CCI files a
separate tax return and has net operating loss carryforwards of $286,000 which
expire 2011.

Note 8. Related Party Transactions

The Company pays a monthly amount to the parent for ongoing rent and accounting
services.Total charges by the parent to the Company were $246,619 for the
fiscal year ended December 29, 1996 and $138,524 for the fiscal year ended
December 31, 1995. At December 29, 1996 and December 31, 1995, the amounts due
the parent were $134,469 and $43,006, respectively. Management believes services
being provided from the parent are at fair value. Beginning in October 1996, all
activities and costs related to accounting services have been incurred directly
by the Company.

In connection with a private placement of CCI preferred stock, a company related
through common ownership was used to provide financial advisory and investor
relations services for a charge of 3% of gross proceeds raised by the offering.
Total charges by the related company in connection with the offering were
approximately $50,000.

Note 9. Purchase of Franchised Cookie Stores

In two separate purchase transactions during the fiscal year ended December 31,
1995, CCI entered into a purchase and franchise agreement with Mrs. Fields
Development Corporation by which CCI acquired thirteen operating cookie stores
for $1,836,375 cash. Six of these cookie stores were subsequently sold to
Butterwings on January 1, 1996 at CCI's historical cost.

F-18

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 9. Purchase of Franchised Cookie Stores (continued)

In October 1995, Butterwings entered into a purchase and franchise agreement
with Mrs. Fields Development Corporation by which Butterwings purchased one
existing cookie store in Flint, Michigan for $364,673 cash.

The aggregate assets acquired were as follows:
Cash $ 1,500
Deposits 8,916
Inventory 36,500
Equipment and leaseholds 888,869
Franchise fees 350,000
Goodwill 915,263
----------
$2,201,048
==========

These transactions were accounted for using the purchase method of accounting
and therefore the purchase price was allocated to the assets acquired based on
their fair market values. The financial statements include the results of
operation of the acquired business since the date of acquisitions.

Note 10. Provision for Loss on Leased Property

During 1995, the Company provided a $145,000 allowance for loss on leased
property which the Company no longer planned to develop. The allowance
represents management's estimate of loss, including loss on purchased leasehold
improvements, carrying costs, and commissions. During September 1996, the
Company executed a sublease whereby the sublessee will pay substantially all
amounts due under the original lease agreement for the remaining lease term.
Under certain conditions, the sublessee may terminate the lease in September
1998 causing the Company to be liable for the remaining rentals of $5,184 per
month through September 30, 2003, equivalent to $311,040. During 1996 the

Company provided an additional $50,000 to the allowance for loss. The remaining
provision at December 29, 1996 is $168,523.

Note 11. Provision for Restaurant Closing

During first quarter 1996, the Company recognized a long lived asset charge of
$327,148 related to one of its Hooters restaurants. A loss was recognized for
the carrying amount of the equipment, building improvements, and franchise fee
related to the restaurant. In addition, a $100,000 provision was established for
probable future expenses primarily related to vacating the lease of this
location.

F-19

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 11. Provision for Restaurant Closing (continued)

During the third quarter of 1996, the Company closed the restaurant and entered
into an agreement with the landlord to vacate the lease agreement. Under the
terms of the agreement, were surrender to the landlord all leasehold
improvements and equipment housed at the site and the Company is obligated to
pay the landlord $4,750 per month from August 1, 1996 through June 30, 2005.
Accordingly, the Company recorded an additional provision of $450,000 to provide
for the settlement and all costs and expenses associated with the closing of the
site. The remaining provision at December 29, 1996 is $529,327.

Note 12. Write off of Franchise Fee Options

During third quarter 1996, the Company recognized a charge to operations of
$145,000 for the franchise fee options paid in contemplation of building
additional Hooters restaurants. This write down was recorded because, under
existing agreements with Hooters, the Company may have no options to build
additional restaurants.

Note 13. Disposal of Assets

On October 26, 1996, CCI sold a cookie store for $62,500 to an unrelated party.
Since the carrying value of the assets of this store at December 31, 1995 were
$221,974, a loss on impairment of assets of $159,474 has been recognized in the
Statement of Operations for the period ending December 31, 1995. Also included
in the Statement of Operations for the periods ending December 31, 1995 and
December 29, 1996, are sales of $74,279 and $141,812, respectively, and income
(loss) from operations of $74 and $(14,146), respectively, attributable to this
store.

Note 14. Contributed Services of Officers

The Company's officers have not received compensation for services provided by
them since inception of the Company. Accordingly, in order for the financial
statements to reflect reasonable compensation levels, capital contributions of
$100,000 for the fiscal year ended December 29, 1996 and $50,000 for the fiscal
year ended December 31, 1995 have been recorded to reflect the fair market value
of such services. Offsetting amounts have been included in general and
administrative in the accompanying statements of operations.

F-20

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 15. Changes in Authorized and Issued Common Stock

In October, 1996, the Company changed its common stock, no par value, 1,000
shares authorized to a par value of $.01 per share with 10,000,000 shares
authorized. In connection with this change, 21,640 shares of the new common
stock were issued for each share of the old common stock outstanding. This
change has been retroactively reflected in the accompanying financial
statements.

Note 16. Sale of Common Stock

As a result of an option issued by the Company on July 11, 1996, 204,444 shares
of common stock were sold to an independent investor for $130,000 in September
1996.

Note 17. Stock Compensation Plan

The 1996 Stock Compensation Plan ("Plan") was approved by stockholders of
Butterwings on November 14, 1996. Accordingly, there will be reserved for the
use upon the exercise of options to be granted from time to time under the Plan,
an aggregate of two hundred thousand (200,000) shares of common stock, $.01 par
value, which shares in whole or in part shall be authorized, but unissued,
shares of common stock or issued shares of common stock which shall have been
reacquired by Butterwings as determined from time to time by the Board of
Directors of Butterwings. On November 14, 1996, the Board of Directors approved
the grant of 100,000 shares to employees, officers and directors at a price of
$5.00 per share which become exercisable one year from date of grant and expire
ten years from the date of grant.

The Company has elected to apply APB Opinion No. 25 and related interpretations
in accounting for its plan. Currently Butterwings anticipates selling its common
stock at a price of $6.50 per share in an initial public offering in 1997 (see
Note 18). Accordingly, compensation has been recognized in the accompanying
financial statements by charging general and administrative $23,000 for the
fiscal year ended December 29, 1996 and recording additional capital in excess
of par value of $150,000 offset by unearned compensation expense of $127,000 in
stockholders' equity (deficit) at December 29, 1996.

F-21

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 17. Stock Compensation Plan (continued)

Had compensation cost for the employee stock transactions been determined
consistent with FASB statement of Financial Accounting Standards No. 123 (FAS
123) the Company's net (loss) applicable to common stockholders and net (loss)
per common share would have been reduced to the pro forma amounts indicated
below:

Net (loss) applicable to common stockholders , as reported $(2,757,259)
Pro forma $(2,796,259)
Net (loss) per common share as reported $( 1.23)
Pro forma $( 1.24)

Under the plan, the exercise price of the options is $5.00 per share and the
market price of Butterwings' stock on the date of grant was estimated to be
$6.50 per share. For purposes of calculating the compensation cost consistent
with FAS 123, the fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in fiscal 1996: (a) dividend yield of 0 for
all years, (b) expected volatility of 22%, (c) risk free interest rates of 6.5%,
and (d) expected life of ten years. Additional information on shares subject to
options is as follows:

Forfeited 0
Outstanding at the end of the year 100,000
Options exercisable at year end 0
Weighted average fair value of options granted
during the year $4.01 per share

Note 18. Public Offering

The Company has executed letters of intent with underwriters to file a
Registration Statement on Form SB-2 with the Securities and Exchange Commission
to offer approximately $6.5 million of its common stock in an IPO. Expenses
related to the IPO of $240,408 at December 29, 1996 will be charged against
proceeds from the IPO. In connection with the IPO, the Company intends to issue
warrants to a) the purchasers of shares of the common stock on a one-to-one
basis and b) to the underwriter which will enable the underwriter to acquire
shares of common stock equal to 10% of the shares offered in the IPO. It is
anticipated that the warrants will be exercisable between one and five years
after the IPO at a price equal to 120% of the share price of the IPO.

F-22

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 18. Public Offering (continued)

In conjunction with the IPO, the Company has offered common stock to the
noteholders to obtain conversion of the Secured Promissory Notes (See Note 2) to
equity. The number of common shares offered is equal to 120% of the outstanding
debt and unpaid interest ($344,700 as of March 31, 1997) divided by the IPO per
share offering price of $6.50 per share. Pursuant to the exchange offer dated
January 1997 (Exchange Offer), note holders representing a total of 77.64%
($2,872,500) principal amount of the notes have accepted the Exchange Offer.
Accordingly, the Company will be obligated to issue 593,945 shares of its common
stock to the note holders accepting the exchange concurrently with the IPO. If
the IPO does not occur, the note holders agreeing to the exchange will continue
as holders of the Secured Promissory Notes.

Concurrent with the IPO, the Company's 10% Convertible Preferred Stock will be
converted to common stock in accordance with the original conversion privileges
(see Note 4).

Note 19. Litigation

The Company in the past has been the subject of several charges of employment
discrimination or sexual harassment suits in administrative proceedings in the
Milwaukee, Wisconsin and San Diego, California offices of the Equal Employment
Opportunity Commission (the "EEOC"). In April 1996, the Milwaukee office of the
EEOC advised the Company that it had determined that it would not bring a civil
action against the Company arising out of a charge of employment discrimination
brought by a male person alleging he had been denied employment as a "Hooters
Girl" in violation of Title VII of the Civil Rights Act of 1964 ("Title VII") on
the basis of his sex but that the complainant had the right to bring such an
action in the United States District Court within 90 days. At the date hereof,
the Company has not received notice that any suit has been filed and management
believes that the threat of litigation in this matter is past.

In March 1996, the San Diego office of the EEOC advised the Company that the
complainant in a similar charge failed to establish a claim but that the hiring
practices of one of the Company's San Diego Restaurants, insofar as they
required that only females be hired for "Hooters Girl" positions, were violative
of Title VII. The Company does not believe that this constitutes a significant
threat of litigation in light of the position taken by the EEOC in the federal
matter discussed below. The Company was also charged in a May 1995 proceeding
brought with the Equal Opportunities Commission ("EOC") of Madison, Wisconsin by
a former employee alleging sexual harassment, hostile work environment and
termination on the basis of sex and retaliation for complaints against sexual
harassment. The Company advised the EEOC that it declined to participate in the
administrative process unless the complainant waived her right to sue

F-23

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 19. Litigation (continued)

in federal court because the law firm representing the complainant had filed an
earlier charge on behalf of a waitress at the same Restaurant and as soon as the
180 day waiting period had expired filed suit in federal court. At the date
hereof no decision in this matter has been rendered and the Company is unable to
predict its outcome but intends to defend its position vigorously.

The Company is currently a defendant in a civil action in the United States
District Court for the Western District of Wisconsin filed in May 1996 in a case
alleging discrimination against a female employee on the basis of her sex, for
unlawful retaliation and for punitive damages and restoration to her former
position as a waitress. The Hooters Franchisor has been named as an additional
defendant claiming that the Hooters Franchisor employed the plaintiff. The
district court judge has granted the Company summary judgement on the
retaliation claim. Recently, the Company reached a settlement with the plaintiff
for approximately $85,000 which has been reflected in the accompanying
consolidated financial statements.

In October 1991, the EEOC filed a charge of employment discrimination against
the Hooters Franchisor and all related business entitles generally referred to
as the Hooters restaurant system (collectively "Hooters") including franchisees,
licensees, and any other entity permitted to operate under the Hooters trademark
with unlawful employment practices under Title VII. In September 1994, the EEOC
issued a decision that there was reasonable cause to believe that Hooters
engaged in employment discrimination for failing to recruit, hire or assign men
into server, bartender or host positions. However, in March 1996, the EEOC
advised that the EEOC's general counsel would not recommend that the EEOC file a
lawsuit against Hooters and that this procedure terminated the EEOC's
consideration of litigation against Hooters to challenge its policies.
Accordingly, the Company believes that the likelihood of EEOC action regarding
these policies is remote. However, in the event litigation is commenced by the
EEOC and the EEOC implements its earlier decision, the Company may be required
to implement a gender neutral hiring policy and to pay money damages to men who
were previously discriminated against by Hooter's hiring practices, the effect
of which could have a substantial adverse impact on the Company's business.

In December 1993, a lawsuit was filed against Hooters, Inc. and Hooters of
Orland Park, Inc. in the United States District Court for the Northern District
of Illinois alleging Hooters nation wide policy" of refusing to recruit, hire,
or assign men into server, bartender or host positions violates Title VII. The
plaintiff seeks certification of a plaintiffs' class consisting of all males
who, since April 1992, have applied, were deterred from applying, or may in the
future apply for server, bartender or host positions at any Hooters Restaurant
and for certification of defendant class consisting of all owners of Hooters
Restaurants, licensed,

F-24

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------

Note 19. Litigation (continued)

sublicensed or whose hiring practices are determined directly or indirectly by
Hooters or its affiliates. As of the date hereof, neither the Company nor any of
its affiliates has been served with any notice that a defendant class which
includes any of them has been certified. Accordingly, the Company is unable to
predict the outcome of this matter. However, in the event that a defendant class
including the Company or any of its affiliates is certified, the Company may be
required to implement a gender neutral hiring policy and to pay money damages to
persons who were previously found to have been discriminated against because of
Hooters hiring practices, the effect of both of which could have substantial
adverse impact on the business of the Company.

The Company is currently a defendent in a civil action in the United States
District Court for the Western District of Wisconsin filed in January 1997 in a
case alleging sexual harassment by a manager of the restaurant where she was
employed and termination of her employment as retaliation for complaints made be
her to management. The complaint seeks compensatory and punitive damages, pre-
and post-judgement interest and attorney's fees. The Company has denied the
material allegations of this complaint and intends to defend the suit
vigorously. The suit is in the discovery stage and it is too soon early to
predict the outcome in this matter.

Note 20. Going Concern

The Company has incurred recurring losses and its ability to continue as a going
concern is dependent on several factors. The successful completion of the IPO

discussed in Note 18 is expected to position the Company to continue as a going
concern and to pursue its business strategies.

As discussed in Note 2, the Company is currently in default of the provisions of

the $3,700,000 Secured Promissory Notes and unable to service the notes in
accordance with the original terms. Further, the Bridge Loan Notes are
subordinate to the Secured Promissory Notes. If the IPO does not occur, the
Company will remain in default on the Secured Promissory Notes and in accordance
with the default provisions be prohibited from repaying the Bridge Loan Notes.
In the event the IPO is unsuccessful, the Company will seek alternate sources of
equity or attempt to refinance or renegotiate its debt obligations or it may be
required to seek protection from creditors under the Federal Bankruptcy Code.

F-25

<PAGE>

PRO FORMA FINANCIAL STATEMENTS

The following unaudited consolidated pro forma balance sheets at December 29,
1996 and the statements of operations for the fiscal years ended December 29,
1996 and December 31, 1995 (collectively, the "Proforma Statements") were
prepared to illustrate the estimate effects of the exchange of senior notes for
common stock, the conversion of preferred stock to common stock, the effect of
the bridge loans, and the sale of the shares of common stock offered hereby by
the Company, as if those transactions had occurred for statement of operations
purposes as of January 1, 1995 and for balance sheet purposes as of December 29,
1996. The Pro Forma Statements do not purport to represent what the Company's
results of operations or balance sheet would actually have been if such
transactions had indeed taken place on such dates or to project the Company's
results of operations or balance sheet for any future period or date.

The adjustments for the Pro Forma Statements are based on available information
and upon certain assumptions which management believes are reasonable. The Pro
Forma Statements and accompanying notes thereto should be read in conjunction
with the Financial Statements and notes thereto, and other financial information
appearing elsewhere in this Prospectus.

<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED BALANCE SHEETS
December 29, 1996
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
ADJUSTMENTS PRO FORMA

<S> <C> <C> <C> <C>
Current Assets
Cash $ 534,072 $ 5,540,408 (2)
(483,000) (3) $ 5,591,480
Accounts receivable 3,137 3,137
Inventories 118,647 118,647
Prepaid expenses 46,032 46,032
Income tax receivable 17,925 17,925

----------- -----------
Total current assets 719,813 5,777,221
----------- -----------

Leasehold improvements and Equipment
Leasehold improvements 1,898,818 1,898,818
Equipment 1,034,568 1,034,568
----------- -----------
2,933,386 2,933,386
Less accumulated depreciation and amortization 619,141 619,141
----------- -----------
2,314,245 2,314,245
----------- -----------

Other Assets
Initial public offering expense 240,408 (240,408) (2) -
Deposits 124,437 124,437
Franchise costs, net of accumulated amortization 497,659 497,659
Finance costs, net of accumulated amortization 309,740 (240,467) (1) 69,273
Organization costs, net of accumulated amortization 26,011 26,011
Goodwill, net of accumulated amortization 839,242 839,242
Bridge loan financing costs, net of
accumulated amortization 434,646 (434,646) (5) -
----------- -----------
2,472,143 1,556,622

-----------
$5,506,201 $ 9,648,088
=========== ===========
</TABLE>

(1) Represents write-off of debt issue costs on retirement of
senior notes exchanged for common stock.

(2) Represents the proceeds to the Company from the initial
public offering of $6,500,000 net of $1,200,000 ($240,408
included in other assets) of offering costs.

(3) Represents repayment of bridge loans.

(4) Represents the conversion of Butterwings preferred stock to
common stock at the time of the IPO.

(5) Represents write-off of remaining deferred financing costs
of bridge loans and the related issuance of 91,000 shares of
common stock.

(6) Pursuant to the results of the exchange offer, the Company
will exchange 593,945 shares of its Common Stock for
$2,872,500 principal amount of the Company's 12% notes. The
exchange offer is based upon the principal amount of the
Notes outstanding, accrued interest ($344,700 through March
31,1997), and a 20% premium ($643,440) of the aggregate
principal amount exchanged and related accrued and unpaid
interest. In addition, as a result of the exchange offer,
finance costs of $240,467 at December 29, 1996 related to
the debt exchanged will be written off.

F-26
<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED BALANCE SHEETS
December 29, 1996
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
ADJUSTMENTS PRO FORMA

<S> <C> <C> <C>
Current Liabilities
Current maturities of long term debt $4,288,063 (2,872,500) (6)
(483,000) (3) 932,563
Due to parent 134,469 134,469
Accounts payable 390,149 390,149
Accrued liabilities
694,754 (258,525) (6) 436,229
------- -------
Total current liabilities 5,507,435 1,893,410
--------- ---------

Long term debt, less current maturities 128,721 128,721
Store closing expense 393,000 393,000
--------- -------
Total non current liabilities 521,721 521,721
--------- -------

Preferred Redeemable Stock
no par value;100,000 shares
authorized,16,900 issued and
outstanding 1,690,000 1,690,000

Stockholders' Deficit

Preferred Stock, no par value; 27,500
shares authorized, 15,685 issued and
outstanding and no stock issued and
outstanding on a pro forma basis 1,568,500 (1,568,500) (4) -

Common stock, $.01 par value;10,000,000
shares authorized, 2,152,047
shares issued and outstanding
and 4,091,000 issued and outstanding
on a pro forma basis 21,520 2,540 (4)
910 (5)
10,000 (2)
5,940 (6) 40,910

Capital in excess of par value 1,564,979 1,565,960 (4)
(910) (5)
5,290,000 (2)
3,854,700 (6) 12,274,729

Unearned compensation expense (127,000) - (127,000)

Accumulated deficit (5,240,954) (729,615) (6)
(434,646) (5)
(240,467) (1) (6,645,682)
----------- -----------

(2,212,955) 5,542,957
----------- ---------

$5,506,201 $9,648,088
========== ==========
</TABLE>

(1) Represents write-off of debt issue costs on retirement of
senior notes exchanged for common stock.

(2) Represents the proceeds to the Company from the initial
public offering of $6,500,000 net of $1,200,000 ($240,408
included in other assets) of offering costs.

(3) Represents repayment of bridge loans.

(4) Represents the conversion of Butterwings preferred stock to
common stock at the time of the IPO.

(5) Represents write-off of remaining deferred financing costs
of bridge loans and the related issuance of 91,000 shares.of
common stock.

(6) Pursuant to the results of the exchange offer, the Company
will exchange 593,945 shares of its Common Stock for
$2,872,500 principal amount of the Company's 12% notes. The
exchange offer is based upon the principal amount of the
Notes outstanding, accrued interest ($344,700 through March
31,1997), and a 20% premium ($643,440) of the aggregate
principal amount excluded and related accrued and unpaid
interest. In addition, as a result of the exchange offer,
finance costs of $240,467 at December 29, 1996 related to
the exchanged debt will be written off.

F-27
<PAGE>
BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended December 29, 1996

<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS ADJUSTMENTS

<S> <C> <C> <C>
Sales $ 8,551,033 $ 8,551,033

Costs and expenses:
Cost of product sold 2,454,078 2,454,078
Salaries and benefits 2,472,022 2,472,022
Other operating 2,911,454 2,911,454
Depreciation and amortization 479,840 479,840
General and administrative 996,200 996,200
Write off of franchise fee options 145,000 145,000
Provisions for losses on leased property 927,148 927,148
--------- ---------
Total costs and expenses 10,385,742 10,385,742
---------- ----------

Operating (loss) (1,834,709) (1,834,709)
--------- ---------

Financial income (expense):
Interest income 17,963 17,963
Interest expense (493,279) 353,354 (b) (139,925)
Amortization of finance costs (279,324) 261,752 (a) (17,572)
--------- --------
(754,640) (139,534)
--------- ---------
(Loss) before income taxes (2,589,349) (1,974,243)

Income taxes - -

----------- ------------
Net (loss) before redeemable preferred stock
dividends of subsidiary $(2,589,349) $(1,974,243)

Redeemble preferred stock dividends of subsidiary (167,910) (167,910)

------------ -----------
Net (Loss) $(2,757,259) (2,142,153)
============ ===========

Net (Loss) per common share $(1.23) $(0.52)
============ ===========

Weighted average number of common
shares outstanding
2,250,736 4,144,077 (c)
============ =========
</TABLE>

(a) To remove amortized bridge loan financing costs ($206,831 )
and debt issue costs related to the exchange of senior notes
($54,921 ).

(b) To remove interest expense related to the exchange of senior
notes ($344,700) and bridge loan financing ($8,654 ).

(c) Includes the weighted average number of shares outstanding
(See Note 1 to the Consolidated Financial Statements) plus
the effect of shares assumed to be outstanding related to
the exchange of Notes to common stock, the conversion of
convertible preferred to common stock, bridge loan units,
and IPO.

(d) When the initial public offering is completed the
unamortized finance costs related to the senior notes
($240,467) and the 20% Premium on the senior notes exchanged
for common stock ($643,440) will be charged to the
Consolidated Statement of Operations.

F-28
<PAGE>

BUTTERWINGS ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended December 31, 1995

PRO FORMA
ACTUAL ADJUSTMENTS
ADJUSTMENTS

<S> <C> <C> <C>
Sales $7,730,956 $7,730,956

Costs and expenses:
Cost of product sold 2,316,341 2,316,341
Salaries and benefits 2,147,595 2,147,595
Other operating 2,525,486 2,525,486
Depreciation and amortization 256,142 256,142
Pre-opening 153,334 153,334
General and administrative 566,918 566,918
Provisions for losses on leased property 145,000 145,000
Loss on impairment of asset 159,474 159,474
------------ ------------
Total costs and expenses 8,270,290 8,270,290
------------ ------------

Operating (loss)
(539,334) (539,334)
------------- ------------

Financial income (expense):
Interest income 25,499 25,499
Interest expense (480,958) 344,700 (b) (136,258)
Amortization of finance costs (72,493) 54,921 (a) (17,572)
------------- ------------

(527,952) (128,331)
------------- ------------
(Loss) before income taxes ( 1,067,286) (667,665)

Income taxes - -

------------- ------------
Net (loss) before redeemable preferred
stock dividends of subsidiary (1,067,286) (667,665)

Redeemable preferred stock dividends of subsidiary (86,388) (86,388)
============= ============
Net (Loss)
$(1,153,674) $(754,053)
============= ============

Net (Loss) per common share $(0.51) $(0.18)
============= ============

Weighted average number of common
shares outstanding 2,250,736 4,144,077 (c)
============= ============
</TABLE>

(a) To remove amortized bridge loan financing costs ($0 ) and
debt issue costs related to the exchange of senior notes
($54,921 ).

(b) To remove interest expense related to the exchange of senior
notes ($344,700 ) and bridge loan financing ($0 ).

F-29
<PAGE>

No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or any Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or an
offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstance, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to the date hereof.

-----------------
TABLE OF CONTENTS

PAGE
----
Prospectus Summary................. 2

Risk Factors....................... 7
Use of Proceeds.................... 15
Dividend Policy.................... 16
Dilution........................... 17
Capitalization..................... 18
Management's Discussion and
Analysis of Financial Condition
and Results of Operation.......... 19
Business and Properties............ 28
Management......................... 40
Certain Relationships
and Related Transactions........ 43
Principal Stockholders............. 45
Selling Security Holders........... 45
Description of Securities.......... 46
Shares Eligible For Future Sale.... 48
Underwriting....................... 50
Legal Matters...................... 52
Experts............................ 52
Additional Information............. 52
Index to Financial Statements...... F-1

........Until , 1997 (25 days from the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.

1,091,000 UNITS

Each Unit Consisting of
One Share of Common Stock
and
One Redeemable Series A
Common Stock Purchase Warrant

OFFERING PRICE

$
PER UNIT

Butterwings
Entertainment
Group, Inc.

Prospectus

National Securities
Corporation

<PAGE>

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers

Article SEVEN of the Amended Articles of Incorporation provides that no
director of the Corporation shall be personally liable to the Corporation or its
shareholders for monetary damages for breach of his fiduciary duty, as a
director; provided, that nothing therein shall be construed to eliminate or
limit the liability of a director (a) for any breach of the director's duty of
loyalty to the Corporation or its shareholders, (b) for acts or omissions not in
good faith or involving intentional misconduct or a knowing violation of Law,
(c) under Section 8.65 of the Illinois Business Corporation Act, as amended, or
(d) for any transaction from which the director derived an improper benefit.

Article 11 of the By-laws of the Corporation provide that the
Corporation may indemnify an officer, director, employee or agent of the
Corporation against expenses, judgments, fines and settlement amounts incurred
in connection with an action, suit or proceeding, other than an action, suit or
proceeding by or in the right of the Corporation, 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 and with respect to any criminal proceeding, has no
reasonable cause to believe his conduct was unlawful.

The Corporation may also indemnify an officer, director, employee or agent of
the Corporation who is a party or is threatened to be made a party to an action,
suit or proceeding by or in the right of the Corporation against expenses
actually and reasonably incurred by him in connection with his defense of such
action or suit 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, provided
that no indemnification shall be made in respect of any claim, issue or matter
as to which he shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation, unless the court
in which such action was brought shall determine upon application that despite
the adjudication of liability, but in view of all the circumstances of the case,
such person fairly and reasonably is entitled to indemnification and expenses as
the court may deem proper,

Any indemnification under Article 11 of the By-laws shall be made by the
Corporation only upon a determination that indemnification of the indemnified
person is proper by (i) a majority vote of a quorum of the board of directors
who were not parties to such action, suit or proceeding, (ii) if such a quorum
is not obtainable, or if directed by the board, by independent legal counsel in
a written opinion, or (iii) by the shareholders.

Expenses incurred in defending a civil or criminal action may be
advanced by the Corporation upon receipt of an undertaking by or on behalf of an
officer, director, employee or agent to repay such amount unless it shall be
determined that he is entitled to indemnification as authorized by the Illinois
Business Corporation Act.

Indemnification under the By-laws is not exclusive of any other rights
which an indemnified party may be entitled under any other By-law, agreement,
vote of shareholders or disinterested directors or otherwise. The Corporation
may purchase and maintain insurance on behalf of persons entitled to
indemnification under Section 8.75 of the Illinois Business Corporation Act. If
the Corporation has paid indemnity or has advanced expenses to a director,
officer, employee or agent, the Corporation shall report the indemnification or
advance in writing to shareholders with or before notice of the next
shareholders meeting.

II-1

<PAGE>

Item 25. Other Expenses of Issuance and Distribution

Estimated expenses in connection with the public offering by the Company of the
securities offered hereunder are as follows:

Securities and Exchange Commission Filing Fee $6,067.85
NASD Filing Fee 2,502.17
Blue Sky Fees and Expenses* 20,000.00
NASDAQ Small Cap Application and Listing Fee 13,000.00
Boston Stock Exchange Application and Listing Fee 7,500.00
Accounting Fees and Expenses* 40,000.00
Legal Fees and Expenses 55,000.00
Printing* 50,000.00
Fees of Transfer Agents and Registrar* 5,000.00
Underwriters' Non-Accountable Expense Allowance 177,287.50
Miscellaneous* 173,642.48
----------

Total* $550,000.00
- -----------------------
* Estimated.

Item 26. Recent Sales of Unregistered Securities

The following is a summary of transactions by the Registrant during the
last three years involving the sale of securities which were not registered
under the Securities Act:

During the period September 1993 through April 1994 the Company issued
$3,700,000 of secured 12% promissory notes (the "Notes") to 160 investors in an
offering exempt from registration pursuant to Rule 506 of Regulation D under the
Securities Act. The purchasers were all accredited investors who took the Notes
for investment and without a view to distribution. The offering was effected
through registered broker dealers who are members of the National Association of
Securities Dealers, Inc.("NASD") and were paid a commission for their sale of
the Notes. The Notes bear a restrictive legend prohibiting the transfer thereof
except in compliance with the Securities Act or in reliance upon an opinion of
counsel that distribution may be made in reliance upon applicable exemptions
from the provisions thereof.

In January 1997, the Registrant offered to exchange the Notes for Common
Stock of the Registrant pursuant to an Exchange Offer to all Note holders. The
number of shares of Common Stock to be exchanged was based upon the principal
amount of Notes held by each Note holder, plus accrued interest plus a premium
of 20% of principal and interest, divided by the proposed public offering price
per share of the Common Stock in the offering covered by this registration
statement ($6.50 per share). In the event the offering price falls below $5.75
per share there will be a proportionate adjustment in the number of shares
issued. The Note holders are required to take the shares of Common Stock for
investment and not with a view to distribution. The stock certificates are to be
issued concurrently with the certificates issued to public stockholders in this
offering and will bear a restrictive legend prohibiting transfer in the absence
of an effective registration statement or an opinion of counsel that
registration is not required. The Note holders were provided a copy of the
Prospectus substantially in the form included in this registration statement.
Each Note holder had the right to accept the Exchange Offer and there was no
requirement to vote on the Exchange Offer as a class. The Exchange Offer was
conditioned on the acceptance of 90% principal amount of Notes outstanding
unless the Underwriter consents to a lesser amount. No commissions or other
remuneration were paid for soliciting the exchange. The exchange is exempt under
Section 3(a)(9) of the Securities Act for securities exchanged by the issuer
with its securities holders exclusively where no commission or other
remuneration is paid for soliciting such exchange. Holders of $2,872,500
principal amount of Notes accepted the Exchange Offer, which was agreed to by
the Underwriter. The Company will be required to issue 593,945 shares to the
Note holders concurrently with the certificates to be issued to the investors in
this Offering. None of the Note holders are affiliated persons of the Company.

II-2

<PAGE>

From September 1995 through February 1996 the Registrant issued and sold
15,685 shares of its Convertible Preferred Stock (the "Preferred Stock") at $100
per share to sixty-three investors in an offering exempt from registration
pursuant to Rule 506 of Regulation D under the Securities Act. The offering was
effected through registered broker dealers who are members of the NASD and were
paid a commission for their sale of the Preferred Stock. The certificates bear a
restrictive legend prohibiting the transfer thereof except in compliance with
the Securities Act or in reliance upon an opinion of counsel that distribution
may be made in reliance upon applicable exemptions from the provisions thereof.
By its terms the Preferred Stock is automatically convertible into common stock
of the Registrant upon the consummation of the first sale of common stock by the
Company to underwriters for the account of the Company pursuant to a
registration statement under the Securities Act. The number of shares of common
stock to be issued to each holder of the Preferred Stock upon conversion will be
determined by dividing the offering price of the Preferred Stock by 95% of the
sale price per share of the common stock in the public offering. The issuance of
the common stock for the Preferred Stock will be exempt under Section 3(a)(9) of
the Securities Act. The certificates for the new common stock will be issued
concurrently with the certificates to be issued to the public stockholders in
this offering and will bear a restrictive legend prohibiting transfer in the
absence of an effective registration statement or an opinion if counsel that
registration is not required.

From October through December 1996, the Company issued $483,000 of
Bridge Loan Notes with warrants to provide working capital and funds for this
offering. The transaction was exempt from registration pursuant to Section 4 (2)
of the Securities Act of 1933 for transactions not involving a public offering.
The securities were sold to four investors through La Jolla Securities
Corporation, a registered broker/dealer which received a commission for its
services and to Palisades Capital, LLC as general partner of Sunset Bridge Fund
#3 and to Sagax Fund II Ltd., the latter two as principals, without commissions.
All of the purchasers were sophisticated investors within the meaning of the
exemption provided by Section 4(2) of the Securities Act. The securities were
stamped with a restrictive legend and the investors agreed to hold the same for
investment and not with a view to distribution. The warrants are automatically
convertible into Units identical to the Units offered pursuant to this
registration statement at the time the registration statement is declared
effective. The Units are included in this registration statement and the Bridge
Loan holders are listed as Selling Security Holders.

Item 27. Exhibits

Exhibit No. Item
- ----------- ----
Exhibit 1.1 Form of Underwriting Agreement. (2)
Exhibit 1.2 Form of Underwriters' Warrant Agreement. (2)
Exhibit 1.3 Form of Selected Dealer Agreement. (2)
Exhibit 1.4 Form of Agreement Among Underwriters. (2)
Exhibit 3.1 Articles of Incorporation, as amended (3)
Exhibit 3.2 Bylaws of the Registrant (3)
Exhibit 5.1 Opinion of Maurice J. Bates L.L.C.(1)
Exhibit 10.1 Franchise Agreement between Mrs. Fields Development Corporation
and the Registrant. (3)
Exhibit 10.2 Franchise Agreement between Hooters of America, Inc. and
Butterwings/Wisconsin. (3)
Exhibit 10.3 Form of 12.0% $3,700,000 Notes, as amended. (3)
Exhibit 10.4 Copy of Exchange Offer for 12.0% Notes, with Acceptance and
Transmittal Letter.(3)
Exhibit 10.5 Form of Underwriter's Financial Consulting Agreement. (2)
Exhibit 10.6 Form of Warrant Agreement.(1) Exhibit 10.7 Independent Contractor
Agreement between the Registrant and Edmund C. Lipinski. (3)
Exhibit 10.8 Copy of 1996 Stock Compensation Plan. (3)
Exhibit 10.9 Copy of Stock Purchase Agreement between the Registrant and
Cookie Crumbs, Inc.(3)
Exhibit 21.1 Subsidiaries of the Registrant.(3)

Exhibit 23.1 Consent of McGladrey & Pullen, LLP Certified Public Accountants.
( 1)
Exhibit 23.2 Consent of Maurice J. Bates, L.L.C. is contained in his opinion
to be filed

as Exhibit 5.1 to this registration statement.(1)
Exhibit 27.1 Revised Financial Data Schedule (1)

- ---------------
(1) Filed herewith
(2) To be filed by amendment
(3) Previously filed
II-3

<PAGE>

Item 28. Undertakings

The undersigned registrant hereby undertakes as follows:

(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

(2) To file, during any period in which it offers or sells
securities, 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
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation form the low or high end of
the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424 (b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement; and

(iii)Include any additional or changed material information on
the plan of distribution.

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

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

(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling 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 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
shares of 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 Act and will be
governed by the final adjudication of such issue.

(7) For determining any liability under the Securities Act, 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
issuer 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.

(8) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus
s anew 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.

II-4

<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 for filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois on April 25, 1997.

BUTTERWINGS ENTERTAINMENT GROUP, INC.

By: /s/ Stephen S.Buckley
Stephen S. Buckley, President
and Director

POWER OF ATTORNEY
-----------------

KNOW ALL MEN BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Stephen S. Buckley and Douglas E. Van
Scoy, and each for them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities (until revoked in writing), to sign any and
all further amendments to this Registration Statement (including post-effective
amendments), and to file same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
such attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, or their substitutes may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date

/s/ Stephan S. Buckley
- -------------------------------

Stephen S. Buckley President and Director April 25,1997

(Principal Executive Officer)

/s/ Douglas E. Van Scoy Chief Financial Officer April 25,1997
- -------------------------------
Douglas E. Van Scoy (Principal Financial

and Accounting Officer)

/s/ Kenneth B .Drost Director April 25,1997
- --------------------

Kenneth B. Drost

/s/ Jeffrey A. Pritikin Director April 25,1997
- -------------------------------

Jeffrey A. Pritikin

/s/ Thomas P. Kabat
- -------------------------------

Thomas P. Kabat Director April 25,1997

* By: Stephen S. Buckley,
As Attorney in Fact
- -------------------------------
Stephen S. Buckley

II-5

<PAGE>

MAURICE J. BATES, L.L.C.
ATTORNEY AT LAW
8214 WESTCHESTER SUITE, 500
DALLAS , TEXAS 75225

Telephone (214) 692-3566
Fax (214) 987-2091

April 24, 1997

Butterwings Entertainment Group, Inc.
2345 Pembroke Ave.
Hoffman Estates, Illinois 601195

Re: Registration Statement on Form SB-2
Offering of 1,000,000 Units by the Company

Gentlemen:

I have acted as counsel to Butterwings Entertainment Group, Inc., an
Illinois corporation (the "Company"), in connection with the registration under
the Securities Act of 1933, as amended, (the "Securities Act"), of 1,000,000
units, each unit consisting of one share of common stock, $.01 par value, (the
"Common Stock") and one Redeemable Series A Common Stock Purchase Warrant (the
"Warrants") to purchase one share of Common Stock of the Company (the "Units")
to be offered to the public by the Company in a firm commitment underwriting by
National Securities Corporation. The Registration Statement (defined below) also
includes 91,000 additional Units to be offered by Selling Security Holders, as
defined in the Registration Statement (the "Selling Security Holders
Securities").

A registration statement on Form SB-2 (SEC File No. 333-20601) was filed
with the Securities and Exchange Commission on January 29, 1997 (the
"Registration Statement") and Amendment No. 1 thereto is being filed herewith.
In connection with rendering this opinion I have examined executed copies of the
Registration Statement and all exhibits thereto and Amendment No. 1 and all
exhibits thereto. I have also examined and relied upon the original, or copies
certified to my satisfaction, of (i) the Articles of Incorporation, as amended,
and the By-laws of the Company, (ii) minutes and records of the corporate
proceedings of the Company with respect to the issuance of the Units, the Common
Stock and the Warrants, and related matters, and (iii) such other agreements and
instruments relating to the Company as I deemed necessary or appropriate for
purposes of the opinion expressed herein. In rendering such opinion, I have made
such further investigation and inquiries relevant to the transaction
contemplated by the Registration Statement as I have deemed necessary to the
opinion expressed herein, and I have relied, to the extent I deemed reasonable,
on certificates and certain other information provided to me by officers of the
Company and public officials as to matters of fact of which the maker of such
certificate or the person providing such other information had knowledge.

<PAGE>

Butterwings Entertainment Group, Inc.
April 24, 1997
Page 2

Furthermore, in rendering my opinion, I have assumed that the signatures on all
documents examined by me are genuine, that all documents and corporate record
books submitted to me as originals are accurate and complete, and that all
documents submitted to me are true, correct and complete copies of the originals
thereof.

In issuing the opinion hereinafter expressed, I do not purport to be an
expert in the laws of any jurisdiction other than the State of Texas and the
United States of America.

Based upon the foregoing, I am of the opinion that the Units, the shares
of Common Stock, the Warrants and the shares of Common Stock issuable upon the
exercise of the Warrants, including the Selling Security Holders Securities, to
be issued by the Company as described in the Registration Statement, have been
duly authorized for issuance and sale and the Units, the shares of Common Stock,
the Warrants and the shares of Common Stock issuable upon exercise of the
Warrants, including the Selling Security Holders Securities, when issued by the
Company, will be validly issued, fully paid and nonassessable.

I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

Very truly yours,

Maurice J. Bates, L.L.C.

/s/ Marice J. Bates
----------------
By Maurice J. Bates

BUTTERWINGS ENTERTAINMENT GROUP, INC.

AND

AMERICAN STOCK TRANSFER & TRUST COMPANY

WARRANT AGENT

WARRANT AGREEMENT

Dated as of __________, 1997

<PAGE>

TABLE OF CONTENTS

Section Page
- ------- ----

ss.1. Appointment of Warrant Agent......................................... 2

ss.2. Form of Warrant...................................................... 2

ss.3. Countersignature and Registration.................................... 2

ss.4. Transfers and Exchanges.............................................. 2

ss.5. Exercise of Warrants................................................. 3

ss.6. Mutilated or Missing Warrants........................................ 3

ss.7. Reservation and Registration of Common Stock......................... 4

ss.8. Warrant Price; Adjustments........................................... 4

ss.9. No Fractional Interests.............................................. 8

ss.10. Notice to Warrantholders............................................. 9

ss.11. Disposition of Proceeds on Exercise of Warrants...................... 10

ss.12. Redemption of Warrants............................................... 10

ss.13. Merger or Consolidation or Change of Name of Warrant Agent........... 11

ss.14. Duties of Warrant Agent.............................................. 11

ss.15. Change of Warrant Agent.............................................. 13

ss.16. Identity of Transfer Agent........................................... 13

ss.17. Notices.............................................................. 13

ss.18. Supplements and Amendments........................................... 14

ss.19. Successors........................................................... 14

ss.20. Merger or Consolidation of the Company............................... 14

ss.21. Texas Contract....................................................... 14

ss.22. Benefits of This Agreement........................................... 14

ss.23. Counterparts......................................................... 14

<PAGE>

WARRANT AGREEMENT, dated as of __________, 1997, between Butterwings
Entertainment Group, Inc. , an Illinois Corporation (hereinafter called the
"Company"), and American Stock Transfer & Trust company, as warrant agent
(hereinafter called the "Warrant Agent");

WHEREAS, the Company proposes to issue 1,091,000 Redeemable Series A
Common Stock Purchase Warrants (hereinafter called the "Series A Warrants"),
entitling the holders thereof to purchase one share of Common Stock, $.01 par
value (hereinafter called the "Common Stock") for each Warrant, in connection
with the proposed issuance by the Company of 1,091,000 Units, each Unit
consisting of one share of Common Stock and one Warrant, and the Company also
proposes to issue up to 163,650 Warrants underlying the Underwriters'
over-allotment option and 109,100 Warrants underlying a warrant to purchase
Units to be granted to the Representative of the Underwriters; and

WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
registration, transfer, exchange and exercise of Warrants;

NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:

SS.1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
hereinafter in this Agreement set forth, and the Warrant Agent hereby accepts
such appointment.

SS.2. FORM OF WARRANT. The text of the Warrant and of the form of election
to purchase shares to be printed on the reverse thereof shall be substantially
as set forth in Exhibit A attached hereto. The Warrant Price to purchase one
share of Common Stock shall be as provided and defined inss.8. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman of the Board or President or Vice
President of the Company, under its corporate seal, affixed or in facsimile,
attested by the manual or facsimile signature of the present or any future
Secretary or Assistant Secretary of the Company.

Warrants shall be dated as of the date of issuance thereof by the Warrant
Agent either upon initial issuance or upon transfer or exchange.

SS.3. COUNTERSIGNATURE AND REGISTRATION. The Warrant Agent shall maintain
books for the transfer and registration of the Warrants. The Warrants shall be
countersigned by the Warrant Agent (or by any successor to the Warrant Agent
then acting as warrant agent under this Agreement) and shall not be valid for
any purpose unless so countersigned. Warrants may be so countersigned, however,
by the Warrant Agent (or by its successor as warrant agent) and be delivered by
the Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature or delivery.

SS.4. TRANSFERS AND EXCHANGES. The Warrant Agent shall transfer, from time
to time after the sale of the Units, any outstanding Warrants upon the books to
be maintained by the Warrant Agent for that purpose, upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant shall be issued to the
transferee and the surrendered Warrant shall be cancelled by the Warrant Agent.
Warrants so cancelled shall be delivered by the Warrant Agent to the Company
from time to time. The Warrants may be exchanged at the option of the holder
thereof, when surrendered at the office of the Warrant Agent, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock. The Warrant Agent is hereby irrevocably authorized to countersign

<PAGE>

in accordance with ss.3 of this Agreement the new Warrants required pursuant to
the provisions of this Section, and the Company, whenever required by the
Warrant Agent, will supply the Warrant Agent with Warrants duly executed on
behalf of the Company for such purpose.

SS.5. EXERCISE OF WARRANTS. Subject to the provisions of this Agreement,
each registered holder of Warrants shall have the right, which may be exercised
as in such Warrants expressed, to purchase from the Company (and the Company
shall issue and sell to such registered holder of Warrants) the number of fully
paid and nonassessable shares of Common Stock specified in such Warrants, upon
surrender of such Warrants to the Company at the office of the Warrant Agent,
with the form of election to purchase on the reverse thereof duly filled in and
signed, and upon payment to the Warrant Agent for the account of the Company of
the Warrant Price for the number of shares of Common Stock in respect of which
such Warrants are then exercised. Payment of such Warrant Price may be made in
cash, or by certified or official bank check, payable in United States dollars,
to the order of the Warrant Agent. No adjustment shall be made for any dividends
on any shares of Common Stock issuable upon exercise of a Warrant. Upon such
surrender of Warrants, and payment of the Warrant Price as aforesaid, the
Company shall issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the registered holder of such Warrants and in such
name or names as such registered holder may designate, a certificate or
certificates for the number of full shares of Common Stock so purchased upon the
exercise of such Warrants. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such shares as of the date of the
surrender of such Warrants and payment of the Warrant Price as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of the Warrant Price, the transfer books for the Common Stock or other
class of stock purchasable upon the exercise of such Warrants shall be closed,
the certificates for the shares in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened and until such date the Company shall be under no duty to deliver any
certificate for such shares; provided further, however, that the transfer books
aforesaid, unless otherwise required by law, shall not be closed at any one time
for a period longer than 20 days. The rights of purchase represented by the
Warrants shall be exercisable, at the election of the registered holders
thereof, either as an entirety or from time to time for part only of the shares
specified therein, and in the event that any Warrant is exercised in respect of
less than all of the shares specified therein, a new Warrant or Warrants will be
issued for the remaining number of shares specified in the Warrant so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrants pursuant to the provisions
of this Section and ofss.3 of this Agreement and the Company, whenever required
by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed
on behalf of the Company for such purpose.

SS.6. MUTILATED OR MISSING WARRANTS. In case any of the Warrants shall be
mutilated, lost, stolen or destroyed, the Company will issue and the Warrant
Agent will countersign and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant, or in lieu of and substitution for the
Warrant lost, stolen or destroyed, a new Warrant of like tenor and representing
an equivalent right or interest; but only upon receipt of evidence satisfactory
to the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant and indemnity, if requested, also satisfactory to them. Applicants for
such substitute Warrants shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company or the Warrant
Agent may prescribe.

SS.7. RESERVATION AND REGISTRATION OF COMMON STOCK.

A. There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and unissued shares of Common Stock, a number of

<PAGE>

shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the Transfer Agent for the Common Stock and
every subsequent Transfer Agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid are hereby
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares as shall be requisite for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent for
the Common Stock and with every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time such Transfer Agent for stock certificates
required to honor outstanding Warrants. The Company will supply such Transfer
Agents with duly executed stock certificates for such purpose and will itself
provide or otherwise make available any cash which may be issuable as provided
in ss.9 of this Agreement. All Warrants surrendered in the exercise of the
rights thereby evidenced shall be cancelled by the Warrant Agent and shall
thereafter be delivered to the Company, and such cancelled Warrants shall
constitute sufficient evidence of the number of shares of stock which have been
issued upon the exercise of such Warrants.

B. The Company represents that it has registered under the Securities Act
of 1933 the shares of Common Stock issuable upon exercise of the Warrants and
will use its best efforts to maintain the effectiveness of such registration by
post-effective amendment during the entire period in which the Warrants are
exercisable, and that it will use its best efforts to qualify such Common Stock
for sale under the securities laws of such states of the United States as may be
necessary to permit the exercise of the Warrants in the states in which the
Units are initially qualified and to maintain such qualifications during the
entire period in which the Warrants are exercisable.

SS.8. WARRANT PRICE; ADJUSTMENTS.

A. The price at which Common Stock shall be purchasable upon exercise of
Warrants at any time after the Common Stock and Warrants become separately
tradable until __________, 2002 (hereinafter called the "Warrant Price") shall
be $_____ per share of Common Stock or, if adjusted as provided in this Section,
shall be such price as so adjusted.

B. The Warrant Price shall be subject to adjustment from time to
time as follows:

(1) Except as hereinafter provided, in case the Company shall at any
time or from time to time after the date hereof issue any additional
shares of Common Stock for a consideration per share less than the Warrant
Price in effect immediately prior to the issuance of such additional
shares, or without consideration, then, upon each such issuance, the
Warrant Price in effect immediately prior to the issuance of such
additional shares shall forthwith be reduced to a price (calculated to the
nearest full cent) determined by dividing:

(a) An amount equal to (i) the total number of shares of
Common Stock outstanding immediately prior to such issuance
multiplied by the Warrant Price in effect immediately prior to such
issuance, plus (ii) the consideration, if any, received by the
Company upon such issuance, by

(b) The total number of shares of Common Stock outstanding
immediately after the issuance of such additional shares.

(2) The Company shall not be required to make any such adjustment of
the Warrant Price in accordance with the foregoing if the amount of such
adjustment shall be less than $.25 (adjustment will be made when
cumulative adjustment equals or exceeds $0.25) but in such case the
Company shall maintain a cumulative record of the Warrant Price as it
would have been in the absence of this provision (the "Constructive

<PAGE>

Warrant Price"), and for the purpose of computing a new Warrant Price
after the next subsequent issuance of additional shares (but not for the
purpose of determining whether an adjustment thereof is required under the
terms of this paragraph) the constructive Warrant Price shall be deemed to
be the Warrant Price in effect immediately prior to such issuance.

(3) For the purpose of this ss.8 the following provisions shall also
be applicable:

(a) In the case of the issuance of additional shares of Common
Stock for cash, the consideration received by the Company therefor
shall be deemed to be the net cash proceeds received by the Company
for such shares before deducting any commissions or other expenses
paid or incurred by the Company for any underwriting of, or
otherwise in connection with, the issuance of such shares.

(b) In case of the issuance (otherwise than upon conversion or
exchange of shares of Common Stock) of additional shares of Common
Stock for a consideration other than cash or a consideration a part
of which shall be other than cash, the amount of the consideration
other than cash received by the Company for such shares shall be
deemed to be the value of such consideration as determined in good
faith by the Board of Directors of the Company, as of the date of
the adoption of the resolution of said Board, providing for the
issuance of such shares for consideration other than cash or for
consideration a part of which shall be other than cash, such fair
value to include goodwill and other intangibles to the extent
determined in good faith by the Board.

(c) In case of the issuance by the Company after the date
hereof of any security (other than the Warrants) that is convertible
into shares of Common Stock or of any warrants, rights or options to
purchase shares of Common Stock (except the options and warrants
referred to in subsection H of this ss.8), (i) the Company shall be
deemed (as provided in subparagraph (e) below) to have issued the
maximum number of shares of Common Stock deliverable upon the
exercise of such conversion privileges or warrants, rights or
options, and (ii) the consideration therefor shall be deemed to be
the consideration received by the Company for such convertible
securities or for such warrants, rights or options, as the case may
be, before deducting therefrom any expenses or commissions incurred
or paid by the Company for any underwriting of, or otherwise in
connection with, the issuance of such convertible security or
warrants, rights or options, plus (A) the minimum consideration or
adjustment payment to be received by the Company in connection with
such conversion, or (B) the minimum price at which shares of Common
Stock are to be delivered upon exercise of such warrants, rights or
options or, if no minimum price is specified and such shares are to
be delivered at an option price related to the market value of the
subject shares, an option price bearing the same relation to the
market value of the subject shares at the time such warrants, rights
or options were granted; provided that as to such options such
further adjustment as shall be necessary on the basis of the actual
option price at the time of exercise shall be made at such time if
the actual option price is less than the aforesaid assumed option
price. No further adjustment of the Warrant Price shall be made as a
result of the actual issuance of the shares of Common Stock referred
to in this subparagraph (c). On the expiration of such warrants,
rights or options, or the termination of such right to convert, the
Warrant Price shall be readjusted to such Warrant Price as would
have pertained had the adjustments made upon the issuance of such
warrants, rights, options or convertible securities been made upon
the basis of the delivery of only the number of shares of Common
Stock actually delivered upon the exercise of such warrants, rights
or options or upon the conversion of such securities.
<PAGE>

(d) For the purposes hereof, any additional shares of Common
Stock issued as a stock dividend shall be deemed to have been issued
for no consideration.

(e) The number of shares of Common Stock at any time
outstanding shall include the aggregate number of shares deliverable
in respect of the convertible securities, rights and options
referred to in subparagraph (c) of this paragraph; provided that
with respect to shares referred to in clause (i) of subparagraph
(c), to the extent that such warrants, options, rights or conversion
privileges are not exercised, such shares shall be deemed to be
outstanding only until the expiration dates of the warrants, rights,
options or conversion privileges or the prior cancellation thereof.

C. In case the Company shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares, the Warrant Price in effect
immediately prior to such subdivision shall be proportionately reduced and, in
case the outstanding shares of the Common Stock of the Company shall be combined
into a smaller number of shares, the Warrant Price in effect immediately prior
to such combination shall be proportionately increased.

D. Upon each adjustment of the Warrant Price pursuant to the provisions of
this ss.8, the number of shares issuable upon the exercise of each Warrant shall
be adjusted by multiplying the Warrant Price in effect prior to the adjustment
by the number of shares of Common Stock covered by the Warrant and dividing the
product so obtained by the adjusted Warrant Price.

E. Except upon consolidation or reclassification of the shares of Common
Stock of the Company as provided for in subsection (C) hereof and except for
readjustment of the Warrant Price upon expiration of warrants, rights or options
as provided for in subparagraph (c) of paragraph 3 of subsection (B) hereof, the
Warrant Price in effect at any time may not be adjusted upward or increased in
any manner whatsoever.

F. Irrespective of any adjustment or change in the Warrant Price or the
number of shares of Common Stock actually purchasable under the several
Warrants, the Warrants theretofore and thereafter issued may continue to express
the Warrant Price per share and the number of shares purchasable thereunder as
the Warrant Price per share and the number of shares purchasable were expressed
in the Warrants when initially issued.

G. If any capital reorganization or reclassification of the capital stock
of the Company (other than a distribution of stock in accordance with ss.10(B))
or consolidation or merger of the Company with another corporation or the sale
of all or substantially all of its assets to another corporation shall be
effected, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the holder of each Warrant then outstanding shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
specified herein and in the Warrants and in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented by each such Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common stock immediately theretofore purchasable and receivable
upon the exercise of the rights represented by each such Warrant had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provisions shall be made with respect to the
rights and interest of the holder of each Warrant then outstanding to the end
that the provisions thereof (including without limitation provisions for
adjustment of the Warrant Price and of the number of shares purchasable upon the
exercise of each Warrant then outstanding) shall thereafter be applicable as
nearly as may be in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of each Warrant.
<PAGE>

H. No adjustment of the Warrant Price shall be made in connection with the
issuance or sale of shares of Common Stock issuable pursuant to currently
outstanding options and warrants granted to officers, directors, employees,
advisory directors, or affiliates of the Company.

I. Whenever the Warrant Price is adjusted as herein provided, the Company
shall (a) forthwith file with the Warrant Agent a certificate signed by the
Chairman of the Board or the President or a Vice President of the Company and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company, showing in detail the facts requiring such adjustment
and the Warrant Price and the number of shares of Common Stock purchasable upon
exercise of the Warrants after such adjustment and (b) cause a notice stating
that such adjustment has been effected and stating the adjusted Warrant Price
and the number of shares of Common Stock purchasable upon exercise of the
Warrants to be published at least once a week for two consecutive weeks in a
newspaper of general circulation in Dallas, Texas and in New York, New York. The
Company, at its option, may cause a copy of such notice to be sent by first
class mail, postage prepaid, to each registered holder of Warrants at his
address appearing on the Warrant register. The Warrant Agent shall have no duty
with respect to any such certificate filed with it except to keep the same on
file and available for inspection by holders of Warrants during reasonable
business hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of a Warrant to determine whether any facts exist
which may require any adjustment of the Warrant Price, or with respect to the
nature or extent of any adjustment of the Warrant Price when made, or with
respect to the method employed in making such adjustment.

J. The Company may retain a firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) selected by the Board of
Directors of the Company or the Executive Committee of said Board and approved
by the Warrant Agent, to make any computation required under this ss.8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this ss.8.

K. In case at any time conditions shall arise by reason of action taken by
the Company which, in the opinion of the Board of Directors of the Company, are
not adequately covered by the other provisions of this Agreement and which might
materially and adversely affect the rights of the holders of the Warrants, or in
case at any time any such conditions are expected to arise by reason of any
action contemplated by the Company, the Board of Directors of the Company shall
appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial statements
of the Company), who shall give their opinion as to the adjustment, if any (not
inconsistent with the standards established in this ss.8), of the Warrant Price
and the number of shares of Common Stock purchasable pursuant hereto (including,
if necessary, any adjustment as to the property which may be purchasable in lieu
thereof upon exercise of the Warrants) which is, or would be, required to
preserve without dilution the rights of the holders of the Warrants. The Board
of Directors of the Company shall make the adjustment recommended forthwith upon
the receipt of such opinion or the taking of any such action contemplated, as
the case may be; provided, however, that no adjustment of the Warrant Price
shall be made which in the opinion of the accountant or firm of accountants
giving the aforesaid opinion would result in an increase of the Warrant Price to
more than the Warrant Price then in effect except as otherwise provided in
subsection E of this ss.8.

SS.9. NO FRACTIONAL INTERESTS. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of Warrants. If any fraction
of a share of Common Stock would, except for the provisions of this Section, be
issuable on the exercise of any Warrant (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the current
value of such fraction (a) computed, if the Common Stock shall be listed or

<PAGE>

admitted to unlisted trading privileges on any national or regional securities
exchange, on the basis of the last reported sale price of the Common Stock on
such exchange on the last business day prior to the date of exercise upon which
such a sale shall have been effected (or, if the Common Stock shall be listed or
admitted to unlisted trading privileges on more than one such exchange, on the
basis of such price on the exchange designated from time to time for such
purpose by the Board of Directors of the Company) or (b) computed, if the Common
Stock shall not be listed or admitted to unlisted trading privileges, on the
basis of the average of the high and low bid prices of the Common Stock in the
Nasdaq Stock Market, on the last business day prior to the date of exercise.

SS.10. NOTICE TO WARRANTHOLDERS.

A. Nothing contained in this Agreement or in any of the Warrants shall be
construed as conferring upon the holders thereof the right to vote or to consent
or to receive notice as stockholders in respect of the meetings of stockholders
for the election of directors of the Company or any other matters, or any rights
whatsoever as stockholders of the Company; provided, however, that in the event
that a meeting of stockholders shall be called to consider and take action on a
proposal for the voluntary dissolution of the Company, other than in connection
with a consolidation, merger or sale of all, or substantially all, of its
property, assets, business and goodwill as an entirety, then and in that event
the Company shall cause a notice thereof to be published at least once a week
for two consecutive weeks in a newspaper of general circulation in Dallas, Texas
and New York, New York, such publication to be completed at least 20 days prior
to the date fixed as a record date or the date of closing the transfer books for
the determination of the stock holders entitled to vote at such meeting. The
Company shall also cause a copy of such notice to be sent by first class mail,
postage prepaid, at least 20 days prior to said date fixed as a record date or
said date of closing the transfer books, to each registered holder of Warrants
at his address appearing on the Warrant register; but failure to mail or receive
such notice or any defect therein or in the mailing thereof shall not affect the
validity of any action taken in connection with such voluntary dissolution. If
such notice shall have been so given and if such a voluntary dissolution shall
be authorized at such meeting or any adjournment thereof, then for and after the
date on which such voluntary dissolution shall have been duly authorized by the
stockholders, the purchase rights represented by the Warrants and other rights
with respect thereto shall cease and terminate.

B. If the Company shall make any distribution on, or to holders of, its
Common Stock (or other property which may be purchasable in lieu thereof upon
the exercise of Warrants) of any property (other than a cash dividend), the
Company shall cause a notice of its intention to make such distribution to be
published at least once a week for two consecutive weeks in a newspaper of
general circulation in Dallas, Texas and New York, New York, such publication to
be completed at least 20 days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the stockholders
entitled to receive such distribution. The Company shall also cause a copy of
such notice to be sent by first class mail, postage prepaid, at least 20 days
prior to said date fixed as a record date or said date of closing the transfer
books, to each registered holder of Warrants at his address appearing on the
Warrant register; but failure to mail or to receive such notice or any defect
therein or in the mailing thereof shall not affect the validity of any action
taken in connection with such distribution.

<PAGE>

SS.11. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS.

A. The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of shares of the Company's stock through the
exercise of such Warrants.

B. The Warrant Agent shall keep copies of this Agreement available for
inspection by holders of Warrants during normal business hours at its principal
office.

SS.12. REDEMPTION OF WARRANTS.

A. At any time on or after __________, 1998, the Company may, at its
option, redeem some or all of the outstanding Warrants at $0.05 per Warrant,
upon thirty (30) days prior written notice, if the closing sale price of the
Common Stock on any national securities exchange or the closing bid quotation on
the Nasdaq Small-Cap Market has equaled or exceeded $_____ for twenty (20)
consecutive trading days within the 30 day period immediately preceding the date
notice of redemption is given (the "Redemption Price"). In the event of an
adjustment in the Warrant Price pursuant to ss.8, the Redemption Price shall
also be automatically adjusted.

B. The election of the Company to redeem some or all of the Warrants
shall be evidenced by a resolution of the Board of Directors of the Company.

C. Warrants may be exercised at any time on or before the date fixed
for redemption (the "Redemption Date").

D. Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each holder of Warrants, at his address appearing in the Warrant
register.

All notices of redemption shall state:

(1) The Redemption Date;

(2) That on the Redemption Date the Redemption Price will
become due and payable upon each Warrant;

(3) The place where such Warrants are to be surrendered for
redemption and payment of the Redemption Price; and

(4) The current Warrant Price of the Warrants, the place or places
where such Warrants may be surrendered for exercise, and the time at which
the right to exercise the Warrants will terminate in accordance with this
Agreement.

E. Notice of redemption of Warrants at the election of the Company
shall be given by the Company or, at the Company's request, by the Warrant
Agent in the name and at the expense of the Company.

F. Prior to any Redemption Date, the Company shall deposit with the
Warrant Agent an amount of money sufficient to pay the Redemption Price of all
the Warrants which are to be redeemed on that date. If any Warrant is exercised
pursuant to ss.5, any money so deposited with the Warrant Agent for the
redemption of such Warrant shall be paid to the Company.
<PAGE>

G. Notice of redemption having been given as aforesaid, the Warrants so to
be redeemed shall, on the Redemption Date, become redeemable at the Redemption
Price therein specified and on such date (unless the Company shall default in
the payment of the Redemption Price), such Warrants shall cease to be
exercisable and thereafter represent only the right to receive the Redemption
Price. Upon surrender of such Warrants for redemption in accordance with said
notice, such Warrants shall be redeemed by the Company for the Redemption Price.

SS.13. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of ss.15 of this Agreement. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement and at
such time any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
Warrant Agent and deliver such Warrants so countersigned; and in case at the
time any of the Warrants shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor warrant agent; and in
all such cases such Warrants shall have the full force provided in the Warrant
and in this Agreement.

In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrants shall have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and
deliver Warrants so countersigned; and in case at that time any of the Warrants
shall not have been countersigned, the Warrant Agent may countersign such
Warrants whether in its prior name or in its changed name; and in all such cases
such Warrants shall have the full force provided in the Warrants and in this
Agreement.

SS.14. DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:

A. The statements contained herein and in the Warrants shall be taken as
statements of the Company, and the Warrant Agent assumes no responsibility for
the correctness of any of the same except such as describe the Warrant Agent or
action taken or to be taken by it. The Warrant Agent assumes no responsibility
with respect to the distribution of the Warrants except as herein otherwise
provided.

B. The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.

C. The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it to perform any duty hereunder either itself or by or through
its attorneys, agents or employees.

D. The Warrant Agent may consult at any time with counsel satisfactory to
it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel, provided the

<PAGE>

Warrant Agent shall have exercised reasonable care in the selection and
continued employment of such counsel.

E. The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.

F. The Company agrees to pay to the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence or bad faith.

G. The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve expense
unless the Company or one or more registered holders of Warrants shall furnish
the Warrant Agent with reasonable security and indemnity for any cost and
expense which may be incurred, but this provision shall not affect the power of
the Warrant Agent to take such action as the Warrant Agent may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrants or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrants, as their respective rights or interests
may appear.

H. The Warrant Agent and any stockholder, director, officer or employee of
the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become peculiarly interested in any transaction in
which the Company may be interested, or contract with or lend money to or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.

I. The Warrant Agent shall act hereunder solely as agent and not in a
ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence or bad faith.

SS.15. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company notice
in writing, and to the holders of the Warrants notice by publication, of such
resignation, specifying a date when such resignation shall take effect, which
notice shall be published at least once a week for two consecutive weeks in a
newspaper of general circulation in Dallas, Texas and New York, New York, prior
to the date so specified. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company and by like publication. If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by the registered holder of a
Warrant (who shall, with such notice, submit his Warrant for inspection by the
Company), then the registered holder of a Warrant may apply to any court of

<PAGE>

competent jurisdiction for the appointment of a successor to the Warrant Agent.
Any successor warrant agent, whether appointed by the Company or by such a
court, shall be a bank or trust company having its principal office, and having
capital and surplus as shown by its last published report to its stockholders,
of at least $1,000,000. After appointment, the successor warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor warrant agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
file or publish any notice provided for in this Section, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor warrant agent, as the
case may be.

SS.16. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment of any
Transfer Agent for the Common Stock or of any subsequent Transfer Agent for
shares of the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such Transfer Agent.

SS.17. NOTICES. Any notice pursuant to this Agreement to be given or made
by the Warrant Agent or the registered holder of any Warrant to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:

Butterwings Entertainment Group, Inc.
2345 Pembroke
Hoffman Estates, Illinois 60195
Attention: President

Any notice pursuant to this Agreement to be given or made by the Company or the
registered holder of any Warrant to or on the Warrant Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing by the Warrant Agent with
the Company) as follows:

American Stock Transfer & Trust Company

SS.18. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant Agent may
from time to supplement or amend this Agreement without the approval of any
holders of Warrants in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not be inconsistent with the provisions
of the Warrants and which shall not adversely affect the interests of the
holders of Warrants.

SS.19. SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.

SS.20. MERGER OR CONSOLIDATION OF THE COMPANY. The Company shall not effect
any consolidation or merger with, or sale of substantially all its property to,
any other corporation unless the corporation resulting from such merger (if not
the Company) or consolidation or the corporation purchasing such property shall
expressly assume, by supplemental agreement satisfactory in form to the Warrant

<PAGE>

Agent and executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and condition of this
Agreement to be performed and observed by the Company.

SS.21. TEXAS CONTRACT. This Agreement and each Warrant issued hereunder
shall be deemed to be a contract made under the laws of the State of Texas and
for all purposes shall be construed in accordance with the laws of said State.

SS.22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.

SS.23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes by deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.

BUTTERWINGS ENTERTAINMENT GROUP, INC.

By:________________________________________
Stephan S. Buckley, President

AMERICAN STOCK TRANSFER & TRUST COMPANY

By:________________________________________

<PAGE>

EXHIBIT A

[FORM OF WARRANT]

No. _____ For the Purchase of ___
Shares of Common Stock

__________, 1997

BUTTERWINGS ENTERTAINMENT GROUP, INC.

REDEEMABLE SERIES A COMMON STOCK PURCHASE WARRANT

EXERCISABLE ON OR BEFORE 5: 00 P. M. , New York City Time 2002

This Warrant Certifies that ________________________________, or registered
assigns, is the holder of __________________Warrants expiring ___________, 2002,
to purchase Common Stock, $.01 par value per share (the "Common Stock"), of
Butterwings Entertainment Group, Inc., an Illinois corporation (the "Company").
Each Warrant entitiles the holder to purchase from the Company on or before 5:00
P. M. New York City time, on _________2002, (subject to extensions in the sole
discretion of the Company, the "Expiration Date") on fully-paid and
non-assessable share of Common Stock of the Company at the exercise price (the
"Exercise Price") of $____per share upon surrender of this Warrant Certificate
and payment of the Exercise Price at the office or agency of the Warrant Agent
in New York, New York, but only subject to the conditions set forth herein and
in the Warrant Agreement. Payment of the Exercise Price may be made in cash or
by certified check payable to the order of the Company. As used herein "shares"
refers to the Common Stock of the Company and, where appropriate, to the other
securities or property issuable upon exercise of a Warrant as provided for in
the Warrant Agreement upon the happening of certain events set forth in the
Warrant Agreement.

No Warrant may be exercised after 5:00 P. M., New York City time, on the
Expiration Date. To the extent not exercised by such time, the Warrants shall be
cancelled and retired notwithstanding delivery of the related Warrant
Certificate. All Warrants evidenced hereby shall thereafter be void.

Reference is hereby made to the further provisions of this Warrant Certificate
set forth on the reverse in hereof and such further provisions shall for all
purposes have the same effect as though fully set forth at this place.

This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent

Dated: Butterwings
Entertainment Group, Inc.
By:
President

Countersigned By:
Warrant Agent Secretary
By:

Authorized Officer

<PAGE>

[ FORM OF ]

ELECTION TO PURCHASE

Butterwings Entertainment Group, Inc.
c/o _______________________

The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,_____
_____________________ shares of the stock provided for therein, and requests
that certificates for such shares shall be issued in the name of _______________
( Please Print )
________________________________________________________________________________

and be delivered to ____________________________________________________________

at _____________________________________________________________________________

and, if said number of shares shall not be all of the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.

Dated:_______________________________,

Name of Warrantholder:____________________________________________________
( Please Print )
Address: ______________________________________________________________

Signature: ______________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant in every
particular, without alteration or enlargement or any
change whatsoever.

<PAGE>

[ FORM OF ]

ASSIGNMENT

For value received _______________________________________________________

does hereby sell, assign and transfer unto _____________________________________
the within Warrant, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint attorney, to transfer said
Warrant on the books of the within-named Corporation, with full power of
substitution in the premises.

Date:________________________________,

Signature:________________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant in every
particular, without alteration or enlargement or any
change whatsoever.

<PAGE>

Consent of Independent Accountants

We consent to the use in this Registration Statement on Form Si3-2 (No.
333-20601) of our report dated March 6, 1997, relating to the consolidated
financial statements of Butterwings Entertainment Group, Inc. and Subsidiaries.
We also consent to the reference to our firm under the caption "expert" in the
prospectus.

/s/McGladrey & Pullen LLP

Schaumburg, Illinois
April 17,1997

<ARTICLE> 5

<CIK> 0001030988
<NAME> Butterwings Entertainment Group, Inc

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-29-1995 DEC-31-1995
<PERIOD-START> JAN-01-1996 DEC-26-1994
<PERIOD-END> DEC-29-1995 DEC-31-1995
<CASH> 534,072 774,157
<SECURITIES> 0 0
<RECEIVABLES> 3,137 70,736
<ALLOWANCES> 0 0
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<PP&E> 2,933,386 2,947,567
<DEPRECIATION> 619,141 258,534
<TOTAL-ASSETS> 5,506,201 6,007,118
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<BONDS> 0 0
0 0
1,568,500 1,266,000
<COMMON> 21,520 19,476
<OTHER-SE> (3,802,975) (1,867,772)
<TOTAL-LIABILITY-AND-EQUITY> 5,506,201 6,007,118
<SALES> 8,551,033 7,730,956
<TOTAL-REVENUES> 8,551,033 7,730,956
<CGS> 2,454,078 2,316,341
<TOTAL-COSTS> 10,385,742 8,270,290
<OTHER-EXPENSES> (279,324) (72,493)
<LOSS-PROVISION> 927,148 145,000
<INTEREST-EXPENSE> 493,279 480,958
<INCOME-PRETAX> (757,259) (1,153,674)
<INCOME-TAX> (757,259) (1,153,674)
<INCOME-CONTINUING> (757,259) (1,153,674)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,757,259) (1,153,674)
<EPS-PRIMARY> (1.23) (0.51)
<EPS-DILUTED> (1.23) (0.51)

</TABLE>