<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
- --------------------------------------------------------------------------------
AMENDMENT NO. 1
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 1, 1998
CEC PROPERTIES, INC.
- --------------------------------------------------------------------------------
[Exact Name of Registrant as specified in its Charter]
Delaware 0-188 13-1919940
- --------------- --------------------- -------------------
[State or other [Commission File No.] [IRS Employer
jurisdiction of Identification No.]
Incorporation]
1500 W. Balboa, Suite 201, Newport Beach, California 92663
- --------------------------------------------------------------------------------
[Address of principal executive offices; Zip Code]
Registrant's Telephone No., including Area Code (949) 673-2282
- --------------------------------------------------------------------------------
Former address, if changed since last report
1
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
- ------- --------------------
(a) Financial statements are attached in connection with the acquisition
reported in the Registrant's Form 8-K for the event reported October 1,
1998, marked Exhibit A.
(b) Pro forma financial information is attached and marked Exhibit B.
23. Consent of Independant Public Accountants
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CEC PROPERTIES, INC.
Dated: December 14, 1998.
By: /S/ Paul Balalis
------------------------
Paul Balalis, President
<PAGE>
FIRST GOLF CORPORATION
FINANCIAL STATEMENTS
December 31, 1997 and 1996
EXHIBIT A
<PAGE>
FIRST GOLF CORPORATION
Table of Contents
REPORT OF INDEPENDENT ACCOUNTANTS..............................................1
FINANCIAL STATEMENTS:
Balance Sheets............................................................2
Statements of Income and Accumulated Deficit..............................4
Statements of Cash Flows..................................................5
NOTES TO FINANCIAL STATEMENTS..................................................6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
First Golf Corporation
We have audited the accompanying balance sheets of First Golf Corporation (an S-
Corporation) as of December 31, 1997 and 1996, and the related statements of
income and accumulated deficit and statements of 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 our audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of First Golf Corporation as of
December 31, 1997 and 1996, and the results of its operations and its 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 6 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 6. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/S/ Starr and Walters
STARR AND WALTERS
ACCOUNTANCY CORPORATION
Santa Ana, California
December 11, 1998
1
<PAGE>
FIRST GOLF CORPORATION
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
- --------------------------------------------------------------------------------
Current Assets:
Cash $ 86,146 $ 18,878
Accounts receivable (Note 2) 75,455 71,011
Inventory (Note 1) 80,563 109,712
------------ ------------
Total Current Assets 242,164 199,601
Property and Equipment, net
of accumulated depreciation (Note 3) 15,289 22,779
Escrow Deposit (Note 7) - 50,000
------------ -----------
$ 257,453 $ 272,380
============ ===========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
FIRST GOLF CORPORATION
BALANCE SHEETS
December 31, 1997 and 1996
LIABILITIES AND DEFICIENCY IN ASSETS
1997 1996
------------- -------------
Current Liabilities:
Current portion long-term debt (Note 4) $ 27,992 $ 49,207
Accounts payable and accrued expenses 266,754 166,855
Accrued interest (Note 4) 102,163 48,000
------------- -------------
Total Current Liabilities 396,909 264,062
Long-term debt, net of current portion (Note 4) 695,000 600,000
------------- -------------
Total Liabilities 1,091,909 864,062
------------- -------------
Deficiency in Assets:
Common stock, $100 par value 5,000
shares authorized, 100 shares issued
and outstanding in 1997 and 1996 10,000 10,000
Additional paid-in capital 156,363 156,363
Accumulated deficit (Note 6) (1,000,819) (758,045)
------------- -------------
Total Deficiency in Assets (834,456) (591,682)
------------- -------------
$ 257,453 $ 272,380
============= =============
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
FIRST GOLF CORPORATION
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
Years ended December 31, 1997 and 1996
1997 1996
------------- -------------
Revenue $ 2,941,452 $ 2,159,989
Cost of Goods Sold 705,917 1,090,762
------------- -------------
Gross Profit 2,235,535 1,069,227
Expenses:
General and administrative 2,478,309 1,556,381
------------- -------------
Total Expenses 2,478,309 1,556,381
------------- -------------
Net Loss (242,774) (487,154)
Accumulated Deficit, beginning of year (758,045) (270,891)
------------- -------------
Accumulated Deficit, end of year $ (1,000,819) $ (758,045)
============= =============
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
FIRST GOLF CORPORATION
STATEMENTS OF CASH FLOWS
Years ended December 31, 1997 and 1996
<CAPTION>
1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (242,774) $ (487,154)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,192 9,156
Increase in accounts receivable net (4,444) (61,072)
Decrease (increase) in inventory 29,149 (34,626)
Decrease (increase) in escrow deposit 50,000 (50,000)
Increase in accounts payable and accrued expenses 99,899 56,767
Increase in accrued interest 54,163 48,000
------------- -------------
Net cash used by operating activities (5,815) (518,929)
------------- -------------
Cash flows from investing activities:
Equipment purchases (702) (11,334)
------------- -------------
Net cash used by investing activities (702) (11,334)
------------- -------------
Cash flows from financing activities:
New borrowing on notes payable 95,000 665,000
Principal payments on notes payable (21,215) (131,794)
------------- -------------
Net cash provided by financing activities 73,785 533,206
------------- -------------
Net increase in cash 67,268 2,943
Cash at beginning of year 18,878 15,935
-------------- -------------
Cash at end of year $ 86,146 $ 18,878
============= =============
Supplemental cash flow information:
Cash paid for interest $ 73,503 $ 69,670
Cash paid for income taxes 0 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
FIRST GOLF CORPORATION
NOTES TO FINANCIAL STATEMENT
December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- ---------------------------------------------------------------------
ORGANIZATION
The Company is in the business of providing services to help facilitate the
construction of golf courses. Some of the services provided include design,
construction management, operations planning and securing financing for
construction and long-term ownership.
BASIS OF ACCOUNTING
The Company reports on the accrual basis of accounting whereby revenues are
recognized when earned and expenses recorded when incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
CASH AND EQUIVALENTS
The Company considers all highly liquid investments with maturity of three
months or less to be cash equivalents for the purpose of determining cash flows.
INVENTORY
Inventory consists of golf related equipment and merchandise and is carried at
the lower of cost (first-in, first-out) or market value.
DEPRECIATION
Property and equipment are stated at cost and are depreciated on a straight-line
basis over the estimated useful lives of the assets. Improvements are
capitalized, and repairs and maintenance are charged to expense as incurred.
See accompanying accountants' report.
6
<PAGE>
FIRST GOLF CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED):
- --------------------------------------------------------------------
COMPENSATED ABSENCES
The Company does not accrue compensated absences as management considers the
amounts to be immaterial.
INCOME TAXES
The Company has elected under the Internal Revenue Code to be an S Corporation.
In lieu of corporation income taxes the stockholders of an S corporation are
taxed on their proportionate share of the Company's taxable income. Therefore,
no provision or liability for federal income taxes has been included in the
financial statements.
NOTE 2 - ACCOUNTS RECEIVABLE:
- -----------------------------
The accounts receivable is presented net of an allowance for doubtful accounts
of approximately $35,073 and $29,079 for 1997 and 1996 respectively.
NOTE 3 - PROPERTY AND EQUIPMENT:
- --------------------------------
Fixed assets consist of golf equipment, office equipment, and furniture and
fixtures. Cost and accumulated depreciation are as follows:
1997 1996
-----------------------------
Golf Equipment $ 6,887 $ 6,887
Office Equipment 23,028 22,326
Furniture and Fixture 18,105 18,105
---------- ----------
48,020 47,318
Accumulated Depreciation (32,731) (24,539)
---------- ----------
Net Property and Equipment $ 15,289 $ 22,779
========== ==========
For the years ended December 31, 1997 and 1996, depreciation expense was $8,192
and $9,156 respectively.
See accompanying accountants' report.
7
<PAGE>
FIRST GOLF CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 4 - NOTES PAYABLE:
- -----------------------
A summary of the notes payable at December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
-------------------------
<S> <C> <C>
a. 8% unsecured note payable to individual
parties, due on demand $ 600,000 $ 600,000
b. 8% unsecured note payable to individual
parties, due on demand 95,000 -
c. 9% unsecured note, payable $2,222 per month including
interest until December 1998 (See Note 5) 27,992 49,208
---------- ----------
722,992 649,208
Less: current portion 722,992 621,216
---------- ----------
Long-term portion $ 0 $ 27,992
========== ==========
</TABLE>
No interest has been paid on the above notes labeled a and b.
NOTE 5 - RELATED PARTY TRANSACTIONS:
- ------------------------------------
During the year ended December 31, 1995 the father of the Company's sole
shareholder loaned money to the Company totaling $65,000. This loan is payable
$2,222 per month including interest at 9%.
The Company advanced monies to a related company Golf, Inc. Golf Inc. is also
controlled by the Company's sole shareholder. At December 31, 1997 and 1996 the
Company was owed $35,073 and $29,079 respectively. These monies were fully
reserved as uncollectible.
See accompanying accountants' report.
8
<PAGE>
FIRST GOLF CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 6 - GOING CONCERN:
- -----------------------
The Company incurred operating losses of $242,774 and $487,154 for the years
ended December 31, 1997 and 1996, respectively.
The Company's working capital position deteriorated significantly during 1997
and 1996. This deterioration was caused by its losses from operations and its
loss from an option deposit forfeiture related to the attempted purchase of a
golf course as more fully described in Note 7. This working capital deficit has
caused accounts payable and current portion of long-term debt to increase
significantly.
Management believes the Company's most likely source of liquidity is a sale of
the Company as more fully described in Note 8.
NOTE 7 - COMMITMENTS:
- ---------------------
EQUIPMENT LEASES
The Company leases various types of equipment under non-cancelable leases. Rent
expense for these operating leases was $172,499 and $57,753 for 1997 and 1996
respectively.
FACILITY LEASES
The Company leases its offices and other golf course facilities. Rent expense
for these leases was $303,363 and $45,794 for 1997 and
1996 respectively.
GOLF COURSE LEASE
On June 26, 1996 the Company entered into a lease to rent a golf course for the
six months ended December 1, 1996. This lease was extended until September,
1997. In lieu of paying fixed rent, the Company paid all normal operating
expenses and was entitled to keep all normal operating profits.
The Company also paid $50,000 for an option to purchase the golf course for
$1,200,000. Management elected to forfeit its $50,000 option deposit in
September, 1997 and it was charged to expense.
See accompanying accountants' report.
9
<PAGE>
FIRST GOLF CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 8 - SUBSEQUENT EVENTS:
- ---------------------------
SALE OF COMPANY ASSETS
On October 1, 1998, certain assets of the Company were acquired by First Golf
Acquisition Corporation, a wholly-owned subsidiary of CEC Properties, Inc. Under
the purchase agreement, the buyer paid or will pay cash of $200,000 and issued
640,000 shares of CEC's common stock. The purchase contract contains revenue
guarantees by the seller, whereby a mutually agreed upon Pledgeholder will
release 176,000 and 160,000 shares of the common stock on the 14th month and
26th month anniversary date of the transaction. Any remaining undelivered shares
will be released on the 38th month anniversary date of the transaction.
Conversely, if there is a revenue shortfall, the seller may be obligated to
return shares issuable or issued. In addition, the purchase contract contains
certain share price levels at the 25th month anniversary date of the
transaction. If the share price does not meet the specified price level, buyer
will deliver to seller additional shares so that the average price of all shares
delivered to seller will aggregate no less than $2,000,000, but the number of
additional shares delivered shall not exceed 445,440 shares.
LITIGATION
The Company was the defendant in two lawsuits. One lawsuit was dismissed in
September, 1998, the other lawsuit was settled for $12,000 in 1998.
See accompanying accountants' report.
10
<PAGE>
FIRST GOLF CORPORATION
BALANCE SHEET
September 30, 1998
(UNAUDITED)
ASSETS
Current Assets:
Cash $ 7,314
Accounts receivable 310,616
Inventory 18,477
Prepaid Expense 8,500
-------------
Total Current Assets 344,907
Property and Equipment, net of
accumulated depreciation 9,145
-------------
$ 354,052
=============
1
<PAGE>
FIRST GOLF CORPORATION
BALANCE SHEET
September 30, 1998
(UNAUDITED)
LIABILITIES AND DEFICIENCY IN ASSETS
Current Liabilities:
Current portion long-term debt $ 735,511
Accounts payable and accrued expenses 432,726
Accrued interest 144,752
-------------
Total Current Liabilities 1,312,989
-------------
Total Liabilities 1,312,989
-------------
Deficiency in Assets:
Common stock, $100 par value 5,000
shares authorized, 100 shares issued
and outstanding 10,000
Additional paid-in capital 156,363
Accumulated deficit (Note 6) (1,125,300)
-------------
Total Deficiency in Assets (958,937)
-------------
$ 354,052
=============
2
<PAGE>
FIRST GOLF CORPORATION
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
Nine months ended September 30, 1998
(UNAUDITED)
Revenue $ 1,536,602
Cost of Goods Sold 390,725
-------------
Gross Profit 1,145,877
Expenses:
General and administrative 1,270,358
-------------
Total Expenses 1,270,358
-------------
Net Loss (124,481)
Accumulated Deficit, beginning of year (1,000,819)
-------------
Accumulated Deficit, end of year $ (1,125,300)
=============
3
<PAGE>
FIRST GOLF CORPORATION
STATEMENT OF CASH FLOWS
Nine months ended September 30, 1998
(UNAUDITED)
Cash flows from operating activities:
Net loss $ (124,481)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 6,144
Increase in accounts receivable net (235,161)
Decrease in inventory 62,086
Increase in prepaid expense (8,500)
Increase in accounts payable and accrued expenses 165,972
Increase in accrued interest 42,589
-------------
Net cash used by operating activities (91,351)
-------------
Cash flows from financing activities:
New borrowing on notes payable 25,000
Principal payments on notes payable (12,481)
-------------
Net cash provided by financing activities 12,519
-------------
Net decrease in cash (78,832)
Cash at beginning of year 86,146
-------------
Cash at end of year $ 7,314
=============
Supplemental cash flow information:
Cash paid for interest $ 56,482
Cash paid for income taxes 0
4
<PAGE>
PRO FORMA FINANCIAL INFORMATION
On October 1, 1998, Registrant acquired substantially all of the assets of First
Golf Corporation, a South Dakota corporation, located in Tempe, Arizona. First
Golf manages the construction of golf courses and has built 25 courses since
1987. The transaction was recorded under the purchase method of accounting,
whereby the purchase price is allocated to assets acquired and liabilities
assumed based on fair market value at date of acquisition. The aggregate
purchase price of the assets purchased was $588,800, paid or to be paid in cash
of $200,000 and 640,000 shares of Registrant's common stock valued at
$0.6075/share. Management valued the shares at fair value at date of transaction
(0.81/share) less a 25% discount for lack of marketability of said shares.
$118,250 was allocated to tangible assets. The balance of the purchase price of
$470,550 was recorded as goodwill to be amortized over a fifteen year period on
a straight-line basis.
The following pro forma information is intended to show how the October 1, 1998
asset purchase transaction of First Golf Corporation might have affected the
historical financial statements of the Registrant had the transactions been
consummated at an earlier date. For this purpose, a pro forma balance sheet as
of July 31, 1998 and pro forma income statement for the nine months ended July
31, 1998 is presented based on the assumption that the transaction was
consummated at the beginning of the Registrant's current fiscal year. A pro
forma income statement for the fiscal year ended October 31, 1997 is presented
based on the assumption that the transaction was consummated at the beginning of
Registrant's prior fiscal year.
In management's opinion, the unaudited proforma combined results of operations
are not necessarily indicative of the actual results that would have occurred
had the acquisition been consummated at the beginning of the fiscal year ended
October 31, 1998 or at the beginning of fiscal year ended October 31, 1997 or of
future operations of the combined companies under the ownership and management
of the Company.
FORWARD-LOOKING STATEMENTS
Certain information in this Form 8-K may contain "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical fact are
"forward-looking statements" for purposes of these provisions, including any
projections of earnings, revenues or other financial items, any statements of
the plans and objectives of management for future operations, any statements
concerning proposed new products or services, any statements regarding future
economic conditions or performance and any statement of assumptions underlying
any of the foregoing. In some cases, forward-looking statements can be
identified by the use of terminology such as "may", "will", "expects", "plans",
"anticipates", "estimates", "potential" or "continue", or the negative thereof
or their comparable terminology. Although The Company believes that the
expectations reflected in its forward-looking statements are reasonable, it can
give no assurance that such expectations or any of its forward-looking
statements will prove to be correct, and actual results could differ materially
from those projected or assumed in The Company's forward-looking statements.
Forward-looking statements are subject to inherent risks and uncertainties, some
of which are summarized in this section.
EXHIBIT B
<PAGE>
<TABLE>
CEC Properties, Inc. and Subsidiaries
Pro Forma Financial Information - Condensed Balance Sheet
July 31, 1998
(Unaudited)
<CAPTION>
Historical
Historical Asset Purchase Pro Forma Pro Forma
CEC First Golf Corp Adjustments CEC
July 31, October 1, (Note 3 and July 31,
1998 1998 Note 4) 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Cash 418,268 0 0 418,268
Inventory 111,608 21,925 0 133,533
Fixed Assets, net of accum depreciation 299,866 96,329 -14,449 381,746
Goodwill 93,064 470,546 -23,527 540,083
Other 156,278 0 0 156,278
--------------- --------------- --------------- ---------------
Total Assets 1,079,084 588,800 -37,976 1,629,908
=============== =============== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes Payable - Stockholders 48,000 200,000 0 248,000
Accounts Payable and Other 235,816 0 0 235,816
--------------- --------------- --------------- ---------------
Total Liabilities 283,816 200,000 0 483,816
Stockholders' Equity:
Common Stock 129,892 6,400 0 136,292
Preferred Stock 904,500 0 0 904,500
Additional Paid in Capital 23,401,793 382,400 0 23,784,193
Accumulated Deficit -23,640,917 0 -37,976 -23,678,893
--------------- --------------- --------------- ---------------
Total Stockholders' Equity 795,268 388,800 -37,976 1,146,092
--------------- --------------- --------------- ---------------
Total Liabilities and Stockholders' Equity 1,079,084 588,800 -37,976 1,629,908
=============== =============== =============== ===============
</TABLE>
See accompanying notes to pro forma condensed financial information.
<PAGE>
<TABLE>
CEC Properties, Inc. and Subsidiaries
Pro Forma Financial Information - Condensed Income Statement
Nine Months ended July 31, 1998
(Unaudited)
<CAPTION>
Historical Historical Pro Forma Pro Forma
CEC First Golf Corp Adjustments CEC
July 31, Nine Months ended (Note 3 and July 31,
1998 September 30, 1998 Note 4) 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue:
Sales 965,000 1,536,602 0 2,501,602
Other 0 0 0 0
--------------- --------------- --------------- ---------------
Total Revenue 965,000 1,536,602 0 2,501,602
Expenses:
Cost of Sales 0 390,725 0 390,725
Operating Expenses 1,059,000 1,270,358 0 2,329,358
Depreciation 5,000 0 14,449 19,449
Amortization 0 0 23,527 23,527
--------------- --------------- --------------- ---------------
Total Expenses 1,064,000 1,661,083 37,976 2,763,059
--------------- --------------- --------------- ---------------
Net Loss from Continuing Operations -99,000 -124,481 -37,976 -261,457
=============== =============== =============== ===============
Net Loss Per Common Share -
Continuing Operations -0.01 -0.02
=============== ===============
Weighted Average Shares Outstanding 12,989,226 13,316,698
=============== ===============
</TABLE>
See accompanying notes to pro forma condensed financial information.
<PAGE>
<TABLE>
CEC Properties, Inc. and Subsidiaries
Pro Forma Financial Information - Condensed Income Statement
Year ended October 31, 1997
(unaudited)
<CAPTION>
Historical Historical Pro Forma Pro Forma
CEC First Golf Corp Adjustments CEC
October 31, 12 months ended (Note 3 and October 31,
1997 December 31, 1997 Note 4) 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue:
Sales 0 2,941,452 0 2,941,452
Gain on Sale of Investment 58,175 0 0 58,175
Other 2,080 0 0 2,080
--------------- --------------- --------------- ---------------
Total Revenue 60,255 2,941,452 0 3,001,707
Expenses:
Cost of Sales 0 705,917 0 705,917
Operating Expenses 146,989 2,478,309 0 2,625,298
Depreciation 0 0 19,266 19,266
Amortization 0 0 31,370 31,370
--------------- --------------- --------------- ---------------
Total Expenses 146,989 3,184,226 50,636 3,381,851
--------------- --------------- --------------- ---------------
Net Loss from Continuing Operations -86,734 -242,774 -50,636 -380,144
=============== =============== =============== ===============
Net Loss Per Common Share -
Continuing Operations -0.01 -0.03
=============== ===============
Weighted Average Shares Outstanding 12,566,698 13,206,698
=============== ===============
See accompanying notes to pro forma condensed financial information.
</TABLE>
<PAGE>
CEC Properties, Inc. and Subsidiaries
Notes to Pro Forma Condensed Financial Information
July 31, 1998 and October 31, 1997
1. Consolidation
- -----------------
The accompanying pro forma condensed financial information includes the accounts
of the Company and its wholly owned subsidiaries, CEC Properties Corp., a Nevada
corporation and Classic Golf Management, Inc., a Georgia corporation, WorldWise
Marketing & Graphics, a California corporation, and First Golf Acquisition
Corp., a Nevada corporation (and owner of assets purchased from First Golf
Corporation). All material intercompany transactions have been eliminated.
2. Basis of Presentation
- -------------------------
The accompanying pro forma condensed income statement includes only income
(loss) from continuing operations. Income from discontinued operations is
omitted.
3. Amortization
- ----------------
The accompanying pro forma condensed income statement includes an adjustment for
the amortization of goodwill recorded in the First Golf Corporation asset
purchase transaction. Goodwill is amortized over a 15-year period on a
straight-line basis.
4. Depreciation
- ----------------
The accompanying pro forma condensed income statement includes adjustments for
the depreciation of the fixed assets acquired in the First Golf Corporation
asset purchase transaction. Depreciation is provided for over a useful life
period five years on a straight-line basis.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated December 11, 1998, included in and made part of the Form 8-K filing
of CEC Properties, Inc. dated October 1, 1998.
/s/ Starr and Walters
STARR AND WALTERS
ACCOUNTANCY CORPORATION
Santa Ana, California
December 11,1998
