JILLIANS ENTERTAINMENT CORP, PREM14A, 1995-11-13

JILLIANS ENTERTAINMENT CORP
PREM14A, 1995-11-13
MISCELLANEOUS AMUSEMENT & RECREATION

Previous: AEI REAL ESTATE FUND 85-A LTD PARTNERSHIP, 10QSB, 1995-11-13

Next: JILLIANS ENTERTAINMENT CORP, PRE13E3, 1995-11-13

<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant / x /

Filed by a Party other than the Registrant / x /

Check the appropriate box:
/ x / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

JILLIAN'S ENTERTAINMENT CORPORATION
COMMISSION FILE NO. 0-13740
(Name of Registrant as Specified in Its Charter)

N/A
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)

Payment of filing fee (Check the appropriate box):

/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ x / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.001 per share
(2) Aggregate number of securities to which transaction applies:
4,263,264 shares of Common Stock
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
$0.50 per share of Common Stock to be received by the Other
Shareholders in the Merger
(4) Proposed maximum aggregate value of transaction: $2,131,632
(5) Total fee paid: $426.33 (1/50 of 1% of $2,131,632)

/ / Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE> 2

PRELIMINARY COPY

JILLIAN'S ENTERTAINMENT CORPORATION
727 ATLANTIC AVENUE, SUITE 600
BOSTON, MASSACHUSETTS 02111

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON _____________, 1995

To the Shareholders:

Notice is hereby given that a special meeting (together with any
adjournments(s) thereof, the "Special Meeting") of the shareholders (the
"Shareholders") of Jillian's Entertainment Corporation, a Florida corporation
(the "Company"), will be held at ____________________, ____________________,
____________________, at __:__ _.M., Eastern Time, on ___________, 1995. Only
Shareholders who were shown on the Company's records as holders of issued and
outstanding shares of common stock, par value $.001 per share (the "Common
Stock") in the Company as of the close of business on October 23, 1995 (the
"Record Date") are entitled to notice of and to vote at the Special Meeting.
Each Shareholder is entitled to one vote in person or by proxy for each share
of Common Stock held by such Shareholder on the Record Date.

The Special Meeting is being held for the following purposes:

1. To consider and vote upon a proposal (the "Proposal") to
approve a merger (the "Merger") by and between the Company and a corporation to
be formed in Delaware ("Newco"). Under the Merger, each share of Common Stock
owned immediately prior to consummation of the Merger by any Shareholder, other
than certain employees of the Company, that (i) is the beneficial owner of less
than 101,000 shares of Common Stock as of the Record Date, or (ii) holds its
shares through a broker or dealer registered under the Securities Exchange Act
of 1934, as amended and does not provide the Company with evidence regarding
the number of shares beneficially owned by such holder will be converted into
the right to receive cash of $0.50 per share, without interest.

2. To transact such other business as may properly come before
the Special Meeting.

The accompanying Proxy Statement sets forth in more detail information
concerning the Merger.
<PAGE> 3
Whether or not you expect to attend the meeting in person, you are
urged to sign and date the enclosed proxy and return the same promptly so that
your shares of Common Stock may be represented and voted at the Special
Meeting.

BY ORDER OF THE BOARD OF DIRECTORS,

Richard F. Landry
Secretary

Boston Massachusetts
____________, 1995

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER
OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, PLEASE SIGN,
DATE AND COMPLETE THE ACCOMPANYING PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE GIVING
OF THE PROXY WILL NOT AFFECT YOUR RIGHTS TO VOTE AT THE MEETING IF THE PROXY IS
REVOKED AS SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.

2
<PAGE> 4

PRELIMINARY COPY

JILLIAN'S ENTERTAINMENT CORPORATION
727 ATLANTIC AVENUE, SUITE 600
BOSTON, MASSACHUSETTS 02111

PROXY STATEMENT FOR A SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON _____________, 1995

INTRODUCTION

This Proxy Statement is being furnished on behalf of Jillian's
Entertainment Corporation, a Florida corporation (the "Company"), in connection
with the solicitation of proxies to be voted at a special meeting (together
with any adjournment(s) thereof, the "Special Meeting") of shareholders of the
Company (the "Shareholders"). The Special Meeting is to be held at __:__ _.m.,
Eastern Time, on _____________, 1995, at _____________________________,
_____________________________, _____________________________. This Proxy
Statement and the Proxy are first being mailed to Shareholders on or about
____________, 1995.

The Board of Directors of the Company (the "Board") is soliciting the
proxies of the Shareholders who were shown on the Company's records as holders
of issued and outstanding shares of common stock, par value $.001 per share
(the "Common Stock") in the Company as of the close of business on October 23,
1995 (the "Record Date") to consider and vote upon a proposal (the "Proposal")
to approve a merger (the "Merger") by and between the Company and a corporation
to be formed in Delaware ("Newco").

Under the Merger (i) the Company will be merged with and into Newco,
and Newco shall be the surviving company in the Merger (the "Surviving
Company"), (ii) each share of Common Stock owned immediately prior to
consummation of the Merger by any Shareholder that is the beneficial owner of
at least 101,000 shares of Common Stock as of the Record Date (any such
Shareholder being hereinafter referred to as an "Initial Continuing
Shareholder") will be converted into the right to receive one share of Common
Stock of Newco, (iii) each share of Common Stock owned immediately prior to
consummation of the Merger by any Shareholder, other than an Employee
Continuing Shareholder (as defined below), that (A) is the beneficial owner of
less than 101,000 shares of Common Stock as of the Record Date, or (B) holds
its shares through a broker or dealer registered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and does not provide the Company
with evidence regarding the number of shares beneficially owned by such holder
(any of such

<PAGE> 5
persons or entities being hereinafter referred to as an "Other Shareholder")
will be converted into the right to receive cash of $0.50 per share, without
interest (a "Merger Payment"), (iv) each stock option or warrant to purchase a
share or shares of Common Stock outstanding immediately prior to consummation
of the Merger will be converted into the right to purchase the same number of
shares of common stock of Newco on the same terms and conditions, and (v) if
the aggregate number of shares of Common Stock beneficially owned by an
employee of the Company on the Record Date plus the aggregate number of shares
of Common Stock underlying stock options or warrants held by such employee on
the Record Date, whether or not such options or warrants are then exercisable,
total at least 101,000 shares of Common Stock (any such employee being
hereinafter referred to as an "Employee Continuing Shareholder" and, together
with the Initial Continuing Shareholders, the "Continuing Shareholders"), then
each such share of Common Stock held of record by the Employee Continuing
Shareholder immediately prior to consummation of the Merger will be converted
into the right to receive one share of common stock of Newco and each such
stock option or warrant held by the Employee Continuing Shareholder immediately
prior to consummation of the Merger will be converted into the right to
purchase the same number of shares of common stock of Newco on the same terms
and conditions.

For purposes of determining a Shareholder's status as a Continuing
Shareholder or Other Shareholder, the Company will rely upon the Company's
shareholder list to determine the beneficial holders of its Common Stock and to
calculate the number of shares of Common Stock held by each such holder on the
Record Date. The Company will treat each holder of record of issued and
outstanding shares of Common Stock as the beneficial owner of such shares of
Common Stock, except that, (i) in making such calculation, the Company will
aggregate shares of Common Stock held of record by an individual with those
held of record by the individual's spouse, their children under the age of 18
and trusts of which one or more of their children under the age of 18 is the
beneficiary, and treat all such shares as being beneficially owned by a single
individual, and (ii) the Company will not treat holders of record who are
brokers or dealers registered under the Exchange Act (such brokers or dealers
being hereinafter referred to as "Broker-Dealer Shareholders") as the
beneficial owners of such shares. In the case of any Broker-Dealer
Shareholder, the number of shares held by such Broker-Dealer Shareholder will
not be treated as being held by a single individual for the purposes of
determining whether a Broker-Dealer Shareholder qualifies to be treated as a
Continuing Shareholder for purposes of the Merger. Rather, a Broker-Dealer
Shareholder will be treated as an Other Shareholder unless, as to a particular
number of shares held of record by such Broker-Dealer Shareholder, the
beneficial owner of such shares provides the Company with a letter of
identification from the Broker-Dealer Shareholder identifying such person as
the beneficial owner, as of the Record Date, of the number of shares specified
in the letter of identification.

2
<PAGE> 6
The Company intends to use funds obtained from the private placement
of equity and/or subordinated debt securities of the Surviving Company (the
"Private Placement") to make the Merger Payments, and it is a condition to
consummation of the Merger that net proceeds from the Private Placement be
sufficient to make the Merger Payments. See "Financing of the Merger" and
"Proposal to Approve the Merger - Structure of the Merger" and "Proposal to
Approve the Merger - Certain Conditions to the Merger."

Approval of the Merger will require the favorable vote of the majority
of all shares of Common Stock. As of the Record Date, there were 9,137,798
issued and outstanding shares of Common Stock held of record by approximately
4,900 Shareholders. As of the Record Date, the members of the Board and the
executive officers of the Company owned an aggregate of 1,468,350 shares
(approximately 14.2 percent of the total shares of Common Stock outstanding).
Only one Continuing Shareholder is a member of the Board and/or an executive
officer of the Company. Such Continuing Shareholder held a total of 1,353,600
shares (approximately 13.1 percent of the total shares of Common Stock
outstanding) as of the Record Date and has informed the Company that he intends
to vote all of the shares of Common Stock held by him FOR the Proposal. For
additional information concerning the beneficial ownership of shares of Common
Stock, see "Security Ownership of Certain Beneficial Owners and Management."

The Board believes that the Merger is fair to the Other Shareholders,
and in the best interest of the Company and the Shareholders, and unanimously
recommends that Shareholders vote FOR approval of the Merger. In making this
recommendation, the Board is relying upon, among other things, the opinion of
Bannon & Co., Inc. (the "Financial Advisor") (which the Company retained to
determine the fairness of the Merger Payment) that the Merger Payment of $0.50
per share of Common Stock is fair to the Other Shareholders, as of __________,
1995. See "Special Factors - Board of Directors Determination of Fairness of
the Proposal" and "Special Factors - Opinion of the Financial Advisor."

If the Merger is consummated, the Company will become an entity the
securities of which are privately held. The registration of the Common Stock
under the Exchange Act will terminate, resulting in the suspension of the
Company's obligations to file periodic reports such as Form 10-Ks, 10-Qs and
8-Ks. Since the Common Stock will no longer be publicly held, the Company will
be relieved of the obligation to comply with the proxy rules of Regulation 14A
under Section 14 of the Exchange Act, and the officers and directors of the
Company and Shareholders owning more than 10 percent of the Common Stock will
be relieved of the reporting requirements and "short swing" trading
restrictions under Section 16 of the Exchange Act. In addition, the Common
Stock will be delisted from the National Securities Dealers Automated Quotation
System ("NASDAQ"), which will terminate the Company's public trading market and
relieve the Company of any further obligations to comply with the rules and
regulations relating to NASDAQ listing.

3
<PAGE> 7
AVAILABLE INFORMATION

The Company is currently subject to the informational requirements of
the Exchange Act, and, in accordance therewith, files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information can be
inspected and copies obtained from the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following
regional offices of the Commission: 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the
Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates.

The Company has filed with the Commission a Rule 13e-3 Transaction
Statement on Schedule 13E-3 (the "Schedule 13E-3") under the Exchange Act.
This Proxy Statement does not contain all of the information set forth in the
Schedule 13E-3, certain parts of which are omitted in accordance with the rules
and regulations of the Commission. The Schedule 13E-3 and any amendments
thereto, including exhibits filed as a part thereof, may be examined and copied
at the principal executive offices of the Company during regular business hours
by any Shareholder or such Shareholder's representative who has been so
designated in writing.

THESE TRANSACTIONS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTIONS OR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.

The date of this Proxy Statement is ___________, 1995.

4
<PAGE> 8
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Heading Page
- ------- ----
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 4

SUMMARY OF PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 8
Business of the Company . . . . . . . . . . . . . . . . . . . . . . 8
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . 8
Meeting and Proxy Information . . . . . . . . . . . . . . . . . . . 14
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Recommendation of the Board of Directors . . . . . . . . . . . . . . 16
Interests of Certain Persons in the Merger . . . . . . . . . . . . . 16
Certain Effects of the Merger . . . . . . . . . . . . . . . . . . . 17
Opinion of the Financial Advisor . . . . . . . . . . . . . . . . . . 18
Material Federal Income Tax Consequences . . . . . . . . . . . . . . 18
Regulatory Requirements and Conditions . . . . . . . . . . . . . . . 19
Market Information . . . . . . . . . . . . . . . . . . . . . . . . . 19
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . 19

VOTING AND PROXY INFORMATION . . . . . . . . . . . . . . . . . . . . . . 20
Record Date; Outstanding Shares; Voting . . . . . . . . . . . . . . 20
Proxy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Revocability of Proxy . . . . . . . . . . . . . . . . . . . . . . . 22
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . 22

SPECIAL FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . 23
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Bank and Equipment Lease Financing . . . . . . . . . . . . . . 25
Seller, Landlord and Municipal Financing . . . . . . . . . . . 26
Equity and Debt Financing . . . . . . . . . . . . . . . . . . . 29
Current Effects of Borrowings and Equity Financing . . . . . . 32
Alternatives Considered . . . . . . . . . . . . . . . . . . . . 36
Payments to the Other Shareholders . . . . . . . . . . . . . . . . . 38
Opinion of the Financial Advisor . . . . . . . . . . . . . . . . . . 39
Board of Directors Determination of Fairness of the Proposal . . . . 42
Material Federal Income Tax Consequences . . . . . . . . . . . . . . 43
</TABLE>

5
<PAGE> 9
<TABLE>
<CAPTION>
Heading Page
- ------- ----
<S> <C>
Federal Income Tax Consequences for Continuing Shareholders . . 44
Federal Income Tax Consequences for Other Shareholders . . . . 46
Federal Income Tax Consequences for Holders of Warrants to
Purchase Common Stock . . . . . . . . . . . . . . . . . . 47
Federal Income Tax Consequences for Holders of Options to
Purchase Common Stock . . . . . . . . . . . . . . . . . . 47
Purposes and Reasons for the Merger . . . . . . . . . . . . . . . . 47
Interests of Certain Persons in the Merger . . . . . . . . . . . . . 48
Certain Effects of the Merger . . . . . . . . . . . . . . . . . . . 49
Effect If the Merger is Not Approved . . . . . . . . . . . . . . . . 50

PROPOSAL TO APPROVE THE MERGER . . . . . . . . . . . . . . . . . . . . . 50
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Certain Effects of the Merger . . . . . . . . . . . . . . . . . . . 50
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . 51
Amounts Paid in the Merger . . . . . . . . . . . . . . . . . . . . . 51
Payment for Common Stock in the Merger . . . . . . . . . . . . . . . 52
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . 53
Lock-Up Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 53
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . 54
Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . 54
Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 54
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . 55
Vote Required and Recommendation of the Board of Directors . . . . . 55

REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

FINANCING OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 55

BUSINESS AND PROPERTIES OF THE COMPANY . . . . . . . . . . . . . . . . . 57
Description of Business . . . . . . . . . . . . . . . . . . . . . . 57
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Jillian's Clubs . . . . . . . . . . . . . . . . . . . . . . . . 59
Description of Properties . . . . . . . . . . . . . . . . . . . . . 61
Administrative Operations . . . . . . . . . . . . . . . . . . . 61
Jillian's Clubs . . . . . . . . . . . . . . . . . . . . . . . . 62
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 68

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . 68
</TABLE>

6
<PAGE> 10
<TABLE>
<CAPTION>
Heading Page
- ------- ----
<S> <C>
Results of Operations . . . . . . . . . . . . . . . . . . . . . 68
Quarter Ended June 30, 1995 Compared to Quarter Ended
June 30, 1994 . . . . . . . . . . . . . . . . . . . . . 68
Fiscal Year Ended March 31, 1995 Compared to Fiscal Year
Ended March 31, 1994 . . . . . . . . . . . . . . . . . 68
Liquidity and Capital Resources . . . . . . . . . . . . . . . . 71

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY AND
NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

PRIOR CONTACTS BETWEEN THE COMPANY AND
CERTAIN AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . 77

SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . 78

MARKET INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . 81

MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

DOCUMENTS INCORPORATED BY REFERENCE . . . . . . . . . . . . . . . . . . . 82

INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

7
<PAGE> 11

SUMMARY OF PROXY STATEMENT

The following is a brief summary of certain information contained in this
Proxy Statement. This summary is not intended to be complete and is qualified
in its entirety by reference to the more detailed information appearing
elsewhere in this Proxy Statement, including the Appendices hereto.
Shareholders are urged to review the entire Proxy Statement carefully.

Business of the Company

The Company is a Florida corporation whose primary business is the
operation of upscale billiard clubs. The Company, through wholly owned
subsidiaries, currently wholly or partially owns, operates and manages nine
billiard clubs, which are located in Miami, Florida; Seattle, Washington;
Cleveland, Ohio; Cleveland Heights, Ohio; Pasadena, California; Worcester,
Massachusetts; Champaign, Illinois; Annapolis, Maryland; and Long Beach,
California. The Company is currently developing an additional club in Tacoma,
Washington. The principal executive offices of the Company are located at 727
Atlantic Avenue, Suite 600, Boston, Massachusetts 02111. See "Business and
Properties of the Company."

Background of the Merger

The decision of the Board of Directors of the Company (the "Board") to
present a proposal (the "Proposal") to approve a merger (the "Merger") by and
between the Company and a corporation to be formed in Delaware ("Newco") to the
Shareholders marked the culmination of a process that began in late 1994. At
that time, the Board determined that it might be necessary to restructure the
Company in order to create the potential for improving the Company's ability to
raise funds both for working capital and for further expansion and development
of its billiard club business in accordance with its business plans. In the
Board's view, the Company has an obligation to use its best efforts to continue
to increase the value of each Shareholder's investment in the Company.
Although the Board believed that the Company had satisfied this objective in
part, the Board determined that it could not continue to fully satisfy this
objective without further expansion of the Company's operations and an increase
in the number of clubs operating under the Company's name. The Board
recognized that since the Company began its upscale billiard club business in
1990, the Company had experienced a net operating loss in each year other than
1993, the Company had substantial difficulty obtaining financing for
development of additional clubs and the Company had not been able to take full
advantage of its position as a public company through equity or debt offerings
of its securities or the securities of its subsidiaries and, since 1993,
management believes that no analysts had followed the Common Stock. In
addition, the Board recognized that since mid 1993 the Common Stock had not
traded above approximately $1.06 per share, and has not traded above $0.50 per
share since March 16, 1995. See "Market Information." As of the date of this
Proxy Statement, each of these factors continues to be true.

8
<PAGE> 12

The Company was one of the pioneers in the concept of upscale billiard
clubs. However, the billiard club business requires significant amounts of
cash, and the Company has not had sufficient cash to operate optimally or
expand its business in accordance with its business plans. As a result, the
Company was not able to develop billiard clubs quickly enough to attain a
dominant position in the upscale billiard club market prior to the entry of a
number of competitors into this market. In all but one year since it began its
billiard club business in 1990, the Company has experienced a net operating
loss. During this same period, the number of competitors in the upscale
entertainment business has increased, and a number of these competitors have
opened billiard clubs in areas where the Company otherwise might have
established clubs if it had been able to obtain sufficient capital to do so.
Such competitors have also opened larger clubs which offer diverse forms of
entertainment.

Since it began its billiard club business, the Company has had difficulty
raising capital at the rate it believes would have been necessary either to
maximize or to benefit from its position as a pioneer in the industry. During
this period the Company has had difficulty obtaining bank, as well as equipment
lease, financing, and when the Company has been able to obtain such financing,
the Company's poor financial condition has adversely affected its ability to
obtain financing on more favorable terms. See "Special Factors - Background of
the Merger - Bank and Equipment Lease Financing."

The Company has been more successful in its efforts to obtain seller,
landlord or municipal financing and has used such financing to partially fund
its acquisition or construction of four of its billiard clubs. In each case,
however, the Company collateralized the financing with the assets or stock of
the subsidiary through which the Company owns the club, leaving the Company
with reduced sources of collateral to obtain additional financing for working
capital and further expansion and development and risking the possibility that
the Company could lose its interests in these clubs. See "Special Factors -
Background of the Merger - Seller, Landlord and Municipal Financing."

In addition, the Company has attempted to raise capital for expansion
through private placements of equity and debt. Because of the dilutive effect
that such issuances would have on the value of the Common Stock in the hands of
the existing Shareholders, the Company has attempted to raise capital in this
manner only as a last resort. Despite its efforts, the Company has had only
modest success in raising capital through private placements of its Common
Stock, of debt instruments or of the equity interests in its subsidiaries.
While the Company believed that its guarantee of favorable returns and offering
of early buy-outs would help attract investors, it was advised during its
discussions with potential investors that such investors had no confidence that
the Company could fulfill its guarantees or buy-out responsibilities, based on
the Company's history of poor performance, and if the Company had insufficient
assets or cash flow, it would be doubtful that an investor with standing

9
<PAGE> 13

to sue would be provided with the rights guaranteed the investor in the
offering. See "Special Factors - Background of the Merger -Equity and Debt
Financing."

While the Company has had modest success in raising capital through
private placements of its Common Stock and the equity interests in its
subsidiaries, it has not considered it advisable to attempt to raise capital
through public offerings of its equity or debt securities. Currently, there is
only a limited trading market for the Common Stock (see "Market Information")
and the Board believes that the Common Stock is not being followed by market
analysts because the Company has not received any communications from market
analysts in the past several years. The Company has made no attempt to get
analysts to follow the Common Stock, however, because, in light of the
Company's history of poor performance to date the Company believes that such
attempts would be futile. Further, the Board recognizes that the Company has
had an unusual history, in that its present involvement in the billiard club
industry is different from the purposes for which it was initially
incorporated. See "Business and Properties of the Company." Further, the
Company has not shown any strong earnings in the course of its operations in
the billiard club industry and is not in the best position to support
optimistic or dramatic market statements. In addition, since mid 1993, the
Common Stock has not traded above approximately $1.06 per share, and has not
traded above $0.50 per share since March 16, 1995. The Board believes that the
lack of liquidity of the Common Stock has inhibited the Company's ability since
it began its billiard club business to retain an investment banking firm to
underwrite a public offering of its securities.

While the Company has raised approximately $5,400,000 in funds (excluding
landlord contributions) for working capital for the acquisition and/or
construction of its nine existing clubs, it has not raised sufficient capital
to enable it to expand in accordance with its business plans. In addition, the
site locations for most of the Company's clubs have in large part been dictated
by the availability of seller, landlord and municipal financing. The Company
has not been able to develop sites in other more attractive areas where such
financing has not been available. The Company's reliance on this type of
financing has resulted in the encumbrance of the assets and/or stock of all but
one of the subsidiaries through which it owns its billiard clubs. The
unavailability of such collateral has, in turn, contributed to the Company's
difficulty in obtaining bank and equipment lease financing. Further, the
Company's history of poor performance has inhibited its ability to raise
capital through the private placement of its securities or the securities of
its subsidiaries.

10
<PAGE> 14

Company had had sufficient capital either to enter the market earlier or to
commence and expand its operations in that market at an earlier date. Instead,
the Company has had to expand the number of clubs that it operates slowly, and
the construction of those clubs has, in some cases, been delayed due to lack of
funds at a particular time. Such delays, in some instances, have required the
Company to pay rent prior to commencement of operations at those clubs, which
resulted in increased expense for the Company without any offsetting increase
in operating income. As a result, delays resulting in the payment of
pre-opening rent have had a direct impact on the costs associated with
developing the clubs. The Board believes that the value of the Common Stock
also has been depressed due to the Company's failure to achieve profitable
operations on a continuing basis. As a result, the Company's ability to raise
capital through the public or private sale of its Common Stock has been
limited. The Board, therefore, is of the view that the Company's profitability
would cause an increase in the market for, and value of, the Common Stock,
which in turn would increase the Company's attractiveness as an investment and
thereby further facilitate capital rasing activities.

By late 1994, for the reasons discussed above, the Board believed that it
was no longer prudent for the Company to continue to seek short-term financing
on terms that could not be considered favorable to the Company due to the
anticipated difficulty of repaying such loans as a result of the Company's slow
or nonexistent growth in assets and income and the increasing level of
competition from better-capitalized entities. The terms of any financing
available to the Company at that time and at the present time was and continues
to be such that the Company's acceptance of financing on such terms would place
the Company at a competitive disadvantage in terms of its debt obligations and
available capital. At a Board meeting held on December 20, 1994, the Board
determined that it might be appropriate for the Company to consider eliminating
its status as a "public company," in part because, as a "private company," the
Company could reduce certain costs associated with complying with the federal
securities laws, the Company's Bylaws and Florida corporate law. Management
indicated that this cost savings, which the Company estimates to be
approximately $150,000 per year, could cause the Company to be more attractive
to the types of well-capitalized and sophisticated investors that are willing
to invest substantial amounts of capital in an enterprise. In addition, in the
experience of certain members of the Board, investors generally are not willing
to commit significant amounts of capital to an enterprise that, like the
Company, does not have a history of profitable operations unless the number of
shareholders is relatively small and composed primarily of individuals who
either are actively involved in the operations of the Company or are family
members of such persons. Further, management of the Company believes that the
additional disclosure regarding company operations, stock ownership and
compensation of, or payments to, persons with a significant investment in the
company that is required by the federal securities laws applicable to a public
company is often unacceptable to investors that are considering a substantial
investment in a company. The Board believes that the Company could be an
attractive investment, even at this time, because the infusion of additional
capital would enable the Company to expand its business and

11
<PAGE> 15

thereby increase the likelihood that the Company will become profitable, due in
part to the Company's ability, as a larger company, to achieve economies of
scale. However, a substantial investment in a company, such as the Company,
that does not have a history of profitable operations, but whose prior
operating history and relative position in its markets indicate that a
significant infusion of capital could produce profitable operating results on a
consistent basis in the future, may be more likely to prove profitable (and,
therefore, may be more attractive to a potential investor) if the company is a
private company. In the experience of management, based on its discussions
with potential investors in the Company, the additional attraction of a private
company lies in the belief of many potential investors that the full value of
the stock of a private company is less likely to be reflected in the price at
which the stock may be transferred than is the case for the stock of a public
company.

At a meeting on January 23, 1995, the Board specifically considered
eliminating the Company's status as a public company. The Board believes that
the elimination of the Company's status as a publicly held company would
provide the Company with greater flexibility in structuring financing
arrangements and attracting additional potential sources of capital. For
example, the Board believes that, as a private company, the Company might be
better able to attract investors that are willing to invest significant amounts
in the Company for the reasons discussed above. In addition, this change in
the Company's status would allow the Company to eliminate certain costs
associated with its status as a public company. Such costs include, in addition
to those involved in managing the assets of the Company, those to maintain
records that comply with the Company's Bylaws and Florida corporate law but
that could be streamlined if the Company were private, including the fees paid
to the Transfer Agent; those required to audit the financial statements of the
Company in compliance with federal securities laws and regulations; those
required to communicate with the approximately 4,900 Shareholders; and those
required to make the necessary filings with, and otherwise comply with the
regulations of, the Securities and Exchange Commission (the "Commission") and
the National Securities Dealers Automated Quotation System ("NASDAQ"). The
Board estimates that the annual savings for the Company due to the reduction or
elimination of these costs would be approximately $150,000. See "Special
Factors - Purposes and Reasons for the Merger."

In addition, at the January 23, 1995 Board meeting, the Board authorized
Mr. Foster to retain a valuation expert to evaluate the Company in connection
with the Company's consideration of becoming a private company. In March 1995,
Mr. Foster engaged Bannon & Co., Inc. (the "Financial Advisor") to undertake a
study to enable it to render an opinion with respect to the proposed
consideration to be offered in a going private transaction as an independent
third party and present a fairness opinion to the Board. See "Special Factors
- - Opinion of the Financial Advisor."

12
<PAGE> 16

After Mr. Foster selected the Financial Advisor, the Board began an
analysis of methods of structuring a transaction that would have the effect of
eliminating the Company's status as a publicly held company while maximizing
Shareholder value. The Board considered transactions that could have the
effect of taking the Company private, but would retain the interest in the
Company or any successor to the Company of each Shareholder that beneficially
owns at least 101,000 shares of Common Stock as of the close of business on
October 23, 1995 (an "Initial Continuing Shareholder") and each Shareholder who
is an employee of the Company and who beneficially owns shares of Common Stock
as of the close of business on October 23, 1995 (the "Record Date") in an
amount that, when added to the aggregate number of shares of Common Stock
underlying stock options or warrants beneficially owned by such employee on the
Record Date, whether or not such options or warrants are then exercisable,
totaling at least 101,000 shares of Common Stock (an "Employee Continuing
Shareholder" and, together with the Initial Continuing Shareholders, the
"Continuing Shareholders"). After considering a number of possible
transactions, as described under "Special Factors - Background of the Merger -
Alternatives Considered," the Board unanimously determined that the Merger
would be the most efficient method for taking the Company private and paying
some Shareholders a fair price for their interests in the Company, as well as
retaining the interests of other Shareholders in the Company or a successor to
the Company. The Board has structured the proposed Merger so that (i) the
Company will be merged into Newco (the "Surviving Company"), (ii) each
Shareholder that beneficially owns less than 101,000 shares of Common Stock as
of the Record Date or that holds of record through a broker or dealer (a
"Broker-Dealer Shareholder") registered under the Securities and Exchange Act
of 1934, as amended (the "Exchange Act") and does not provide the Company with
evidence regarding the number of shares beneficially owned by such holder (an
"Other Shareholder") will have the right to receive a cash payment of $0.50 per
share, without interest (a "Merger Payment"), (iii) each share of Common Stock
held by a Continuing Shareholder will be converted into the right to receive
one share of common stock of Newco and/or each stock option or warrant of the
Company held by a Continuing Shareholder will be converted into the right to
purchase the same number of shares of common stock of Newco on the same terms
and conditions. The Board determined that the Continuing Shareholders should
receive shares of common stock in Newco in the Merger so that the Merger would
satisfy one of the requirements necessary for the Merger to have no federal
income tax consequences to the Company and, therefore, would make it more
attractive to a potential investor that could supply the funds necessary to
make the Merger Payments. See "Special Factors - Background of the Merger -
Alternatives Considered" and "- Material Federal Income Tax Consequences."

13
<PAGE> 17

Meeting and Proxy Information

A special meeting (together with any adjournment(s) thereof, the "Special
Meeting") of Shareholders will be held at __:__ _.m., Eastern Time, on
_____________, 1995, at _____________________________,
_____________________________, ______________ for the purposes of: (i)
considering and voting upon the Proposal to approve the Merger, and (ii)
transacting such other business as may properly come before the Special
Meeting.

Only Shareholders of record at the close of business on October 23, 1995
(the "Record Date") will be entitled to vote at the Special Meeting. As of the
Record Date, there were 9,137,798 issued and outstanding shares of Common Stock
held by approximately 4,900 Shareholders of record. Each Shareholder is
entitled to one vote in person or by proxy for each share of Common Stock held
by such Shareholder on the Proposal submitted to a vote of the Shareholders at
the Special Meeting. The Proposal will be approved if and only if it receives
the favorable vote of the majority of all shares of Common Stock outstanding on
the Record Date.

The Merger

The description of the proposed Agreement and Plan of Merger (the "Merger
Agreement") included in this Proxy Statement is a summary of the principal
terms currently expected to be included, and should not be viewed as complete.
The form of Merger Agreement will become available only upon negotiation of the
final terms thereof with the investors in the private placement of equity
and/or subordinated debt securities of the Surviving Company (the "Private
Placement"), and the following description is, therefore, subject to change and
qualified in its entirety by reference to the definitive Merger Agreement. See
"Financing of the Merger." The Company will make copies of the form of Merger
Agreement available to any Shareholder without cost upon request when the form
of Merger Agreement becomes available.

If the Merger is approved, then, subject to the terms and conditions of
the Merger Agreement, (i) the Company will be merged with and into Newco at the
Effective Time, and each share of Common Stock held by Other Shareholders (the
"Other Common Stock") will be converted into the right to receive the Merger
Payment of $0.50 in cash, without interest; (ii) the Other Common Stock will be
canceled; (iii) each share of Common Stock owned by the Continuing Shareholders
will be converted into a share of common stock of the Surviving Company; (iv)
each stock option issued under the stock option plans or warrants of the
Company to purchase a share or shares of Common Stock outstanding immediately
prior to consummation of the Merger will be converted into the right to
purchase the same number of shares of common stock of Newco on the same terms
and conditions; (v) Newco will be the Surviving Company in the Merger, and the
Company will cease to exist as a result of the

14
<PAGE> 18

Merger; (vi) the articles of incorporation and bylaws of Newco will be the
articles of incorporation and bylaws of the Surviving Company; and (vii) the
name of the Company shall be the name of the Surviving Company. Immediately
after the Effective Time, the Other Shareholders will possess no interest in,
or rights as Shareholders of, the Company, and the Company will be wholly owned
by the Continuing Shareholders. For a description of how the Company will
calculate the number of shares of Common Stock held by each holder of record on
the Record Date for purposes of determining a Shareholder's status as a
Continuing Shareholder or Other Shareholder, see "Voting and Proxy Information
- - Record Date; Outstanding Shares; Voting."

The Company has determined that approximately $2,132,000 in cash will be
required in order to make the Merger Payment with respect to each share of
Common Stock held by an Other Shareholder. The Company intends to retain
Island Partners, Ltd., a Massachusetts limited partnership (the "Placement
Agent"), to raise $6,000,000 to $10,000,000 through the Private Placement. The
Company intends to use funds obtained through the Private Placement primarily
to make the Merger Payments. The respective obligations of the Company and
Newco to consummate the Merger are contingent upon, among other things, the
Company's receipt of net proceeds from the Private Placement to cover the
Merger Payments. See "Proposal to Approve the Merger - Conditions to the
Merger." There can be no assurance, however, that the Company will raise any
funds from the Private Placement or that it will raise funds sufficient to make
the Merger Payments. In addition, the Placement Agent has no obligation to
consummate any Private Placement if the Proposal is not approved by the
Shareholders. See "Financing of the Merger."

The Board's purpose in proposing to the Shareholders the transactions
contemplated by the Proposal is to provide the Company greater flexibility in
structuring financing arrangements and additional potential sources of capital
that will enable it to operate efficiently, expand its business and improve its
market position, while providing fair treatment to the Other Shareholders. The
Board believes that, as a private company, the Company might be better able to
attract venture capitalists for the reasons set forth above under "Background
of the Merger." In addition, the Board believes that operating the Company as
a privately operated company that does not include the Other Shareholders will
significantly reduce or eliminate certain costs that currently are necessary to
operation of the Company. The Board estimates that the annual savings for the
Company due to the reduction or elimination of these costs would be
approximately $150,000. See "Background of the Merger - Purposes and Reasons
for the Merger."

15
<PAGE> 19

subordinated debt securities of the Surviving Company. See "Financing of the
Merger." No other transaction is currently under consideration by the Company
as an alternative to the Merger, although the Company from time to time may
explore other alternatives if the Proposal is not approved.

Recommendation of the Board of Directors

The Board unanimously approved the Proposal and recommends a vote FOR
approval of the Proposal. The Board believes that the Proposal, including the
Merger Payment, is fair to, and in the best interest of, each Shareholder,
including the Continuing Shareholders. In reaching this conclusion, the Board
considered a number of factors, including but not limited to the following: (i)
the opinion of the Financial Advisor rendered to the Other Shareholders that
the Merger Payment of $0.50 per share of Common Stock is fair to the Other
Shareholders, as of ____________, 1995, (ii) the Company's financial condition,
earnings and business prospects, market price of the Common Stock, and the
trading market for the Common Stock and the manner in which these matters
compared to those of other food, beverage and entertainment companies whose
stock is publicly traded, (iii) the Board's own knowledge regarding the
financial condition, results of operations, business and prospects of the
Company, as well as current industry, economic and market conditions, and (iv)
the Merger Payment in relation to current market prices, historical market
prices and purchase prices paid by members of the Board and executive officers
and other Shareholders owning more than five percent of the issued and
outstanding shares of Common Stock as of the Record Date during the past two
years. See "Special Factors - Board of Directors Determination of Fairness of
the Merger."

Interests of Certain Persons in the Merger

Steven L. Foster, as Chief Executive Officer and Chairman of the Board of
the Company and as a Continuing Shareholder, and Hugh Brennan, as Director of
Construction of the Company and as an Employee Continuing Shareholder, are each
participants on both sides of the proposed Merger because they will be
shareholders in the Surviving Company. Their continuing interest in the
Company, as well as certain other effects of the Merger, present each of them
with a conflict of interest in voting for the Proposal and recommending that
the Other Shareholders vote for the Proposal. In addition, each Continuing
Shareholder, even if not a member of management or employee of the Company, has
an interest in voting their shares of Common Stock in favor of the Proposal
because their interests in the Merger are not the same as those of the Other
Shareholders. See "Special - Certain Effects of the Merger."

The Merger Agreement is expected to permit continuing indemnification in
accordance with the articles of incorporation of the Surviving Company and the
bylaws of the

16
<PAGE> 20

Surviving Company in the Merger, of directors and executive officers of the
Company to the fullest extent permitted under applicable state law, including
indemnification relating to the period occurring prior to the time at which a
Certificate of Merger and Articles of Amendment to the articles of
incorporation of the Surviving Company are filed and recorded with the
Secretary of State of the States of Florida and/or Delaware (the "Effective
Time"). See "Proposal to Approve the Merger - Indemnification."

Certain Effects of the Merger

If the Merger is consummated, the Other Shareholders will no longer have
an equity interest in the Company. Instead, each Other Shareholder will have
the right to receive the Merger Payment of $0.50 per share of Common Stock in
cash. The Other Shareholders will no longer be subject to the inherent risks
of investing in a Company with a history of poor performance, but will also be
denied the opportunity to participate in any future growth of the Company after
the Effective Time. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations - Financial Condition."

If the Merger is consummated, the Surviving Company will be entitled to
any cash reserves held by the Company. At June 30, 1995, the Company held
$115,354 in restricted cash. The Board expects the restricted cash will be
used for construction costs related to development of the Long Beach billiard
club. In addition, the Continuing Shareholders, who include Steven L. Foster,
Chief Executive Officer and Chairman of the Board of the Company, and Hugh
Brennan, Director of Construction of the Company, will have an opportunity to
share in the future results of operations of the Surviving Company and to take
advantage of any increase in the value of such Company's assets if the Merger
is consummated. There can be no assurance, however, that the value of these
assets will increase or as to whether there will be any future distributions by
the Surviving Company. The Company has never declared a cash dividend. See
"Market Information." In addition, if the Merger is consummated, all of the
Company's loan obligations and guaranteed return, buy-out and registration
rights obligations undertaken in connection with the private placement of the
securities of certain of its subsidiaries will continue in the Surviving
Company. See "Special Factors - Background of the Merger - Current Effects of
Borrowings and Equity Financing." It is anticipated that all of the current
officers and directors of the Company will continue to hold the same positions
in Newco, although the form of the Merger Agreement has not yet been
negotiated. Except as described in this Proxy Statement, there will be no
other relationships that will continue between the Company and any persons who
are officers, directors, or Shareholders of the Company as of the date of this
Proxy Statement. See "Special Factors - Certain Effects of the Merger."

The Company, as a result of the Merger, will become an entity the
securities of which are privately held. The registration of the Common Stock
under the Exchange Act will

17
<PAGE> 21

terminate, resulting in the suspension of the Company's obligations to file
periodic reports such as Form 10-Ks, 10-Qs and 8-Ks. Since the Common Stock
will no longer be publicly held, the Company will be relieved of the obligation
to comply with the proxy rules of Regulation 14A under Section 14 of the
Exchange Act, and the officers and directors of the Company and Shareholders
owning more than 10 percent of the Common Stock will be relieved of the
reporting requirements and "short swing" trading restrictions under Section 16
of the Exchange Act. In addition, the Common Stock will be delisted from
NASDAQ, which will terminate the Company's public trading market and the
Company no longer will be required to comply with the rules and regulations
relating to NASDAQ listing.

Opinion of the Financial Advisor

The Financial Advisor rendered its opinion to the Other Shareholders that
the Merger Payment of $0.50 per share of Common Stock is fair to the Other
Shareholders, as of ____________, 1995. The opinion is being delivered to
the Other Shareholders as Appendix __ to this Proxy Statement.

In conducting its analysis and arriving at its opinion, the Financial
Advisor considered such financial and other factors as it deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial position and results of operations of the
Company; (ii) the business prospects of the Company; and (iii) the historical
and current market for the Common Stock and for the equity securities of
certain other companies that the Financial Advisor determined were comparable
in certain limited respects to the Company. The Financial Advisor also took
into account its assessment of general economic, market and financial
conditions and its knowledge of the entertainment industry as well as its
experience in connection with similar transactions and securities valuation
generally. The Financial Advisor's opinion was based on conditions as they
existed and could be evaluated on ___________, 1995, the date of its opinion.
In rendering its opinion, the Financial Advisor reviewed, among other things,
certain publicly available information relating to the Company and performed
such studies and analyses as it considered appropriate, including, among other
things, a comparison of the financial and operational results and certain other
financial and stock market information of the Company with similar information
of certain other publicly traded companies which the Financial Advisor deemed
comparable in certain limited respects to the Company.

Material Federal Income Tax Consequences

The Merger should be treated as a reorganization under section 368(a)(1)(A)
of the Internal Revenue Code of 1986, as amended (the "Code") (a so-called
"Type A reorganization"), provided it is structured as described in this Proxy
Statement and each Continuing Shareholders enters into a lock-up agreement, as
described in "Proposal to Approve the Merger - Lock-

18
<PAGE> 22

Up Agreements." If the Merger is treated as a Type A reorganization,
Continuing Shareholders should not recognize any gain or loss as a result of
the Merger, and the tax basis of each Continuing Shareholder in the shares of
common stock of Newco received in the Merger should be equal to such
Shareholder's adjusted tax basis in the shares of Common Stock surrendered in
the Merger. See "Special Factors - Material Federal Income Tax Consequences -
Federal Income Tax Consequences for Continuing Shareholders."

Regardless of whether the Merger is treated as a Type A reorganization,
each of the Other Shareholders will recognize gain or loss as a result of the
Merger equal to the difference, if any, between (i) the Merger Payment received
by such Other Shareholder and (ii) such Other Shareholder's adjusted tax basis
in such Shareholder's shares of Common Stock immediately prior to the
consummation of the Merger. See "Special Factors - Material Federal Income Tax
Consequences - Federal Income Tax Consequences for Other Shareholders."

Regulatory Requirements and Conditions

No federal or state regulatory approvals must be obtained in connection
with the Proposal. However, certain filings will be required to be made with
the Secretary of State of the States of Florida and Delaware in order to effect
the Merger.

Market Information

The Common Stock is traded in the over-the-counter market and is included
for quotation on NASDAQ under the symbol "QBAL." On October 23, 1995, the
average of high and low bid prices of the Common Stock was $0.30 per share. On
___________, 1995, the last full day of trading for which quotations were
available at the time of printing of this Proxy Statement, the average of the
high and low bid prices of the Common Stock was $_____ per share. Despite the
fact that the Common Stock is quoted on NASDAQ, there is currently only a
limited trading market for the Common Stock. See "Market Information."

Rights of Dissenting Shareholders

Any Shareholder objecting to the Proposal is not entitled to any statutory
rights of dissent or appraisal under Florida law or the Articles of
Incorporation or Bylaws of the Company.

19
<PAGE> 23

VOTING AND PROXY INFORMATION

Record Date; Outstanding Shares; Voting

The Board of Directors of the Company (the "Board") has fixed the close of
business on October 23, 1995 as the record date (the "Record Date") for
determination of shareholders of the Company (the "Shareholders") entitled to
receive notice of and to vote on a proposal (the "Proposal") to approve a
merger (the "Merger") by and between the Company and a corporation to be formed
in Delaware ("Newco"). Accordingly, only Shareholders of record at the close
of business on the Record Date will be entitled to vote at a special meeting
(together with any adjournment(s) thereof, the "Special Meeting") of
Shareholders.

Under the Merger (i) the Company will be merged with and into Newco, and
Newco shall be the surviving company in the Merger, (ii) each share of common
stock, par value $.001 per share (the "Common Stock") owned immediately prior
to consummation of the Merger by any Shareholder that is the beneficial owner
of at least 101,000 shares of Common Stock as of the Record Date (any such
Shareholder being hereinafter referred to as an "Initial Continuing
Shareholder") will be converted into the right to receive one share of Common
Stock of Newco, (iii) each share of Common Stock owned immediately prior to
consummation of the Merger by any Shareholder, other than an Employee
Continuing Shareholder (as defined below), that is the beneficial owner of less
than 101,000 shares of Common Stock as of the Record Date or that holds its
shares through a broker or dealer registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and does not provide the Company with
evidence regarding the number of shares beneficially owned by such holder (any
of such persons or entities being hereinafter referred to as an "Other
Shareholder") will be converted into the right to receive a cash payment of
$0.50 per share, without interest (a "Merger Payment"), (iv) each stock option
issued under the Company's Consolidated Stock Option Plan, 1994 Director,
Adviser and Key Employee Stock Option Plan and 1995 Director, Adviser and Key
Employee Stock Option Plan (the "Stock Option Plans") or warrant of the Company
to purchase a share or shares of Common Stock outstanding immediately prior to
consummation of the Merger will be converted into the right to purchase the
same number of shares of common stock of Newco on the same terms and
conditions, and (v) if the aggregate number of shares of Common Stock
beneficially owned by an employee of the Company on the Record Date plus the
aggregate number of shares of Common Stock underlying stock options or warrants
held by such employee on the Record Date, whether or not such options or
warrants are then exercisable, total at least 101,000 shares of Common Stock
(any such employee being hereinafter referred to as an "Employee Continuing
Shareholder" and, together with the Initial Continuing Shareholders, the
"Continuing Shareholders"), then each such share of Common Stock held of record
by the Employee Continuing Shareholder immediately prior to consummation of the
Merger will be converted into the right to receive one share of common stock of
Newco, and each such stock option or warrant

20
<PAGE> 24

held by the Employee Continuing Shareholder immediately prior to consummation
of the Merger will be converted into the right to purchase the same number of
shares of common stock of Newco on the same terms and conditions.

For purposes of determining a Shareholder's status as a Continuing
Shareholder or Other Shareholder, the Company will rely upon the Company's
shareholder list to determine the beneficial holders of its Common Stock and to
calculate the number of shares of Common Stock held by each such holder on the
Record Date. The Company will treat each holder of record of issued and
outstanding shares of Common Stock as the beneficial owner of such shares of
Common Stock, except that, (i) in making such calculation, the Company will
aggregate shares of Common Stock held of record by an individual with those
held of record by the individual's spouse, their children under the age of 18
and trusts of which one or more of their children under the age of 18 is the
beneficiary, and treat all such shares as being beneficially owned by a single
individual, and (ii) the Company will not treat holders of record who are
brokers or dealers registered under the Exchange Act (such brokers or dealers
being hereinafter referred to as "Broker-Dealer Shareholders") as the
beneficial owners of such shares. In the case of any Broker-Dealer
Shareholder, the number of shares held by such Broker-Dealer Shareholder will
not be treated as being held by a single individual for the purposes of
determining whether a Broker-Dealer Shareholder qualifies to be treated as a
Continuing Shareholder for purposes of the Merger. Rather, a Broker-Dealer
Shareholder will be treated as an Other Shareholder unless, as to a particular
number of shares held of record by such Broker-Dealer Shareholder, the
beneficial owner of such shares of such beneficial owner provides the Company
with a letter of identification from the Broker-Dealer Shareholder identifying
such person as the beneficial owner, as of the Record Date, of the number of
shares specified in the letter of identification.

As of the Record Date, there were 9,137,798 issued and outstanding shares
of Common Stock held by approximately 4,900 Shareholders of record. As of the
Record Date, the members of the Board and the executive officers of the Company
owned an aggregate of 1,468,350 shares (approximately 14.2 percent of the total
shares of Common Stock outstanding). Only one Continuing Shareholder is a
member of the Board and/or an executive officer of the Company. Such
Continuing Shareholder held a total of 1,353,600 shares (approximately 13.1
percent of the total shares of Common Stock outstanding) as of the Record Date
and has informed the Company that he intends to vote all shares of Common Stock
held by him FOR the Proposal. For additional information concerning the
beneficial ownership of shares of Common Stock, see "Security Ownership of
Certain Beneficial Owners and Management."

Each Shareholder is entitled to one vote in person or by proxy for each
share of Common Stock held by such Shareholder on the Proposal submitted to a
vote of the Shareholders at the Special Meeting. Votes cast in person or by
proxy at the Special Meeting will be

21
<PAGE> 25

tabulated by American Stock Transfer (the "Transfer Agent"), who will determine
whether a quorum is present. The Proposal will be approved if and only if it
receives the favorable vote of the majority of all shares of Common Stock
outstanding on the Record Date. The Transfer Agent will treat abstentions as
shares of Common Stock that are present and entitled to vote for purposes of
determining the approval of such matter. In addition, if a broker submits a
proxy indicating that it does not have discretionary authority as to certain
shares of Common Stock to vote on a particular matter, those shares will not be
treated as present and entitled to vote for purposes of determining the
approval of such matter, but will be treated as present for purposes of
determining whether a quorum is present at the Special Meeting.

Proxy

The proxy set forth on the proxy card which is enclosed with this Proxy
Statement (the "Proxy") contains a space where each Shareholder may indicate
whether such Shareholder chooses to vote such Shareholder's shares of Common
Stock in favor of or against the Proposal or to abstain from voting. If the
Proxy is duly completed and returned to the Transfer Agent, the Proxy will be
voted in accordance with the instructions thereon. If a Shareholder returns
the Proxy duly executed, but does not indicate the manner in which the Proxy is
to be voted, the Proxy will be voted FOR the Proposal.

Revocability of Proxy

A Shareholder may revoke or amend the Shareholder's Proxy at any time
prior to the Proxy's exercise at the Special Meeting by executing a
subsequently dated Proxy or by filing a written request with Richard F. Landry,
Secretary of the Company, at 727 Atlantic Avenue, Suite 600, Boston,
Massachusetts 02111, to revoke or amend the Proxy. The giving of a Proxy does
not preclude the right of a Shareholder to vote in person should the
Shareholder giving the Proxy attend the Special Meeting and choose to do so.

Solicitation of Proxies

This Proxy Statement is submitted, and Proxies are being solicited by, the
Board in support of the Proposal. The expense of solicitation of Proxies will
be borne by the Company. The Board and certain officers or other employees of
the Company may solicit proxies by telephone, telegram or personal interview or
may engage a third party to do so. The Board will request that custodians,
nominees and fiduciaries forward proxy materials to the beneficial owners of
shares of Common Stock, and the Company will reimburse such persons for
reasonable expenses incurred in connection therewith.

22
<PAGE> 26

If you have any questions concerning this proxy solicitation or the
procedure to be followed to execute and deliver a Proxy, please contact Richard
F. Landry at 727 Atlantic Avenue, Suite 600, Boston, Massachusetts 02111 or by
telephone at (617) 350-3111.

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

The principal executive offices of the Company are located at 727 Atlantic
Avenue, Suite 600, Boston, Massachusetts 02111, and the telephone number of the
Company at such address is (617) 350-3111. The principal executive offices of
Newco are located at 727 Atlantic Avenue, Suite 600, Boston, Massachusetts
02111, and the telephone number of Newco at such address is (617) 350-3111.

SPECIAL FACTORS

Background of the Merger

General. The Board's decision to present the Proposal to the Shareholders
marked the culmination of a process that began in late 1994. At that time, the
Board determined that it might be necessary to restructure the Company in order
to create the potential for improving the Company's ability to raise funds both
for working capital and for further expansion and development of its billiard
club business in accordance with its business plans. In the Board's view, the
Company has an obligation to use its best efforts to continue to increase the
value of each Shareholder's investment in the Company. Although the Board
believed that the Company had satisfied this objective in part, the Board
determined that it could not continue to fully satisfy this objective without
further expansion of the Company's operations and an increase in the number of
clubs operating under the Company's name. The Board recognized that since the
Company began its upscale billiard club business in 1990, the Company had
experienced a net operating loss in each year other than 1993, the Company had
substantial difficulty obtaining financing for development of additional clubs
and the Company had not been able to take full advantage of its position as a
public company through equity or debt offerings of its securities or the
securities of its subsidiaries and, since 1993, management believes that no
analysts had followed the Common Stock. In addition, the Board recognized that
since mid 1993 the Common Stock had not traded above approximately $1.06 per
share, and has not traded above $0.50 per share since March 16, 1995. See
"Market Information." As of the date of this Proxy Statement, each of these
factors continues to be true.

Since 1990, the Company's primary business has been the operation of
upscale billiard clubs. The Company, through wholly owned subsidiaries,
currently wholly or partially owns, operates and manages nine billiard clubs,
which are located in Miami, Florida; Seattle, Washington; Cleveland, Ohio;
Cleveland Heights, Ohio; Pasadena, California; Worcester, Massachusetts;
Champaign, Illinois; Annapolis, Maryland; and Long Beach, California. The
Cleveland Heights, Worcester, Champaign and Annapolis clubs are owned by
limited

23
<PAGE> 27

partnerships in which wholly owned subsidiaries of the Company are the general
partners, with 87 percent, 25 percent, 43 percent and 79 percent ownership
interests, respectively. See "Business and Properties of the Company."

In addition, the Company currently is developing an additional billiard club
in Tacoma, Washington. Approximately $1,600,000 of the $2,100,000 currently
believed by management to be necessary for development of the Tacoma club was
or will be derived from a landlord contribution, equipment financing and cash
generated from the Company's operations. Unless at least a portion of the
additional $500,000 required to complete development of the Tacoma club can be
obtained by approximately December 1, 1995, it will be necessary to cease
development activities for the club. The Company originally believed that the
total cost of the Tacoma club would be between $1,000,000 and $1,600,000, but
the Company's decision to install higher quality equipment and fixtures
increased the projected cost of the club to the estimated $2,100,000. In order
to raise the additional capital, the Board of Directors, at its meeting on
October 2, 1995, approved an effort to obtain bridge financing from a limited
number of friends and relatives of certain officers or directors of the Company
at the rate of approximately 12.5 to 15 percent per annum for a six-month
period. The Company also is considering offering to pay an interest rate as
high as 25 to 30 percent per annum if necessary to obtain the bridge financing.
Management does not believe that it will be possible to obtain the loan from a
bank or other conventional lender.

Since it began its billiard club business, the Company has had difficulty
raising capital at the rate it believes would have been necessary either to
maximize or to benefit from its position as a pioneer in the industry. As
described in more detail below, during this period the Company has had
difficulty obtaining bank, as well as equipment lease, financing, and when the
Company has been able to obtain such financing, the Company's poor financial
condition has adversely affected its ability to obtain financing on more
favorable terms.

24
<PAGE> 28

Bank and Equipment Lease Financing. The Company has attempted to obtain
loans in principal amounts of between $100,000 and $600,000 to be used as
working capital and for business expansion and development from at least 15
financial institutions during the past five years, including First Union Bank
("First Union"), where the Company maintains its business accounts, and U.S.
Trust Bank, where Steven L. Foster, the Chief Executive Officer and Chairman of
the Board of the Company, maintains certain of his personal and other business
accounts. The Company sought a variety of structures for these loans
(including secured and unsecured lines of credit and term loans) in an effort
to increase the likelihood that the Company would obtain approval of one or
more of these loan requests. All but one of the Company's loan requests were
denied because, according to communications from such lending institutions to
the Company, the Company did not meet the lending criteria of the institutions.
These lending institutions also advised the Company that its poor financial
condition and lack of available collateral were the principal reasons for the
credit denials.

The one loan that the Company was able to obtain came from Evergreen
National Bank, a Seattle bank in which the subsidiary of the Company that owns
the Seattle billiard club, Jillian's Billiard Club of Seattle, Inc. ("Jillian's
- - Seattle"), maintains an account. In 1994, the Seattle bank loaned the
Company $200,000 for working capital. The loan, which matures in May 1999 and
bears interest at the rate of 9.5 percent, is collateralized by all of the
common stock of Jillian's - Seattle. At the time of the loan, Jillian's -
Seattle had assets of approximately $860,000 and had generated annual cash flow
in excess of $350,000. In addition, the loan is guaranteed by the Company. At
March 31, 1995, the Company's most recent year-end, Jillian's - Seattle had
assets and cash flow of approximately $851,000 and $442,000, respectively. At
March 31, 1995, the Company was in compliance with its obligations under the
loan, and the loan had a principal balance of $176,527. See "Financial
Statements of the Company." The Company believes, based on its historical
operations, that it will have sufficient working capital in the future to make
the scheduled loan payments. If the Company fails to make the required loan
payments, it could lose all ownership interest in the Seattle club.

In addition, the Company had difficulty demonstrating that it was
creditworthy in connection with a First Union loan. The loan, originally in
the amount of $440,000 with United National Bank, was obtained in 1989 by an
unaffiliated trust to purchase 206,825 shares of Common Stock from a
Shareholder. The Company became a guarantor and a co-obligor of the loan in
1992 when United National Bank refused to renew the loan and First Union
refinanced it. In addition to First Union's requirement that the trust use the
206,825 shares of Common Stock (which was trading at over $1 per share at that
time) as collateral for the loan, the Bank required that the Company, in its
capacity as co-obligor of the loan, provide as cash collateral a $240,000
certificate of deposit. First Union required the Company to maintain the
certificate of deposit as collateral even after the outstanding principal
balance of the loan had been reduced to $262,500 at December 31, 1994. In
April 1995, $103,413 in net

25
<PAGE> 29

proceeds from the sale, at $0.50 per share, of the 206,825 shares of Common
Stock was used to pay down the loan, and in June 1995, approximately $159,000
of the $240,000 certificate of deposit was used to pay the remaining balance of
the loan. See "Financial Statements of the Company."

In addition to bank financing, the Company also has attempted to obtain
$50,000 to $300,000 in equipment financing from approximately 15 leasing
companies during the past five years. Most of the requests were denied for the
same reasons the Company was unable to obtain bank credit: the Company had a
history of poor performance and lacked available collateral other than the
equipment to be purchased. One of the leases that the Company was able to
obtain resulted in the encumbrance of the assets of one of its clubs and the
stock of another one of its clubs. Specifically, in March 1994, the Company
financed certain equipment for, and leasehold improvements in, the Annapolis,
Maryland billiard club for $300,000 at an annual lease rate of 12 percent. The
lease, which was obtained from Leasing Technology, Inc., was collateralized by
all of the equity securities of the subsidiary through which the Company owns
the Kendall club, Jillian's Billiard Club of Kendall, Inc. ("Jillian's -
Kendall"), and all of the assets of the subsidiary through which the Company
owns the Annapolis billiard club, Jillian's Billiard Club of Annapolis, Inc.
("Jillian's - Annapolis"). At the time of the lease, Jillian's - Kendall had
assets of approximately $646,000 and was generating approximately $173,000 in
cash flow, and the Company projected that Jillian's - Annapolis would have
$600,000 in assets within three months after commencement of the loan. At
March 31, 1995, Jillian's - Kendall had assets and cash flow of approximately
$587,000 and $129,000, respectively, and Jillian's - Annapolis had assets and
cash flow of approximately $748,000 and $308,000, respectively. At March 31,
1995, the Company was in compliance with its obligations under the lease, and
$255,000 remained payable under the lease. See "Financial Statements of the
Company." The Company believes, based on its historical operations, that it
will have sufficient working capital in the future to make the scheduled lease
payments. If the Company fails to make the required payments under the lease,
it could lose all ownership interest in the Kendall club and effectively lose
all rights to continue the operations of the Annapolis club if Leasing
Technology, Inc. becomes the owner of that club's assets.

Seller, Landlord and Municipal Financing. The Company has been able to
obtain the seller, landlord or municipal financing described below to partially
fund its acquisition or construction of four of its clubs. In each case,
however, the Company collateralized the financing with the assets or stock of
the subsidiary through which the Company owns the club, leaving the Company
with reduced sources of collateral to obtain additional financing for working
capital and further expansion and development and risking the possibility that
the Company could lose its interests in these clubs.

The City of Cleveland Heights, Ohio, loaned the Company $100,000 of the
approximately $580,000 necessary to construct and equip the Cleveland Heights
billiard club in 1991

26
<PAGE> 30

as an incentive to enter into the lease in what the City considered a
"redevelopment urban area." The loan, which bears interest at a rate of seven
percent and matures in April 1998, is collateralized by the assets of the
subsidiary through which the Company owns the club, Jillian's Billiard Club of
Cleveland Heights, Inc. ("Jillian's - Cleveland Heights"). At March 31, 1995,
the Company was in compliance with its obligations under the loan, and the loan
had a principal balance of $84,501. See "Financial Statements of the Company."
The Company believes, based on its historical operations, that it will have
sufficient working capital in the future to make the scheduled loan payments.
If the Company fails to make such payments, it could effectively lose all
rights to continue the operations of the Cleveland Heights club if the City of
Cleveland Heights becomes the owner of the club's assets. The Company also
attempted to raise $150,000 in mid 1992 through the private placement of
interests in the limited partnership, Jillian's Billiard Club of Cleveland
Heights Limited Partnership (the "Cleveland Heights Limited Partnership"), in
which Jillian's - Cleveland Heights is the general partner and currently has an
87 percent ownership interest. The Company raised only $22,500, out of the
$150,000 that it attempted to raise, from a single unaffiliated third party
even though the Company offered each investor an option to sell the investor's
partnership interest to the Company at a cash price equal to the greater of the
price paid for the investment or 500 percent of the adjusted net income of the
Cleveland Heights Limited Partnership for the 12 months ending December 31,
1995, multiplied by a fraction representing a percentage interest in the
Partnership's profits and losses of the investment to be sold to the Company.
The option must be exercised within 60 days of the transmittal to investors of
the financial statements of the Cleveland Heights Limited Partnership for the
12 months ending December 31, 1995. As of the date of this Proxy Statement,
the Company believes that it has sufficient cash flow to meet its obligation to
purchase the interest of the $22,500 investor. The Company's failure to honor
this commitment could result in a suit by the investor to obtain the price, as
well as the investor's cost and expenses, including reasonable attorneys' fees.
The Company financed the remaining $457,500 needed to develop the Cleveland
Heights club using cash generated from the Company's operations, a private
placement and a loan made by an unaffiliated third party. The loan has since
been converted into a 10 percent equity interest in the Cleveland Heights club.

In 1993, the Company paid $150,000 in cash and obtained the remaining
$175,000 of the $325,000 necessary to acquire an existing billiard club in
Pasadena, California, through a loan from the club's seller. The Company
issued the seller a three-year note collateralized by the assets of the
subsidiary through which the Company owns the club, Jillian's Billiard Club of
Pasadena, Inc. ("Jillian's - Pasadena"). Interest on the note is payable
monthly at eight percent and the entire principal amount of $175,000 (and
unpaid interest, if any) is due when the note matures in August 1996. At March
31, 1995, the Company was in compliance with its obligations under the loan.
See "Financial Statements of the Company." The Company believes, based on its
historical operations, that it will have sufficient working capital in the
future to make the scheduled loan payments. If the Company fails to make such
payments, it

27
<PAGE> 31

could effectively lose all rights to continue the operations of the Pasadena
club if the seller becomes the owner of the club's assets.

In 1994, the landlord of the Champaign club loaned the Company $150,000 of
the $700,000 required to develop the Champaign club. The loan is
collateralized by the assets of the subsidiary through which the Company owns
the club, Jillian's Billiard Club of Champaign - Urbana, Inc. ("Jillian's -
Champaign"), bears interest at a rate of 10 percent, and matures in September
1999. At March 31, 1995, the Company was in compliance with its obligations
under the loan, and the loan had a principal balance of $136,097. See
"Financial Statements of the Company." The Company believes, based on its
historical operations, that it will have sufficient working capital in the
future to make the scheduled loan payments. If the Company fails to make such
required payments, it could lose all rights to continue the operations of the
Champaign club if the landlord becomes the owner of the club's assets. The
landlord provided the financing after the Company was able to raise an
additional $425,000 through a 1994 private placement of interests in the
limited partnership, Jillian's Billiard Club of Champaign - Urbana, L.P. (the
"Champaign Limited Partnership"), in which Jillian's - Champaign is the general
partner and currently has a 43 percent ownership interest. Of the $425,000
raised, $365,000 in limited partnership interests in the Champaign Limited
Partnership were sold to unaffiliated third parties and $60,000 in such
interests were sold to existing Shareholders. The Company had attempted to
raise $525,000 through this offering and believed that the investment was
attractive because the Company, among other things, (i) guaranteed each
investor a 140 percent return of their investment within six years, (ii)
offered a buy-out in 1997 of each investor to be paid 15 percent in cash and 85
percent in Common Stock, to be valued at the average of the bid and asked price
of the Common Stock during the 30 days prior to the transmittal to investors of
the financial statements of the Champaign Limited Partnership for the 12 months
ending December 31, 1996; provided, however, that if all investors sell their
partnership interests to the Company, the purchase price would be five times 50
percent of the net profits of the Partnership for the 12 months ending December
31, 1996, and (iii) for a limited period of time, offered a demand registration
right requiring the Company to register such Common Stock after the end of its
1997 fiscal year. The Company's obligation to buy out a Champaign investor is
contingent upon such investor's giving notice to the Company, within 60 days of
the transmittal to investors of the aforementioned financial statements, of the
investor's desire to sell its partnership interest to the Company. There can
be no assurance that the Company will have sufficient cash flow to meet these
guaranteed payment or buy-out obligations when they do become due or when they
become exercisable. The Company's failure to meet these obligations could
result in a suit by investors to obtain the guaranteed return or buy-out
rights. The Company financed the remaining $125,000 needed to develop the
Champaign club using cash generated from the Company's operations.

28
<PAGE> 32

In 1995, the City of Long Beach, California, agreed to honor its
commitment to lend the Company $450,000 of the $1,500,000 necessary to
construct and equip the Long Beach billiard club in a "redevelopment urban
area" only after the Company agreed to use the assets of the subsidiary through
which the Company owns the club, Jillian's Billiard Club of Long Beach, Inc.
("Jillian's - Long Beach"), as well as the assets of Jillian's - Pasadena
(through a second lien), as collateral. The loan bears interest at a rate of
seven percent, and matures in January 2006. As additional consideration for
the loan, the Company granted the City of Long Beach a warrant to receive
225,000 shares of Common Stock at a conversion price of $0.00 per share. At
March 31, 1995, the Company was in compliance with its obligations under the
loan, and the loan had a principal balance of $450,000. The Company believes,
based on its historical operations, that it will have sufficient working
capital in the future to make the scheduled loan payments. If the Company
fails to make such payments, it could effectively lose all rights to continue
the operations of the Long Beach and Pasadena clubs if the City of Long Beach
becomes the owner of the assets of both clubs. In addition, if the Company
defaults on the loan, the warrant will be automatically exercisable. If the
City of Long Beach exercises the warrant and the value of the Common Stock
issued under the warrant is less than the outstanding loan balance, the Company
is required to continue to issue additional shares of Common Stock until the
total value of the Common Stock issued to the City of Long Beach is equal to
the outstanding loan balance. The Company financed the remaining $1,050,000
needed to develop the Long Beach club primarily using cash generated from the
Company's operations, a landlord contribution and equipment leases.

Equity and Debt Financing. Since it began its billiard club business, the
Company has made at least six attempts, as described below, in addition to the
Cleveland Heights and Champaign private placements, to raise capital for
expansion through private placements of equity and debt. Because of the
dilutive effect that such issuances would have on the value of the Common Stock
in the hands of the existing Shareholders, the Company has attempted to raise
capital in this manner only as a last resort. Despite its efforts, the Company
has had only modest success in raising capital through private placements of
its Common Stock, of debt instruments or of the equity interests in its
subsidiaries. While the Company believed that its guarantee of favorable
returns and offering of early buy-outs would help attract investors, it was
advised during its discussions with potential investors that such investors had
no confidence that the Company could fulfill its guarantees or buy-out
responsibilities, based on the Company's history of poor performance, and if
the Company had insufficient assets or cash flow, it would be doubtful that an
investor with standing to sue would be provided with the rights guaranteed the
investor in the offering. First, during fiscal 1993, in an effort to raise
working capital and funds for expansion and development, the Company offered
Common Stock for sale through a private placement. The Company sold 2,043,022
shares of Common Stock for approximately $874,000, net of offering expenses and
sales commissions. While the private placement was successful in that the
Company realized over 80 percent of its goal of $1,000,000, the offering had
the effect of substantially diluting the value of the

29
<PAGE> 33

Common Stock in the hands of the existing Shareholders because the Common Stock
was placed for between approximately $0.50 and $0.60 per share at a time when
the Common Stock was trading at approximately $1 per share.

Second, the Company was also successful in raising the $850,000 it needed
to construct the Worcester billiard club. In 1993, it sold 75 percent of the
limited partnership interests in Jillian's Billiard Club of Worcester Limited
Partnership (the "Worcester Limited Partnership"). The Company's wholly owned
subsidiary, Jillian's Billiard Club of Worcester, Inc. ("Jillian's -
Worcester"), is the general partner and currently has a 25 percent ownership
interest in the Worcester Limited Partnership. The Company, among other
things, (i) guaranteed a 15 percent annual return on the Worcester investment,
(ii) offered a buy-out in 1999 of each investor to be paid 50 percent in cash
and 50 percent in Common Stock, to be valued at 80 percent of the average of
the bid and asked price of the Common Stock during the 30 days prior to the
transmittal to investors of the financial statements of the Worcester Limited
Partnership for the 12 months ending December 31, 1998; provided, however, that
if all investors sell their partnership interests to the Company, the purchase
price would be five times 75 percent of the net profits of the Partnership for
the 12 months ending December 31, 1998, with a maximum purchase price equal to
200 percent of capital invested, and (iii) offered, for a limited period of
time, a demand registration right requiring the Company to register such Common
Stock after the end of its 1999 fiscal year. The Company's obligation to buy
out a Worcester investor is contingent upon such investor giving notice to the
Company, within 60 days of the transmittal to investors of the aforementioned
financial statements, of the investor's desire to sell its partnership interest
to the Company. In addition, the Company may elect to buy out Worcester
investors for the same purchase price described above if the Company gives such
investors notice during the same 60-day period. There can be no assurance that
the Company will have sufficient cash flow to meet these guaranteed payment or
buy-out obligations when they do become due or when they become exercisable.
The Company's failure to meet these obligations could result in a suit by
investors to obtain the guaranteed return, buy-out and/or the registration
rights.

Third, after offering, among other things, (i) a 140 percent return of
investment in Jillian's Billiard Club of Annapolis Limited Partnership (the
"Annapolis Limited Partnership") within six years, (ii) a buy-out of each
investor in 1998 to be paid 15 percent in cash and 85 percent in Common Stock,
to be valued at the average of the bid and asked price of the Common Stock
during the 30 days prior to the transmittal to investors of the financial
statements of the Annapolis Limited Partnership for the 12 months ending
December 31, 1997; provided, however, that if all investors sell their
partnership interests to the Company, the purchase price would be four times 50
percent of the net income of the Partnership for the 12 months ending December
31, 1997, with a maximum purchase price equal to 100 percent of capital
invested, and (iii) for a limited period of time, a demand registration right
requiring the Company to register such Common Stock after the end of its 1998
fiscal year. The

30
<PAGE> 34

Company's obligation to buy out an Annapolis investor is contingent upon such
investor giving notice to the Company, within 60 days of the transmittal to
investors of the aforementioned financial statements, of the investor's desire
to sell its partnership interest to the Company. Existing Shareholders
accounted for $83,000 of the funds raised through the Annapolis Limited
Partnership in which Jillian's - Annapolis is a general partner and currently
has a 79 percent ownership interest. There can be no assurance that the
Company will have sufficient cash flow to meet these guaranteed payment or
buy-out obligations when they do become due or when they become exercisable.
The Company's failure to meet any of its obligations with respect to the
investors in the Annapolis Limited Partnership could result in a suit by them
to obtain the guaranteed return, buy-out and/or registration rights. The
Company financed the remaining $567,000 needed to develop the Annapolis club
through equipment lease financing (see "Bank and Equipment Lease Financing,"
above) and cash generated from the Company's operations.

The Company had virtually no success in its efforts to raise capital
through three additional private placements. Between 1993 and 1994, the
Company attempted to sell $4,000,000 in interests in two limited partnerships
by guaranteeing a 15 percent return on the investments and favorable buy-out
terms. The Company did not sell any interests in the limited partnerships.
Lastly, in 1994, the Company attempted to privately place a $750,000 debt
instrument guaranteed by the Company. The Company raised only $185,000,
$60,000 of which came from existing Shareholders. The Company believes that it
was unable to succeed in placing the debt instrument because it had difficulty
in convincing potential lenders that it would be able to repay the loan.

31
<PAGE> 35

investment banking firm to underwrite a public offering of its securities.
Although Whale Securities, an investment banking firm that placed Common Stock
in a public offering in 1987, was willing to offer the Company advice in 1994
as to a manner in which the Company might raise capital, Whale Securities
expressed no interest in undertaking to underwrite any of the Company's
securities. The Company was advised by Whale Securities that the Company could
raise capital by reducing the exercise price of then outstanding warrants to
purchase approximately 627,000 shares of Common Stock at a price significantly
below the then current market value of the Common Stock and reducing the
exercise period of the warrants. At that time, the Common Stock was trading
for approximately $1 per share. The Board determined that it was inadvisable
to reduce the exercise price of the warrants because if the warrants were
exercised at the reduced exercise price, the value of the Common Stock in the
hands of the existing Shareholders would be diluted.

Current Effects of Borrowings and Equity Financing. Of the $2,600,000
borrowed by the Company since it began its billiard club business, an aggregate
of approximately $2,052,000 was outstanding as of March 31, 1995. This amount,
which is represented by eight loans and two leases, bears interest at annual
rates ranging from seven to 15 percent and required an annual debt service of
approximately $135,000 at March 31, 1995. The Company believes, based on its
historical operations, that it will have sufficient working capital in the
future to make the scheduled payments with respect to the foregoing
indebtedness. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources." If the
Company fails to make the required payments on obligations secured by the
assets or stock of the subsidiaries through which the Company owns the relevant
clubs, the Company could lose its interests in these clubs as discussed above
under "Bank and Equipment Lease Financing" and "Seller, Landlord and Municipal
Financing." These obligations and contingent liabilities, as well as the
lenders' recourse in the event of the Company's default under the loans, will
continue in the Surviving Company if the Proposal is approved by the
Shareholders and the Merger is consummated.

None of the Company's obligations to provide the guaranteed returns and
buy-outs associated with the Champaign, Worcester and Annapolis Limited
Partnerships has matured as of the date of this Proxy Statement. There can be
no assurance that the Company will have sufficient working capital in the
future to meet these obligations when they do mature or when they become
exercisable. The Company's failure to honor these commitments could result in
investor suits to obtain the guaranteed returns or buy-outs. All of these
obligations, as well as the investors' rights to sue in the event that the
Company fails to satisfy such obligations, will continue in the Surviving
Company if the Proposal is approved by the Shareholders and the Merger is
consummated. In addition, the Board believes that the existence of the
guaranteed returns, buy-outs and registration rights is itself depressing the
price of the Common Stock and inhibiting the Company's ability to raise capital
and will continue

32
<PAGE> 36

to have this effect, whether or not the Company is a "public company" or a
"private company," as long as these rights remain pending and unsatisfied.

While the Company has raised approximately $5,400,000 in funds (excluding
landlord contributions) for working capital for the acquisition and/or
construction of its nine existing clubs, as described above, it has not raised
sufficient capital to enable it to expand in accordance with its business
plans. In addition, the site locations for most of the Company's clubs have in
large part been dictated by the availability of seller, landlord and municipal
financing. The Company has not been able to develop sites in other more
attractive areas where such financing has not been available. The Company's
reliance on this type of financing has resulted in the encumbrance of the
assets and/or stock of all of subsidiaries through which it owns its billiard
clubs except Jillian's Billiard Club of Cleveland, Inc. ("Jillian's -
Cleveland"). The unavailability of such collateral has, in turn, contributed
to the Company's difficulty in obtaining bank and equipment lease financing.
Further, the Company's history of poor performance has inhibited its ability to
raise capital through the private placement of its securities or the securities
of its subsidiaries.

The Board believes that the Company's inability to raise capital has
significantly contributed to the fact that the Company has experienced net
losses for all but one of the past five years, and such lack of profit, in
turn, has prevented the Company from significantly improving its position in
the upscale billiard club market through expansion and development. Management
believes that there are a number of markets in which the Company could have
achieved market dominance or acquired a more substantial share of the market if
the Company had had sufficient capital either to enter the market earlier or to
commence and expand its operations in that market at an earlier date. Instead,
the Company has had to expand the number of clubs that it operates slowly, and
the construction of those clubs has, in some cases, been delayed due to lack of
funds at a particular time. Such delays, in some instances, have required the
Company to pay rent prior to commencement of operations at those clubs, which
resulted in increased expense for the Company without any offsetting increase
in operating income. As a result, delays resulting in the payment of
pre-opening rent have had a direct impact on the costs associated with
developing the clubs. The Board believes that the value of the Common Stock
also has been depressed due to the Company's failure to achieve profitable
operations on a continuing basis. As a result, the Company's ability to raise
capital through the public or private sale of its Common Stock has been
limited. The Board, therefore, is of the view that the Company's profitability
would cause an increase in the market for, and value of, the Common Stock,
which in turn would increase the Company's attractiveness as an investment and
thereby further facilitate capital rasing activities.

33
<PAGE> 37

loans as a result of the Company's slow or nonexistent growth in assets and
income and the increasing level of competition from better-capitalized
entities. The terms of any financing available to the Company at that time and
at the present time was and continues to be such that the Company's acceptance
of financing on such terms would place the Company at a competitive
disadvantage in terms of its debt obligations and available capital. At a
Board meeting held on December 20, 1994, the Board determined that it might be
appropriate for the Company to consider eliminating its status as a "public
company," in part because, as a "private company," the Company could reduce
certain costs associated with complying with the federal securities laws, the
Company's Bylaws and Florida corporate law. Management indicated that this
cost savings, which the Company estimates to be approximately $150,000 per
year, could cause the Company to be more attractive to the types of
well-capitalized and sophisticated investors that are willing to invest
substantial amounts of capital in an enterprise. In addition, in the
experience of certain members of the Board, investors generally are not willing
to commit significant amounts of capital to an enterprise that, like the
Company, does not have a history of profitable operations unless the number of
shareholders is relatively small and composed primarily of individuals who
either are actively involved in the operations of the Company or are family
members of such persons. Further, management of the Company believes that the
additional disclosure regarding company operations, stock ownership and
compensation of, or payments to, persons with a significant investment in the
company that is required by the federal securities laws applicable to a public
company is often unacceptable to investors that are considering a substantial
investment in a company. The Board believes that the Company could be an
attractive investment, even at this time, because the infusion of additional
capital would enable the Company to expand its business and thereby increase
the likelihood that the Company will become profitable, due in part to the
Company's ability, as a larger company, to achieve economies of scale.
However, a substantial investment in a company, such as the Company, that does
not have a history of profitable operations, but whose prior operating history
and relative position in its markets indicate that a significant infusion of
capital could produce profitable operating results on a consistent basis in the
future, may be more likely to prove profitable (and, therefore, may be more
attractive to a potential investor) if the company is a private company. In
the experience of management, based on its discussions with potential investors
in the Company, the additional attraction of a private company lies in the
belief of many potential investors that the full value of the stock of a
private company is less likely to be reflected in the price at which the stock
may be transferred than is the case for the stock of a public company.

At the request of the Board, Mr. Foster agreed to explore the feasibility
and potential benefits of causing the Company to become a private company.

34
<PAGE> 38

in structuring financing arrangements and attracting additional potential
sources of capital. For example, the Board believes that, as a private
company, the Company might be better able to attract investors that are willing
to invest significant amounts in the Company for the reasons discussed above.
In addition, this change in the Company's status would allow the Company to
eliminate certain costs associated with its status as a public company. Such
costs include, in addition to those involved in managing the assets of the
Company, those to maintain records that comply with the Company's Bylaws and
Florida corporate law but that could be streamlined if the Company were
private, including the fees paid to the Transfer Agent; those required to audit
the financial statements of the Company in compliance with federal securities
laws and regulations; those required to communicate with the approximately
4,900 Shareholders; and those required to make the necessary filings with, and
otherwise comply with the regulations of, the Securities and Exchange
Commission (the "Commission") and the National Securities Dealers Automated
Quotation System ("NASDAQ"). The Board estimates that the annual savings for
the Company due to the reduction or elimination of these costs would be
approximately $150,000. See "Purposes and Reasons for the Merger," below.

At the January 23, 1995 Board meeting, Mr. Foster recommended that the
Company retain Bannon & Co., Inc. (the "Financial Advisor") to evaluate the
Company in connection with the Company's consideration of becoming a private
company. Mr. Foster then presented to the Board information regarding the
qualifications and fees of the Financial Advisor. Upon Mr. Foster's request
for additional valuation experts, John L. Kidde suggested that the Board
consider Brown, Brothers, Harriman & Co. and Layne Weggeland. The Board
authorized Mr. Foster to obtain information regarding the qualifications and
fees of these two valuation experts and to select, in consultation with the
other directors as appropriate, the most suitable of the three experts to
present an opinion to the Board. The Board also authorized the Company to pay
all reasonable fees and expenses incurred by the expert selected in connection
with the engagement.

Each of the two experts referred to the Board by Mr. Kidde advised Mr.
Foster that the firm would be unable to undertake the engagement, without
offering any specific reason for that decision. Although Mr. Foster contacted
certain other experts in the industry who were recommended by the two experts
originally referred by Mr. Kidde, these individuals or organizations were, in
the opinion of Mr. Foster, understaffed or had relatively insufficient
experience to complete the evaluation properly. Consequently, in March 1995,
Mr. Foster engaged the Financial Advisor to undertake a study to enable it to
render an opinion with respect to the proposed Merger Payment as an independent
third party and present a fairness opinion to the Board. Except as described
above, there were no contacts between the Financial Advisor and the Company and
its affiliates regarding the hiring of the Financial Advisor to present a
fairness opinion to the Board. See "Special Factors - Opinion of the Financial
Advisor."

35
<PAGE> 39

Alternatives Considered. After Mr. Foster selected the Financial
Advisor, the Board began an analysis of methods of structuring a transaction
that would have the effect of eliminating the Company's status as a publicly
held company while maximizing Shareholder value. At meetings held on April 4,
and October 2, 1995, the Board considered continuing to operate the Company
with the current capital structure as a public company. The Board rejected
this alternative primarily because of the Company's history of poor performance
and the Board's belief that the Company's status as a private company would
reduce certain expenses associated with its current public status and provide
the Company with greater flexibility in structuring financing arrangements and
additional potential sources of capital. Because the Board believes that
reducing such expenses and obtaining financing will increase the likelihood
that the Company's performance will improve and the value of the Common Stock
will increase, the Board determined that it would be imprudent to sell the
Company at this time. In addition, the Board has received only one bid in the
last 18 months, and this bid was from a Canadian company that indicated its
shares were publicly traded, although the Company was unable to verify this.
The Canadian company also indicated that it operated four billiard club
restaurants. The bid was an offer to exchange shares of the Company's Common
Stock for shares of the Canadian company in a transaction that, prior to
expenses and based on the then-trading value of the common stock of the
Canadian company, would have had a value of approximately $1.25 per share.
Although Mr. Foster, on behalf of the Company, requested certain information
from the Canadian company that he believed was necessary to evaluate the
relative merits of the bid, the Canadian company never responded to Mr.
Foster's inquiry. Although the Board has not solicited bids for the sale of
the Company's assets during the past 18 months nor received any other bids
during this time, the Board believes that the Company has little resale value
because of the nature of the Company's assets, which are primarily comprised of
leasehold interests in the billiard clubs that the Company operates, as well as
equipment and furniture. These clubs are not readily convertible to other
uses, and without an agreement by the Company or the managers of the clubs to
continue operating these clubs, the clubs, the leasehold interests and the
equipment and furniture held by the Company have relatively low resale value
even if sold to a competitor of the Company that would take over operations of
the club. In particular, the Board believes that a sale of the Company's
assets, with the accompanying expenses, would be unlikely to result in a net
distribution to Shareholders of an amount as great as the Merger Payment. For
these reasons, the Board believes that it can structure a transaction likely to
yield greater distributions to the Shareholders than any distributions they
would receive if the Company were sold.

In light of the Board's belief that it is not in the best interests of the
Company and the Shareholders to sell the Company at this time, the Board
considered transactions at the meeting held on October 2, 1995 that could have
the effect of taking the Company private, but would retain the interest in the
Company or any successor to the Company of each Continuing Shareholder (i.e., a
Shareholder that beneficially owns at least 101,000 shares of Common

36
<PAGE> 40

Stock as of the Record Date (an Initial Continuing Shareholder) and each
Shareholder who is an employee of the Company and who beneficially owns shares
of Common Stock on the Record Date in an amount that, when added to the
aggregate number of shares of Common Stock underlying stock options or warrants
beneficially owned by such employee on the Record Date, whether or not such
options or warrants are then exercisable, totaling at least 101,000 shares of
Common Stock (an Employee Continuing Shareholder)). Any one of the
transactions considered could have the effect of terminating the interest of
each Other Shareholder (i.e., a Shareholder that beneficially owns less than
101,000 shares of Common Stock as of the Record Date). The Board considered
(i) a tender offer by the Company, (ii) a tender offer by the Company and a
subsequent merger of the Company into a newly formed company to eliminate any
nontendering Other Shareholders, and (iii) a merger, as proposed herein.

The Board rejected the first alternative as impractical because there
could be no assurance that any Shareholders would elect to tender their Common
Stock to the Company. Further, in light of its recent difficulty in obtaining
financing from financial institutions and other sources, it was unlikely that
the Company could obtain financing sufficient to acquire all of the tendered
Common Stock. Because the Board had determined that it was in the best
interest of the Company and the Shareholders for the Company to become a
private company not subject to the provisions of the federal securities laws
and regulations relating to the operation of public entities, the Board did not
believe that it was advisable or in the interest of the Shareholders to
undertake a transaction in which the Company would incur significant expense
but would have no assurance that, even if a majority of the Shareholders
supported the transaction by tendering their Common Stock to the Company, the
transaction would accomplish its purpose. If the transaction were not
sufficient to enable the Company to become a private company, the Company would
have incurred the expense associated with a transaction of this type but would
be required to continue to incur additional expenses to satisfy the additional
recordkeeping requirements associated with operating the Company as a public
company that is subject to the provisions of the federal securities laws and
regulations relating to the operation of public entities. The second
alternative was rejected because, while it could terminate the interests of all
Shareholders in the Company, it would be a protracted and costly process.
After reviewing these alternatives, the Board unanimously selected the Merger
as the most efficient method for taking the Company private and paying some
Shareholders a fair price for their interests in the Company, as well as
retaining the interests of other Shareholders in the Company or a successor to
the Company. The Board has structured the proposed Merger so that (i) the
Company will be merged into Newco (the "Surviving Company"), (ii) each Other
Shareholder (i.e., a Shareholder that beneficially owns less than 101,000
shares of Common Stock as of the Record Date or that holds of record through a
Broker-Dealer Shareholder and does not provide the Company with evidence
regarding the number of shares beneficially owned by such holder) will have the
right to receive the Merger Payment of $0.50 per share of Common Stock, (iii)
each share of Common Stock held by a

37
<PAGE> 41

Continuing Shareholder (i.e., a Shareholder that beneficially owns at least
101,000 shares of Common Stock as of the Record Date) or a Shareholder who is
an employee of the Company and who beneficially owns shares of Common Stock on
the Record Date in an amount that, when added to the aggregate number of shares
of Common Stock underlying stock options or warrants beneficially owned by such
employee on the Record Date, whether or not such options or warrants are then
exercisable, total at least 101,000 shares of Common Stock (an Employee
Continuing Shareholder) will be converted into the right to receive one share
of common stock of Newco and/or each stock option issued under the Stock Option
Plans or warrant of the Company held by a Continuing Shareholder will be
converted into the right to purchase the same number of shares of common stock
of Newco on the same terms and conditions. The Board determined that Initial
Continuing Shareholders should receive shares of common stock in Newco in the
Merger so that the Merger would satisfy one of the requirements necessary for
the Merger to have no federal income tax consequences to the Company. One of
the conditions for such tax-free treatment is that after the Merger, the
Shareholders, as a group, maintain a significant continuing equity interest in
Newco. The Board was advised by its tax advisor, Shaw, Pittman, Potts &
Trowbridge, that this continuity requirement would be satisfied if
Shareholders, as a group, receive shares of common stock in Newco in the Merger
with a value equal to at least 48 percent of the value of the Common Stock
surrendered in the Merger. After reviewing the Company's Shareholder records,
the Board determined that it could satisfy this requirement if it set a
101,000-share threshold for those receiving shares of common stock of Newco in
the Merger. The Board decided that Employee Continuing Shareholders should
receive shares of common stock in Newco because it would satisfy one of the
requirements necessary for the Merger to have no federal income tax
consequences to the Company and, therefore, would make it more attractive to a
potential investor that could supply the funds necessary to make the Merger
Payments. See "Material Federal Income Tax Consequences."

At the meeting held on October 2, 1995, the Board also discussed potential
sources of financing for the Merger. At the suggestion of Mr. Foster, the
Board authorized the Company to retain Island Partners, Ltd., a Massachusetts
limited partnership (the "Placement Agent"), to structure a transaction
designed to raise $6,000,000 to $10,000,000 to be used for the Merger Payments,
working capital and the development of additional billiard clubs.

In addition, at the meeting on October 2, 1995, the Financial Advisor
presented its preliminary fairness opinion to the Board. See "Opinion of the
Financial Advisor," below.

Payments to the Other Shareholders

Based on the preliminary fairness opinion presented to the Board by the
Financial Advisor on October 2, 1995 and the final opinion, dated _________,
1995 rendered to the Other Shareholders, the Board determined that the Merger
Payment of $0.50 per share of Common

38
<PAGE> 42

Stock is reasonable and fair to the Other Shareholders. See "Special Factors -
Opinion of the Financial Advisor."

Opinion of the Financial Advisor

On October 2, 1995, the Financial Advisor presented its preliminary
opinion, subject to review and revision, to the Board that the proposed Merger
Payment of $0.50 per share was fair to the Other Shareholders, as of October 2,
1995. In addition, the Financial Advisor issued its final opinion to the Other
Shareholders that the proposed Merger Payment of $0.50 per share was fair to
the Other Shareholders, as of ___________, 1995. The opinion is being
delivered to the Other Shareholders as Appendix __ to this Proxy Statement.

The Financial Advisor is continually engaged in providing financial
advisory and investment banking services, including the valuation of businesses
and their securities, principally in the entertainment and media industries.

The Board selected the Financial Advisor based on its qualifications and
experience, particularly its familiarity with entertainment entities and its
lack of potential conflicts of interest, as well as its cost. The Board did
not give any instructions to or impose any limitations on the Financial
Advisor. As of the date of this Proxy Statement, the Financial Advisor and its
controlling persons do not beneficially own any equity securities of the
Company. Neither the Financial Advisor nor its controlling persons has ever
had any relationship with the Company or any of its controlling persons.

In August 1995, the Board authorized the Company to engage the Financial
Advisor to undertake a study to enable it to render an opinion to the Board
with respect to the proposed Merger Payment and to pay all reasonable fees and
expenses incurred by the Financial Advisor in connection with providing such
opinion. Except as described above, there were no contacts between the
Financial Advisor and the Company and its affiliates regarding the engagement
of the Financial Advisor to provide a fairness opinion to the Board.

39
<PAGE> 43

Financial Advisor reviewed, among other things, certain publicly available
information relating to the Company and performed such studies and analyses as
it considered appropriate, including, among other things, a comparison of the
financial and operational results and certain other financial and stock market
information of the Company with similar information of certain other publicly
traded companies which the Financial Advisor deemed comparable in certain
limited respects to the Company.

The Financial Advisor relied without independent verification upon the
accuracy and completeness of all of the financial and other information
reviewed by the Financial Advisor for the purposes of its opinion. With
respect to any financial forecasts, the Financial Advisor assumed that they
have been reasonably prepared and reflect the best currently available
estimates and judgment of the management of the Company as to the expected
future financial performance of the Company. The Financial Advisor did not
make an independent evaluation or appraisal of the assets or liabilities of the
Company (or its affiliates ) and it has not been furnished with any such
evaluation or appraisal.

In connection with a presentation to the Company's Board on October 2,
1995, the Financial Advisor advised the Company's Board that, in evaluating the
consideration to be received in the Merger by the Other Shareholders, the
Financial Advisor had performed a variety of financial analyses with respect to
the Company, all as summarized below.

The Financial Advisor reviewed for background purposes certain aspects of
the financial performance of the Company, including revenue, earnings before
interest, taxes, depreciation and amortization ("EBITDA") and earnings before
interest and taxes ("EBIT") for fiscal years 1992, 1993, 1994 and 1995 and
during the latest twelve months ended June 30, 1995 ("LTM"), as well as
management estimates for fiscal 1996 (calculated as of September 11, 1995).
The Financial Advisor also reviewed with the Company's Board certain
information concerning the trading prices and volumes of trading of the Common
Stock through September 29, 1995. The Financial Advisor observed that the
Merger Payment represented approximately a 60 percent premium over the trading
price of the Common Stock on September 29, 1995. The Financial Advisor
calculated, among other things, multiples of the Merger Payment to the
Company's LTM earnings and to its earnings for fiscal year 1995 and projected
fiscal year 1996, and multiples of the Company's firm value (market
capitalization plus debt less cash and cash equivalents) ("Firm Value") for
these same periods, based upon the Merger Payment. Because LTM earnings,
fiscal year 1995 earnings and projected fiscal year 1996 earnings, as well as
fiscal year 1995, LTM and projected fiscal year 1996 EBIT, were all negative,
no multiple was applicable or calculable. The results of the EBITDA
calculations were as follows: Firm Value to LTM EBITDA was 90.03, for 1995
EBITDA was 92.79 and for projected 1996 EBITDA was 9.04. The EBIT and EBITDA
calculations are before start-up costs and provisions for losses and other
income and after minority interest expense and adjustments for the compensation
and bonuses paid by the Company to Mr. Foster.

40
<PAGE> 44

The Financial Advisor also reviewed certain publicly available financial,
operating and stock market information for the Company and for certain selected
publicly traded companies in the entertainment industry (which were comparable
in certain limited respects to the Company). These companies were Bowl
America, O'Charley's, Brinker International and Western Country Clubs.

The foregoing summary does not purport to be a complete description of the
analyses performed by the Financial Advisor or of its presentation to the
Company's Board. The preparation of financial analyses and fairness opinions
is a complex process and is not necessarily susceptible to partial analysis or
summary description. The Financial Advisor believes that its analyses (and the
summary set forth above) must be considered as a whole, and that selecting
portions of such analyses and of the factors considered by the Financial
Advisor, without considering all of such analyses and factors, could create an
incomplete view of the processes underlying the analyses conducted by the
Financial Advisor and its opinion. The Financial Advisor made no attempt to
assign specific weights to particular analyses. Any estimates contained in the
Financial Advisor's analyses are not necessarily indicative of actual values,
which may be significantly more or less favorable than as set forth therein.
Estimates of values of companies do not purport to be appraisals or necessarily
to reflect the prices at which companies may actually be sold.

Based on the foregoing, on October 2, 1995, the Financial Advisor
delivered to the Board its preliminary opinion, subject to review and revision,
that the proposed Merger Payment of $0.50 per share was fair to the Other
Shareholders, as of October 2, 1995. In addition, the Financial Advisor issued
its final opinion to the Other Shareholders that the proposed Merger Payment of
$0.50 per share was fair to the Other Shareholders, as of ___________, 1995.
The opinion is being delivered to the Other Shareholders as Appendix __ to this
Proxy Statement.

In connection with the engagement, the Company has agreed to indemnify the
Financial Advisor against all losses, claims, damages, liabilities and expenses
to which the Financial Advisor or any of its affiliates, stockholders,
partners, directors, agents, employees or controlling persons may become
liable. In the case of a loss, claim, damage or liability, the Company will
not be required to indemnify the Financial Advisor to the extent that the loss,
claim, damage or liability results from the gross negligence or willful
misconduct of the Financial Advisor in connection with its issuance of the
fairness opinion or any services that it may have provided to the Company.

For its services in rendering its opinion, the Company has agreed to pay
the Financial Advisor a $75,000 fee, $25,000 of which already has been paid to
the Financial Advisor and will reimburse the Financial Advisor for its
reasonable out-of-pocket expenses, including fees

41
<PAGE> 45

and disbursements of the Financial Advisor's counsel (approximately $5,000) in
connection with the engagement.

Board of Directors Determination of Fairness of the Merger

The Board unanimously approved the Proposal. Two of the four directors
are not employed by the Company. The Board believes that the Proposal,
including the Merger Payment, is fair to, and in the best interest of, each
Shareholder, including the Continuing Shareholders. In reaching this
conclusion, the Board considered a number of factors, including but not limited
to the following.

(1) The fairness opinion of the Financial Advisor. In considering such
opinion, the Board also took note of the Financial Advisor's reputation,
qualifications and experience in the industry. The Board concluded that the
fact that the Financial Advisor, which is an independent entity whose
principals have substantial experience in making fairness determinations of the
type delivered to the Other Shareholders, concluded that the Common Stock has a
value of $0.50 per share and the Merger Payment is fair to the Other
Shareholders as of ______________, 1995 supported its view that the Proposal is
fair to the Shareholders.

(2) Certain of the factors considered by the Financial Advisor, as set
forth in this paragraph. Like the Financial Advisor, the Board considered the
Company's financial condition, earnings and business prospects, market price of
the Common Stock, and the trading market for the Common Stock and the manner in
which these matters compared to those of other food, beverage and entertainment
companies whose stock is publicly traded.

(3) The Board's own knowledge regarding the financial condition, results
of operations, business and prospects of the Company, as well as current
industry, economic and market conditions.

(4) The Merger Payment in relation to current market prices, historical
market prices and purchase prices paid by members of the Board and executive
officers and other Shareholders owning more than five percent of the issued and
outstanding shares of Common Stock as of the Record Date during the past two
years.

In reaching its conclusion that the Proposal, including the Merger
Payment, is fair to each Shareholder, including the Continuing Shareholders,
the Board considered the aforementioned factors because most of them involve
evaluations and judgments made by an unaffiliated third party. In view of the
variety of factors considered, the Board did not find it practicable to, and
therefore did not, quantify or otherwise assign relative weights to the
individual factors considered in reaching its conclusion that the Proposal is
fair to the Shareholders. For the reasons discussed in the preceding listing
of these factors, each of the individual factors supported its conclusion.
While the Financial Advisor was not retained by the two

42
<PAGE> 46

directors who are not employed by the Company or by any of the Other
Shareholders, the Board retained the Financial Advisor on behalf of the Other
Shareholders and the Financial Advisor rendered its opinion directly to the
Other Shareholders.

The Board did not seek an explanation of the analysis performed or
conclusion reached by the Financial Advisor because it had hired the Financial
Advisor, which has substantial experience in these types of evaluations, to
function as an independent expert and did not wish to influence either the
process followed by the Financial Advisor or its ultimate opinion. The Board
accepted the opinion of the Financial Advisor without detailed evaluation of
the conclusion contained therein not only because of the expertise and
experience of the Financial Advisor in these types of evaluations but also
because the conclusion of the Financial Advisor, which is an independent expert
not affiliated with any member of the Board, any officer or any affiliate of
either, accorded with the analysis, evaluation and conclusion of the Board.

The Board believes that it has satisfied its fiduciary obligation to the
Other Shareholders to obtain a fair price for their Common Stock. In order to
fulfill this obligation, the Board not only reviewed the history of the
Company's performance and lack of ability to obtain financing and attract
investors as a public company, but also obtained an opinion from an independent
third party as to the fairness of the Merger Payment.

The analysis of the Financial Advisor included consideration of the Merger
Payment in relation to EBITDA, EBIT, LTM EBIT and LTM EBITDA. The Board
considered these factors in reaching its conclusion that the Proposal,
including the Merger Payment, is fair to each Shareholder, including the
Continuing Shareholders.

No firm offers of which the Board is aware have been made by an
unaffiliated person during the preceding 18 months for (i) the merger or
consolidation of the Company into or with such person, (ii) the sale or other
transfer of all or any substantial part of the assets of the Company. or (iii)
the purchase of a number of shares of Common Stock that would enable the holder
thereof to exercise control of the Company. In addition, the Board did not
solicit any such offers.

Material Federal Income Tax Consequences

The following is a summary of the material federal income tax consequences
associated with the proposed Merger, based upon the advice of Shaw, Pittman,
Potts & Trowbridge, as tax advisor to the Company. This discussion is based
upon the laws, regulations and reported rulings and decisions in effect as of
the date of this Proxy Statement (or, in the case of certain regulations,
proposed as of such date), all of which are subject to change, retroactively or
prospectively, and to possibly differing interpretations. This discussion does
not purport to deal with the federal income or other tax consequences
applicable to all

43
<PAGE> 47

Shareholders in light of their particular investment circumstances (such as
their source and level of income, the nature of their investment portfolio and
the nature and amount of tax deductions, credits and other expenses unrelated
to the Company). This discussion also does not purport to deal with all
categories of Shareholders, some of whom may be subject to special rules
(including, for example, insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who
are not citizens or residents of the United States). No ruling on the federal
income tax consequences of the Merger has been or will be requested from the
Internal Revenue Service or from any other tax authority.

This discussion of the federal income tax consequences of the Merger is
intended to provide a general summary and does not address tax consequences
which may vary with, or are contingent on, individual circumstances. For
example, the proposed Merger may affect the tax liability of each Shareholder
differently, depending on such factors as whether the Shareholder is an
individual, corporation, company or other entity. This discussion is not
binding upon any tax authority or any court and no assurance can be given that
a position contrary to those expressed in this discussion will not be asserted
and sustained. Moreover, this discussion does not address any foreign, state
or local income or other tax consequences of the Merger.

ACCORDINGLY, EACH SHAREHOLDER IS STRONGLY URGED TO CONSULT SUCH
SHAREHOLDER'S OWN TAX ADVISOR REGARDING ANY SPECIFIC TAX CONSEQUENCES TO THE
SHAREHOLDER OF THE MERGER, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN INCOME
AND OTHER TAX CONSEQUENCES OF THE MERGER AND POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.

Federal Income Tax Consequences for Continuing Shareholders. The federal
income tax consequences of the Merger for Continuing Shareholders will depend
upon whether or not the Merger is treated as a reorganization under section
368(a)(1)(A) of the Code (a so-called "Type A reorganization") for federal
income tax purposes.

In order to qualify as a Type A reorganization the Merger must satisfy
four requirements. First, the Merger must qualify as a merger or consolidation
under state law. Second, the Merger must have a bona fide business purpose
(other than tax avoidance). Third, after the Merger, Newco must continue the
Company's billiard club business or use a significant portion of the Company's
"historic business assets" in its business. Fourth, after the Merger, the
Shareholders, as a group, must maintain a significant continuing equity
interest in Newco. For purposes of issuing private letter rulings, the IRS has
provided a safe harbor, with respect to the minimum continuing equity interest
needed to satisfy this requirement. The safe harbor requires that the
shareholders in a corporation that is being merged out of

44
<PAGE> 48

existence (the "target" corporation) receive and retain an amount of acquiring
corporation stock with a value at the time of the transaction equal to at least
50 percent of the value of the target corporation stock surrendered by such
shareholders in the transaction. However, this is merely a safe harbor, and
the Company's tax advisor believes that the Shareholders should be treated as
maintaining a sufficient continuing equity interest in the Company if they, as
a group, receive shares of common stock of Newco in the Merger with a value
equal to at least 48 percent of the value (measured at the time of the Merger)
of the shares of Common Stock surrendered in the Merger, and they actually
retain ownership of such stock for at least two years (assuming that at the
time of the Merger, Shareholders owning at least 48 percent of the Common Stock
have no plan or intention to dispose of the shares of common stock of Newco
received in the Merger). Therefore, if the Merger is structured as described
in this Proxy Statement and Shareholders owning at least 48 percent of the
Common Stock (i) enter into Lock-Up Agreements (as defined below) and (ii) have
no plan or intention of disposing of the shares of common stock of Newco, then
the Merger should qualify as a Type A reorganization for federal income tax
purposes.

If the Merger qualifies as a Type A reorganization, Continuing
Shareholders should not recognize any gain or loss as a result of the Merger
and the tax basis of each Continuing Shareholder in the shares of common stock
of Newco received in the Merger should be equal to such Shareholder's adjusted
tax basis in the shares of Common Stock surrendered in the Merger.

On the other hand, if the Merger does not qualify as a Type A
reorganization, it most likely will be treated as a taxable exchange of the
Company's assets for shares of common stock of Newco and cash, followed by a
liquidation of the Company in which the Continuing Shareholders receive shares
of common stock of Newco. As a result, if the Merger does not qualify as a
Type A reorganization, each Continuing Shareholder will recognize taxable gain
(or loss) equal to the difference, if any, between (i) the value of the shares
of common stock of Newco received by such Shareholder in the Merger and (ii)
such shareholder's adjusted tax basis in its shares of Common Stock immediately
prior to consummation of the Merger. This gain (or loss) will be treated as
ordinary income (or loss) if the shares of Common Stock surrendered by a
Continuing Shareholder is not a capital asset. Otherwise, if the shares of
Common Stock had been held by a Continuing Shareholder for more than one year
prior to the Merger, then this gain (or loss) will be treated as long-term
capital gain (or loss), and if the shares of Common Stock had been held by a
Continuing Shareholder for one year or less prior to the Merger, then they will
be treated as short-term gain (or loss).

If the Merger does not qualify as a Type A reorganization and the value of
the shares of common stock of Newco and cash distributed in the Merger exceeds
the Company's adjusted taxable basis in its assets, then the Merger will also
result in the recognition of taxable gain by the Company. All of the
Shareholders, including the Continuing Shareholders, may

45
<PAGE> 49

be liable as transferees under section 6901 of the Code for the Company's tax
liability with respect to such taxable gain.

Individual Shareholders will be subject to federal income tax on any
capital gains recognized as a result of the Merger at a maximum rate of 28
percent and generally will only be able to offset capital gains with capital
losses and up to $3,000 of ordinary income, on an annual basis ($1,500 in the
case of a married individual filing a separate return). However, unused
capital losses of individual Shareholders may be carried forward indefinitely
to subsequent tax years to offset either capital gains or a maximum of $3,000
of ordinary income, on an annual basis. Individual Shareholders will be
subject to federal income tax on any ordinary income recognized as a result of
the Merger at a maximum rate of 39.6 percent.

Corporate Shareholders will be subject to federal income tax on any
ordinary income or capital gains recognized as a result of the Merger at a
maximum rate of 35 percent (39 percent for certain corporations in order to
effect the phase-out of the benefits of the graduated rates applied to income
below $75,000) and generally will be able to use any capital losses only to
offset capital gains. However, unused capital losses of corporate Shareholders
may be (i) carried back to each of the three taxable years preceding the
taxable year in which the loss is recognized and (ii) carried forward to each
of the five taxable years following the taxable year in which the loss is
recognized.

Federal Income Tax Consequences for Other Shareholders. As a result of
the Merger, Other Shareholders will receive a cash payment in exchange for each
share of their Common Stock (i.e., the Merger Payment), resulting in taxable
gain or loss to such Shareholders. This gain or loss will be equal to the
difference, if any, between (i) the Merger Payment received by the Other
Shareholder and (ii) such Other Shareholder's adjusted tax basis in such
Shareholder's shares of Common Stock immediately prior to consummation of the
Merger. If the shares of Common Stock surrendered in the Merger by an Other
Shareholder is a capital asset, the gain or loss recognized by such Other
Shareholder will be treated as a capital gain or loss. Otherwise, the gain or
loss recognized by such Other Shareholder will be treated as ordinary income or
loss. Capital gain (or loss) recognized by an Other Shareholder who has held
shares of Common Stock for more than one year at the time of the Merger will
generally be treated as long term capital gain (or loss). Capital gain (or
loss) recognized by an Other Shareholder who has held shares of Common Stock
for one year or less at the time of the Merger will generally be treated as
short-term capital gain (or loss).

Any capital gains or ordinary income that would be recognized by the Other
Shareholders, would be taxed at the same rates and could be utilized subject to
the same rules described in "Federal Income Tax Consequences for Continuing
Shareholders," above.

46
<PAGE> 50

As noted above, if the Merger does not qualify as a Type A reorganization
and the value of the shares of common stock of Newco and cash distributed in
the Merger exceeds the Company's adjusted taxable basis in its assets, then the
Merger will result in the recognition of taxable gain by the Company. All of
the Shareholders, including the Other Shareholders, may be liable as
transferees under section 6901 of the Code for the Company's tax liability with
respect to such taxable gain. This tax liability would be in addition to any
tax liability resulting from any taxable gain recognized by the Other
Shareholders in connection with their receipt of a Merger Payment.

Federal Income Tax Consequences for Holders of Warrants to Purchase Common
Stock. If the Merger is approved, each warrant to purchase a share or shares of
Common Stock outstanding immediately prior to consummation of the Merger will
be converted into the right to purchase the same number of shares of common
stock of Newco on the same terms and conditions. This conversion will be
treated as a taxable exchange, and each holder of a warrant to purchase a share
or shares of Common Stock will recognize gain or loss equal to the difference,
if any, between (i) the value of the warrant to purchase shares of common stock
of Newco and (ii) such holder's adjusted tax basis in the warrant to purchase
shares of Common Stock immediately prior to the conversion. This gain (or
loss) will be treated as ordinary income (or loss) if the warrants are not
capital assets. Otherwise, if the warrant had been held for more than one year
prior to the conversion, then this gain (or loss) will be treated as long-term
capital gain (or loss), and if the warrant had been held for one year or less
prior to the conversion, then it will be treated as short-term gain (or loss).

Federal Income Tax Consequences for Holders of Options to Purchase Common
Stock. If the Merger is approved, each stock option issued under the Stock
Option Plans to purchase a share or shares of Common Stock outstanding
immediately prior to consummation of the Merger will be converted into the
right to purchase the same number of shares of common stock of Newco. This
conversion will not effect the exercise price, expiration date, vesting
provisions, or any other provisions of the options. The holders of options to
purchase shares of Common Stock issued under the Stock Option Plans should not
recognize any taxable income as a result of this conversion.

Purposes and Reasons for the Merger

47
<PAGE> 51

addition, the Board believes that operating the Company as a privately operated
company that does not include the Other Shareholders will significantly reduce
or eliminate certain costs that currently are necessary to operation of the
Company. Such costs include, in addition to those involved in managing the
assets of the Company, those to maintain records that comply with the Company's
Bylaws and Florida corporate law but that could be streamlined if there were no
Other Shareholders, including the fees paid to the Transfer Agent; those
required to audit the financial statements of the Company in compliance with
federal securities laws and regulations; those required to communicate with the
approximately 4,900 Shareholders; those required to make the necessary filings
with, and otherwise comply with the regulations of, the Commission and NASDAQ.
The Board estimates that the annual savings for the Company due to the
reduction or elimination of these costs would be approximately $150,000. The
majority of this savings would result from reductions in audit and legal fees
associated with the Company's compliance with federal securities laws and
regulations. The Company would also incur significantly lower expenses
relating to printing, mailing and postage charges. In addition, the Company
would not in the future incur certain other charges due to its status as a
public corporation.

Interests of Certain Persons in the Merger

The proposed Agreement and Plan of Merger (the "Merger Agreement"), which
will, when negotiated, provide the terms and conditions of the Merger, is
expected to permit continuing indemnification in accordance with the articles
of incorporation of the Surviving Company and the bylaws of the Surviving
Company in the Merger, of directors and executive officers of the Company to
the fullest extent permitted under applicable state law, including
indemnification relating to the period occurring prior to the time at which a
Certificate of Merger and Articles of Amendment to the articles of
incorporation of the Surviving Company are filed and recorded with the
Secretary of State of the States of Florida and/or Delaware (the "Effective
Time"). See "Proposal to Approve the Merger - Indemnification."

48
<PAGE> 52

Certain Effects of the Merger

If the Merger is consummated, the Surviving Company will be entitled to
any cash reserves held by the Company. At June 30, 1995, the Company held
$115,354 in restricted cash. The Board expects the restricted cash will be
used for construction costs related to development of the Long Beach billiard
club. In addition, the Continuing Shareholders, who include Steven L. Foster,
Chief Executive Officer and Chairman of the Board of the Company, and Hugh
Brennan, Director of Construction of the Company, will have an opportunity to
share in the future results of operations of the Surviving Company and to take
advantage of any increase in the value of such Company's assets if the Merger
is consummated. There can be no assurance, however, that the value of these
assets will increase or as to whether there will be any future distributions by
the Surviving Company. The Company has never declared a cash dividend. See
"Market Information." In addition, if the Merger is consummated, all of the
Company's loan obligations and guaranteed return, buy-out and registration
rights obligations undertaken in connection with the private placement of the
securities of certain of its subsidiaries will continue in the Surviving
Company. See "Current Effects of Borrowings and Equity Financing," above. It
is anticipated that all of the current officers and directors of the Company
will continue to hold the same positions in Newco, although the form of the
Merger Agreement has not yet been negotiated. Except as described in this
Proxy Statement, there will be no other relationships that will continue
between the Company and any persons who are officers, directors, or
Shareholders of the Company as of the date of this Proxy Statement. See
"Special Factors - Certain Effects of the Merger."

Consummation of the Merger through the Private Placement would likely
result in the execution by the Continuing Shareholders of Lock-Up Agreements
(as defined below) which would restrict their ability to transfer any shares of
common stock of Newco received in the Merger. See "Proposal to Approve the
Merger - Lock-Up Agreements."

The Company, as a result of the Merger, will become an entity the
securities of which are privately held. The registration of the Common Stock
under the Securities and Exchange Act of 1934, as amended (the "Exchange Act")
will terminate, resulting in the suspension of the Company's obligations to
file periodic reports such as Form 10-Ks, 10-Qs and 8-Ks. Since the Common
Stock will no longer be publicly held, the Company will be relieved of

49
<PAGE> 53

the obligation to comply with the proxy rules of Regulation 14A under Section
14 of the Exchange Act, and the officers and directors of the Company and
Shareholders owning more than 10 percent of the Common Stock will be relieved
of the reporting requirements and "short swing" trading restrictions under
Section 16 of the Exchange Act. In addition, the Common Stock will be delisted
from NASDAQ, which will terminate the Company's public trading market and the
Company no longer will be required to comply with the rules and regulations
relating to NASDAQ listing.

In addition, if the Merger is consummated, the Company plans to explore
the possibility of providing other billiard and entertainment services.

Effect if the Merger is Not Approved

The Board expects that if the Proposal is not approved by the
Shareholders, or if the Merger is not consummated for any other reason, the
Board will continue to manage the Company as an ongoing business. In addition,
if the Proposal is not approved by the Shareholders, the Placement Agent will
not consummate the Private Placement of equity and/or subordinated debt
securities of the Surviving Company. See "Financing of the Merger." No other
transaction is currently under consideration by the Company as an alternative
to the Merger, although the Company from time to time may explore other
alternatives if the Proposal is not approved.

PROPOSAL TO APPROVE THE MERGER

General

Because the Proposal will terminate the interests of the Other
Shareholders in the Company while enabling the Continuing Shareholders to
obtain ownership of all of the equity interest in the Company, Shareholders
will have one vote per share of Common Stock with respect to the Proposal. The
description of the Merger Agreement included in this Proxy Statement is a
summary of the principal terms currently expected to be included, and should
not be viewed as complete. The form of Merger Agreement will become available
only upon negotiation of the final terms thereof with the investors in the
Private Placement, and the following description is, therefore, subject to
change and qualified in its entirety by reference to the definitive Merger
Agreement. The Company will make copies of the form of Merger Agreement
available to any Shareholder without cost upon request when the form of Merger
Agreement becomes available.

Certain Effects of the Merger

The Merger Agreement provides that, subject to the terms and conditions of
the Merger Agreement, (i) the Company will be merged with and into Newco at the
Effective

50
<PAGE> 54

Time, and each share of Common Stock held by Other Shareholders (the "Other
Common Stock") will be converted into the right to receive the Merger Payment
of $0.50 in cash, without interest; (ii) the Other Common Stock will be
canceled; (iii) each share of Common Stock owned by the Continuing Shareholders
will be converted into a share of common stock of the Surviving Company; (iv)
each stock option issued under the Stock Option Plans or warrant of the Company
to purchase a share or shares of Common Stock outstanding immediately prior to
consummation of the Merger will be converted into the right to purchase the
same number of shares of common stock of Newco on the same terms and
conditions; (v) Newco will be the Surviving Company in the Merger, and the
Company will cease to exist as a result of the Merger; (vi) the articles of
incorporation and bylaws of Newco will be the articles of incorporation and
bylaws of the Surviving Company; and (vii) the name of the Company shall be the
name of the Surviving Company. In addition, it is anticipated that the board
of directors of Newco will be identical to the Company's Board, with one or
more investors as possible additions, but the terms of the Board structure have
not yet been negotiated. Immediately after the Effective Time, the Other
Shareholders will possess no interest in, or rights as Shareholders of, the
Company, and the Company will be wholly owned by the Continuing Shareholders.
For a description of how the Company will calculate the number of shares of
Common Stock held by each holder of record on the Record Date for purposes of
determining a Shareholder's status as a Continuing Shareholder or Other
Shareholder, see "Voting and Proxy Information - Record Date; Outstanding
Shares; Voting."

Effective Time of the Merger

The Merger Agreement provides that the Merger will become effective upon
the filing and recordation of Articles of Merger and Articles of Amendment to
the articles of incorporation of the Surviving Company with the Secretary of
State of the States of Florida and/or Delaware (i.e., the Effective Time). The
Company intends to make such filing promptly after the satisfaction or written
waiver, where permissible, of the conditions contained in the Merger Agreement.

Amounts Paid in the Merger

The Merger Payments will be funded by the Company from funds obtained
through the Private Placement. See "Financing of the Merger." One of the
conditions to consummation of the Merger is that net proceeds from the Private
Placement be sufficient to make the Merger Payments. See "Proposal to Approve
the Merger - Conditions to the Merger" and "Financing of the Merger."

51
<PAGE> 55

Payment for Common Stock in the Merger

In order to receive the Merger Payment, each Other Shareholder will be
required to (i) submit a duly executed letter of transmittal (a "Letter of
Transmittal") in the form to be sent to each such Shareholder as promptly as
practicable after the Effective Time and (ii) surrender their Common Stock
certificates to a disbursing agent (the "Disbursing Agent").

Upon receipt of a duly executed Letter of Transmittal and Common Stock
certificates, the Disbursing Agent will promptly issue a check to the person or
persons entitled thereto in an amount equal to $0.50 for each share of Other
Common Stock owned by such person or persons. No interest will be paid or
accrued on amounts payable.

Instructions with respect to the submission of a Letter of Transmittal to
be used for this purpose will be mailed to Other Shareholders as promptly as
practicable after the Effective Time. It is also expected that Letters of
Transmittal will be available at the office of the Disbursing Agent. OTHER
SHAREHOLDERS SHOULD NOT SEND ANY COMMON STOCK CERTIFICATES WITH THE ENCLOSED
PROXY OR AT ANY TIME PRIOR TO RECEIPT OF A LETTER OF TRANSMITTAL.

The Merger Agreement provides that the Surviving Company shall deposit in
trust for the benefit of Other Shareholders with the Disbursing Agent the funds
to which the holders of shares of Other Common Stock will be entitled in the
Merger. The Merger Agreement provides that the Disbursing Agent may invest
portions of the cash as the Surviving Company shall direct, provided that
substantially all of such investments be in obligations of the United States of
America or agencies of the United States of America, in commercial paper
obligations receiving the highest rating from either Moody's Investors Service,
Inc. or Standard & Poor's Ratings Group or in certificates of deposit, bank
repurchase agreements secured by obligations of the United States of America or
bank money market funds of banks with capital, surplus and retained earnings in
excess of $500,000,000 (collectively, the "Permitted Investments"). The
maturity of the obligations of the United States of America or agencies of the
United States of America shall not exceed six months and the maturity of the
commercial paper may not exceed 270 days. Any net profit resulting from, or
interest or income produced by, the Permitted Investments, shall be paid from
time to time to the Surviving Company.

Any amount remaining on deposit with the Disbursing Agent six months after
the Effective Time will be released and paid by the Disbursing Agent to the
Surviving Company, which will be liable for any payment to be made thereafter
under the terms of the Merger Agreement, after which time persons entitled
thereto may look, subject to applicable abandonment, escheat or similar laws,
only to the Surviving Company for any cash payments remaining to be paid to
them pursuant to the Merger, without any interest thereon.

52
<PAGE> 56

Conditions to the Merger

The respective obligations of the Company and Newco to consummate the
Merger are subject to the fulfillment or written waiver of the following
conditions at or prior to the Effective Time: (i) approval of the Proposal by
Shareholders owning a majority of the outstanding Common Stock; (ii) the
absence of any order, decree or temporary, preliminary or permanent injunction
of any court of competent jurisdiction preventing the consummation of the
Merger (the Company and Newco having agreed to use their best efforts to
prevent the entry or issuance of such an order or injunction); and (iii) the
Company's receipt of net proceeds from the Private Placement to cover the
Merger Payments. In addition, Newco's obligation to effect the Merger is
subject to the fulfillment or written waiver of the following conditions: (i)
the Company's having performed in all material respects its agreements
contained in the Merger Agreement at or prior to the Effective Time; (ii) the
representations and warranties of Newco being true and correct in all material
respects at the Effective Time; and (iii) the Company's having made all
necessary filings, registrations and notifications with appropriate regulatory
authorities and having obtained all necessary approvals and authorizations from
appropriate third parties. Furthermore, the Company's obligation to effect the
Merger is subject to the fulfillment or written waiver of the following
conditions: (i) the Company's having performed in all material respects its
agreements contained in the Merger Agreement at or prior to the Effective Time;
(ii) the representations and warranties of Newco being true and correct in all
material respects at the Effective Time; (iii) Newco's having made all
necessary filings, registrations and notifications with appropriate regulatory
authorities and having obtained all necessary approvals and authorizations from
appropriate regulatory authorities; and (iv) the opinion of the Financial
Advisor included herein as Appendix __ not having been withdrawn prior to the
Effective Time.

Lock-Up Agreements

The Merger Agreement provides that the Company shall use its best efforts
to obtain a lock-up agreement (a "Lock-Up Agreement") from each Continuing
Shareholder prior to consummation of the Merger pursuant to which each
Continuing Shareholder (i) agrees not to offer, sell or otherwise transfer any
of the shares of common stock of Newco received by the Continuing Shareholder
in the Merger until two years following consummation of the Merger without the
prior written consent of the Surviving Company, and (ii) will represent that
the Continuing Shareholder has no plan or intention to dispose of the shares of
common stock of Newco. Consummation of the Merger is not conditioned upon the
execution of a Lock-Up Agreement by each Continuing Shareholder. Failure of
each Continuing Shareholder to execute a Lock-Up Agreement could result in
certain adverse tax consequences to all of the Shareholders and the Surviving
Company, however. See "Special Factors - Material Federal Income Tax
Consequences - Federal Income Tax Consequences for Continuing

53
<PAGE> 57

Shareholders." There can be no assurance that each Continuing Shareholder will
execute a Lock-Up Agreement.

Indemnification

The Merger Agreement provides that the Company and the Surviving Company
shall provide continuing indemnification, in accordance with the Articles of
Incorporation and Bylaws of the Company, to the directors and executive
officers of the Company to the greatest extent permissible under applicable law
for matters occurring prior to the Effective Time.

Employee Benefit Matters

The Company anticipates that the Surviving Company will continue all of
the existing employee benefit plans offered by the Company as of the date of
this Proxy Statement. The terms of the Merger have not yet been negotiated,
however, and, as a result, the employee benefit plans offered by the Surviving
Company may differ substantially from those offered by the Company.

Waiver and Amendment

Any provision of the Merger Agreement may be waived in writing at any time
by the party that is entitled to the benefits thereof and the Merger Agreement
may be amended in writing at any time before or after approval of the Merger by
the Shareholders, but after any such approval no amendment may be made that
decreases the amount or changes the type of the Merger Payments or that in any
way adversely affects the rights of such Shareholders without the approval of
the Other Shareholders.

Fees and Expenses

The Merger Agreement provides that if the Merger Agreement is not
consummated, all legal and other costs and expenses incurred in connection with
the Merger Agreement will be paid by the Company.

54
<PAGE> 58

Rights of Dissenting Shareholders

Any Shareholder objecting to the Proposal is not entitled to any statutory
rights of dissent or appraisal under Florida law or the Articles of
Incorporation or Bylaws of the Company.

Vote Required and Recommendation of the Board of Directors

The Merger will be approved if and only if it receives the favorable vote
of the majority of all Common Stock outstanding on the Record Date. As of the
Record Date, members of the Board and executive officers of the Company owned
1,468,350 shares (approximately 14.2 percent of the total shares of Common
Stock outstanding). Only one Continuing Shareholder is a member of the Board
and/or executive officer of the Company. Such Continuing Shareholder held a
total of 1,353,600 (approximately 13.1 percent of the total shares of Common
Stock outstanding) as of the Record Date and has informed the Company that he
intends to vote all of the shares of Common Stock held by him in favor of the
Proposal.

The board of directors and shareholders of Newco have approved the Merger,
the execution and delivery of the Merger Agreement by Newco and consummation of
the Merger.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
MERGER.

REGULATORY MATTERS

FINANCING OF THE MERGER

The Company has determined that approximately $2,132,000 in cash will be
required in order to make the Merger Payment with respect to each share of
Other Common Stock held by an Other Shareholder. The Company intends to retain
the Placement Agent to raise $6,000,000 to $10,000,000 through the Private
Placement (i.e., the private placement of equity and/or subordinated debt
securities of the Surviving Company), as described below. The Company intends
to use funds obtained through the Private Placement primarily to make the
Merger Payments, with any additional proceeds, after payment of expenses of the
Private Placement, to be used as working capital and for development of
additional billiard clubs. The respective obligations of the Company and Newco
to consummate the Merger are contingent upon, among other things, the Company's
receipt of net proceeds from the Private Placement to cover the Merger
Payments. See "Proposal to Approve the Merger -

55
<PAGE> 59

Conditions to the Merger." There can be no assurance, however, that the
Company will raise any funds from the Private Placement or that it will raise
funds sufficient to make the Merger Payments. In addition, the Placement Agent
has no obligation to consummate any Private Placement if the Proposal is not
approved by the Shareholders.

The Company intends to grant the Placement Agent an exclusive right to
present a Merger proposal acceptable to the Company designed to raise
$6,000,000 to $10,000,000 through the Private Placement by March 31, 1996.
Although the Company has not yet entered into a written agreement with the
Placement Agent relating to the sale of securities of the Surviving Company,
the Board has approved the Company's execution of an agreement that would grant
the Placement Agent an exclusive right to raise $6,000,000 to $10,000,000 of
capital through the Private Placement to a limited number of institutional
accredited investors. Consummation of each Private Placement is subject to a
number of material contingencies, including execution of a definitive purchase
agreement satisfactory to the potential investor, the Company and Newco and
approval of the Proposal by the Shareholders. There can be no assurance,
however, that the Placement Agent will consummate a Private Placement.

The Placement Agent has proposed, subject to negotiation among each
potential investor, the Company and Newco, that the Private Placement consist
of 12 units of 100,000 shares of preferred stock of the Surviving Company per
unit for a price of $500,000 per unit (the "Preferred Stock") and that none of
the Preferred Stock be sold unless all 12 units are sold. Each share of
Preferred Stock would be convertible, at the option of the holder, initially
into two shares of common stock of the Surviving Company, subject to certain
customary anti-dilution adjustments under certain circumstances. The Preferred
Stock would automatically convert into shares of common stock of the Surviving
Company if the Surviving Company sold shares of its common stock in a public
offering or upon the consent of two thirds of the shares of Preferred Stock
outstanding. The Surviving Company would be obligated to redeem the Preferred
Stock six years from the date of issuance of the Preferred Stock. Dividends on
the Preferred Stock would be payable in cash at a rate of six percent per annum
on a cumulative basis at the time of either conversion or redemption, whichever
would occur first, of the Preferred Stock. The Preferred Stock would be
entitled to voting rights identical to the common stock of the Surviving
Company, on an "as if converted" basis, and would have special voting rights as
a class requiring approval of a majority of the shares of Preferred Stock
outstanding for the creation of any senior security or any transaction in which
control of the Surviving Company were transferred. The Preferred Stock would be
entitled to a liquidation preference over the common stock of the Surviving
Company, or any other class or series of stock of the Surviving Company ranking
junior to the Preferred Stock, in an amount equal to the original purchase
price of the Preferred Stock plus accrued but unpaid dividends. In addition,
holders of shares of Preferred Stock would be granted certain demand and
piggyback registration rights.

56
<PAGE> 60

The Placement Agent has not received any letters of intent or expressions
of interest from potential purchasers of Preferred Stock. Consequently, there
is no indication that the Placement Agent will be able to place any Preferred
Stock at all or will be able to place any Preferred Stock on the terms
described above.

In consideration of the Placement Agent's undertaking, the Company expects
to pay, upon the successful raising of at least $6,000,000, an amount equal to
five percent of the gross amount of proceeds raised through the Private
Placement. In addition, the Company expects to sell to the Placement Agent,
concurrently with the consummation of the Private Placement, 400,000 shares of
common stock of the Surviving Company for a price of $0.50 per share and to
accept the Placement Agent's seven-year promissory note as payment for the
$200,000 purchase price for the shares. The Company anticipates that the note
would be secured by the 400,000 shares of common stock and would bear interest
at a rate applicable to the federal rate for seven-year notes, with the entire
principal amount of the loan maturing at the end of the seven-year term.
Regardless of the success or otherwise of the Placement Agent's efforts, the
Company further agrees to pay the expenses of the Placement Agent involved in
this undertaking, provided such expenses do not exceed $10,000. Such expenses
are not to include payments by the Placement Agent in respect of legal advice
or services and the services of other third party service providers. The
Company may, in its discretion and having had received prior written notice of
the proposed expenditure by the Placement Agent, pay the reasonable expenses of
the Placement Agent where the total of expenses otherwise paid or payable is in
excess of $10,000.

BUSINESS AND PROPERTIES OF THE COMPANY

Description of Business

General. From its organization in 1983 through March 16, 1989, the
Company conducted business as a wholesale dealer engaged in the purchase and
sale of fine gold and pure silver in the form of bullion and granules. The
Company terminated its precious metals division with the sale of the assets
used in the precious metals operation on March 16, 1989. The operations and
all related gains and losses of the metals division have been treated as
discontinued operations. From the date of the sale of its metals operation and
until April 11, 1990 when the Company acquired an interest in a billiard club
business (discussed below), the Company's primary business operation was
conducted through its wholly owned subsidiary, Dixie Run Corporation ("Dixie
Run"). Dixie Run and its wholly owned subsidiaries had been engaged in the
business of identifying, purchasing and developing raw land suitable for
subdivision and resale to builders and developers and construction of primarily
luxury residential homes. On June 7, 1990, the Board approved the
discontinuation of the operations of Dixie Run and, accordingly, Dixie Run has
been treated as discontinued operations. For a discussion of the discontinued
precious metal division and real estate subsidiary, see

57
<PAGE> 61

"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Financial Statements of the Company."

On March 11, 1990, the Board approved the acquisition by the Company of a
majority interest in Jillian's, Inc., formerly Jillian's Entertainment
Corporation, a Delaware corporation formed to acquire and operate billiard
clubs located in various cities throughout the United States. The Company
entered into a Stock Exchange Agreement, dated April 11, 1990 (the "Acquisition
Date"), with Jillian's Inc. and Steven L. Foster, The Frank and Celia Foster
Family Trust, Steven Rubin and Kevin Troy (collectively, the "Foster Group")
pursuant to which it acquired a 51 percent ownership interest in Jillian's,
Inc., and the Foster Group acquired the remaining 49 percent ownership
interest. The Company acquired the remaining 49 percent of Jillian's, Inc.
from the Foster Group on March 14, 1991. See "Financial Statements of the
Company" for a discussion of the terms and conditions of the agreements
governing the acquisition of Jillian's, Inc.

Pursuant to a series of related transactions, on the Acquisition Date,
Jillian's, Inc. acquired all of the outstanding stock of corporations that own
and operate billiard clubs in Seattle, Washington and Miami, Florida. Since
the Acquisition Date, Jillian's, Inc., through wholly owned subsidiaries, has
constructed new billiard clubs in Cleveland, Ohio, Cleveland Heights, Ohio,
Worcester, Massachusetts, Champaign, Illinois, Annapolis, Maryland and Long
Beach, California and additionally, has acquired an existing billiard club in
Pasadena, California. The Company, through wholly owned subsidiaries of
Jillian's, Inc., also has entered into a lease for a new Jillian's billiard
club to be located in Tacoma, Washington. The necessary leasehold improvements
currently are being made to the premises in which the Tacoma club will operate.

The Jillian's clubs are part of the new generation of upscale billiard
parlors in America. These new billiard clubs offer a wider variety of
entertainment and food service and are designed to attract a broader segment of
the population than traditional pool halls. The clubs are decorated in an
appealing and comfortable style. The Jillian's billiard clubs face competition
in their respective cities from other billiard clubs as well as from other
leisure time activities, such as theaters, bowling centers and night clubs.
The Jillian's clubs compete with other clubs and activities by providing
customers with a comfortable setting, a variety of entertainment activities in
each club (e.g., electronic games, darts and pingpong) and light food and
beverage services.

The Company currently is concentrating its efforts on its investment in
the billiard parlor business. Although no assurance can be given, the Company
intends to develop, through wholly owned subsidiaries of Jillian's, Inc.,
additional Jillian's clubs. These clubs may be owned by Jillian's, Inc.
subsidiaries directly or indirectly through their participation in limited
partnerships or joint ventures that own the clubs. In the case of clubs owned
by

58
<PAGE> 62

limited partnerships, the Company expects that in each case a wholly owned
subsidiary would be the general partner, own a substantial interest in the
limited partnership and receive a management fee. The Company currently is
investigating potential sites for clubs in Arizona, Florida, Massachusetts and
certain other areas in the Midwest and Mid-Atlantic regions.

Jillian's Clubs. Set forth in the table below are descriptions of the
existing Jillian's clubs and clubs that are in the development stage.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DATE OF DESCRIPTION OF SPACE NUMBER OF BRUNSWICK
NAME OF COMMENCEMENT (APPROXIMATE BILLIARD TABLES;
SUBSIDIARY OWNER LOCATION OF CLUB OF OPERATIONS FOOTAGE) OTHER AMENITIES
----------------- ---------------- --------------- -------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EXISTING CLUBS:
- -----------------------------------------------------------------------------------------------------------------------
Jillian's - Kendall Miami, Florida November 1989 9,600 square feet; 27 tables; other games
located in a shopping (including darts); bar
center next to a nine and food service
screen movie theater
- -----------------------------------------------------------------------------------------------------------------------
Jillian's - Seattle Seattle, April 1990 18,500 square feet; 34 tables; other games
Washington two-story free standing (including darts);
building separate room available
for private rental; bar
and food service on
both floors
- -----------------------------------------------------------------------------------------------------------------------
Jillian's - Cleveland Cleveland, Ohio July 1990 13,000 square feet; two 25 tables; other games
(on the banks of floors of a building (including darts);
the Cuyohoga separate room available
River) for private rental; bar
and food service on
both floors
- -----------------------------------------------------------------------------------------------------------------------
Jillian's - Cleveland Cleveland November 1992 9,600 square feet 21 tables; other games
Heights 1/ Heights, Ohio (including darts); bar
and food service
- -----------------------------------------------------------------------------------------------------------------------
Jillian's - Pasadena "Old Town" August 1993 2/ 7,200 square feet; two 18 tables; bar and food
Pasadena, floors of a building service on both floors
California with additional outside
seating on the first
floor
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

59
<PAGE> 63

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DATE OF DESCRIPTION OF SPACE NUMBER OF BRUNSWICK
NAME OF COMMENCEMENT (APPROXIMATE BILLIARD TABLES;
SUBSIDIARY OWNER LOCATION OF CLUB OF OPERATIONS FOOTAGE) OTHER AMENITIES
----------------- ---------------- --------------- -------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jillian's - Worcester, December 1993 16,000 square feet, 24 tables; table top
Worcester 1/ Massachusetts including a 5,000 games, dart boards and
(near Worcester square foot game room; game room with high
Polytechnic one-story free standing tech video games
Institute) building (including Virtual
Racing) and an
interactive motorcycle
racing game
- -----------------------------------------------------------------------------------------------------------------------
Jillian's - Champaign, August 1994 12,000 square feet; 20 tables; other games;
Champaign 1/ Illinois two-story free standing bar and food service
(adjacent to the building
University of
Illinois campus)
- -----------------------------------------------------------------------------------------------------------------------
Jillian's - Annapolis, October 1994 10,000 square feet; 16 tables; other games;
Annapolis 1/ Maryland (near one-story free standing bar and food service
the U.S. Naval building
Academy and the
Annapolis
historical
district)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

60
<PAGE> 64

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
DATE OF DESCRIPTION OF SPACE NUMBER OF BRUNSWICK
NAME OF COMMENCEMENT (APPROXIMATE BILLIARD TABLES;
SUBSIDIARY OWNER LOCATION OF CLUB OF OPERATIONS FOOTAGE) OTHER AMENITIES
----------------- ---------------- --------------- -------- ---------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jillian's - Long Long Beach, May 1995 16,000 square feet; two 16 tables; other games;
Beach California floors of a 13-story bar and food service;
free standing building night club located in
the basement
- -----------------------------------------------------------------------------------------------------------------------
DEVELOPMENT STAGE
CLUBS:
- -----------------------------------------------------------------------------------------------------------------------
Jillian's Billiard Tacoma, expected to 25,000 square feet 20 tables; other table
Club of Tacoma, Inc. Washington open in including a game room; top games and dart
("Jillian's - (near the December 1995 two-story free standing boards; bar and food
Tacoma") 3/ University of building service
Puget Sound
campus)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

1/ The Cleveland Heights, Worcester, Champaign and Annapolis clubs are owned
by limited partnerships in which the Jillian's subsidiary owner is the
general partner and owns a substantial (87%, 25%, 43% and 79%,
respectively) interest. The Jillian's subsidiary receives a management fee
for operating the related club equal to 6.5% of the gross revenues in
the case of the Cleveland Heights club, 6% in the case of the Champaign and
Annapolis clubs and 5% in the case of the Worcester club.

2/ The club located in Pasadena was an existing billiard club/diner that
the Company, through Jillian's - Pasadena, acquired in August 1993. As
part of the acquisition, the Company acquired all of the assets located at
the existing club (including all leasehold improvements, furniture,
fixtures, bar and kitchen equipment and billiard tables), all of the
seller's interest in the lease for the premises and all alcoholic beverage
licenses and other licenses necessary to operate the club.

3/ On December 21, 1994, the Company, through Jillian's - Tacoma, entered into
a lease for the Tacoma club. The estimated cost of building out and
equipping the club is approximately $2,100,000, which will be
financed primarily by a $660,000 landlord contribution, equipment financing
and cash flow generated from the Company's operations. The Company is
likely to raise funds to finance the Tacoma club through limited
partnerships, bank financing or other sources.

Description of Properties

Administrative Operations. On June 13, 1995, the Company entered into a
written lease agreement for 3,020 square feet of space for its administrative
operation to be located at 727 Atlantic Avenue in Boston, Massachusetts. The
agreement began on July 28, 1995 and expires on July 28, 1998. In addition,
the lease has a two-year renewal period. Under the lease agreement, the
Company is obligated to pay the lessor minimum annual rent equal to $31,710
(payable in monthly installments of $2,642) for the first year, $34,730
(payable in monthly installments of $2,894) for the second year and $37,750
(payable in monthly installments of $3,146) for the third year.

61
<PAGE> 65

On May 20, 1993, the Company entered into a verbal agreement to sublet
1,110 square feet of space for its administrative operation in an executive
center in Coral Gables, Florida. The agreement began on June 1, 1993 and
expired on June 30, 1994. The monthly payments were $1,500. On June 1, 1994,
the Company entered into a written lease agreement for its administrative
operation in an executive center located at One Alhambra Plaza, Coral Gables,
Florida. The lease is for 1,243 square feet of office space and began on July
1, 1994 and expires June 30, 1999. The total required monthly payments are
$1,916, all of which is paid by third parties who sublease the space.

Jillian's, Inc. leases additional administrative space in an executive
center located at 508 North Second Street, Fairfield, Iowa. The lease began on
April 1, 1994 and expires on March 31, 1997. The required monthly payments are
$910.

Jillian's Clubs. Set forth in the table below are descriptions of the
leases for the existing Jillian's clubs and clubs that are in the development
stage.

rental payments
for FY-95 of
$263,874, which
includes taxes,
common area
maintenance
charges and
percentage rent
of $3,905
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

62
<PAGE> 66

63
<PAGE> 67

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OTHER
&
LEASE TERM & RENTAL PAYMENTS
LESSEE/ LEASE RENEWAL MINIMUM FOR THE YEAR
SUBLESSEE DATE OPTION ANNUAL RENT PERCENTAGE RENT ENDED 3/31/95
---------- ---- ---------- ----------- --------------- -------------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jillian's - 4/20/90; triple net; 10 $69,615 ($5,801 per month) 5% of gross sales 11/24/93
Cleveland amended years; two for years 1-4; $80,325 in excess of amendment
11/24/93 five-year ($6,694 per month) $1,392,300 for temporarily
renewal thereafter; beginning year years 1 through 4, limited rent and
options 7, rent will be increased $1,606,500 common area
to an amount equal to the thereafter maintenance
lesser of (i) 105% of the charges and
annual rent payable for lessor and lessee
the prior lease year, or subsequently
(ii) the annual rent verbally agreed
payable for the prior to limit the
lease year adjusted for rents to $6,000
increases in CPI; if per month
option to renew lease is indefinitely; in
exercised, rent shall be exchange for such
negotiated, but will not reduction, lessee
be less than the greater agreed to pay
of comparable rentals or 8.5% of gross
the rent payable for the sales in excess
last month of the of $650,000 until
preceding term; rent for lessor received
each year of first renewal 100% of the
period may not be greater reduced rents and
than 115% of annual rent common area
of last year of initial maintenance
term
FY-95 rental
payments totaled
$133,132, which
included taxes
and common area
maintenance
charges

- -------------------------------------------------------------------------------------------------------------------------
Jillian's - 10/17/91 triple net; 10 $57,240 ($4,770 per month none FY-95 rental
Cleveland years; two starting 5/92) for years 1 payments for
Heights five-year and 2; $68,688 ($5,724 per primary and
renewal month) for years 3-6; option space
options $76,320 ($6,360 per month) totaled $108,666,
for years 7-10; if renewal which included
option is exercised, taxes and common
minimum annual rent for area maintenance
each of the options will charges
be $91,584 and $106,848,
respectively
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

64
<PAGE> 68

65
<PAGE> 69

FY-95 rental
payments totaled
$185,064, which
included taxes,
parking rental
and common area
maintenance
charges
- -------------------------------------------------------------------------------------------------------------------------
Jillian's - 4/14/93 triple net; 10 $64,800 ($5,400 per month none in 10/94, lessee
Champaign years; two starting 8/93) for years 1 entered into
five-year and 2; from April 1, 1995, separate leasing
renewal and on April 1 of each agreement for
options year thereafter, during parking; annual
the initial term and any rent is $5,220
extension term, the ($435 per month)
monthly rental amount and the lease
shall be adjusted by expires on 9/1/97
increases in CPI
FY-95 rental
payments totaled
$79,842, which
included taxes
and common area
maintenance
charges
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

66
<PAGE> 70

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
OTHER
&
LEASE TERM & RENTAL PAYMENTS
LESSEE/ LEASE RENEWAL MINIMUM FOR THE YEAR
SUBLESSEE DATE OPTION ANNUAL RENT PERCENTAGE RENT ENDED 3/31/95
---------- ---- ---------- ----------- --------------- -------------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jillian's - 4/20/93 triple net; 10 $79,992 ($6,666 per month none FY-95 rental
Annapolis years; two starting 4/26/93) for year payments totaled
five-year 1; $90,000 ($7,500) for $119,451, which
renewal year 2; $99,996 ($8,333 included taxes
options per month) for year 3; and common area
beginning year 4, the maintenance
minimum annual rent will charges
be adjusted upward to an
amount equal to 66 2/3%
of the annual increase in
CPI, with the adjustment
in any year limited to 5%
of prior year's annual
rent; if a renewal is
exercised, the minimum
annual rent for each of
the first and second five-
year renewal periods will
be the same as the tenth
year's rent with the same
CPI adjustment
- -------------------------------------------------------------------------------------------------------------------------
Jillian's - 7/12/93 triple net; 10 $178,935 ($14,911 per none FY-95 rental
Long Beach years, two month starting 1/94) for payments totaled
five-year year 1; $220,790 ($18,399 $284,480, which
renewal per month) for years 2-3; included taxes
options yearly increases of 5% for and common area
years 4-10; if renewal maintenance
option is exercised, charges
minimum annual rent will
be equal to annual base
rent payable for
immediately preceding
year, increased by 5% per
annum
- -------------------------------------------------------------------------------------------------------------------------
Jillian's - 12/21/94; triple net; 10 $223,119 ($18,593 per none no rental
Tacoma amended years month starting payments were
6/15/95 commencement of operations made during FY-95
or 1/1/96) for years 1-3;
$224,119 ($20,343 per
month) for years 4-6;
$265,116 ($22,093 per
month) for years 7-10
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

67
<PAGE> 71

Legal Proceedings

Neither the Company nor any of its properties currently is subject to any
litigation nor, to the knowledge of the Board, is any material litigation
currently threatened against the Company or any of its properties, other than
ordinary litigation routine to the Company's business.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Quarter Ended June 30, 1995 Compared to Quarter Ended June 30, 1994. The
Company had net losses of $191,164 and $197,842 for the quarters ended June 30,
1995 and 1994, respectively. The slight decrease in net losses from 1994 to
1995 was primarily due to higher net club operating income of $125,972 and a
reduction in start-up costs related to development stage clubs of $68,979,
offset in part by increased general and administrative expenses, depreciation
and amortization and interest expense.

Total revenues were $2,461,662 and $1,598,081 for the quarters ended June
30, 1995 and 1994, respectively. The increase of $863,581 was primarily due to
increased revenues of $811,409 from the Champaign, Annapolis and Long Beach
clubs, which opened on August 19, 1994, October 24, 1994 and May 5, 1995,
respectively.

Total costs and expenses were $2,620,309 and $1,797,648 for the quarters
ended June 30, 1995 and 1994, respectively. The increase in total expenses of
$822,661 was primarily due to increased costs of $756,591 associated with the
Champaign, Annapolis and Long Beach clubs and increased general and
administrative expenses. The Company had general and administrative expenses
of $294,970 and $161,689 for the three month period ended June 30, 1995 and
1994, respectively. The increase in general and administrative expenses was
primarily due to increased wages, professional services and travel of
approximately $42,000, $71,000 and $22,000, respectively. The increase in
wages and travel from 1994 to 1995 was primarily attributed to the hiring of a
new President and Chief Operating Officer and a new Controller. The increase
in professional fees was primarily due to various consulting and legal fees.

Interest expense was $45,218 and $15,120 for the quarter ended June 30,
1995 and 1994, respectively. The increase was primarily due to debt associated
with the Champaign, Annapolis and Long Beach clubs.

Fiscal Year Ended March 31, 1995 Compared to Fiscal Year Ended March 31,
1994. The Company had a net loss of $863,056 for the year ended March 31, 1995
as compared to a net loss of $904,282 for the year ended March 31, 1994. This
improvement from 1994 to 1995

68
<PAGE> 72

was primarily due to higher net club operating income of $812,171 offset in
part by increased start-up costs relating to development stage clubs of
$293,790 and increased general and administrative expenses of $503,682.

Total revenues were $8,023,949, and $5,196,423 for the year ended March
31, 1995 and 1994, respectively. The increase in total revenues of $2,827,526
was primarily due to increases in revenues from club operations of $2,821,610.
The increase in revenues from club operations was primarily due to full
operating years for second year clubs of approximately $939,000 (relating to
the Pasadena and Worcester clubs, which opened for business on August 19, 1993
and December 3, 1993, respectively) and from new clubs opened in fiscal 1995 of
approximately $1,445, 000.

The increase in start-up costs relating to development stage clubs of
$293,790 was primarily due to the fact that during fiscal 1995, the Company
developed three new clubs as compared to two new clubs in fiscal 1994. In
addition, the Long Beach club was required to pay rent totaling approximately
$284,000 during fiscal 1995, bud did not open for business until May 5, 1995.

The provision for losses on investments and receivables amounted to
$41,587 and $398,000 for the years ended March 31, 1995 and 1994, respectively.
In 1994, the provision was due to the write off of various receivables totaling
$353,000 and an investment in L.C. Holdings of $45,000. In 1995, the provision
was due to the write down of the note receivable from stockholders. See
"Financial Statements of the Company," Note 4.

The Company had general and administrative expenses of $1,145,174 and
$641,492 for the years ended March 31, 1995 and 1994, respectively. General
and administrative expenses consisted primarily of wages in the amount of
$259,621 and $197,738, professional fees in the amount of $345,656 and $122,237
for the years ended March 31, 1995 and 1994, respectively, and a one-time
charge of $88,158 for the write-off of franchise costs previously capitalized.
The increase in wages from 1994 to 1995 was primarily attributable to the
hiring of a new President and Chief Operating Officer and a new Controller.
The increase in professional fees was primarily due to recruiting fees paid in
connection with hiring the new President and Chief Operating Officer and
various consulting fees.

The Company's continuing operations during fiscal 1994 consisted of the
operations of Jillian's, Inc. The following is a summary of the Company's club
operations for the fiscal years ended March 31, 1995 and 1994.

69
<PAGE> 73

JILLIAN'S ENTERTAINMENT CORPORATION
SUMMARY OF CLUB OPERATIONS
MARCH 31, 1995

<TABLE>
<CAPTION>
OPENED 11/89 4/5/90 7/18/90 11/5/92 8/19/93 12/3/93 8/19/94 10/27/94

CLEVELAND
---------
YEAR ENDED 3/31/95 MIAMI SEATTLE CLEVELAND HEIGHTS PASADENA WORCESTER CHAMPAIGN ANNAPOLIS TOTAL
- ------------------ ----- ------- --------- ------- -------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TABLE TIME RENTALS $440,482 $641,184 $225,358 $242,123 $191,456 $203,887 $101,969 $139,039 $2,185,498
BEVERAGE SALES 423,460 623,292 469,775 445,684 378,022 720,862 357,588 490,496 $3,909,179
CAFE SALES 146,832 403,973 120,354 130,836 236,211 107,831 151,082 63,842 $1,360,961
PRO SHOP AND OTHER 47,246 110,232 26,363 32,902 1,864 154,038 51,793 89,171 $513,609
------ ------- ------ ------ ----- ------- ------ ------

TOTAL REVENUES FROM
CLUB OPERATIONS $1,058,020 $1,778,681 $841,850 $851,545 $807,553 $1,186,618 $662,432 $782,548 $7,969,247

COST OF SALES $200,634 $295,544 $193,685 $182,235 $212,330 $319,223 $169,327 $176,291 $1,749,269
WAGES 263,034 453,029 162,573 183,008 245,589 278,368 153,031 131,728 $1,870,360
RENT 263,874 292,780 133,132 108,667 141,159 185,064 47,675 51,434 $1,223,785
DIRECT OPERATING COSTS 201,546 295,431 186,690 218,823 202,069 263,445 107,434 114,832 $1,590,270
------- ------- ------- ------- ------- ------- ------- -------

TOTAL COST OF
CLUB OPERATIONS $929,088 $1,336,784 $676,080 $692,733 $801,147 $1,046,100 $477,467 $474,285 $6,433,684

NET OPERATING INCOME $128,932 $441,897 $165,770 $158,812 $6,406 $140,518 $184,965 $308,263 $1,535,563

<CAPTION>
CLEVELAND
---------
YEAR ENDED 3/31/94 MIAMI SEATTLE CLEVELAND HEIGHTS PASADENA WORCESTER CHAMPAIGN ANNAPOLIS TOTAL
- ------------------ ----- ------- --------- ------- -------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TABLE TIME RENTALS $472,936 $572,328 $185,914 $243,913 $119,341 $90,863 $1,685,295
BEVERAGE SALES 419,276 545,905 357,162 450,285 206,904 371,990 $2,351,522
CAFE SALES 145,319 347,733 93,470 124,921 136,427 63,166 $911,036
PRO SHOP AND OTHER 36,962 62,489 17,170 16,345 1,346 65,472 $199,784
------ ------ ------ ------ ----- ------

TOTAL REVENUES FROM
CLUB OPERATIONS $1,074,493 $1,528,455 $653,716 $835,464 $464,018 $591,491 $0 $0 $5,147,637

COST OF SALES $199,168 $265,353 $153,077 $180,893 $122,170 $158,146 $1,078,807
WAGES 231,970 381,267 156,197 204,198 133,834 121,088 $1,228,554
RENT 268,890 289,781 133,703 113,040 80,139 121,997 $1,007,550
DIRECT OPERATING COSTS 201,496 268,538 166,057 226,497 112,657 134,089 $1,109,334
------- ------- ------- ------- ------- -------

TOTAL COST OF CLUB
OPERATIONS $901,524 $1,204,939 $609,034 $724,628 $448,800 $535,320 $0 $0 $4,424,245

NET OPERATING INCOME $172,969 $323,516 $44,682 $110,836 $15,218 $56,171 $0 $0 $723,392
</TABLE>

-70-
<PAGE> 74

Liquidity and Capital Resources

The Company's cash and cash equivalents and restricted cash decreased
$746,619 during the three month period ended June 30, 1995. The primary reason
for the decrease was the construction costs related to the Long Beach club and
the repayment of certain indebtedness, of approximately $544,000 and $159,000
respectively.

The total cost of building out and equipping the Long Beach club was
approximately $1,500,000. The Long Beach club was financed primarily by a
$250,000 landlord contribution, a $450,000 11-year loan from the City of Long
Beach, equipment financing and cash generated from the Company's club
operations.

As of June 30, 1995, the Company estimated that the total cost of the
Tacoma club, which currently is under development and is expected to open for
business in the fourth quarter of calendar 1995, will be approximately
$1,600,000. The Tacoma club is being financed primarily by a $660,000 landlord
contribution, equipment financing and cash generated from the Company's clubs
operations. The Company is likely to raise funds for this purpose through bank
financing and other sources.

The Company had nine clubs fully operational as of June 30, 1995 as
compared to six clubs as of June 30, 1994. Net club operating income was
$357,231 and $231,259 for the three month period ended June 30, 1995 and 1994,
respectively.

The Company anticipates that its cash on hand at June 30, 1995, cash
generated from club operations and other financing sources should be adequate
to complete the Tacoma club and to fund the Company's future working capital
needs.

The Company, as of June 30, 1995, has recorded goodwill of $845,323, net
of amortization. The Company reviews at each balance sheet date the value of
the goodwill for impairment. The valuation is principally based on the
profitability of the clubs and the ongoing value of the Jillian's concept.
Based on its most recent evaluation, the Company does not believe goodwill has
been impaired.

The Company intends to develop, through wholly owned subsidiaries of
Jillian's, Inc., additional clubs. These clubs may be owned by Jillian's, Inc.
subsidiaries directly or indirectly through their participation in limited
partnerships or joint ventures. In the case of clubs owned by limited
partnerships, the Company expects that in each case a wholly owned subsidiary
would be the general partner, own a substantial interest in the limited
partnership and receive a management fee. The Company currently is
investigating potential sites for clubs in Arizona, Florida, Massachusetts and
certain other areas in the Midwest and Mid-Atlantic states. There can be no
assurance that the Company will be successful in developing additional billiard
clubs.

71
<PAGE> 75

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth, at October 23, 1995, the ownership of the
Common Stock and the common stock of the Company's subsidiaries, by each
executive officer and director of the Company, executive officers and directors
of the Company as a group and each person known by the Board to own more that
five percent of the Common Stock. The ownership percentages are calculated in
accordance with Rule 13d-3 under the Exchange Act. The calculations were based
on a total of 10,356,170 shares, which reflects the shares issued and
outstanding at October 23, 1995 of 9,137,798 and 1,218,372 shares issuable
pursuant to warrants and stock options issued under the Stock Option Plans.

<TABLE>
<CAPTION>
Name, Position & Business Address Number of Shares Percent of Outstanding Shares
--------------------------------- ---------------- -----------------------------
<S> <C> <C>
Steven L. Foster, Chief Executive 1,353,600(1) 13.1%
Officer, Chairman of the Board
and a Director of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Daniel M. Smith, President, Chief 0(2) 0.0%
Operating Officer and a Director
of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Richard F. Landry, Vice President 0(3) 0.0%
of Finance, Treasurer, Secretary
and Principal Accounting Officer
of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Stephen M. Weis, Vice President 0(4) 0.0%
of Operations of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111
</TABLE>

72
<PAGE> 76

<TABLE>
<CAPTION>
Name, Position & Business Address Number of Shares Percent of Outstanding Shares
--------------------------------- ---------------- -----------------------------
<S> <C> <C>
Ronald Widman, Vice President of 0(5) 0.0%
Development of the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

John L. Kidde, Director of the 61,250(6) (7)
Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Donald R. Leopold, Director of 43,000(8) (7)
the Company
727 Atlantic Avenue, Suite 600
Boston, MA 02111

Kevin Troy 571,667(9) 5.5%
145 Ipswich Street
Boston, MA 02215

Steven Rubin 1,280,765(10) 12.4%
508 North Second Street
Fairfield, IA 52556

All executive officers and 1,468,350(11) 14.2%
directors as a group (six
persons)
</TABLE>

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

(1) Consists of (i) 300,000 shares owned by a trust, (ii) 1,021,000
shares held by Mr. Foster, of which Mr. Steven Rubin beneficially owns 10,000
shares, (iii) 40,000 shares issuable pursuant to a warrant held by Mr. Foster,
and (iv) 8,600 shares, of which 4,300 shares are held by each of Mr. Foster's
sons. Mr. Foster disclaims any beneficial ownership of the 10,000 shares owned
by Mr. Rubin and the 8,600 shares owned by his children. Excludes 750,000
shares issuable pursuant to options held by Mr. Foster.

(2) Excludes 460,000 shares issuable pursuant to options held by Mr.
Smith.

(3) Excludes 60,000 shares issuable pursuant to options held by Mr.
Landry.

(4) Excludes 60,000 shares issuable pursuant to options held by Mr. Weis.

(5) Excludes 60,000 shares issuable pursuant to options held by Mr.
Widman.

73
<PAGE> 77

(6) Consists of (i) 1,000 shares owned by Mr. Kidde's son, (ii) 17,250
shares held by Mr. Kidde, and (iii) 43,000 shares issuable pursuant to options
held by Mr. Kidde. Mr. Kidde disclaims any beneficial ownership of the 1,000
shares owned by his son. Excludes 7,000 shares issuable pursuant to options
held by Mr. Kidde.

(7) Less than one percent.

(8) All shares issuable pursuant to options held by Mr. Leopold.
Excludes 7,000 shares issuable pursuant to options held by Mr. Leopold.

(9) Consists of 551,667 shares and 20,000 shares issuable pursuant to a
warrant held by Mr. Troy. Excludes 250,000 shares issuable pursuant to options
held by Mr. Troy.

(10) Consists of (i) 10,000 shares purchased by Mr. Foster in Mr. Foster's
name and beneficially owned by Mr. Rubin, (ii) 1,230,765 shares held by Mr.
Rubin, and (iii) 40,000 shares issuable pursuant to warrants held by Mr. Rubin.

(11) Includes options to purchase 10,500 shares held by Joanne Barbato,
formerly Secretary of the Company, and 40,000, 20,000 and 40,000 shares
issuable pursuant to warrants held by Mr. Foster, Mr. Troy and Mr. Rubin,
respectively, but excludes 750,000, 460,000, 60,000, 60,000, 60,000, 7,000,
7,000, 250,000 shares issuable pursuant to options held by Mr. Foster, Mr.
Smith, Mr. Landry, Mr. Weis, Mr. Widman, Mr. Kidde, Mr. Leopold and Mr. Troy,
respectively.

EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
AND NEWCO

Set forth below is the name, age and principal occupation or employment
during the past five years of each executive officer and director of the
Company and Newco, each of whom is a citizen of the United States.

<TABLE>
<CAPTION>
Positions with the Company and Newco;
Name and Business Address Principal Occupation and Business Experience
------------------------- --------------------------------------------
<S> <C>
Steven L. Foster, age 46 ............................. Mr. Foster has been Chief Executive Officer of the
Company since March 1991, Chairman of the Board of
the Company since March 1994 and a Director of the
Company since April 1991. He is the principal
founder and co-creator of the Jillian's billiard
club concept. He has been actively involved in
creating and operating entertainment clubs since
1979 and is co-owner of a Jillian's billiard club
in Boston, Massachusetts. In addition, Mr. Foster
is co-founder of United Fuels International, Inc.,
an international energy brokerage firm, and its
affiliates. Mr. Foster graduated magna cum laude
from Boston University School of Law in 1978 with a
Juris Doctor (J.D.) degree.
</TABLE>

74
<PAGE> 78

Richard F. Landry, age 38............................. Mr. Landry has been Controller, Principal
Accounting Officer and Secretary of the Company
since January 1995 and Vice President of Finance of
the Company since May 1995. Mr. Landry was
employed by Dunkin' Donuts from 1985 to 1994 and
served as Controller of Development and Operations
from 1990 to 1994, Regional Controller of
Development and Operations from 1989 to 1990 and
Corporate Accounting Manager from 1985 to 1989.
Mr. Landry holds a Bachelor of Science (B.S.)
degree in accounting from Bentley College. Mr.
Landry also is a Certified Public Accountant.

Ronald Widman, age 31 ............................. Mr. Widman has been Vice President of Development
of the Company since June 1995. Prior to joining
the Company, Mr. Widman was employed by KFC/Pepsico
for over 11 years where he was most recently
responsible for the creation, implementation and
turn-key development of new concepts, including the
cross functional development of Taco Bell and KFC
facilities. He received a Masters of Business
Administration (M.B.A.) degree from the University
of Louisville.

Stephen M. Weis, age 30 ............................. Mr. Weis has been Vice President of Operations of
the Company since June 1995. Mr. Weis was Delivery
Operations Manager of KFC from 1991 to 1995 where
he oversaw the field operations of over 100
delivery restaurants. Prior to that, Mr. Weis was
Senior Operations Supervisor of Domino's Pizza in
the Mid-Atlantic region from 1987 to 1991. He
received a Bachelor of Arts (B.A.) degree in
marketing from The American University.
</TABLE>

75
<PAGE> 79

<TABLE>
<CAPTION>
Positions with the Company and Newco;
Name and Business Address Principal Occupation and Business Experience
------------------------- --------------------------------------------
<S> <C>
John L. Kidde, age 61 ............................. Mr. Kidde has been a Director of the Company since
1988. Mr. Kidde is currently the President of KDM
Development Corporation, an investment management
firm. Mr. Kidde currently serves as a member of
the board of directors of The Futures Group of
Washington, D.C.; Asset Management Advisors, Inc.,
Palm Beach, Florida; International Resources Group,
Washington, D.C.; Australasia Inc., Cayman Islands;
International Agritech Resources, New York; Juniper
Partners, Inc., New York; and HFG Expansion
Management Inc., Massachusetts. He currently
serves as a trustee of Stevens Institute of
Technology, Hoboken, New Jersey; Open Space
Institute, New York; and the Montclair Kimberly
Academy, Montclair, New Jersey. He is a general
partner of Claflin Capital Management I-V and The
Opportunity Fund, both of Boston, Massachusetts,
and North American Venture Capital II, L.P. of
Madison, New Jersey. From June 1968 through
January 1988, Mr. Kidde was Vice President and
Director of International Operations of Kidde,
Inc., a multi-industrial conglomerate.

Donald R. Leopold, age 45............................. Mr. Leopold has been a Director of the Company
since April 1991. For the past six years, he has
been President of Game Plan, Inc., a Boston-area
based marketing and strategic planning consulting
firm. Game Plan provides marketing research,
marketing planning and strategic planning
consulting services to clients in the sports,
recreation, leisure and consumer goods industries.
Mr. Leopold is also on the faculty of the Harvard
University Extension School, where he teaches
graduate level courses in Marketing of Services and
Management of Service Operations. He earned a
Bachelor of Arts (B.A.) degree, cum laude, from
Harvard College in general studies, and a Masters
in Business Administration (M.B.A.) degree from the
Harvard University Graduate School of Business
Administration.
</TABLE>

76
<PAGE> 80

PRIOR CONTACTS BETWEEN THE COMPANY
AND CERTAIN AFFILIATES

Since April 1, 1993, there have been no contacts, negotiations or
transactions between the Company and a current director or executive officer of
the Company, or between the Company or a director or executive officer of the
Company and an unaffiliated party concerning (i) a merger, consolidation or
acquisition, (ii) tender offer for or other acquisition of any class of
securities of the Company, (iii) an election of directors of the Company, or
(iv) a sale or other transfer of a material amount of assets of the Company or
any of its subsidiaries. In addition, there have been no transactions between
the Company and any one or more of its directors or executive officers since
April 1, 1993 that involve an aggregate amount of one percent or more of the
Company's consolidated revenues.

77
<PAGE> 81

SELECTED FINANCIAL DATA

The following table sets forth certain financial information with respect
to the Company excerpted or derived from the audited and unaudited financial
statements contained elsewhere in this Proxy Statement. See "Financial
Statements of the Company." No pro forma financial information is included in
this Proxy Statement. Due to the nature of the proposed Merger, the Board has
not deemed such information to be material to a Shareholder's decision
hereunder.

<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
3/31/95 3/31/94 3/31/93 3/31/92 3/31/91
------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
---------------------

Total Revenue $ 8,023,949 $ 5,196,423 $3,620,756 $ 3,037,917 $ 2,401,226
Income/(loss) from
continuing operations $ (863,056) $ (932,529) $ 64,824 $(1,061,404) $ (990,663)
Net income (loss) $ (863,056) $ (904,282) $ 161,834 $(1,665,676) $(2,715,719)

Per Share Data:
--------------

Income (loss) from
continuing operations $ (0.11) $ (0.12) $ .01 $ (0.25) $ (0.31)
Net income (loss) $ (0.11) $ (0.12) $ .02 $ (0.40) $ (0.86)
Weighted average common and
common stock equivalent
shares outstanding 8,116,291 7,803,209 6,713,323 4,176,041 3,150,317

Balance Sheet Data:
------------------
Working capital $ (24,485) $ 454,879 $ 555,641 $ 141,083 $ 2,070,441
Total assets $ 7,847,472 $ 6,339,345 $5,352,088 $ 5,459,847 $ 8,102,334
Long-term debt $ 1,568,171 $ 589,291 $ 406,266 $ 469,108 $ 753,401
Stockholders' equity $ 3,111,746 $ 3,600,298 $4,049,771 $ 3,008,211 $ 4,691,277
</TABLE>

78
<PAGE> 82

MARKET INFORMATION

The following table sets forth the range of high and low bid quotations
for the Common Stock as reported by NASDAQ for each quarter since March 31,
1993. Such quotations reflect inter-dealer prices without retail markup,
markdown or commissions and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
------------- -------- -------
<S> <C> <C>
6/30/93 1 1/16 9/16

9/30/93 1 1/16 11/16

12/31/93 1 1/16 9/16

3/31/94 7/8 9/16

6/30/94 25/32 11/16

9/30/94 23/32 5/8

12/31/94 3/4 7/16

3/31/95 5/8 7/16

6/30/95 15/32 5/16
</TABLE>

Despite the fact that the Common Stock is quoted on NASDAQ, there is
currently only a limited trading market for the Common Stock. In addition, the
Company has never declared a cash dividend and does not intend to do so in the
foreseeable future.

79
<PAGE> 83

The following table shows the shares of Common Stock purchased by the
Company and each director and executive officer (including former directors and
officers) of the Company and the average purchase price for shares for each
quarter since March 31, 1993.

<TABLE>
<CAPTION>
Number of Average Purchase
Company/Director/Officer Shares Purchased Price Paid
------------------------ ---------------- ----------
<S> <C> <C> <C>
First Quarter Ended Steven L. Foster, Chief 260,000 $0.0(1)
6/30/93 Executive Officer,
Chairman of the Board
and a Director of the
Company

Howard Glicken, formerly 750,000 $0.13
Chairman of the Board of
the Company

Second Quarter Ended N/A N/A N/A
9/30/93

Third Quarter Ended N/A N/A N/A
12/31/93

Fourth Quarter Ended John L. Kidde, Director 10,000 $0.25
3/31/94 of the Company

First Quarter Ended N/A N/A N/A
6/30/94

Second Quarter Ended N/A N/A N/A
9/30/94

Third Quarter Ended N/A N/A N/A
12/31/94

Fourth Quarter Ended Steven L. Foster, Chief 850,000 $0.25
3/31/95 Executive Officer,
Chairman of the Board
and a Director of the
Company

First Quarter Ended N/A N/A N/A
6/30/95

Second Quarter Ended N/A N/A N/A
9/30/95
</TABLE>

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

(1) The shares were purchased without consideration in satisfaction of
certain anti-dilution obligations of the Company arising from a merger
agreement between the Company and a company owned by Mr. Foster and Kevin Troy,
a Shareholder of the Company.

80
<PAGE> 84

FEES AND EXPENSES

All fees and expenses in connection with the preparation, printing and
mailing of this Proxy Statement and the Proxy and in connection with the
Proposal (including the fees and expenses of the Financial Advisor) will be
borne by the Company.

The estimated fees and expenses referred to above are as follows:

<TABLE>
<S> <C>
SEC Filing Fee . . . . . . . . . . . . . . . . . $426

Financial Advisor Fees and Expenses . . . . . . . *

Legal Fees . . . . . . . . . . . . . . . . . . . *

Accounting Fees . . . . . . . . . . . . . . . . *

Solicitation Expenses . . . . . . . . . . . . . *

Mailing Expense . . . . . . . . . . . . . . . . *

Printing Costs . . . . . . . . . . . . . . . . . *

Miscellaneous . . . . . . . . . . . . . . . . . *
</TABLE>

-----------------------
*To be determined.

INDEPENDENT ACCOUNTANTS

The financial statements of the Company as of March 31, 1995 and 1994 and
for each of the years in the three-year period ended March 31, 1995 included
herein have been included herein in reliance upon the report of Deloitte &
Touche, L.L.P., independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. Representatives of the firm are expected to be present at the
Special Meeting, will have an opportunity to make a statement should they
desire to do so and are expected to be available to respond to appropriate
questions.

MISCELLANEOUS

No person has been authorized to give any information or make any
representation on behalf of the Company other than as contained in this Proxy
Statement and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company.

81
<PAGE> 85

The Board is not aware of any matter which may properly be presented for
action at the Special Meeting other than the matters set forth herein, but
should any matter requiring the vote of the Shareholders arise, it is intended
that Proxies in the accompanying form will be voted in respect thereof in
accordance with the best judgment of the person or persons voting the Proxies,
discretionary authority to do so being included in the Proxy.

DOCUMENTS INCORPORATED BY REFERENCE

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement and prior
to the date of the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement to the extent that a
statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement.

82
<PAGE> 86

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Unaudited Financial Statements

Consolidated condensed Balance Sheets as of June 30, 1995 and March 31, 1995
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Condensed Statements of Operations for the Three Month Periods ended
June 30, 1995 and 1994 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3

Consolidated Condensed Statements of Cash Flows for the Three Month Periods ended
June 30, 1995 and 1994 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Notes to Consolidated Condensed Financial Statements for the Three Month Period ended June 30, 1995 (unaudited) . . . F-5

Financial Statements

Report of Deloitte & Touche LLP, Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Consolidated Balance Sheets as of March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

Consolidated Statements of Operations for the Years Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . F-8

Consolidated Statements of Cash Flows for the Years Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . F-9

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended March 31, 1995 and 1994 . . . . . . . F-11

Notes to Consolidated Financial Statements for the Years Ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . F-12
</TABLE>

F-1
<PAGE> 87

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)
<TABLE>
<CAPTION>
June 30, March 31,
1995 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 392,147 $ 564,120
Restricted cash 115,354 690,000
Inventory 175,509 155,567
Accounts receivable 31,429 33,688
Other current assets 201,274 263,910
----------- -----------
Total current assets 915,713 1,707,285
Investments, net 39,725 39,725
Property and equipment, net 5,449,634 4,988,624
Goodwill 845,323 858,636
Other assets 264,059 253,202
----------- -----------
Total assets $ 7,514,454 $ 7,847,472
=========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable $ 645,784 $ 683,028
Accrued expenses and other liabilities 559,738 564,584
Current portion of notes and equipment leases payable 506,380 484,158
----------- -----------
Total current liabilities 1,711,902 1,731,770
Notes and equipment leases payable 1,355,524 1,568,171
----------- -----------
Total liabilities 3,067,426 3,299,941
----------- -----------
Minority interest 1,423,033 1,435,785
----------- -----------
Stockholders' equity:
Cumulative preferred stock, $.001 par value, 1,000,000 shares
authorized, none issued or outstanding
Common stock, $.001 par
value, 25,000,000 shares authorized, 9,137,798 shares issued
and outstanding on June 30, 1995 and March 31, 1995 9,138 9,138
Paid-in capital 9,513,277 9,513,277
Accumulated deficit (6,498,420) (6,307,256)
----------- -----------
Total 3,023,995 3,215,159
Notes receivable from stockholders - (103,413)
----------- -----------
Total stockholders' equity 3,023,995 3,111,746
----------- -----------
Total liabilities and stockholders' equity $ 7,514,454 $ 7,847,472
=========== ===========
</TABLE>

See accompanying notes to consolidated condensed financial statements

F-2
<PAGE> 88

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)
<TABLE>
<CAPTION>
Three Month Period
Ended June 30
1995 1994
--------- --------
<S> <C> <C>
Revenues from clubs $2,461,662 $1,598,081
--------- ---------

Cost and expenses:
Cost of club operations:
Cost of food and beverage 599,743 356,293
Wages 577,730 385,528
Rent 387,540 281,998
Direct operating expenses 539,418 343,003
Start-up costs related to development stage clubs 57,976 126,955
General and administrative expenses 294,970 161,689
Depreciation and amortization 143,548 113,642
Minority interest 19,384 28,540
--------- ---------
Total cost and expenses 2,620,309 1,797,648
--------- ---------

Other income/(expenses):
Gain on sale of investment - 4,785
Other income, primarily interest 12,701 12,060
Interest expense (45,218) (15,120)
----------- --------
Total other income/(expenses) (32,517) 1,725
----------- --------

Net loss $ (191,164) $ (197,842)
========== ==========

Net loss per share of common and
common equivalents $ (0.02) $ (0.02)
========== ==========

Weighted average common and common
equivalent shares outstanding 9,137,798 8,032,798
========= =========
</TABLE>

See accompanying notes to consolidated condensed financial statements

F-3
<PAGE> 89

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)

<TABLE>
<CAPTION>
Three Month Period
Ended June 30
1995 1994
------- --------
<S> <C> <C>
Cash flows from operating activities:
$ (191,164) $ (197,842)
---------- ----------
Net loss
Adjustments to reconcile loss to net
cash used by continuing operations:
Depreciation and amortization 143,548 113,642
Gain on sale of investment - (4,785)
Decrease in accounts receivables 2,259 6,986
(Increase)/decrease in inventory (19,942) 5,813
Decrease/(increase) in other assets 44,707 (65,051)
Decrease in accounts payable (37,244) (77,713)
(Decrease)/increase in other liabilities (4,846) 53,226
Decrease in minority interest 19,384 28,540
---------- ----------
Total adjustments 147,866 60,658
---------- ----------
Cash used by operating activities (43,298) (137,184)
---------- ----------

Cash flows from investing activities:
Purchases of property and equipment (584,173) (255,145)
Collections of notes receivable 103,413 6,667
Proceeds from sale of stock - 14,470
---------- ----------
Cash used in investing activities (480,760) (234,008)
---------- ----------

Cash flows from financing activities:
(Repayment)/issuance of notes and
leases payables (190,425) 135,120
Distributions to minority interest shareholders (32,136) (44,566)
---------- ----------
Cash (used by)/provided by financing activities (222,561) 90,554
---------- ----------

Net decrease in cash (746,619) (280,638)
Cash and cash equivalents at beginning of year 1,254,120 1,129,561
---------- ----------

Cash and cash equivalents at the end of period $ 507,501 $ 848,923
========== ==========
</TABLE>

See accompanying notes to consolidated condensed financial statements

F-4
<PAGE> 90

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 30, 1995

Note A - General

The unaudited consolidated financial statements include the accounts of
Jillian's Entertainment Corporation (the "Registrant"), Jillian's, Inc. and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.

Net loss per share amounts are computed based upon the average number of common
and common equivalent shares outstanding, assuming proceeds from the assumed
exercise of options and warrants were used to purchase common shares,
outstanding at the average fair market value during each period, unless such
exercise is anti-dilutive.

The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions for Form 10-QSB and therefore
do not include all information and footnotes necessary for a fair presentation
of financial position, results of operations and changes in cash flow in
conformity with generally accepted accounting principles. The unaudited
consolidated condensed financial statements should be read in conjunction with
the financial statements and related notes included in the Registrant's Annual
Report on Form 10-KSB for the year ended March 31, 1995. In the opinion of
management, the unaudited consolidated condensed financial statements contain
all adjustments necessary for a fair presentation of the results of operations
for the interim periods presented and all such adjustments are of a normal and
recurring nature. The results of operations for the three months ended June
30, 1995 are not necessarily indicative of the results which may be expected
for the entire fiscal year.

Certain amounts in the accompanying condensed consolidated financial statements
for the three months ended June 30, 1994 have been reclassified to conform to
the presentation in the three months ended June 30, 1995.

Note B - Development Stage Club

On December 21, 1994, the Registrant, through a Delaware corporation that is
wholly-owned by the Registrant, entered into a lease to operate a Jillian's
billiard club in Tacoma, Washington. The property is located near the
University of Puget Sound. The Registrant anticipates that this club will open
in the fourth quarter of calendar 1995. The club will contain approximately
25,000 square feet of space on two floors and approximately 20 Brunswick
billiard tables, along with other table-top games, dart boards and a game room.
The estimated cost of building out and equipping the club is approximately
$1,600,000. The Tacoma club is being primarily finance by a $660,000 landlord
contribution, equipment financing, and cash generated from the Registrant's
club operations. The Registrant is likely to raise funds for this purpose
through bank financing and other sources.

F-5
<PAGE> 91

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Jillian's Entertainment
Corporation:

We have audited the accompanying consolidated balance sheets of Jillian's
Entertainment Corporation and subsidiaries (the "Company") as of March 31, 1995
and 1994, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company at March 31, 1995 and
1994, and the results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
June 27, 1995

F-6
<PAGE> 92

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and 1994

<TABLE>
<CAPTION>
ASSETS
March 31, March 31,
1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 1) $ 564,120 $ 889,561
Restricted cash (Note 4) 690,000 240,000
Inventory 155,567 117,083
Accounts receivable 33,688 39,394
Other current assets 263,910 142,982
---------- ----------
Total current assets 1,707,285 1,429,020

Investments, net (Note 2) 39,725 44,410
Property, leasehold improvements and equipment, net (Note 3) 4,988,624 3,646,410
Goodwill, net (Note 9) 858,636 911,887
Other assets 253,202 307,618
---------- ----------
Total assets $7,847,472 $6,339,345
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 683,028 $ 398,436
Accrued expenses and other liabilities 564,584 270,482
Current portion of notes and equipment leases payable (Note 4) 484,158 305,223
---------- ----------
Total current liabilities 1,731,770 974,141

Notes and equipment leases payable (Note 4) 1,568,171 589,291
---------- ----------
Total liabilities 3,299,941 1,563,432
---------- ----------
Minority interests (Note 14) 1,435,785 1,175,615
---------- ----------

Stockholders' equity (Note 7)
Cumulative preferred stock, $.001 par value, 1,000,000 shares
authorized, none issued or outstanding
Common stock, $.001 par value, 25,000,000 shares authorized,
9,137,798 and 8,032,798 shares issued and outstanding in 1995 and
1994, respectively 9,138 8,033
Paid-in capital 9,513,277 9,188,132
Accumulated deficit (6,307,256) (5,444,200)
---------- ----------
Total 3,215,159 3,751,965

Note receivable from stockholders (Notes 4 and 8) (103,413) (151,667)
---------- ----------

Total stockholders' equity 3,111,746 3,600,298
---------- ----------

Total liabilities and stockholders' equity $7,847,472 $6,339,345
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements

F-7
<PAGE> 93

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 1995 and 1994

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues:
Revenues from club operations $7,969,247 $5,147,637
Gain on sale of investments (Note 2) 4,785
Other income, primarily interest 49,917 48,786
---------- ----------
Total 8,023,949 5,196,423
---------- ----------
Costs and expenses:
Cost of club operations:
Cost of goods sold 1,749,269 1,078,807
Wages 1,870,360 1,228,554
Rent 1,223,785 1,007,550
Direct operating costs 1,590,270 1,109,334
Start-up costs related to development stage clubs 534,808 241,018
Loss on investment (Note 2) - 45,000
Provision for losses on receivables (Notes 4 and 8) 41,587 353,000
General and administrative expenses 1,145,174 641,492
Interest expense 98,021 49,540
Depreciation and amortization expense 523,500 394,134
Income/(loss) applicable to minority interest (Note 1) 110,231 (19,477)
---------- ----------
Total 8,887,005 6,128,952
---------- ----------
Loss from continuing operations (863,056) (932,529)

Discontinued operations (Note 10):
Gain on disposal of precious metals division - 28,247
---------- ----------
Net loss (863,056) (904,282)
========== ==========

Loss per share of common and common equivalent share for primary
and fully diluted:
Continuing operations $ (0.11) $ (0.12)
Discontinued operations - -
---------- ----------
Net loss $ (0.11) $ (0.12)
========== ==========

Weighted average common and common equivalent shares outstanding:
Primary 8,116,291 7,803,209
========= =========
Fully diluted 8,116,291 7,803,209
========= =========
</TABLE>

See accompanying notes to Consolidated financial statements

F-8
<PAGE> 94

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years ended March 31, 1995 and 1994

<TABLE>
<CAPTION>
March 31, March 31,
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:

Loss from continuing operations $(863,056) $(932,529)
Adjustments to reconcile loss to
net cash used in continuing operations:
Depreciation and amortization 523,500 394,134
(Gain)/loss on sale of investments (4,785) 45,000
Provision for losses on receivables 41,587 353,000
Increase in paid-in capital for contribution
of services 50,000 -
Decrease/(increase) in accounts receivable 5,706 (14,957)
Increase in inventory (38,484) (56,554)
Increase in other assets (103,015) (161,560)
Increase in accounts payable 284,592 125,650
Increase in accrued expenses and other liabilities 294,102 128,465
Increase/(decrease) in minority interest 110,231 (19,477)
--------- ---------
Total adjustments 1,163,434 793,701
--------- ---------

Cash provided/(used) in continuing operations 300,378 (138,828)
Income from discontinued precious metals operations - 28,247
Adjustments to reconcile to net cash
used in discontinued operations:
Gain on sale of stock - (28,247)
--------- ---------

Cash provided/(used) in continuing and discontinued
operations 300,378 (138,828)
--------- ---------
</TABLE>

See accompanying notes to consolidated financial statements

F-9
<PAGE> 95

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years ended March 31, 1995 and 1994
(Continued)

<TABLE>
<CAPTION>
March 31, March 31,
1995 1994
--------- ---------
<S> <C> <C>
Cash flow from investing activities:
Purchase of property and equipment $(1,775,960) $(1,211,497)
Issuance of note receivable - (318,000)
Collection of note receivable 6,667 93,333
(Purchase)/proceeds from sale of
investment securities 9,470 16,815
Proceeds from sale of stock received in
sale of precious metals division - 28,247
----------- -----------
Net cash used in investing activities (1,759,823) (1,391,102)
----------- -----------

Cash flows from financing activities:
Proceeds from notes payable 1,419,320 175,000
Repayment of notes and leases payable (261,505) (39,330)
Proceeds from issuance of common stock 276,250 326,476
Proceeds from sale of partnership interests 258,084 1,150,000
Distributions to minority interest partners (108,145) (83,578)
----------- -----------
Net cash provided by financing activities 1,584,004 1,528,568
----------- -----------

Net increase/(decrease) in cash and equivalents 124,559 (1,362)
Cash and cash equivalents at beginning of year 1,129,561 1,130,923
----------- -----------
Cash and cash equivalents at end of year $ 1,254,120 $ 1,129,561
=========== ===========

Supplemental Disclosure of Cash Flow Information -
Cash paid during the year for interest $ 98,021 $ 47,377
=========== ===========

River Club's conversion of notes payable into
limited partnership interest (Note 11) $ 100,000 $ -
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements

F-10
<PAGE> 96

JILLIAN'S ENTERTAINMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended March 31, 1995 and 1994

Common Stock Total
----------------------- Paid-in Accumulated Notes Stockholders'
Shares Amount Capital Deficit Receivable Equity
------ ------ ------- ----------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31,
1993 6,482,798 $6,483 $8,863,206 $(4,539,918) $(280,000) $4,049,771
Shares issued in connection
with the precious metals
settlement (Note 10) 100,000 100 (100) -
Offering costs in connection
with private placement (Note 7) (5,284) (5,284)
Shares issued. stock options
exercised (Note 8) 760,000 760 323,800 (318,000) 6,560
Note receivable from
stockholder (Notes 4 and 8) - - - - 446,333 446,333
Shares issued in connection with
private placement (Note 7) 650,000 650 (650) -
Shares issued in connection
with site selection (Note 7) 40,000 40 7,160 7,200
Net loss (904,282) (904,282)
--------- ---------- --------- ---------- -------- ---------
Balance at March 31,
1994 8,032,798 8,033 9,188,132 (5,444,200) (151,667) 3,600,298
--------- ---------- --------- ---------- -------- ---------
Shares issued, stock options
exercised (Note 7) 1,105,000 1,105 275,145 276,250
Note receivable from
stockholder (Notes 4 and 8) 48,254 48,254
Services contributed by shareholder 50,000 50,000
Not loss (863,056) (863,056)
--------- ---------- ---------- ----------- -------- ---------
Balance at March 31,
1995 9,137,798 $ 9,138 $9,513,277 $(6,307,256) (103,413) $3,111,746
========= ========== ========== =========== ======== =========
</TABLE>

See accompanying notes to consolidated financial statements

F-11
<PAGE> 97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS

Jillian's Entertainment Corporation (the "Company"), owns, operates and
manages, through wholly-owned subsidiaries, billiard clubs in Miami, Florida,
Seattle, Washington, Cleveland, Ohio, Cleveland Heights, Ohio, Pasadena,
California, Worcester, Massachusetts, Champaign, Illinois and Annapolis,
Maryland. The Cleveland Heights, Worcester, Champaign and Annapolis clubs are
owned by limited partnerships in which wholly-owned subsidiaries of Jillian's,
Inc. are the general partners and own 87%, 25%, 43% and 79% interests,
respectively. The Company, through wholly-owned subsidiaries, opened a club in
Long Beach, California on May 5, 1995 and has entered into a lease for a new
billiard club in Tacoma, Washington.

The following is a summary of significant accounting policies followed in the
preparation of these consolidated financial statements:

Principles of Consolidation

The consolidated financial statements include the accounts of Jillian's
Entertainment Corporation, Jillian's, Inc. and subsidiaries and Carom Financial
Corporation. The Cleveland Heights, Worcester, Champaign and Annapolis clubs
are owned by limited partnerships in which wholly-owned subsidiaries of the
Company have an 87%, 25%, 43% and 79% ownership interest respectively. All of
the limited partnerships are consolidated herein, since the Company controls
the operations of the limited partnership. All significant intercompany
accounts and transactions have been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks and
interest-bearing deposits with banks, with original maturities of less than
three months.

Inventory

Inventory, primarily food and beverage, is stated at cost. Cost is determined
by the first-in, first-out method.

Investments

Investments in equity securities and non-billiard club limited partnerships are
carried at the lower of cost or fair market value. Gains and losses on the
sale of investments are calculated on the "specific identification" method.

F-12
<PAGE> 98

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS,
CONTINUED

Property, Leasehold Improvements and Equipment

Property, leasehold improvements and equipment are stated at cost. Property
and equipment are depreciated using the straight-line method over the estimated
useful lives of the assets which range from five to ten years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term (including all renewal periods) or the useful lives of the
improvement which range from ten to twenty years. When items are retired or
otherwise disposed of, the related costs and accumulated depreciation are
removed from the accounts and any resulting gains or losses are recognized.

Goodwill

The excess of the cost of the investment in Jillian's, Inc. over the fair value
of net assets acquired is being amortized on a straight-line basis over twenty
years from the acquisition dates. The Company reviews at each balance sheet
date the value of the goodwill for impairment. The valuation is principally
based on the profitability of the clubs and the ongoing value of the Jillian's
concept based on the evaluation. The Company does not believe that its
goodwill has been impaired. See Note 9.

Income Taxes

In February 1992, the Financial Accounting Standards Board issued Statement No.
109 entitled "Accounting for Income Taxes" ("SFAS No. 109"). SFAS No. 109
requires the liability approach and made certain changes in the measurement of
deferred tax liabilities and assets. The Company has adopted the provisions of
SFAS No 109 for the financial statements as of April 1, 1993. The adoption of
this Statement had no effect on the Company's consolidated financial
statements. See Note 5.

Earnings/Loss Per Share

Primary per share amounts are computed based upon the average number of common
and common equivalent shares outstanding, assuming proceeds from the assumed
exercise of options were used to purchase common shares outstanding at the
average fair market value during each period, unless such exercise is
anti-dilutive. Fully diluted earnings per share assumes that the proceeds were
used to purchase common shares outstanding at the higher of the fair market
value per share as of the end of each period or the average fair market value
during each period, unless such exercise is anti-dilutive.

Start-up Costs

Start-up costs related to development stage clubs are expensed as incurred.
These costs include all wages, rents and general and administrative expenses
incurred prior to a club opening for business.

F-13
<PAGE> 99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

2. INVESTMENTS

Investments at March 31, 1995 and 1994 consisted of the following:

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
North American Venture Capital Fund II, L.P. $25,000 $25,000
Celtic Trust - 9,685
Tellurado Assoc., Ltd. 14,725 9,725
------ ------
Total $39,725 $44,410
======= =======
</TABLE>

North American Venture Capital Fund H, LP. and Tellurado Assoc. Ltd represent
limited partnership interests purchased in fiscal 1990 and fiscal 1992,
respectively. These partnerships were formed primarily to invest in marketable
securities and real estate, respectively. The stock held in Celtic Trust was
sold in May 1994 for $14,470 and the Company recognized a gain of $4,785. In
fiscal 1994, the Company wrote off it's $45,000 investment in L.C. Holdings,
Ltd. after it was advised that the company was insolvent.

3. PROPERTY, LEASEHOLD IMPROVEMENTS AND EQUIPMENT, NET

Property, leasehold improvements and equipment consists of the following at
March 31, 1995 and 1994:

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Leasehold improvements $ 3,760,618 $ 2,750,246
Game equipment 805,757 506,142
Club and office equipment 1,107,487 863,191
Furniture and fixtures 425,720 571,996
----------- -----------
6,099,582 4,691,575
Less accumulated depreciation (1,110,958) (1,045,165)
----------- -----------
Total $ 4,988,624 $ 3,646,410
=========== ===========
</TABLE>

F-14
<PAGE> 100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

4. NOTES AND EQUIPMENT LEASES PAYABLE

Notes and equipment leases payable at March 31, 1995 and 1994 consist of
the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Note payable to The River Club Limited Partnership. Exchanged
for a 10% interest in the Limited Partnership which owns the
Champaign club during 1995. (See Note 11). $ - $100,000

Note payable to U.S. Government. (See Note 10). 229,792 244,792

Note payable to City of Cleveland Heights. Interest payable at 7%.
Principal and interest payable in monthly installments of $1,161.
Balance due in April 1998. 84,501 92,222

Note payable to bank collateralized by certificates of deposit
totalling $240,000. Interest payable at 9.75%. Principal and
interest payable in monthly installments of $2,500. Balance was
paid off in June 1995. See discussion below. 262,500 282,500

Note payable to seller of Pasadena club. Interest payable monthly
at 8%. Principal due in August, 1996. (See Note 12). 175,000 175,000

Note payable to unaffiliated third parties. Interest payable at 15%.
Interest payable monthly at 12%. Principal and accrued interest
due October 20, 1999. 185,000 -

Note payable to bank collateralized by stock in Seattle club.
Interest payable at 9.5%. Principal and interest payable in
monthly installments of $4,205. Balance due May 18, 1999. 176,527 -

Note payable to Champaign club landlord. Interest payable at
10%. Principal and interest payable in monthly installments of
$3,187. Balance due September 1, 1999. 136,097 -

Note payable to City of Long Beach. Interest accrues at 7% for
first year, thereafter, principal and interest is payable in monthly
installments of approximately $5,600 beginning April 1, 1996.
Balance due April 2006. See discussion below. 450,000 -

Equipment leases payable to unaffiliated third party. Payable in
monthly installments of $6,673. $30,000 buy-out due June 1, 1999. 255,000 -

Other equipment leases payable to unaffiliated third party. 97,912 -
---------- --------
Total notes and equipment leases payable 2,052,329 894,514

Less current portion of notes and equipment leases payable 484,158 305,223
---------- --------
Long term portion of notes and equipment leases payable $1,568.171 $589,291
========== ========
</TABLE>

F-15
<PAGE> 101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

4. NOTES AND EQUIPMENT LEASES PAYABLE, CONTINUED

The aggregate amount of required payments under the notes and equipment leases
payable at March 31, 1995 are as follows:

<TABLE>
<CAPTION>
Years Ending March 31,
----------------------
<S> <C>
1996 $ 484,158
1997 408,770
1998 276,577
1999 319,246
2000 273,374
Thereafter 290,204
----------
Total $2,052,329
=========
</TABLE>

In 1989, CDA, an unaffiliated third party, purchased 206,825 shares of the
Company's common stock from a shareholder. Because the Company believed the
shareholder's ownership of such shares would be disruptive to its business, it
entered into an agreement with CDA which granted CDA the right to require the
Company to repurchase the shares at $1.64 per share. In February 1992, in
order to prevent CDA from exercising its right to require the Company to
repurchase the shares, the Company became a co-obligor with CDA on a $340,000
note payable to a bank from which CDA had borrowed funds to purchase the
shares. Prior to this date, the Company had been the guarantor of the note and
CDA was the primary obligor. The Company recorded the note payable and a
corresponding receivable from CDA in the amount of $340,000. The receivable is
presented as a reduction of equity and as of March 31, 1995 and March 31, 1994,
the balance was $145,000 and $103,413, respectively. The receivable from CDA
is secured by the assets of CDA, which include the 206,825 shares of the
Company's common stock. On July 1, 1992, the Company and CDA agreed in writing
to terminate the agreement concerning CDA's repurchase right and the Company's
purchase option. The Company reserved $41,587, $135,000 and $60,000 against
the receivable during fiscal 1995, 1994 and 1993 respectively, as the Company
believed such amounts are uncollectible due to the decrease in value of the
assets owned by the Trust. On April 3, 1995, CDA sold the Company's common
stock to an unaffiliated third party for $103,413 in net proceeds, which were
used to pay down the note payable. On June 16, 1995, the Company paid off the
balance of the note payable with the cash from the certificate of deposits.

The proceeds from the $450,000 loan from the City of Long Beach were reported
as restricted cash, since they can only be used to construct and equip the Long
Beach club. As collateral on this loan, the Company has issued the City of
Long Beach a warrant to receive 225,000 shares of its common stock at no
charge. This warrant is only exercisable after the Company has defaulted on
the loan and failed to cure such default. Any net proceeds the City of Long
Beach receives on the sale of such warrant will be used to offset the
outstanding loan balance. If such net proceeds

F-16
<PAGE> 102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

are not sufficient to repay the outstanding loan balance, the Company has
agreed to continue to issue additional shares of its common stock until the
outstanding loan balance is paid in full.

5. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes and operating loss
carryforwards. The tax effects of significant items comprising the Company's
net deferred tax asset as of March 31, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax liabilities:
Depreciable property $ - $30,467
--------- ----------
Gross deferred tax liabilities - 30,467
--------- ----------
Deferred tax assets:
Reserve for bad debts 73,379
Contribution carryforward 6,743 2,759
Net operating loss carryforward 2,107,350 1,841,283
Capital loss carryforward 33,405 -
--------- ----------
Gross deferred tax assets 2,147,498 1,917,421
--------- ----------

Net deferred tax asset 2,147,498 1,886,954
Valuation allowance (2,147,498) (1,886,954)
--------- ----------
Net deferred asset $ - $ -
========= ==========
</TABLE>

No provision or benefit for income taxes was recorded in the accompanying
consolidated financial statements for the years ended March 31, 1995 and 1994.
As of March 31, 1995, the Company has an unused operating loss carryforwards of
approximately $5,600,000 for federal income tax purposes. Approximately
$4,000,000 of this carryforward is limited under Section 382 of the Internal
Revenue Code to approximately $350,000 per year. These carryforwards begin to
expire in the year 2006.

The valuation allowance increased by $260,545 in the year ended March 31, 1995.

The Company's provision for income taxes differs from the amounts determined by
applying the statutory federal income tax rate to income before income taxes as
follows:

<TABLE>
<CAPTION>
1995 1994
---- ----
Amount % Amount %
------ - ------ -
<S> <C> <C> <C> <C>
Tax (benefit) at federal rate $(302,070) 35.0 $(316,499) 35.0
Benefit of graduated rate 8,631 (1.0) 9,043 (1.0)
Goodwill amortization 18,637 (2.2) 19,065 (2.1)
</TABLE>

F-17
<PAGE> 103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

<TABLE>
<S> <C> <C> <C> <C>
Change in valuation allowance 260,545 (30.1) 288,391 (31.9)
Other 14,257 (1.7) - -
--------- ------ --------- ------

Total $ 0 0% $ 0 0%
========= ====== ========= ======
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

On May 20, 1993, the Company entered into a verbal subletting agreement for its
administrative operation in an executive center located in Coral Gables,
Florida. The agreement began on June 1, 1993 and expired on June 30, 1994.
The required monthly payments were $1,500. The total required payments under
this lease for the year ended March 31, 1994 were equal to $15,000. On June 1,
1994, the Company entered in a lease agreement for its administrative operation
in an executive center located at One Alhambra Plaza, Coral Gables, Florida.
The agreement begins on July 1, 1994 and expires June 30, 1999. The monthly
payments are $1,916. The Company subleases approximately 45% of the space.
For the year ended March 31, 1995 approximately $23,334 was charged to
operations in connection with payments pursuant to the lease agreement.

On June 13, 1995, the Registrant entered into a lease agreement for 3,020
square feet of space for its administration operation to be located at 727
Atlantic Avenue in Boston, Massachusetts. The agreement begins in July, 1995
and expires July, 1998. In addition, the lease has a two-year renewal period.
Under the lease agreement, the Registrant will be obligated to pay the lessor
minimum annual rent equal to $31,710 (payable in monthly installments of
$2,642) for the first year, $34,730 (payable in monthly installments of $2,894)
for the second year and $37,750 (payable in monthly installments of $3,146) for
the third year.

Jillian's, Inc. leases additional administrative space in Fairfield, Iowa. The
required monthly payments were $460. A new lease was entered into on April 1,
1994 and expires March 31, 1997. Additional space was leased and the required
monthly payments are $910.

The Company leases the premises in which the billiard clubs are operated. The
future minimum lease payments under these operating leases are as follows:

<TABLE>
<CAPTION>
Years ending Leases as of
March 31, March 31, 1995
------------- --------------
<S> <C>
1996 $ 1,334,921
1997 1,441,992
1998 1,421,231
1999 1,475,743
2000 1,233,594
Thereafter 3,832,049
-----------
Total $10,739,530
===========
</TABLE>

F-18
<PAGE> 104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Some of the billiard clubs lease agreements contain clauses that provide for
additional rental expense based on gross sales exceeding specified dollar
amounts. Such rental clauses differ by club. During the year ended March 31,
1995, none of the clubs were required to pay any material amounts of additional
rent. Additionally, the Company is using the straight line method for certain
lease payments under the lease agreements and, therefore, current expenses are
greater than the actual cash payments.

7. STOCKHOLDERS' EQUITY

During fiscal 1993, the Company offered for sale its common stock through a
private placement. The Company sold 2,043,022 shares of its common stock for
approximately $874,000 net of offering expenses and sales commissions. In
accordance with the terms of the subscription agreement for the private
placement, the Company filed with the Securities and Exchange Commission a
registration statement with respect to the shares sold in the private
placement. The registration statement became effective February 5, 1993 and
continues to be effective.

On March 14, 1991 the Company issued 1,000,000 shares of common stock in
connection with the Jillian's, Inc. acquisition. See Note 9. Additionally, on
such date, the Company, and Steven Foster, Steven Rubin, Kevin Troy and The
Frank and Celia Foster Family Trust (collectively, the "Foster Group") entered
into a Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, the Foster Group has a one time demand registration right to require
the Company to register their stock for sale to the public and certain rights
to participate in registrations of securities by the Company, subject to
certain restrictions.

The Registration Rights Agreement also contains an anti-dilution provision
providing that for a period of 18 months from March 14, 1991, the Company would
not engage in any offering and sale of any of its equity securities or
securities convertible into or exchangeable into equity securities without the
prior written consent of Steven Rubin acting as the representative of the
Foster Group. Steven Rubin was required to negotiate on behalf of the Foster
Group in good faith with the Company in an effort to achieve the Company's
capital requirements while minimizing the dilutive effect on the Foster Group
of the sale of any securities in any such offering. On April 28, 1993, the
Company and Steven Rubin negotiated a settlement with respect to the
anti-dilution provision for the River Club Limited Partnership transaction (see
Note 11) and the 1993 private placement of common stock discussed above. The
Company issued the Foster Group an additional 650,000 shares of common stock
pursuant to their anti-dilution rights. The Company also granted the Foster
Group a warrant, for the purchase of 100,000 shares of the Company's common
stock at an exercise price of $1.50. The warrant is exercisable for a
three-year period commencing April 28, 1993.

F-19
<PAGE> 105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

7. STOCKHOLDERS' EQUITY, CONTINUED

At March 31, 1995, outstanding warrants and options to purchase shares of the
Company's common stock were as follows:

<TABLE>
<S> <C>
Warrants issued to investment banker (a). 125,000
Warrants issued in connection with the River Club
Limited Partnership transaction. (See Note 11) 75,995
Warrants issued in connection with the Seattle club lease (b). 58,777
Warrants issued to public relations firm (c). 50,000
Warrants issued to former directors and officers (d). 262,500
Warrants issued in connection with the California clubs' acquisition (e). 10,000
Warrants issued to the Foster Group in connection with the anti-dilution
provision, discussed above. 100,000
Warrants issued in connection with the Miami club lease (f). 65,000
Consolidated Stock Option Plan (g). 168,500
1994 Stock Option Plan (h). 124,000
Warrants issued to the City of Long Beach (See Note 4) 225,000
----------
Total number of common shares issuable upon exercise of warrants -
and stock options. 1,264,772
=========
</TABLE>

(a) On December 31, 1988, the Company entered into a letter agreement with
an investment banking firm (the "Firm"), pursuant to which the Company
retained the Firm to assist the Company in its efforts to locate
suitable acquisition opportunities. The Firm failed to locate an
acquisition opportunity for the Company and the Company and the Firm
informally agreed on March 7, 1990 to terminate the agreement. The
Company and the Firm negotiated a settlement with respect to the
investment banking services rendered. Under the terms of the
settlement, the Firm was granted warrants to purchase 100,000 shares
and 25,000 shares of the Company's common stock exercisable for a five
year period commencing May 15, 1991 at an exercise price of $1.00 and
$2.00 per share, respectively.

(b) Under the terms of an amendment to the Seattle club lease, the lessor
and Jillian's Seattle have agreed that the percentage rental payments
may be made one-third in cash and two-thirds by issuing the lessor
warrants to purchase shares of the Registrant's common stock in an
amount equal to one share for each dollar of percentage rent owing.
The warrants will be issued on the 15th day following the end of each
fiscal year and will be exercisable for a five-year period at an
exercise price equal to the average bid and asked prices of the common
stock for the ten-day period prior to issuance. The warrants issued
under this amendment are as follows:

<TABLE>
<CAPTION>
For Fiscal Warrants Exercise
Year Issued Price / Share
---------- ---------- -------------
<S> <C> <C>
1992 9,901 $0.97
1993 12,608 0.745
1994 15,637 0.70
1995 20,631 0.45
</TABLE>

F-20
<PAGE> 106

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

7. STOCKHOLDERS' EQUITY, CONTINUED

(c) On September 10, 1992, the Company issued to its public relations
firm, for services rendered, a warrant to purchase 50,000 shares of
the Company's common stock for a five-year period commencing at the
time of issuance at an exercise price of $0.50 per share.

(d) The Board of Directors has issued former directors and a former
officer of the company common stock purchase warrants exercisable for
a five-year period from the date of grant. The warrants have various
restrictions and registration rights. The warrants issued are as
follows:

<TABLE>
<CAPTION>
Date Warrants Exercise
Granted Issued Price / Share
------- ---------- -------------
<S> <C> <C>
3/23/93 40,000 $0.78
3/31/94 40,000 0.70
1/23/95 40,000 0.656
2/17/95 67,500 0.656
2/17/95 75,000 0.33
</TABLE>

(e) On August 19, 1993, the Company issued to an unaffiliated broker, for
services rendered in connection with the acquisition of the Pasadena
club and negotiating the City of Long Beach loan, a warrant to
purchase 10,000 shares of the Company's common stock for a three-year
period, commencing on the date of issuance, at an exercise price of
$1.00 per share.

(f) On March 7, 1994, under the terms of an amendment to the Miami club
lease, the lessor and the Company have agreed to eliminate all basic
percentage rents due from inception of the lease through the
termination of the lease (including all renewal periods) and delay all
CPI increases until January 1, 1995. The basic percentage rent was 3%
of gross revenues up to $1,000,000 for years 1990 and 1991 of the
lease and 4% thereafter. In exchange for the amendment, the Company
issued the lessor 40,000 shares of its common stock and granted the
lessor warrants to purchase 65,000 shares of its common stock at $0.50
per share. The warrants are exercisable for a five-year period.

(g) On June 28, 1994, the Board of Directors cancelled all options
(786,000 shares of the Company's common stock in the aggregate)
previously granted to directors, advisors and key employees under all
stock option plans adopted prior to March 31, 1994. Such plans were
replaced with the Consolidated Stock Option Plan which provided that
options to purchase 786,000 shares of the Company's common stock could
be awarded. On the same date, the Stock Option Committee granted
options to purchase 786,000 shares of the Company's common stock. As
of March 31, 1995, 520,000 of these options were exercised, 168,500 of
these options remain outstanding and 97,500 of these options were

F-21
<PAGE> 107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

7. STOCKHOLDERS' EQUITY, CONTINUED

surrendered by the option holder and terminated by the Company. The
outstanding options are exercisable at $.656 per share to the extent
vested which is as follows: 1) 113,900 options were exercisable as of
March 31, 1995, 2) 22,200 options vest during fiscal 1996, 3) 12,200
options vest during fiscal 1997 and 4) 20,200 options vest during
fiscal 1998. The outstanding options expire as follows: 1) 5,000
options in fiscal 1998, 2) 2,500 options in fiscal 1999, 3) 5,500
options in fiscal 2000, 4) 42,000 options in fiscal 2001, 5) 22,500
options in fiscal 2002 and 6) 91,000 options in fiscal 2004.

On December 20, 1994, the Company reduced the exercise price of
520,000 options held by Mr. Foster and Mr. Troy to $0.25 per share and
all such options were exercised during the fourth quarter of fiscal
1995.

(h) On March 31, 1994, the Board of Directors adopted, subject to
shareholder approval, the 1994 Director, Adviser and Key Employee
Stock Option Plan (the "1994 Plan"). Under the 1994 Plan, options to
purchase 804,000 shares of the Company's common stock can be awarded
on the same date, the stock option committee granted options to the
Board of Directors and to key employees which, in the aggregate, allow
for the purchase of 774,000 shares of the Company's common stock. The
options were exercisable to the extent vested under the vesting
schedule which is 100% vested on the date of grant for 660,000 of the
options and 50% on the date of grant and 50% one year thereafter for
the remaining 114,000 options. The exercise price was $0.656 per
share for 114,000 options and $0.33 for the remaining 660,000 options.
On March 31, 1995, the Board of Directors granted 20,000 additional
options with an exercise price of $0.45 per share to the outside
directors, exclusive of Mr. Foster; these options were 50% vested upon
grant and will fully vest on March 31, 1996. As of March 31, 1995,
the 20,000 options recently granted and 104,000 of previously issued
options remain outstanding and 85,000 options were surrendered by the
option holder and terminated by the Company, 114,000 of the
outstanding options are currently vested and the remaining 10,000
options will become fully vested on March 31, 1996, 104,000 of the
outstanding options expire on March 31, 2004 and 20,000 expire on
March 31, 2005.

8. RELATED PARTY TRANSACTIONS

At a Board meeting held on March 29, 1994, Mr. Glicken announced he would be
resigning as the Company's chairman effective March 31, 1994. Mr. Glicken
stated that his new business pursuits would require his full time commitment
and attention and that he would not, therefore, be able to continue meeting his
responsibilities as Chairman of the Board. Mr. Glicken also announced that due
to the capital requirements of his new business pursuits he had undertaken the
private sale of all of his 1,017,365 shares of the Company's common stock to a
limited partnership and four

F-22
<PAGE> 108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

8. RELATED PARTY TRANSACTIONS, CONTINUED

individuals. One of those individuals already has a substantial ownership
interest in the Company and another is an officer of Jillian's, Inc.

The Company has entered into several agreements in connection with Mr.
Glicken's resignation and stock sale. In particular, Mr. Glicken and the
Company entered into a Separation Agreement which terminated a $50,000 per year
consulting agreement. The Separation Agreement also includes an undertaking by
Mr. Glicken not to compete with the Company for a three-year period. In
consideration of Mr. Glicken's non-compete agreement and his agreement to
terminate the consulting agreement, the Separation Agreement provides that Mr.
Glicken's aggregate exercise price of $318,000 due to the Company for Mr.
Glicken's exercise of his stock options for 760,000 shares of the Company's
common stock shall be fully and completely satisfied upon Mr. Glicken's payment
of $100,000 to the Company. The Company recorded, as an expense in the fourth
quarter, the $218,000 reduction in the receivable which was presented as a
reduction of equity. As of March 31, 1994, Mr. Glicken owed the Company $6,667
of the aggregate exercise price and on April 4, 1994 Mr. Glicken paid such
balance.

9. ACQUISITION OF JILLIAN'S, INC.

On April 11, 1990, the Company acquired a 51% interest in Jillian's, Inc. for
$1,500,000 in cash and a subordinated loan to Jillian's, Inc. in the principal
amount of $500,000. The Foster Group acquired 49% of Jillian's, Inc. in
consideration for their contribution of 100% of the common stock of Jillian's
Billiard Club of Seattle, Inc., a Delaware corporation, which owns and operates
a Jillian's billiard club located in Seattle, Washington and 100% of the common
stock of Jillian's Billiard Club of Coconut Grove, Inc., an inactive Delaware
corporation. Jillian's, Inc. was formed to own and operate billiard clubs and
has the exclusive right to the use of the Jillian's name, except that a
Jillian's club located in Boston, Massachusetts has the right to use the name
in connection with the operation of the club.

Simultaneously with the acquisition, Jillian's, Inc. purchased 100% of the
stock of Jillian's Billiard Club of Kendall, Inc., which was controlled by the
Foster Group and whose primary asset was a billiard club located in Miami,
Florida.

In addition to the $500,000 subordinated loan the Company made on April 11,
1990, the Company loaned Jillian's, Inc. an additional $276,124 during the
period of April 11, 1990 to March 14, 1991. No interest payments were made on
these loans. As discussed below, on March 14, 1991 the Company acquired the
remaining 49% of Jillian's Inc. and the loans, accrued interest and related
income and expense were eliminated in the consolidated financial statements.

Pursuant to the terms of the Agreement and Plan of Merger (the "Agreement")
dated March 14, 1991, in exchange for the 49% interest in Jillian's, Inc.
common stock owned by the Foster Group, the Foster Group received an aggregate
of 1,000,000 shares of the Company's common stock.

F-23
<PAGE> 109

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

9. ACQUISITION OF JILLIAN'S, INC., CONTINUED

Pursuant to the Agreement, Steven L Foster, President of Jillian's, Inc., also
became President and Chief Executive Officer of the Company. On March 14,
1991, Steven L Foster entered into an employment agreement with the Company.
The term of the employment agreement was for four years at an annual salary of
$50,000 plus annual incentive compensation and has been extended to September
14, 1995. Mr. Foster has waived his annual salary and annual incentive
compensation from May 1, 1992 through September 14, 1995 in order to reduce the
Company's general and administrative expenses. For fiscal 1995, the Company
has recognized an expense of $50,000 for the fair value of the service rendered
by Mr. Foster and a corresponding credit to paid-in capital.

The Company estimated that based on the market value of the Company's common
stock, the value of the consideration issued in exchange for the 49% interest
in Jillian's, Inc. approximated the book value of the 49% interest.
Accordingly, the issuance of common stock in the Company in exchange for the
49% interest in Jillian's, Inc. was recorded at the amount of the minority
interest in Jillian's reflected in the accompanying consolidated financial
statements. The acquisitions were accounted for as a purchase and the accounts
of Jillian's Inc. have been included in the consolidated financial statements.
Goodwill of $1,066,967 is being amortized on a straight-line basis over 20
years.

10. DISCONTINUED OPERATIONS

Precious Metals Operation

On April 30, 1992, the United States Attorney executed a Settlement Agreement
with the Company concerning certain litigation. The litigation related to the
Company's discontinued precious metals operations that were sold in March 1989
to Advent Technology, Inc. ("Advent") prior to its involvement in the
Jillian's billiard club business.

Under the Settlement Agreement, the Company specifically denied any wrongdoing
but agreed, because the Company may have unknowingly received property subject
to forfeiture, and therefore, desired to prevent the expenditure of monies in
defense of any such claim, that a newly-incorporated subsidiary would deliver
to the government 100,000 shares of the common stock of the Registrant owned by
the subsidiary and a secured promissory note in the amount of $250,000 payable
over eight years commencing April 30, 1993. The promissory note is secured by
the Company's obligation to issue 200,000 shares of the Company's common stock
in the event of default.

On March 31, 1994, the Company amended the promissory note to provide that the
Company would, starting April 30, 1994, make six monthly payments of $1,000,
followed by six monthly payments of $1,500, followed by twelve monthly payments
of $2,500, followed by twenty-four monthly payments of $3,000, and one final
payment of $127,792 on April 30, 1998.

F-24
<PAGE> 110

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

When the Company sold its discontinued precious metal operation, it received as
partial consideration, 500,000 shares of common stock in the purchaser. During
fiscal 1994, the Company sold its remaining 120,031 shares of the purchaser's
stock for a net gain of $28,247.

11. THE RIVER CLUB LIMITED PARTNERSHIP PRIVATE PLACEMENT

On February 4, 1992, (the "closing date") the Company entered into an agreement
(the "Agreement") and two $100,000 promissory notes with the River Club Limited
Partnership ("River Club"). Pursuant to the Agreement, River Club delivered to
the Company $325,000 in exchange for 311,377 shares of the Company's common
stock. The offering of the common stock issued to River Club was registered
pursuant to a registration statement which became effective April 14, 1993.
Additionally, under the Agreement the Company has granted River Club 75,995
common stock purchase warrants (which includes warrants issued pursuant to an
anti-dilution provision) exercisable for five years from the closing date at
$1.50 per share. The promissory notes were four-year convertible notes
accruing interest at a rate of 12.5% per annum.

On January 1, 1993 and October 1, 1994 the River Club converted each of the
promissory notes for a 10% interest in each of the limited partnerships which
own the Cleveland Heights club and Champaign club, respectively. After River
Club holds the limited partnerships' equity for a four year period, it can
exchange its equity interest in the limited partnership for the Company's
common stock. The number of shares issuable by the Company in the exchange
will equal River Club's percentage of the limited partnerships' cash flow times
five divided by the average bid and ask prices of the Company stock for the
last ten days before the exchange.

12. ACQUISITION OF PASADENA CLUB

On August 19, 1993, the Company, through Jillian's Billiard Club of Pasadena,
Inc., a wholly-owned California corporation ("Jillian's-Pasadena"), entered
into a series of related agreements with an unrelated third-party to acquire
all the assets of an existing billiard club/diner located in the downtown
business district of Pasadena, California. The Pasadena club contains
approximately 7,200 square feet of space on two floors. The ground floor is
approximately 1,400 square feet, which is operated as a diner with additional
outside seating. The downstairs space is approximately 5,800 square feet and
is operated as a billiard club with 16 Brunswick billiard tables. The Pasadena
club also has a bar and food service. The assets acquired were (a) all assets
located at the billiard club/diner, which includes all leasehold improvements,
furniture, fixtures, bar and kitchen equipment, billiard tables and related
items; (b) all of the seller's rights, title and interest as lessee under the
leases of the premises, and (c) all alcoholic beverage licenses and other
licenses and permits necessary or useful for the operation of the billiard
club/diner.

Jillian's-Pasadena paid $150,000 in cash and delivered a $175,000 note payable
for the assets. The note bears interest at the rate of 8% per annum.
Jillian's-Pasadena will pay interest monthly with all principal and any unpaid
interest due three years from the closing date. (See Note 4). The obligations
of Jillian's-Pasadena under the note are guaranteed by the Company.

F-25
<PAGE> 111

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

13. DEVELOPMENT STAGE CLUBS

The Company, through a wholly-owned subsidiary, entered into a lease for the
development of a Jillian's billiard club in Long Beach, California. The
necessary leasehold improvements were completed and the club was opened on May
5, 1995. The Long Beach club was primarily financed by a $250,000 landlord
contribution and a $450,000 eleven-year loan from the City of

Long Beach, California. The loan bears interest at 7% per annum, except that
no principal or interest payments are due until one year from the funding date,
which was April 1, 1995. (See Note 4).

On December 21, 1994, the Company, through a Delaware corporation that is
wholly-owned by the Registrant, entered into a lease to operate a Jillian's
billiard club in Tacoma, Washington. The property is located near the
University of Puget Sound. The Company anticipates that this club will open in
the fourth quarter of calendar 1995. The club win contain approximately 25,000
square feet of space on two floors and approximately 20 Brunswick billiard
tables, along with other table-top games, dart boards and a game room. The
estimated cost of building out and equipping the club is approximately
$1,000,000. The Tacoma club is being primarily financed by a $660,000 landlord
contribution, equipment financing and cash flow generated from the Registrant's
operations. The Registrant may also seek to raise monies through limited
partnerships, bank financing or other sources if necessary.

14. MINORITY INTERESTS

In order to partially finance the costs of renovating and equipping the
Jillian's billiard clubs located in Cleveland Heights, Worcester, Champaign and
Annapolis, the Company sold limited partnership interests in limited
partnerships that own those clubs. (The Company sold 13%, 75%, 57% and 21% of
the partnership interests in the partnerships that own the billiard clubs in
Cleveland Heights, Worcester, Champaign and Annapolis, respectively).
Wholly-owned subsidiaries of the Company own the remaining interest. Each of
the limited partnership agreements for the partnerships allows the limited
partners, after a certain date (the "Put Date") to require the Company to
repurchase their limited partnership interests. The purchase price is a
multiple (ranging from four to five) times the limited partner's allocable
share of the limited partnership's net income for the twelve month period
preceding the Put Date. The limited partners will receive part of their
purchase price in the form of the Company's common stock and the balance in
cash. The limited partners also will have the right for a certain period of
time after receipt of the common stock to require that the Company register its
shares of common stock for sale to the public. The Company will receive a fee
from its limited partnership for managing the related club and the partnership,
ranging from 5% to 6.5% of the gross revenues of the club.

F-26
<PAGE> 112

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

14. MINORITY INTERESTS, CONTINUED

The following is a summary of the limited partnerships terms:

<TABLE>
<CAPTION>
Minimum Percent of
Original Annual Purchase Purchase Price
Investment by Return Put Price Payable in Cash/
Limited Partners Guaranteed Date Multiple Common Stock
---------------- ---------- ---- -------- ------------
<S> <C> <C> <C> <C> <C>
Cleveland Heights $ 22,500 0 12/31/95 5(a) 100%/0%
Cleveland Heights 100,000 0 1/01/97 5 0%/100%
Worcester 850,000 15%(b) 12/31/98 5 50%/50%
Champaign 325,000 23.33%(c) 12/31/96 5 15%/85%
Champaign 100,000 0 10/01/98 5 0%/100%
Annapolis 133,084 23.33%(c) 12/31/97 4 15%/85%
</TABLE>

- ----------------------------
(a) Minimum return of original investment.
(b) Minimum annual return guaranteed until put date.
(c) Minimum annual return guaranteed over a six-year period, assuming
partners do not exercise their right to sell.

The minority interest at March 31, 1995 and 1994 consists of the following:

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cleveland Heights Limited Partnership $ 117,949 $ 126,172
Worcester Limited Partnership 721,231 796,120
Champaign Limited Partnership 419,682 253,323
Annapolis Limited Partnership 176,923 -
--------- ---------
Total $1,435,785 $1,175,615
========= =========
</TABLE>

F-27
<PAGE> 113

PRELIMINARY COPY

JILLIAN'S ENTERTAINMENT CORPORATION

PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
_____________, 1995

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.

The undersigned hereby appoints Steven L. Foster and Daniel M. Smith,
and each of them as proxies, with full power of substitution in each, to
represent and to vote all shares of common stock, par value $.001 per share
(the "Common Stock") of Jillian's Entertainment Corporation (the "Company")
which the undersigned would be entitled to vote, as fully as the undersigned
could vote and act if personally present, at the Special Meeting of
Shareholders to be held on ___________, 1995, at __:__ _.m., Eastern Time, and
all adjournments thereof, upon all matters set forth in the Notice of Special
Meeting of Shareholders and Proxy Statement, dated __________, 1995, a copy of
which has been received by the undersigned, as follows:

1. To approve a merger (the "Merger") by and between the Company
and a corporation to be formed in Delaware ("Newco"), pursuant
to which, among other matters (a) the Company will be merged
with and into Newco, and Newco will be the surviving entity,
and (b) each share of Common Stock owned immediately prior to
consummation of the Merger by any Shareholder that holds of
record less than 101,000 shares of Common Stock will be
converted into the right to receive cash of $0.50, without
interest, other than certain employees of the Company and
certain brokers or dealers.

/ / For / / Against / / Abstain

2. GRANT AUTHORITY to vote upon such other matters as may
properly come before the Special Meeting as Steven L. Foster
and Daniel M. Smith determine are in the best interest of the
Company.

/ / For / / Against / / Abstain

The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders and the Proxy Statement. Any proxy heretofore given to
vote said Common Stock is hereby revoked. The undersigned hereby ratify and
confirm all that said proxy or any of their substitutes may lawfully do by
virtue hereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR EACH OF THE MATTERS STATED.
<PAGE> 114

Please complete, date and sign your name(s) as it appear(s) to the
left and return in the enclosed envelope. If acting as an executor,
administrator, trustee, guardian, etc., you should so indicate when signing.
If the signer is a corporation, please sign the full corporate name, by a duly
authorized officer. If Common Stock is held jointly, each Shareholder named
should sign.

Date: , 1995
----------------

Name Signature
-------------------------- --------------------------