<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For The Quarterly Period Ended March 31, 1997
COMMISSION FILE NUMBER: 0-24058
WESTERN COUNTRY CLUBS, INC.
(Exact name of registrant as specified in its charter)
COLORADO 84-1131343
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1601 N.W. EXPRESSWAY, SUITE 1610
OKLAHOMA CITY, OKLAHOMA 73118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including zip code: (405) 848-0996
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12 months
(or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for at least the
past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Shares of Common Stock, $.01 par value, outstanding as of May 12, 1997:
3,634,721
Traditional Small Business Disclosure Format: Yes [X] No [ ]
<PAGE> 2
WESTERN COUNTRY CLUBS, INC.
FORM 10-QSB QUARTERLY REPORT
MARCH 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Part I
1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Management's Discussion and Analysis . . . . . . . . . . . . . . . . . 1
Part II
6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 5
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
i
<PAGE> 3
PART 1
ITEM 1. FINANCIAL STATEMENTS
The Company's unaudited Consolidated Financial Statements and Notes
thereto are included in the report after the signature page.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-QSB under Part I, "Item 2. Management's
Discussion and Analysis" constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other facts which may cause the actual results, performance
or achievements of Western Country Clubs, Inc. (the "Company") and its
nightclubs to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; competition; success of operating initiatives; development and
operating costs; advertising and promotional efforts; adverse publicity;
customer appeal and loyalty; availability, locations and terms of sites for
nightclub development; changes in business strategy or development plans;
quality of management; availability, terms and development of capital; business
abilities and judgment of personnel; availability of qualified personnel; food,
labor and employee benefit costs; changes in, or the failure to comply with
government regulations; regional weather conditions; construction schedules;
and other factors. The use in this Form 10-QSB of such words as "believes",
"anticipates", "expects", "intends" and similar expressions are intended to
identify forward-looking statements, but are not the exclusive means of
identifying such statements. The success of the Company is dependent on the
efforts of the Company and its management and personnel and the manner in which
they operate and develop stores.
The following discussion and analysis should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Report.
GENERAL
The Company started in April 1993 with a country-western nightclub in
Indianapolis, Indiana (the "Indy Club"). In April 1994, the Company opened a
nightclub in St. Louis, Missouri (the "St. Louis Club"). The Company financed
these Clubs through limited partnerships in which it was the general partner.
In May 1994, the Company completed its initial public offering of securities
receiving net proceeds of approximately $1.9 million. In November 1994, the
Company purchased a nightclub in Tucson, Arizona (the "Tucson Club"). At this
time, the Company also increased its ownership of the Indy Club to 80% and
acquired 100% of the St. Louis Club.
In September 1996, Troy H. Lowrie, then President and the largest
shareholder of the Company, entered into a stock purchase agreement whereby (i)
Red River Concepts, Inc. a Delaware corporation ("Red River"), would acquire
1,300,000 shares of Mr. Lowrie's Common Stock; (ii) new management assumed
control of the Company's operations; and (iii) James E.
<PAGE> 4
Blacketer and Joe R. Love, officers of Red River, were appointed to the
Company's Board of Directors. The change in control occurred in October 1996.
During the fourth quarter of 1996, the Company acquired a nightclub in
Wichita, Kansas (the "Wichita Club") for 400,000 shares of the Company's Common
Stock and assumption of $150,000 in debt.
In February 1997, the Company filed a registration statement for a
public offering of up to 460,000 shares of Preferred Stock at $12.00 and up to
1,150,000 warrants to purchase Common Stock (the "Public Offering"). If the
Public Offering is closed (expected in June 1997), the Company will realize net
proceeds of approximately $4.0 million. New management intends to use these
proceeds to reduce debt, remodel existing Clubs, and develop and acquire
additional clubs. Many factors could prevent the Public Offering from closing,
including the weakening of the financial markets for small capitalization or
hospitality industry equities or the inability of the Company to attract
investment or underwriting interest.
Due to declining performance and continuing operational losses at the
Tucson Club, new management concluded that the assets thereof were impaired and
were written off as of December 31, 1996. The Company sold the Tucson Club
assets in May 1997 and has reached an agreement in principle to settle the
leasehold obligations. Details of the sale and lease settlement are described
more fully below.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its capital needs through a
combination of cash flows from operations, proceeds from public and private
securities issuances, and loans from commercial banks, principal shareholders
or related persons or entities. During the first quarter of 1997, the Company
borrowed $140,000 from a lender to supplement its cash. Uses of cash included
repayment of notes payable of $248,086 ($200,000 to a commercial bank; $27,714
to related parties on notes outstanding; and $20,372 to holders of the first
and second mortgages on the Indy Club). The Company also invested $12,351 in
capital expenditures at the Clubs.
As of March 31, 1997, the Company had cash of $154,152, which was
generated from operating activities, financing activities and equity
participation. Cash for the quarter ended March 31, 1997 decreased $36,472
from cash of $190,624 reported at December 31, 1996. For the quarter ended
March 31, 1997, the Company generated a negative $97,217 in cash flow from
operations compared to positive cash flow of $143,628 from operations for the
quarter ended March 31, 1996, or a decrease of $240,845. This decrease in cash
flow for the quarter is primarily due to the loss from operations experienced
by the Company and $66,134 expended in costs related to the Public Offering
during the period. Store-level losses of $90,023 at the Tucson Club were the
principal component in the operating loss and the decrease in cash flow.
At March 31, 1997, the Company's working capital position (current
assets minus current liabilities) was a negative $541,145, compared with a
negative $533,633 at the end of 1996, or an additional $7,512 deficit. This
increase in the working capital deficit was due primarily to the reduction in
cash of $36,472 and the addition of $84,128 of short-term notes payable and
current portion of long-term debt used in the Company's operations, offset by a
reduction in accounts payable of $77,812. Management does not believe the
negative working capital position poses a liquidity risk or is unusual in the
Company's line of business, which is labor intensive, has significant payables
and does not have significant receivables or inventory.
2
<PAGE> 5
Property and equipment is primarily made up of assets required to open
and operate the Indy, St. Louis and Wichita Clubs. Leasehold improvements
total $2,116,885; equipment, furniture and fixtures are $1,009,131; buildings
and improvements are $755,900; and land and improvements are $298,286.
The deferred income tax asset of $333,621 at March 31, 1997 is
unchanged from the amount reflected at December 31, 1996. Future realization
of this asset is dependent upon the generation of sufficient future taxable
income liability against which the tax loss carryforward and losses from the
impairment of the Tucson assets can be offset. The amount of the deferred
income tax asset at March 31, 1997 does not include $668,244 reserved as a
deferred income tax valuation allowance based on historical operating results
and projected levels of future income tax liability. The reserved allowance
will provide additional benefit if the Company's level of future income tax
liability exceeds the deferred income tax asset within the carryforward period
(15 years).
Accounts payable at March 31, 1997 decreased $77,812 as compared to
amounts due at December 31, 1996 in part due to new management's efforts to
more closely control expenses and the related payables. Total liabilities
decreased by $167,207 due to the decrease in accounts payable and a net
decrease in notes payable of the Company of $108,086, partially offset by an
increase of $18,691 in accrued expenses which relate to accruals for future
rent escalations. Long term liabilities decreased by $23,958 due to the
continued reduction of these notes in accordance with required monthly
amortization.
The Company has and is aggressively looking toward expanding its
operations in the future. It intends to expand its ownership and operation of
country-western nightclubs and may acquire other nightclub or restaurant
concepts. Potential locations are being considered in both the Midwestern and
Southwestern sections of the country. This growth strategy will dictate the
need for and application of funding through 1997 and beyond. New management
expects to fund its growth strategy primarily with proceeds from the Public
Offering, which is expected to close in June 1997. Further expansion may be
financed through private and/or public equity offerings, internal funding,
bank financing or a combination of the foregoing. The Company may also
purchase existing clubs or restaurants through transactions involving the
issuance of the Company's Common Stock or cash. Until the Company's
profitability is restored and debt levels are decreased, management does not
foresee commercial banks as a significant source of capital financing. If the
Company is unsuccessful in completing the Public Offering in the near future,
the Company's planned expansion will be sharply curtailed. Management believes
that current levels of cash flow will support existing operations for the
foreseeable future.
RESULTS OF OPERATIONS - QUARTER ENDED MARCH 31, 1997 COMPARED TO THE QUARTER
ENDED MARCH 31, 1996
For the period ended March 31, 1997, total revenues of the Company
decreased by $32,843 or 1.5% as compared to the first quarter of 1996. The
decline in revenues was primarily attributable to sharply lower revenues at the
Tucson Club, the assets of which were sold May 1, 1997. Beverage and food
sales increased by $36,216 or 2.5% but this increase was more than offset by a
decrease in admission fees and other revenues of $69,059 or 9.9%. This decline
in admission fees and other revenues is primarily attributable to the Company's
decision to contract with an independent promoter for entertainment
performances instead of contracting performances internally. This change
reduces both admission and fee revenue and concert-related expense, which are
generally borne by the promoter.
3
<PAGE> 6
Total costs and expenses for the first quarter, 1997, increased
$179,698, or 9% over the first quarter of 1996. The cost of products and
services increased $152,269 or 24%, partially as a result of additional
beverage costs associated with marketing promotions implemented by new
management during the Fall of 1996. The increase in cost of products and
services was partially offset by (i) decreases in depreciation and amortization
of $43,356 or 27% (related to the write-off of the Tucson Club's assets at
December 31, 1996); and (ii) decreases in interest expense of $7,839 or 21%.
General and administrative expenses increased $78,624 or 7%.
The Company operated three Clubs during the first quarter 1996: the
Indy Club, the St. Louis Club and the Tucson Club. During the first quarter
1997, the Company also operated the Wichita Club. The Tucson Club was sold May
1, 1997, and became a discontinued operation. The Indy Club reported sales of
$453,477 and $508,264 for the first quarter 1997 and 1996, respectively, or a
decline of 10.8%. Sales at the St. Louis Club were $721,867 for the first
quarter 1997 compared to $1,024,822 for 1996, a decline of 29.6%. The Tucson
Club experienced a sales decline of 32.7% for the first quarter 1997 compared
to 1996, reporting sales of $400,970 versus $595,804. The Wichita Club
recorded an increase in first quarter sales of $39,474 or 8.1%, showing sales
of $526,694 as compared to $487,220 a year ago. The Company believes that the
decline in sales at the Indy and St. Louis Clubs were due in part to its
conversion of these Clubs to the entertainment format used in the Wichita Club
and to deferred maintenance and enhancements. The format changes, which are
designed to appeal to a younger and more diverse customer, are expected to show
positive results in future quarters. The Wichita Club is experiencing growth
in sales and operating income, and management believes the Indy and St. Louis
Clubs will experience similar improvement. The Company has dedicated a portion
of the proceeds of its pending Public Offering to the remodeling of these
Clubs, which is expected to restore profitability.
The Company has sold the Tucson Club assets effective May 1, 1997, and
reached an agreement in principle to settle its future rental obligations under
the related lease. Under the purchase and sale agreement, the Company will
receive $325,000 from the sale as follows: $100,000 cash which was paid at
closing, $10,000 to be paid in cash each month for three months beginning June
1997, and the balance of $195,000 to be paid by promissory note having monthly
payments of $7,500 beginning in November 1997 until maturity at September 30,
1999. The note bears interest at eight percent per year and provides for
prepayment discounts of $20,000 if paid before December 31, 1997, and $10,000
if paid before December 31, 1998. Under the lease settlement, the Company is
obligated for rent and property taxes through July 1997 in the amount of
$93,400, which obligation will be paid in monthly installments of $10,750
beginning June 1997, with the balance due December 31, 1997. The Company's
security deposit of $24,000 will be transferred to the benefit of the new
lessee. This settlement agreement is expected to close in May, 1997. During
the first quarter, the Tucson Club suffered an operating loss before taxes of
$90,023. Additionally, the Company expects to report an additional Tucson
operating loss for April, 1997.
For the quarter ended March 31, 1997, the Company incurred a
consolidated loss of $82,044 compared to a consolidated gain of $90,670 for the
quarter ended March 31, 1996. This loss was primarily due to the operating
loss of the Tucson Club of approximately $90,000. With the sale of the Tucson
Club assets as of May 1, 1997, and the gain to be reported thereon in the
second quarter, management believes the Company and its three remaining Clubs
will return to profitability. Management also believes that, assuming
completion of the Public Offering, the Company can expand its number of
operating locations, and that the combination of the
4
<PAGE> 7
elimination of Tucson Club losses and the expansion of new locations will
ensure the Company's success in future periods.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.36 Agreement For Purchase and Sale of Assets dated
April 14, 1997, between Kirby Bond and Western Country Clubs,
Inc. is incorporated by reference to the like numbered exhibit
filed with Amendment No. 1 to Issuer's Registration Statement
on Form SB-2, No. 33-72942.
27.1 Financial Data Schedule
(b) During the quarter ended March 31, 1997, the Company filed one
Report on Form 8-K as follows:
1. Form 8-K dated January 30, 1997, reporting the Company's
change in certifying accountants to the firm of Gross, Collins
+ Cress, P.C., Atlanta, Georgia, under Item 4 - Changes in
Registrant's Certifying Accountant.
5
<PAGE> 8
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized..
May 15, 1997 Western Country Clubs, Inc.
By: /s/ James E. Blacketer
----------------------------------
James E. Blacketer
President
6
<PAGE> 9
WESTERN COUNTRY CLUBS, INC.
INDEX TO FINANCIAL STATEMENTS AND NOTES
<TABLE>
<S> <C>
Consolidated Condensed Balance Sheet - March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Condensed Statements of Income -
For the Three Months Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Condensed Statements of Stockholders' Equity -
For the Three Months Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Condensed Statements of Cash Flows -
For the Three Months Ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
</TABLE>
<PAGE> 10
WESTERN COUNTRY CLUBS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 154,152
Accounts receivable 55,081
Notes and loans receivable 100,000
Inventories 64,571
Prepaid expenses 96,266
Capitalized offering cost 208,991
Deferred income taxes 244,287
Refundable income taxes 4,181
----------
TOTAL CURRENT ASSETS 927,529
----------
PROPERTY AND EQUIPMENT, at cost
Land and improvements 298,286
Building and improvements 755,900
Leasehold improvements 2,116,885
Equipment 675,803
Furniture and fixtures 333,328
----------
4,180,202
Less accumulated depreciation 1,202,727
----------
NET PROPERTY AND EQUIPMENT 2,977,475
----------
OTHER ASSETS
Deferred income taxes 89,334
Goodwill, net of amortization 152,724
Deposits and other 123,496
Investments (Note 2) 114,800
----------
TOTAL OTHER ASSETS 480,354
----------
TOTAL ASSETS $4,385,358
==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
F-2
<PAGE> 11
WESTERN COUNTRY CLUBS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 248,010
Accrued expenses 408,858
Notes payable (Note 3) 415,742
Current portion of notes payable - related parties 299,266
Current portion of long-term debt 96,798
-----------
TOTAL CURRENT LIABILITIES 1,468,674
-----------
NOTES PAYABLE - RELATED PARTIES,
less current portion 52,399
LONG-TERM DEBT, less current portion 478,695
EQUITY INTEREST OF OTHER PARTNERS IN
CONSOLIDATED SUBSIDIARIES 276,399
COMMITMENTS (Note 4)
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value; 10,000,000 shares
authorized, none issued and outstanding --
Common stock, $.01 par value; 25,000,000 shares
authorized, 3,634,721 shares issued and outstanding 36,347
Additional paid-in capital 4,314,739
Retained earnings (deficit) (2,241,895)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,109,191
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,385,358
===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
F-3
<PAGE> 12
WESTERN COUNTRY CLUBS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
REVENUES
Beverage and food sales $ 1,476,812 $ 1,440,596
Admission fees and other revenues 628,073 697,132
----------- -----------
TOTAL REVENUES 2,104,885 2,137,728
----------- -----------
COSTS AND EXPENSES
Cost of products and services 773,167 620,898
Depreciation and amortization 116,475 159,831
Interest 29,651 37,490
General and administrative expenses 1,254,452 1,175,828
----------- -----------
TOTAL COSTS AND EXPENSES 2,173,745 1,994,047
----------- -----------
INCOME (LOSS) BEFORE TAXES AND
MINORITY INTEREST (68,860) 143,681
PROVISION FOR INCOME TAXES -- 44,973
----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST (68,860) 98,708
----------- -----------
OTHER PARTNERS' INTERESTS IN NET INCOME OF
OF CONSOLIDATED SUBSIDIARIES, NET OF
INCOME TAX BENEFIT OF $-0- (1997) AND
AND $2,073 (1996) 13,184 8,038
----------- -----------
NET INCOME (LOSS) $ (82,044) $ 90,670
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ (0.02) $ 0.03
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,587,525 3,085,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
F-4
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WESTERN COUNTRY CLUBS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Additional Retained
------------------------------- Paid-in Earnings
Shares Amount Capital (Deficit)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, December 31,
1995 2,944,721 $ 29,447 $ 3,782,738 $ (243,557)
Common stock issued for
cash in private placement 29,200 292 72,708 --
Net income for the three
months ended March 31,
1996 90,670
----------- ----------- ----------- -----------
Balance, March 31, 1996 2,973,921 $ 29,739 $ 3,855,446 $ (152,887)
=========== =========== =========== ===========
Balance, December 31,
1996 3,519,921 $ 35,199 $ 4,201,087 $(2,159,051)
Common stock issued for
investment (Note 2) 114,800 1,148 113,652
Net loss for the three
months ended March 31,
1997 (82,044)
----------- ----------- ----------- -----------
Balance, March 31, 1997 3,634,721 $ 36,347 $ 4,314,739 $(2,241,895)
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
F-5
<PAGE> 14
WESTERN COUNTRY CLUBS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (82,044) $ 90,670
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities
Depreciation and amortization 116,475 159,831
Minority interest in earnings of subsidiaries 13,184 10,111
Deferred tax provision -- (31,000)
Increase in present value of liability
under noncompete agreement -- 10,268
Changes in assets and liabilities
Increase in accounts receivable (10,345) (68,473)
Decrease in inventories 15,057 4,454
Increase in prepaid expenses (27,377) (61,552)
Decrease (increase) in refundable income taxes 3,088 (10,563)
Increase in capitalized offering costs (66,134) --
Decrease in accounts payable (77,812) (82,214)
Increase in income taxes payable -- 73,900
Increase in accrued expenses 18,691 48,196
--------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (97,217) 143,628
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of certificate of deposit 200,000 --
Acquisition of property and equipment (12,351) (2,580)
(Increase) decrease in deposits and other assets (16,318) 9,750
--------- ---------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 171,331 7,170
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable 140,000 --
Proceeds from sale of common stock -- 73,000
Partnership distributions to minority interests (2,500) (6,000)
Payments on notes payable (200,000) (341,970)
Payments on notes payable, related parties (27,714) 100,000
Payments on long-term debt (20,372) --
--------- ---------
NET CASH USED BY FINANCING
ACTIVITIES (110,586) (174,970)
NET DECREASE IN CASH (36,472) (24,172)
--------- ---------
CASH AT BEGINNING OF PERIOD 190,624 223,839
--------- ---------
CASH AT END OF PERIOD $ 154,152 $ 199,667
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid during the period $ 42,630 $ 35,306
========= =========
NONCASH FINANCING ACTIVITY
Issuance of common stock for investment $ 114,800 $ --
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
F-6
<PAGE> 15
WESTERN COUNTRY CLUBS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 In the opinion of Western Country Clubs, Inc. (the "Company"), the
accompanying unaudited consolidated condensed financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of March 31,
1997 and the results of operations and cash flows for the quarters
ended March 31, 1997 and March 31, 1996. These statements are
condensed and, therefore, do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. The statements should be read in
conjunction with the consolidated financial statements and footnotes
included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996. The results of operations for the quarters
ended March 31, 1997 and March 31, 1996 are not necessarily indicative
of the results to be expected for the full year.
NOTE 2 On February 6, 1997, the Company exchanged 114,800 shares of its
common stock for 57,400 shares and 57,400 purchase warrants of the
stock of Cowboys Concert Hall Arlington, Inc. ("Cowboys"). The
individual shareholders of the Cowboys' stock had participated in a
private placement conducted by Cowboys in Fall 1995 to raise funds for
Cowboys to pay its expense in connection with a proposed merger
between Cowboys and the Company which did not occur.
NOTE 3 On February 18, 1997, the Company obtained a line of credit. The
Company may borrow up to $160,000 at an interest rate of 12% per
annum. The principal and interest were due on April 18, 1997 at which
time the line of credit was extended for an additional 60 days. The
Company pledged as collateral a third mortgage position on the Indy
Club property, an assignment of rents and leases related to the
property, a UCC-1 financing statement covering all the personal
property located thereon, and an assignment of the Company's 80%
partnership interest in the partnership which owns the Indy Club. The
Company also agreed to issue warrants to purchase its common stock at
a price of $2 per share. One warrant will be issued for every $2
borrowed. The Company has borrowed $140,000 as of March 31, 1997.
NOTE 4 On March 15, 1997, the Company entered into a 51.5-month lease
agreement for office space to serve as the corporate headquarters in
Oklahoma City, Oklahoma. From March 15, 1997 to August 31, 1998, the
base rent will be $36,900 per year. From September 1, 1998 to January
31, 2000, the rent increases to $39,360 per year. From February 1,
2000 to June 30, 2001, the base rent will be $41,820.
NOTE 5 On May 1, 1997, the Company sold the assets of the Tucson club. The
sales price was $325,000 which is to be received as follows: $100,000
shall be paid to the Company on May 3, 1997; $30,000 shall be paid to
the Company at the rate of $10,000 per month for the months of June,
July, and August; and $195,000 shall be paid to the Company in the
form of a promissory note bearing interest at 8% per annum payable
beginning November 1, 1997. The promissory note is secured by a
security interest in the assets purchased by the buyer.
The Company is liable for certain expenses related to the sale of the
Tucson club, including approximately $93,400 for rent and property
taxes for the period May 1, 1997 through July 31, 1997.
F-7
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.36 Agreement For Purchase and Sale of Assets dated April 14, 1997,
between Kirby Bond and Western Country Clubs, Inc. is
incorporated by reference to the like numbered exhibit filed
with Amendment No. 1 to Issuer's Registration Statement on Form
SB-2, No. 33-72942.
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 154,152
<SECURITIES> 0
<RECEIVABLES> 155,081
<ALLOWANCES> 0
<INVENTORY> 64,571
<CURRENT-ASSETS> 927,529
<PP&E> 4,180,202
<DEPRECIATION> 1,202,727
<TOTAL-ASSETS> 4,385,358
<CURRENT-LIABILITIES> 1,468,674
<BONDS> 0
0
0
<COMMON> 36,347
<OTHER-SE> 2,072,844
<TOTAL-LIABILITY-AND-EQUITY> 4,385,358
<SALES> 1,476,812
<TOTAL-REVENUES> 2,104,885
<CGS> 773,167
<TOTAL-COSTS> 773,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,651
<INCOME-PRETAX> (68,860)
<INCOME-TAX> 0
<INCOME-CONTINUING> (68,860)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,044)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
