<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT
TO SECTION 12, 13, OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
WESTERN COUNTRY CLUBS, INC.
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its CURRENT REPORT
DATED DECEMBER 16, 1996 as filed on FORM 8-K as set
forth in the pages attached hereto:
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to Form 8-K as filed on January 8, 1997, registrant
previously reported the acquisition of Entertainment Wichita, Inc. on December
16, 1996. The Agreement and Plan of Merger was filed as an exhibit to that
report.
That report is being amended to include the Financial Statements of
the business acquired and the Pro Forma Financial Information which are filed
with this report as Exhibits 7.0, 7.1 and 7.2 and are incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) The following exhibits are filed with this report:
7.0 Audited Financial Statements of Entertainment Wichita, Inc.
for the years ended December 31, 1994 and 1995, and unaudited
Financial Statements for the nine months ended September 30, 1995 and
1996.
7.1 Audited Financial Statements of In Cahoots, Limited
Partnership for the years ended December 31, 1994 and 1995, and
unaudited Financial Statements for the nine months ended September 30,
1995 and 1996.
7.2 Unaudited Pro Forma Information of Western Country Clubs, Inc.
and Entertainment Wichita, Inc. as of September 30, 1996.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
Western Country Clubs, Inc.
/s/ Ted W. Strickland
------------------------------------------
Ted W. Strickland, Chief Financial Officer
Date: February 26, 1997
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXH. NO. EXHIBIT NAME
- -------- ------------
<S> <C>
7.0 Audited Financial Statements of Entertainment Wichita,
Inc. for the years ended December 31, 1994 and 1995, and
unaudited Financial Statements for the nine months ended
September 30, 1995 and 1996.
7.1 Audited Financial Statements of In Cahoots, Limited Partner-
ship for the years ended December 31, 1994 and 1995, and
unaudited Financial Statements for the nine months ended
September 30, 1995 and 1996.
7.2 Unaudited Pro Forma Information of Western Country Clubs,
Inc. and Entertainment Wichita, Inc. as of September 30, 1996.
</TABLE>
<PAGE> 1
EXHIBIT 7.0
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholders
Entertainment Wichita, Inc.
We have audited the accompanying balance sheet of Entertainment Wichita, Inc.
as of December 31, 1994 and 1995, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Entertainment Wichita, Inc. as
of December 31, 1994 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
Denver, Colorado CAUSEY DEMGEN & MOORE INC.
December 4, 1996
1
<PAGE> 2
ENTERTAINMENT WICHITA, INC.
BALANCE SHEET
DECEMBER 31, 1994 AND 1995
ASSETS
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Current asset:
Cash $ 30 $ 224
Investment in limited partnership
(Note 2) 1,048 1,528
-------- --------
$ 1,078 $ 1,752
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10 $ 10
Income taxes payable 406 142
-------- --------
Total current liabilities 416 152
Stockholders' equity (Note 3):
Common stock, $1 par value;
50,000 shares authorized,
3,200 shares issued and
outstanding 3,200 3,200
Additional paid-in capital 1,800 1,800
Less notes receivable from stockholders (4,500) --
Retained earnings (deficit) 162 (3,400)
-------- --------
Total stockholders' equity 662 1,600
-------- --------
$ 1,078 $ 1,752
======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 3
ENTERTAINMENT WICHITA, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C> <C>
Equity in earnings of limited
partnership (Note 2) $ 2,238 $ 1,080
General and administrative expenses 1,170 4,500
-------- --------
Income (loss) before income taxes 1,068 (3,420)
Provision for income taxes 406 142
-------- --------
Net income (loss) $ 662 $ (3,562)
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
ENTERTAINMENT WICHITA, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
Common Stock Additional Notes Retained
----------------------- paid-in receivable earnings
Shares Amount capital stockholders (deficit)
---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 3,200 $ 3,200 $ 1,800 $ (4,500) $ --
Net income for the year
ended December 31, 1994 -- -- -- -- 662
Distributions made to
stockholders -- -- -- -- (500)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1994 3,200 3,200 1,800 (4,500) 162
Cancellation of notes receivable
for services performed -- -- -- 4,500 --
Net loss for the year ended
ended December 31, 1995 -- -- -- -- (3,562)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1995 3,200 $ 3,200 $ 1,800 $ -- $ (3,400)
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 5
ENTERTAINMENT WICHITA, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 662 $ (3,562)
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Cancellation of notes receivable
for services performed -- 4,500
Equity in earnings of limited
partnership (2,238) (1,080)
Change in assets and liabilities:
Increase in accounts payable 10 --
Increase (decrease) in accrued
expenses 406 (264)
-------- --------
Total adjustments (1,822) 3,156
-------- --------
Net cash used in operating
activities (1,160) (406)
Cash flows from investing activities:
Investment in limited partnership (10) --
Distributions received from limited
partnership 1,200 600
-------- --------
Net cash provided by investing
activities 1,190 600
Cash flows from financing activities:
Proceeds from sale of common stock 500 --
Distributions to stockholders (500) --
-------- --------
Net cash provided by (used in)
financing activities -- --
-------- --------
Increase in cash 30 194
Cash at beginning of period -- 30
-------- --------
Cash at end of period $ 30 $ 224
======== ========
Supplemental cash flow information:
Cash paid for income taxes $ -- $ 406
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
ENTERTAINMENT WICHITA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
1. Summary of significant accounting policies
Organization:
The Company was incorporated in Kansas on July 27, 1992. The Company is
the General Partner of In Cahoots, Limited Partnership. The Partnership
commenced operations in February 1994. The Partnership's operations have
consisted primarily of owning and operating a "Country-Western" theme
nightclub in Wichita, Kansas.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and cash equivalents:
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
Fair value of financial instruments:
Cash, accounts payable and accrued liabilities are carried in the
financial statements in amounts which approximate fair value because of
the short-term maturity of these instruments.
Investments:
Investments in partnerships, which the Company do not financially control,
are accounted for on the equity method until financial control is
established.
Income taxes:
Income taxes are provided based on earnings reported in the financial
statements. The Company follows Statement of Financial Accounting
Standards No. 109 whereby deferred income taxes are provided on temporary
differences between reported earnings and taxable income.
2. Investment of In Cahoots, Limited Partnership
During 1994, the Company, as general partner, contributed capital of $10
and the limited partners contributed capital of $990 to In Cahoots,
Limited Partnership. Profits and losses are allocated 99% to the limited
partners' interests and 1% to the general partner.
6
<PAGE> 7
ENTERTAINMENT WICHITA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
2. Investment of In Cahoots, Limited Partnership (continued)
During the years ended December 31, 1994 and 1995, the Partnership
distributed $1,200 and $600, respectively, to the general partner.
3. Subsequent events
Effective October 1, 1996, the Company's board of directors approved a 16
for 25 reverse stock split. All shares in the accompanying financial
statements have been adjusted to reflect the split.
Effective October 1, 1996, the Company issued 36,800 shares of its common
stock and assumed notes payable with an aggregate principal balance owed
of $150,000 in exchange for an additional 79% interest in the Partnership.
This transaction will be recorded as a reverse acquisition of the Company
by the Partnership using purchase accounting and the acquisition of
minority interests resulting in goodwill of $62,945 to be recognized.
On December 16, 1996, 100% of the Company's common stock was acquired in a
merger transaction by Western Country Clubs, Inc. (Western) in exchange
for 400,000 shares of common stock of Western. This transaction will be
accounted for as a transaction between companies under common control and
as such all assets and liabilities of the Company will be carried over at
historic cost.
4. Litigation
A lawsuit has been brought against the Partnership for an alleged personal
injury sustained in 1994 at the club. The Partnership is currently
defending the action with defense costs being paid by the Partnership's
insurer. The Partnership's management believes that the financial exposure
is minimal and in any event is covered by insurance. While the
Partnership's insurance company has verbally suggested to Partnership's
counsel that they may contest coverage in this matter, no such action has
been filed and the insuror continues to pay for representation. Claims
such as this are routine in the industry and management believes that the
ultimate resolution of this matter will not materially affect the
partnership's financial position.
7
<PAGE> 8
ENTERTAINMENT WICHITA, INC.
BALANCE SHEET
SEPTEMBER 30, 1995 AND 1996
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Current asset:
Cash $ 224 $ 224
Investment in limited partnership 1,538 2,177
------- -------
$ 1,762 $ 2,401
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10 $ 10
Income taxes payable 164 239
------- -------
Total current liabilities 174 249
Stockholders' equity:
Common stock, $1 par value;
50,000 shares authorized,
3,200 shares issued and
outstanding 3,200 3,200
Additional paid-in capital 1,800 1,800
Less notes receivable from stockholders (4,500) --
Retained earnings (deficit) 1,088 (2,848)
------- -------
Total stockholders' equity 1,588 2,152
------- -------
$ 1,762 $ 2,401
======= =======
</TABLE>
See accompanying notes.
8
<PAGE> 9
ENTERTAINMENT WICHITA, INC.
INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Equity in earnings of limited
partnership $ 1,090 $ 649
General and administrative expenses -- --
-------- --------
Income before income taxes 1,090 649
Provision for income taxes 164 97
-------- --------
Net income $ 926 $ 552
======== ========
</TABLE>
See accompanying notes.
9
<PAGE> 10
ENTERTAINMENT WICHITA, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Notes Retained
----------------------- paid-in receivable earnings
Shares Amount capital stockholders (deficit)
---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 3,200 $ 3,200 $ 1,800 $ (4,500) $ 162
Net income for the nine months
ended September 30, 1995 -- -- -- -- 926
---------- ---------- ---------- ---------- ----------
Balance at September 30, 1995 3,200 3,200 1,800 (4,500) 1,088
Cancellation of notes receivable
for services performed -- -- -- 4,500 --
Net income for the three months
ended December 31, 1995 -- -- -- -- (4,488)
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1995 3,200 3,200 1,800 -- (3,400)
Net income for the nine months
ended September 30, 1996 -- -- -- -- 552
---------- ---------- ---------- ---------- ----------
Balance at September 30, 1996 3,200 $ 3,200 $ 1,800 $ -- $ (2,848)
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
10
<PAGE> 11
ENTERTAINMENT WICHITA, INC.
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 926 $ 552
Adjustments to reconcile net income
to net cash used in operating
activities:
Equity in earnings of limited
partnership (1,090) (649)
Change in assets and liabilities:
Increase (decrease) in accrued
expenses (242) 97
--------- ---------
Total adjustments (1,332) (552)
--------- ---------
Net cash used in operating
activities (406) --
Cash flows from investing activities:
Distributions received from limited
partnership 600 --
--------- ---------
Net cash provided by investing
activities 600 --
--------- ---------
Increase in cash 194 --
Cash at beginning of period 30 224
--------- ---------
Cash at end of period $ 224 $ 224
========= =========
Supplemental cash flow information:
Cash paid for income taxes $ 406 $ --
========= =========
</TABLE>
See accompanying notes.
11
<PAGE> 12
ENTERTAINMENT WICHITA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
1. Summary of significant accounting policies
Organization:
The Company was incorporated in Kansas on July 27, 1992. The Company is
the General Partner of In Cahoots, Limited Partnership. The Partnership
commenced operations in February 1994. The Partnership's operations have
consisted primarily of owning and operating a "Country-Western" theme
nightclub in Wichita, Kansas.
Basis of presentation:
The accompanying financial statements have been prepared by the Company,
without audit. In the opinion of management, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the financial
position as of September 30, 1995 and 1996, and the results of operations
and cash flows for the nine months ended September 30, 1995 and 1996.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and cash equivalents:
For purposes of the statement of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
Fair value of financial instruments:
Cash, accounts payable and accrued liabilities are carried in the
financial statements in amounts which approximate fair value because of
the short-term maturity of these instruments.
Investments:
Investments in partnerships, which the Company do not financially control,
are accounted for on the equity method until financial control is
established.
Income taxes:
Income taxes are provided based on earnings reported in the financial
statements. The Company follows Statement of Financial
12
<PAGE> 13
ENTERTAINMENT WICHITA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
1. Summary of significant accounting policies (continued)
Accounting Standards No. 109 whereby deferred income taxes are provided on
temporary differences between reported earnings and taxable income.
2. Litigation
A lawsuit has been brought against the Partnership for an alleged personal
injury sustained in 1994 at the club. The Partnership is currently
defending the action with defense costs being paid by the Partnership's
insurer. The Partnership's management believes that the financial exposure
is minimal and in any event is covered by insurance. While the
Partnership's insurance company has verbally suggested to Partnership's
counsel that they may contest coverage in this matter, no such action has
been filed and the insuror continues to pay for representation. Claims
such as this are routine in the industry and management believes that the
ultimate resolution of this matter will not materially affect the
partnership's financial position.
13
<PAGE> 1
EXHIBIT 7.1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners
In Cahoots, Limited Partnership
We have audited the accompanying balance sheet of In Cahoots, Limited
Partnership as of December 31, 1994 and 1995, and the related statements of
income, partners' capital and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of In Cahoots, Limited
Partnership as of December 31, 1994 and 1995, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
Denver, Colorado CAUSEY DEMGEN & MOORE INC.
October 12, 1996
1
<PAGE> 2
IN CAHOOTS, LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1994 AND 1995
ASSETS
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Current assets:
Cash $ 42,972 $ 33,717
Accounts receivable (Note 2):
Credit cards 605 609
Other 270 6,514
Related parties (Note 5) 39,000 43,803
Inventories (Note 2) 38,682 31,587
Prepaid expenses 32,788 2,120
Pre-opening expenses, net of accumulated
amortization of $159,959 (1994) and
$174,501 (1995) 14,542 --
-------- --------
Total current assets 168,859 118,350
Property and equipment, at cost (Note 2):
Leasehold improvements 168,464 174,939
Parking lot improvements 54,579 73,297
Furniture, fixtures and equipment 260,463 262,963
-------- --------
483,506 511,199
Less accumulated depreciation
and amortization 43,851 94,521
-------- --------
Net property and equipment 439,655 416,678
-------- --------
$608,514 $535,028
======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 3
IN CAHOOTS, LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1994 AND 1995
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 43,468 $ 41,674
Notes payable - related parties (Note 2) 50,000 50,000
Current portion of long-term note
payable (Note 2) 48,514 75,425
Note payable - bank (Note 2) 137,758 18,307
Payroll and payroll taxes payable 19,218 16,548
Sales and liquor taxes payable 22,837 16,216
Accrued property taxes payable 7,993 36,471
Accrued rent - related party (Note 3) 9,905 32,011
Accrued interest payable 4,967 12,089
-------- --------
Total current liabilities 344,660 298,741
Long-term debt (Note 2):
Notes payable - related parties 10,000 10,000
Note payable - bank, net of current
portion 149,094 73,501
-------- --------
Total long-term debt 159,094 83,501
Commitments (Note 3)
Partners' capital (Note 4):
General partner 1,048 1,528
Limited partners 103,712 151,258
-------- --------
Total partners' capital 104,760 152,786
-------- --------
$608,514 $535,028
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
IN CAHOOTS, LIMITED PARTNERSHIP
INCOME STATEMENT
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Revenues:
Beverage and food sales $2,033,900 $1,616,741
Admission fees 718,712 735,881
Other revenues 59,164 67,133
---------- ----------
Total revenues 2,811,776 2,419,755
Costs and expenses:
Cost of products and services 879,494 811,945
Depreciation and amortization 203,810 65,212
Interest 43,460 46,002
Management fees - related party
(Note 5) 152,376 127,005
Rent - related party (Note 3) 164,052 157,011
General and administrative
expenses 1,144,824 1,104,554
---------- ----------
Total costs and expenses 2,588,016 2,311,729
---------- ----------
Net income $ 223,760 $ 108,026
========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 5
IN CAHOOTS, LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
General Limited
partner partners Total
--------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1993 $ 10 $ 990 $ 1,000
Net income for the year ended
December 31, 1994 2,238 221,522 223,760
Distributions to partners
(Note 4) (1,200) (118,800) (120,000)
--------- --------- ---------
Balance at December 31, 1994 1,048 103,712 104,760
Net income for the year
ended December 31, 1995 1,080 106,946 108,026
Distributions to partners
(Note 4) (600) (59,400) (60,000)
--------- --------- ---------
Balance at December 31, 1995 $ 1,528 $ 151,258 $ 152,786
========= ========= =========
</TABLE>
See accompanying notes.
5
<PAGE> 6
IN CAHOOTS, LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 223,760 $ 108,026
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 203,810 65,212
Change in assets and liabilities:
Decrease (increase)in accounts
receivable 1,643 (6,248)
Decrease (increase) in inventories (38,682) 7,095
Decrease (increase) in prepaid
expenses (32,788) 30,668
Increase (decrease) in accounts
payable 43,468 (1,794)
Increase in accrued expenses 58,904 48,415
--------- ---------
Total adjustments 236,355 143,348
--------- ---------
Net cash provided by operating
activities 460,115 251,374
Cash flows from investing activities:
Acquisition of property and equipment (456,539) (27,693)
Increase in pre-opening expenses (87,197) --
Increase in accounts receivable -
related party (21,371) (4,803)
--------- ---------
Net cash used in investing activities (565,107) (32,496)
Cash flows from financing activities:
Borrowings from related parties 175,000 1,000
Repayments of borrowings from related
parties (115,000) (1,000)
Borrowings from banks 359,794 --
Repayments of borrowings from banks (191,178) (168,133)
Distributions to partners (120,000) (60,000)
--------- ---------
Net cash provided by (used in)
financing activities 108,616 (228,133)
--------- ---------
Increase (decrease) in cash 3,624 (9,255)
Cash at beginning of period 39,348 42,972
--------- ---------
Cash at end of period $ 42,972 $ 33,717
========= =========
Supplemental cash flow information:
Cash paid for interest $ 38,493 $ 38,880
========= =========
</TABLE>
See accompanying notes.
6
<PAGE> 7
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
1. Summary of significant accounting policies
Organization:
The Partnership was organized in Kansas on June 15, 1992. The general
partner is Entertainment Wichita, Inc., a Kansas corporation. The
Partnership commenced operations in February 1994. The Partnership's
operations have consisted primarily of owning and operating a
"Country-Western" theme nightclub in Wichita, Kansas.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and cash equivalents:
For purposes of the statement of cash flows, the Partnership considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
Inventories:
Inventories consist of liquor, wine, beer and bar supplies. Inventories
are stated at the lower of cost (first-in, first-out method) or market.
Depreciation and amortization:
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the assets' estimated useful lives as
follows:
Years
-----
Leasehold improvements 10
Parking lot improvements 10
Furniture, fixtures and equipment 10
Certain costs incurred before a nightclub is opened are capitalized as
pre-opening expenses and amortized over a 12 month period commencing the
first full month the nightclub begins operation.
Repairs and maintenance:
Normal costs incurred to repair and maintain fixed assets are charged to
operations as incurred. Repairs and betterments which extend the life of
an asset are capitalized and subsequently
7
<PAGE> 8
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
1. Summary of significant accounting policies (continued)
depreciated on a straight-line basis over the remaining useful life of the
asset. When assets are sold or retired, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss
is included in operations.
Fair value of financial instruments:
Cash, accounts receivable, accounts payable and accrued liabilities are
carried in the financial statements in amounts which approximate fair
value because of the short-term maturity of these instruments. Long-term
debt is carried in the financial statements in amounts which approximate
fair value because interest rates have not changed significantly after the
debt was incurred.
Advertising costs:
The Partnership expenses the costs of advertising as incurred.
During the years ended December 31, 1994 and 1995, the Partnership
incurred advertising costs of $112,805 and $85,408, respectively.
Income taxes:
No provision for income taxes has been provided for the Partnership since
the partners report their distributive share of income or loss in their
personal capacity.
Concentration of credit risk:
Financial instruments which potentially subject the Partnership to
concentrations of credit risk are primarily cash and temporary cash
investments. The Partnership places its cash investments in highly rated
financial institutions.
2. Notes payable
Short-term notes payable to bank consisted of the following at December
31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Note payable to bank, payable in monthly installments of $13,444, including
interest at 1% over the bank's base rate with the final balance due on
December 8, 1995, unsecured. As of December 31, 1995 this note was in de-
fault but was paid in full during 1996 $137,758 $ 18,307
======== ========
</TABLE>
8
<PAGE> 9
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
2. Notes Payable (continued)
Notes payable - related parties consists of the following at December 31,
1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Notes payable - affiliates of limited partners, payable in monthly installments
of $5,000, including interest at 10%, secured by the personal guarantee of
the Company's president, these loans
were in default at December 31, 1995 $ 50,000 $ 50,000
========= =========
Notes payable - limited partners, in the original principal amount of $50,000,
payable on demand, including interest at 10%, unsecured, due date
subsequently
extended to July 28, 1997 $ 10,000 $ 10,000
========= =========
Long-term note payable - bank consists of the following at December 31, 1994
and 1995:
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Note payable - bank, payable at the rate of $8,069 per month including interest
at 18%, secured by accounts receivable
inventory and furniture and equipment $ 197,608 $ 148,926
Less current maturities (48,514) (75,425)
--------- ---------
Amount due after one year $ 149,094 $ 73,501
========= =========
Maturities of long-term debt at December 31, 1995 are as follows for the years
ended December 31:
1996 $ 75,425
1997 83,501
---------
$ 158,926
=========
</TABLE>
3. Real estate leases
On July 30, 1993, the Partnership entered into a building lease for club
operations in Wichita, Kansas with a 20% limited partner. The lease term
is ten years commencing October 15, 1993. In addition to minimum rental
payments the Partnership is obligated to pay to the landlord, as
additional rent, a percentage of gross sales after deductions for alcohol
and sales taxes. The lease agreement contains two five-year renewal
options at the primary lease term rental rate. For the year ended December
31, 1994 and 1995, the Partnership has incurred additional percentage rent
expense of $9,011 and $12,052 respectively.
9
<PAGE> 10
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
3. Real estate leases (continued)
Rent expense for the years ended December 31, 1994 and 1995 amounted to
$164,052 and $157,011, respectively, including percentage rent.
The minimum annual commitments under the real estate lease for the years
ended December 31, are as follows:
<TABLE>
<S> <C> <C>
1996 $ 150,000
1997 150,000
1998 150,000
1999 150,000
2000 150,000
2001-2003 431,250
----------
$1,181,250
==========
</TABLE>
4. Capital contributions and distributions of the Partnership
During 1993, the general partner contributed capital of $10 and the
limited partners contributed capital of $990. Profits and losses are
allocated 99% to the limited partners' interests and 1% to the general
partner. During the years ended December 31, 1994 and 1995, the
Partnership distributed $120,000 and $60,000, respectively, to the
partners.
5. Related party transactions
For the years ended December 31, 1994 and 1995, the Partnership paid
management fees to a company owned by relatives of the president of the
general partner amounting to $127,376 and $127,005, respectively, and an
additional $25,000 fee during 1994 for assistance in opening the club. At
December 31, 1994 and 1995, $24,000 and $28,803, respectively, had been
advanced to this related company.
During the year ended December 31, 1994, the Partnership provided training
services valued at $15,000 to the 20% limited partner who leases the club
to the Partnership. This amount has been reflected as a receivable at
December 31, 1994 and 1995. This amount is expected to be repaid upon the
payment by the Partnership of certain notes payable to companies related
to the 20% limited partner.
6. Litigation
A lawsuit has been brought against the Partnership for an alleged personal
injury sustained in 1994 at the club. The Partnership is currently
defending the action with defense costs being paid by the Partnership's
insurer. The Partnership's management believes that
10
<PAGE> 11
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
6. Litigation (continued)
the financial exposure is minimal and in any event is covered by insurance.
While the Partnership's insurance company has verbally suggested to
Partnership's counsel that they may contest coverage in this matter, no
such action has been filed and the insuror continues to pay for
representation. Claims such as this are routine in the industry and
management believes that the ultimate resolution of this matter will not
materially affect the partnership's financial position.
11
<PAGE> 12
IN CAHOOTS, LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1995 AND 1996
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Current assets:
Cash $ 43,305 $ 45,812
Accounts receivable (Note 2):
Credit cards 197 531
Other 1,477 6,297
Related parties (Note 5) 40,790 39,000
Inventories (Note 2) 29,372 29,773
Prepaid expenses 4,027 6,633
Pre-opening expenses, net of
accumulated amortization of
$174,501 (1995) and $174,501 (1996) -- --
-------- --------
Total current assets 119,168 128,046
Property and equipment, at cost (Note 2):
Leasehold improvements 174,939 176,536
Parking lot improvements 72,673 73,297
Furniture, fixtures and equipment 260,463 263,699
-------- --------
508,075 513,532
Less accumulated depreciation
and amortization 81,759 132,884
-------- --------
Net property and equipment 426,316 380,648
-------- --------
$545,484 $508,694
======== ========
</TABLE>
See accompanying notes.
12
<PAGE> 13
IN CAHOOTS, LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1995 AND 1996
(Unaudited)
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 43,974 $ 48,629
Notes payable - related parties
(Note 2) 50,000 50,000
Current portion of long-term debt
(Note 2) 60,159 95,292
Note payable - bank (Note 2) 49,469 --
Payroll and payroll taxes payable 9,281 6,218
Sales and liquor taxes payable 15,493 12,732
Accrued property taxes payable 10,794 29,378
Accrued rent - related party (Note 3) 32,010 17,000
Accrued interest payable 10,309 17,000
-------- --------
Total current liabilities 281,489 276,249
Long-term debt (Note 2):
Notes payable - related parties 10,000 --
Note payable - bank, net of current
portion 100,268 14,807
-------- --------
Total long-term debt 110,268 14,807
Commitments (Note 3)
Partners' capital (Note 4):
General partner 1,538 2,177
Limited partners 152,189 215,461
-------- --------
Total partners' capital 153,727 217,638
-------- --------
$545,484 $508,694
======== ========
</TABLE>
See accompanying notes.
13
<PAGE> 14
IN CAHOOTS, LIMITED PARTNERSHIP
INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenues:
Beverage and food sales $1,276,176 $ 957,951
Admission fees 578,511 456,636
Other revenues 54,590 35,934
---------- ----------
Total revenues 1,909,277 1,450,521
Costs and expenses:
Cost of products and services 665,719 445,184
Depreciation and amortization 52,450 38,363
Interest 38,653 25,681
Management fees - related party
(Note 5) 101,483 73,685
Rent - related party (Note 3) 119,511 112,500
General and administrative
expenses 822,494 690,256
---------- ----------
Total costs and expenses 1,800,310 1,385,669
---------- ----------
Net income $ 108,967 $ 64,852
========== ==========
</TABLE>
See accompanying notes.
14
<PAGE> 15
IN CAHOOTS, LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
General Limited
partner partners Total
--------- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1994 $ 1,048 $ 103,712 $ 104,760
Net income for the nine months
ended September 30, 1995 1,090 107,877 108,967
Distributions to partners
(Note 4) (600) (59,400) (60,000)
--------- --------- ---------
Balance at September 30, 1995 1,538 152,189 153,727
Net loss for the three months ended
December 31, 1995 (10) (931) (941)
--------- --------- ---------
Balance at December 31, 1995 1,528 151,258 152,786
Net income for the nine months ended
September 30, 1996 649 64,203 64,852
--------- --------- ---------
Balance at September 30, 1996 $ 2,177 $ 215,461 $ 217,638
========= ========= =========
</TABLE>
See accompanying notes.
15
<PAGE> 16
IN CAHOOTS, LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 108,967 $ 64,852
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 52,450 38,363
Change in assets and liabilities:
Decrease (increase)in accounts
receivable (799) 295
Decrease in inventories 9,310 1,814
Decrease (increase) in prepaid
expenses 28,761 (4,513)
Increase in accounts payable 506 6,955
Increase (decrease) in accrued
expenses 12,967 (31,007)
--------- ---------
Total adjustments 103,195 11,907
--------- ---------
Net cash provided by operating
activities 212,162 76,759
Cash flows from investing activities:
Acquisition of property and equipment (24,569) (2,333)
Decrease (increase) in accounts
receivable - related party (1,790) 4,803
--------- ---------
Net cash provided by (used in)
investing activities (26,359) 2,470
Cash flows from financing activities:
Repayments of borrowings from banks (125,470) (67,134)
Distributions to partners (60,000) --
--------- ---------
Net cash used in financing activities (185,470) (67,134)
--------- ---------
Increase in cash 333 12,095
Cash at beginning of period 42,972 33,717
--------- ---------
Cash at end of period $ 43,305 $ 45,812
========= =========
Supplemental cash flow information:
Cash paid for interest $ 33,311 $ 20,770
========= =========
</TABLE>
See accompanying notes.
16
<PAGE> 17
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
1. Summary of significant accounting policies
Organization:
The Partnership was organized in Kansas on June 15, 1992. The general
partner is Entertainment Wichita, Inc., a Kansas corporation. The
Partnership commenced operations in February 1994. The Partnership's
operations have consisted primarily of owning and operating a
"Country-Western" theme nightclub in Wichita, Kansas.
Basis of presentation:
The accompanying financial statements have been prepared by the
Partnership, without audit. In the opinion of management, the accompanying
unaudited financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary for a fair presentation of the
financial position as of September 30, 1995 and 1996, and the results of
operations and cash flows for the nine months ended September 30, 1995 and
1996.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and cash equivalents:
For purposes of the statement of cash flows, the Partnership considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents.
Inventories:
Inventories consist of liquor, wine, beer and bar supplies. Inventories
are stated at the lower of cost (first-in, first-out method) or market.
Depreciation and amortization:
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the assets' estimated useful lives as
follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Leasehold improvements 10
Parking lot improvements 10
Furniture, fixtures and equipment 10
</TABLE>
17
<PAGE> 18
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
1. Summary of significant accounting policies (continued)
Certain costs incurred before a nightclub is opened are capitalized as
pre-opening expenses and amortized over a 12 month period commencing the
first full month the nightclub begins operation.
Repairs and maintenance:
Normal costs incurred to repair and maintain fixed assets are charged to
operations as incurred. Repairs and betterments which extend the life of
an asset are capitalized and subsequently depreciated on a straight-line
basis over the remaining useful life of the asset. When assets are sold or
retired, the cost and accumulated depreciation are removed from the
accounts and any resulting gain or loss is included in operations.
Fair value of financial instruments:
Cash, accounts receivable, accounts payable and accrued liabilities are
carried in the financial statements in amounts which approximate fair
value because of the short-term maturity of these instruments. Long-term
debt is carried in the financial statements in amounts which approximate
fair value because interest rates have not changed significantly after the
debt was incurred.
Advertising costs:
The Partnership expenses the costs of advertising as incurred.
During the nine months ended September 30, 1995 and 1996, the Partnership
incurred advertising costs of $59,215 and $111,411, respectively.
Income taxes:
No provision for income taxes has been provided for the Partnership since
the partners report their distributive share of income or loss in their
personal capacity.
Concentration of credit risk:
Financial instruments which potentially subject the Partnership to
concentrations of credit risk are primarily cash and temporary cash
investments. The Partnership places its cash investments in highly rated
financial institutions.
2. Notes payable
Short-term notes payable to bank consisted of the following at September
30, 1995 and 1996:
18
<PAGE> 19
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
2. Notes payable (continued)
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Note payable to bank, payable in monthly installments of $13,444, including
interest at 1% over the bank's base rate with the final balance due on
December 8, 1995, unsecured. As of December 31, 1995 this note was in de-
fault but was paid in full during 1996 $ 49,469 $ --
========= =========
Notes payable - related parties consists of the following at September 30, 1995
and 1996:
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Notes payable - affiliates of limited partners, payable in monthly installments
of $5,000, including interest at 10%, secured by the personal guarantee of
the Company's president, these loans
were in default at September 30, 1996 $ 50,000 $ 50,000
========= =========
Notes payable - limited partners, in the original principal amount of $50,000,
payable on demand, including interest at 10%, unsecured, due date
subsequently
extended to July 28, 1997 $ 10,000 $ 10,000
========= =========
Long-term note payable - bank consists of the following at September 30, 1995
and 1996:
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Note payable - bank, payable at the rate of $8,069 per month including interest
at 18%, secured by accounts receivable
inventory and furniture and equipment $ 160,427 $ 100,099
Less current maturities (60,159) (85,292)
--------- ---------
Amount due after one year $ 100,268 $ 14,807
========= =========
Maturities of long-term debt at September 30, 1996 are as follows for the
twelve month periods ended September 30:
1997 $ 95,292
1998 14,807
---------
$ 110,099
</TABLE>
3. Real estate leases
On July 30, 1993, the Partnership entered into a building lease for club
operations in Wichita, Kansas with a 20% Limited Partner. The lease term
is ten years commencing October 15, 1993. In addition to minimum rental
payments the Partnership is obligated to pay to
19
<PAGE> 20
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
3. Real estate leases (continued)
the landlord, as additional rent, a percentage of gross sales after
deductions for alcohol and sales taxes. The lease agreement contains two
five-year renewal options at the primary lease term rental rate. For the
nine months ended September 30, 1995 and 1996, the Partnership has
incurred additional percentage rent expense of $6,711 and $0,
respectively.
Rent expense for the nine months ended September 30, 1995 and 1996
amounted to $119,511 and $112,500, respectively, including percentage
rent.
The minimum annual commitments under the real estate lease for the twelve
month periods ended September 30, are as follows:
<TABLE>
<S> <C> <C>
1997 $ 150,000
1998 150,000
1999 150,000
2000 150,000
2001 150,000
2002-2004 318,750
----------
$1,068,750
</TABLE>
4. Capital contributions and distributions of the Partnership
During 1993, the general partner contributed capital of $10 and the
limited partners contributed capital of $990. Profits and losses are
allocated 99% to the limited partners' interests and 1% to the general
partner. During the nine months ended September 30, 1995 and 1996 the
Partnership distributed $60,000 and $0, respectively, to the partners.
5. Related party transactions
For the nine months ended September 30, 1995 and 1996, the Partnership
paid management fees to a company owned by relatives of the general
partner amounting to $101,483 and $73,685, respectively. At September 30,
1995 and 1996, $25,790 and $24,000, respectively, had been advanced to
this related company.
During the year ended December 31, 1994, the Partnership provided training
services valued at $15,000 to the 20% limited partner who leases the club
to the Partnership. This amount has been reflected as a receivable at
September 30, 1995 and 1996. This amount is expected to be repaid upon the
payment by the Partnership of certain notes payable to companies related
to the 20% limited partner.
20
<PAGE> 21
IN CAHOOTS, LIMITED PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1996
6. Litigation
A lawsuit has been brought against the Partnership for an alleged personal
injury sustained in 1994 at the club. The Partnership is currently
defending the action with defense costs being paid by the Partnership's
insurer. The Partnership's management believes that the financial exposure
is minimal and in any event is covered by insurance. While the
Partnership's insurance company has verbally suggested to Partnership's
counsel that they may contest coverage in this matter, no such action has
been filed and the insuror continues to pay for representation. Claims
such as this are routine in the industry and management believes that the
ultimate resolution of this matter will not materially affect the
partnership's financial position.
21
<PAGE> 1
EXHIBIT 7.2
UNAUDITED PRO FORMA INFORMATION
Entertainment Wichita, Inc. ("EWI") is the general partner of In
Cahoots, Limited Partnership ("In Cahoots"). Through September 30, 1996, EWI
owned a 1% interest in the profits and losses of In Cahoots. On October 1,
1996, limited partners of In Cahoots owning an aggregate 79% limited
partnership interest, exchanged these partnership interests for an aggregate of
36,800 shares of common stock of EWI and the assumption of $150,000 of debt
related to a previous acquisition of limited partnership interests by another
party.
Western Country Clubs, Inc. (the "Company"), EWI and WCCI Acquisition
Corporation ("Merger Sub") have entered into an Agreement and Plan of Merger
whereby EWI would become a 100% owned subsidiary of the Company by merger with
Merger Sub. On December 16, 1996, the Company issued 400,000 shares of its
common stock and assumed $150,000 of notes owed to former limited partners of
In Cahoots in exchange for all of the outstanding common shares of EWI.
The following unaudited pro forma consolidated balance sheet as of
September 30, 1996, gives effect to the above transactions as though they were
consummated on September 30, 1996. The financial statements shown as EWI on
the attached pro forma balance sheet are the pro forma consolidated financial
statements of EWI and In Cahoots. The statements of operations assume the
above transactions had occurred at the beginning of the periods presented.
The exchange of partnership interests of In Cahoots for shares of
common stock of EWI and the assumption of certain notes payable has been
treated as a reverse acquisition of EWI by the Partnership using purchase
accounting and the acquisition of minority interests resulting in the
recognition of goodwill in the amount of $62,945.
The Agreement and Plan of Merger has also been treated as a
transaction between entities under common control and therefore the
consolidated assets and liabilities of EWI are carried over at historical cost.
1
<PAGE> 2
WESTERN COUNTRY CLUBS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
EWI PRO FORMA
WESTERN PRO FORMA ADJUSTMENTS PRO FORMA
---------- --------- ------------ - --------
<S> <C> <C> <C> <C>
ASSETS
------
Current assets:
Cash $ 186,509 $ 46,036 $ $ 232,545
Accounts receivable 104,771 45,828 150,599
Notes receivable - Cowboys 100,000 - 100,000
Inventories 84,599 29,773 114,372
Prepaid expenses 99,777 6,633 106,410
Pre-opening expenses 13,068 - 13,068
Deferred income taxes 154,000 - 154,000
Refundable income taxes 109,975 - 109,975
---------- ---------- -------------- -----------
Total current assets 852,699 128,270 980,969
Property and equipment:
Land and improvements 224,989 - 224,989
Building and improvements 755,900 73,297 829,197
Leasehold improvements 2,605,709 176,536 2,782,245
Furniture, fixtures and
equipment 980,633 263,699 1,244,332
---------- ---------- -------------- -----------
4,567,231 513,532 5,080,763
Less accumulated depreci-
ation and amortization (1,037,694) (132,884) (1,170,578)
---------- ---------- -------------- -----------
3,529,537 380,648 3,910,185
Other assets:
Deferred income taxes 136,000 - 136,000
Goodwill, net of amortization 507,184 62,945 570,129
Covenant not to compete, net of
amortization 480,476 - 480,476
Deposits and other 123,027 - 123,027
---------- ---------- -------------- -----------
Total other assets 1,246,687 62,945 1,309,632
---------- ---------- -------------- -----------
$5,628,923 $ 571,863 $ $ 6,200,786
========== ========== ============== ===========
</TABLE>
2
<PAGE> 3
WESTERN COUNTRY CLUBS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
EWI PRO FORMA
WESTERN PRO FORMA ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 116,420 $ 48,639 $ $ 165,059
Notes payable 300,035 200,000 500,035
Income taxes payable 94,400 239 94,639
Accrued expenses 353,500 82,328 435,828
Current portion of long-
term debt 78,083 95,292 173,375
---------- ---------- ---------- ----------
942,438 426,498 1,368,936
Long-term debt 499,492 14,807 514,299
Equity interest of other partners
in consolidated subsidiaries 215,320 43,527 258,847
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, 3,119,921 (Western),
400,000 (EWI) and 3,519,921
(Pro Forma) shares issued and outstanding 31,199 85,379 (81,379) 35,199
Additional paid-in capital 4,183,986 - 83,031 4,267,017
Retained earnings (deficit) (243,512) 1,652 (1,652) (243,512)
---------- ---------- ---------- ----------
3,971,673 87,031 - 4,058,704
---------- ---------- ---------- ----------
$5,628,923 $ 571,863 $ - $6,200,786
========== ========== =========== ==========
</TABLE>
3
<PAGE> 4
WESTERN COUNTRY CLUBS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
WESTERN EWI PRO FORMA
HISTORICAL PRO FORMA ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Beverage and food sales $5,878,502 $1,616,741 $ $ 7,495,243
Admission fees 1,986,847 735,881 2,722,728
Other revenue 642,709 67,133 709,842
---------- ---------- -----------
Total revenues 8,508,058 2,419,755 10,927,813
Costs and expenses:
Cost of products and services 2,349,097 811,945 3,161,042
Depreciation and amortization 642,812 65,212 708,024
Interest 137,059 46,002 183,061
General and administrative
expense 4,909,189 1,104,554 6,013,743
Consulting fees - related parties 11,400 127,005 138,405
Rent - related parties - 157,011 157,011
Merger expenses 117,190 - 117,190
---------- -- ---------- ----------- -----------
Total costs and expenses 8,166,747 2,311,729 10,478,476
---------- ---------- ----------- -----------
Income before taxes, minority
interest and equity in loss of
partnership 341,311 108,026 449,337
Provision (benefit) for income
taxes:
Current 183,660 31,400 215,060
Deferred (50,000) 9,300 (40,700)
---------- ---------- ----------- -----------
Total provision for income
taxes 133,660 40,700 174,360
---------- ---------- ----------- -----------
Income before minority interest and
equity in loss of partnership 207,651 67,326 274,977
Other partners' and shareholders'
interests in net income of consoli-
dated subsidiaries, net of income tax
benefit (20,587) (13,460) (34,047)
Equity in loss of partnership, net of
income tax benefit (123,676) - (123,676)
Write off of investment in partnership,
net of income tax benefit (274,621) - (274,621)
---------- -- ---------- ----------- -----------
Net income (loss) $ (211,233) $ 53,866 $ $ (157,367)
========== ========== =========== ===========
Net income (loss) per common
share $ (.07) $ .13 $ (.04)
========== ========== ===========
Weighted average common
shares outstanding 3,161,000 400,000 3,561,000
========== ========== ===========
</TABLE>
4
<PAGE> 5
WESTERN COUNTRY CLUBS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
WESTERN EWI PRO FORMA
HISTORICAL PRO FORMA ADJUSTMENTS PRO FORMA
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Beverage and food sales $3,544,385 $ 957,951 $ $4,502,336
Admission fees and other revenue 1,967,085 492,570 2,459,655
---------- ---------- ------------- ----------
Total revenues 5,511,470 1,450,521 6,961,991
Costs and expenses:
Cost of products and services 1,623,473 445,184 2,068,657
Depreciation and amortization 465,496 38,363 503,859
Interest 109,425 25,681 135,106
Management fees - related party - 73,685 73,685
Rent - related party - 112,500 112,500
General and administrative
expense 3,390,571 690,256 4,080,827
---------- ---------- ------------- ----------
Total costs and
expenses 5,588,965 1,385,669 6,974,634
---------- ---------- ------------- ----------
Income (loss) before taxes, minority
interest and extraordinary item (77,495) 64,852 (12,643)
Provision (benefit) for income
taxes (26,481) 24,190 (2,291)
---------- ---------- ------------- ----------
Income (loss) before minority interest (51,014) 40,662 (10,352)
Other partners' interest in net
income of consolidated subsidiaries,
net of income tax provision 16,528 8,132 24,660
---------- ---------- ------------- ----------
Income (loss) before extraordinary
item (67,542) 32,530 (35,012)
Extraordinary item:
Gain on extinguishment of debt,
net of income tax provision 67,587 - 67,587
---------- ---------- ------------- ----------
Net income $ 45 $ 32,530 $ $ 32,575
========== ========== ============= ==========
Net income (loss) per share before
extraordinary item $ (.02) $ .08 $ (.01)
Extraordinary gain .02 - .02
---------- ---------- ------------- ----------
Net income per common share $ * $ .08 $ .01
========== ========== ============= ==========
Weighted average common
shares outstanding 3,136,000 400,000 3,536,000
========== ========== ============= ==========
</TABLE>
* less than .01 per share
5
<PAGE> 6
WESTERN COUNTRY CLUBS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
SEPTEMBER 30, 1996
The pro forma adjustments assume 400,000 shares of common stock of Western were
issued in exchange for the currently outstanding shares of common stock of EWI
at the beginning of the periods presented.
The following is a summary of the adjustments required based upon the above
assumptions.
<TABLE>
<CAPTION>
September
30, 1996
Amount
---------
<S> <C> <C>
1. To record issuance of 400,000
shares of Western's common stock
for the common stock of EWI
Common stock $(81,379)
Additional paid-in capital 83,031
Retained earnings (1,652)
</TABLE>
6
