Atomic Burrito, Inc.

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International Guild of Hospitality & Restaurant Managers

Atomic Burrito, Inc., organized in December 1989, currently operates two country-western theme nightclubs located in St. Louis, Missouri (the St. Louis Club) and Wichita, Kansas (the Wichita Club). Each Club combines live entertainment, dancing, bar and food in a country-western atmosphere. The Wichita Club has operated as In Cahoots since its inception in 1994, and the St. Louis Club was changed to an In Cahoots in 1996, having previously operated as A Little Bit of Texas.

The Company's current focus is on the development of its Atomic Burrito concept, as evidenced by the recent change of name. With six restaurants currently in operation, including the recently-opened Oklahoma City unit as well as the licensed unit in Longview, Washington, the Company intends to continue the expansion of this concept during 2000. Additional restaurants openings during 2000 are planned in Tulsa, Wichita, Houston and Oklahoma City, in order to command more of a market presence in those areas, along with plans for new units in Dallas and Austin, Texas.

The St. Louis Club

The St. Louis Club is located on the I-70 corridor between St. Louis, Missouri and Kansas City, Kansas. The Club occupies roughly one-half of a building which previously housed a Sam's Club wholesale warehouse operation and is in excess of 56,000 square feet making it the largest nightclub in Missouri. This mammoth nightclub operates under the name In Cahoots and features a design with the look and feel of an authentic rustic western town. The Club, with a capacity of almost 3,000, houses a huge dance floor, performance stage, a billiards and video arcade area and several retail stores including Sundance Silver & Hide, which sells wardrobe items, including hats and boots, and the Homestead Store, which sells Indian artifacts, clothing and jewelry.

Sundance Silver & Hide occupies approximately 800 square feet of the Club, for which it pays $1, 200 per month pursuant to an oral agreement with the Company. The Homestead Store occupies approximately 600 square feet of the Club, for which it pays $300 plus 10% of sales per month pursuant to an oral agreement with the Company. The Club also features a walk-up restaurant selling various food items in addition to its extensive drink offerings. The St. Louis Club featured numerous nationally known entertainers during the past year, including such performers as Tracy Lawrence, Lone Star, Chris LeDoux and Willie Nelson. The St. Louis Club opened for business as a non-alcoholic club in April 1994. It began marketing alcoholic beverages in May 1994, upon receipt of a liquor license from the Supervisor of Liquor Control of the State of Missouri.

The Wichita Club

The Company acquired its interest in the Wichita Club in December 1996, when it acquired Entertainment Wichita, Inc., the general partner and 80% owner of In Cahoots, Limited Partnership, a Kansas limited partnership. The Wichita Club opened in February 1994, and has been voted the top country-western club in Wichita since opening. It consists of approximately 30,000 square feet and has parking for 900 cars. The Wichita Club is designed to appeal to rodeo cowboys as well as the casual country western music lover. It blends high tech, state-of-the-art, and good old country boy entertainment. The high tech presentation includes giant 20 foot video screens, double CD players, a roll up lighted American flag, neon lighting and the capability to include a live band's sound throughout the house speaker system. A comfortable ambiance is achieved through rustic wooden floors, old west photographs, antique back bars, and a huge, hand-painted mural of past and present Country and Western entertainers. The showcase of the Club is the circular, race track style dance floor, complete with a bar in the center allowing for more dancing room.

In March 1999, the Company completed an expansion and addition to the Wichita Club called Pockets Sports Grill, which is adjacent to the In Cahoots club. The 8,000 square foot addition houses a sports bar, grill and pool hall, and features 17 full-size pool tables, 14 big-screen television monitors, a 40-foor bar with a sports ticker tape across the top, and various sports memorabilia. The grill features casual dining items such as tacos, nachos, burritos, quesadillas, charcoaled hamburgers, grilled chicken sandwiches, onion rings and french fries. Pockets Sports Grill is open seven days a week from 11 a.m. until midnight, and allows customers of the In Cahoots nightclub to have a place to eat before going to the club. Pockets Sports Grill also allows for customers of the facility to come in for lunch, thus attracting new customers who may not be familiar with the nightclub. Since the facilities are adjacent to the original InCahoots, management gets the benefit of certain economies of scale and is able to operate the grill with some of the same personnel as the nightclub.

Atomic Burrito Restaurants

During late 1997 and the first half of 1998, the Company conducted an extensive search for a viable restaurant concept to acquire and/or merge with. The Company decided to develop its own restaurant concept during the summer of 1998. The Company developed a Fresh-Mex burrito concept, which features fresh ingredients and made-to-order burritos. The menu contains a variety of Mexican items with the burrito being the featured entry, and with a focus on lunch and dinner business. While the concept emphasizes a family atmosphere, alcoholic beverages will be an option depending on the particular location.

The Company formed a wholly-owned subsidiary, Atomic Burrito, Inc., now Atomic Development, Inc., an Oklahoma corporation, in the summer of 1998, for development of its new restaurant concept. Because of its limited financial resources, the Company opted to develop its prototype restaurants through a license agreement whereby an experienced restaurant operator would own and operate the restaurant, using the Atomic Burrito name, menu, recipes, logo, layout and design, and utilizing the Atomic Burrito operations manual developed by the Company. In return, the licensee would pay the Company's subsidiary (licensor) an initial license fee and an ongoing royalty fee.

The first two Atomic Burrito restaurants were opened in Stillwater and Norman, Oklahoma in the fall of 1998 under license agreements. Subsequent to fiscal year end 1998, the Company entered into an additional license agreement of an Atomic Burrito restaurant to be opened in Longview, Washington. In addition, in October of 1998, the Company entered into a joint venture agreement with New York Bagel Enterprises, Inc., for the joint development of up to eight Atomic Burrito restaurants. The first joint venture restaurant under the agreement opened in March 1999 in Tulsa, Oklahoma, with a second restaurant scheduled to open in April 1999 in Wichita, Kansas. In September, 1999, the Company and New York Bagel agreed to terminate any future development under the joint venture agreement, and New York Bagel gave the Company an option to purchase New York Bagel's interest in the Tulsa and Wichita units, which the Company has not yet done. The Company has been in contact with the trustee and intends to purchase New York Bagel's interest in the two units.

During 1999, the Company entered into an agreement with a former employee for the joint development, on a 50%-50% basis, of an Atomic Burrito restaurant in Houston, Texas. This restaurant subsequently opened in September 1999. In December 1999, the Company entered into discussions with the licensee which owned the Norman, Oklahoma Atomic Burrito restaurant, regarding the possible purchase of the unit by the Company. The licensee approached the Company with the idea of selling the restaurant to the Company in exchange for common stock in the Company. Subsequently, an agreement was reached, effective December 1999, whereby the Company purchased the assets of the licensee and assumed certain liabilities. Thus, at the end of 1999, the Company owned and operated restaurants in Tulsa, Wichita, Houston, and Norman, with a licensed unit in Longview, Washington, and subsequent to year end opened an additional restaurant in Oklahoma City. The Oklahoma City unit is wholly owned by the Company.

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