LEVEL BEST GOLF INC /FL/, 10KSB40/A, 1997-06-06

LEVEL BEST GOLF INC /FL/
10KSB40/A, 1997-06-06
MISCELLANEOUS AMUSEMENT & RECREATION

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<PAGE> 1

FORM 10-KSB/A

U. S. Securities and Exchange Commission
Washington, D.C. 20549

(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 1996

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
------------- ----------------

Commission File No. 33-97770

LEVEL BEST GOLF, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)

Florida 59-3205644
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

14561 58th St. North
Clearwater, Florida 34620
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

(813) 535-7770
---------------------------
(Issuer's telephone number)

Securities registered under Section 12(b) of the Securities Exchange
Act of 1934:

Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
None None

Securities registered under Section 12(g) of the Securities Exchange
Act of 1934:

None
----------------
(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 the past 90 days. Yes X No
----- -----

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $495,681

The aggregate market value of the issuer's Common Stock, $.001 par value per
share, held by non-affiliates on December 23, 1996, based on the last sale price
of the Common Stock as reported by Nasdaq of $3.56 per share, was $7,824,033.

As of December 24, 1996, there were 3,246,042 shares of the issuer's Common
Stock, $.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None

<PAGE> 2

FORM 10-K

U. S. Securities and Exchange Commission
Washington, D.C. 20549

(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 1996

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
------------- ----------------

Commission File No. 33-97770

LEVEL BEST GOLF, INC.
(Exact name of small business issuer as specified in its charter)

Florida 59-3205644
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

14561 58th St. North
Clearwater, Florida 34620
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

(813)535-7770
---------------------------
(Issuer's telephone number)

Securities registered under Section 12(b) of the Securities Exchange
Act of 1934:

Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
None None

Securities registered under Section 12(g) of the Securities Exchange
Act of 1934:

None
----------------
(Title of Class)

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-K is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

State issuer's revenues for its most recent fiscal year: $495,681

As of December 24, 1996, there were 3,246,042 shares of the issuer's Common
Stock, $.001 par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None

<PAGE> 3

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS
-----------------------------------------------------------------------

The Company has not sent an annual report or proxy material to its
security holders. If an annual report or proxy material is furnished to the
Company's security holders subsequent to the filing of this Form 10-KSB, the
Company shall furnish copies of such material to the Securities and Exchange
Commission when such material is sent to the Company's security holders.

<PAGE> 4

LEVEL BEST GOLF, INC.

FORM 10-K

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I Page
------ ----
<S> <C> <C>
Item 1. Business

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security-Holders

PART II
-------

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

PART III
--------

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners
and Management

Item 13. Certain Relationships and Related Transactions

Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K

</TABLE>

<PAGE> 5

PART I

ITEM 1. BUSINESS.

GENERAL.

Level Best Golf, Inc. (the "Company"), was incorporated in Florida on
October 1, 1993. The Company markets unique, high quality and effective golf
training aids to domestic and foreign markets. With the cooperation of several
Professional Golfers Association ("PGA") professionals nationwide and support
from a variety of manufacturers of golf equipment, the Company offers a line of
products for the purpose of improving scores and enhancing enjoyment of the
game. The Company's executive offices are located at 14561 - 58th Street North,
in Clearwater, Florida. Its telephone number at that address is (813) 535-7770
and the fax number is (813) 535-0070.

PRODUCTS.

The Company's flagship product is MAXIMIZING YOUR GAME(TM). The product
consists of three, 2-hour videos which address almost every facet of the game.
It also comes with 5 training aids designed to work in conjunction with the
practice drills demonstrated on the videos. Tape 1 - "The Clinic: The Full Fall
Swing" - gives easy-to-follow instructions which help the golfer feel the
correct swing motion for driver, fairway woods and long irons. Tape 2 - "The
Clinic: The Short Game: Error Corrections and Misconceptions" - shows proper
techniques for chipping, pitching, sand shots and putting. Tape 2 also
demonstrates correction for hooks, slices and other problem shots. Tape 3 -
"Playing the Course" - shows golfers how to not get bogged down with too many
swing mechanics and also how to manage the golf game on the course. Included is
a 20-minute segment with noted sports psychologist, Dr. David Cook. Throughout
the videos, there are training aids to convey easy-to-understand practice drills
from which to build a solid golf swing.

MAXIMIZING YOUR GAME(TM) was first made available for general retail
during the fourth quarter of 1996. During the second quarter of 1997 the Company
will re-introduce the product as SCRATCH SCORE GOLF(TM) at a reduced price of
$59.95 (down from $79.95) via an infomercial featuring Mr. Wally Armstrong, a
PGA member since 1974, and testimonials and will simultaneously offer the
product in the retail market at prices ranging between $39.95 and $49.95. The
Company did not participate in any way with the initial introduction of this
product by Mr. Armstrong. American Telecast and Mr. Armstrong initially
introduced the product in 1992 and the infomercial ran in 1993. This was done as
"Wally Armstrong Golf, Inc." which sold over 100,000 units at $149.95 per unit.

The Company acquired exclusive marketing rights to the MAXIMIZING YOUR
GAME(TM) system for a term of 18 months commencing on March 15, 1995. It
continues thereafter on a year-to-year basis if annual payments of at least
$20,000 are made to Gator Golf

<PAGE> 6

Enterprises, Inc. ("Gator Golf"), a company controlled by Mr. Armstrong. The
Company pays 10% of the gross collected revenue on MAXIMIZING YOUR GAME(TM) to
Gator Golf. Gator Golf may terminate the Agreement upon written notice if timely
payments are not made by the Company or in the event the Company declares
bankruptcy or is insolvent. The Company would have ten days to cure any default.
As of the end of the Company's fiscal year, the Company owed Gator Golf royalty
payments in the amount of $34,751 but had not tendered any royalty payments to
Gator Golf and Gator Golf had not delivered a demand notice for such payments.
In the event that Gator Golf delivers notice to the Company demanding payment of
outstanding royalties, the Company intends to pay such royalties within the
10-day cure period. There can be no assurance that Gator Golf will not, in the
future, demand payment of outstanding royalties or that the Company will be able
to cure within 10 days of such notice.

From MAXIMIZING YOUR GAME(TM) the Company developed three individual
instructional videos, each one packaged with a training aid. THE TEMPO BALL
focuses on the swing lesson, THE RULER focuses on alignments and the short game,
and THE HANGER focuses on the power lesson.

Each of these products has a selling price point of $19.95. This price
point targets not only the inexpensive self-purchase, but also the much larger
gift-buying, audience and allows the products to enter into an expanded
distribution pattern. The promotional series was first made available for
general retail during the fourth quarter of 1996.

The LEVEL BEST GOLF SYSTEM consists of three engineered plastic
components (Hand Positioner, Loft Indicator and Lie Detector), a 20-minute
instructional video featuring Wally Armstrong, a carrying pouch and a bag tag
for recording training information specific to each golfer. The LEVEL BEST GOLF
SYSTEM retails for $49.95, plus $4.95 shipping and handling. The Company
introduced this product in green grass pro shops (a traditional pro shop located
at a golf course or driving range) and concrete golf shops (off-course golf
shops which sell golf clubs and accessories) nationwide in January 1995.

HAND POSITIONER: The Hand Positioner is a small plastic curved
component which attaches to the golf club just below the grip. The Hand
Positioner's vial and bubble indicate the golfer's hand position when he/she
addresses the ball and actually remain on the club as practice balls are hit.
This allows the golfer to return to the same position before hitting each shot,
which in turn builds consistency into the golfer's set-up and shot making.

LOFT INDICATOR: The Loft Indicator magnetically attaches a curved
plastic and vial component to the club face of the golf club. The Loft Indicator
will actually read the loft of the club face as the golfer addresses the ball
and also indicates whether the face of the club is pointed at the target
(square), which is the desired position, pointed to the right of the target
(open) or pointed to the left of the target (closed). Achieving proper alignment
of the club face to the target is an ongoing challenge

<PAGE> 7

for golfers of all skill levels and the Loft Indicator provides a quick and
repeatable method of achieving proper club face to target alignment.

LIE DETECTOR: The Lie Detector is a smaller plastic component which
also magnetically attaches to the club face and has a small vial just like a
carpenter's level. Proper club lie can vary as much as four degrees from one
player to the next. When the Lie Detector is placed parallel to a groove in the
club face and the bubble is centered between the lines on the vial (which
indicate level), if the hands are not in a comfortable relaxed position an
adjustment to the club lie would be indicated. The adjustment would be either
upright or flat, which would bring a golfer's hands to a comfortable and relaxed
position with the bubble in the level centered.

The 20 minute video which accompanies the components shows proper use
of each component and how they may be used in combination to improve set-up and
shot-making. It also shows how to record an individual golfer's proper hand
position and loft at address for quick reference and maximum benefit when using
the system to practice.

Mr. Perry Marshall invented and patented the basic components of the
LEVEL BEST GOLF SYSTEM in 1990. He updated and redesigned the components to
create the present form of the system. He filed new patents in January 1994 to
encompass these changes, as well as to tie the components together for use as a
training system. Mr. Marshall still holds these patents.

PUTT PERFECTOR - The PUTT PERFECTOR is a patented training aid designed
to help golfers of any skill level develop a pendulum putting stroke. The PUTT
PERFECTOR is a small plastic component. It attaches to the shaft of a putter
just above the head and has a small vial which assures that the PUTT PERFECTOR
is squared to the club face of the putter in one plane, and is level with the
horizon when the golfer addresses the ball. Inside the body of the PUTT
PERFECTOR, a small white ball sits on the front end of the PUTT PERFECTOR when
the golfer is addressing a putt. When the golfer makes a putting stroke, the
white ball travels toward the rear of the PUTT PERFECTOR and lands in one of
three pockets (similar to a pool table pocket and ball). The center pocket is
located directly behind the point from which the small white ball sits prior to
making the stroke. If a proper straight back and straight through (pendulum
stroke) to the target stroke is made, the white ball will go into this pocket
which is centered between two other pockets. If the white ball travels into
either of the other pockets, it would indicate the putter stroke was incorrect
by taking the putter path inside or outside of the desired center line path and
would indicate that correction is needed. The 30 minute instructional video
shows golfers how to attach and use the PUTT PERFECTOR and also shows how to
make proper strokes and correct faults in improper strokes.

The PUTT PERFECTOR is currently retailing at $24.95, plus $3.95
shipping and handling. The Company introduced this product

<PAGE> 8

in sporting goods stores as well as in green grass pro shops and concrete golf
shops nationwide in the first quarter of 1995 following the introduction of the
LEVEL BEST GOLF SYSTEM. The product will be re-introduced as the ONE PUTT
PERFECTOR in either the first or second quarter of 1997, at a retail price point
of $19.95.

The ANGLEIRON(TM) is a multi-purpose training club for all levels of
play. The ANGLEIRON(TM) is a single golf club that adjusts to a 3, 5, 7 or 9
iron or sand wedge setting that locks into place with a turn of a dial near the
foot of the club's shaft. This product will help any golfer develop a better
chipping, pitching and full swing motion. The ANGLEIRON(TM) will be on
infomercial in the first quarter of 1997.

The REACH VIDEO is targeted for junior golfers. The one-hour video
highlights the Rules, Etiquette, Appreciation, Conduct and History of the game
of golf. It is a program of the National Association of Junior Golfers,
sponsored by the Company and produced in cooperation with the United States Golf
Association, the PGA, the Ladies Professional Golfers Association, the National
Golf Foundation and the Golf Course Superintendents Association of America. The
product was made available for general retail beginning in the fourth quarter of
1996.

The Company has negotiated the rights to market and sell the BALL
BUTLER. This patented device hangs on either the inside or outside of a golf
bag, holds up to 12 golf balls at a time and provides easy access to golf balls.
The BALL BUTLER will be distributed directly into the retail market beginning in
either the first or second quarter of 1997 and will be priced at approximately
$20.

To capitalize on the market for improving an individual's performance
in golf, the Company will introduce the PERFORMANCE PACK around February 1997.
The PERFORMANCE PACK will consist of two products. One is a unique glove
featuring a reinforced palm, knuckle insert and a new method of stitching, and
the other is a "dry hands" solution that prevents moisture and repels rain. The
combination of these products should help to improve a golfer's performance. The
PERFORMANCE PACK will sell for approximately $19.95.

The LASER TRACKER or PLAIN SIGHT LASER is a product made with high
quality laser technology. It is designed to help any golfer improve his/her game
by allowing the golfer to follow the line of his/her swing. The Company has
initiated negotiations to license the products and anticipates that the product
will be available in the United States by April 1997, although there is no
assurance that it will be available by then.

GOLF 21 is an indoor/outdoor putting game for all ages that not only
entertains, but also can improve putting skills. It is promotionally priced and
was first made available during the fourth quarter of 1996.

<PAGE> 9

The Company has negotiated the rights to market and sell a patented
golf bag cover under the name of the CLUBS HOUSE. This is a high quality,
uniquely designed golf bag cover for use in inclement weather. It is
promotionally priced, has a universal need and can be purchased for personal use
or as a gift.

The GOLFERS FIRST AID CADDY is an assortment of products (aspirin,
bandages, sunscreen, etc.) packaged as a gift for golfers. This product is
promotionally priced and packaged for impulse buying. This product is expected
to be available in the first quarter of 1997, although there is no assurance
that it will be available by then.

The Company has an exclusive marketing agreement with Marshall
Products, Inc. ("Marshall Products"), for the LEVEL BEST GOLF SYSTEM, the PUTT
PERFECTOR and other golf related products currently under review and development
by Mr. Marshall, its principal. As of the end of its 1996 fiscal year, the
Company intends to continue to market only the PUTT PERFECTOR. The agreement is
for a term of five years from the effective date of January 1, 1994, with an
option to renew the agreement for an additional five years. The Company pays a
royalty of 7.5% of net sales. In the event that net sales of units shall not
exceed in the aggregate, for a period of four years, 60,000 units, Marshall
Products, shall have the right to give the Company 30 days notice of the
termination of the exclusive character of the agreement, unless the Company can
show, to the satisfaction of Marshall Products, that its failure was
attributable to facts beyond its control, such as market conditions, failure of
supply of needed raw materials, strike, etc. Marshall Products, may terminate
the Agreement upon written notice if timely payments of royalties are not made
by the Company or in the event the Company declares bankruptcy or is insolvent.
The Company would have 90 days to cure any default.

Mr. Marshall individually holds the patents relating to these products.
The patent for the PUTT PERFECTOR expires in May 2010. As a result, Mr. Marshall
could, in the future, limit the Company's use of the products. However, Marshall
Products is controlled by Mr. and Mrs. Marshall and the Company does not foresee
any limitations or possible breach of contract by Marshall Products.

The Company also has an exclusive marketing agreement with Automated
Golf Training Aids, Inc., for the ANGLEIRON(TM). The agreement is for a term
of five years that began March 31, 1996. The Company pays a royalty of 8% of
ANGLEIRON(TM) net sales. The Company must make minimum royalty payments of
$50,000 at the end of the calendar year and of $100,000 for each of 1998 through
2000.

The Company has an exclusive marketing agreement with Innovative
Products, Inc., for the BALL BUTLER. The agreement is for a term of five years
beginning January 1, 1997. The Company pays a royalty of $3.50 per unit for the
first 10,000 units sold and 11% of gross sales for all subsequent units. The
Company is required to maintain minimum unit sales for each calendar year of the
agreement. The minimum for 1997 is 150,000 units; for 1998,

<PAGE> 10

250,000 units; for 1999, 300,000 units; for 2000, 150,000 units; and for 2001,
100,000 units.

The Company has an exclusive marketing agreement with Donald Cofer for
GOLF 21. The agreement is for a term of five years that began in February 1996.
The Company issued Mr. Cofer 2,000 shares of its Common Stock and agreed to pay
a royalty of 7.5% of gross sales. The Company is required to maintain minimum
unit sales for each calendar year of the agreement. The minimum for the first
year is 10,000 units; for the second year, 20,000 units; for the third year,
30,000 units; for the fourth year, 40,000 units; and for the fifth year, 50,000
units.

The Company furthermore has an exclusive marketing agreement with B C
Communications for the CLUBS HOUSE (originally known as the CLUB PARKA). The
agreement is for a term of five years beginning in January 1997. The Company
pays a royalty of 10% of gross sales. The Company is required to maintain
minimum unit sales for each calendar year of the agreement. The minimum for 1997
is 50,000 units and for each of 1998 through 2002 is 100,000 units.

The Company is reviewing numerous products for market viability. The
Company is also evaluating other golf product companies for potential
acquisition. Currently, the Company has not targeted any specific acquisitions.
The Company plans to finance any future products or acquisitions by future
revenue from operations and/or any proceeds received from subsequent sales of
the Company's debt or equity securities or upon exercise of the Company's
warrants, if any. There is no assurance that any financing for either of these
purposes will be available.

MARKET.

The total U.S. golf market is estimated at 25 million golfers according
to the National Golf Foundation. The Japanese market provides an additional 17
million golfers using courses and another 20 million on off-course venues,
according to Golf Data International.

The National Golf Foundation recently released a new NFG study stating
consumer spending on golf equipment and related merchandise in the U.S. now
totals $6.2 billion a year, with golfers accounting for $5.0 billion of this
total and non-golfers $1.2 billion.

This report also shows baby boomers and women are playing the sport in
record numbers. Both groups spend significantly on leisure activities. With golf
instruction being one of the fastest growing segments of the golf industry, the
Company's product line should appeal to a wide range of golfers.

MARKETING STRATEGY.

The Company's marketing strategy employs a products tier approach
consisting of primary infomercial products, secondary infomercial products,
mid-range price point products and

<PAGE> 11

promotional price point products. Furthermore, the Company has identified three
product classifications consisting of learning/teaching, performance improvement
and accessories.

Primary infomercials will be produced by the Company and run on cable
and television. A primary infomercial is one in which a new product is being
introduced to the public and has neither been available at retail nor on
infomercial prior to airing of the primary infomercial The products will range
in retail price points from $69.95 to $149.95. The ANGLEIRON(TM) is the
Company's first primary infomercial and is expected to be completed in the
second quarter of 1997.

Secondary infomercials will be a "second" generation of a primary
infomercial running at a reduced retail price point. These infomercials
re-introduce products that have previously been introduced to the public at
retail and will run in conjunction with retail placement at price points from
$59.95 to $99.95. MAXIMIZING YOUR GAME(TM) is the Company's first secondary
infomercial and is expected to be completed in the second quarter of 1997.

Mid-range price products will be non-infomercial products (with
exceptions) with price points between $39.95 and $59.95, and are expected to be
the items most likely to appeal to large specialty and significant sporting
goods departments in general retail and catalog. MAXIMIZING YOUR GAME(TM) will
be an example of a mid-range price product when it is re-introduced to the
retail market after the secondary infomercial stops airing.

Promotional price point products will be non-infomercial products (with
exceptions) with price points between $14.95 and $29.95, and an objective of
reaching mass market appeal. A retailer would purchase these products for resale
during seasonal periods. Examples of promotional price point products would be
the PUTT PERFECTOR, MAXIMIZING YOUR GAME(TM) promotional series, GOLF 21, BALL
BUTLER, PERFORMANCE PACK, CLUBS HOUSE, GOLFERS FIRST AID CADDY and PUTTING LINK.
The Company has received initial orders on a variety of these products which are
currently available in several retail outlets.

DISTRIBUTION.

The Company has developed the following to implement the distribution
and marketing plan of its products:

SALES TO NATIONAL CHAINS. The Company has established a relationship on
a national level with Sports & Recreation, Inc., which currently has the
Company's products in all 80 of its stores. The Company is seeking to create
similar relationships with other national chains.

CATALOG SALES. The Company has had its products featured in
the catalogues of both Hammacher Schlemmer and Austad's. This has
helped promote the Company's products on a national level.

<PAGE> 12

SALES TO GOLF SHOPS. The Company is purchasing close-out inventory of
several major golf manufacturers and will be aggressively marketing those
products. This will occur both on a local level, through newspaper
advertisements and contact with local golf shops, and on a national level,
through a relationship as an approved vendor of Play It Again Sports, a sporting
goods chain with over 650 stores. The markup on the products will be
approximately 40%. A portion of the financing of this effort is being provided
by Lorimar Capital Management Corp. located in Columbus, Ohio, which approved a
$100,000 loan for a golf club close-out purchase from Head Sports in Boulder,
Colorado.

OVERSEAS SALES. The Company is working with SNUGZ USA, Inc., to
distribute the Company's products in Japan, beginning with MAXIMIZING YOUR
GAME(TM). However, no agreement has yet been reached between the Company and
SNUGZ USA, Inc., and there is no assurance that one will be reached. Any such
agreement should require no outlay of cash on the part of the Company as the
distributor will be responsible for the marketing expense associated with this
project.

NATIONAL INFOMERCIAL. The Company authorized its Canadian distributor
to produce a thirty minute infomercial featuring MAXIMIZING YOUR GAME(TM). The
infomercial has aired on both U.S. and Canadian television nationally since
February 1996. This infomercial features PGA teacher Wally Armstrong, PGA tour
member Andy Bean, who has won 11 times on tour, and actor McLean Stevenson.

All of the costs for this production are being borne by the Canadian
distributor. The Company will be providing the product on a reduced cost basis.
The Company also has in excess of 100,000 units of this product in inventory.
The Company will only have to provide the video tapes in the product package.
The infomercial also provides advertising support to the Company's retail sales
without the expense associated with conventional retail support advertising.

MANUFACTURING AND ASSEMBLY.

The Company outsources all component manufacturing to proven reliable
sources and also has alternate sources available at similar costs for all
components of the LEVEL BEST GOLF SYSTEM. All components except for curved glass
vials and custom molded plastic bodies are readily available from a number of
suppliers. Winders Products Company, Port Austin, Michigan, is the current
source for glass curved vials. The Company's alternate source for glass curved
vials is W. A. Moyer and Sons, Emporia, Kansas. The plastic molded bodies are
currently being provided by Dickson Tool and Mold, Inc., Brooksville, Florida.
The Company owns all tooling used in this process. Because there are several
alternate sources available to the Company for its component manufacturing
requirements, the Company believes that the termination of any agreements with
its current suppliers would not have a material adverse effect on the Company.

<PAGE> 13

UPARC, Inc., St. Petersburg, Florida, does the final assembly of some
components with quality surveillance being conducted by the Company's personnel.
The Company also has in-house capability to support near-term requirements.

COMPETITION.

The Company's current and future products compete in the recreation,
fitness, and sports training markets, which are highly competitive. Increased
competition generally, and the introduction or promotion of competing products
specifically, could adversely affect the Company's sales and profitability by
exerting pressure to reduce pricing and thereby gross margin, reducing market
share and creating other obstacles. In the golf industry, as distributor's
ability to compete is dependent in part upon its ability to satisfy various
subjective preferences of golfers, including the look and "feel" of a golf
product and the level of acceptance that the product has achieved among
professional and other golfers. The subjective preferences of purchasers of golf
training products may be subject to rapid and unanticipated changes.

The Company will be competing with established companies and other
entities, many of which may possess substantially greater resources than the
Company. Almost all of the companies with which the Company competes are
substantially larger, have more substantial histories, backgrounds, experience
and records of successful operations, greater financial, technical, marketing
and other resources, more employees and more extensive facilities than the
Company now has, or will have in the foreseeable future. It is also likely that
other competitors will emerge in the near future. There is no assurance that the
Company's products will compete successfully with other similar products. The
Company intends to compete on the basis of quality of its products in addition
to a price basis. Inability to compete successfully might result in increased
costs and reduced yields.

EMPLOYEES.

As of December 23, 1996, the Company has 12 full time employees. None
of the employees is subject to a collective bargaining agreement. The Company
believes that its relationship with its employees is good. The Company will, as
operations demand, sub-contract the balance of its personnel through independent
contractors or hire additional employees.

ITEM 2. PROPERTIES.

The Company's executive offices are located at 14561 58th Street North,
Clearwater, Florida 34620, and the telephone number at that address is (813)
535-7770. These offices consist of approximately 5,500 square feet of office
space and approximately 60,000 square feet of warehouse space on approximately
2.5 acres leased for 3 years for $6,000 per month, plus applicable sales tax.

<PAGE> 14

ITEM 3. LEGAL PROCEEDINGS.

The Company currently has no material pending or threatened legal
proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

The Company's Common Stock trades under the symbol "LBGF" on the OTC
Bulletin Board(R) operated by The Nasdaq Stock Market, Inc. The high and low bid
prices for the Company's Common Stock for the quarter ended September 30, 1996,
the first quarter in which the Common Stock was quoted on the OTC Bulletin
Board(R), were $3-7/8 and $3-1/8, respectively. These bid prices are
inter-dealer prices without retail markup, mark-down or commission, and may not
represent actual transactions.

At December 24, 1996, there were approximately 1,068 holders of record
of the Common Stock.

The Company has not declared cash dividends to any class of
shareholders as of the date of this filing, and have no plans to do so in the
immediate future.

Please see Notes 2 and 12 of the Company's Notes to Financial
Statements included in this report for a description of the sales during fiscal
year 1996 by the Company of securities in transactions that were not registered
pursuant to the Securities Act of 1933, as amended (the "Securities Act"). The
Company relied upon the exemption from registration provided by Section 4(2) of
the Securities Act in connection with those sales.

<PAGE> 15

ITEM 6. SELECTED FINANCIAL DATA.

The following selected financial data of the Company for the period
October 1, 1993 (inception) through September 30, 1994, the years ended
September 30, 1995 and 1996, and as of September 30, 1995 and 1996, are derived
from the Company's financial statements and have been audited by Winter,
Scheifley & Associates, P.C., independent certified public accountants. This
financial data should be read in conjunction with the Financial Statements and
the Notes thereto, and the other financial information appearing elsewhere in
this report.

<TABLE>
<CAPTION>
OCTOBER 1, 1993
(INCEPTION)
STATEMENT OF THROUGH YEAR ENDED
OPERATIONS DATA: SEPTEMBER 30, SEPTEMBER 30,
---------------- ---------------- ----------------------
1994 1995 1996
---- ---- ----

<S> <C> <C> <C>
Revenue $ 22,339 $ 98,474 $ 495,681

Costs and expenses:
Cost of sales 15,791 149,263 198,396
Common shares issued
for services 21,500 664,726 111,950
General and
administrative 357,792 727,178 1,287,951
----------- ----------- -----------
395,083 1,541,167 1,598,297

Net loss from operations (372,744) (1,442,693) (1,102,616)

Other income and
(expense):
Interest expense -- (10,175) (7,087)
Interest expense-related
party (12,382) (20,314) (35,492)
----------- ----------- -----------
Net loss $ (385,126) $(1,473,182) $(1,145,195)

Per share information:

Weighted average number
of common shares
outstanding 1,624,703 1,991,640 2,698,060

Net loss per share $ (.24) $ (.74) $ (.42)
=========== =========== ===========

</TABLE>

<PAGE> 16

SEPTEMBER 30,
------------------------------
BALANCE SHEET DATA: 1995 1996
------------------- ----------- ------------
<S> <C> <C>
Current assets:
Cash $ 8,061 $ 46,923
Accounts Receivable 202 13,138
Prepaid expenses -- 9,000
Inventory 156,657 156,356
----------- -----------
Total current assets 164,920 225,417
=========== ===========

TOTAL ASSETS: $ 188,214 $ 454,515

Total Current Liabilities $ 460,095 $ 1,229,460

Long Term Debt 76,131 47,380

Total Shareholder Equity $ (348,012) $ (822,325)

TOTAL LIABILITIES AND
SHAREHOLDER EQUITY: $ 188,214 $ 454,515
=========== ===========
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.

Except for the historical information contained herein, the matters
discussed in this item are forward-looking statements involving risks and
uncertainties which may cause actual results to materially differ. Those risks
and uncertainties include, but are not limited to, economic, competitive,
industry and market factors affecting the Company's operations, markets,
products, and prices, and other factors discussed in the Company's filings with
the Securities and Exchange Commission.

TRENDS AND UNCERTAINTIES

The Company is seeking to lower its operating expenses while expanding
operations and increasing its customer base and operating revenues. The Company
is focusing on decreasing administrative costs. However, increased marketing
expenses will probably occur in future periods as the Company attempts to
further increase its marketing and sales efforts.

Inasmuch as a major portion of the Company's activities is the
development and marketing of golf training aids, the Company's business
operations may be adversely affected by competitors and prolonged recessionary
periods. The sale of the Company's products is seasonal in that the Christmas
season and Father's Day are two strong buying periods. In addition, the spring
season produces strong orders in the first six months of each calendar year.

The Company has been adding new accounts, representative groups,
expanding into new markets and channels of distribution in recent months. See
"Item 1 - Marketing Strategy". The continuation of obtaining additional types of
new business and markets is uncertain and the continued success of any of the
Company's new marketing strategies for generating revenue is uncertain.

The purchasers in a private placement of shares of the Company's Common
Stock during September through November 1996 may have certain rescission rights
pursuant to federal and state securities laws. Accordingly, the Company may have
a contingent liability for rescission of up to $524,000, plus interest at 12%
per annum. The exercise of such rescission rights by a sufficient number of the
purchasers may have a materially adverse effect upon the Company.

RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED SEPTEMBER 30, 1996 AND 1995.

The Company experienced a net operating loss of $1,145,195 for the
fiscal year ended September 30, 1996, compared to a net operating loss of
$1,473,182 for the fiscal year ended September 30, 1995, a decrease of 22.3%.
Net sales and cost of sales for the fiscal year ended September 30, 1996, were
$495,681 and $198,396, respectively, as compared to net sales of $98,474 and
cost of sales of $149,263 for the fiscal year ended September 30, 1995. The
sales increase resulted from a large sale to Best Buy for $265,000 and
increasing sales into retail of MAXIMIZING YOUR GAME(TM) and PUTT PERFECTOR.
Selling, general and administrative ("SGA") expenses for fiscal year were
$1,399,901 as compared to $1,391,904 for fiscal year 1995, an increase of only
0.6%. Included in SGA expenses is salaries & wages $633,081; advertising
$167,783; travel & entertainment $88,419; rent $64,344; consulting $56,355;
interest $42,579; telephone $40,824; depreciation $36,209; shipping $30,702;
tradeshows $27,456; and commissions $21,650. Also included in SGA expenses is
stock issued for services related to product development and marketing of
$111,950 for fiscal year 1996 as compared to $664,726 for fiscal year 1995, a
decrease of 83.2%.

<PAGE> 17

The decrease was the result of the Company's ability to pay for services in cash
in lieu of stock.

Accrued officers' salaries increased by $287,548 in fiscal year 1996.
Net cash used in operations was $506,505 for fiscal year 1996 as compared to
$636,762 for fiscal year 1995. Notes payable to affiliates increased by $272,233
for fiscal year 1996. Proceeds from the issuance of common stock were $455,000
for fiscal year 1996 as compared to $609,177 for fiscal year 1995.

RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED SEPTEMBER 30, 1995 AND 1994.

The Company experienced a net operating loss of $1,473,182 for the year
ended September 30, 1995 compared to $385,126 for the year ended September 30,
1994. Net sales and cost of sales for the year ended September 30, 1995 were
$98,474 and $149,263, respectively, as compared to net sales of $22,339 and cost
of sales of $15,791 for the year ended September 30, 1994. This increase for the
year ended September 30, 1995 was due to increased operations. Selling, general
and administrative expenses for the year ended September 30, 1995 were
$1,391,904 as compared to selling, general and administrative expenses of
$379,292 for the same period in 1994. This increase for the year ended September
30, 1995 was due to management's attempt to obtain further capitalization and
increase operations. The primary change was stock issued for salaries and to
consultants for services related to product development and marketing of
$665,000. The other material components consisted of increases in salaries and
payroll taxes of $133,000, consulting fees of $50,000 and advertising of
$28,000. Net cash used in operations was $636,762 for the year ended September
30, 1995.

For the year ending September 30, 1995, the Company promoted three
products and sold 140 units of The LEVEL BEST GOLF SYSTEM, 1,832 units of
MAXIMIZING YOUR GAME(TM) and 372 units of the PUTT PERFECTOR. For the year ended
September 30, 1994, the Company promoted and sold 894 units of the LEVEL BEST
GOLF SYSTEM.

<PAGE> 18

CAPITAL AND SOURCE OF LIQUIDITY.

The Company was in the developmental stage through the fiscal year
ended September 30, 1995. The Company will being airing infomercials in the
first half of calendar year 1997. The infomercials will emphasize the Company's
premier products, ANGLEIRON(TM) and MAXIMIZING YOUR GAME(TM), and provide brand
identification for the "Level Best Golf" product line.

In June 1996, the Company entered into a 3 year lease for its current
facility at a monthly rental rate of $6,000. Other than this lease, the Company
has no material commitments for capital expenditures. The Company has an option
to buy its current facility at a price of $600,000. The Company intends to
purchase its new facility when it can obtain acceptable mortgage financing for
not less than 80% of the purchase price. The Company may elect to pay all or
part of the purchase price with proceeds realized, if any, from the sale of
Common Stock pursuant to exercise of outstanding Warrants, although there is no
assurance that sufficient proceeds will be received from such exercise for such
purpose.

The Company has incurred operating losses of $1,145,195, $1,473,182 and
$385,126, respectively, for the fiscal years ended September 30, 1996, 1995 and
1994. Through the end of fiscal year 1996, the Company has not generated
positive cash flow from operations. At September 30, 1996, the Company had
negative working capital of $1,004,043. The Company's independent auditors have
qualified their opinion on the Company's financial statements for the fiscal
year ended September 30, 1996, to the effect that there is substantial doubt
about the ability of the Company to continue as a going concern.

The Company believes that it will have a positive cash flow from
operations during fiscal year 1997, although there is no assurance that it will
occur. The Company is planning to seek additional capital during fiscal year
1997 through equity financing, but there is no assurance that such financing
will be available on terms acceptable to the Company or at all.

<PAGE> 19

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA.

PLEASE SEE "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" ON PAGE F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

OFFICERS AND DIRECTORS.

Pursuant to the Articles of Incorporation, each Director serves until
the annual meeting of the stockholders, or until his successor is elected and
qualified. Directors may be removed with or without "cause". The term of office
of each officer of the Company is at the pleasure of the Company's Board.

The directors and principal executive officers of the Company are as
follows:

<TABLE>
<CAPTION>
Director
Name Age Current Company Positions Since
- ---- --- ------------------------- -----
<S> <C> <C> <C>
William E. Foley 49 Director 1996

Patricia A. Sanders 48 Director and Secretary 1993

Fred L. Solomon 52 Director and President 1993

James G. ("Greg") Solomon 43 Director and Vice President 1993

Donald E. Thompson 46 Director 1996

Curt L. Rodgers 48 Chief Financial Officer ----

</TABLE>

WILLIAM E. FOLEY - Mr. Foley has been a Director of the Company since
December 4, 1996. From 1987 to 1996, Mr. Foley was with Vi-Tel Electronics,
Inc., a consumer electronics distributor, which filed a Chapter 11 proceeding on
January 16, 1996, in the Bankruptcy Court of the Federal District Court for New
Jersey, Case No. 96-20222. From 1990 to 1996, including at the date of filing
the Chapter 11 proceeding, Mr. Foley was also Executive Vice President and Chief
Operating Officer. From 1994 to 1996, Mr. Foley was also President of
Selectronics, a consumer electronic manufacturer and subsidiary of Vi-Tel. Mr.
Foley was responsible for all facets of the business of Selectronics, with
specific emphasis on marketing and sales to the retail community. As President
of Selectronics, Mr. Foley was responsible for the

<PAGE> 20

start up, organization and expansion of this business segment with a product
line for direct sale to retailers. From 1981 to 1987, Mr. Foley was owner and
president of two separate companies: G & S Advertising, a full service
advertising agency specializing in retail, and Flick's N Fones, a six store
retail operation. Prior to 1981, Mr. Foley held positions as Senior Vice
President of Marketing and Advertising for Korvettes, Inc., a 50 store $600
million discount retailer; Vice President Advertising for Vornado and
Merchandise Manager for Mangurians Home Furnishings. Mr. Foley's professional
career started with the JC Penney Company. Mr. Foley received a Bachelor of
Science degree in Business Administration from Fairleigh University in 1969.

PATRICIA A. SANDERS - Ms. Sanders has been a Director and the Secretary
of the Company since its October 1993 inception. From January 1989 to April
1993, Ms. Sanders worked as an executive assistant/corporate officer to Paul L.
Simmons in the following companies; (i) Viral Control Technology, Inc. a public
company located in Tampa, Florida, which marketed a line of environmentally safe
disinfectants; (ii) Fam-Pak, St. Petersburg, Florida, a private company
manufacturing Viral On-Guard, a disinfectant spray; (iii) R.O.S.T., Inc., a
Tampa research and development company of environmental products and (iv)
SanDesign, Inc., an environmental product design company. From January 1979 to
January 1989, Ms. Sanders was administrative assistant at Nu-Room Company. Her
responsibilities included marketing strategy, negotiating contracts, processing
mortgages, payroll, inventory and overseeing staff and the production team.

FRED L. SOLOMON - Mr. Solomon has been a Director of the Company since
its October 1993 inception, its President since November 1994 and its Controller
since January 1996. From inception to November 1994, he was a Vice President of
the Company. From January 1993 to January 1994, Mr. Solomon was Vice President
of Power Generation for Nab Construction Company. He was responsible for all
aspects of the operation of power generation and mechanical contracting for all
projects. From October 1989 to November 1990, Mr. Solomon was President of
Southern Energy & Aerospace, Inc., a family-owned business which fabricated and
installed mechanical systems for the electric utility power generation industry
and which was acquired by JWP-Zack. Mr. Solomon's responsibilities included
total management of the Gary, Evansville and Tampa Divisions which included
sales, estimating, procurement and construction of the mechanical systems. From
April 1978 to August 1989 Mr. Solomon was President of Specialty Maintenance &
Construction, Inc., a general contractor with over 200 employees. Mr. Solomon
performed a variety of sales, estimating, accounting, purchasing, human
resources, contract negotiations and executive management services. Mr. Solomon
received an Associates of Arts degree at Daytona Community College in 1964 and a
Bachelor of Arts degree at the University of Florida in 1966.

JAMES G. ("GREG") SOLOMON - Mr. Solomon has been a Director of the
Company since its October 1993 inception and Vice President of the Company since
November 1994. He had served as President of

<PAGE> 21

the Company from inception to November 1994. From October 1981 to July 1993, Mr.
Solomon was Vice President of Southern Energy & Aerospace, Inc., a family-owned
business which fabricated and installed mechanical systems for the electric
utility power generation industry. He was responsible for operations and
achieving the goals of the board of directors. He was also responsible for
ensuring that critical schedules and project budgets were achieved through
proper utilization of corporate resources. From November 1979 to September 1989,
Mr. Solomon also acted as Vice President of Specialty Maintenance &
Construction, Inc., a general contractor with over 200 employees. Mr. Solomon
performed a variety of sales, estimating, accounting, purchasing, human
resources, contract negotiations and executive management services.

DONALD E. THOMPSON - Mr. Thompson has served as a Director of the
Company since December 4, 1996. He provides consulting services to the Company
in the area of news media relations, as well as marketing and public relations.
From 1986 to the present, Mr. Thompson has been the President of Thompson
Communications, a marketing and public relations firm, with clients in the
insurance, financial services, legal and accounting professions.

CURT L. RODGERS - Mr. Rodgers has been the Chief Financial Officer of
the Company since November 1996. From 1994 to November 1996, Mr. Rodgers was
Executive Vice President and General Manager of Florida Directory Publishing,
Inc., located in St. Petersburg, Florida. Mr. Rodgers managed operations,
finance, systems, sales and human resources of this directory publisher owned by
the St. Petersburg Times. From 1988 to 1994, Mr. Rodgers was with Advo, Inc.,
located in Tampa, Florida. Mr. Rodgers served in the capacity of Vice President
of Finance and Division Controller for Advo, Inc. from 1991 to 1994. During that
time, Mr. Rodgers managed financial reporting and analysis and systems
development for a $200 million division within this $1 billion direct-mail
advertising company and directed the activities of a financial staff of 66
associates located in five regional offices.

KEY EMPLOYEES.

JOSEPH RALPH ("BUTCH") PAUL, JR. - Mr. Paul, age 46, has been the
Company's National Sales Manger since April 1996. Mr. Paul is a full-time
employee and devotes substantially all of his time to his responsibilities as
National Sales Manager. Mr. Paul has over 20 years experience in corporate and
golf sales. Mr. Paul is the owner of Rutland Travel Company, a $2 million in
sales travel agency in Rutland, Vermont, which he founded in 1986. He has been
a featured speaker to corporate and golf organizations and associations across
the United States. He is a competitive golfer with a USGA 3 handicap. In 1992,
Mr. Paul was retained by the E. J. Manely Company as a consultant to management
and sales. His responsibilities included training, organization, and
motivation, as well as dealing with service and attitude. Since 1992, Mr. Paul
has worked as a consultant to golf companies that have included Active Sports,
Copely, Inc., TEE Sports, and the B. C. Open. In 1988, Mr. Paul helped found
Mindset, Inc. As Mindset's President,

<PAGE> 22

his responsibilities included daily operations and sales of Mindset's Golf
Workshops, which dealt successfully with the mental side of golf and its
relationship to business and life. Mr. Paul also directed all sales of Mindset
Golf Apparel, which grew to $2.3 million in sales in two years. Until 1988, he
was employed by the Prudential Insurance Company, with both sales and management
responsibilities. In his tenure with Prudential, Mr. Paul was the recipient of
many national sales awards including: Prudential Academy of Honor, the
PRESTIGIOUS President Citation Award, the National Quality Award, and the
National Sales Achievement Award.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The Company is required to file periodic reports on Forms 10-KSB,
10-QSB or 8-K pursuant to Section 15(d), not Section 13, of the Exchange Act. As
a result, Section 16(a) of the Exchange Act is not applicable to the Company, it
directors or its executive officers at the current time.

ITEM 11. EXECUTIVE COMPENSATION.

The following table provides information with respect to the
compensation paid or accrued by the Company and its subsidiaries to the
Company's Chief Executive Officer in all capacities and all other executive
officers of the Company who received combined salary and bonus compensation in
fiscal year 1996 in excess of $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
Salary Bonus COMPENSATION(1) OPTIONS/SARS
Name and Principal Position Year ($) ($) ($) (#)
- --------------------------- ---- ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Fred L. Solomon, 1996 125,000(2) -0- -0- 200,000
Director and President 1995 80,000(2) -0- -0- -0-
1994 80,000(2) -0- -0- -0-

</TABLE>
- ----------

(1) The table does not include amounts for personal benefits extended to
Mr. Solomon by the Company, such as health or life insurance. The
Company believes that the incremental cost of those benefits to Mr.
Solomon during any of fiscal 1994-1996 did not exceed the lesser of
$50,000 or 10% of his total annual salary and bonus.

(2) The figures in the table are the stated annual salary rates for the
fiscal years presented. Mr. Solomon received actual compensation of
only $14,423 in fiscal 1996, $17,300 in fiscal 1995 and $14,400 in
fiscal 1994. The Company accrued, but did not pay to Mr. Solomon, the
balance of his stated annual salary in each of those years ($110,577 in
fiscal 1996, $62,700 in fiscal 1995 and $65,600 in fiscal 1994).

<PAGE> 23

OPTIONS GRANTED DURING LAST FISCAL YEAR

The following table sets forth information concerning option grants
during the fiscal year ended September 30, 1996, to the named officer.

<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------------------------------------
Shares % of Total
Underlying Options
Options Granted to Exercise
Granted Employees in Price Expiration
Name (#) Fiscal Year ($/Share) Date
---- ----------- ----------------- --------- ----------
<S> <C> <C> <C> <C>
Fred L. Solomon 200,000(1) 18.64% 2.25 6/3/2001

</TABLE>
- ----------
(1) Amounts shown represent the number of non-qualified stock options,
without tandem stock appreciation rights ("SAR's"), granted in fiscal
year 1996. Payment must be made in full upon exercise in cash or Common
Stock. The option holder may elect to have shares of Common Stock
issuable upon exercise withheld by the Company to pay withholding taxes
due.

AGGREGATED OPTIONS EXERCISED DURING LAST FISCAL YEAR AND FISCAL
YEAR END OPTION VALUES

The following table sets forth information concerning the value of
unexercised stock options at the end of the fiscal year for the named officer.

<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal Year In-The-Money Options at
Shares Acquired Value Realized End(1) Fiscal Year End ($)(2)
Name on Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable*
---- --------------- -------------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Fred L. Solomon 0 0 200,000/0 175,000/0

</TABLE>

- ----------
(1) No SAR's were outstanding at September 30, 1996.

(2) The value shown equals the difference between the exercise price of
unexercised in-the-money options and the closing market price of the
underlying Common Stock at September 30, 1996.

The Company has not entered into employment agreements with its
officers. The Company does have in place medical insurance for its employees
(insurance cost of approximately $1,066 every three months), however, it does
not have any retirement benefit programs or Section 401(k) benefit plans.

DIRECTOR COMPENSATION

Members of the Board of Directors may receive an amount yet to be
determined annually for their participation and will be required to attend a
minimum of four meetings per fiscal year. All expenses for meeting attendance or
out-of-pocket expenses connected directly with their Board participation will be
reimbursed by the Company. Director liability insurance may be provided to all
members of the Board of Directors. No differentiation is made in the
compensation

<PAGE> 24

of "outside directors" and directors who are also officers of the
Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

The following table sets forth, as of December 24, 1996, certain
information regarding the Company's Common Stock owned of record or beneficially
by (i) each person who owns beneficially more than 5% of the Company's
outstanding Common Stock; (ii) each of the Company's Directors and executive
officers; and (iii) all Directors and executive officers as a group.

<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
- ------------------- ----------------------- -------------------
<S> <C> <C>
William E. Foley 50,000(2) 1.5%
170 Berkshire Road
Hasbrouck Heights, NJ 07604

Curt L. Rodgers 5,000(3) 0.2%
15624 Indian Queen Drive
Odessa, FL 33556

Patricia A. Sanders(4) 271,544(5) 8.2%
11680 Shipwatch Drive
Villa 1452
Largo, FL 34644

Fred L. Solomon(4) 912,077(6) 26.3%
285 - 107th Ave., #801
Treasure Island, FL 33706

James G. ("Greg") Solomon(4) 909,912(7) 26.3%
4101 Kipling Avenue
Plant City, FL 33567

Donald E. Thompson 42,309(8) 1.3%
3580 Lakemont Drive
Bonita Springs, FL 34134

All Directors and Officers 2,190,842(9) 49.9%
as a group (consisting
of 6 persons)

</TABLE>

- ----------------
(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.

(2) Represents five-year options to purchase 50,000 shares of Common Stock
at an exercise price of $2.25 per share that were granted to Mr. Foley
in 1996.

(3) Represents five-year options to purchase 5,000 shares of Common Stock
at an exercise price of $3.50 per share that were granted to Mr.
Rodgers in November 1996.

(4) Pursuant to a Lock-up Agreement dated October 1, 1995, Fred L. Solomon,
James G. Solomon and Patricia A. Sanders have agreed that, in the event
any of them exercises any warrants, the stock issued pursuant to the
exercise will be restricted from trading for a period of two years.
They also agreed not to sell or otherwise transfer their interest in
the warrants except to an underwriter or other market makers in the
stock once a market is established. They further agreed that the total
value, in

<PAGE> 25

cash, or other consideration, paid by the buyer to the seller in such
circumstances will not exceed $.001 per warrant.

(5) Includes five-year options to purchase 200,000 shares of Common Stock
at an exercise price of $2.25 per share that were granted to Ms.
Sanders in June 1996 and 20,047 and 20,047 shares of Common Stock
subject to Class A Warrants and Class B Warrants, respectively, held by
Ms. Sanders and exercisable immediately on issuance and for a period of
48 months, subject to redemption. Excludes 18,000 shares of Common
Stock owned by the adult children of Ms. Sanders, as to which she
disclaims any beneficial interest.

(6) Includes five-year options to purchase 200,000 shares of Common Stock
at an exercise price of $2.25 per share that were granted to Mr. Fred
Solomon in June 1996 and 109,367 and 109,367 shares of Common Stock
subject to Class A Warrants and Class B Warrants, respectively, held by
Mr. Fred Solomon and exercisable immediately on issuance and for a
period of 48 months, subject to redemption.

(7) Includes 30,000 shares of Common Stock owned by Mr. Greg Solomon's wife
and minor children and five-year options to purchase 200,000 shares of
Common Stock at an exercise price of $2.25 per share that were granted
to Mr. Greg Solomon in June 1996 and 109,367 and 109,367 shares of
Common Stock subject to Class A Warrants and Class B Warrants,
respectively, held by Mr. Greg Solomon and exercisable immediately on
issuance and for a period of 48 months, subject to redemption.

(8) Includes 21,795 shares of Common Stock jointly owned by Mr. Thompson
and his wife and five-year options to purchase 10,000 shares of Common
Stock at an exercise price of $2.25 per share that were granted to Mr.
Thompson in June 1996.

(9) Includes 665,000 shares of Common Stock subject to options.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In order to facilitate its development and growth during various stages
of operation the Company received loans from certain affiliated parties. During
December 1993, the Company borrowed $177,000 from Southern Energy & Aerospace,
Inc. ("Southern Energy"), a corporation controlled by Fred Solomon and Greg
Solomon, two of the Company's Directors, executive officers and largest
shareholders. This loan had a balance of $162,805 during fiscal year 1995.
During fiscal year 1996, the Company borrowed an additional net amount of
$272,233, leaving a balance owed of $435,038 at September 30, 1996. The note
bears interest, which is accrued, at prime plus 1.5% and is payable on demand.
Due to the Company's insufficient history of earnings, the lower closing costs
associated with these loans and Southern Energy's willingness to loan the
Company money at rates more favorable to the Company than otherwise would be
available from outside sources, the Company believed that it was in its best
interest to enter into the loan transactions with this affiliated party.

On October 26, 1994, the Board of Directors authorized the distribution
of 275,000 each of Class A, B, and C Warrants to purchase shares of Common Stock
exercisable as follows:

<PAGE> 26

$4.75 to exercise each Class A warrant for one share of Common
Stock;

$7.50 to exercise each Class B warrant for one share of Common
Stock; and

$12.50 to exercise each Class C warrant for one share of
Common Stock.

Fred L. Solomon, James G. ("Greg") Solomon and Patricia A. Sanders, the
Company's President, Vice President and Secretary, respectively, were issued
109,367, 109,367 and 20,047 Class A warrants, respectively, and 109,367, 109,367
and 20,047 Class B warrants, respectively. The warrants are exercisable for a
period of 48 months from the date of issue and are callable with 30 days notice
at a price of $.001 per warrant. The distributions of the Class A and Class B
warrants were made to the owners of record of common stock on the books of the
Company as of January 2, 1995. As of that date, only Messrs. F. and G. Solomon
and Ms. Sanders were affiliates of the Company who were also shareholders. The
Company has never distributed its Class C warrants. The book value of the
Company's Common Stock as of the date the warrants were granted was $0.13 per
share at September 30, 1996. The Class A and Class B Warrants and the common
stock underlying said Class A and Class B Warrants are currently registered
pursuant to the Securities Act on Form S-1, File No. 33-97770. The Company
intends to use funds received from the exercise of the warrants to facilitate
its continued growth and development.

During the fiscal year ended September 30, 1996, the Company accrued
$266,732 in unpaid salary due to Mr. Fred Solomon ($110,577), Mr. Greg Solomon
($88,462) and Ms. Sanders ($67,693). During the fiscal year ended September 30,
1995, the Company accrued $178,940 in unpaid salary due Mr. Fred Solomon
($74,900), Mr. Greg Solomon ($70,200) and Ms. Sanders ($33,840). As of December
24, 1996, no portion of the accrued unpaid salaries due to these officers
has been made and no agreement has been reached as to the manner or timing of
payment of the accrued salaries owed to these officers.

In the event that the Company requires additional funding, the Company
believes that it is in its best interest to enter into loan transactions with
affiliated parties, until it is able to negotiate equitable terms with
unaffiliated lenders. However, the Company is currently exploring the
feasibility of factoring of its receivables and/or a private placement of its
securities as an alternative/in addition to receiving loans from affiliates.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.

(a) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:

LEVEL BEST GOLF, INC.
Independent Certified Public Accountants
Report - Winter, Scheifley & Associates..................... F-2

Audited Balance Sheet as
of September 30, 1996 and 1995.............................. F-3

<PAGE> 27

Audited Statements of Operations
for the fiscal years ended
September 30, 1996, 1995 and 1994........................... F-4

Audited Statement of Stockholder's
Equity for the three years
ended September 30, 1996.................................... F-5

Audited Statements of Cash Flow
for the fiscal years ended
September 30, 1996, 1995 and 1994........................... F-7

Exhibits. Please see Exhibits Index on page _______

(b) REPORTS ON FORM 8-K

The Company did not file any Current Reports on Form 8-K for the fiscal
quarter ended September 30, 1996.

4.1 Specimen Certificate for Class A Warrants

4.2 Specimen Certificate for Class B Warrants

10.4 Real Property Lease dated June 28, 1996, between the Company
and Douglas J. Ebbers and Laura G. Ebbers

10.6 Licensing Agreement dated September 5, 1996, between the
Company and Innovative Products, Inc.

10.7 Agreement dated March 17, 1995, between the Company and Gator
Golf Enterprises, Inc.

10.8 Licensing Agreement dated March 31, 1996, between the Company
and Automated Golf Training Aids, Inc.

10.9 Marketing Agreement dated February 9, 1996, between the
Company and Golf 21

10.10 Exclusive Marketing Agreement dated September 5, 1996, between
the Company and Bill Coward and Nikki Coward.

<PAGE> 28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

LEVEL BEST GOLF, INC.

June 6, 1997 By: /s/ Fred L. Solomon
--------------------------
Fred L. Solomon, President

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<S> <C> <C>
/s/ Fred L. Solomon Director, President June 6, 1997
- ------------------------
Fred L. Solomon

/s/ James G. Solomon Director, Executive Vice June 6, 1997
- ------------------------ President
James G. Solomon

/s/ Patricia A. Sanders Director, Secretary June 6, 1997
- ------------------------
Patricia A. Sanders

- ------------------------ Director, Chief ______, 1997
William E. Foley Operating Officer

- ------------------------ Director ______, 1997
Donald E. Thompson

/s/ Curt L. Rodgers Chief Financial Officer June 6, 1997
- ------------------------ (Also Chief Accounting
Curt L. Rodgers Officer)

</TABLE>

<PAGE> 29

EXHIBIT INDEX

3. Articles of Incorporation, Amendments and ByLaws (Exhibit 3
as filed on the Company's Registration Statement on Form S-1,
File Number 33-97770 is hereby incorporated by reference [the
"Form S-1"])

4.1 Specimen Certificate for Class A Warrants

4.2 Specimen Certificate for Class B Warrants

10.1 License and Technical Assistance Agreement dated January 1,
1994, between the Company and Marshall Products, Inc.
(Exhibit 10.1 to the Form S-1 is hereby incorporated by
reference)

10.2 Agreement dated September 8, 1994, between the Company and
the Booklegger, Inc. (Exhibit 10.2 to the Form S-1 is hereby
incorporated by reference)

10.3 Personal Services Agreement dated October 1, 1994, between the
Company and Wally Armstrong (Exhibit 99.1 to the Form S-1 is hereby
incorporated by reference)

10.4 Real Property Lease dated June 28, 1996, between the Company
and Douglas J. Ebbers and Laura G. Ebbers

10.5 Consulting Agreement dated October 24, 1994, between the
Company and Pratt, Wylce and Lords, Ltd. (Exhibit 99.3 to the
Form S-1 is hereby incorporated by reference)

10.6 Licensing Agreement dated September 5, 1996, between the
Company and Innovative Products, Inc.

10.7 Agreement dated March 17, 1995, between the Company and Gator
Golf Enterprises, Inc.

10.8 Licensing Agreement dated March 31, 1996, between the Company
and Automated Golf Training Aids, Inc.

10.9 Marketing Agreement dated February 9, 1996, between the
Company and Golf 21

10.10 Exclusive Marketing Agreement dated September 5, 1996,
between the Company and Bill Coward and Nikki Coward.

27 Financial Data Schedule (For SEC Use Only)

<PAGE> 30

LEVEL BEST GOLF

INDEX TO FINANCIAL STSTEMENTS

<TABLE>
<S> <C>
Independent auditors report F-2
Balance sheets F-3
Statements of operations F-4
Statement of stockholders' equity F-5
Statements of cash flows F-7
Notes to financial statements F-8
</TABLE>

F-1

<PAGE> 31

REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
Level Best Golf, Inc.

We have audited the accompanying balance sheets of Level Best Golf, Inc. as of
September 30, 1996 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the three 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 audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 Level Best Golf, Inc. as of
September 30, 1996 and 1995, and the results of its operations, and its cash
flows for each of the three years then ended, in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company has suffered recurring losses from operations
and currently has negative working capital and a stockholders' deficit. These
matters raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 11. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Winter, Scheifley & Associates, P.C.
Certified Public Accountants

Denver, Colorado
December 4, 1996,
except for Note 11,
which is dated June 6, 1997

F-2
<PAGE> 32

Level Best Golf, Inc.
Balance Sheets
September 30,

1996 1995
---------- ---------
ASSETS

<S> <C> <C>
Current assets:
Cash $ 46,923 $ 8,061
Accounts receivable 13,138 202
Prepaid expenses 9,000 -
Inventory 156,356 156,657
---------- ---------
Total current assets 225,417 164,920

Property, plant and equipment,
at cost:
Office and production equipment 66,008 17,090
Less: accumulated depreciation 9,953 4,019
---------- ---------
56,055 13,071

Other assets:
Deposits 9,077 -
Product design and video production,
net of accumulated amortization
of $39,915 and $4,994 163,966 10,223
---------- ---------
173,043 10,223
---------- ---------
$ 454,515 $ 188,214
========== =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 5) $ 71,302 -
Accounts payable 223,108 $ 108,072
Notes payable - affiliate (Note 5) 435,038 149,840
Accrued expenses - affiliates (Note 7) 468,683 181,135
Accrued expenses 10,281 -
Current portion of long-term debt (Note 6) 21,048 21,048
---------- ---------
Total current liabilities 1,229,460 460,095

Note payable - affiliate (Note 5) - 12,965
Long-term debt (Note 6) 47,380 63,166

Commitments and contingencies (Notes 7, 8 9 and 10)

Stockholders' equity: (Notes 2 and 3)
Preferred stock, $1,000 par value,
convertible, 300 shares authorized - -
Common stock, $.001 par value,
50,000,000 shares authorized,
3,051,174 and 2,612,218 shares
issued and outstanding 3,051 2,612
Paid in capital 1,113,415 542,972
Common stock subscriptions 100,000 -
Accumulated deficit (2,038,791) (893,596)
---------- ---------
(822,325) (348,012)
---------- ---------
$ 454,515 $ 188,214
========== =========

</TABLE>

See the accompanying notes to the financial statements.

F-3
<PAGE> 33

Level Best Golf, Inc.
Statements of Operations
For the Years Ended September 30, 1996, 1995 and 1994

<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ -----------
<S> <C> <C> <C>
Revenue $ 495,681 $ 98,474 $ 22,339

Costs and expenses:
Cost of sales 198,396 149,263 15,791
Common shares issued for services 111,950 664,726 21,500
General and administrative 1,287,951 727,178 357,792
----------- ------------ -----------
1,598,297 1,541,167 395,083

Net loss from operations (1,102,616) (1,442,693) (372,744)

Other income and (expense):
Interest expense (7,087) (10,175) -
Interest expense - related party (35,492) (20,314) (12,382)
----------- ------------ -----------
Net loss $(1,145,195) $(1,473,182)$ (385,126)
=========== =========== ===========

Per share information:

Weighted average number of common
shares outstanding 2,698,060 1,991,640 1,624,703
=========== =========== ===========
Net loss per share $ (.42) $ (.74)$ (.24)
=========== =========== ===========
</TABLE>

See the accompanying notes to the financial statements.

F-4
<PAGE> 34

Level Best Golf, Inc.
Statement of Stockholders' Equity
For the Three Years Ended September 30, 1996

<TABLE>
<CAPTION>
Paid in Accumulated Stock
Common Stock Preferred Stock Capital Deficit Subscriptions
-------------------- ---------------- ---------- ---------- -------------
Shares Amount Shares Amount
------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for cash to
affiliates at $.003
per share 1,418,162 $ 1,418 - $ - $ 2,676 $ - $ -
Shares issued for cash to
affiliates at $.08
per share 129,900 130 - - 9,871 - -
Shares issued for cash at
$.46 per share 97,338 98 - - 44,901 - -
Shares issued for cash at
$.58 per share 43,300 43 - - 24,957 - -
Shares issued for services
at $.50 per share 43,300 43 - - 21,457 - -
Contribution of officers
salaries to capital - - - - 121,800 - -
Net loss for the year - - - - (385,126) -
--------- -------- --- ----- ---------- --------- -------
Balance September 30, 1994 1,732,000 1,732 - - 225,662 (385,126) -
Shares issued for cash at
$1.00 per share 51,000 51 - - 51,949 - -
Shares issued for the
conversion of debt to
affiliate at $1.00 per
share 9,000 9 - - 8,991 - -
Shares issued pursuant to
a private placement at
$1.50 per share 377,067 377 - - 565,221 - -
Cost of private placement - - - - (8,422) - -
Shares issued for services and
inventory at $1.50 per
share 8,334 8 - - 12,492 - -
Shares issued for services
at $1.50 per share 275,000 275 - - 412,225 - -
Shares issued for services
at $1.50 per share 159,817 160 - - 239,566 - -
Reclassification of
S Corporation deficit to
paid in capital - - - - (964,712) 964,712 -
Net loss for the year - - - (1,473,182) -
--------- -------- --- ----- --------- --------- -------
Balance September 30, 1995 2,612,218 2,612 - - 542,972 (893,596) -
</TABLE>

F-5
<PAGE> 35

Level Best Golf, Inc.
Statement of Stockholders' Equity
For the Three Years Ended September 30, 1996

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for cash
at $1,000 per share - - 300 300,000 - - -
Shares issued for services
at $1.50 per share 70,668 71 - - 105,929 - -
Shares issued for services
at $1.63 per share 1,000 1 - - 1,629 - -
Shares issued for services
at $1.44 per share 3,000 3 - - 4,317 - -
Shares issued for inventory
at $1.50 per share 14,288 14 - - 21,418 - -
Shares issued for inventory
at $2.75 per share 30,000 30 - - 82,470 - -
Shares issued for cash
at $2.75 per share 20,000 20 - - 54,980 - -
Common stock subscriptions
at $2.75 per share - - - - - - 100,000
Conversion of preferred
shares to common shares 300,000 300 (300) (300,000) 299,700 - -
Net loss for the year - - - (1,145,195) -
--------- ------- ---- --------- ---------- ----------- ---------
Balance September 30, 1996 3,051,174 $ 3,051 - $ - $1,113,415 $(2,038,791) $ 100,000
========= ======= ==== ========= ========== =========== =========
</TABLE>

See the accompanying notes to the financial statements.

F-6
<PAGE> 36

Level Best Golf, Inc.
Statements of Cash Flows
For the Years Ended September 30, 1996, 1995 and 1994

<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- ----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss $(1,145,195) $(1,473,182) $(385,126)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Amortization 34,721 3,084 1,910
Depreciation 5,934 2,794 1,225
Officers salary contributed to capital - - 121,800
Common stock issued for services and
other non-cash items 111,950 664,726 21,500
(Increase) in receivables (12,936) (202) -
(Increase) in prepaid expenses (9,000) - -
(Increase) decrease in inventory 104,233 (95,220) (61,437)
(Increase) decrease in other assets (9,077) 3,926 (3,926)
Increase in due to affiliates 287,548 178,940 -
Increase in accounts payable and accruals 125,317 78,372 29,699
--------- ----------- ---------
Total adjustments 638,690 836,420 110,771
Net cash provided by (used in)
operations (506,505) (636,762) (274,355)
--------- ----------- ---------
Cash flows from investing activities:
Acquisition of designs and video production (188,464) - (15,217)
Acquisition of property and equipment (48,918) (3,831) (13,259)
--------- ----------- ---------
Net cash provided by (used in)
investing activities (237,382) (3,831) (28,476)
--------- ----------- ---------
Cash Flows from financing activities:
Increase (decrease) in due to affiliates - (30,942) 42,137
Increase (decrease) in notes payable -
affiliates 272,233 (13,795) 176,600
Proceeds from notes and long-term debt 71,302 100,000 -
Repayment of long-term debt (15,786) (15,786) -
Proceeds from the issuance of stock 455,000 609,177 84,094
--------- ----------- ---------
Net cash provided by (used in)
financing activities 782,749 648,654 302,831
--------- ----------- ---------
Net increase (decrease) in cash and
cash equivalents 38,862 8,061 -
Beginning cash and cash equivalents 8,061 - -
--------- ----------- ---------
Ending cash and cash equivalents $ 46,923 $ 8,061 $ -
========= =========== =========
Supplemental cash flow information:
Cash paid for: Income taxes $ - $ - $ -
Interest $ 7,087 $ 28,735 $ 12,382
Non-cash investing and financing activities:
Conversion of note payable - affiliate to
common stock $ - $ 9,000 $ -
Issuance of common stock for inventory $ 103,932 $ - $ -
</TABLE>

See the accompanying notes to the financial statements.

F-7
<PAGE> 37

Level Best Golf, Inc.
Notes to Financial Statements
September 30, 1996

Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Company was incorporated on October 1, 1993, in the State of Florida. The
Company is in the business of developing and marketing golf training aids and
related products. The Company has chosen September 30, as a year end and prior
to the current fiscal year had been in the development stage.

Inventories: Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventory consists principally
of work in process and finished goods.

Fixed assets: The company depreciates its office and production equipment
utilizing the straight line method over periods of five to seven years.

Net loss per share: The net loss per share is computed by dividing the net loss
for the period by the weighted average number of common shares outstanding for
the period. Common stock equivalents are excluded from the computation as their
effect would be anti-dilutive.

Product design and video production: The company amortizes its product designs
and video production over a period of 3 years using the straight line method.
Amortization charged to operations was $34,721, $3,084 and $1,910 during 1996,
1995 and 1994.

Cash and cash equivalents: Cash and cash equivalents consist of cash and other
highly liquid debt instruments with original maturities of less than three
months.

Revenue recognition: The company recognizes revenue from the sale of its
products upon shipment.

Advertising costs: Advertising costs are charged to operations when incurred.
Costs associated with product endorsements are charged to expense when
incurred. Advertising costs charged to operations were $167,783, $42,719 and
$15,465 during 1996, 1995 and 1994.

Estimates: The preparation of the Company's financial statements requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
from these estimates.

F-8
<PAGE> 38
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)

During December, 1994 the Company began offering shares of its common stock at
$1.50 per share pursuant to a private placement. Pursuant to this private
placement the Company issued 377,067 shares of common stock for cash
aggregating $565,598.

During November, 1994 the Company issued 51,000 shares of its common stock for
cash aggregating $52,000.

During January, 1995 the Company entered into an agreement to acquire certain
inventory and assume certain liabilities related to the operation of a golf
school which had been formed in December, 1994. Pursuant to the agreement the
Company agreed to pay the owner of the inventory cash aggregating $12,500 and
to issue 8,334 shares of its common stock valued at $12,500 to him. During
November, 1995 the Company rescinded the transaction. The operation of the golf
school was not material to the Company's operations during the period which it
was operated. The Company has accounted for its investment in the golf school
as a temporary investment and has charged the acquisition costs aggregating
$25,000 to operations during the year ended September 30, 1995.

During September, 1995 the Company issued 159,817 shares of its common stock to
certain employees for salaries and consultants for services related to product
development and marketing valued at $239,726.

During November, 1994 an affiliate of the Company converted a loan in the
amount of $9,000 into 9,000 shares of the Company's $.001 par value common
stock (see Note 7).

During October, 1995 the Company filed a registration statement with the
Securities and Exchange Commission on Form S-1 whereby it registered 275,000
Class A warrants, 275,000 Class B warrants and 2,066,967 shares of common
stock (including the 550,000 shares of common stock underlying the Class A
and Class B warrants).

During the year ended September 30, 1996 the Company issued 74,668 shares of
its $.001 par value common stock for services valued at $111,950 ($1.44 to
$1.63 per share).

During January, 1996 and September, 1996 the Company issued 44,288 shares of
its $.001 par value common stock for inventory valued at $103,932 ($1.50 per
share and $2.75 per share).

During September, 1996 the Company issued 20,000 shares of its $.001 par value
common stock for cash aggregating $55,000 and accepted subscriptions for 36,364
shares of its $.001 par value common stock for cash aggregating $100,000.

F-9
<PAGE> 39

Level Best Golf, Inc.
Notes to Financial Statements
(Continued)

Fair value of financial instruments: The Company's short term financial
instruments consist of cash and cash equivalents, receivables and accounts and
notes payable. The carrying amounts of such financial instruments approximates
fair market value because of the short term maturity of these instruments. The
carrying amount of long term debt also approximates fair market value based
upon the similarity of rates at which the Company could borrow funds with
similar maturities.

Note 2. STOCKHOLDERS EQUITY

Common stock:

At inception, the Company issued 1,418,162 shares of its $.001 par value common
stock to two of its officers and directors in exchange for cash of $4,094 and
129,900 shares of its $.001 common stock to an officer and director in exchange
for cash of $10,000.

During the year ended September 30, 1994 the Company issued shares of its $.001
par value common stock to non-affiliates as follows:
97,338 shares for cash of $45,000
43,300 shares for cash of $25,000
43,300 shares for services related to product development and
marketing valued at $21,500

During October, 1994 the Company declared a 346.4 to 1 stock split. All shares
included in these financial statements have been adjusted to reflect this
split.

During October, 1994 the Company entered into a one year consulting agreement
with an entity whereby the entity would provide to the Company financial
consulting services. Pursuant to the agreement the entity agreed to assist the
Company in preparing a private placement memorandum to obtain equity or debt
financing in the amount of $525,000 and to assist the Company in completing the
offering. In exchange for these services the Company agreed to pay $17,500 in
cash and to issue 275,000 shares of its $.001 par value common stock valued at
$412,500.

During October, 1994, the Company authorized the issuance of 275,000 each of A,
B, and C stock purchase warrants exercisable as follows:

$ 4.75 to exercise each A warrant for one share of Common Stock
$ 7.50 to exercise each B warrant for one share of Common Stock
$12.50 to exercise each C warrant for one share of Common Stock

The warrants are exercisable for a period of 48 months from the date of issue
and are callable with 30 days notice at a price of $.001 per warrant.

F-10
<PAGE> 40

Level Best Golf, Inc.
Notes to Financial Statements
(Continued)

Preferred stock:

During October, 1995 the Company authorized the issuance of 300 shares of
$1,000 par value preferred stock. The preferred stock is convertible into 1,000
shares of common stock for each preferred share at any time after 4 months from
the date of issue at the option of the holder. The preferred stock shall not
have any vote on matters submitted to shareholders and shall not be entitled to
the payment of dividends and shall be deemed for the purpose of distribution of
assets in liquidation to be converted into common stock as described above.

During the period from January to March, 1996 the Company issued 300 shares of
its $.001 par value preferred stock for cash aggregating $300,000. Subsequently
these preferred shares were converted into 300,000 shares of $.001 par value
common stock.

During the periods covered by these financial statements the Company issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the sales if
such exemptions were found not to apply. There are eight shareholders subject
to the possibility of rescission. These shareholders are in frequent contact
with the Company and have not expressed any intent to pursue rescission.

Note 3. CONTRIBUTION TO PAID IN CAPITAL

During September, 1994, certain officers agreed to contribute $121,800 in
unpaid salaries to the capital of the Company.

Note 4. INCOME TAXES

The Company had elected to be an "S" corporation under the provisions of the
Internal Revenue Code and state statutes. Under these provisions, no income tax
is normally incurred at the corporate level. Instead the shareholder includes
his pro rata share of the corporation's income or loss on his personal tax
returns. During March, 1995 the number of shareholders in the Company exceeded
the maximum number of shareholders allowed for an "S" corporation and the
election was terminated. In addition, the Company had used December 31, as its
year end for income tax purposes. Effective April 1, 1995 the Company adopted
Financial Accounting Standards Board Statement No. 109, Accounting for Income
Taxes. Of the loss for the year ended September 30, 1995 approximately $893,596
will be available as an operating loss carryforward for the Company expiring
during 2010, and the balance was allocated to the shareholders. The accumulated
loss through the termination of the "S" election of $964,712 has been
reclassified to paid in capital in the accompanying financial statements. In
addition, the Company has a net operating loss carryforward for the year ended
September 30, 1996 of approximately $1,145,195 expiring in 2011.

F-11
<PAGE> 41

Level Best Golf, Inc.
Notes to Financial Statements
(Continued)

Deferred income taxes may arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classifications of the assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not related
to an asset or liability are classified as current or non-current depending on
the periods in which the temporary differences are expected to reverse.

The Company is unable to predict future taxable income that would enable it to
utilize the deferred tax asset and therefore the deferred tax asset related to
its operating loss carryforward which expires in 2010 and 2011 is fully
reserved.

Note 5. NOTES PAYABLE

Bank:

During August, 1996 the Company arranged for a $75,000 bank line of credit due
on August 20, 1997 bearing interest at prime plus 2% (10.25% at September 30,
1996). At September 30, 1996 $71,302 was outstanding on the line and $3,698
remained unused.

Related parties:

During December, 1993 the Company borrowed $177,000 from an entity controlled
by its two largest shareholders. During 1994 and 1995 $14,195 had been repaid.
This note had a balance of $162,805 at September 30, 1995. During 1996 this
entity advanced an additional $272,233 bringing the balance to $435,038 at
September 30, 1996. The note bears interest at prime plus 1.5% (9.75% at
September 30, 1996)and is due on demand.

Note 6. LONG-TERM DEBT

During October, 1994 the Company obtained a U.S. Small Business Administration
loan in the amount of $100,000. This note is payable in installments of $1,754
plus interest at 11% per annum and is due on or before October 1, 1999. The
balance of this note was $68,428 and $84,214 at September 30, 1996 and 1995.

Maturity of long-term debt is as follows:

Year ended September 30, 1997: $21,048
1998: $21,048
1999: $26,332

F-12
<PAGE> 42

Level Best Golf, Inc.
Notes to Financial Statements
(Continued)

Note 7. RELATED PARTY TRANSACTIONS

During the year ended September 30, 1994 certain officers and directors of the
Company and parties related to these individuals made advances to the Company
aggregating $42,137. During the year ended September 30, 1995 $9,000 of this
debt was converted into common stock (see Note 2) and $30,942 was repaid. In
addition, the Company accrued $178,940 in unpaid salary due these individuals
bringing the balance due to $181,145 at September 30, 1995. During 1996 the
Company accrued an additional $287,548 in salary due to these individuals
bringing the balance due to $468,683 at September 30, 1996.

Note 8. COMMITMENTS

In the normal course of its business operations the Company has entered into
several license agreements whereby its acquires licenses to market certain
products developed or owned by third parties. In exchange for these marketing
rights the Company agrees to make certain royalty payments and guarantee
certain minimum sales. In most cases should the minimum sales not be made and
the corresponding minimum license fee not be paid the licenser has the right to
cancel the agreement with no further payments due from the Company. In some
cases the Company guarantees minimum license payments which are payable
regardless of whether the Company makes sales of the licensed product or not.

Guaranteed minimum license payments are as follows:

1997: $50,000 1998: $100,000 1999: $100,000 2000: $100,000

Note 9. OPERATING LEASES

During June, 1996 the Company entered into a lease for its office facilities
expiring during June, 1999. The lease calls for monthly rental payments of
$6,000 to be adjusted annually for increases in the Consumer Price Index. In
addition the Company has the option to purchase the building for $600,000
adjusted for the increases in the Consumer Price Index described above.

Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of 1 year are as follows:

Year ended September 30, 1997: $ 72,000
1998: 72,000
1999: 54,000
--------
$198,000
========

Rent expense was $64,344, $18,181 and $8,922 for 1996, 1995 and 1994.

F-13
<PAGE> 43

Level Best Golf, Inc.
Notes to Financial Statements
(Continued)

Note 10. STOCK OPTIONS

At September 30, 1996 the Company has stock options outstanding as follows:

<TABLE>
<CAPTION>
Number of options Exercise price Expiration date
----------------- -------------- ---------------
<S> <C> <C>
868,000 $2.25 June 3, 2001
200,000 $3.00 July 1, 2001
</TABLE>

Note 11. GOING CONCERN

The accompanying financial statements have been prepared on a "going concern"
basis, which contemplates the realization of assets and the liquidation of
liabilities in the ordinary course of business.

The Company has incurred operating losses for years ended September 30, 1996,
1995 and 1994 of $1,145,195, $1,473,182 and $385,126 respectively, and has
negative working capital of $1,004,043 and a stockholders' deficit of $822,325
at September 30, 1996, which raises substantial doubt about the Company's
ability to continue as a going concern.

Management has developed plans intended to remedy these conditions. The Company
has aired infomercials in April and May 1997 on two of its major products and
have generated sales of approximately $600,000 in April and $100,000 in May.
The Company has executed a line of credit in the amount of $500,000 as of April
1, 1997 and received orders from major retail chains for several of the
Company's products. However, there can be no assurance that the increased sales
and required financing will be adequate to meet the financial needs of the
Company.

Note 12. SUBSEQUENT EVENT

During October and November 1996, the Company issued 134,182 shares of its
$.001 par value common stock for cash aggregating $369,000. In addition, the
Company issued the common shares which were included as stock subscriptions at
September 30, 1996.

Note 13. FUTURE ACCOUNTING REQUIREMENTS

The FASB has issued Statement of Financial Accounting Standards No. 123 ("SFAS
123"), which encourages employers to account for stock-based awards based on
their fair value at the date the awards are granted. The resulting compensation
award would be shown as an expense on the statement of operations. Entities
can choose not to apply the new accounting method and continue to apply current
accounting requirements, which generally result in no compensation cost for
most fixed stock-option plans. Those that do so, however, will be required to
disclose in the notes to the financial statements what net earnings and
earnings per share would have been had they followed SFAS 123's accounting
method. SFAS 123 is effective for years beginning in 1996. The Company
anticipates using the intrinsic value method as permitted by SFAS 123. Had
the fair value method of accounting been applied to the Company's stock option
plans, which requires recognition of compensation cost ratably over the vesting
period of the underlying equity instruments, there would have been no material
effect on the net loss. Earnings per share would have been increased by $.12
per share for the year ended September 30, 1996.

Note 14. IMPAIRMENT OF LONG-LIVED ASSETS

The Company assesses the recoverability of long-lived assets, including
equipment and leasehold improvements and purchased contracts, by determining
whether the assets can be recovered from undiscounted future cash flows. The
amount of impairment, if any, is measured based on projected future cash flows
using a discount rate reflecting the Company's average costs of funds.

Recoverability of long-lived assets is dependent upon, among other things, the
Company's ability to achieve profitability, so as to be able to meet its
obligations when they become due. In the opinion of management, based upon
current information and projections, long-lived assets will be recovered over
the period of benefit.

F-14