GOLF TRAINING SYSTEMS INC, 10KSB, 1996-09-27

GOLF TRAINING SYSTEMS INC
10KSB, 1996-09-27
SPORTING & ATHLETIC GOODS, NEC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-KSB

Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
[Fee Required] for the fiscal year ended June 30, 1996

Commission file number 0-25332

GOLF TRAINING SYSTEMS, INC.
(Name of small business issuer in its charter)

Delaware 58-1963120
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

3400 Corporate Way, Suite G
Duluth, Georgia 30136
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code: (770) 623-6400

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common stock, $.01
par value
Redeemable warrants

Check whether Issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter period that the Registrant was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---

Check if there is no disclosure of delinquent filers pursuant 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. [ ]

Issuer's revenues for its most recent fiscal year were $1,428,173.

The aggregate market value of the voting stock held by non-affiliates of Issuer
at September 17, 1996 was $6,804,999 based on a market price of $2.53 per share.

The number of shares outstanding of Issuer's class of common stock at September
17, 1996 was 2,982,987 shares of common stock.

Documents Incorporated by Reference: Portions of the Proxy Statement for the
1996 Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission within 120 days of Issuer's fiscal year-end are incorporated by
reference in Part III.

Transitional Small Business Disclosure Format (Check one): Yes No X
--- ---
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GOLF TRAINING SYSTEMS, INC.

TABLE OF CONTENTS
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Page
PART I
ITEM 1. DESCRIPTION OF BUSINESS..................................... 1
ITEM 2. DESCRIPTION OF PROPERTY.................................... 11
ITEM 3. LEGAL PROCEEDINGS.......................................... 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.................................... 11

PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.................................... 12
ITEM 7. FINANCIAL STATEMENTS....................................... 19
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE................................... 19

PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT.............................. 21
ITEM 10. EXECUTIVE COMPENSATION..................................... 21
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT........................... 21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS........................................... 21
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K........................... 22

SIGNATURES........................................................... 26
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS.
-----------------------

(a) BUSINESS DEVELOPMENT

Golf Training Systems, Inc. (the "Company") specializes in the
marketing of golf improvement and learning products professionally designed to
promote proper training, fitness and swing mechanics for both the beginning and
advanced golfer. The Company currently markets The Leadbetter Collection, a
group of training devices, books, videotapes and other products, endorsed by
renowned golf instructor, David Leadbetter, and the Rotella Performance
Enhancement series of books, audiotapes and group workshops and seminars,
endorsed by noted sports/golf psychologist, Dr. Bob Rotella.

The Company's strategy is to become the leading source for
professionally designed and coordinated golf learning and improvement products.
A principal component of this strategy is to expand its various product lines
through the development, acquisition and introduction of new products and
services aimed at beginning golfers who want to learn how to play golf as well
as advanced golfers who wish to improve their game.

The Company is a Delaware corporation which is a successor by merger
in September 1994 to Golf Training Systems, Inc., a Georgia corporation
incorporated in June 1991. Unless the context requires or as otherwise
indicated, all references to the "Company" include the predecessor company. The
Company's executive offices are located at 3400 Corporate Way, Suite G, Duluth,
Georgia 30136 and its telephone number is (770) 623-6400.

(b) BUSINESS OF ISSUER

INDUSTRY BACKGROUND

According to The National Golf Foundation, a non-profit industry
association, in 1994 there were approximately 24.3 million golfers in the United
States and over $10 billion was spent in the United States on golf and golf
related activities. The Company believes the sport is growing in popularity,
particularly among women and senior players. In certain foreign markets,
particularly Japan, Germany and Sweden, golf has also experienced significant
growth over the last decade.

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The golf instruction business is premised on a golfer's continuing
desire to improve his or her game as well as the instruction desired by new
golfers. Historically, instruction has been conducted primarily by local golf
professionals. In recent years, technological improvements and the interests of
both the golf professional and consumer have created a shift towards
instructional products and programs. However, the golf learning and improvement
products industry continues to be composed principally of single product
companies, none of which, to the Company's knowledge, offers an integrated
approach to golf learning and improvement. The Company intends to further
develop and market a coordinated package of golf educational products and
services under The Leadbetter Collection, Rotella Performance Enhancement, and
the Dave Pelz Short Game.

STRATEGY

The Company's goal is to become the leading source for professionally
designed and coordinated golf learning and improvement products. A principal
component of this strategy is to expand its product base by introduction of new
products and additional product lines. Additionally, the Company intends to
promote proper fitness and training through the use of its products as an
essential element of any golfer's regimen. The Company believes that a
coordinated and effective product line, coupled with endorsements by David
Leadbetter, Dr. Bob Rotella, Dave Pelz, and professional golfers, along with
focused advertising, will promote the Company's identity as the major source of
products promoting the learning, improvement and enjoyment of golf.

To implement its business strategy, the Company intends to expand its
sales and marketing activities to include promotional efforts aimed at achieving
product and corporate recognition and acceptance in the golf community. As part
of this effort, the Company intends to promote its corporate logo, Golf Training
Systems The Pro's Pros, within the golf industry and to golf consumers. The
Company also intends to market its product line brands such as The Leadbetter
Collection, Rotella Performance Enhancement, and Dave Pelz Short Game logos.
The Company expects to modify its marketing strategy in international markets,
reflecting consumer preferences, development of the market and other market
factors, and in marketing to institutional customers such as golf schools and
driving ranges. In addition, pricing, distribution and sales strategies will
vary in certain foreign markets, particularly with products requiring service or
an information-intensive sales approach.

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PRODUCTS

THE LEADBETTER COLLECTION

The Company markets a group of mechanical, literary, video and other
products endorsed by renowned golf instructor David Leadbetter. The Company
commenced marketing these products under the name The Leadbetter Collection in
January 1994 in order to generate name recognition and product credibility.
Some of the products incorporated in The Leadbetter Collection were previously
marketed separately by the Company and others.

The Leadbetter Collection includes a variety of products that help
educate the golfer and to teach them to perform on the course. The Leadbetter
Collection presently is comprised of the following products:

The Coach 300 SX - a golf training and fitness system for home use.
The system includes both an instructional video by David Leadbetter and an
instructional manual.

The Coach 500 - an institutional model of the 300 SX sold and marketed
to professional teachers and such as fitness centers, universities, etc.

Computer Coach - Swing Analysis System - a computer system complete
with both hardware and software marketed to the teaching environment. The
computer software is owned by NEAT systems and is marketed by GTS on a worldwide
exclusive basis.

Computer Coach CD-Rom V3.0 - This product is a consumer based CD which
includes instructional content and graphic capability for the analysis of the
consumers own swing. The product includes the swings of both PGA and LPGA tour
players such as Nick Price, Brad Faxon and Patty Sheehan.

The Right Link - used to promote a correct position at the top of the
swing and a proper release.

The Mirror - a mirror that provides a wide range of vision throughout
the swing.

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The Putting Rules - a "ruler" that incorporates a number of
fundamental putting tips and allows the golfer to repeat the proper stroke and
develop distance control.

The Glove - A golf glove which has marks which aids the golfer with
the correct grip.

The Short Club - a 27" club for indoor practice.

Set Right - an alignment tool for placing two clubs at a 90 degree
angle.

SwingLink - keeps the body in control of the arms and encourages a
body pivot.

The Leadbetter Collection also includes (1) several books by David
Leadbetter, published by a third party, The Golf Swing, Faults & Fixes, and
Lessons from The Golf Greats; and (2) a series of instructional videos, produced
by a third party, The Full Golf Swing, The Short Game ,Taking it to the Course,
Faults & Fixes, Simple Secrets, and Practice Makes Perfect.

PRODUCTS UNDER DEVELOPMENT

The Company is continually evaluating and developing new products and
services. Product development has been conducted primarily by the Company. The
Company anticipates expanding The Leadbetter Collection by introducing some or
all of the following proposed products, which are currently under development:
Wrist Angle, a device designed to allow a golfer to achieve the correct position
of the wrist during the golf swing for the pitching and chipping strokes, a
practice kit; and a coordinated group of products designed for beginners.

The Company is also under development with a new series of The Coach,
which will be adjustable for all types of golfers and will be a product
extension of The Coach 300 SX Series which comes in separate "tension" levels.
Management anticipates introduction of this product in January 1997.

The Company entered into an agreement in February 1996 with Dr. Bob
Rotella, a noted sports/golf psychologist for the marketing by the Company of a
performance enhancement series of audiotapes, videotapes, newsletters, group
workshops and seminars, and other golf motivation and training applications
developed by Dr. Rotella. The Company

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also entered into a newsletter publishing agreement in August 1996 with MSV
Publishing, Inc. of Charlottesville, Virginia to develop, test, publish, market
and distribute a monthly newsletter to be written by Dr. Rotella.

The Rotella Performance Enhancement series includes the following
products:

1. Books - Golf is not a Game of Perfect and a companion audio Golf
is a Game of Confidence and a companion audio

2. Audio - Putting Out of Your Mind

These products are owned and distributed by Simon and Schuster.

3. Business audio tape series --- Playing to Win - a five set audio
cassette series for application in life, business, and sports. This product was
developed by Dr. Rotella and the Company is distributed by the Company.
Introduction of this series is tentatively scheduled during October 1996.

PRODUCTS UNDER DEVELOPMENT

The Company is pursuing additional titles of books, videos, and audios
with Dr. Rotella as well as speaking and corporate outings and seminars.

The Company also entered into an agreement in August 1996 with Dave
Pelz, a noted golf short game instructor, for the marketing by the Company of
putting and short game audio tapes, videotapes, newsletters, mechanical learning
and training devices and club fitting programs developed by Mr. Pelz. The
Company, as part of the agreement, took over the marketing of Mr. Pelz existing
product line which includes, The Truth Board, The Putting Track, Teacher Clips,
Position Mat, a book entitled Putt Like the Pros, and videos entitled Amazing
Truth About Putting and Developing Great Touch. The Company plans to develop
additional products with Mr. Pelz to expand this product line.

The Company has entered into a business venture with Biomechanics,
Inc. for the licensing of three-dimensional movement analysis and computer
animation technology for golf applications through Sports Training Systems, LLC.
The Company is the majority shareholder of Sports Training Systems, which will
market and distribute the licensed technology through products and services to
golfers, including golf swing analysis, golf swing modification, physical
analysis and muscular activity assessment of the golf swing

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through a worldwide license program. Sports Training Systems intends to license
the technology for instruction and teaching in high traffic areas such as
shopping malls, hotels or stand-alone teaching centers in major metropolitan
areas. The technology (code name STS*3D) was introduced by the Company at the
PGA International Show in Las Vegas in September 1996. Management is presently
negotiation with two potential domestic licensees and a potential international
licensee of the technology.

SALES AND MARKETING

Domestic sales accounted for approximately 86% of the Company's net
sales during the fiscal year ended June 30, 1996. The Company has historically
marketed its products through magazine and direct mail advertisements. The
Company will continue to market specific products such as The Coach and Computer
Coach through this channel, but has increased its efforts in the area of retail
sales. The Company continues to build a national independent sales
representative force in order to sell directly to golf, general sports and
gift/specialty retail markets.

The Company also attends national and selected regional trade shows in
order to promote its products and name and logo recognition. The Company plans
to continue to advertise in national golf magazines, such as Golf Digest, Golf
Magazine, Golf World and Golf Tips, and regional magazines targeted to golfers.
The Company also plans to continue to focus on "consumer response" marketing to
potential consumers comprised of individuals, schools, teaching professionals,
driving ranges, hotels and health clubs through direct mail and television
direct response commercials.

The Company was a presenting sponsor of the 1996 Dupont World Amateur
Handicap Championship, the largest golf tournament in the world, with over 4,000
participants, and also intends to sponsor other golf and golf related events.
The Company may also seek to develop various promotional programs with The David
Leadbetter Golf Academies and various corporate sponsors to provide a vehicle
for obtaining lists of potential customer for the Company's direct mail efforts
and to provide exposure and credibility through sweepstake entry programs at
airports, car dealerships, retail golf shops and other high-traffic locations.

INTERNATIONAL MARKETS

Foreign sales accounted for approximately 14% of the Company's net
sales during the fiscal year ended June 30, 1996. The Company has exclusive
distribution

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agreements with a distributor in Thailand, in Germany, Austria, Switzerland, and
Canada as of June 30, 1996. The Company has non-exclusive distributors in
Malaysia, Argentina, Sweden, the Philippines, and Belgium as of June 30, 1996.
The Company intends to enter into agreements with additional distributors in the
United Kingdom, Japan, Korea, and Australia and to increase its international
marketing efforts in these regions. Although marketing and sales strategies may
vary among geographic segments, the Company expects to offer a similar product
line and overall promotional campaign in all target markets. The Company is
currently in discussions with potential distributors in the United Kingdom and
Japan.

The Company's distribution agreements with its distributors are
generally exclusive as to the territory for a minimum period of one year and
provide that the distributor must purchase a minimum number of the Company's
products in each year. In the event the distributor fails to meet this
obligation, the Company may terminate the distribution agreement with respect to
one or more products of the Company. In the event the Company fails to supply
the minimum amounts to the distributor, the distributor may terminate its
agreement. The Company's distribution agreements further provide that the
distributors shall bear the responsibility and expenses of developing an annual
marketing plan for the sale of the Company's products within their respective
territories and shall be responsible for compliance with all applicable laws,
regulations and governmental orders within such respective territories.

LEADBETTER AGREEMENT

In May 1994, the Company entered into an agreement with golf
instructor David Leadbetter (the "Leadbetter Agreement"), which superseded a
July 1991 agreement between the Company and Mr. Leadbetter. Mr. Leadbetter is a
professional golf instructor and former European golf tour professional. Mr.
Leadbetter has instructed such professional golfers as Nick Price, Nick Faldo,
David Frost, Denis Watson, Mike Hulbert, Jerry Pate, Mark McNulty, Tom Watson,
Scott Simpson, Brad Faxon, Seve Balesteros, Larry Mize, Bernhard Langer and Ian
Baker-Finch. Mr. Leadbetter is a contributing editor of Golf Digest.

Pursuant to the Leadbetter Agreement, which extends through December
31, 1997, the Company has the exclusive worldwide right and license to use Mr.
Leadbetter's name, likeness and identification, and the trademark The Leadbetter
Collection, which is owned by Mr. Leadbetter, in connection with the sale of the
Company's present collection of golf products. In addition, the Company has
acquired the exclusive right to use Mr.

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Leadbetter's name, likeness and identification in connection with the sale of
any new mechanical golf products sought to be incorporated by the Company into
The Leadbetter Collection (upon approval by Mr. Leadbetter of such products),
except in connection with certain products manufactured by third parties and
already endorsed by Mr. Leadbetter, which products the Company views as
insignificant from a marketing standpoint.

Mr. Leadbetter has also agreed to provide certain promotional and
endorsement services to the Company. These services are limited to three days
per year during the term of the agreement at no charge to the Company (except
for expenses); however, Mr. Leadbetter is not required to provide such services
unless all payments due to him under the Leadbetter Agreement have been paid.
Compensation for any additional personal services performed by Mr. Leadbetter
for the Company must be negotiated between Mr. Leadbetter and the Company. Mr.
Leadbetter has also agreed to be designated and represented to the general
public and the golfing industry as a spokesperson for the Company. Mr.
Leadbetter has the right to approve any references to or identification of him
and the Company is required to consult with Mr. Leadbetter on all marketing
plans and promotions for The Leadbetter Collection products. During the fiscal
year ended June 30, 1996, the Company paid royalties aggregating $68,750 to Mr.
Leadbetter.

ROYALTY OBLIGATIONS

In addition to the royalty payments due to Mr. Leadbetter as described
above, the Company is obligated to pay a royalty to Robert Fitch, the inventor
of The Coach. In October 1990, Mr. Fitch assigned his entire right, title and
interest in his invention known as The Coach and the related patent to Gruv-a-
Swing, Inc., which were then assigned in August 1991 by Gruv-a-Swing, Inc. to
the Company. During the fiscal year ended June 30, 1996, the Company paid Mr.
Fitch $5,773 pursuant to this agreement.

It is also likely that the Company will owe incidental royalty
payments to talent appearing in videos and other instructional materials
produced by or on behalf of the Company or to other professional golfers who
endorse specific products, although the Company does not currently have any
pending arrangements, negotiations, understandings or contracts with respect
thereto.

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MANUFACTURING AND SUPPLIERS

The Company uses outside domestic sources to manufacture the
components of its products many of which are the single source for the component
supplied. Should such outside sources cease to supply such components, the
Company could experience significant delays in the production and delivery of
such products. To date, the Company has not experienced any significant delay in
the production and delivery of components of any of its products from outside
domestic sources. The Company assembles and packages many of the products in the
Company's warehouse located in Duluth, Georgia.

PATENTS AND TRADEMARKS

The Company has two United States patents covering The Coach and has
filed corresponding patent applications in Canada and Japan. Although the
Company believes that these patents may provide it with a competitive advantage,
there can be no assurance that the patents will not be designed around or
successfully challenged or that any of the foreign patents will be issued. The
Company has registered trademarks with respect to The Coach for use as golf
swing training and exercising machines and the Golf Training Systems logo, the
Company has filed a patent application covering The Glove, and has filed
applications to register the ComputerCoach, The Right Link, The Putting Rules,
Set Right as trademarks. The Company believes that these trademarks are an
important factor in marketing its products. The Company has an exclusive
worldwide license to use the trademark, The Leadbetter Collection, which is
owned by David Leadbetter.

COMPETITION

The Leadbetter Collection, together with the other products of the
Company, will compete in the recreation, fitness and sports training markets,
which are highly competitive. The golf industry has been characterized by
widespread imitation of popular products. Increased competition generally, and
the introduction or promotion of competing products specifically, could
adversely affect the Company's sales and profitability by exerting pricing
pressure, reducing market share and/or creating other obstacles. In the golf
industry, a manufacturer'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. There are numerous recreational and exercise

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devices, equipment and other apparatus in the general fitness industry, as well
as several golf-targeted products, such as swing-enhancing products, on the
market. Although the Company is not aware of any apparatus currently on the
market other than The Coach which combines golf-swing training, strength
training and muscle-memory training, there can be no assurance that superior
fitness and golf-training devices will not be developed and successfully
marketed or that the technology incorporated in The Coach and other products
developed and marketed by the Company will not become obsolete. The Company
also competes with the manufacturers and distributors of the other products
included in The Leadbetter Collection.

EMPLOYEES

As of June 30, 1996, the Company employed 17 people on a full-time
basis and 6 people on a part-time basis. None of the employees are covered by a
collective bargaining agreement. The Company considers its relations with its
employees to be good.

EXECUTIVE OFFICERS

The following sets forth certain information regarding the executive
officers of the Company:

Wayne C. McDonald, age 48, has been Chairman of the Board and Chief
Executive Officer of the Company since the Company's inception in June 1991.
Mr. McDonald was president, chief executive officer and a director of
Cornerstone Products, Inc., a company that develops and markets point-of-sale
products and programs in the sports industry, since September 1986. Cornerstone
Products, Inc. manages programs for the National Basketball Association, Major
League Baseball International, the National Hockey League, the Indianapolis
Motor Speedway, the Brickyard 400 and the United States Olympic Committee. Mr.
McDonald devotes substantially all of his business time to the Company.

George P. Lee, III, age 38, has been President and Chief Operating
Officer of the Company since July 1993, has been a director of the Company since
its inception in June 1991, and from its inception to July 1993 was the
Company's Vice President--Operations. From November 1990 to June 1991, Mr. Lee
was self-employed in the construction business. From 1979 to November 1990, Mr.
Lee held various positions with P. R. Orton, Inc., a general contractor and
developer, including vice president and general manager.

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There are no family relationships between any of the executive
officers of the Company.

ITEM 2. DESCRIPTION OF PROPERTY.
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The Company leases its office space and warehouse facilities in
Duluth, Georgia, which contain approximately 11,000 combined square feet of
space, from an unaffiliated party pursuant to a lease providing for an annual
rental of approximately $60,000, subject to annual increases, which expires on
September 30, 1997. However, it is possible that the Company will need to seek
additional or larger facilities in the foreseeable future in the event that its
operations expand.

ITEM 3. LEGAL PROCEEDINGS.
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The Company is not a party to any legal proceedings.

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

No matter was submitted to a vote of the stockholders during the
Company's fourth quarter of the fiscal year ended June 30, 1996.

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PART II
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.

The Company's common stock was listed on The NASDAQ Stock Market on
May 15, 1995, while the Company's units consisting of one share of common stock
and one redeemable warrant were previously listed on March 9, 1995. As of
September 16, 1996, the Company had approximately 300 shareholders of record of
its common stock.

The following is a summary of the range of high and low bids for the
Company's common stock and warrants, including the units, as reported on The
NASDAQ Stock Market system:
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High Low
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Quarter ended March 31, $6.00 (units) $4.25 (units)
1995

Quarter ended June 30, $6.00 (units) $4.75 (units)
1995 $6.25 (common $5.63 (common
stock) stock)
$1.50 (warrant) $0.75 (warrant)

Quarter ended September $6.38 (common $5.50 (common
30, 1995 stock) stock)
$1.38 (warrant) $0.50 (warrant)

Quarter ended December $9.25 (common $2.75 (common
31, 1995 stock) stock)
$2.00 (warrant) $0.44 (warrant)

Quarter ended March 31, $5.25 (common $3.38 (common
1996 stock) stock)
$0.75 (warrant) $0.25 (warrant)

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Quarter ended June 30, $5.00 (common $1.50 (common
1996 stock) stock)
$0.75 (warrant) $0.16 (warrant)
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These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.

The Company has not declared any cash dividends since its inception
and it does not anticipate paying cash dividends in the foreseeable future. The
Company currently intends to retain all earnings, if any, for use in the
expansion of the Company's business. The declaration and payment of future cash
dividends, if any, will be at the sole discretion of the Board of Directors and
will depend upon the Company's profitability, financial condition, cash
requirements, future prospects and other factors deemed relevant by the Board of
Directors.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
---------------------------------------------
OF OPERATIONS.
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RESULTS OF OPERATIONS

1996 TO 1995

Net sales (gross sales less returns and allowances) for the year ended
June 30, 1996 (fiscal 1996) increased to $1,428,173, from $652,620 for the year
ended June 30, 1995 (fiscal 1995), an increase of approximately 119%. The
increase in sales is attributable to the resumption of advertising during fiscal
1996 which management believes continues to result in increased unit sales.
During fiscal 1995, the Company allocated its limited financial resources to the
redesign and development of new models of products rather than to marketing
resulting in lower sales during that period, but having an improved product
ready for distribution during fiscal 1996. In addition to the revenue growth in
sales of products introduced in prior years, sales also continue to be
positively impacted by the introduction of other new products in The Leadbetter
Collection, and other products being developed by Dr. Bob Rotella, a noted
golf/sports psychologist.

The Company's strategy and operating plans continue to be executed as
originally announced. The final introduction of products in The Leadbetter
Collection, as introduced at the annual PGA Show in January 1996, completed the
initial product line in the area of swing improvement for golfers. The Company
recently announced the addition of an independent sales force which the Company
anticipates will add sales growth in the retail golf products market. Prior to
February 1996, sales were generally as a result of direct response marketing
activities for the United States market and overseas distributors. During
February 1996, the Company also announced an alliance with Dr. Bob Rotella, a
leading golf/sports psychologist. The Company will continue to develop an
entire line of products on an exclusive basis with Dr. Rotella, targeted to
performance enhancement for golf, initially, and expanded to business people,
and all other sports, ultimately. During August and September 1996, the Company
continued to introduce new products being developed by Dave Pelz in the area of
putting and the short game, and through Sports Training Systems, a business
venture with Biomechanics, Inc. which management believes will continue to
enhance its strategy of full product lines and the use of advance computer aided
teaching technology. Sports Training Systems owns certain technology licensing
rights for three-dimensional human movement analysis and computer animation in
the sports training industry. The Company believes that such technology
provides the most

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accurate full body golf swing evaluation and makes the results easier to
understand through real-time three-dimensional virtual reality computer
animation of body and golf club motions and instant feedback of all
biomechanical performance data.

Cost of sales as a percentage of net sales was approximately 77% in
fiscal 1996, as compared to approximately 79% in fiscal 1995. These changes
reflect the impact of the increased sales of the Computer Coach, which has a
lower gross margin somewhat offset by other new higher margin products.

Selling and marketing expenses increased approximately 111% in fiscal
1996, as compared to fiscal 1995. The increased selling and marketing expenses
reflect the resumption of certain advertising and payments and costs associated
with the Company's royalty, commission and endorsement agreements as well as
costs associated with increased sales.

General and administrative, depreciation and amortization, and
research and development expenses increased approximately 104% in fiscal 1996
over comparable amounts for the fiscal 1995. The increase reflects the Company's
increase in operations, including salaries and related personnel costs following
the completion of its initial public offering in March 1995, as well as an
increase in associated costs such as legal and consulting, and increased
amortization of intangibles following the Company's reorganization, as discussed
below.

The Company's other income (expense) of $82,838 for fiscal 1996 was
primarily interest income compared to interest income in fiscal 1995 of $33,681.

The Company had a consolidated net loss of $2,741,716 ($1.22 per
share) for fiscal 1996 compared to a net loss of $2,815,539 ($1.65 per share)
fiscal 1995. The net loss and net loss per share amounts primarily reflect the
increase in sales, the non-recurring noncash reorganization premium and
consulting fees, the interest associated with the debentures, and the increased
selling and marketing and general and administrative expenses discussed above as
the Company increased its level of operations and increased selling and
marketing efforts on new products introduced during fiscal 1996.

1995 TO 1994

Net sales (gross sales less returns and allowances) for the year ended
June 30, 1995 (fiscal 1995) decreased to $652,620 from $729,404 for the year
ended June 30,

-15-
<PAGE>

1994 (fiscal 1994), a decrease of approximately 11%. The decrease in sales is
primarily attributable to a 57% decline in sales of The Coach, which accounted
for 78% of net sales fiscal 1994. The Company did not actively market The Coach
fiscal 1995 and engaged in only limited marketing of The Coach fiscal 1994,
reflecting the Company's allocation of its limited financial resources to the
redesign and development of new models of The Coach rather than to marketing.
The Company completed the redesign of The Coach in the third quarter of fiscal
1995. During April 1995 production and shipping began on backorders of The
Coach Model 300SX. The Company also completed its development of an interactive
software teaching and analysis product, the ComputerCoach by the end of the
third quarter of fiscal 1995.

International sales, consisting primarily of The Coach, decreased from
$348,747 or 48% of net sales in fiscal 1994 to $175,024 or 27% of net sales for
fiscal 1995, primarily reflecting decreased marketing activities, a lack of
minimal consumer acceptance of the relatively high retail price of the older
model of The Coach, economic conditions, and lack of effective distribution in
the existing foreign markets. The Company has responded with a lower price
point for The Coach Model 300SX and increased activity in interviewing and
developing potential qualified distributors in key foreign markets.

The Company experienced greater than anticipated sales of its other
products, including $123,594 of new sales of the ComputerCoach "Swing Analysis
System", during fiscal 1995 as compared to fiscal 1994 as total sales of other
products increased from $147,655 to $392,012 reflecting an increased acceptance
of computer aided golf instruction tools in the marketplace.

Cost of sales as a percentage of net sales increased to approximately
79% in fiscal 1995 from approximately 71% in fiscal 1994. These increases
reflect the impact of the increased sales of the ComputerCoach "Swing Analysis
System" and its relatively lower margins from the hardware component of the
related sale.

Selling and marketing expenses increased approximately 100% to
$612,416 in fiscal 1995 from $306,784 in fiscal 1994. The increased selling and
marketing expenses reflect the continued development of new advertising
materials for future use and payments and costs associated with the Company's
royalty and endorsement agreements.

General and administrative, depreciation and amortization, and
research and development expenses increased approximately 117% to a combined
$915,709 for fiscal 1995 from $422,510 for fiscal 1994. The increases reflect
the Company's anticipated

-16-
<PAGE>

increase in operations, including salaries and related personnel costs following
the completion of its initial public offering in March 1995, as well as an
increase in associated costs such as legal and consulting, research and
development costs in the redesign of The Coach, and increased amortization of
intangibles following the Company's merger (See Note 1 to the Company's
financial statements).

The Company's operating expenses for fiscal 1995 also include a non-
cash non-recurring charge consisting of a reorganization premium of $589,099
reflecting the difference in fair value of the shares exchanged in the
recapitalization of the Company by the former holders of Class B common stock,
other than Gruv-A-Swing, Inc., relating to the benefit to such holders resulting
from the elimination of the Class A common stock liquidation preference in
connection with the recapitalization.

The Company's other income (expense) of $(1,423,495) for fiscal 1995
included approximately $868,000 of non-recurring non-cash charges (interest and
amortization) relating to the debentures and the repayment of the debentures
upon the completion of the initial public offering.

The Company had a net loss of $2,815,539 ($1.65 per share) for fiscal
1995 compared to a net loss of $525,205 ($.30 per share) for fiscal 1994. The
increased net loss and net loss per share amounts primarily reflect the lower
sales, the reorganization premium, the charges associated with the repayment of
the debentures, and the increased selling and marketing and general and
administrative expenses discussed above as the Company increased its level of
operations and increased selling and marketing efforts on new products
introduced during the third and fourth quarter of fiscal 1995. The per share
amounts are computed using the weighted average number of shares which reflects
the results of the initial public offering and the reorganization and
recapitalization as discussed in Note 1 to the Company's financial statements.

LIQUIDITY AND SOURCES OF CAPITAL

The Company completed a Regulation S private placement of $4,150,000
of its Convertible Preferred Stock with a group of foreign investors on April
11, 1996. However, the Company determined on August 13, 1996 to suspend
conversion of the Convertible Preferred Stock issued in the private placement as
a result of concerted market manipulation and/or irregularities in the trading
of the Company's outstanding common stock, which management believes is related
to the conversion terms of the Convertible Preferred Stock. The Company, through
its corporate finance advisors, is currently negotiating revised terms with the
holders of the securities.

-17-
<PAGE>

At the end of fiscal 1996, the Company had consolidated working
capital of $2,254,074, including $2,009,820 of cash and cash equivalents. The
Company believes that the remaining net proceeds of the private placement
together with funds expected to be generated from operations in response to the
Company's current efforts to expand its product line and sales will be
sufficient to meet its normal operating requirements over the near term.
However, the Company's strategy of growth into the retail market and
international sales and the continued introduction of new products will require
additional funds to implement. The Company has no commitments and no assurance
additional funds will be available or if so, will be sufficient to continue to
implement such strategy.

The Company had a negative cash flow from operations of $2,176,354 for
fiscal 1996 and a negative cash flow from operations of $1,307,462 fiscal 1995.
The negative cash flow from operations reflects the increased expenses discussed
above.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-18-
<PAGE>

ITEM 7. FINANCIAL STATEMENTS.
--------------------

The financial statements, notes thereto and auditor's report thereon
included on the following pages are included herein by reference.

Index to Financial Statements
-----------------------------
<TABLE>
<CAPTION>

Financial Statements Page
- -------------------- ----
<S> <C>

Reports of Independent Auditors...................... F-2

Consolidated Balance Sheet as of June 30, 1996....... F-4

Consolidated Statements of Operations for the
years ended June 30, 1996 and 1995................ F-5

Consolidated Statements of Stockholders' Equity for
the years ended June 30, 1996 and 1995............ F-6

Consolidated Statements of Cash Flows for the
years ended June 30, 1996 and 1995................ F-7

Notes to Consolidated Financial Statements........... F-8

</TABLE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
-----------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
--------------------------------------

The Company's Board of Directors dismissed Ernst & Young LLP, the
Company's independent accountants, effective June 24, 1996, and engaged Evans,
Porter, Bryan & Co. as its new independent accountants to audit the Company's
financial statements. The reports prepared by Ernst & Young LLP on the
financial statements of the Company for the Company's June 30, 1995 fiscal year
contained no adverse opinion or disclaimer of opinion nor was it modified as to
audit scope or accounting principles.

There were no disagreements with Ernst & Young LLP, the Company's
previous auditors, on any matter of accounting principles or practices,
financial statement

-19-
<PAGE>

disclosure or auditing scope or procedure for the June 30, 1995 fiscal year.
There have been no consultations with the Company's newly engaged accountants
with regard to either the application of accounting principles as to any
specific transaction, either completed or proposed, the type of audit opinion
that would be rendered on the Company's financial statements, or any matter of
disagreement with the Company's former accountants.

The Company has filed a Form 8-K with the Securities and Exchange
Commission as to this matter as noted in Item 13(b) of this Report.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-20-
<PAGE>

PART III
--------

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
-------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
-------------------------------------------------

The information set forth under the heading "Election of Directors" in
the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders is
incorporated herein by reference. Information with respect to the Company's
executive officers is included in Item 1 of Part I of this Report.

ITEM 10. EXECUTIVE COMPENSATION.
----------------------

The information set forth under the heading "Executive Compensation"
in the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders is
incorporated herein by reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------

The information set forth under the heading "Principal Stockholders"
in the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders is
incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------

The information set forth under the heading "Certain Transactions" in
the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders is
incorporated herein by reference.

-21-
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
--------------------------------

(A) 1. FINANCIAL STATEMENTS.
--------------------

The financial statements, notes thereto and auditor's report thereon,
filed as part hereof, are listed in the Index to Item 7 of this Report.

2. FINANCIAL STATEMENT SCHEDULES.
-----------------------------

All schedules have been omitted as the required information is not
applicable.

3. EXHIBITS.
--------

Exhibit No. Description
----------- -----------

3.1(a)* Certificate of Incorporation

3.1(b)* Certificate of Ownership and Merger

3.2* Bylaws

4.1* Form of Debenture

4.2* Form of Rights Agreement

4.3* Revised Form of Warrant Agreement

4.4* Revised Form of Representatives' Option

4.5* Agreement between the Registrant and David Leadbetter dated
Warrant held by David Leadbetter and Registration Rights as
of May 2, 1994

4.6* Warrant held by Golf Products International dated as of July
1, 1994

4.7* Warrant held by James H. Brennan, III dated as of August 1,
1993

-22-
<PAGE>

Exhibit No. Description
----------- -----------
4.8* Warrant held by Samuel R. Dunlap, Jr. dated as of June 1,
1993

4.9* Form of Common Stock Certificate

10.1* 1994 Stock Option Plan

10.2* Employment Agreement between the Registrant and Wayne C.
McDonald dated as of September 15, 1994

10.3* Employment Agreement between the Registrant and George P.
Lee, III dated as of September 15, 1994

10.4* Lease Agreement dated September 27, 1991 between the
Registrant and Southeast Venture Limited Partnership and
First Addendum and Second Addendum to Lease Agreement

10.5* Form of Indemnification Agreement

10.6* Agreement dated November 9, 1991 between the
Registrant and Robert E. Fitch

10.7* Agreement dated May 2, 1994 between the Registrant and
David Leadbetter

10.8* Agreement dated as of July 1, 1994 between the
Registrant and Denis Watson.

10.9* Agreement dated as of July 1, 1994 between the
Registrant and Golf Products International

10.10* Letter Agreement dated September 28, 1994 between
the Registrant and Neat Systems, Inc.

10.11* Letter of Agreement dated September 22, 1994 between
the Registrant and Bart Productions, Inc.

-23-
<PAGE>

10.12* Distribution Agreement dated September 15, 1993 between the
Registrant and Golf Training Systems, Ltd.

10.13* Distribution Agreement dated August 1, 1994 between
the Registrant and Asian-Thai Golf International Co., Ltd.

10.14* Distribution Agreement dated January 1, 1994 between
the Registrant and Dynaflo Sports Tech Co., Ltd.

10.15* Distribution Agreement dated September 1, 1992
between the Registrant and Sumitomo Rubber Industries, Inc.

10.16* Distribution Agreement dated September 1, 1992
between the Registrant and Chung Sports Corp.

10.17* Agency Agreement dated August 1, 1994 between the
Registrant and Sithichai Tonapat

10.18* Consulting Agreement dated as of June 1, 1993
between the Registrant and Samuel R. Dunlap, Jr.

10.19* Revised Form of Consulting Agreement between the
Registrant and First Allied Securities, Inc.

10.20* Letter of Termination of Agreement dated February
16, 1994 between the Registrant and Bart Productions, Inc.

11** Statement Re: Computation of Earnings Per Share

16*** Letter on Change in Certifying Accountant

27** Financial Data Schedule

*Previously filed by the Company as exhibits to a Registration Statement on Form
SB-2 (File No. 33-84808), and such documents are incorporated herein by
reference.

**Filed herewith.

***Previously filed by the Company as an exhibit on Form 8-K dated June 24,
1996, and such document is incorporated herein by reference.

-24-
<PAGE>

(B) REPORTS ON FORM 8-K.
-------------------

The Company filed a report on Form 8-K dated June 24, 1996 regarding the
dismissal of Ernst & Young LLP, the Company's independent accountants, and the
engagement of Evans, Porter, Bryan & Co. as the Company's new independent
accountants to audit the Company's financial statements. See Item 8 of this
Report for further details concerning this matter.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-25-
<PAGE>

SIGNATURES
----------

Pursuant to the requirements 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, on September 25, 1996.

GOLF TRAINING SYSTEMS, INC..

By:/s/ Wayne C. McDonald
----------------------
Wayne C. McDonald,
Chief Executive Officer

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 indicated on September 25, 1996.

SIGNATURE TITLE
- --------- -----

/s/ Wayne C. McDonald Chairman of the Board and Chief
- -------------------------- Executive Officer (principal
Wayne C. McDonald executive officer)

/s/ George P. Lee, III President, Chief Operating Officer
- -------------------------- and Director (principal financial
George P. Lee, III officer)

/s/ Nicholas J. Aquilino Director
- --------------------------
Nicholas J. Aquilino

/s/ Daniel A. Gordon Director
- --------------------------

/s/ Parker Smith Director
- --------------------------
Parker Smith

/s/ Richard E. White Director
- --------------------------
Richard E. White

-26-
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Auditors ........................................... F-2

Consolidated Balance Sheet as of June 30, 1996............................. F-4

Consolidated Statements of Operations for the years ended June 30, 1996
and 1995................................................................ F-5

Consolidated Statement of Stockholders' Equity for the years ended
June 30, 1996 and 1995.................................................. F-6

Consolidated Statements of Cash Flows for the years ended June 30, 1996
and 1995................................................................ F-7

Notes to Consolidated Financial Statements................................. F-8

F-1
<PAGE>

Report of Independent Auditors

The Board of Directors and Stockholders
Golf Training Systems

We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Golf Training Systems, Inc. for the year
ended June 30, 1995. 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 made 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 consolidated statements of operations, cash flows and
stockholders' equity of Golf Training Systems, Inc. referred to above present
fairly, in all material respects, the results of its operations and its cash
flows for the year ended June 30, 1995 in conformity with generally accepted
accounting principles.

/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP

Atlanta, Georgia
September 14, 1995

<PAGE>

[LETTERHEAD OF EVANS, PORTER, BRYAN & CO. APPEARS HERE]

To the Board of Directors
Golf Training Systems, Inc.

We have audited the accompanying consolidated balance sheet of Golf Training
Systems, Inc. and subsidiary as of June 30, 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year 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.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Golf Training
Systems, Inc. and subsidiary as of June 30, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.

/s/ Evans, Porter, Bryan & Co.
------------------------------
EVANS, PORTER, BRYAN & CO.

August 29, 1996
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
June 30, 1996
<TABLE>
<CAPTION>

ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 2,009,820
Receivables less allowance for doubtful
accounts of $1,500 164,304
Inventories 430,141
Prepayments 62,807
-----------

Total current assets 2,667,072

Equipment and improvements:
Office furniture and equipment 220,701
Manufacturing equipment 200,916
Leasehold improvements 8,185
-----------

429,802
Accumulated depreciation 204,176
-----------

Net property and equipment 225,626

Other assets:
Intangible assets:
License fees, net of amortization of $8,417 1,001,583
Patents and trademarks, net of amortization
of $15,467 71,906
Goodwill, net of amortization of $400,957 1,687,282
Deposits 271,123
-----------

Total Assets $ 5,924,592
===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 300,316
Salaries and taxes payable 14,308
Other accrued expenses 44,837
Commissions and royalties payable 53,537
-----------

Total current liabilities 412,998

Commitments
Minority interest --

Stockholders' equity:
Preferred Stock, no par value; 3,000,000
shares authorized;
Series A, $.01 par value; 600 shares
authorized, 398 shares issued 3,980,000
Common Stock, $.01 par value; 10,000,000
shares authorized,
2,393,050 shares issued 23,931
Paid-in capital 8,775,059
Accumulated deficit (7,267,396)
-----------

Total stockholders' equity 5,511,594
-----------

Total Liabilities and Stockholders' Equity $ 5,924,592
===========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended June 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>

Sales $ 1,470,173 $ 667,135
Less returns and allowances 42,000 14,515
----------- -----------

1,428,173 652,620

Cost of Sales 1,094,333 516,539
----------- -----------

Gross margin 333,840 136,081

Operating Expenses:
Selling and marketing 1,290,722 612,416
General and administrative 1,551,517 652,375
Depreciation and amortization 289,297 224,942
Research and development 28,089 38,392
----------- -----------

Total operating expenses 3,159,625 1,528,125
----------- -----------

Operating loss (2,825,785) (1,392,044)

Minority interest 1,231 --

Other income (expense):
Other income 82,838 33,681
Reorganization premium -- (589,099)
Interest expense -- (868,077)
----------- -----------

82,838 (1,423,495)
----------- -----------

Net Loss $(2,741,716) $(2,815,539)
=========== ===========

Net Loss Per Share $(1.22) $(1.65)
=========== ===========

Weighted Average Common Shares 2,249,911 1,707,705
=========== ===========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>

Preferred Stock Common Stock
-------------------- -------------------- Paid-in Accumulated
Shares Amount Shares Amount capital deficit Total
------- ----------- ---------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 -- $ -- 1,525,568 $15,256 $1,707,796 $(1,710,141) $ 12,911

Exchange of shares in connection
with merger -- -- (422,939) (4,230) 2,092,469 -- 2,088,239
Reorganization premium -- -- -- -- 589,099 -- 589,099
Contributed capital in connection
with debentures -- -- -- -- 433,956 -- 433,956
Issuance of warrants -- -- -- -- 26,272 -- 26,272
Issuance of stock to debenture
holders -- -- 235,392 2,354 (2,354) -- --
Sale of stock in public offering -- -- 850,000 8,500 3,622,958 -- 3,631,458
Net loss -- -- -- -- -- (2,815,539) (2,815,539)
------ ---------- --------- ------- ---------- ----------- -----------

Balance, June 30, 1995 -- -- 2,188,021 21,880 8,470,196 (4,525,680) 3,966,396

Issuance of stock for services -- -- 251 3 997 -- 1,000
Sale of stock -- -- 100,000 1,000 555,000 -- 556,000
Sale of preferred stock 415 4,150,000 -- -- (420,086) -- 3,729,914
Conversion of preferred stock
to common stock (17) (170,000) 104,778 1,048 168,952 -- --
Net loss -- -- -- -- -- (2,741,716) (2,741,716)
------ ---------- --------- ------- ---------- ----------- -----------

Balance, June 30, 1996 398 $3,980,000 2,393,050 $23,931 $8,775,059 $(7,267,396) $ 5,511,594
====== ========== ========= ======= ========== =========== ===========

</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

Years ended June 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss before minority interests $(2,742,947) $(2,815,539)
Minority interest in loss of subsidiary 1,231 --
Depreciation and amortization 326,649 224,942
Reorganization premium -- 589,099
Amortization of debt discount and
issuance costs -- 868,077
Issuance of common stock and warrants
for services 307,000 26,272
Changes in operating assets and liabilities:
Receivables (124,913) 1,257
Inventories (204,294) (155,517)
Prepayments and other assets 18,978 (65,099)
Accounts payable 207,318 (1,063)
Accrued expenses and other liabilities 34,624 20,109
----------- -----------

Net cash used by operating activities (2,176,354) (1,307,462)

Cash flows from investing activities:
Purchase of equipment and leasehold improvements (142,716) (160,624)
Payments on license fees and other assets (1,274,400) --
Payments for patents and trademarks (34,802) (6,514)
----------- -----------

Net cash used by investing activities (1,451,918) (167,138)

Cash flows from financing activities:
Debt issuance costs -- (66,917)
Proceeds from issuance of debentures -- 700,000
Proceeds from sale of stock, net of issuance costs 3,729,914 3,631,458
Proceeds from exercise of stock options 250,000 --
Repayment of debentures -- (1,412,500)
----------- -----------

Net cash provided by financing activities 3,979,914 2,852,041
----------- -----------

Net increase in cash and cash equivalents 351,642 1,377,441

Cash and cash equivalents at beginning of period 1,658,178 280,737
----------- -----------

Cash and cash equivalents at end of period $ 2,009,820 $ 1,658,178
=========== ===========

Supplemental schedule of noncash investing
and financing activities:
Debt discount recorded as paid-in capital $ -- $ 433,956
Intangible assets and paid-in capital due to
downstream merger -- 2,088,239
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS

Golf Training Systems, Inc. ("GTS") was organized on June 20, 1991, and
specializes in the creation, production and marketing of educational and
training products for golf and general fitness. GTS has exclusive rights to
manufacture and market an exercise machine, "The Coach," designed specifically
to improve the golf swing, strengthen golf muscles, teach timing and improve
fitness, and "The Computer Coach," a computerized swing analysis system designed
to instruct the individual golfer on corrections to his or her swing. GTS also
markets a collection of mechanical, computer programs and systems, literary and
other products manufactured by third parties and endorsed by golf teaching
professionals, David Leadbetter and Dave Pelz, in addition to motivational and
training tapes and materials developed by Dr. Bob Rotella. GTS's present
collection of products is marketed in North America, the Far East and Europe.
During fiscal 1996, GTS organized a majority owned subsidiary, Sports Training
Systems, LLC ("STS") through which it intends to further develop and market a
biomechanical analysis and real-time interactive learning computer system.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION The Consolidated financial statements contain all
the accounts of GTS and STS, together ("The Company"). All intercompany
transactions have been eliminated in consolidation.

BASIS OF PRESENTATION The Company's consolidated financial statements have been
presented on the basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company's future is dependent upon its ability to generate
additional revenues from new products which were introduced in 1994 and early
1995 as well as from products to be introduced in the future.

USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results inevitably will differ from those estimates,
and such differences may be material to the consolidated financial statements.

CASH AND CASH EQUIVALENTS The Company considers all money market accounts and
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents. At times, the Company maintains funds at certain
financial institutions in excess of federally insured amounts and which may
significantly exceed balance sheet amounts due to outstanding checks.

INVENTORIES Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. Inventories consist of
the following components:

Raw materials $237,021
Finished goods 193,120
--------

$430,141
========

EQUIPMENT AND IMPROVEMENTS Equipment and improvements are stated at cost.
Depreciation is provided primarily using the straight-line method over the
estimated useful lives of the depreciable assets, principally five years.

INTANGIBLE ASSETS Intangible assets are stated at amortized cost and consist of
patents and trademarks, license fees and goodwill. Patents and trademarks are
amortized using the straight-line method over their estimated

F-8
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

lives of 17 years. License fees are amortized over 7 years. Goodwill is
amortized on a straight-line basis over ten years.

The Company periodically evaluates recorded goodwill and license fees against an
estimate of anticipated undiscounted net income over the remaining life of the
goodwill and license fee. Adjustments are made whenever this evaluation
indicates that the recorded amount exceeds expected future benefits or whenever
events and circumstances warrant a revised estimate of the useful life of
recorded goodwill or license fee.

REVENUE RECOGNITION Revenue is recognized at the time of shipment. Provision
is made for sales return and allowances in the period in which the related
products are shipped.

PRODUCT WARRANTY The Company provides a two-year limited warranty on "The
Coach." The Company provides for the estimated cost of this warranty at the
time of sale.

ADVERTISING COSTS All advertising and development costs included in selling and
marketing expenses are expensed as incurred. Advertising expense for the years
ended June 30, 1996 and 1995 was $381,783 and $381,060, respectively.

CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject
the Company to concentration of credit risk consist principally of trade
receivables. At June 30, 1996, receivables from customers outside the United
States were $8,756. The Company attempts to reduce its credit risk by generally
obtaining irrevocable letters of credit from overseas customers prior to the
shipment of inventory.

RESEARCH AND DEVELOPMENT Research and development costs are expensed as
incurred.

NET LOSS PER SHARE Net loss per share has been computed using the weighted
average number of common shares and common equivalent shares, using the treasury
stock method, if dilutive, outstanding during the period. Pursuant to the
requirements of the Securities and Exchange Commission, common equivalent shares
issued at prices below the Company's initial public offering price of $6.00 per
share (attributing no value to the warrants included in the Company's units)
during the twelve months immediately preceding the date of the initial filing of
the Registration Statement have been included in the calculation of common
shares as if they were outstanding for all periods presented.

PRO FORMA NET LOSS PER SHARE In connection with the Company's initial public
offering, the Company repaid $1,412,500 of senior debentures (see Note 8) from
the proceeds of the offering. Giving effect to these repayments and issuance of
shares, as if they had occurred on July 1, 1994, would result in a decrease in
the net loss for the year ended June 30, 1995 by $868,077 due to a reduction in
interest expense relating to the repayment of debt. The reduction in interest
expense would result in a decrease of $.51 in the net loss per share to $(1.14)
per share for the year ended June 30, 1995.

NOTE 3. INCOME TAXES

Income taxes are computed based on the provisions of SFAS 109, "Accounting for
Income Taxes." Under this statement, deferred tax assets and liabilities are
determined based on differences between financial reporting and income tax bases
of assets and liabilities and are measured using the enacted tax rates and laws
that are expected to be in effect when they reverse or are realized. The income
tax benefit differs from the amount computed by applying the statutory federal
income tax rates to the loss before income taxes for the following reasons:

F-9
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3. INCOME TAXES (continued)
<TABLE>
<CAPTION>
Years ended June 30,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Income tax benefit at statutory federal income
tax rate applied to loss before income taxes $ (966,000) $ (957,283)
State income tax benefit, net of federal income
tax benefit (110,000) (111,495)
Amortization of goodwill 34,000 58,272
Reorganization premium and other 11,000 200,294
Tax benefit not currently recognizable 1,031,000 810,212
---------- ----------

$ -- $ --
========== ==========
</TABLE>

Significant components of deferred tax assets and liabilities at June 30, 1996
are as follows:
<TABLE>
<S> <C>
Deferred tax assets
Net operating loss carryforwards $2,474,000
Other 16,800
----------

Net deferred tax assets 2,490,800

Valuation allowance (2,490,800)
----------

$ --
==========
</TABLE>
The valuation allowance at July 1, 1995 was approximately $1,414,000.

For federal income tax purposes, the Company has net operating loss
carryforwards of approximately $6,500,000 which expire in 2007 through 2011.
The utilization of the tax loss carryforwards may be limited in future years due
to the application of certain provisions of the Internal Revenue Code.

NOTE 4. MAJOR CUSTOMERS

Approximately 14% and 27% of the Company's net sales in its years ended June 30,
1996 and 1995, respectively, were outside the United States, primarily to Japan,
Germany, England, Canada and Malaysia. Sales to two customers in Thailand and
Taiwan represented 10% and 6% of net sales, respectively, for fiscal 1995.

NOTE 5. RELATED PARTY TRANSACTIONS

Transactions and outstanding balances with related parties are summarized as
follows:
<TABLE>
<CAPTION>

1996 1995
------- -------
<S> <C> <C>

Patent and legal costs $31,931 $ 7,173
Inventory purchases 35,079 21,617
Commissions and royalties 77,023 81,250
Consulting fees 44,475 69,608
Debt and stock issue costs -- 41,910

</TABLE>

F-10
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. RELATED PARTY TRANSACTIONS (continued)

PATENT COSTS Patent applications and renewal fees were paid to a director and
officer's firm which provides patent counsel to the Company.

INVENTORY PURCHASES Inventory is occasionally purchased from unrelated
companies owned by certain officers and stockholders of GTS.

COMMISSIONS AND ROYALTIES In Decmber 1995, the GTS entered into an agreement
expiring December 31, 1997 with David Leadbetter, a renowned golf instructor and
a stockholder. The agreement provides that GTS will pay Mr. Leadbetter a
royalty equal to 10% of net sales, as defined, from the sale of golf products
under "The Leadbetter Collection," except "The Coach," for which Mr. Leadbetter
will receive 5% of net sales. GTS has guaranteed to pay, in monthly
installments, minimum royalties of $95,000 per year, plus up to an additional
$25,000 per product per year in the event that certain additional products
developed by third parties are added to "The Leadbetter Collection."
Additionally, GTS issued warrants to Mr. Leadbetter to purchase up to 24,879
shares of the common stock of GTS at an exercise price of $3.316 per share
through May 2, 1999. At June 30, 1996 royalties of $49,471 were payable to Mr.
Leadbetter.

In February 1996, GTS entered into a five year exclusive distribution agreement
to distribute all audio, video newsletters, seminars, and all other books and
other training materials produced by Dr. Bob Rotella. The agreement provides
royalties of 10% on all related products and services sold. Additionally, GTS
guarantees a minimum royalty paid monthly on all products, except the
newsletter, of $50,000 per year in the first year increasing by 10% each year in
the second and the third years, and a $25,000 minimum guarantee on a newsletter
beginning with its initial publication. Additionally, options as to 35,000
shares are to be granted, 15,000 in fiscal 1996 and 10,000 on each anniversary
date of the agreement for two years.

Subsequent to June 30, 1996, GTS entered into a five year distribution agreement
to distribute all audio, video, computer programs, mechanical and other training
devices or material developed jointly with Independent Golf Research Corporation
and Dave Pelz. The agreement provides royalties of 10% on all related products
sold. Additionally, GTS guarantees a minimum royalty paid monthly on all
products of $75,000 per year and increasing by 10% on each anniversary date of
the agreement. Additionally, options as to 55,000 shares are to be granted,
15,000 in fiscal 1996 and 10,000 on each anniversary date of the agreement for
four years. GTS has also granted to Pelz, an option to purchase 100,000 shares
of STS at $5.00 per share exercisable through July 31, 2001.

CONSULTING FEES GTS has a three-year agreement expiring in 1997 with a national
marketing consulting firm owned by a director to provide certain marketing,
promotions and sales consulting under which the consulting firm would receive
$4,000 per month in addition to quarterly bonuses based upon net sales. Also,
the Company issued warrants to the consulting firm to purchase 16,586 shares of
common stock at $3.316 per share. The value assigned to the warrants issued to
the consulting firm was $1.58 per warrant resulting in additional sales expense
of $26,272 during fiscal 1995.

NOTE 6. LEASES

The Company leases office/warehouse space and equipment under noncancelable
operating leases. Future minimum lease payments under leases with initial or
remaining noncancelable lease terms in excess of one year as of June 30, 1996,
are as follows:

Year ending:
June 30, 1997 $68,699
Thereafter 16,028
-------
$84,727
=======

F-11
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. COMMITMENTS

Rent expense totaled $60,585 for fiscal 1996 and $71,864 for fiscal 1995.

The Company assumed a Patent Purchase and Payment Agreement between a
stockholder and the inventor of "The Coach." Under the terms of the agreement,
the Company has agreed to pay the inventor $25,000 in one lump sum and an
additional royalty fee in the amount of $5 per system sold within the United
States and approximately 1.5% of net sales, as defined, of "The Coach" outside
the United States, payable quarterly.

NOTE 8. NOTES PAYABLE

From May 1994 through September 1994, under a private placement, the Company
received $1,412,500 of proceeds for senior debentures and stock acquisition
rights. These debentures were repaid from the proceeds of the initial public
offering in accordance with their terms and the debenture holders received
235,392 shares of the Company's common stock for no additional consideration.

The rights to receive shares of stock for no further consideration were
transferable by the debenture holders separate from the debentures, and
accordingly, the proceeds from this financing were allocated based on
management's estimate of the relative fair value of the debt and the stock
acquisition rights which resulted in $826,304 less related issuance costs of
$103,437 being credited to paid-in capital and a corresponding discount on the
debentures. The remaining unamortized discount at the date of repayment was
charged to interest expense. During the fourth quarter of fiscal 1995,
management adjusted its previously reported estimate of debt discount by an
additional $136,456 to reflect recognition of certain increases in the estimated
valuation of the stock acquisition rights.

NOTE 9. STOCKHOLDERS' EQUITY

On September 28, 1994, Gruv-A-Swing, Inc., a majority stockholder of the Company
with no significant operations and no significant assets, other than its
investment in the Company, was merged with and into the Company. In connection
with the merger, the Company issued 422,939 shares of common stock to the
shareholders of Gruv-A-Swing, Inc. The 845,878 shares of the Company held by
Gruv-A-Swing, Inc. have been canceled and became authorized but unissued shares
of the Company. The transaction has been accounted for under the purchase
method of accounting as a purchase of minority interest in a downstream merger.
The 422,939 shares of stock issued in the merger were valued at an estimated
fair value of $2,072,401. The stock held by Gruv-A-Swing, Inc. had a book value
of $(15,838). The resulting $2,088,239 excess of purchase price over net assets
acquired has been recorded as goodwill. Additionally, a reorganization premium
of $589,099 was charged to operations in connection with the difference in fair
value of the shares exchanged in the Plan of Recapitalization by the former
Class B stockholders other than Gruv-A-Swing, Inc.

On March 9, 1995, Golf Training Systems, Inc.'s registration statement relating
to the initial public offering of 850,000 units, consisting of an aggregate of
850,000 shares of its common stock and 850,000 redeemable common stock purchase
warrants filed with the Securities and Exchange Commission, was declared
effective.

In connection with the public offering, the Company adopted the Amended and
Restated Articles of Incorporation (Restated Articles) and a Plan of
Recapitalization. Under the Restated Articles, the maximum number of
authorized shares increased to 43,000,000, consisting of 40,000,000 shares of
common stock with a $.01 par value and 3,000,000 shares of preferred stock with
a $.01 par value. The Restated Articles eliminated the two classes of common
stock previously authorized, issued and outstanding, as well as the liquidation
preference associated with the previous Class A common stock and all the
preemptive rights to which the stockholders were entitled by law.

F-12
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. STOCKHOLDERS' EQUITY (continued)

Under the Plan of Recapitalization, all common stock then issued and outstanding
was converted into the Company's new common stock through a 6.02923-for-1
reverse stock split. All outstanding stock purchase warrants were automatically
adjusted for the reverse stock split. The financial statements have been
prepared to give retroactive effect to the stock split, and accordingly, all
share and per share data have been restated.

On April 11, 1996, the Company completed a Regulation S private placement of
$4,150,000 of Series A convertible preferred stock. The Company has designated
600 of the 3,000,000 previously authorized preferred stock as Series A preferred
stock, par value $.01 with the following rights and preferences. One-third of
the Series A preferred stock is convertible beginning 45 days subsequent to
April 11, 1996, two-thirds of the Series A preferred stock is convertible after
75 days, and all remaining Series A preferred stock is convertible after 105
days into shares of common stock of the Company based upon a conversion formula
which among other things includes an 8% return for all outstanding days as
preferred stock and at a conversion price of the lesser of $4.1625 per common
share or 85% of the average closing price for the five days prior to the date of
conversion. Each share of Series A preferred stock outstanding on March 22,
1999 automatically converts into common stock of the Company at the above
conversion formula. The Company has the right to redeem for cash any Series A
preferred stock presented for conversion at the above conversion formula amounts
or at a stated value including a premium amount for the three years subsequent
to April 11, 1996. The Series A preferred stock is also subject to certain
liquidation and dilution preferences and has no voting rights. At June 30,
1996, 17 preferred shares had been converted into common stock of the Company.

WARRANTS The Company has issued 1,319,374 warrants to purchase shares of its
common stock to certain advisors, investors and management personnel of the
Company. Of these warrants, 197,374 are exercisable at any time for $3.316 per
share of common stock and expire in varying amounts ranging from November 1996
to June 1999. Additionally, the Company issued in its initial public offering,
warrants for an additional 850,000 shares to investors and warrants for an
additional 170,000 shares to the Underwriters of the offering. Each of the
850,000 warrants issued to the investors entitles the holder to purchase one
share of common stock at $7.20 per share until March 2000 and are redeemable by
the Company at $.10 per warrant provided that the market price of the Company's
common stock equals or exceeds $9.00 for certain trading periods. The 170,000
underwriter's warrants are exercisable, 85,000 at $9.32 and 85,000 at $7.36
beginning March 1998 until March 2000.

The Company has also issued to the underwriters of the above referenced private
placement warrants for the purchase of 99,000 shares of common stock exercisable
at the lower of $4.1625 or the average of certain trades until March 2001. The
Company has also issued warrants for 3,000 shares exercisable at various amounts
for services to the Company. At June 30, 1995, the Company has reserved
1,319,374 shares of its common stock for issuance in connection with warrants.

STOCK OPTIONS The Company has elected to follow Accounting Principles Board
opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options, because the
alternative fair value accounting provided for under SFAS No. 123, "Accounting
for Stock-Based Compensation" requires use of option valuation models that were
not developed for use in valuing employee stock options. The exercise price of
the Company's employee stock options equaled the market price of the underlying
stock on the date of grant and no compensation expense is recognized.

In October 1994, the Company adopted a stock option plan (the Plan) under which
230,000 shares of the Company's common stock are reserved for issuance. Under
the Plan, employees, officers and directors, consultants and advisors to the
Company are eligible to receive incentive stock options or options that do not
qualify as

F-13
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. STOCKHOLDERS' EQUITY (continued)

incentive options. Incentive options granted under the Plan are exercisable for
a period of up to 10 years from the date of grant at an exercise price which is
not less than the fair market value of the common stock on the date of the
grant, except that the term of an incentive option granted to a stockholder
owing more than 10% of the outstanding common stock may not exceed five years,
and its exercise price may not be less than 110% of the fair market value of the
common stock on the date of the grant. The provisions of the Plan also provide
for the automatic grant of stock options to purchase shares of common stock to
directors of the Company who are not employees or principal stockholders of the
Company. Options to purchase 285,000 shares and 55,000 shares of the Company's
common stock were granted at exercise prices ranging from $1.375 to $6.25 during
fiscal 1996 and subsequent to June 30, 1996, respectively. Options as to
132,400 shares were cancelled and options as to 100,000 shares were exercised
during fiscal 1996. Options to purchase 117,400 shares of the Company's common
stock at an exercise price of $6.00 to $6.25 per share were granted during
fiscal 1995. Options as to 143,000 shares are immediately exercisable and the
remaining options vest over a period of three to four years. No options were
exercised during fiscal 1996 and 1995. Consulting expense was charged for
$306,000 during fiscal 1996 as a result of the granting of certain options and
no amount was charged to expense during fiscal 1995.

NOTE 10. PARENT COMPANY ONLY FINANCIALS

GOLF TRAINING SYSTEMS, INC.
BALANCE SHEET
June 30, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 1,677,633
Receivables, net 209,942
Inventories 430,141
Prepayments 62,807
-----------
Total current assets 2,380,523
Net property and equipment 225,626
Other assets:
Investment in STS 1,533,392
Intangible assets, net 1,759,188
Other 7,123
-----------
Total Assets $ 5,905,852
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 281,576
Other accrued expenses 112,682
-----------
Total current liabilities 394,258
Stockholders' equity:
Preferred Stock, no par value; 3,000,000 shares authorized;
Series A, $.01 par value; 600 shares authorized, 398 shares
issued 3,980,000
Common Stock, $.01 par value, 10,000,000 shares authorized;
2,393,050 shares issued 23,931
Paid-in capital 8,775,059
Accumulated deficit (7,267,396)
-----------
Total stockholders' equity 5,511,594
-----------
Total Liabilities and Stockholders' Equity $ 5,905,852
===========
</TABLE>

F-14
<PAGE>

GOLF TRAINING SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. PARENT COMPANY ONLY FINANCIALS (Continued)

STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended June 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net sales $ 1,428,173 $ 652,620
Cost of Sales 1,094,333 516,539
----------- -----------
Gross margin 333,840 136,081
Operating Expenses:
Selling and marketing 1,290,722 612,416
General and administrative 1,337,095 652,375
Depreciation and amortization 280,880 224,942
Research and development 28,089 38,392
----------- -----------
Total operating expenses 2,936,786 1,528,125
----------- -----------
Operating loss (2,602,946) (1,392,044)
Equity in loss of subsidiary (266,608) --
Other income (expense) 127,838 (1,423,495)
----------- -----------
Net Loss $(2,741,716) $(2,815,539)
=========== ===========
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended June 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,741,716) $(2,815,539)
Equity in loss of subsidiary 266,608 --
Depreciation and amortization 318,232 224,942
Reorganization premium -- 589,099
Amortization of debt discount and
issuance costs -- 868,077
Issuance of common stock and warrants
for services 307,000 26,272
Changes in operating assets and liabilities:
Receivables (170,551) 1,257
Inventories (204,294) (155,517)
Prepayments and other assets 18,978 (65,099)
Accounts payable 188,578 (1,063)
Accrued expenses and other liabilities 34,624 20,109
----------- -----------
Net cash used by operating activities (1,982,541) (1,307,462)
Cash flows from investing activities:
Purchase of equipment and leasehold improvements (142,716) (160,624)
Investment in STS (1,800,000) --
Payments for patents and trademarks and other (35,202) (6,514)
----------- -----------
Net cash used by investing activities (1,977,918) (167,138)
Cash flows from financing activities:
Debt issuance costs -- (66,917)
Proceeds from issuance of debentures -- 700,000
Proceeds from sale of stock, net of issuance costs 3,729,914 3,631,458
Proceeds from sale of warrants 250,000 --
Repayment of debentures -- (1,412,500)
----------- -----------
Net cash provided by financing activities 3,979,914 2,852,041
----------- -----------
Net increase in cash and cash equivalents 19,455 1,377,441
Cash and cash equivalents at beginning of period 1,658,178 280,737
----------- -----------
Cash and cash equivalents at end of period $ 1,677,633 $ 1,658,178
=========== ===========
</TABLE>

F-15

<PAGE>

GOLF TRAINING SYSTEMS, INC.

EXHIBIT 11 - Statement Re: Computation of Earnings Per Share

Years ended
June 30,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>

Primary and fully diluted:
Weighted average shares outstanding
during the period 2,249,911 1,522,124
Effect of common stock acquisition rights
and warrants granted subsequent to
October 19, 1993 computed in accordance
with the treasury stock method as required
by the SEC (1). -- 185,581
----------- ----------

Total weighted average common shares 2,249,911 1,707,705
=========== ==========

Net loss $(2,741,716) $2,815,539)
=========== ==========

Net loss per share $ (1.22) $ (1.65
=========== ==========

</TABLE>

(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, Common and Preferred Stock issued and stock options and warrants granted
at prices below the assumed initial public offering price of $6.00 per share
during the twelve-month period immediately preceding the initial filing date
of the Company's Registration Statement for its initial public offering have
been included as outstanding for all periods presented using the treasury
stock method.

S-1

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,010
<SECURITIES> 0
<RECEIVABLES> 166
<ALLOWANCES> 2
<INVENTORY> 430
<CURRENT-ASSETS> 2,667
<PP&E> 430
<DEPRECIATION> 204
<TOTAL-ASSETS> 5,925
<CURRENT-LIABILITIES> 413
<BONDS> 0
0
3,980
<COMMON> 24
<OTHER-SE> 1,508
<TOTAL-LIABILITY-AND-EQUITY> 5,925
<SALES> 1,428
<TOTAL-REVENUES> 1,428
<CGS> 1,094
<TOTAL-COSTS> 1,094
<OTHER-EXPENSES> 3,160
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,742)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,742)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,742)
<EPS-PRIMARY> (1.22)
<EPS-DILUTED> (1.22)

</TABLE>