FAMILY GOLF CENTERS INC, 424B1, 1996-07-08

FAMILY GOLF CENTERS INC
424B1, 1996-07-08
MEMBERSHIP SPORTS & RECREATION CLUBS

Previous: CVO GREATER CHINA FUND INC, 497, 1996-07-08

Next: PIONEER VARIABLE CONTRACTS TRUST /MA/, 497, 1996-07-08

<PAGE>

Filed Pursuant to Rule 424(b)(1)
Registration File Nos.
File No. 333-4541 and File No. 333-7489

PROSPECTUS

3,000,000 SHARES

#############################################################################

GRAPHIC OMITTED
#############################################################################

FAMILY GOLF CENTERS, INC.

COMMON STOCK

All of the 3,000,000 shares of common stock, par value $0.01 per share
(the "Common Stock"), offered hereby (the "Offering"), are being sold by
Family Golf Centers, Inc. (the "Company"). The Common Stock is quoted on the
Nasdaq National Market under the symbol "FGCI." On July 2, 1996, the last
sale price of the Common Stock as reported by the Nasdaq National Market was
$28 1/8 per share. See "Price Range of Common Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 7 HEREIN FOR A DISCUSSION OF
CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY POTENTIAL INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
-------------- -------------- ---------------
<S> <C> <C> <C>
Per Share .. $27.00 $1.89 $25.11
Total(3) .... $81,000,000 $5,670,000 $75,330,000
</TABLE>

(1) The Company and certain stockholders of the Company have agreed to
indemnify the several underwriters identified elsewhere herein (the
"Underwriters") against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act").
See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $500,000.

(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted the Underwriters a 30-day option to purchase up to 450,000
additional shares of Common Stock on the same terms and conditions as
set forth above, solely to cover over-allotments, if any. If the
Underwriters exercise this option in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and proceeds to the Selling
Stockholders will be $93,150,000, $6,520,500, $75,330,000 and
$11,299,500, respectively. See "Principal Stockholders" and
"Underwriting."

The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if issued to and accepted by the Underwriters and
subject to approval of certain legal matters by counsel for the Underwriters.
It is expected that delivery of the Common Stock will be made against payment
therefor on or about July 9, 1996, in New York, New York.

JEFFERIES & COMPANY, INC.

HAMPSHIRE SECURITIES CORPORATION

July 3, 1996

<PAGE>

#############################################################################

IMAGE OMITTED
[Map depicting Locations of Family Golf Centers, Inc. Facilities
#############################################################################

#############################################################################

IMAGES OMITTED ON INSIDE FRONT COVER AND INSIDE BACKCOVER OF PROSPECTUS
VARIOUS PHOTOGRAPHS DEPICTING FAMILY GOLF CENTERS, INC. FACILITIES

#############################################################################

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes that the Underwriters' over-allotment option is not
exercised. As used in this Prospectus, the term "Company" means, unless the
context requires otherwise, Family Golf Centers, Inc. and its subsidiaries.
Prospective investors are urged to read this Prospectus in its entirety.

THE COMPANY

Family Golf Centers, Inc. operates golf centers designed to provide a wide
variety of practice opportunities, including facilities for driving,
chipping, putting, pitching and sand play. In addition, the Company's golf
centers typically offer golf lessons instructed by PGA-certified golf
professionals, full-line pro shops and other amenities to encourage family
participation. The Company currently owns, leases or manages 24 golf
facilities, comprised of 17 golf centers and seven combination golf center
and golf course facilities located in ten states. Of the golf centers, seven
are currently operated under the name "Golden Bear Golf Centers," licensed
from Jack Nicklaus' licensing company, Golden Bear Golf Centers, Inc. Of the
seven combination golf center and golf course facilities, six include par-3
golf courses, generally designed to facilitate the practice of golf, and one
includes a regulation 18-hole golf course. The Company has experienced
significant recent growth, primarily through the acquisition or opening of 20
facilities since the Company's initial public offering in November 1994. The
Company's total revenue increased from $1.9 million in 1992 to $12.4 million
for the year ended December 31, 1995. During the same period, the Company's
net income increased from a net loss of $22,000 to a net profit of $1.1
million.

According to the National Golf Foundation (the "NGF"), there were
approximately 25 million golfers in the United States in 1995. According to
the Golf Range and Recreational Association, there are currently between
1,900 and 2,300 stand-alone driving ranges in the United States. The NGF
estimates that in 1993 92% of all stand-alone driving ranges were managed by
owner-operators. The Company believes that many of these owner-operated
ranges are managed by individuals who may lack the experience, expertise and
financial resources to compete effectively. The Company believes this highly
fragmented industry presents numerous opportunities for the Company to
acquire, upgrade and renovate golf centers and driving ranges.

The Company believes that it attracts customers to its golf centers
primarily due to the quality, convenience and comfort of its facilities and
their appeal to the whole family. The Company's golf centers are designed
around a driving range with target greens, bunkers and traps to simulate golf
course conditions. The ranges are lighted to permit night play and the
hitting tees are enclosed or sheltered from above and from the rear in a
climate-controlled environment and, in three cases, all or a portion of the
range is enclosed under an air inflated dome to permit all-weather play.
There are approximately 80 to 100 hitting tees in facilities with the
two-tier design and approximately 30 to 60 hitting tees at smaller golf
centers. In addition to the driving range, the Company's golf centers include
a number of amenities designed to appeal to golfers and their families, such
as a 4,000-6,000 square foot clubhouse (including a full-line pro shop,
locker facilities, a restaurant or snack bar and video games), PGA-certified
golf instructors, landscaped 18-hole miniature golf courses and a short game
practice area (with putting green and sand traps). The Company's pro shops
are stocked with clubs, bags, shoes, apparel, videos and related accessories
from a number of suppliers, including brand name manufacturers such as
Karsten Manufacturing Corporation (Ping), Callaway Golf Company, Tommy Armour
Golf, Wilson Golf Company,

<PAGE>

Mizuno Golf Company, Spalding Sports Worldwide, Titleist and Footjoy
Worldwide (Division of American Brands, Inc.), Ashworth Clothing Company and
Nicklaus Golf Equipment Company.

The Company was incorporated in the State of Delaware on July 13, 1994.
The Company operates through its wholly-owned subsidiaries, the first of
which was incorporated on March 27, 1991. The Company's principal executive
offices are located at 225 Broadhollow Road, Melville, New York 11747 and its
telephone number is (516) 694-1666 and its World Wide Web address is
http://www.familygolf.com.

THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company ................... 3,000,000 shares
Common Stock to be outstanding after the Offering .... 11,598,025 shares(1)
Use of proceeds ....................................... To repay approximately $6.6 million of bank
indebtedness, for the acquisition, leasing,
development and improvement of golf facilities and
for general working capital purposes. See "Use of
Proceeds."
Nasdaq National Market symbol ......................... FGCI
</TABLE>
- ---------------
(1) Does not include 760,705 shares of Common Stock issuable upon exercise
of outstanding options and warrants. See "Description of Capital
Stock--Outstanding Options and Warrants."

<PAGE>

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA AND OTHER DATA

The following table presents, for the periods and dates indicated, summary
historical and pro forma financial data and other data of the Company. The
pro forma condensed statements of operations data for the year ended December
31, 1995 and for the three months ended March 31, 1996 give effect to the
acquisitions of Pelham Enterprises, Inc., the Hiland Park Golf Course, RFC
Enterprises, Inc., Upper Hembree Partners, L.P., The Practice Tee, Inc.
("TPT"), Golf Masters Limited Partnership and Air Dome Limited Partnership
(collectively, "Valley View"), Owl's Creek Golf Center, Inc., Flemington Golf
and Sports Center, LLC and associated land, 202 Golf Associates, Inc.
("Yorktown Heights"), Indian River Golf-O-Rama, Inc. ("Indian River"), K.G.
Golf, Inc. ("Fairfield"), Catalina Golf Center ("Tucson"), Tree Court Golf &
Recreational Complex, Inc. ("St. Louis") and Golf & Sports Center of the Palm
Beaches, Inc. and W.A.G.N. Partners (collectively, "West Palm Beach") as if
they had been consummated as of January 1, 1995. The pro forma as adjusted
statement of operations data for the three months ended March 31, 1996 also
give effect to the sale of 199,124 shares of Common Stock offered hereby by
the Company at an offering price of $27 per share and the application of the
net proceeds therefrom to repay bank indebtedness of $5.0 million as
described under "Use of Proceeds" as if such transaction had occurred as of
January 1, 1996. The pro forma condensed balance sheet as of March 31, 1996
gives effect to the acquisition of Yorktown Heights, Indian River, Fairfield,
Tucson, St. Louis and West Palm Beach as if they had occurred on March 31,
1996. The pro forma as adjusted balance sheet at March 31, 1996 also gives
effect to the sale of 3,000,000 shares of Common Stock offered hereby by the
Company at an offering price of $27 per share and the application of $5.0
million of the net proceeds therefrom to repay bank indebtedness as described
under "Use of Proceeds" (excluding $1.6 million borrowed in contemplation of
a potential acquisition of a golf recreational facility in San Jose,
California). This information should be read in conjunction with
"Capitalization," "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," Pro Forma
Unaudited Condensed Financial Information and the Company's Financial
Statements and the notes thereto, each included elsewhere herein. The pro
forma data set forth below is not necessarily indicative of what the actual
results of operations would have been had the transactions occurred at the
dates referred to above, nor do they purport to indicate the results of
future operations.

YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------- ---------------------------------
PRO FORMA
PRO PRO AS
HISTORICAL FORMA HISTORICAL FORMA ADJUSTED
------------------------------- ------- -------------- ------ --------
1992 1993 1994 1995 1995 1995 1996 1996 1996
------ ------ ------ ------ ------- -------------- ------ --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue ........................ $1,887 $2,632 $6,362 $12,432 $18,979 $1,782 $3,362 $3,973 $3,973
Operating expenses ................... 1,128 2,247 4,215 6,614 12,750 1,061 2,252 2,755 2,755
Cost of merchandise sold ............. 320 459 750 1,779 2,222 295 457 523 523
Selling, general and administrative
expenses ............................ 351 615 548 1,242 2,576 352 643 743 743
------ ------ ------ ------- ------- ------ ------ ------ ------
Operating income (loss) .............. 88 (689) 849 2,797 1,431 74 10 (48) (48)
Interest expense ..................... (111) (192) (313) (939) (2,188) (92) (100) (176) (51)
Other income ......................... 1 106 16 66 76 22 197 125 125
------ ------ ------ ------- ------- ------ ------ ------ ------
Income (loss) before income taxes,
minority interest and extraordinary
item ................................ (22) (775) 552 1,924 (681) 4 107 (99) (26)
Income tax expense (benefit) ......... -- -- (65) 669 (246) 2 38 (36) (9)
------ ------ ------ ------- ------- ------ ------ ------ ------
Income (loss) before minority
interest and extraordinary item .... (22) (775) 617 1,255 (435) 2 69 (63) (17)
Minority interest in (income) loss .. -- 12 (129) -- -- -- -- -- --
Extraordinary item (net of tax
effect) ............................. -- -- -- 181 -- -- -- -- --
------ ------ ------ ------- ------- ------ ------ ------ ------
Net income (loss) .................... $ (22) $ (763) $ 488 $ 1,074 $ (435) $ 2 $ 69 $ (63) $ (17)
====== ====== ====== ======= ======= ====== ====== ====== ======
Net income (loss) per share before
extraordinary item .................. $(0.23) $ 0.13 $ 0.24 $ (0.08) $ 0.00 $ 0.01 $(0.01) $ 0.00
Extraordinary item ................... -- -- (.04) -- -- -- -- --
------ ------ ------- ------- ------ ------ ------ ------
Net income (loss) per share .......... $(0.23) $ 0.13 $ 0.20 $ (0.08) $ 0.00 $ 0.01 $(0.01) $ 0.00
====== ====== ======= ======= ====== ====== ====== ======
Weighted average number of common
shares outstanding .................. 3,272 3,636 5,271 5,637 4,938 8,648 8,779 8,978
====== ====== ======= ======= ====== ====== ====== ======
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT MARCH 31, 1996
-------------------- -----------------------------------------
PRO FORMA AS
HISTORICAL HISTORICAL PRO FORMA ADJUSTED(1)
-------------------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ............. $23,121 $11,147 $ 7,532 $ 77,362
Working capital ....................... 20,598 12,950 4,373 79,203
Total assets .......................... 61,582 63,130 68,800 138,630
Short-term borrowings ................. 5,000
Total long-term debt, including
current maturities ................... 8,193 8,752 8,752 8,752
Total stockholders' equity ............ 49,388 51,986 52,586 127,416
</TABLE>

THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ ---------------
1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Facilities open at beginning of
period .............................. 0 1 2 5 5 14
Facilities built during period ...... 1 1 2 1 1 1
Facilities or management contracts
acquired during period .............. 0 0 1 8 0 3
------ ------ ------ ------ ------ ------
Facilities open at end of period .... 1 2 5 14 6 18(2)
====== ====== ====== ====== ====== ======
</TABLE>

(1) Assumes that as of March 31, 1996 the sale by the Company of 3,000,000
shares of Common Stock in the Offering at an offering price of $27 per
share and the application of the net proceeds therefrom to repay
indebtedness of $5.0 million as set forth in "Use of Proceeds" had
occurred.

(2) Subsequent to March 31, 1996, the Company acquired six golf facilities.

<PAGE>

RISK FACTORS

Prospective investors should carefully consider the specific factors set
forth below, as well as the other information included in this Prospectus,
before deciding to invest in the Common Stock offered hereby. This Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from the results discussed
in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in "Risk
Factors," as well as those discussed elsewhere in this Prospectus.

LIMITED OPERATING HISTORY

The Company opened its first golf center in March 1992 and, accordingly,
has only a limited history of operations. The Company generated net income of
approximately $488,000 during the year ended December 31, 1994, approximately
$1.1 million during the year ended December 31, 1995 and approximately
$69,000 for the three months ended March 31, 1996. However, the Company
experienced losses prior to 1994 and there can be no assurance that the
Company will operate profitably in the future or that recent results of
operations will be indicative of future results. See "Risk Factors--Expansion
Strategy" and Pro Forma Unaudited Condensed Statement of Operations.

EXPANSION STRATEGY

The Company's ability to significantly increase revenue, net income and
operating cash flow over time depends in large part upon its success in
acquiring or leasing and constructing additional golf facilities at suitable
locations upon satisfactory terms. There can be no assurance that suitable
golf facility acquisition or lease opportunities will be available or that
the Company will be able to consummate acquisition or leasing transactions on
satisfactory terms. The acquisition of golf facilities may become more
expensive in the future to the extent that demand and competition increases.
The likelihood of the success of the Company must be considered in light of
the problems, expenses, difficulties, complications and delays frequently
encountered in connection with the construction and opening of new golf
facilities. See "Risk Factors--Additional Financing Requirements," "Risk
Factors--Dependence Upon Key Employee; Recruitment of Additional Personnel,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."

To successfully implement its expansion strategy, the Company must
integrate acquired or newly- opened golf facilities into its existing
operations. As the Company grows, there can be no assurance that additional
golf facilities can be readily assimilated into the Company's operating
structure. Inability to efficiently integrate golf facilities could have a
material adverse effect on the Company's financial condition and results of
operations. In addition, a number of the golf facilities which the Company
has acquired have, and golf facilities it may acquire in the future may have,
experienced losses. On a pro forma basis, as adjusted to give effect to the
acquisitions consummated after January 1, 1995 as if they had occurred as of
January 1, 1995, the Company had a net loss before extraordinary item of
$435,000 (as compared to income before extraordinary item of $1.3 million on
a historical basis) for the year ended December 31, 1995 and a net loss of
$63,000 (as compared to net income of $69,000 on a historical basis) for the
three months ended March 31, 1996. There can be no assurance that golf
facilities recently acquired by the Company or those that the Company may
acquire in the future will operate profitably and will not adversely affect
the Company's results of operations. See "Business" and Pro Forma Unaudited
Condensed Statement of Operations.

TERMINATION OF LEASES

Although after giving effect to renewal options none of the Company's
leases for its golf centers or facilities is expected to expire until 2007,
the leases may be terminated prior to their scheduled expiration should the
Company default in its obligations thereunder. Such obligations include the
Company's timely payment of rent and maintenance of adequate insurance
coverage. The termination of any of the Company's leases could have an
adverse effect on the Company. If any of the Company's leases were to be
terminated, there can be no assurance that the Company would be able to enter
into leases for comparable properties on favorable terms, or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

<PAGE>

TERMINATION OF MANAGEMENT AGREEMENTS

The Company's management agreement with the City of New York (the "City")
for the Douglaston, New York golf center, which expires on December 31, 2006,
is terminable by the City at will. During the year ended December 31, 1995,
the management agreement accounted for 17% of the Company's total revenue.
Pursuant to the management agreement, as of March 31, 1996 the Company had
made approximately $2.3 million of capital improvements to the Douglaston
center. If the management agreement is terminated, the City may retain, and
is not obligated to pay the Company for the value of, such capital
improvements. Unless reimbursed, for accounting purposes the Company would
immediately have to write off the undepreciated value of these capital
improvements and the goodwill related to its purchase of the limited
partners' minority interest (the "Minority Interest") in Alley Pond
Associates, L.P., which are currently being depreciated and amortized over
the life of the management agreement. Accordingly, termination of the
management agreement with the City could have a material adverse effect on
the Company. See "Business--Properties."

The Company's management agreement with the City of El Segundo for the El
Segundo golf facility terminates on June 30, 1998, unless earlier terminated
by either party, with or without cause, as of the end of any operating year
during the term of the agreement, upon at least 90 days prior written notice.
Termination of the management agreement with the City of El Segundo may have
an adverse effect on the Company. See "Business--Properties."

GOLDEN BEAR LICENSE

The Company operates seven of its golf centers, and intends to operate at
least one additional golf center, under the name "Golden Bear Golf Center"
pursuant to a non-exclusive license agreement (the "License Agreement"),
expiring August 2002, with Golden Bear Golf Centers, Inc. (the "Licensor").
The License Agreement is terminable by the Licensor prior to August 2002
under certain circumstances, including if the current directors of the
Company at any time constitute less than 50% of the Company's directors. In
September 1995, the Company agreed to cure an alleged default of the License
Agreement (principally by making certain capital improvements by November
1996). Failure by the Company to take the agreed upon actions by such date
could result in the termination of the License Agreement. Termination of the
License Agreement could adversely affect the Company's Golden Bear Golf
Centers and, possibly, the Company. The value of the "Golden Bear" name is
dependent, in part, upon the continued popularity of Jack Nicklaus.
Accordingly, the occurrence of any event which diminishes the reputation of
Mr. Nicklaus and the related "Golden Bear" symbol could adversely affect the
Company's Golden Bear Golf Centers. See "Risk Factors--Competition" and
"Business--Golden Bear License."

COMPETITION

The golf center industry is highly competitive and includes competition
from other golf centers, traditional golf ranges, golf courses and other
recreational pursuits. The Company may face imitation and other forms of
competition and the Company cannot prevent or restrain others from utilizing
a similar operational strategy. Many of the Company's competitors and
potential competitors have considerably greater financial and other
resources, experience and customer recognition than does the Company. Until
September 1995, the Company had the exclusive right to open Golden Bear Golf
Centers in certain territories. As a result of a change in the License
Agreement in September 1995, the Licensor now is permitted to establish, or
license others to establish, "Golden Bear" golf centers that compete with the
Company's golf centers, including its Golden Bear Golf Centers. Golden Bear
Golf, Inc., an affiliate of the Licensor, has recently publicly indicated
that it intends to focus its efforts on the direct ownership and operation of
golf facilities through the acquisition or development of additional golf
centers and to pursue new licensees and enter into additional territorial
development agreements only in locations and territories where it and its
affiliates do not intend to acquire or develop their own facilities. There
can be no assurance that such competition will not adversely affect the
Company's ability to acquire additional properties. See
"Business--Competition."

VULNERABILITY TO WEATHER CONDITIONS AND SEASONAL RESULTS

Historically, the second and third quarters of the year have accounted for
a greater portion of the Company's operating revenue than have the first and
fourth quarters of the year. This is primarily due to an outdoor playing
season limited by inclement weather. Although most of the Company's driving
ranges are designed to be all-weather facilities (including the domed
facilities), and although the Company has recently expanded its operations
into territories where inclement weather may have less of an impact than

<PAGE>

in the Northeast, portions of the Company's facilities, including the
miniature golf courses, are outdoors and vulnerable to weather conditions.
Also, golfers are less inclined to practice when weather conditions limit
their ability to play golf on outdoor courses. This seasonal pattern, as well
as the timing of new center openings and acquisitions, may cause the
Company's results of operations to vary significantly from quarter to
quarter. Accordingly, period-to-period comparisons are not necessarily
meaningful and should not be relied on as indicative of future results. In
addition, variability in the Company's results of operations could cause the
Company's stock price to fluctuate following the release of interim results
of operations or other information and may have a material adverse effect on
the Company and its stock price. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

ADDITIONAL FINANCING REQUIREMENTS

As of March 31, 1996, the Company had working capital of approximately
$13.0 million. The Company anticipates, based on its currently proposed
expansion plans and assumptions relating to its operations, that the net
proceeds of the Offering, together with availability under its primary credit
facility and cash flow from operations, will be sufficient to permit the
Company to conduct its operations and to carry on its contemplated expansion
over at least the next 12 months. The Company also anticipates that it may
need to raise substantial additional equity capital in the future to continue
its longer term expansion plans. There can be no assurance that the Company
will be able to obtain additional financing on favorable terms or at all. See
"Use of Proceeds," "Capitalization" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

ENVIRONMENTAL REGULATION

Operations at the Company's golf facilities involve the use and limited
storage of various hazardous materials such as pesticides, herbicides, motor
oil, gasoline and paint. Under various federal, state and local laws,
ordinances and regulations, an owner or operator of real property is
generally liable for the costs of removal or remediation of hazardous
substances that are released on or in its property regardless of whether the
property owner or operator knew of, or was responsible for, the release of
hazardous materials. The Company has not been informed by any governmental
authority of any non-compliance or violation of any environmental laws,
ordinances or regulations and the Company believes that it is in substantial
compliance with all such laws, ordinances and regulations applicable to its
properties or operations. However, the Company is aware of one notice of
violation issued by the New York Department of Environmental Conservation
(the "DEC") against the owner of the land leased by the Company in Elmsford,
New York alleging that certain hazardous materials were placed on the site.
The owner has taken remedial action and the Company does not believe it will
be affected by the alleged violation. To date, the Company has not incurred
material costs of remediation in relation to any of its golf facilities and
the Company knows of no material environmental liability to which it may
become subject. Although the Company usually hires environmental consultants
to conduct environmental studies, including invasive procedures such as soil
sampling or ground water analysis on golf facilities it owns, operates or
intends to acquire, in some cases only limited invasive procedures are
conducted on such properties. Even when invasive procedures are used,
environmental studies may fail to discover all potential environmental
problems. Accordingly, there may be potential environmental liabilities or
conditions of which the Company is not aware. See "Business--Governmental
Regulation."

DEPENDENCE UPON KEY EMPLOYEE; RECRUITMENT OF ADDITIONAL PERSONNEL

The Company is heavily dependent on the services of Dominic Chang, its
Chairman of the Board, President and Chief Executive Officer. The loss of the
services of Mr. Chang could materially adversely affect the Company. Mr.
Chang has entered into an employment agreement with the Company which
terminates on December 31, 1999. See "Management--Employment Agreements." The
Company owns, and is the sole beneficiary of, key person life insurance in
the amount of $1.5 million on the life of Mr. Chang. The Company will also be
required to hire additional personnel and PGA-certified professionals to
staff the golf centers it intends to acquire, lease or construct. There can
be no assurance that the Company will be able to attract and retain qualified
personnel. See "Business--Operations," "Business--Employees" and
"Management."

<PAGE>

DILUTION

Purchasers in the Offering will experience immediate and substantial
dilution of $16.02 in net tangible book value per share of the Common Stock.

CONTROL BY CURRENT STOCKHOLDER

Following the completion of the Offering, Dominic Chang will beneficially
own 2,822,750 shares of Common Stock, constituting approximately 24.3% of the
outstanding shares (or if the Underwriters' over-allotment option is
exercised in full, Mr. Chang will beneficially own 2,549,334 shares of Common
Stock, constituting approximately 22.0% of the outstanding shares). Mr. Chang
will, therefore, be able to exercise significant influence with respect to
the election of the directors of the Company and all matters submitted to a
vote of the stockholders of the Company, including the acquisition or
disposition of material assets. See "Management" and "Principal
Stockholders."

DEPENDENCE ON DISCRETIONARY CONSUMER SPENDING

The amount spent by consumers on discretionary items, such as family and
entertainment activities like those offered by the Company's golf facilities,
have historically been dependent upon levels of discretionary income, which
may be adversely affected by general economic conditions. A decrease in
consumer spending on golf could have an adverse effect on the Company's
financial condition and results of operations.

BROAD DISCRETION IN USE OF PROCEEDS

The Company intends to use substantially all of the net proceeds of the
Offering for the acquisition, leasing, development and improvement of golf
facilities and for general working capital purposes. Accordingly, the Company
will have broad discretion as to the application of such proceeds. An
investor will not have the opportunity to evaluate the economic, financial
and other relevant information which will be utilized by the Company in
determining the application of such proceeds in the acquisition, leasing,
development and improvement of golf facilities. See "Use of Proceeds."

DIVIDEND POLICY

The Company has not paid any cash dividends on the Common Stock since
inception and does not intend to pay any dividends to its stockholders in the
foreseeable future. The Company currently intends to reinvest earnings, if
any, in the development and expansion of its business. See "Dividend Policy."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

The sale, or availability for sale, of substantial amounts of Common Stock
in the public market subsequent to the Offering pursuant to Rule 144 under
the Securities Act ("Rule 144") or otherwise could materially adversely
affect the market price of the Common Stock and could impair the Company's
ability to raise additional capital through the sale of its equity securities
or debt financing. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated), including a person who may
be deemed to be an "affiliate" of the Company as that term is defined under
the Securities Act, would be entitled to sell within any three month period a
number of shares beneficially owned for at least two years that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock,
or (ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain requirements as to the manner of sale, notice and the availability of
current public information about the Company. However, a person who is not
deemed to have been an affiliate of the Company during the 90 days preceding
a sale by such person and who has beneficially owned shares of Common Stock
for at least three years may sell such shares without regard to the volume,
manner of sale or notice requirements of Rule 144.

Of the 11,598,025 shares of Common Stock outstanding after the Offering,
7,980,075 shares will be freely tradeable without restrictions following
completion of the Offering, unless held by "affiliates" of

<PAGE>

the Company who are subject to certain volume limitations and manner of sale
restrictions, and 3,617,950 will be "restricted securities" as that term is
defined in Rule 144. The two-year holding period for substantially all of the
"restricted securities" will have been met by November 1996 and such
securities may, subject to the agreements described below, be sold without
registration under the Securities Act, subject to volume limitations and
other restrictions. The holders of 3,161,950 shares of Common Stock (not
including those shares to be sold if the Underwriters' over-allotment option
is exercised) and the holders of options to purchase up to 169,000 shares of
Common Stock will remain subject to an agreement entered into, in connection
with the Company's public offering in December 1995 (the "Secondary
Offering"), pursuant to which they cannot publicly sell or otherwise dispose
of any securities of the Company until December 13, 1996 without the prior
written consent of Jefferies & Company, Inc. ("Jefferies"). Mr. Chang has
pledged 361,750 shares of Common Stock to two banks to secure personal loans,
and may in the future pledge additional shares to secure additional personal
loans, which shares are not, or would not be, subject to such agreements.

The holders of warrants to purchase up to 300,000 shares of Common Stock
issued to the representatives of the underwriters and their designees in the
Secondary Offering have certain demand and "piggyback" registration rights
commencing in December 1996. The holder of warrants to purchase up to 70,000
shares of Common Stock issued to a consultant have certain "piggyback"
registration rights and certain demand registration rights commencing one
month after the closing of the Offering. In addition, as of the date of this
Prospectus, the holders of an aggregate of 247,100 shares of Common Stock
(including 76,584 shares to be registered and sold if the Underwriters'
over-allotment option is exercised in full) have certain "piggyback"
registration rights, which commence on various dates in 1996. Of these
247,100 shares, approximately 64,351 are held in escrow, and will be
released, subject to certain conditions, on various dates in 1996 and 1997.
See "Description of Capital Stock--Outstanding Options and Warrants."

PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER, BY-LAW
AND CONTRACTUAL PROVISIONS

The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 2,000,000 shares of preferred stock, par value $.10
per share. The preferred stock may be issued in one or more series, the terms
of which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders. Although no preferred stock is
currently outstanding and the Company currently has no plans for the issuance
of any preferred stock, there can be no assurance that the Company will not
do so in the future. The ability of the Board of Directors to issue preferred
stock could have the effect of delaying, deferring or preventing a change of
control of the Company or the removal of existing management and, as a
result, could prevent the stockholders of the Company from being paid a
premium over the market value for their shares of Common Stock. The Company's
By-Laws contain provisions requiring advance notice of stockholder proposals
and imposing certain procedural restrictions on stockholders wishing to call
a special meeting of stockholders. In addition, the License Agreement may be
terminated by the Licensor if the current members of the Company's Board of
Directors do not constitute at least 50% of the Company's Board of Directors.
Such provisions could discourage possible future attempts to gain control of
the Company (which attempts, if stockholders were offered a premium over the
market value of their Common Stock, might be viewed as beneficial to
stockholders). See "Business--Golden Bear License" and "Description of
Capital Stock."

<PAGE>

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
3,000,000 shares of Common Stock being offered by the Company are estimated
to be approximately $74.8 million, after deducting underwriting discounts and
estimated offering expenses payable by the Company, based upon an offering
price of $27 per share. Approximately $5.0 million of the net proceeds will
be used to repay indebtedness outstanding under the Company's revolving line
of credit with Chemical Bank, which expired on June 30, 1996 and which, as of
June 27, 1996, bore interest at 8.5%. The Company has received a letter of
intent from Chemical Bank to extend the line of credit to June 30, 1997. Such
indebtedness was incurred to purchase the Tucson, Arizona, Fairfield, Ohio
and St. Louis, Missouri golf centers and a portion of the West Palm Beach,
Florida golf center. If the proposed acquisition of the golf recreational
facility in San Jose, California is consummated, approximately $1.6 million
of the net proceeds will be used to repay short-term indebtedness with
Chemical Bank incurred in contemplation of that acquisition, which
indebtedness matures on September 5, 1996 and bears interest at 8.5%. See
"Business--Recently Opened or Acquired Facilities" and "--Other Potential
Sites." The Company intends to use the balance of the net proceeds of the
Offering for the acquisition, leasing, development and improvement of golf
facilities and for general working capital purposes.

Pending the uses described above, the net proceeds from the Offering will
be invested in investment-grade, short-term, interest-bearing securities. The
Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders in connection with any exercise of the Underwriters'
over-allotment option.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "FGCI." The following table sets forth, for the periods indicated,
the high and low last sale prices for the Common Stock as reported by the
Nasdaq National Market.

<TABLE>
<CAPTION>
STOCK PRICE
-------------------
HIGH LOW
---------- -------
<S> <C> <C>
CALENDAR YEAR 1994:
Fourth Quarter (from November 17, 1994
through December 31, 1994) .................. $ 7 1/4 $ 5 3/4

CALENDAR YEAR 1995:
First Quarter ................................ $ 7 7/8 $ 6
Second Quarter ............................... 11 5 1/2
Third Quarter ................................ 19 5/8 10 1/4
Fourth Quarter ............................... 19 12 3/4

CALENDAR YEAR 1996:
First Quarter ................................ $27 3/4 $17 1/8
Second Quarter ............................... 29 3/4 25 5/8
Third Quarter (through July 2, 1996) ........ 29 1/8 24 3/4
</TABLE>

On July 2, 1996, the last reported sale price for the Company's Common
Stock on the Nasdaq National Market was $28 1/8 per share. As of June 27,
1996, there were 90 stockholders of record of the Common Stock.

DIVIDEND POLICY

The Company has neither declared nor paid dividends on its Common Stock
and does not intend to declare or pay any dividends in the foreseeable
future. The Company currently intends to retain earnings, if any, for the
development and expansion of its business. The declaration of dividends in
the future will be at the election of the Board of Directors and will depend
upon the earnings, capital requirements and financial position of the
Company, general economic conditions and other pertinent factors.

<PAGE>

CAPITALIZATION

The following table sets forth, at March 31, 1996, the actual short-term
debt and capitalization of the Company, and the pro forma short-term debt and
capitalization of the Company as if the acquisitions of Yorktown Heights,
Indian River, Fairfield, Tucson, St. Louis and West Palm Beach had been
consummated as of such date and as adjusted to give effect to the sale of
3,000,000 shares of Common Stock offered hereby by the Company at an offering
price of $27 per share. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Pro Forma Unaudited Condensed Balance Sheet and notes thereto
and the Company's Financial Statements and notes thereto, each included
elsewhere herein.

<TABLE>
<CAPTION>
AT MARCH 31, 1996
-------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
--------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term obligations and short-term debt $ 1,523 $ 6,523 $ 1,523
========= =========== =============
Long-term obligations ........................................ $ 7,229 $ 7,229 $ 7,229
Stockholders' equity (1):
Preferred stock, $0.10 par value, 1,000,000 shares
authorized; as adjusted, 2,000,000 shares authorized (2),
none outstanding ........................................... -- -- --
Common stock, $0.01 par value, 10,000,000 shares authorized;
as adjusted, 50,000,000 shares authorized (2), 8,489,325
issued and outstanding (8,520,225 pro forma, 11,520,225 pro
forma as adjusted) ......................................... 85 85 115
Additional paid-in capital .................................. 50,909 51,509 126,309
Retained earnings ........................................... 1,027 1,027 1,027
Treasury stock .............................................. (35) (35) (35)
--------- ----------- -------------
Total stockholders' equity ................................. 51,986 52,586 127,416
--------- ----------- -------------
Total capitalization ...................................... $59,215 $59,815 $134,645
========= =========== =============
</TABLE>

- ------------
(1) Does not include any shares issuable upon exercise of outstanding stock
options or warrants.

(2) Gives effect to the increase in the Company's authorized number of
shares of preferred stock from 1,000,000 to 2,000,000 and the increase
in the authorized number of shares of Common Stock from 10,000,000 to
50,000,000 subsequent to March 31, 1996.

<PAGE>

SELECTED FINANCIAL DATA

The following table presents, for the periods and dates indicated, summary
historical and pro forma financial data and other data of the Company. The
pro forma condensed statements of operations data for the year ended December
31, 1995 and the three months ended March 31, 1996 give effect to the
acquisitions of Pelham Enterprises, Inc., the Hiland Park Golf Course, RFC
Enterprises, Inc., Upper Hembree Partners, L.P., TPT, Valley View, Owl's
Creek Golf Centers, Inc., Flemington Golf and Sports Center, LLC and
associated land, Yorktown Heights, Indian River, Fairfield, Tucson, St. Louis
and West Palm Beach as if they had been consummated as of January 1, 1995.
The pro forma as adjusted statement of operations data for the three months
ended March 31, 1996 also give effect to the sale of 199,124 shares of Common
Stock offered hereby by the Company at an offering price of $27 per share and
the application of the net proceeds therefrom to repay bank indebtedness of
$5.0 million as described under "Use of Proceeds" as if such transaction had
occurred as of January 1, 1996. The pro forma condensed balance sheet as of
March 31, 1996 gives effect to the acquisition of Yorktown Heights, Indian
River, Fairfield, Tucson, St. Louis and West Palm Beach as if they had
occurred on March 31, 1996. The pro forma as adjusted balance sheet at March
31, 1996 also gives effect to the sale of 3,000,000 shares of Common Stock
offered hereby by the Company at an offering price of $27 per share and the
application of $5.0 million of the net proceeds therefrom to repay bank
indebtedness as described under "Use of Proceeds" (excluding $1.6 million
borrowed in contemplation of a potential acquisition of a golf recreational
facility in San Jose, California). This information should be read in
conjunction with "Capitalization," "Selected Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
Pro Forma Unaudited Condensed Financial Information and the Company's
Financial Statements and the notes thereto, each included elsewhere herein.
The pro forma data set forth below is not necessarily indicative of what the
actual results of operations would have been had the transactions occurred at
the dates referred to above, nor do they purport to indicate the results of
future operations.

<PAGE>

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT MARCH 31, 1996
-------------------- -----------------------------------------
PRO FORMA AS
HISTORICAL HISTORICAL PRO FORMA ADJUSTED(1)
-------------------- ------------ ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ......................... $23,121 $11,147 $ 7,532 $ 77,362
Working capital ................................... 20,598 12,950 4,373 79,203
Total assets ...................................... 61,582 63,130 68,800 138,630
Short-term borrowings ............................. 5,000
Total long-term debt, including current maturities 8,193 8,752 8,752 8,752
Total stockholders' equity ........................ 49,388 51,986 52,586 127,416
</TABLE>

THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ ---------------
1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Facilities open at beginning of period .... 0 1 2 5 5 14
Facilities built during period ............. 1 1 2 1 1 1
Facilities or management contracts acquired
during period ............................. 0 0 1 8 0 3
------ ------ ------ ------ ------ ------
Facilities open at end of period ........... 1 2 5 14 6 18(2)
====== ====== ====== ====== ====== ======
</TABLE>

- ------------

(2) Subsequent to March 31, 1996, the Company acquired six golf facilities.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Company's Financial Statements and the notes thereto appearing elsewhere
in this Prospectus. This Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from the results discussed in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are
not limited to, those discussed in "Risk Factors," as well as those discussed
elsewhere in this Prospectus.

GENERAL

The Company's strategy is to grow revenue and net income by (i) increasing
the number of golf centers it owns, leases or manages by (a) identifying and
acquiring well-located ranges that have the potential for improvement under
better management and with improved or expanded facilities, including the
addition of enclosed hitting areas, full-line pro shops, miniature golf
courses and other amenities and (b) building new centers in locations where
suitable acquisition opportunities are not available and (ii) seeking to
realize economies of scale through centralized purchasing, accounting,
management information and cash management systems. The Company currently
owns, leases or manages 24 golf facilities, comprised of 17 golf centers and
seven combination golf center and golf course facilities. Of the seven
combination golf center and golf course facilities, six include par-3 golf
courses, generally designed to facilitate the practice of golf, and one
includes a regulation 18-hole golf course. The following table sets forth
certain information as to the Company's golf facilities:

OWNED LEASED MANAGED TOTAL
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
AT JANUARY 1, 1992 ............................................. -- -- -- 0
Facilities built during 1992 .................................. -- 1 -- 1
Facilities or management contracts acquired during 1992 ...... -- -- -- 0
--------- ---------- ----------- ---------
AT JANUARY 1, 1993 ............................................. -- 1 -- 1
Facilities built during 1993 .................................. -- 1 -- 1
Facilities or management contracts acquired during 1993 ...... -- -- -- 0
--------- ---------- ----------- ---------
AT JANUARY 1, 1994 ............................................. -- 2 -- 2
Facilities built during 1994 .................................. -- 1 1 2
Facilities or management contracts acquired during 1994 ...... -- 1 -- 1
--------- ---------- ----------- ---------
AT JANUARY 1, 1995 ............................................. -- 4 1 5
Facilities built during 1995 .................................. -- 1 -- 1
Facilities or management contracts acquired during 1995 ...... 6 1 1 8
--------- ---------- ----------- ---------
AT JANUARY 1, 1996 ............................................. 6 6 2 14
Facilities built during the first three months of 1996 ....... -- 1 -- 1
Facilities or management contracts acquired during the first
three months of 1996 ......................................... 2 1 -- 3
Facilities or management contracts acquired after
March 31, 1996 ............................................... 3 3 -- 6
--------- ---------- ----------- ---------
AT JULY 2, 1996 ................................................ 11 11 2 24
========= ========== =========== =========
</TABLE>

The Company's golf facilities have opened at varying times over the past
several years. As a result of changes in the number of golf centers open from
period to period, the seasonality of operations, the completion of the
Company's initial public offering in November 1994 (the "IPO") and the
Secondary Offering in December 1995, results of operations for any particular
period may not be indicative of the results of operations in the future.

Most of the Company's revenues from its golf centers are derived from
selling tokens for use in automated range-ball dispensing machines, pro shop
merchandise sales, charging for rounds of miniature golf, golf lessons and
management fees. The Company also derives revenues at its golf centers from
food

<PAGE>

and beverage sales, video games and the use of batting cages. The Company
derives revenues from its golf courses from club membership fees, fees for
rounds of golf and golf lessons, pro shop merchandise sales and from food and
beverage sales at the clubhouse. See "Business--The Golf Centers."

RESULTS OF OPERATIONS

The following table sets forth selected operations data of the Company
expressed as a percentage of total revenue (except for operating expenses
which is expressed as a percentage of operating revenue and cost of
merchandise sold which is expressed as a percentage of merchandise sales) for
the periods indicated below:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
----------------------------- ----------------
1993 1994 1995 1995 1996
--------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating revenues ................. 75.7% 84.0% 78.8% 76.3% 80.0%
Merchandise sales .................. 24.3 16.0 21.2 23.7 20.0
Total revenue ...................... 100.0 100.0 100.0 100.0 100.0
Operating expenses ................. 112.8 78.9 67.5 78.0 83.7
Cost of merchandise sold ........... 71.7 73.5 67.5 69.9 68.1
Selling, general and administrative
expenses .......................... 23.4 8.6 10.0 19.8 19.1
Income (loss) from operations ..... (26.2) 13.3 22.5 4.2 0.3
Interest expense ................... (7.3) (4.9) (7.6) (5.2) (3.0)
Other income ....................... 4.0 0.3 0.6 1.2 5.9
Income (loss) before income taxes,
minority interest and
extraordinary item ................ (29.5) 8.7 15.5 0.2 3.2
Income tax expense (benefit) ...... -- (1.0) 5.4 0.1 1.1
Income (loss) before minority
interest and extraordinary item .. (29.5) 9.7 10.1 0.1 2.1
Minority interest in (income) loss 0.5 (2.0) -- -- --
Extraordinary item (net of tax
effect) ........................... -- -- (1.5) -- --
Net income (loss) .................. (29.0)% 7.7% 8.6% 0.1% 2.1%
</TABLE>

Three Months Ended March 31, 1996 Compared to Three Months Ended March 31,
1995

Results for the three months ended March 31, 1996 reflect the operations
of nine golf centers (Farmingdale, Elmsford and Syracuse, New York, Wayne,
New Jersey, Greenville, South Carolina, Duluth, Georgia, El Segundo and
Gilroy, California and Valley View, Ohio) for the full period, operations of
the Douglaston, New York and Alpharetta, Georgia golf centers (which were
undergoing renovation for one month) and the Henrietta, New York and Mesa,
Arizona golf centers for approximately two months, operations of the
Richmond, Virginia golf center (which was undergoing renovation for two
months) and the Virginia Beach, Virginia golf center for approximately one
month, operations of the Flemington, New Jersey golf center for less than one
month, and the pro shop and food service operations only of the Utica and
Queensbury, New York facilities. Results for the three months ended March 31,
1995 reflect the operations of the Farmingdale, Wayne and Elmsford golf
centers for the full period, operations of the indoor portion of the Syracuse
golf center for approximately two and one-half months, operations of the
Douglaston golf center for approximately half of the period, and pro shop
revenues only for the Utica golf center. As a result of the change in the
number of golf centers open from period to period, the comparison between the
1996 and 1995 periods may not necessarily be meaningful.

Total revenue for the three months ended March 31, 1996 was $3.4 million
as compared to $1.8 million for the same period in 1995, an increase of $1.6
million (89.0%). Total revenue for the four golf centers operating for the
three months ended March 31, 1996 and 1995 (Farmingdale, Wayne, Elmsford

<PAGE>

and Syracuse) decreased 12.5% to $1.4 million in the 1996 period from $1.6
million in the 1995 period. The overall increase in revenue is attributable
to having additional golf centers in operation during the 1996 period, as
described above, partially offset by a decrease in revenue at those
facilities open in both periods caused by severe winter conditions in the
Northeast region in 1996, relative to milder winter conditions in 1995.

Operating revenues, consisting of all sales except merchandise sales,
amounted to $2.7 million for the three months ended March 31, 1996, as
compared to $1.4 million for the comparable 1995 period, an increase of $1.3
million (98.0%). The increase in operating revenues was primarily
attributable to having additional golf centers in operation during the 1996
period.

Merchandise sales, consisting of golf clubs, balls, bags, gloves, videos,
apparel and related accessories, amounted to $671,000 for the three months
ended March 31, 1996 as compared to $422,000 for the comparable 1995 period,
an increase of $249,000 (59.0%). The increase in merchandise sales was
primarily due to the contribution of new locations added during 1995.

Operating expenses, consisting of operating wages and employee costs, land
rent, depreciation of golf driving range facilities and equipment, utilities
and all other facility operating costs, increased to $2.3 million (83.7% of
operating revenue) in the 1996 period from $1.1 million (78.0% of operating
revenue) in the 1995 period, an increase of $1.2 million (112.0%). The
increase in operating expenses was primarily due to the operating costs of
locations that were not operated by the Company during the 1995 period.
Operating expenses as a percentage of operating revenues increased to 83.7%
in 1996 from 78.0% in 1995 primarily due to a decrease in revenues as a
result of severe winter conditions in 1996 relative to 1995.

The cost of merchandise sold increased to $457,000 (68.1% of merchandise
sales) in the 1996 period from $295,000 (69.9% of merchandise sales) in the
comparable 1995 period. The overall increase in this cost of $162,000 (54.9%)
was primarily due to the higher level of merchandise sales. The decrease in
this cost as a percentage of merchandise sales was due to improved buying
techniques and volume discounts.

Selling, general and administrative expenses for the three months ended
March 31, 1996 amounted to $643,000 (19.1% of total revenue) compared to
$352,000 (19.8% of total revenue) in the comparable 1995 period, an increase
of $291,000 (83.0%), primarily due to the expenses associated with operating
additional golf centers.

Interest expense increased to $100,000 for the three months ended March
31, 1996 from $92,000 in the comparable 1995 period. Other income, primarily
interest income, increased to $197,000 in the 1996 period from $22,000 in the
1995 period. The increase in interest income is attributable to the receipt
and investment of proceeds from the Secondary Offering.

The Company had income before income taxes for the three months ended
March 31, 1996 of $107,000 as compared to income of $4,000 in the comparable
1995 period. Net income for the three months ended March 31, 1996 amounted to
$69,000 as compared to $2,000 for the comparable 1995 period.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Results for the year ended December 31, 1995 reflect the operations of the
Farmingdale and Elmsford, New York and the Wayne, New Jersey golf centers for
the full period, operations of the Douglaston, New York golf center (which
was undergoing renovation and was operating in a limited capacity for
approximately four of the 12 months), operations of the Syracuse, New York
golf center for approximately 12 months (although the outdoor portion of the
golf center was open for only six months), operations of the Utica, New York
golf center for approximately nine months, operations of the Greenville,
South Carolina golf center and the Queensbury, New York golf facility for
approximately eight months each, operations of the Richmond, Virginia and
Duluth and Alpharetta, Georgia golf centers for approximately five months,
four months and five months, respectively, and operations of El Segundo and
Gilroy, California and Valley View, Ohio for two months each. Results for the
year ended December 31, 1994 reflect the operations of the Farmingdale and
Wayne golf centers for the full period, operations of the Douglaston golf
center (which was undergoing renovation and was operating in a

<PAGE>

limited capacity for four months) and operations of the Elmsford golf center
for approximately five months. As a result of the change in the number of
facilities open from period to period, the comparison between 1995 and 1994
periods may not necessarily be meaningful. Revenue from the Farmingdale and
Wayne golf centers, which were the only golf centers open and not undergoing
substantial renovations for the full December 31, 1994 and 1995 periods,
increased from $3.7 million to $4.1 million during such periods, an increase
of 10.8%.

Total revenue for the year ended December 31, 1995 was $12.4 million as
compared to $6.4 million in 1994, an increase of $6.0 million (93.8%). The
overall increase in revenue was primarily attributable to having additional
golf centers in operation during the 1995 period.

Operating revenues amounted to $9.8 million as compared to $5.3 million,
an increase of $4.5 million (84.9%) for this period. The increase in
operating revenues was primarily attributable to having additional golf
centers in operation during the 1995 period.

Merchandise sales amounted to $2.6 million for 1995 as compared to $1.0
million for 1994. The increase in merchandise sales of $1.6 million (160.0%)
was due to the contribution of new locations to the 1995 period and the
increased emphasis placed by the Company on improving pro shop sales in the
1995 period, improved purchasing procedures and increased promotion.

Operating expenses increased to $6.6 million in 1995 from $4.2 million in
1994. The overall increase of $2.4 million (57.1%) was primarily due to the
operating costs of locations that were not open for all or part of 1994.
However, operating expenses as a percentage of operating revenues declined to
67.5% in 1995 from 78.9% in 1994 primarily due to the substantial increase in
revenues and relatively low corresponding incremental increases in certain
fixed or partially fixed costs, such as rent.

The cost of merchandise sold increased to $1.8 million (67.5% of
merchandise sales) in 1995 from $750,000 (73.5% of merchandise sales) in
1994. The overall increase in this cost of $1.05 million (140.0%) was
primarily due to the higher level of merchandise sales. The decrease in this
cost as a percentage of merchandise sales was due to improved buying
techniques and volume discounts.

Selling, general and administrative expenses in 1995 amounted to $1.2
million (10.0% of total revenue) as compared to $548,000 (8.6% of total
revenue) in 1994, an increase of $652,000 (119.0%), primarily due to an
increase in corporate staff, advertising and other expenses resulting from
the increase in the number of golf centers operating during 1995.

Interest expense increased to $939,000 in 1995 from $313,000 in 1994. The
increase was attributable to increased borrowings to fund the Company's
expansion, as well as a higher prime lending rate during 1995 as compared to
1994.

The Company had income, before income tax expense (benefit), an
extraordinary item and the Minority Interest, of $1.9 million for 1995 as
compared to $552,000 in 1994. The Company recognized an extraordinary charge
of $181,000 (net of taxes) in the fourth quarter of 1995. This extraordinary
item reflects the write-off of debt acquisition costs, net of income taxes,
arising from the repayment of certain bank debt using the proceeds of the
Secondary Offering. The Minority Interest in 1994 represents limited
partnership interests in Alley Pond Associates, L.P., a partnership which
operated the Douglaston, New York golf center. The Minority Interest was
acquired by the Company in December 1994. Net income, after income tax
expense (benefit), the extraordinary item and the Minority Interest, rose to
$1.1 million in 1995 as compared to $488,000 in 1994.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

Results for 1994 reflect the operations of the Farmingdale, New York and
Wayne, New Jersey golf centers for the full year, operations of the
Douglaston, New York golf center (which was operating in a limited capacity
for approximately five months of the year) and operations of the Elmsford,
New York golf center for approximately five months of 1994. Results for 1993
reflect the operations of the Farmingdale golf center for the full year and
approximately five months of operations of the Wayne golf center. As a result
of the change in the number of golf centers open from period to period, the
comparison between 1994 and 1993 may not necessarily be meaningful.

<PAGE>

Total revenue for 1994 was $6.4 million as compared to $2.6 million for
1993, an increase of 141.7%. Operating revenues for 1994 amounted to $5.3
million as compared to $2.0 million for 1993. The overall increase in revenue
was primarily attributable to having additional golf centers in operation
during 1994, as described above, partially offset by the impact of severe
winter weather in the first three months of 1994.

Merchandise sales amounted to $1.0 million for 1994 as compared to
$639,000 for 1993. The increase in merchandise sales of $381,000 (59.6%) was
primarily due to strong pro shop sales at the Wayne golf center in 1994 and
the new locations added during 1994.

Operating expenses increased to $4.2 million in 1994 from $2.2 million in
1993. The increase of $2.0 million (87.6%) was primarily due to the
operations of the Wayne, Elmsford and Douglaston golf centers, which were not
open for most of 1993. However, operating expenses as a percentage of
operating revenues declined to 78.9% in 1994 from 112.8% in 1993 due to the
substantial increase in revenue and relatively low corresponding incremental
increases in certain fixed or partially fixed costs, such as rent. In 1993,
pre-opening expenses for the Wayne center, which had a delayed opening in
August of that year, resulted in a higher percentage of operating expenses to
operating revenues.

Cost of merchandise sold for 1994 increased to $750,000, representing
73.5% of merchandise sales in 1994 from $459,000, representing 71.7% of
merchandise sales in 1993. The increase of $291,000 was primarily due to the
higher merchandise sales, as well as a slight increase in the average cost of
goods sold. No single factor accounted for the change in gross margins from
1993 to 1994. Gross margins on merchandise sales were affected by local price
competition and the product mix of sales.

Selling, general and administrative expenses in 1994 amounted to $548,000
(8.6% of total revenue) as compared to $615,000 (23.4% of total revenue) in
1993, a decrease of $67,000, primarily due to the re-allocation of personnel
from corporate staff in 1993 to new operating locations in 1994. Interest
expense increased to $313,000 in 1994 from $192,000 in 1993. The increase was
attributable to borrowings to fund the Wayne, Elmsford and Douglaston golf
centers ($2.25 million, $2.5 million and $250,000, respectively), and
increases in the prime lending rate upon which most of the Company's bank
loans are based.

In 1994, the Company had net income of $617,000 before the Minority
Interest as compared to a loss of $775,000 in 1993. After giving effect to
the Minority Interest, the Company had net income of $488,000 for 1994 as
compared to a loss of $763,000 for 1993. A portion of the proceeds of the
IPO, which was completed on November 23, 1994, was used to purchase the
Minority Interest in December 1994.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company had working capital of $13.0 million
compared to $20.6 million at December 31, 1995, which decrease was
principally due to the acquisition of golf facilities and capital
expenditures during the three months ended March 31, 1996.

The cash requirements of funding the Company's expansion have historically
exceeded cash flow from operations. Accordingly, the Company has satisfied
its capital needs primarily through debt and equity financings. The Company
currently anticipates that it will continue to satisfy its capital needs
through additional debt or equity financing until the Company has established
an adequate number of profitable golf centers to support its growth through
internal cash flow.

The Company's outstanding indebtedness as of June 10, 1996 of $13.75
million bears interest at fixed and variable rates currently ranging from
5.25% to 10.5%. The Company has an agreement with TaipeiBank, New York Agency
for a construction loan of up to $1.7 million for the development of the golf
facility at Henrietta, New York. This loan bears interest at the prime rate
plus 2% per annum, and is due May 14, 1997. As of June 27, 1996, the Company
had drawn down an aggregate amount of $1.5 million under this loan.

The Company has a $5.0 million revolving line of credit with Chemical Bank
which expired on June 30, 1996. As of June 27, 1996, the Company had drawn
down the entire $5.0 million under this line of credit. Amounts outstanding
under this credit line, as of June 27, 1996, bear interest at 8.5%. The

<PAGE>

Company has received a letter of intent from Chemical Bank to extend the line
of credit to June 30, 1997. After the application of the net proceeds of the
Offering, the Company will have no amounts outstanding under this line of
credit. On June 20, 1996 the Company borrowed an additional $1.6 million from
Chemical Bank at an interest rate of 8.5% under a short-term note due
September 5, 1996.

The Company anticipates making substantial additional expenditures in
connection with the acquisition and opening of new golf facilities and
capital improvements to existing facilities. Golf center opening expenditures
primarily relate to projected golf center construction and opening costs,
associated marketing activities and the addition of personnel. From time to
time, the Company acquires, rather than leases, the land on which its golf
centers are located, which entails additional expenditures. Based on the
Company's experience with its existing golf centers, the Company believes
that the cost of opening or acquiring a golf center generally will not exceed
$3.5 million (exclusive of land costs). However, there can be no assurance
that golf center opening or acquisition costs will not exceed $3.5 million.
Golf center acquisition costs vary substantially depending on the location
and status of the acquired property (i.e., whether significant capital
improvements are necessary) and whether the Company acquires or leases the
related land. Land acquisition costs vary substantially depending on a number
of factors, including principally location. To the extent that the Company
acquires any golf courses, the Company may be required to make capital
improvements to these courses, depending again upon the location and status
of the acquired property. The cost of golf course acquisitions depends, to a
large extent, upon the price of the land and may substantially exceed the
anticipated cost of golf center acquisitions. The Company intends to make
capital improvements, estimated to aggregate approximately $3.5 million over
the next 12 months, including $3.0 million on recently acquired facilities.
The Company intends to utilize substantially all the net proceeds of the
Offering in connection with the acquisition and opening of golf facilities.
See "Use of Proceeds." In addition, in connection with the acquisition of
TPT, up to $2.0 million of additional purchase price will be payable if
certain operating income targets are achieved in 1996 and 1997. See "Business
- -- Recently Opened or Acquired Facilities -- The El Segundo and Gilroy Golf
Facilities" for a description of such contingent payments.

The Company believes that the net proceeds from the Offering, cash flow
from operations and its revolving credit facility with its primary lender
will be sufficient to finance the Company's currently contemplated expansion
plans for at least the next 12 months.

Management does not believe that recently issued accounting standards will
have a material impact on the Company's financial statements when adopted by
the Company.

EFFECT OF RECENTLY ACQUIRED FACILITIES

On a pro forma basis, as adjusted to give effect to acquisitions
consummated after January 1, 1995 as if they had occurred as of January 1,
1995, the Company had a net loss before extraordinary item of $435,000 (as
compared to income before extraordinary item of $1.3 million on a historical
basis) for the year ended December 31, 1995 and a net loss of $63,000 (as
compared to net income of $69,000 on a historical basis) for the three months
ended March 31, 1996. Although the recently acquired facilities have
adversely affected income on a pro forma basis, the Company believes that it
will be able to (i) enhance revenues at such facilities by adding amenities
including enclosed hitting areas, token-based automated range-ball dispensing
machines, full-line pro shops, miniature golf courses and par-3 golf courses
and (ii) reduce expenses by economies of scale achieved through centralized
purchasing, accounting, management information systems and cash management.
There can be no assurance, however, that the Company will be able to improve
the performance of newly-acquired facilities. See "Risk Factors--Expansion
Strategy."

The Company expects to spend approximately $3.0 million over the next 12
months on recently acquired facilities for capital improvements. Of such
amount, the Company expects that approximately $1.0 million will be used at
the Duluth, Georgia facility to build a par-3 golf course, shelter the
driving range, add a miniature golf course and expand the clubhouse to add a
pro shop. An aggregate of approximately $2.0 million is expected to be used
for facility improvements at the Valley View, Ohio, Greenville, South
Carolina, Glen Allen, Virginia, Alpharetta, Georgia, Virginia Beach,
Virginia, Mesa, Arizona, Flemington, New Jersey, Yorktown Heights, New York
golf centers.

<PAGE>

SEASONALITY

Historically, the second and third quarters have accounted for a greater
portion of the Company's operating income than have the first and fourth
quarters of the year. This is primarily due to an outdoor playing season
limited by inclement weather. Although most of the Company's facilities are
designed to be all-weather, portions of the facilities, such as miniature
golf courses which are outdoors, tend to be vulnerable to weather conditions.
One of the Company's golf centers and one golf course are closed during a
portion of the winter. Also, golfers are less inclined to practice when
weather conditions limit their ability to play golf on outdoor courses. The
Company believes that its recent expansion of operations into areas (Arizona,
California, Florida, Georgia, Virginia) where inclement weather may have less
of an impact on the outdoor playing season than in the Northeast may mitigate
to some extent this seasonal pattern. Nonetheless, this seasonal pattern, as
well as the timing of new golf facility acquisitions and openings, may cause
the Company's results of operations to vary significantly from
quarter-to-quarter. Accordingly, period-to-period comparisons are not
necessarily meaningful and should not be relied on as indicative of future
results.

INFLATION

There was no significant impact on the Company's operations as a result of
inflation during 1993, 1994, 1995 or the three months ended March 31, 1996.

<PAGE>

BUSINESS

GENERAL

The Company operates golf centers designed to provide a wide variety of
practice opportunities, including facilities for driving, chipping, putting,
pitching and sand play. In addition, the Company's golf centers typically
offer golf lessons instructed by PGA-certified golf professionals, full-line
pro shops and other amenities to encourage family participation. The Company
currently owns, leases or manages 24 golf facilities, comprised of 17 golf
centers and seven combination golf center golf course facilities located in
ten states. Of the golf centers, seven are currently operated under the name
"Golden Bear Golf Centers." Of the seven combination golf center and golf
course facilities, six include par-3 golf courses, generally designed to
facilitate the practice of golf, and one includes a regulation 18-hole golf
course. The Company has experienced significant recent growth, primarily
through the opening or acquisition of 20 facilities since the IPO in November
1994. The Company's total revenue increased from $1.9 million in 1992 to
$12.4 million for the year ended December 31, 1995. During the same period,
the Company's net income increased from a net loss of $22,000 to a net profit
of $1.1 million.

The Company believes that it attracts customers to its golf centers
primarily due to the quality, convenience and comfort of its facilities and
their appeal to the whole family. The Company's golf centers are designed
around a driving range with target greens, bunkers and traps to simulate golf
course conditions. The ranges are lighted to permit night play, the hitting
tees are enclosed or sheltered from above and from the rear in a
climate-controlled environment and, in three cases, all or a portion of the
range is enclosed under an air inflated dome to permit all-weather play.
There are approximately 80 to 100 hitting tees in facilities with the
two-tier design and approximately 30 to 60 hitting tees at smaller golf
centers. In addition to the driving range, the Company's golf centers include
a number of amenities designed to appeal to golfers and their families, such
as a 4,000-6,000 square foot clubhouse (including a full-line pro shop,
locker facilities, a restaurant or snack bar and video games), PGA-certified
golf instructors, landscaped 18-hole miniature golf courses and a short game
practice area (including putting green and sand traps). The Company's pro
shops are stocked with clubs, bags, shoes, apparel, videos and related
accessories from a number of suppliers, including brand name manufacturers
such as Karsten Manufacturing Corporation (Ping), Callaway Golf Company,
Tommy Armour Golf, Wilson Golf Company, Mizuno Golf Company, Spalding Sports
Worldwide, Titleist and Footjoy Worldwide (Division of American Brands,
Inc.), Ashworth Clothing Company and Nicklaus Golf Equipment Company.

INDUSTRY OVERVIEW

According to the NGF, there were approximately 25 million golfers in the
United States in 1995. The average age of the golf driving range user was
37.1 years old, with an average household income of $55,700 per year. Those
with household income in excess of $75,000 (approximately 35% of all
stand-alone range users), were the most likely to visit a stand-alone range,
visiting 3.7 times more frequently than those with household income of less
than $30,000 (19% of all stand-alone range users) and 1.5 times more
frequently than those with household incomes between $30,000 and $75,000 (46%
of all stand-alone range users).

According to the Golf Range and Recreational Association there are
currently between 1,900 and 2,300 stand-alone driving ranges in the United
States. Most of the Company's golf centers, the smallest of which has 20 tee
stations, are larger than those generally found in the industry. The average
number of tee stations per range in the industry in 1993, as estimated by the
NGF, was 40, with 50% of all stand-alone ranges offering 35 or fewer tee
stations. Large stand-alone ranges, defined as ranges with more than 50 tee
stations, accounted for approximately 21% of all facilities. The stand-alone
range industry is highly fragmented. The NGF estimates that in 1993 92% of
stand-alone ranges were managed by owner- operators. The Company believes
that many of these owner-operated ranges are managed by individuals who may
lack the experience, expertise and financial resources to compete
effectively.

BUSINESS STRATEGY

The Company's business strategy is to grow revenue and net income by (i)
increasing the number of golf centers it owns, leases or manages through (a)
identifying and acquiring well-located ranges that have

<PAGE>

the potential for improvement under better management and with improved or
expanded facilities, including the addition of enclosed hitting areas,
full-line pro shops, miniature golf courses and other amenities and (b)
building new centers in locations where suitable acquisition opportunities
are not available and (ii) seeking to realize economies of scale through
centralized purchasing, accounting, management information systems and cash
management.

Acquire Existing Ranges and Centers. The Company believes the highly
fragmented driving range industry presents numerous opportunities for it to
acquire, upgrade and renovate golf centers and driving ranges. The Company's
acquisition strategy is to target well-located, underperforming stand-alone
ranges or golf centers in stable communities with favorable demographics,
generally in close proximity to upscale urban and suburban areas which
generally contain the highest concentration of golfers. The Company
anticipates that it will purchase the land and facilities of the properties
it acquires but may from time to time enter into long-term leases or
contracts to manage sites where the Company determines ownership to be
uneconomical or where the facilities are not for sale, such as those owned by
municipalities. In determining which facilities may be suitable acquisition
candidates, management conducts demographic and competitive analyses and
considers such factors as ease of access, visibility from major thoroughfares
and potential for improvement in revenue and operating cash flow through
capital improvements. The Company has three full-time acquisition and
development professionals who are responsible for strategic planning and
project management. These professionals work together with various outside
consultants who are familiar with the Company's demographic requirements and
are knowledgeable about the current opportunities in the various real estate
markets.

After taking operating control of an acquired range, the Company may
commence various capital improvements to conform the acquired range to the
Company's individually tailored development plan for that site. Capital
improvements may include increasing the number of tee stations, sheltering
the hitting stations or enclosing the driving range, installing lights to
permit night play, adding or expanding pro shop and clubhouse facilities and
constructing miniature golf courses and other amenities to encourage family
participation. The Company trains the staff of newly acquired golf centers in
accordance with the standards of existing facilities, and directs the general
manager of the site to report to one of the Company's five Regional Managers.
The Company also usually installs operational controls, including a
token-based system for dispensing range balls, centralized cash management
and management information systems, which allow the Company to centrally
track the operations of each facility from its headquarter offices.

Develop New Centers. In locations where suitable acquisition opportunities
are not available or where the Company determines ownership is not
economically feasible, the Company intends to lease land on which it will
build new golf centers similar to those currently operated by the Company. To
date, the Company has built five of its facilities. Based upon its
experience, the Company anticipates that under normal conditions construction
of a facility will take approximately four months to complete and can be
achieved at a total cost of less than $3.5 million, exclusive of the cost of
land. However, there can be no assurance that the Company will be able to
continue to construct its facilities in such time periods or for such cost.
The Company has the expertise and the personnel to act as its own general
contractor and intends to subcontract the construction of its centers to
third parties.

Economies of Scale. The Company believes that by virtue of its size, the
Company will continue to take advantage of quantity discounts on equipment
and golf merchandise sold through its pro shops. All accounting, insurance,
cash management, finance and human resource functions are monitored centrally
at the Company's headquarters. In markets where the Company has or attains a
substantial presence, the Company believes that it will be able to take
advantage of various advertising media to promote attendance at its
facilities.

The Company believes that the net proceeds from the Offering and its
revolving credit facility with its primary lender will afford the Company
greater financial flexibility and access to capital resources to pursue its
business strategy.

<PAGE>

GOLF FACILITIES

The Company currently owns, leases or manages 24 golf facilities in ten
states. Set forth below is information concerning each of them:

<TABLE>
<CAPTION>
SIZE OF
PROPERTY PGA MINIATURE NO.OF OWNED, DATE
APPROXIMATE CERTIFIED PRO GOLF HITTING LEASED OR OPENED OR
LOCATION OF FACILITY TYPE OF FACILITY ACRES) INSTRUCTORS SHOP COURSES TEES MANAGED ACQUIRED(1)
- -------------------- ------------------- ----------- ----------- ---- --------- ------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FARMINGDALE, NY GOLDEN BEAR GOLF CENTER 13 X X ONE 80 LEASED MARCH 1992
WAYNE, NJ GOLDEN BEAR GOLF CENTER 16 X X TWO 80 LEASED JULY 1993
DOUGLASTON, NY GOLDEN BEAR GOLF CENTER 12 X X ONE 70 MANAGED(2) DEC. 1993
ELMSFORD, NY GOLDEN BEAR GOLF CENTER 27 X X TWO 80 LEASED JULY 1994
UTICA, NY FAMILY GOLF CENTER 18 X X ONE 60 LEASED DEC. 1994
CLAY, NY GOLDEN BEAR GOLF CENTER 23 X X ONE 132 LEASED JAN. 1995
(NEAR SYRACUSE)
QUEENSBURY, NY FAMILY GOLF CENTER AND 200 X X -- 40 OWNED MAY 1995
(NEAR ALBANY) 18-HOLE GOLF COURSE
GREENVILLE, SC FAMILY GOLF CENTER 24 X X ONE(3) 100 OWNED MAY 1995
GLEN ALLEN, VA FAMILY GOLF CENTER 10 X X ONE 50 OWNED AUG. 1995
(NEAR RICHMOND)
DULUTH, GA FAMILY GOLF CENTER(4) 56 X X ONE(3) 60 OWNED AUG. 1995
(NEAR ATLANTA)
ALPHARETTA, GA FAMILY GOLF CENTER 26 X X TWO 60 OWNED AUG. 1995
(NEAR ATLANTA)
EL SEGUNDO, CA GOLDEN BEAR GOLF CENTER 28 X X -- 58 MANAGED(5) NOV. 1995
AND PAR-3 GOLF COURSE
GILROY, CA FAMILY GOLF CENTER AND 36 X X -- 20 LEASED NOV. 1995
PAR-3 GOLF COURSE
VALLEY VIEW, OH FAMILY GOLF CENTER 19 X X ONE(3) 130(6) OWNED/LEASED NOV. 1995
(NEAR CLEVELAND)
HENRIETTA, NY GOLDEN BEAR GOLF CENTER 28 X X ONE(3) 132(7) LEASED JAN. 1996
MESA, AZ FAMILY GOLF CENTER AND 39 X X -- 80 OWNED FEB. 1996
PAR-3 GOLF COURSE
VIRGINIA BEACH, VA FAMILY GOLF CENTER AND 81 X X -- 36 LEASED MARCH 1996
PAR-3 GOLF COURSE
FLEMINGTON, NJ FAMILY GOLF CENTER 17 X X TWO 67 OWNED MARCH 1996
YORKTOWN HEIGHTS, NY FAMILY GOLF CENTER 14 X X -- 54 OWNED APRIL 1996
INDIAN RIVER, VA FAMILY GOLF CENTER 14 X X ONE 60 LEASED MAY 1996
(NEAR NORFOLK)
TUCSON, AZ FAMILY GOLF CENTER 18 X X(3) ONE(3) 50 OWNED JUNE 1996
FAIRFIELD, OH FAMILY GOLF CENTER 24 X X ONE 68 LEASED JUNE 1996
(NEAR CINCINNATI)
ST. LOUIS, MO FAMILY GOLF CENTER AND 42 X X ONE 100 LEASED JUNE 1996
PAR-3 GOLF COURSE
WEST PALM BEACH, FL FAMILY GOLF CENTER AND 32 X X ONE 40 OWNED JUNE 1996
PAR-3 GOLF COURSE
</TABLE>

- ------------

(1) Represents the first month that the facility generated revenue for the
Company.

(2) The Company manages the facility pursuant to a management contract with
the City of New York. The management agreement terminates on December
31, 2006, but is terminable by the City of New York at will.

(3) Under development.

(4) The Company has commenced construction of an par-3 executive golf
course adjacent to its golf center which it intends to have completed
by November 1996.

(5) The Company manages the facility pursuant to a management agreement
with the City of El Segundo, California. The management agreement
terminates on June 30, 1998 but is terminable earlier by either party,
with or without cause, at the end of each operating year during the
term of the management agreement, upon at least 90 days prior written
notice.

(6) The Company owns a 5-acre parcel which includes an enclosed dome with
50 hitting tees and leases the adjacent 14-acre parcel on which it is
constructing an outdoor driving range consisting of 80 hitting tees, a
miniature golf course and short game practice area.

(7) In January 1996, the Company opened the domed portion of this golf
center which encloses 50 hitting tees. The Company has commenced
construction of an outdoor driving range consisting of 82 hitting tees,
a minature golf course and short game practice area.

<PAGE>

The Golf Centers

The Company's typical golf center is designed around a driving range
landscaped with target greens, bunkers and traps to simulate golf course
conditions. The Company's larger centers, such as the ones in Elmsford,
Syracuse, Henrietta and Farmingdale, New York and Wayne, New Jersey include
approximately 80 to 100 hitting tees in a two-tier design. Smaller golf
centers include approximately 30 to 60 hitting tees. The ranges are generally
open from 8:00 a.m. to 11:00 p.m. and are lighted to permit night play. The
hitting tees are enclosed or sheltered from above and from the rear in a
climate-controlled environment and, in three cases, all or a portion of the
range is enclosed under an air inflated dome, to permit all-weather play.
Tokens are sold to driving range customers at each of the Company's golf
centers. These tokens are deposited by customers in machines which dispense
precise amounts of golf balls, thus allowing the Company to monitor closely
its cash receipts for buckets of balls and provides inventory assessment
information.

In addition to the driving range, the Company's golf centers generally
include a 4,000-6,000 square foot clubhouse, including a full-line pro shop
and locker facilities, landscaped 18-hole miniature golf courses, and a short
game practice area (with putting green and sand traps) and PGA-certified golf
instructors. As part of the Company's strategy to encourage family
participation, the Company's golf centers include amenities such as miniature
golf courses, restaurants and snack bars (three of which are operated by
Friendly Ice Cream Corporation under the "Friendly's" name), video games and
batting cages.

Most of the Company's recently acquired golf centers are undergoing or
expected to undergo capital improvement programs to add certain amenities.
Golf center design is affected by the size, shape and other characteristics
of available site locations, weather patterns, zoning requirements,
availability of capital and market conditions.

The Company's pro shops are stocked with clubs, bags, shoes, apparel,
videos and related accessories from a number of suppliers, including brand
name manufacturers such as Karsten Manufacturing Corporation (Ping), Callaway
Golf Company, Tommy Armour Golf, Wilson Golf Company, Mizuno Golf Company,
Spalding Sports Worldwide, Titleist and Footjoy Worldwide (Division of
American Brands, Inc.), Ashworth Clothing Company and Nicklaus Golf Equipment
Company. Each pro shop is staffed with at least one sales person and one of
the Company's PGA-certified instructors.

The Golf Courses

Since the IPO in November 1994, the Company has acquired one regulation
18-hole golf course (Queensbury, New York) and six par-3 practice golf
courses (Mesa, Arizona, Virginia Beach, Virginia, El Segundo and Gilroy,
California, St. Louis, Missouri and West Palm Beach, Florida). The Company
has commenced construction of a par-3 golf course, adjacent to a driving
range at its Duluth, Georgia facility.

The 200-acre, 18-hole regulation golf course at Queensbury, New York,
known as the Hiland Golf Club, has a restaurant and catering facility to
accommodate large parties and weddings, a clubhouse, a full-line pro shop, a
driving range and PGA-certified golf instructors on site.

Each of the par-3 golf courses at Mesa, Arizona, St. Louis, Missouri and
West Palm Beach, Florida has a clubhouse, a full-line pro shop and a driving
range. The par-3 golf course in Virginia Beach, Virginia known as the "Owl's
Creek Golf Course," has a clubhouse, a pro shop, a driving range and a
putting course. Each of these golf courses have PGA-certified golf
instructors on site.

Each of the par-3 practice golf courses in California, one of which is
part of a Golden Bear Golf Center, has a clubhouse, a pro shop, a driving
range and PGA-certified golf instructors on site.

The Company's strategy is to acquire golf courses in areas where it owns
or operates or, intends to own or operate, golf centers so that it has
available a golf course on which to: (i) train its golf instructors so that
they may become PGA-certified and (ii) provide full golf packages and
complete instruction to driving range customers.

<PAGE>

OPERATIONS

The Company currently has golf facilities located in five regions (the New
York City region, the Northern region, the Southeast region, Mid-Atlantic
region and the Western region), each of which is managed by a Regional
Manager. Each golf facility has a general manager who reports to a Vice
President-Regional Manager, one to two assistant managers, a head golf
professional, up to four PGA-certified professionals who instruct golfers,
approximately five full-time staff members and approximately 13 to 20
part-time employees, depending on the season.

Day-to-day responsibility for operation of the Company's golf centers
resides with the general managers. General managers have overall
administrative responsibility for golf center operations, including the
driving range, miniature golf courses, short game practice area, pro shop and
snack bar concession, as well as the condition of the facilities. In
addition, general managers work with the Vice President-Regional Managers to
prepare monthly and annual budgets and marketing plans.

The Company places great importance on recruiting and training skilled
personnel. A majority of the golf instructors are PGA-certified. In addition,
a majority of the general managers have managed or were assistant managers at
other golf centers or courses prior to being hired by the Company. Regional
managers and general managers, as well as other management personnel, are
provided performance incentives such as stock options and bonuses.

The Company emphasizes customer service. Employees undergo a comprehensive
training program where they are instructed, among other things, to be
courteous, wear standardized clothing and display a professional attitude.
The Company believes that excellent customer service is second in importance
only to the quality of the golf facilities.

By virtue of operating a number of golf facilities, the Company believes
it achieves economies of scale not available to smaller operators. Typically,
the Company can acquire artificial turf, range balls, pro shop merchandise
and other golf center supplies and equipment at lower prices than could an
individual operator. The Company can also purchase insurance coverage at a
lower premium rate than would be charged for an individual golf center. The
Company's corporate policies relating to personnel, labor, cash management
and budgets are formulated at the Company's headquarters and provided to each
of the Company's golf facilities. The Company's accounting, legal, insurance
and finance functions and management information systems are also
centralized. This centralization enables personnel at a golf center to focus
on matters relating to the performance of the particular golf center.

Management information services are important to the successful operation
of the Company's golf centers. The Company's management information system
provides for a centralized purchasing program, financial performance and
other key operating data for all golf facilities. This system allows the
Company to review data on a regular basis and enables the identification of
potential problems.

The Company advertises in newspapers and on radio and cable television and
uses direct mailings and other promotions, including sponsoring certain
charitable events, holding contests and giving free clinics and equipment
demonstrations, to increase consumer awareness of its golf facilities. The
Company incurred advertising expenses of $73,000 and $207,000 for the years
ended December 31, 1994 and 1995, respectively. The Company believes
advertising plays an important role in attracting golfers to its facilities
and, in this connection, recently hired a director of marketing to direct the
Company's marketing efforts. Pursuant to the License Agreement, the Licensor
retains the right to approve advertising and other material using the "Golden
Bear" name and logo.

RECENTLY OPENED OR ACQUIRED FACILITIES

Since the IPO in November 1994, the Company has opened or acquired 20 golf
facilities, including one regulation 18-hole golf course and six combination
golf center and par-3 golf course facilities. The newly opened or acquired
centers are located in Syracuse, Henrietta, Yorktown Heights and Utica, New
York, Flemington, New Jersey, Greenville, South Carolina, Glen Allen,
Virginia (near Richmond), Indian River, Virginia (near Norfolk), Alpharetta
and Duluth, Georgia (both of which are near Atlanta) Tucson, Arizona, and
Valley View (near Cleveland), and Fairfield (near Cincinnati), Ohio. The
regulation golf

<PAGE>

course is located in Queensbury, New York, the par-3 golf course is located
in Virginia Beach, Virginia and the combination golf center and par-3 golf
course facilities are located in Mesa, Arizona, El Segundo and Gilroy,
California, St. Louis, Missouri and West Palm Beach, Florida. The Company has
commenced construction of a par-3 golf course on land adjacent to the Duluth,
Georgia golf center which it intends to have completed by November 1996.

The consideration paid by the Company to acquire each golf facility has
been based on a number of factors, including appraisals of the acquired
facility, the location and demographics of the facility and the Company's
evaluation of the prospects of improving the facility's performance. None of
the proceeds of the Offering are being used to finance any of the
acquisitions described below.

The Syracuse Golf Center

On October 18, 1994, the Company entered into a long-term lease for
approximately 23 acres of vacant land in Clay, New York (near Syracuse). The
Company immediately commenced construction of a Golden Bear Golf Center
consisting of an indoor domed driving range, an outdoor driving range, a
miniature golf course, pro shop, clubhouse and restaurant. The Company
completed and opened the domed driving range in January 1995 and the outdoor
range and other amenities in July 1995.

The Utica Golf Center

On December 7, 1994, the Company entered into a long-term lease for
approximately 18 acres of land in Utica, New York on which there was an
existing golf center. The Utica golf center was opened in March 1995.

The Greenville Golf Center

On May 1, 1995, the Company acquired Pelham Enterprises, Inc. ("Pelham"),
an entity that owned a 24-acre golf center in Greenville, South Carolina. The
purchase price consisted of: (i) $512,000 in cash to satisfy certain debts of
Pelham, all of which was derived from the Company's line of credit with
Chemical Bank, (ii) a promissory note in favor of the sole stockholder of
Pelham in the principal amount of $230,727 and (iii) 90,000 shares of Common
Stock of the Company, which as of May 1, 1995 had an aggregate market value
of $573,750, based on the last sale price of $6 3/8 per share as reported by
the Nasdaq National Market. The note and the $818,000 mortgage of the land
upon which the Greenville golf center is located, which bore interest at the
prime rate and 7.5% (as of May 1, 1995), respectively, were repaid using a
portion of the net proceeds of the Secondary Offering.

The Queensbury Golf Facility

On May 16, 1995, the Company acquired certain assets located in
Queensbury, New York, from Evergreen Bank, N.A. for $3.75 million in cash, of
which $750,000 was derived from the Company's line of credit with its primary
lender and $3.0 million was loaned to the Company by Orix USA Corporation and
secured by a mortgage on the property on which the Queensbury golf facility
is located. The acquired assets included (i) all of the real property used
and operated as the "Hiland Golf Club," consisting of a 200-acre, 18-hole
regulation golf course and clubhouse and (ii) certain equipment, fixtures and
personal property used in connection with the operation of Hiland Golf Club,
including the use of the name "Hiland Golf Club."

The Glen Allen Golf Center

On August 25, 1995, the Company consummated the purchase of RFC
Enterprises, Inc. ("RFC"), an entity that owned a golf center located on 10
acres in Glen Allen, Virginia (near Richmond). The purchase price consisted
of: (i) $454,000 in cash to satisfy certain debts of RFC, of which $4,000 was
derived from the Company's working capital and $450,000 was derived from the
Company's line of credit with its primary lender and (ii) 7,500 shares of
Common Stock of the Company (3,750 of which have been placed in escrow for
one year to satisfy indemnification claims of the Company, if any) which as
of August 25, 1995 had an aggregate market value of $131,250, based on the
last sale price of $17 1/2 per share as reported

<PAGE>

by the Nasdaq National Market. At August 25, 1995, the land upon which the
Richmond golf center is located was subject to a $170,000 mortgage, due
December 12, 1996, and bearing interest at 10% per annum. The mortgage was
repaid with a portion of the net proceeds from the Secondary Offering. Under
certain circumstances, the Company may have to pay additional consideration
if the market price of the Company's Common Stock is less than $10.00 per
share on August 25, 1997.

The Duluth Golf Center

On August 28, 1995, the Company consummated the purchase of 56 acres of
land in Duluth, Georgia (near Atlanta) on which it has begun construction of
a par-3 golf course adjacent to the existing driving range, which it intends
to complete by November 1996. The purchase price consisted of: (i) $500,000
in cash, all of which was derived from the Company's line of credit with its
primary lender, (ii) a mortgage note in the principal amount of $1.6 million,
bearing interest at the prime rate, payable on August 28, 2000, and (iii) a
promissory note in the principal amount of $1.0 million, due on August 28,
1997 in cash or Common Stock, at the Company's option, and bearing interest
at 8% per annum.

The Alpharetta Golf Center

On September 28, 1995, the Company consummated the purchase from Upper
Hembree Partners, L.P. of 26 acres of land in Alpharetta, Georgia (near
Atlanta) on which there is an existing golf center. The purchase price
consisted of: (i) 85,000 shares of the Common Stock of the Company (which as
of September 28, 1995 had an aggregate market value of approximately $1.52
million, based on the last sale price of $17 7/8 per share as reported by the
Nasdaq National Market), (ii) an option to purchase up to 8,500 shares of the
Company's Common Stock (which was subsequently reduced to an option for 8,280
shares of Common Stock, in accordance with the terms of the purchase
agreement) at an exercise price of $25.00 per share and (iii) $53,000 in
cash, all of which was derived from the Company's working capital. The option
expires on September 28, 2000. At September 28, 1995, the property was
subject to a $1.8 million mortgage, due November 1, 1996, and bearing
interest at 9.8% per annum. The Company also loaned the seller $35,000, which
loan was repaid in February 1996 by the transfer by the seller to the Company
of 2,200 shares of Common Stock, in accordance with the terms of the purchase
agreement.

The Valley View Golf Center

On November 8, 1995, the Company consummated the purchase from Golf
Masters Limited Partnership and Air Dome Limited Partnership of a five-acre
property in Valley View, Ohio (near Cleveland) (the "Valley View Golf
Center") on which there is a domed indoor driving range. The purchase price
consisted of: (i) 101,800 shares of the Common Stock of the Company, (33,934
of which have been placed in escrow for one year to satisfy indemnification
claims of the Company, if any), which as of November 8, 1995 had an aggregate
market value of approximately $1.4 million, based on the last sale price of
$14.00 per share as reported by the Nasdaq National Market, (ii) an option to
purchase up to 10,000 shares of the Company's Common Stock at an exercise
price of $25.00 per share and (iii) $299,000 in cash, all of which was
derived from funds made available to the Company by its primary lender. The
option expires on November 8, 2000. At November 1, 1995, the property was
subject to a $342,000 mortgage, due September 1997, and bearing interest at
the greater of 8% per annum and 1% over National City Bank's base rate. The
mortgage was repaid using a portion of the net proceeds of the Secondary
Offering. On November 8, 1995, the Company entered into a 15-year lease with
two five-year renewal options for 14 acres of land adjacent to the five-acre
Valley View property. The Company has commenced construction of an outdoor
driving range, miniature golf course and short game practice area on such
leased property.

The El Segundo and Gilroy Golf Facilities

On November 8, 1995, the Company acquired TPT. TPT operates a combination
Golden Bear Golf Center and golf course facility in El Segundo, California
and a combination golf center and par-3 golf course facility in Gilroy,
California pursuant to a management contract and a lease, respectively. The
purchase price consisted of $4.0 million (payable in the form of a note which
became due and was paid

<PAGE>

upon the closing of the Secondary Offering) and up to $2.0 million of
additional purchase price payable upon the achievement of certain operating
income targets. The contingent purchase price in respect of the year ending
December 31, 1996 will be determined by multiplying $1.0 million by the
lesser of (i) 1.0 and (ii) the number obtained by dividing the OIBITA (as
defined below) during such year by $500,000 (the "1996 Multiplier"). The
contingent purchase price in respect of the year ending December 31, 1997
will be determined by multiplying $1.0 million by the lesser of (i) 1.0 and
(ii) the number obtained by dividing the OIBITA during such year by $1.0
million (the "1997 Multiplier"). If the 1997 Multiplier is higher than the
1996 Multiplier, then the former TPT shareholders will also be entitled to
receive an amount equal to (a) the amount which they would have been entitled
to receive in respect of 1996 if the 1996 Multiplier had been as high as the
1997 Multiplier less (b) the contingent amount, if any, that they received in
respect of 1996.

For purposes of the preceding paragraph, "OIBITA" for any year shall mean
the operating income before interest, taxes and depreciation or amortization,
determined in accordance with generally accepted accounting principles
consistently applied, generated by all golf facilities owned by the Company
and located west of the Mississippi River. Dominic Chang and Krishnan Thampi,
officers and directors of the Company, owned 65% and 5% of TPT, respectively,
and received 65% and 5% of the consideration, respectively, from the
acquisition of TPT. The Company received an opinion from the investment
banking firm of Houlihan Lokey Howard & Zukin ("Houlihan Lokey") that the
consideration to be paid by the Company for TPT was fair from a financial
point of view. The acquisition of TPT was approved unanimously by the
disinterested members of the Company's Board of Directors. In addition to the
opinion of Houlihan Lokey, such Board members also considered a number of
factors, including (i) the elimination of potential conflicts of interest,
(ii) the opportunity to expand operations to the West Coast, (iii) the
location and prospects of the golf facilities operated by TPT, (iv) the cost
of establishing golf facilities comparable to those operated by TPT, (v) the
operating history of TPT compared with the operating history of the Company's
East Coast facilities at a comparable stage of development, (vi) the
potential improvement in TPT's performance due to the elimination of
duplicative administrative expenses, (vii) TPT's current financial condition
and (viii) the opportunity to acquire TPT for less than the Company believed
it would pay if it exercised its option to purchase TPT in 1998. Such option
gave the Company the right to acquire TPT, commencing on January 1, 1998 or
earlier if TPT had at least $1.0 million of net income, for 12.5 times TPT's
after tax income, payable in Common Stock. See "Certain Relationships and
Related Transactions."

The Henrietta Golf Center

On October 10, 1995, the Company entered into a 25-year lease with three
five-year renewal options for 28 acres of land in Henrietta, New York on
which the Company is constructing a Golden Bear Golf Center. Pursuant to the
lease, the rental cost will be $110,000 per year for the first five years of
the lease, $125,000 per year for the sixth through tenth year of the lease
and thereafter would increase 15% every five years. The Company opened the
domed portion of the golf center in January 1996.

The Mesa Golf Center

On February 20, 1996, the Company consummated the purchase from Rowley
Properties Limited Partnership, an Arizona limited partnership, of a 39-acre
parcel of property in Mesa, Arizona on which there is an existing golf
recreational facility, including a par-3 golf course.

The Virginia Beach Golf Facility

On March 6, 1996, the Company acquired from Owl's Creek Golf Center, Inc.
its long-term leasehold interests in an 81-acre parcel of property in
Virginia Beach, Virginia on which there is an existing golf recreational
facility, including a par-3 golf course.

The Flemington Golf Center

On March 7, 1996, the Company consummated the purchase from Flemington
Equities VII of a 17-acre parcel of property in Flemington, New Jersey on
which there is an existing golf recreational

<PAGE>

facility. Concurrently, the Company consummated the purchase from Flemington
Golf and Sports Center, LLC of certain equipment, fixtures and other property
used in connection with the operation of this golf center.

The Yorktown Heights Golf Center

On April 8, 1996, the Company consummated the purchase from 202 Golf
Associates, Inc., of approximately 14 acres of land in Yorktown Heights, New
York on which there is an existing golf recreational facility. The Company
intends to build a miniature golf course and batting cages on this property.

The Indian River Golf Center

On May 20, 1996, the Company consummated the purchase from Indian River
Golf-O-Rama, Inc. of its long-term leasehold interests in a 14-acre parcel of
property in Indian River, Virginia (near Norfolk) on which there is an
existing golf recreational facility.

The Fairfield Golf Center

On June 7, 1996, the Company consummated the purchase from three
individuals of K.G. Golf, Inc., an entity that has a long term leasehold
interest in a 24-acre parcel of property in Fairfield, Ohio (near Cincinnati)
on which there is an existing golf recreational facility.

The Tucson Golf Center

On June 7, 1996, the Company consummated the purchase from four
individuals of an 18-acre parcel of property in Tucson, Arizona on which
there is an existing golf recreational facility.

The St. Louis Golf Center

On June 7, 1996, the Company consummated the purchase from Tree Court Golf
& Recreational Complex, Inc. of its long-term leasehold interests in a
42-acre parcel of property in St. Louis, Missouri on which there is an
existing golf recreational facility, including a par-3 golf course.

The West Palm Beach Golf Center

On June 10, 1996, the Company consummated the purchase from W.A.G.N.
Partners of a 32-acre parcel of property in West Palm Beach, Florida on which
there is an existing golf recreational facility, including a par-3 golf
course.

The Company acquired the Mesa, Arizona, the Virginia Beach, Virginia, the
Indian River, Virginia, the Yorktown Heights, New York, the Flemington, New
Jersey, the Tucson, Arizona, the Fairfield, Ohio, the St. Louis, Missouri and
the West Palm Beach, Florida golf facilities for the aggregate purchase price
of approximately $18.1 million, consisting of cash, Common Stock (based on
the value of the Common Stock as reported by the Nasdaq National Market on
the date of the respective acquisition), notes or assumption of liabilities,
or a combination thereof. All of these acquisitions were consummated after
the Secondary Offering was completed in December 1995.

OTHER POTENTIAL SITES

On November 21, 1995, the Company was orally advised by the City of
Seattle, Washington that it had selected the Company's bid to negotiate a
20-year lease with the City for a 40-acre parcel of land located in downtown
Seattle. The Company intends to construct and operate a Golden Bear Golf
Center on this property, including an 80 station two-tier design driving
range, par-3 golf course, miniature golf course and clubhouse with a
full-line pro shop and restaurant. The lease is subject to the successful
negotiation and execution of definitive agreements with the City of Seattle
and the Company's right to

<PAGE>

develop this golf facility as a Golden Bear Golf Center is subject to
negotiation and execution of definitive agreements with the Licensor. There
can be no assurance that a lease with the City of Seattle or an agreement
with the Licensor will be executed with respect to the location.

The Company has engaged in negotiations to purchase, for approximately
$4.8 million in cash, 35 acres of land in Fairfield, Connecticut, on which
the Company intends to build a golf center. Although the Company had entered
into a letter of intent relating to this transaction, this letter of intent
expired while the Company was awaiting the results of an environmental study
of the property being conducted by an environmental consulting firm. If the
environmental report is satisfactory, the Company intends to continue such
negotiations. Although the Company is conducting the environmental study
referred to above and continues to discuss the possibility of acquiring the
land, the owner of the property has no obligation to sell it to the Company
and there can be no assurance that this purchase will be consummated on the
terms contemplated by the original letter of intent or at all.

The Company is in an advanced stage of negotiations to purchase a
California corporation which owns a golf recreational facility located on 25
acres of leased land in San Jose, California (the "San Jose Corp."). The
consideration is expected to consist of cash and promissory notes convertible
into shares of Common Stock at the option of the holder. The acquisition of
the San Jose Corp. is subject to the negotiation and execution of definitive
agreements with the owners of the San Jose Corp. and there can be no
assurance that this purchase will be consummated on the terms currently
contemplated or at all. The proposed acquisition would not be deemed
significant under applicable accounting rules and, accordingly, would not
require separate financial statements to be included in this Prospectus.

The Company continually seeks to acquire or lease new golf facilities and
has had discussions with a number of parties as to the acquisition or lease
of golf facilities or land. Except as described above, the Company has no
commitments or agreements to acquire or lease golf facilities or land.

GOLDEN BEAR LICENSE

Under the License Agreement, the Company is licensed to use the trademark
"Golden Bear" and related trademarks and tradenames in the operation of
certain of its golf facilities. The License Agreement expires in August 2002,
subject to earlier termination under certain circumstances. Unless terminated
by written notice 90 days prior to the end of its initial term or renewal
term, as the case may be, it will be automatically extended for additional
five-year periods. The License Agreement is also terminable if the current
directors of the Company, at any time, constitute less than 50% of the
Company's directors.

The Company paid the Licensor a one-time fee of up to $25,000 facility
development fee for each Golden Bear Golf Center and, in most cases, pays the
Licensor an ongoing royalty fee ranging between 3% and 5% of Adjusted Gross
Revenues, as defined in the License Agreement, subject to a minimum
guaranteed royalty of at least $50,000 per year per site. For two of the
sites, the Company pays a fixed annual fee ranging between $35,000 and
$45,000, however, at one of such sites this amount is subject to increase for
increases in the consumer price index. The value of the "Golden Bear" name is
dependent, in part, upon the continued popularity of Jack Nicklaus.
Accordingly, the occurrence of any event which diminishes the reputation of
Mr. Nicklaus and the related "Golden Bear" symbol could adversely affect the
Company's Golden Bear Golf Centers.

On September 13, 1995, following discussion between the Company and the
Licensor, the Company's exclusive rights to open Golden Bear Golf Centers in
defined territories were terminated and the Company gained the right to
develop golf centers under its own name in such territories. The Company has
no right to open additional Golden Bear Golf Centers. In September 1995, the
Licensor also agreed to the Company's proposal to cure an alleged default
under the License Agreement (principally by making certain capital
improvements to its Golden Bear Golf Centers by November 1996). Failure by
the Company to take the agreed upon actions by such date could result in
termination of the License Agreement. Termination of the License Agreement
could adversely affect the Company's Golden Bear Golf Centers and, possibly,
the Company.

<PAGE>

Most of the Company's recently acquired golf centers are not intended to
be Golden Bear Golf Centers. Golf centers operated by the Company under names
other than "Golden Bear" do not have the benefit of the goodwill generated by
such name and, accordingly, may not perform as well as Golden Bear Golf
Centers. The Company believes that the disadvantages of operating golf
centers under another name would be at least partially offset by the
elimination of the obligation to pay royalties and other fees for the use of
the "Golden Bear" name as well as the elimination of certain capital and
operating expenditures required by the Licensor.

COMPETITION

The golf center industry is highly competitive and includes competition
from other golf centers, traditional golf ranges, golf courses and other
recreational pursuits. The Company may face imitation and other forms of
competition and the Company cannot prevent or restrain others from utilizing
a similar operational strategy. Until September 1995, the Company had the
exclusive right to open Golden Bear Golf Centers in certain territories. As a
result of a recent change in the License Agreement, the Licensor now is
permitted to establish, or license others to establish, Golden Bear Golf
Centers that compete with the Company's golf centers, including its Golden
Bear Golf Centers. Golden Bear Golf, Inc., an affiliate of the Licensor, has
recently publicly indicated that it intends to focus its efforts on the
direct ownership and operation of golf facilities through the acquisition or
development of additional golf centers and to pursue new licensees and enter
into additional territorial development agreements only in locations and
territories where it and its affiliates do not intend to acquire or develop
their own facilities. The Company's pro shop business faces competition from
pro shops at golf courses and other golf centers, specialty retailers devoted
to golf equipment and apparel, sporting goods stores and department stores.
One advantage that the Company's pro shops have over certain of its
competitors is that the customer may try golf clubs on the driving ranges
before purchasing them. Many of the Company's competitors and potential
competitors have considerably greater financial and other resources,
experience and customer recognition than does the Company.

EMPLOYEES

As of April 30, 1996, the Company had 406 employees, of which 169 were
full-time employees and 237 of which were part-time employees. Each golf
center is staffed with approximately 10 full-time employees, including up to
four full-time PGA-certified professionals who instruct golfers of all skill
levels, and approximately 13 to 20 part-time employees depending on the
season. None of the employees are represented by a collective bargaining
agreement. The Company has never experienced a strike or work stoppage. The
Company believes that its relationship with its employees is good.

GOVERNMENTAL REGULATION

Operations at the Company's golf facilities involve the use and limited
storage of various hazardous materials such as pesticides, herbicides, motor
oil, paint and gasoline. Under various federal, state and local laws,
ordinances and regulations (which are administered, in the case of federal
laws and regulations, primarily by the United States Environmental Protection
Agency), an owner or operator of real property is generally liable for the
costs of removal or remediation of hazardous substances that are released on
or in its property regardless of whether the property owner or operator knew
of, or was responsible for, the release of hazardous materials. The Company
has not been informed by any governmental authority or instrumentality of any
non-compliance or violation of any environmental laws, ordinances or
regulations. However, the Company is aware of one notice of violation issued
by the DEC against the owner of the land leased by the Company in Elmsford,
New York alleging that certain hazardous materials were placed on the site.
The owner has taken remedial action and the Company does not believe it will
be affected by the alleged violation. To date, the Company has not incurred
material costs of remediation in relation to any of its golf facilities and
the Company knows of no material environmental liability to which it may
become subject. Although the Company usually hires environmental consultants
to conduct environmental studies, including invasive procedures such as soil
sampling or ground water analysis, on golf facilities it owns, operates or
intends to acquire, in some cases only limited invasive procedures are
conducted on

<PAGE>

such properties. Even when invasive procedures are used, environmental
studies may fail to discover all potential environmental problems.
Accordingly, there may be potential environmental liabilities or conditions
of which the Company is not aware.

The Company is subject to the Fair Labor Standards Act and various state
laws governing such matters as minimum wage requirements, overtime and other
working conditions and citizenship requirements. The restaurants at the
Company's golf facilities in Queensbury, New York, Virginia Beach, Virginia
and Gilroy, El Segundo, California serve alcoholic beverages and are subject
to certain state "dram-shop" laws, which provide a person injured by an
intoxicated individual the right to recover damages from an establishment
that wrongfully served such beverages to the intoxicated individual.

PROPERTIES

The Company maintains its executive offices in approximately 5,292 square
feet of space in Melville, New York pursuant to a lease expiring in October
1999. The Company owns the land, subject to mortgages, on which its
Queensbury, New York golf course (approximately 200 acres), its Yorktown
Heights, New York golf center (approximately 14 acres), its Flemington, New
Jersey golf center (approximately 17 acres), its Greenville, South Carolina
golf center (approximately 24 acres), its Duluth, Georgia (near Atlanta) golf
center (approximately 56 acres), its Alpharetta, Georgia (near Atlanta) golf
center (approximately 26 acres), its Glen Allen, Virginia (near Richmond)
golf center (approximately 10 acres), its Mesa, Arizona golf center
(approximately 39 acres), its Valley View, Ohio (near Cleveland) golf center
(approximately five acres), its Tucson, Arizona golf center (approximately 18
acres) and its West Palm Beach, Florida golf center (approximately 32 acres)
are located. The Company also leases the land on which ten of its golf
facilities are located as well as the land adjacent to its Valley View, Ohio
golf center on which it has commenced construction of additional golf
facilities. None of such leases are with affiliates of the Company.

After giving effect to renewal options, none of the Company's current
leases for its golf centers or facilities is scheduled to expire until 2007.
However, the leases may be terminated prior to their scheduled expiration
should the Company default in its obligations thereunder. The termination of
any of the Company's leases could have an adverse effect on the Company. If
any of the Company's leases were to be terminated, there can be no assurance
that the Company would be able to enter into leases for comparable properties
on favorable terms, or at all.

The Company manages the Douglaston, New York golf center pursuant to a
management agreement with the City of New York, which provides for annual
payments to the City of the greater of $900,000 or 50% of the revenues from
this golf center. The City owns the land on which such facility is located.
The Company's management agreement with the City terminates on December 31,
2006, but is terminable by the City at will.

The Company manages the El Segundo, California golf course and golf center
pursuant to a management agreement with the City of El Segundo which provides
for monthly payments to the Company of $10,417, subject to annual adjustments
based on the Consumer Price Index, and an annual bonus based on the
facility's annual gross revenue, which bonus may not exceed the total amount
of monthly fees for such operating year. The City of El Segundo owns the land
on which the facility is located. Such management agreement terminates on
June 30, 1998, unless earlier terminated by either party, with or without
cause, as of the end of any operating year during the term of the agreement,
upon at least 90 days prior written notice.

LEGAL PROCEEDINGS

The Company knows of no material litigation or proceeding pending,
threatened or contemplated to which the Company is or may become a party.

<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the
executive officers and directors of the Company:

NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dominic Chang(1)(2) .. 46 Chairman of the Board, President and Chief
Executive Officer
Krishnan P. Thampi ... 47 Chief Financial Officer, Chief Operating Officer,
Executive Vice President, Secretary, Treasurer and
Director
Richard W. Hasslinger 46 Vice President--Regional Manager
Garrett J. Kelleher .. 59 Vice President--Finance
Robert J. Krause ...... 50 Vice President--Strategic Planning and Development
Rodger P. Potocki .... 52 Vice President--Regional Manager
Margaret Santorufo ... 30 Controller
James Ganley(1)(3) ... 60 Director
Jimmy C.M. Hsu(2) .... 46 Director
Yupin Wang(1)(2)(3) .. 63 Director
</TABLE>

- ------------

(1) Member of Audit Committee

(2) Member of Compensation Committee

(3) Member of Stock Option Committee

Dominic Chang has been the Chairman of the Board, President and Chief
Executive Officer of the Company and its predecessors since 1991. From 1989
to 1992, Mr. Chang was a Senior Vice President and Sector Executive for
Corporate Real Estate and General Services for The Bank of New York. He was
responsible for the acquisition, management and disposition of The Bank of
New York's properties worldwide, facilities design and construction, security
and centralized administrative services. Mr. Chang previously had over 15
years banking experience with Bankers Trust and Irving Trust Company. He has
a Masters Degree in Industrial Engineering from New York University and a
Bachelors Degree from the State University of New York at Stonybrook.

Krishnan P. Thampi has been the Chief Financial Officer, Executive Vice
President, Chief Operating Officer, Secretary and Treasurer of the Company
and its predecessors since 1992. He became a director of the Company in 1994.
From 1989 to 1992, he was a Senior Vice President for Administrative Services
at The Bank of New York. From 1988 to 1989, he was a Senior Vice President
for Systems Services at Irving Trust Company. He also performed controller
and personnel management functions while at Irving Trust Company. Mr. Thampi
has a Masters Degree in Business Administration from Columbia University and
a Bachelors Degree in Engineering from McGill University.

Richard W. Hasslinger joined the Company's predecessor in November 1992 as
a Site Manager and has been Vice President-Regional Manager for the New York
City region since January 1995. From May 1992 to November 1992, he served as
a consultant to the Company. From May 1988 until May 1992, he was Vice
President and Division Head for Facilities Management at The Bank of New
York. His responsibilities there included leasing and acquisitions, design
and construction, and property management. From 1973 to 1988, he managed
several operational activities at Irving Trust Company. Mr. Hasslinger has a
Bachelors Degree in Business Administration from Hope College.

Garrett J. Kelleher, a certified public accountant, joined the Company's
predecessor in July 1993 as a Site Manager and served as Controller from
January 1994 to June 1995. He has been the Vice President--Finance since July
1995. From 1980 to September 1990, Mr. Kelleher was Group Controller for Bank
Operations at The Bank of New York. He has held a variety of accounting and
financial

<PAGE>

management positions at The Bank of New York, and previously in public
accounting. Mr. Kelleher acted as an independent consultant from September
1990 to July 1993. Mr. Kelleher has a Masters Degree in Finance from St.
Johns University and a Bachelors Degree in Business Administration from
Manhattan College.

Robert J. Krause joined the Company's predecessor in June 1993 and served
as a Site Manager until January 1995, when he became the Vice
President--Strategic Planning and Development. From 1983 to 1993, Mr. Krause
was Vice President of Administrative Services for The Bank of New York. From
1978 to 1983, he held product development, marketing and strategic planning
responsibilities at Irving Trust Company. Mr. Krause has a Bachelors Degree
in Electrical Engineering from the University of Oklahoma.

Rodger P. Potocki was the Northern District Director for the Company from
September 1994 until he was appointed Vice President--Regional Manager,
Northern Region, in February 1995. From October 1979 to September 1994, he
was Executive Vice President of Oneida County Industrial Development
Corporation, a non-profit development corporation ("Oneida Industrial"). At
Oneida Industrial, Mr. Potocki was responsible for new investment and job
creation projects in Oneida County, New York, and implemented New York
State's first direct loan fund for new businesses. Previously, he served as
Director of Planning and Development for the City of Rome, New York. Mr.
Potocki has a Masters Degree in Political Science from the Graduate School of
Public Affairs in Albany, New York and a Bachelors Degree from Syracuse
University.

Margaret M. Santorufo joined the Company as Controller in June 1995. From
January 1990, until she joined the Company in 1995, she was an audit
supervisor with Richard A. Eisner & Company, L.L.P. Ms. Santorufo received a
Bachelors Degree in Accounting from St. John's University.

James Ganley has been a director of the Company since 1994. From October
1988 until his retirement in 1990, Mr. Ganley was a Senior Executive Vice
President of The Bank of New York. Mr. Ganley was a member of the Senior
Management Steering Committee at The Bank of New York and was directly
responsible for the merger of the systems, products and operations of The
Bank of New York with Irving Trust Company. Prior to 1988, Mr. Ganley had
held various executive positions at Irving Trust Company and was Group
Executive responsible for Banking Operation activities, which comprised 13
divisions. He was also a member of Irving Trust Company's Senior Executive
Management Committee. Mr. Ganley received a Bachelors Degree in Economics
from New York University and was a participant in Harvard University's
program for management development.

Jimmy C.M. Hsu has been a director of the Company since 1994. Mr. Hsu is
currently the Vice Chairman and a director of Russ Berrie and Company, Inc.
("Russ Berrie"), a New York Stock Exchange listed company which manufactures
and distributes toys and gifts to retail stores; however Mr. Hsu has
announced his resignation from Russ Berrie, effective July 31, 1996. Mr. Hsu
joined Russ Berrie in 1979 as Vice President, Far East Operations. In 1987,
he was appointed Senior Vice President and Director of World-Wide Marketing
of Russ Berrie. In 1991, he was elected to the board of Russ Berrie and was
appointed the position of Executive Vice President. In 1995, Mr. Hsu became
Vice Chairman of Russ Berrie.

Yupin Wang has been a director of the Company since 1994. Mr. Wang is
currently the President of W W International, a worldwide management
consulting firm. Prior to establishing W W International in 1992, Mr. Wang
was a member of the executive management team of International Business
Machines Corp. ("IBM") from 1962 to 1992. He had held various positions at
IBM, including Director of Marketing Operations, Director of Marketing
Strategy and Director of Customer Satisfaction. As Director of Customer
Satisfaction, he established IBM's Customer Satisfaction Management System,
which contributed to IBM Rochester winning the Malcolm Baldrige Award. Mr.
Wang received a Bachelors Degree in Economics from National Taiwan University
and Masters Degrees from Oklahoma State University and New York University.

Directors are currently elected annually. Vacancies and newly-created
directorships resulting from any increase in the number of authorized
directors will be filled by a majority vote of the directors then in office.
Officers are elected by, and serve at the pleasure of, the Board of
Directors.

<PAGE>

The Company's employee directors do not receive any additional
compensation for their services as directors. Non-employee directors do not
receive a fee for serving as such, but are reimbursed for expenses. However,
each non-employee director received options to purchase 5,000 shares of
Common Stock upon adoption of the 1994 Stock Option Plan and receives
additional options annually. See "Stock Option Plans" below.

EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation for
services in all capacities paid to Dominic Chang, the Company's Chairman of
the Board, President and Chief Executive Officer, during 1993, 1994 and 1995.
No executive officer received compensation exceeding $100,000 during 1993,
1994 or 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- ------------------------------------------
NAME AND RESTRICTED SECURITIES LONG-TERM
PRINCIPAL OTHER ANNUAL STOCK UNDERLYING INCENTIVE PLAN ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
- ----------------- ------ --------- ------- -------------- ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DOMINIC CHANG, 1993 $65,000 -- $9,000(1) -- -- -- --
Chairman of the
Board, Chief 1994 $65,000 -- $9,000(1)(2) -- -- -- --
Executive
Officer and
President 1995 $65,000 -- $9,000(1) -- 10,000(3) -- --
</TABLE>

- ------------

(1) Represents amounts paid to lease a car used by Mr. Chang.

(2) Does not include a distribution of $310,000 made to reimburse Mr. Chang
for federal and state income taxes payable by him based on
undistributed earnings of the Company's subsidiaries which elected to
be treated as S Corporations pursuant to Section 1362(a) of the
Internal Revenue Code, through the date of the Company's initial public
offering of its securities.

(3) Stock options to purchase 10,000 shares of Common Stock were granted in
March 1995 at $6.75 per share (the fair market value of the Common
Stock on the date of such grant); these options became exercisable in
March 1996.

The following table sets forth certain information concerning options
granted to the Chief Executive Officer during the fiscal year ended December
31, 1995.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE
NAME GRANTED(1) FISCAL YEAR ($/SHARE) EXPIRATION DATE
- -------------- ------------ --------------- ------------- ---------------
Dominic Chang 10,000 6.5% $6.75 MARCH 8, 2005

- ------------

(1) All options were granted at an exercise price equal to the fair market
value of the Common Stock on the date of grant.

<PAGE>

AGGREGATED OPTION EXERCISES DURING THE FISCAL YEAR ENDED DECEMBER 31, 1995
AND FISCAL YEAR END OPTION VALUES

The following table sets forth certain information concerning the number
and value of securities underlying exercisable and unexercisable stock
options as of the fiscal year ended December 31, 1995 by the Chief Executive
Officer. No options were exercised by the Chief Executive Officer during the
fiscal year ended December 31, 1995.

FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END (1)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------- ------------- --------------- ------------- ---------------
Dominic Chang -- 10,000 -- $115,000

- ------------

(1) The value of unexercised options is determined by multiplying the
number of options held by the difference between the closing price of
the Common Stock of $18.25 at December 31, 1995, as reported by the
Nasdaq National Market and the exercise price of the options granted.

STOCK OPTION PLANS

On July 19, 1994, the Board of Directors of the Company and stockholders
of the Company adopted the Company's 1994 Stock Option Plan (the "Plan"). The
Plan provides for the grant of options to purchase up to 300,000 shares of
Common Stock to employees, officers, directors and consultants of the
Company. Options may be either "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
or non-qualified options. Incentive stock options may be granted only to
employees of the Company, while non-qualified options may be issued to
non-employee directors, consultants and others, as well as to employees of
the Company. On March 6, 1996, the Board of Directors of the Company adopted,
and on June 7, 1996, the stockholders approved, the Company's 1996 Stock
Incentive Plan (the "New Plan"). The New Plan is identical to the Plan,
except that the New Plan provides (i) for the grant of options to purchase up
to 500,000 shares of Common Stock and (ii) an automatic grant of
non-qualified stock options to purchase 10,000 shares to each non-employee
director upon his election or appointment to the Board of Directors and
annual grants (commencing on the date the New Plan was approved by
stockholders) to each non-employee director of non-qualified stock options to
purchase 10,000 shares of Common Stock at the fair market value of the Common
Stock on the date of the grant.

The Plan is administered by the Stock Option Committee, which determines,
among other things, those individuals who receive options, the time period
during which the options may be partially or fully exercised, the number of
shares of Common Stock issuable upon the exercise of each option and the
option exercise price. The Plan also provided for an automatic grant of
non-qualified stock options to purchase 5,000 shares of Common Stock to each
non-employee director upon his election or appointment to the Board of
Directors and annual grants of non-qualified stock options to purchase 2,000
shares of Common Stock at the fair market value of the Common Stock on the
date of such grant. Effective on June 7, 1996, such automatic grants ceased
and were replaced by the automatic grants under the New Plan.

The exercise price per share of Common Stock subject to an incentive
option may not be less than the fair market value per share of Common Stock
on the date the option is granted. The per share exercise price of the Common
Stock subject to a non-qualified option may be established by the Board of
Directors. The aggregate fair market value (determined as of the date the
option is granted) of Common Stock for which any person may be granted
incentive stock options which first become exercisable in any calendar year
may not exceed $100,000. No person who owns, directly or indirectly, at the
time of the granting of an incentive stock option to such person, 10% or more
of the total combined voting power of all classes of stock of the Company (a
"10% Stockholder") shall be eligible to receive any incentive stock options
under the Plan unless the exercise price is at least 110% of the fair market
value of the shares of Common Stock subject to the option, determined on the
date of grant. Non-qualified options are not subject to such limitation.

<PAGE>

No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution, and, during the lifetime of an
optionee, the option will be exercisable only by the optionee. In the event
of termination of employment other than by death or disability, the optionee
will have no more than three months after such termination during which the
optionee shall be entitled to exercise the option, unless otherwise
determined by the Stock Option Committee. Upon termination of employment of
an optionee by reason of death or permanent disability, such optionee's
options remain exercisable for one year thereafter to the extent such options
were exercisable on the date of such termination.

Options under the Plan must be issued within 10 years from the effective
date of the Plan which is July 19, 1994. Incentive stock options granted
under the Plan cannot be exercised more than 10 years from the date of grant.
Incentive stock options issued to a 10% Stockholder are limited to five-year
terms. All options granted under the Plan provide for the payment of the
exercise price in cash or by delivery to the Company of shares of Common
Stock already owned by the optionee having a fair market value equal to the
exercise price of the options being exercised, or by a combination of such
methods. Therefore, an optionee may be able to tender shares of Common Stock
to purchase additional shares of Common Stock and may theoretically exercise
all of such optionee's stock options with no additional investment other than
the purchase of the original shares.

Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance
under the Plan.

To date, options to purchase 294,000 shares of Common Stock have been
granted under the Plan (of which options to purchase 25,075 shares have been
exercised), and options to purchase 30,000 shares of Common Stock have been
granted under the New Plan. In addition, on March 8, 1995, Messrs. Chang and
Thampi were each granted options outside of the Plan to purchase 10,000
shares of Common Stock at $6.75 per share (the fair market value of the
Common Stock on the date of such grant) in connection with an amendment to
their respective employment agreements. These options became exercisable in
March 1996. In addition, on March 7, 1996, various employees of the Company
were granted options outside of both the Plan and the New Plan to purchase an
aggregate of 53,500 shares of Common Stock at $19.875 (the fair market value
of the Common Stock on the date of such grant), which options vest ratably
over three years.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements, each expiring on
December 31, 1999, with each of Mr. Chang and Mr. Thampi, pursuant to which
each will devote at least 95% of his business time to the affairs of the
Company. Pursuant to his employment agreement, Mr. Chang received a base
salary of $65,000 in 1995 and will receive a base salary of $120,000 in 1996,
$140,000 in each of 1997 and 1998, and $160,000 in 1999. Such base salaries
are subject to additional increase within the discretion of the Board of
Directors which will take into account, among other things, the performance
of the Company and the performance, duties and responsibilities of Mr. Chang.
Mr. Chang will also receive use of a Company-leased automobile. The
employment agreement also provides that Mr. Chang will not compete with the
Company for two years after the termination of his employment.

Pursuant to his employment agreement, Mr. Thampi received a base salary of
$60,000 in 1995 and will receive a base salary of $100,000 in 1996, $120,000
in each of 1997 and 1998 and $140,000 in 1999. Such base salaries are subject
to additional increase within the discretion of the Board of Directors which
will take into account, among other things, the performance of the Company
and the performance, duties and responsibilities of Mr. Thampi. Mr. Thampi
will also receive use of a Company-leased automobile. The employment
agreement also provides that Mr. Thampi will not compete with the Company for
two years after the termination of his employment.

<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of May 1, 1996
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each director and the chief executive officer of the
Company and (iii) all directors and executive officers of the Company as a
group. Except as otherwise indicated and subject to community property laws
where applicable, the persons named in the table below have sole voting and
dispositive power with respect to the shares of Common Stock shown as
beneficially owned by them.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
OF THE COMMON STOCK OF COMMON STOCK
BEFORE THE OFFERING AFTER THE OFFERING(1)
--------------------------------- -------------------------------------
PERCENTAGE OF PERCENTAGE OF
NAME AND ADDRESS OUTSTANDING OUTSTANDING
OF BENEFICIAL OWNER NUMBER SHARES NUMBER SHARES
- ------------------------------ ---------------- --------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Dominic Chang (2) ............. 2,822,750(5) 32.8% 2,822,750(5)(6) 24.3%
Janus Capital Corporation (3) 1,015,875 11.8% 1,015,875 8.8%
George Soros (4) .............. 500,000 5.8% 500,000 4.3%
Jimmy C.M. Hsu (2) ............ 191,084(7)(8) 2.2% 191,084(7)(8)(9) 1.6%
Krishnan P. Thampi (2) ........ 181,950(10) 2.1% 181,950(10)(11) 1.6%
James Ganley (2) .............. 15,834(8) * 15,834(8) *
Yupin Wang (2) ................ 7,334(8) * 7,334(8) *
All directors and executive
officers of the Company
as a group (ten persons) .... 3,233,286(5)(7) 37.3% 3,233,286(5)(7) 27.7%
(10)(12) (10)(12)(13)
</TABLE>

- ------------

*Less than 1%.

(1) If the Underwriters' over-allotment option is exercised in full, the
Selling Stockholders, who are Dominic Chang, Jimmy C. M. Hsu, Krishnan P.
Thampi, Upper Hembree Partners, L.P. and Air Dome Limited Partnership and
Golf Masters Limited Partnership will sell an aggregate of 450,000 shares of
Common Stock. Following are the positions, offices or other material
relationship (other than as a stockholder) which each of the Selling
Stockholders has had within the past three years with the Company: Dominic
Chang (officer/director); Jimmy C.M. Hsu (director); Krishnan P. Thampi
(officer/director); Upper Hembree Partners, L.P. (the seller of the
Alpharetta Golf Center in September 1995); Air Dome Limited Partnership and
Golf Masters Limited Partnership (the sellers of the Valley View Golf Center
in November 1995). Prior to the Offering, Upper Hembree Partners, L.P.
beneficially owned 91,080 shares of Common Stock (1.1% of the outstanding
Common Stock), which amount includes 8,280 shares of Common Stock issuable
upon exercise of options which are currently exercisable. Prior to the
Offering, Air Dome Limited Partnership and Golf Masters Limited Partnership
beneficially owned 86,800 shares of Common Stock (1.0% of the outstanding
Common Stock), which amount includes 10,000 shares of Common Stock issuable
upon exercise of options which are currently exercisable. If the
Underwriters' over-allotment option is exercised in full, (i) Upper Hembree
Partners, L.P. will sell 33,718 shares of Common Stock and after the
Offering will beneficially own 57,362 shares of Common Stock, representing
0.5% of the outstanding Common Stock, and (ii) Air Dome Limited Partnership
and Golf Masters Limited Partnership will sell 42,866 shares of Common Stock
and after the Offering will beneficially own 43,934 shares of Common Stock,
representing 0.4% of the outstanding Common Stock. See "Underwriting."

(2) The address of such stockholder is: c/o Family Golf Centers, Inc.,
225 Broadhollow Road, Melville, New York 11747.

<PAGE>

(3) The address of Janus Capital Corporation ("JCC"), Janus Enterprise Fund
("JEF") and Mr. Thomas H. Bailey is: 100 Fillmore Street, Suite 300, Denver,
Colorado 80206. Information regarding the aggregate number of shares of
Common Stock beneficially owned by JCC, a registered investment advisor,
JEF, an investment company, and Mr. Thomas H. Bailey and their investment
and voting power with respect to such shares is based on the information as
reported in the Schedule 13G filed by these persons, dated January 9, 1996.
Mr. Thomas H. Bailey owns approximately 12.2% of JCC and may be deemed to
exercise control over JCC as a result. As a result of JCC's role of advisor
to various entities, including JEF, JCC may be deemed to be the beneficial
owner of the 1,015,875 shares of Common Stock held by such accounts managed
by it, including JEF. Mr. Bailey and JCC do not have the right to receive
dividends from, or the proceeds from the sale of, any such shares owned by
the accounts managed by JCC and each disclaims beneficial ownership of the
shares held by the accounts JCC manages (including JEF).

(4) George Soros ("Soros") holds these shares of Common Stock in his capacity
as the sole proprietor of the investment advisory firm, Soros Fund
Management ("SFM"), which holds the shares for the account of Quantum
Partners, LDC ("Quantum"), a Cayman Islands company. The address of Soros
and SFM is: 888 Seventh Avenue, 33rd Floor, New York, New York 10106.
Certain information regarding the number of shares of Common Stock
beneficially owned by Soros and Quantum and their investment and voting
power with respect to such shares is based on the information as reported in
the Schedule 13D filed by these persons, dated December 20, 1995.

(5) Includes 1,000 shares of Common Stock owned by Mr. Chang's children.
Includes 10,000 shares of Common Stock issuable upon exercise of options
which are currently exercisable. Of such shares, 174,000 are pledged to
United Orient Bank and 187,750 are pledged to Chemical Bank, each to secure
a personal loan to Mr. Chang.

(6) If the Underwriters' over-allotment option is exercised in full, Mr. Chang
will sell 213,416 shares of Common Stock and after the Offering will
beneficially own 2,609,334 shares of Common Stock, representing 23.3% of the
outstanding Common Stock.

(7) Does not include 66,250 shares of Common Stock beneficially owned by Mr.
Hsu's brother. Mr. Hsu disclaims beneficial ownership of his brother's
shares.

(8) Includes 2,334 shares of Common Stock issuable upon exercise of options
which are currently exercisable.

(9) If the Underwriters' over-allotment option is exercised in full, Mr. Hsu
will sell 50,000 shares of Common Stock and after the Offering will
beneficially own 141,084 shares of Common Stock, representing 1.3% of the
outstanding Common Stock.

(10) Includes 45,000 shares of Common Stock issuable upon exercise of options
which are currently exercisable.

(11) If the Underwriters' over-allotment option is exercised in full, Mr. Thampi
will sell 50,000 shares of Common Stock and after the Offering will
beneficially own 131,950 shares of Common Stock, representing 1.2% of the
outstanding Common Stock.

(12) Includes 16,336 shares of Common Stock issuable upon exercise of options
which are currently exercisable.

(13) If the Underwriters' over-allotment option is exercised in full, three of
the group of ten directors and executive officers of the Company will sell
an aggregate of 313,416 shares of Common Stock. Assuming such exercise,
after the Offering the directors and executive officers of the Company as a
group will beneficially own 2,919,870 shares of Common Stock, representing
25.9% of the outstanding Common Stock.

<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to an Exchange Agreement dated as of September 11, 1994, among
the Company and Dominic Chang, the Chairman of the Board, President, Chief
Executive Officer and a principal stockholder of the Company, Krishnan
Thampi, the Chief Financial Officer, Executive Vice President, Chief
Operating Officer, Secretary, Treasurer and a director and principal
stockholder of the Company, Jimmy C.M. Hsu, a director and principal
stockholder of the Company, John Chen and Tommy Hsu (collectively, the
"Predecessor Holders"), upon the closing of the IPO, the Company received all
of the issued and outstanding shares of the following corporations
(collectively, the "Subsidiary Shares"): Skycon Construction Co., Inc., which
is the general contractor of the Company's golf centers; Orient Associates
International, Inc., which leases the land upon which the Company's golf
centers are located and is the party which owns the license to the "Golden
Bear" trademarks; Skydrive Co., Inc., Skydrive Greenburgh Co., Inc. and
Skydrive Willowbrook NJ, Inc., each of which operates one of the Company's
golf centers; and Skydrive Alley Pond Company, Inc., which was the general
partner of the partnership that operated the Douglaston golf center. The
Predecessor Holders received an aggregate of 3,445,000 shares of Common Stock
in exchange for the Subsidiary Shares, for which they had paid an aggregate
of $2.4 million (approximately $.70 per share of Common Stock). In connection
with the initial organization of the Company, Mr. Chang purchased 5,000
shares of Common Stock for nominal consideration in July 1994.

In February 1994, Messrs. Chang and Thampi acquired interests in TPT of
65% and 5%, respectively, for nominal cash consideration plus Mr. Chang's
agreement to obtain up to $4.5 million of bank loans for TPT and to guarantee
such bank loans, if necessary. The remaining 30% was owned by two individuals
not affiliated with the Company (although one of such individuals became an
employee of the Company subsequent to the acquisition of TPT). Also in
February 1994, the predecessor of the Company assigned to TPT its rights
under the License Agreement for the establishment of Golden Bear Golf Centers
in California. The Company guaranteed TPT's obligations to the Licensor in
connection with the assignment. By agreement dated October 25, 1994, TPT's
stockholders granted the Company the option, exercisable on January 1, 1998
or earlier if TPT had at least $1.0 million of income, to acquire TPT for a
price payable in Common Stock equal to 12.5 times the net after tax income of
TPT during the full 12 months immediately preceding the exercise of such
option. In November 1995, the Company acquired TPT for $4.0 million (payable
in the form of a note which became due and was paid at the closing of the
Secondary Offering) and up to $2.0 million of additional purchase price
payable upon the achievement of certain operating income targets. The terms
of the acquisition were determined by negotiations involving Messrs. Chang
and Thampi and the non-affiliated stockholders of TPT and the transaction was
subject to certain conditions (which were satisfied on November 8, 1995),
including approval by all of the directors of the Company, other than Messrs.
Chang and Thampi and receipt of an opinion from an investment banking firm
that the consideration to be paid by the Company for TPT was fair from a
financial point of view. The Company received an opinion from the investment
banking firm of Houlihan Lokey that the consideration to be paid by the
Company for TPT was fair from a financial point of view. Houlihan Lokey has
been engaged in the business of providing financial advisory services since
1970. They specialize in the valuation of businesses and properties, with
substantial experience in the valuation of securities of recreational
companies. In addition to such opinion, such Board members also considered a
number of factors in approving the acquisition of TPT, including (i) the
elimination of potential conflicts of interest, (ii) the opportunity to
expand operations to the West Coast, (iii) the location and prospects of the
golf facilities operated by TPT, (iv) the cost of establishing golf
facilities comparable to those operated by TPT, (v) the operating history of
TPT compared with the operating history of the Company's East Coast
facilities at a comparable stage of development, (vi) the potential
improvement in TPT's performance due to the elimination of duplicative
administrative expenses, (vii) TPT's current financial condition and (viii)
the opportunity to acquire TPT for less than the Company believed it would
pay if it exercised its option to purchase TPT in 1998. For a description of
the terms of the acquisition, including amounts received by Messrs. Chang and
Thampi, see "Business--Recently Opened or Acquired Facilities."

Mr. Chang, either individually or with his wife, was the guarantor or
co-borrower of $3.7 million, $1.46 million and $1.46 million of the Company's
indebtedness, as of December 31, 1994, December 31,

<PAGE>

1995 and March 31, 1996, respectively. In addition, a company ("Hsing Lung")
which owns and operates a dairy farm in New York and has been owned by Mr.
Chang since 1986, was a co-borrower with the predecessor of the Company of a
loan that had an outstanding balance of $2.5 million as of December 31, 1994
and no outstanding balance as of December 31, 1995. Mr. Chang granted
security interests in certain of his personal assets, including Hsing Lung
and his Common Stock, to secure his obligations under certain of such
guarantees.

Neither Mr. Chang nor any other officer of the Company is obligated to
provide any additional guaranty or financial assistance to the Company in the
future.

The Company was indebted to Mr. Chang and Mr. Thampi in the amounts of
$330,000 and $125,000, respectively, as of December 31, 1994. As of December
31, 1995, the Company was not indebted to either of Mr. Chang or Mr. Thampi.
The amounts outstanding as of December 31, 1994 were paid in full by the
Company on November 30, 1995. Such loans were due on demand and, except for
the $310,000 described below, bore interest at LIBOR (6.5% at December 31,
1994 and 6.8% at November 30, 1995). Interest on such loans aggregated
$40,000 and $16,000 for the years ended December 31, 1994 and 1995,
respectively. In addition, from September 1, 1994 through November 21, 1994,
Hsing Lung made non-interest bearing loans to the Company in the aggregate
amount of $88,000, which the Company repaid on December 16, 1994.

The amount due to Mr. Chang as of December 31, 1994 of $330,000 includes
$310,000, representing a distribution payable to Mr. Chang to pay federal and
state income taxes owed by Mr. Chang in respect of the earnings of certain of
the Company's subsidiaries operated under Subchapter S of the Internal
Revenue Code of 1986, as amended, until the closing of the IPO.

The Company believes that each of the foregoing transactions were
completed on terms at least as favorable to the Company as those which could
have been obtained from an unaffiliated party.

<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following description of the Company's capital stock and selected
provisions of its Certificate of Incorporation and By-Laws is a summary and
is qualified in its entirety by reference to the Company's Certificate of
Incorporation and By-Laws, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.

COMMON STOCK

The Company is authorized to issue up to 50,000,000 shares of Common
Stock, par value $.01 per share, of which 8,598,025 shares are outstanding as
of the date hereof. Holders of Common Stock are entitled to one vote for each
share held of record on each matter submitted to a vote of stockholders.
There is no cumulative voting for election of directors. Subject to the prior
rights of any series of preferred stock which may from time to time be
outstanding, if any, holders of Common Stock are entitled to receive ratably,
dividends when, as, and if declared by the Board of Directors out of funds
legally available therefor and, upon the liquidation, dissolution or winding
up of the Company, are entitled to share ratably in all assets remaining
after payment of liabilities and payment of accrued dividends and liquidation
preferences on the preferred stock, if any. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other securities. The outstanding Common Stock is validly authorized and
issued, fully paid and nonassessable.

PREFERRED STOCK

The Company is authorized to issue up to 2,000,000 shares of preferred
stock, par value $.10 per share. The preferred stock may be issued in one or
more series, the terms of which may be determined at the time of issuance by
the Board of Directors, without further action by stockholders, and may
include voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion rights,
redemption rights and sinking fund provisions. The issuance of any such
preferred stock could adversely affect the rights of the holders of Common
Stock and, therefore, reduce the value of the Common Stock. The ability of
the Board of Directors to issue preferred stock could discourage, delay or
prevent a takeover of the Company. See "Risk Factors--Preferred Stock;
Possible Anti-Takeover Effects of Certain Charter, By-Law and Contractual
Provisions."

DELAWARE ANTI-TAKEOVER LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"), an anti-takeover law. In general,
Section 203 prohibits a Delaware corporation, the stock of which generally is
publicly traded or held of record by more than 2,000 stockholders, from
engaging, in certain circumstances, in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. For purposes of
Section 203, a "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder,
and an "interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock. Section 203 could prohibit or delay a merger,
takeover or other change in control of the Company and therefore could
discourage attempts to acquire the Company.

CERTAIN BY-LAW PROVISIONS

The Company's By-Laws provide that special meetings of the stockholders
may only be called by the Chairman of the Board of Directors, if any, the
Chief Executive Officer, the Secretary of the Company or a majority of the
Board of Directors or by stockholders who own in the aggregate 66 2/3 % of
the outstanding stock of all classes entitled to vote at such meeting. The
By-Laws also provide that stockholder action can be taken only at an annual
or special meeting of stockholders, prohibit stockholder action by written
consent in lieu of a meeting and require an advance notice procedure for
stockholders to make nominations of candidates for election as directors. The
foregoing provisions could have the

<PAGE>

effect of delaying until the next stockholders' meeting stockholder actions
which are favored by the holders of a majority of the outstanding voting
securities of the Company. The By-Laws require the affirmative vote of 80% of
the Board of Directors to amend or repeal any of the provisions described in
this paragraph.

OUTSTANDING OPTIONS AND WARRANTS

The Company has outstanding options to purchase up to an aggregate of
390,705 shares of Common Stock at prices ranging from $3.50 to $27.50 per
share, with a weighted average price per share of $12.48. Of such options,
options to purchase 372,425 shares of Common Stock expire on various dates in
2004 through 2006, subject to earlier expiration if the Company's employment
of the optionee terminates and options to purchase 18,280 shares of Common
Stock issued in connection with the acquisition of various golf facilities
expire in 2000. In addition, options to purchase 20,000 shares of Common
Stock have been issued to certain executive officers, which expire in 2005.
See "Management -- Stock Option Plans." The Company has outstanding warrants
issued to the representatives of the underwriters of the Secondary Offering
at the closing thereof, expiring on December 18, 2000, to purchase 300,000
shares of Common Stock at $20.25 per share, and warrants issued on March 7,
1996 to Monness, Crespi, Hardt & Co. for consulting services to be rendered
over a three-year period, expiring on March 7, 1997, to purchase 70,000
shares of Common Stock at $19.875 per share.

TRANSFER AGENT

Continental Stock Transfer & Trust Company, New York, New York is the
Transfer Agent for the Company's Common Stock.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a company will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
for liability for (i) any breach of their duty of loyalty to the company or
its stockholders, (ii) acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law, (iii) unlawful payment
of dividends or unlawful stock repurchases or redemptions as provided in
Section 174 of the Delaware General Corporation Law or (iv) any transaction
from which the director derived an improper personal benefit.

The Company's Certificate of Incorporation provides that the Company shall
indemnify its officers, directors, employees and other agents to the fullest
extent permitted by Delaware law.

The Company maintains a policy of insurance under which the directors and
officers of the Company are insured, subject to the limits of the policy,
against certain losses arising from claims made against such directors and
officers by reason of any acts or omissions covered under such policy in
their respective capacities as directors or officers, including liabilities
under the Securities Act. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.

<PAGE>

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell an aggregate of 3,000,000 shares of
Common Stock to the Underwriters named below (the "Underwriters"), for whom
Jefferies & Company, Inc. and Hampshire Securities Corporation are acting as
the representatives (the "Representatives"), and the Underwriters have
severally agreed to purchase, the number of shares of Common Stock set forth
opposite their respective names in the table below at the price set forth on
the cover page of this Prospectus.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
Jefferies & Company, Inc. ............. 1,020,000
Hampshire Securities Corporation ..... 1,020,000
CS First Boston Corp. ................. 60,000
A.G. Edwards & Sons, Inc. ............. 60,000
Goldman, Sachs & Co. .................. 60,000
Morgan Stanley & Co. Incorporated .... 60,000
Oppenheimer & Co., Inc. ............... 60,000
Salomon Brothers Inc. ................. 60,000
Crowell, Weedon & Co. ................. 30,000
Cruttenden Roth Incorporated .......... 30,000
Dain Bosworth Incorporated ............ 30,000
Fahnestock & Co. Inc. ................. 30,000
First Albany Corporation .............. 30,000
First of Michigan Corp. ............... 30,000
Gerard Klauer Mattison & Co., LLC .... 30,000
Janney Montgomery Scott Inc. .......... 30,000
Josephthal Lyon & Ross Inc. ........... 30,000
Ladenburg, Thalmann & Co. Inc. ....... 30,000
Mesirow Financial Inc. ................ 30,000
H.J. Meyers & Co., Inc. ............... 30,000
Monness, Crespi, Hardt & Co., Inc. ... 30,000
Rauscher Pierce Refsnes, Inc. ......... 30,000
The Robinson-Humphrey Company, Inc. .. 30,000
Rodman & Renshaw, Inc. ................ 30,000
Starr Securities Inc. ................. 30,000
Van Kasper & Co. ...................... 30,000
Vector Securities International, Inc. 30,000
The Williams Capital Group, L.P. ..... 30,000
-----------
Total ............................... 3,000,000
===========
</TABLE>

The Underwriting Agreement provides that the obligation of the
Underwriters to purchase the shares of Common Stock is subject to certain
conditions. The Underwriters are committed to purchase all of the shares of
the Common Stock (other than those covered by the over-allotment option
described below), if any are purchased.

The Underwriters propose to offer the Common Stock to the public initially
at the public offering price set forth on the cover page of this Prospectus,
and to certain dealers at such price less a concession not in excess of $1.20
per share. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of $0.10 per share to certain other dealers. After the
Offering, the public offering price, the concession to selected dealers and
the reallowance to other dealers may be changed by the Representatives.

<PAGE>

In the Secondary Offering, the Company granted Jefferies the right, at its
option, for a period ending in December 1998, to have a representative attend
all meetings of the Board of Directors of the Company and receive
reimbursement for all expenses incurred in attending such meetings. Such
agreement remains in effect.

The Selling Stockholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
450,000 additional shares of Common Stock at the public offering price, less
the underwriting discount. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
additional shares of Common Stock proportionate to such Underwriter's initial
commitment as indicated in the preceding table. The Underwriters may exercise
such right of purchase only for the purpose of covering over-allotments, if
any, made in connection with the sale of the shares of Common Stock.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.

In the Secondary Offering, the directors and officers of the Company
agreed with the underwriters of such offering not to publicly sell or
otherwise dispose of any shares of Common Stock or securities exercisable for
or convertible into shares of Common Stock ("Securities") until December 13,
1996, except in the case of Common Stock pledged or to be pledged by Dominic
Chang to secure personal loans, without the prior written consent of
Jefferies. Such agreements remain in effect and, after the Offering, will
cover 3,161,950 shares of Common Stock or 27.3% of the then outstanding
Common Stock (or, if the Underwriters' over-allotment option is exercised in
full, 2,788,534 shares of Common Stock or 24.0% of the then outstanding
Common Stock). See "Risk Factors--Shares Eligible for Future Sale;
Registration Rights."

The Company has agreed with the Underwriters not to offer, issue or sell
any Securities for a period of six months from the date of this Prospectus,
subject to certain limited exceptions, without the consent of Jefferies.

Certain of the Underwriters and selling group members that currently act
as market markers for the Common Stock may engage in "passive market making"
in the Common Stock on the Nasdaq Stock Market in accordance with Rule 10b-6A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Rule 10b-6A permits, upon the satisfaction of certain conditions,
underwriters and selling group members participating in a distribution that
are also market makers in the security being distributed to engage in limited
market making transactions during the period when Rule 10b-6 under the
Exchange Act would otherwise prohibit such activity. Rule 10b-6A prohibits
underwriters and selling group members engaged in passive market making
generally from entering a bid or effecting a purchase at a price that exceeds
the highest bid for those securities on the Nasdaq Stock Market by a market
maker that is not participating in the distribution. Under Rule 10b-6A each
underwriter or selling group member engaged in passive market making is
subject to a daily net purchase limitation equal to 30% of such entity's
average daily trading volume during the two full consecutive calendar months
immediately preceding the date of the filing of the registration statement
under the Securities Act pertaining to the security to be distributed.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby and certain
other legal matters will be passed upon for the Company and the Selling
Stockholders by Squadron, Ellenoff, Plesent & Sheinfeld, LLP, New York, New
York. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Fulbright & Jaworski L.L.P., New York, New York.

EXPERTS

The consolidated financial statements of the Company as at December 31,
1994 and December 31, 1995 and for each of the years in the three year period
ended December 31, 1995 have been audited by

<PAGE>

Richard A. Eisner & Company, LLP, independent auditors, as indicated in their
report with respect thereto, and are included herein in reliance upon such
report given upon the authority of said firm as experts in accounting and
auditing. The financial statements of the Hiland Park Golf Course at April
30, 1995 and for the eleven month period then ended, which are included in
this Prospectus, have been included herein in reliance upon the report of
Silverstein, Loftus & Ross, CPAs, P.C., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing. The financial statements of Pelham
Enterprises, Inc. at December 31, 1994 and for the year then ended, which are
included in this Prospectus, have been included herein in reliance upon the
report of Bradshaw, Gordon & Clinkscales, P.A., independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing. The financial statements of RFC
Enterprises, Inc. at December 31, 1994 and for the year then ended, which are
included in this Prospectus, have been included herein in reliance upon the
report of Drunagel, Johnson, Rutherford & Wilkins, P.C., independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. The financial
statements of Upper Hembree Partners, L.P. at December 31, 1994 and for the
two years then ended, which are included in this Prospectus, have been
included herein in reliance upon the report of Ernest T. Northrup,
independent certified public accountant, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The
financial statements of The Practice Tee, Inc. at December 31, 1994 and for
the period February 8, 1994 (inception) to December 31, 1994, which are
included in this Prospectus, have been included herein in reliance upon the
report of Robert Del Riego, independent certified public accountant,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The financial statements of Golf Masters Limited
Partnership at December 31, 1994 and for the year then ended, and Air Dome
Limited Partnership at December 31, 1994 and for the year then ended, which
are included in this Prospectus, have been included herein in reliance upon
the reports of Sewell & Co., Inc., independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The financial statements of Owl's Creek Golf Center,
Inc. at December 31, 1995, and for the year then ended which are included in
this Prospectus, have been included herein in reliance upon the report of
Anne E. Gorry, independent certified public accountant, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. The financial statements of Flemington Golf and Sports Center, LLC
at December 31, 1995 and for the year then ended, which are included in this
Prospectus, have been included herein in reliance upon the report of
Ehrenkrantz and Company, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The financial statements of 202 Golf Associates,
Inc. at December 31, 1995 and for the year then ended, which are included in
this Prospectus, have been included herein in reliance upon the report of
Mangini, Traeger & Company, P.C., independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The financial statements of Indian River
Golf-O-Rama, Inc. at December 31, 1995 and for the year then ended, which are
included in this Prospectus, have been included herein in reliance upon the
report of Shanholt Glassman Hoffman Klein & Co., P.C., independent certified
public accountants, appearing elsewhere herein, and upon the authority of
said firm as experts in accounting and auditing. The financial statements of
Golf and Sports Center of the Palm Beaches, Inc. at December 31, 1995 and for
the year then ended, and W.A.G.N. Partners at December 31, 1995 and for the
year then ended, which are included in this Prospectus, have been included
herein in reliance upon the reports of Charles W. Cairnes, Jr. P.A.,
independent certified public accountant, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The
financial statements of Catalina Golf Center at December 31, 1995 and for the
year then ended which are included in this Prospectus, have been included
herein in reliance upon the report of Robert Decker, C.P.A., independent
certified public accountant, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing. The financial
statements of K.G. Golf, Inc. at December 31, 1995 and for the year then
ended, which are included in this Prospectus, have been included herein in
reliance upon the report of Goffena & Baker, C.P.A., independent certified
public accountants, appearing elsewhere herein, and upon the authority of
said firm as experts in accounting and auditing. The financial statements of
Tree Court Golf & Recreational Complex, Inc., at December 31,

<PAGE>

1995 and for the year then ended, which are included in this Prospectus, have
been included herein in reliance upon the report of BDO Seidman, LLP,
independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements, and
other information with the Commission. Such reports, proxy statements, and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, Suite 1300, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission, Room 1024, 450
Fifth Street, N.W. Washington, D.C. 20549 at prescribed rates. In addition,
copies of such reports, proxy statements, and other information concerning
the Company may also be inspected and copied at the library of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006, upon which the
Common Stock of the Company is traded. The Commission maintains a World Wide
Web site on the Internet at http:// www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission.

The Company has filed with the Commission a Registration Statement on Form
SB-2 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act, with respect to the
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information with respect to the Company and the Common Stock,
reference is hereby made to the Registration Statement and the documents
incorporated herein by reference, which may be examined without charge at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549. Copies thereof may be obtained
from the Commission upon payment of the prescribed fees. Statements contained
in this Prospectus or in any document incorporated herein by reference as to
the contents of any contract or document referred to herein are not
necessarily complete, and in each instance reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement
or such other document, each such statement being qualified in all respects
by such reference.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PRO FORMA:
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
Pro Forma Unaudited Condensed Balance Sheet as of March 31, 1996 ......................... F-6
Notes to Pro Forma Unaudited Condensed Balance Sheet ..................................... F-8
Pro Forma Unaudited Condensed Statements of Operations for the Year Ended
December 31, 1995 and for the Three Months Ended March 31, 1996 ......................... F-9
Pro Forma Unaudited Condensed Statement of Operations for the
Year Ended December 31, 1995 ............................................................ F-10
Notes to Pro Forma Unaudited Condensed Statement of Operations for the Year Ended
December 31, 1995 ....................................................................... F-12
Pro Forma Unaudited Condensed Statement of Operations for the
Three Months Ended March 31, 1996 ....................................................... F-13
Notes to Pro Forma Unaudited Condensed Statement of Operations for the Three Months
Ended March 31, 1996 .................................................................... F-14
HISTORICAL:
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
Report of Independent Auditors ........................................................... F-15
Consolidated Balance Sheets as at December 31, 1994, December 31, 1995 and
March 31, 1996 (Unaudited) .............................................................. F-16
Consolidated Statements of Operations for the Years Ended December 31, 1993,
December 31, 1994 and December 31, 1995 and for the Three Months Ended March 31, 1995
(Unaudited) and March 31, 1996 (Unaudited) ............................................... F-17
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1993, December 31, 1994 and December 31, 1995 and for the Three Months
Ended March 31, 1996 (Unaudited) ........................................................ F-18
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,
December 31, 1994 and December 31, 1995 and for the Three Months Ended
March 31, 1995 (Unaudited) and March 31, 1996 (Unaudited) ............................... F-19
Notes to Financial Statements ............................................................ F-20
OWL'S CREEK GOLF CENTER, INC.
Independent Auditor's Report ............................................................. F-32
Balance Sheet as of December 31, 1995 .................................................... F-33
Statement of Operations and Retained Earnings (Deficit) for the Year Ended
December 31, 1995 ....................................................................... F-34
Statement of Cash Flows for the Year Ended December 31, 1995 ............................. F-37
Notes to Financial Statements ............................................................ F-38
Statement of Operations for the Period from January 1, 1996 to March 5, 1996 ............ F-40
FLEMINGTON GOLF AND SPORTS CENTER, LLC
Independent Auditors' Report ............................................................. F-42

F-1

<PAGE>

PAGE
---------
Balance Sheet as of December 31, 1995 .................................................... F-43
Statement of Operations and Members' Deficit as of December 31, 1995 ..................... F-44
Statement of Cash Flows as of December 31, 1995 .......................................... F-45
Notes to Financial Statements ............................................................ F-46
202 GOLF ASSOCIATES, INC.
Independent Auditors' Report ............................................................. F-49
Balance Sheet as of December 31, 1995 .................................................... F-50
Statement of Operations & Shareholders' Deficit for the Year Ended
December 31, 1995 ....................................................................... F-51
Statement of Cash Flows for the Year Ended December 31, 1995 ............................. F-52
Notes to Financial Statements ............................................................ F-53
Balance Sheet as of March 31, 1995 ....................................................... F-55
Statement of Operations for the Three Months Ended March 31, 1996 ........................ F-56
Statement of Cash Flows for the Three Months Ended March 31, 1996 ........................ F-57
Notes to Financial Statements ............................................................ F-58
INDIAN RIVER GOLF-O-RAMA, INC.
Independent Auditors' Report ............................................................. F-59
Balance Sheets as of December 31, 1995 and December 31, 1994 ............................. F-60
Statement of Changes in Shareholder's Equity for the Years Ended December 31, 1995
and 1994 ................................................................................ F-61
Statement of Cash Flows for the Years Ended December 31, 1995 and 1994 .................. F-62
Statements of Operations for the Years Ended December 31, 1995 and 1994 ................. F-63
Notes to Financial Statements ............................................................ F-64
Balance Sheet as of March 31, 1996 ....................................................... F-66
Statements of Operations for the Period January 1, 1996 to March 31, 1996 ............... F-67
Statement of Cash Flows for the Three Months Ended March 31, 1996 ........................ F-68
Notes to Financial Statements ............................................................ F-69
CATALINA GOLF CENTER
Independent Auditor's Report ............................................................. F-70
Balance Sheet as of December 31, 1995 .................................................... F-71
Statement of Income and Proprietor's Capital for the Year Ended December 31, 1995 ....... F-72
Statement of Cash Flow for the Year Ended December 31, 1995 .............................. F-73
Notes to Financial Statements ............................................................ F-74
Balance Sheet as of March 31, 1996 ....................................................... F-77
Income Statement for the Period January 1, 1996 to March 31, 1996 ........................ F-78
Statement of Cash Flows for the Period Ended March 31, 1996 .............................. F-79
Notes to Financial Statements ............................................................ F-80

F-2

<PAGE>
PAGE
---------
K.G. GOLF, INC.
Independent Auditors' Report ............................................................. F-81
Balance Sheet as of December 31, 1995 .................................................... F-82
Income Statement for the Year Ended December 31, 1995 .................................... F-83
Statement of Retained Earnings for the Year Ended December 31, 1995 ...................... F-83
Statement of Cash Flows for the Year Ended December 31, 1995 ............................. F-84
Notes to Financial Statements ............................................................ F-85
Balance Sheet as of March 31, 1996 ....................................................... F-87
Income Statement for the Three Months Ended March 31, 1996 ............................... F-88
Statement of Cash Flows for the Three Months Ended March 31, 1996 ........................ F-89
Notes to Financial Statements ............................................................ F-90
TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
Independent Auditors' Report ............................................................. F-91
Balance Sheet as of December 31, 1995 .................................................... F-92
Statement of Operations for the Year Ended December 31, 1995 ............................. F-93
Statement of Stockholders' Deficit ....................................................... F-94
Statement of Cash Flows for the Year Ended December 31, 1995 ............................. F-95
Summary of Accounting Policies ........................................................... F-96
Notes to Financial Statements ............................................................ F-97
Balance Sheet as of March 31, 1996 ....................................................... F-99
Statement of Operations for the Three Months Ended March 31, 1996 ........................ F-100
Statement of Cash Flows for the Three Months Ended March 31, 1996 ........................ F-101
Notes to Financial Statements ............................................................ F-102
GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
Independent Auditor's Report ............................................................. F-103
Balance Sheet as of December 31, 1995 .................................................... F-104
Statement of Loss and Accumulated Deficit for the Year Ended December 31, 1995 .......... F-105
Statement of Cash Flows for the Year Ended December 31, 1995 ............................. F-106
Notes to Financial Statements ............................................................ F-107
Balance Sheet as of March 31, 1996 ....................................................... F-108
Statement of Operations for the Three Months Ended March 31, 1996 ........................ F-109
W.A.G.N. PARTNERS
Independent Auditor's Report ............................................................. F-110
Balance Sheet as of December 31, 1995 .................................................... F-111
Statement of Loss and Partners' Capital for the Year Ended December 31, 1995 ............ F-112
Statement of Cash Flows for the Year Ended December 31, 1995 ............................. F-113
Notes to Financial Statements ............................................................ F-114

F-3

<PAGE>

PAGE
---------
PELHAM ENTERPRISES, INC.
Independent Auditors' Report ........................................................... F-115
Balance Sheets at December 31, 1994 and April 30, 1995 ................................. F-116
Statements of Income and Retained Earnings for the Year Ended December 31, 1994 and for
the Four Months Ended April 30, 1995 ................................................... F-117
Statements of Cash Flows for the Year Ended December 31, 1994 and for the Four Months
Ended April 30, 1995 .................................................................. F-118
Notes to Financial Statements .......................................................... F-119
HILAND PARK GOLF COURSE
Independent Auditors' Report ........................................................... F-121
Balance Sheet at April 30, 1995 ........................................................ F-122
Statement of Income for the Eleven Months Ended April 30, 1995 ......................... F-123
Statement of Equity for the Eleven Months Ended April 30, 1995 ......................... F-124
Statement of Cash Flows for the Eleven Months Ended April 30, 1995 ..................... F-125
Notes to Financial Statements .......................................................... F-127
RFC ENTERPRISES, INC.
Independent Auditors' Report ........................................................... F-129
Balance Sheet at December 31, 1994 ..................................................... F-130
Statement of Income and Accumulated Deficit for the Year Ended December 31, 1994 ....... F-131
Statement of Cash Flows for the Year Ended December 31, 1994 ........................... F-132
Notes to Financial Statements .......................................................... F-133
Balance Sheet at July 31, 1995 ......................................................... F-136
Statement of Income and Accumulated Deficit for the Seven Months Ended July 31, 1995 ... F-137
Statement of Cash Flows for the Seven Months Ended July 31, 1995 ....................... F-138
Notes to Financial Statements .......................................................... F-139
UPPER HEMBREE PARTNERS, L.P.
Independent Accountant's Report ........................................................ F-142
Balance Sheets at December 31, 1994 and July 31, 1995 .................................. F-143
Statements of Income for the Years Ended December 31, 1993, December 31, 1994 and the
Seven Months Ended July 31, 1995 ...................................................... F-144
Statements of Changes in Partners' Capital for the Years Ended December 31, 1993,
December 31, 1994 and the Seven Months Ended July 31, 1995 ............................ F-145
Statements of Cash Flows for the Years Ended December 31, 1993, December 31, 1994 and
the Seven Months Ended July 31, 1995 .................................................. F-146
Notes to Financial Statements .......................................................... F-147
THE PRACTICE TEE, INC.
Independent Auditors' Report ........................................................... F-152
Consolidated Balance Sheet at December 31, 1994 ........................................ F-153
Consolidated Statement of Operations and Accumulated Deficit for the Period February 8,
1994 (Inception) to December 31, 1994 ................................................. F-154

F-4

<PAGE>

PAGE
---------
Consolidated Statement of Cash Flow for the Period February 8, 1994 (Inception) to
December 31, 1994 ..................................................................... F-155
Notes to Financial Statements .......................................................... F-156
Consolidated Balance Sheet at September 30, 1995 ....................................... F-159
Consolidated Statement of Operations and Accumulated Deficit for the Nine Months Ended
September 30, 1995 ..................................................................... F-160
GOLF MASTERS LIMITED PARTNERSHIP
Independent Auditors' Report ........................................................... F-161
Balance Sheets at December 31, 1994 and September 30, 1995 ............................. F-162
Statements of Changes in Partners' Capital for the Year Ended December 31, 1994 and the
Nine Months Ended September 30, 1995 .................................................. F-164
Statements of Income and Expense for the Year Ended December 31, 1994 and for the Nine
Months Ended September 30, 1995 ........................................................ F-165
Statements of Cash Flows for the Year Ended December 31, 1994 and for the Nine Months
Ended September 30, 1995 .............................................................. F-166
Notes to Financial Statements .......................................................... F-167
AIR DOME LIMITED PARTNERSHIP
Independent Auditors' Report ........................................................... F-170
Balance Sheet at December 31, 1994 ..................................................... F-171
Statement of Changes in Partners' Capital for the Year Ended December 31, 1994 ......... F-172
Statement of Income and Expense for the Year Ended December 31, 1994 ................... F-173
Statement of Cash Flows for the Year Ended December 31, 1994 ........................... F-174
Notes to Financial Statements .......................................................... F-175
Balance Sheet at September 30, 1995 .................................................... F-176
Statement of Changes in Partners' Capital for the Nine Months Ended September 30, 1995 . F-177
Statement of Income and Expense for the Nine Months Ended September 30, 1995 ........... F-178
Statement of Cash Flows for the Nine Months Ended September 30, 1995 ................... F-179
Notes to Financial Statements .......................................................... F-180
</TABLE>

F-5

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1996

The following pro forma condensed balance sheet reflects the transactions
indicated below as if they had occurred on March 31, 1996: (1) the acquisitions
(the "Acquisitions") of 202 Golf Associates, Inc. ("Yorktown Heights"),
Indian River Golf-O-Rama, Inc. ("Indian River"), K.G. Golf Inc.
("Fairfield"), Catalina Golf Center ("Tucson"), Tree Court Golf &
Recreational Complex, Inc. ("St. Louis") and Golf & Sports Center of the Palm
Beaches, Inc. and W.A.G.N. Partners (collectively, "West Palm Beach") and (2)
the Acquisitions and assumed repayment of $5.0 million of indebtedness
incurred in connection with the Acquisitions, from the net proceeds
from the sale of 199,124 shares of Common Stock of the Company at an
offering price per share of $27. The Acquisitions are accounted for as
purchases in accordance with Accounting Principles Board Opinion No. 16. In
the opinion of management of Family Golf Centers, Inc. and its subsidiaries
(the "Company"), all adjustments necessary to present fairly such pro forma
condensed balance sheet have been made.

The pro forma condensed balance sheet should be read in conjunction with
the notes thereto, the financial statements of the Company, Yorktown Heights,
Indian River, Fairfield, Tuscon, St. Louis and West Palm Beach and the
related notes thereto and with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," each included elsewhere in
this Prospectus. The pro forma condensed balance sheet is not necessarily
indicative of what the actual financial position would have been had the
transactions occurred at March 31, 1996, nor does it purport to represent the
future financial position of the Company.

F-6

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
MARCH 31, 1996
(IN THOUSANDS)

THE YORKTOWN INDIAN WEST PRO FORMA
COMPANY HEIGHTS RIVER FAIRFIELD TUCSON ST. LOUIS PALM BEACH ADJUSTMENTS
------- -------- ------ --------- ------ --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS .............. $11,147 $ 5 $(3,620)(A)
INVENTORIES ............................ 3,019 106
PREPAID EXPENSES ....................... 2,358 2
------- -------- ------ --------- ------ --------- ---------- -----------
TOTAL CURRENT ASSETS .................. 16,524 113 (3,620)

PROPERTY AND EQUIPMENT .................. 44,027 $2,100 $1,549 $ 993 $569 $609 $3,506 (149)(A)
LOAN ACQUISITION COSTS .................. 222
DEFERRED TAX BENEFIT .................... 116
OTHER ASSETS ............................ 1,567
EXCESS OF COST OVER FAIR VALUE OF ASSETS 674
------- -------- ------ --------- ------ --------- ---------- -----------
TOTAL ................................. $63,130 $2,100 $1,549 $1,106 $569 $609 $3,506 $ (3,769)
======= ======== ====== ========= ====== ========= ========== ===========

LIABILITIES
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 2,051 $ 70
CURRENT PORTION OF LONG-TERM
OBLIGATIONS ........................... 1,523 $ 5,000
------- -------- ------ --------- ------ --------- ---------- -----------
TOTAL CURRENT LIABILITIES ............. 3,574 70 5,000

LONG-TERM OBLIGATIONS (LESS CURRENT
PORTION) ............................... 7,229
DEFERRED RENT ........................... 103
OTHER LIABILITIES ....................... 238
------- -------- ------ --------- ------ --------- ---------- -----------
TOTAL LIABILITIES ..................... 11,144 70 5,000

COMMON STOCK ............................ 85
ADDITIONAL PAID-IN CAPITAL .............. 50,909 600
RETAINED EARNINGS ....................... 1,027
TREASURY STOCK .......................... (35)
NET ASSETS ACQUIRED ..................... $2,100 $1,549 $1,036 $569 $609 $3,506 (9,369)(A)
------- -------- ------ --------- ------ --------- ---------- -----------
TOTAL STOCKHOLDERS' EQUITY ............ 51,986 2,100 1,549 1,036 569 609 3,506 (8,769)
------- -------- ------ --------- ------ --------- ---------- -----------
TOTAL ................................. $63,130 $2,100 $1,549 $1,106 $569 $609 $3,506 $ (3,769)
======= ======== ====== ========= ====== ========= ========== ===========

[TABLE CONTINUED FROM ABOVE]

PRO FORMA
PRO FORMA REFLECTING
REFLECTING THE ACQUISITIONS
THE PRO FORMA AND REPAYMENT OF
ACQUISITIONS(1) ADJUSTMENTS DEBT(2)
----------------- ----------- ----------------
<C> <C> <C>

$ 7,532 $ 7,532
3,125 3,125
2,360 2,360
----------------- ----------- ----------------
13,017 13,017

53,204 53,204
222 222
116 116
1,567 1,567
674 674
----------------- ----------- ----------------
$68,800 $68,800
================= =========== ================

$ 2,121 $ 2,121

(A) 6,523 $(5,000)(B) 1,523
----------------- ----------- ----------------
8,644 (5,000) 3,644

7,229 7,229
103 103
238 238
----------------- ----------- ----------------
16,214 (5,000) 11,214
----------------- ----------- ----------------

85 2 (B) 87
51,509 4,998 (B) 56,507
1,027 1,027
(35) (35)
-- --
----------------- ----------- ----------------
52,586 5,000 57,586
----------------- ----------- ----------------
$68,800 $ -- $68,800
================= =========== ================

</TABLE>

F-7

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(A) To reflect the acquisition of Yorktown Heights, Indian River, Fairfield,
Tucson, St. Louis and West Palm Beach after March 31, 1996 as follows:

<TABLE>
<CAPTION>
ADJUSTMENT BOOK VALUE
TO FAIR OF NET
VALUE ASSETS ASSETS COMMON DEBT
COMPANY ACQUIRED ACQUIRED STOCK ISSUED CASH
- ---------------- ------------ ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Yorktown Heights $ 100 $2,100 $600 $1,600
Indian River ... (149) 1,549 1,400
Fairfield ....... 434 1,036 $1,470
Tucson .......... 531 569 1,100
St. Louis ....... 691 609 1,300
West Palm Beach (1,756) 3,506 1,130 620
------------ ------------ -------- -------- --------
$ (149) $9,369 $600 $5,000 $3,620
============ ============ ======== ======== ========
</TABLE>

(B) Reflects the sale of 199,124 shares of Common Stock of the Company at an
offering price of $27, the net proceeds of which will be used to
repay indebtedness of $5,000.

F-8

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996

The following pro forma condensed statements of operations reflect the
transactions indicated below as if such transactions had occurred on January
1, 1995: (1) the acquisitions of Pelham Enterprises, Inc., the Hiland Park
Golf Course, RFC Enterprises, Inc., Upper Hembree Partners, L.P., The
Practice Tee, Inc. (''TPT'') Golf Masters Limited Partnership and Air Dome
Limited Partnership (collectively, "Valley View"), Owl's Creek Golf Center,
Inc., ("Virginia Beach"), Flemington Golf and Sports Center, LLC
("Flemington") and associated land, Yorktown Heights, Indian River,
Fairfield, Tucson, St. Louis and West Palm Beach (collectively, the "Acquired
Companies") acquired during 1995 and 1996 as if the Acquired Companies had
been acquired on January 1, 1995 and (2) the acquisition of the Acquired
Companies and the assumed repayment of $5.0 million of indebtedness incurred
in connection with the acquisitions of the Acquired Companies from the net
proceeds of the sale of 199,124 shares of Common Stock of the Company at an
offering price per share of $27. The acquisitions of the
Acquired Companies except TPT have been accounted for as purchases in
accordance with Accounting Principles Board Opinion No. 16. Since TPT has
been acquired from related parties, the acquisition has been recorded using
historical basis. In the opinion of management of the Company, all
adjustments necessary to present fairly such pro forma statements of
operations have been made.

These pro forma condensed statements of operations should be read in
conjunction with the notes thereto, the financial statements of the Company
and the Acquired Companies and the related notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," each included elsewhere in this Prospectus. The pro forma
condensed statements of operations are not necessarily indicative of what the
actual results of operations would have been had the transactions occurred at
January 1, 1995, or January 1, 1996 nor do they purport to indicate the
results of future operations.

F-9

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
ACQUIRED COMPANIES
---------------------------------------------
HILAND UPPER
PELHAM PARK RFC HEMBREE
THE ENTERPRISES, GOLF ENTERPRISES PARTNERS,
COMPANY INC.(A) COURSE(A) INC.(A) L.P.(A)
------- ------------ ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues ................... $ 9,795 $117 $ 100 $363 $386
Merchandise sales .................... 2,637 150 17
------- ------------ ------- ----------- ---------
Total revenue ....................... 12,432 267 117 363 386
------- ------------ ------- ----------- ---------
Operating expenses ................... 6,614 87 297 234 317
Cost of merchandise sold ............. 1,779 111 152
Selling, general and administrative
expenses ............................ 1,242 39 44 110 46
------- ------------ ------- ----------- ---------
Operating income (loss) .............. 2,797 30 (376) 19 23
Interest expense ..................... 939 16 61 112
Other (income) expense ............... (66) (6)
------- ------------ ------- ----------- ---------
Income (loss) before income taxes and
extraordinary item .................. 1,924 14 (376) (42) (83)
Income tax expense (benefit) ......... 669
------- ------------ ------- ----------- ---------
INCOME (LOSS) before extraordinary
item ................................ $ 1,255 $ 14 $(376) $(42) $(83)
======= ============ ======= =========== =========
Income (loss) per share before
extraordinary item .................. $ 0.24
=======
Weighted average shares outstanding . 5,271
=======
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
VALLEY VIRGINIA YORKTOWN
TPT(A) VIEW(A) BEACH(B) FLEMINGTON(B) HEIGHTS(B)
------ ------ -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues ................... $ 244 $ 668 $616 $ 501 $ 388
Merchandise sales .................... 44 92
------ ------ -------- ----------- ---------
Total revenue ....................... 244 712 708 501 388
------ ------ -------- ----------- ---------
Operating expenses ................... 86 395 404 900 393
Cost of merchandise sold ............. 36 72
Selling, general and administrative
expenses ............................ 264 404 119 101
------ ------ -------- ----------- ---------
Operating income (loss) .............. (106) (123) 113 (399) (106)
Interest expense ..................... 3 34 192 128 164
Other (income) expense ............... (1) (2) 2 2,448
------ ------ -------- ----------- ---------
Income (loss) before income taxes and
extraordinary item .................. (108) (155) (81) (2,975) (270)
Income tax expense (benefit) ......... 1
------ ------ -------- ----------- ---------
INCOME (LOSS) before extraordinary
item ................................ $(109) $(155) $(81) $(2,975) $(270)
====== ====== ======== =========== =========
Income (loss) per share before
extraordinary item ..................
Weighted average shares outstanding .
</TABLE>

(a) Represents operations from January 1, 1995 through date of
acquisition.

(b) Represents operations for the year ended December 31, 1995.

F-10

<PAGE>

<TABLE>
<CAPTION>
ACQUIRED COMPANIES
--------------------------------------------------------------
INDIAN WEST PALM
RIVER(B) FAIRFIELD(B) TUCSON(B) ST. LOUIS(B) BEACH(B)
-------- ------------ --------- ------------ -------------
<S> <C> <C> <C> <C>
$ 510 $791 $ 156 $ 443 $ 863
98
-------- ------------ --------- ------------ -------------
608 791 156 443 863
-------- ------------ --------- ------------ -------------
607 800 214 544 1,029

161 33
-------- ------------ --------- ------------ -------------
(232) (9) (91) (101) (166)
104 132 77 182
(5) 2
-------- ------------ --------- ------------ -------------

(232) (113) (218) (180) (348)

-------- ------------ --------- ------------ -------------

$(232) $(113) $(218) $(180) $ (348)
======== ============ ========= ============ =============

</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
PRO FORMA
REFLECTING THE
PRO FORMA ACQUIRED
REFLECTING THE COMPANIES AND
PRO FORMA ACQUIRED PRO FORMA REPAYMENT OF
ADJUSTMENTS COMPANIES(1) ADJUSTMENTS DEBT(2)
------------- -------------- ------------- ---------------
<S> <C> <C> <C>
$15,941 $15,941
3,038 3,038
------------- -------------- ------------- ---------------
18,979 18,979
------------- -------------- ------------- ---------------
$ (171)(A) 12,750 12,750

2,222 2,222

13 (A) 2,576 2,576
------------- -------------- ------------- ---------------
158 1,431 1,431
44 (A) 2,188 $(500)(D) 1,688
(2,448)(A) (76) (76)
------------- -------------- ------------- ---------------

2,562 (681) 500 (181)
(916)(B) (246) 180 (D) (66)
------------- -------------- ------------- ---------------

$ 3,478 $ (435) $320 $ (115)
============= ============== ============= ===============

$ (0.08) $ (.02)
============= ============== ===============
366 (C) 5,637 199 (D) 5,836
============= ============== ============= ===============
</TABLE>

F-11

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(in thousands, except share and per share data)

(A) Expense adjustments for the period ended December 31, 1995 to reflect
the acquisition of the Acquired Companies as if the acquisitions had
taken place at the beginning of the period:

<TABLE>
<CAPTION>
IMPAIRMENT
INTEREST DEPRECIATION AMORTIZATION IN VALUE OF
COMPANY DATE ACQUIRED ADJUSTMENT(1) ADJUSTMENT OF GOODWILL ASSETS
- ------------------------------ --------------- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Pelham Enterprises, Inc. ..... April 1995 $ (30) $ 12
Hiland Park Golf Course ...... May 1995 (212) 14
RFC Enterprises, Inc. ......... August 1995 9 (33) $8
Upper Hembree Partners, L.P. . August 1995 (4) (108)
TPT ........................... November 1995 26
Valley View ................... November 1995 (56)
Virginia Beach ................ March 1996 12 22
Flemington .................... March 1996 39 $(2,448)
Yorktown Heights .............. April 1996 4 5
Indian River .................. May 1996 140 (4)
Fairfield ..................... June 1996 36 25
Tucson ........................ June 1996 (22)
St. Louis ..................... June 1996 53 34
West Palm Beach ............... June 1996 (7) (77)
------------- -------------- -------------- ------------
$ 44 $(171) $13 $(2,448)
============= ============== ============== ============
</TABLE>

(1) Assumes average rate of borrowing at 10%.

(B) To reflect the income tax effect arising from the losses of the
Acquired Companies.

(D) To reflect the reduction of interest expense assuming that the net
proceeds of $5,000 from the sale of 199,124 shares of Common Stock of the
Company at an offering price of $27 has been applied to the repayment of
indebtedness at the beginning of the year and the related income tax effect.

F-12

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
ACQUIRED COMPANIES
----------------------------------------------------------------------------

WEST
THE VIRGINIA FLEMINGTON YORKTOWN INDIAN FAIRFIELD TUCSON ST. LOUIS PALM
COMPANY BEACH(A) (B) HEIGHTS(C) RIVER(C) (C) (C) (C) BEACH(C)
------- -------- ---------- -------- ------ --------- ------ --------- ------
<S> <C>
Operating revenues . $2,691 $ 35 $ 74 $54 $ 52 $ 39 $ 63 $221
Merchandise sales .. 671 2 3 68
------- -------- ---------- -------- ------ --------- ------ --------- ------
Total revenue ...... 3,362 37 74 57 120 39 63 221
------- -------- ---------- -------- ------ --------- ------ --------- ------
Operating expenses . 2,252 39 $ 25 88 40 61 11 77 191
Cost of merchandise
sold ............... 457 2 3 61
Selling, general and
administrative
expenses ........... 643 27 22 8 10 26 7
------- -------- ---------- -------- ------ --------- ------ --------- ------
Operating income
(loss)............. 10 (31) (25) (36) 6 (12) 2 (14) 23
Interest expense ... 100 34 26 24 40 22
Other income
(expense) .......... 197 (14) 3
------- -------- ---------- -------- ------ --------- ------ --------- ------
Income before Income
taxes .............. 107 (79) (25) (59) 6 (36) (38) (36) 23
Income tax expense
(benefit) .......... 38
------- -------- ---------- -------- ------ --------- ------ --------- ------
Net income (loss) ... $ 69 $(79) $(25) $(59) $6 $(36) $(38) $(36) $ 23
======= ======== ========== ======== ====== ========= ====== ========= ======
Net income
(loss) per share ... 0.01
Weighted average =======
shares outstanding 8,648
=======

[TABLE CONTINUED FROM ABOVE]

PRO FORMA
REFLECTING
THE
PRO FORMA ACQUISITIONS
REFLECTING AND
PRO FORMA THE PRO FORMA REPAYMENT OF
ADJUSTMENTS ACQUISITIONS(1) ADJUSTMENTS DEBT(2)
- ----------- ------------- ----------- ------------

$3,229 $3,229
744 744
- ----------- ------------- ----------- ------------
3,973 3,973
- ----------- ------------- ----------- ------------
$ (29) 2,755 2,755

523 523

743 743
- ----------- ------------- ----------- ------------
29 (48) (48)
(70) (A) 176 $ (125) (D) 51

(61) (A) 125 125
- ----------- ------------- ----------- ------------

38 (99) 125 (26)
(74) (B) (36) 45 (D) (9)
- ----------- ------------- ----------- ------------
$ 112 $ (63) $ 80 $ (17)
=========== ============= =========== ============
$(0.01) $(0.00)
============= ============
131 (C) 8,779 199 (D) 8,978
========== ============= =========== ============

</TABLE>

(a) Represents operations from January 1, 1996 through date of acquisition.

(b) Represents estimated operations from January 1, 1996 through date of
acquisition.

F-13

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(A) Expense adjustments for the period ended March 31, 1996 to reflect
the acquisition of the Acquired Companies as if the acquisitions had
taken place at the begining of the period:
<TABLE>
<CAPTION>
OTHER
DATE INTEREST EXPENSE DEPRECIATION (INCOME)
COMPANY ACQUIRED ADJUSTMENT (1) ADJUSTMENT EXPENSE OTHER
- ----------------- ------------ ---------------- -------------- --------- -------
<S><C>
Virginia Beach .. March 1996 $ 34 $ (9) $15 $14
Flemington ....... March 1996
Yorktown Heights April 1996 26 20
Indian River ..... May 1996 (1) 17
Fairfield ........ June 1996 11 6
Tucson ........... June 1996 (12)
St. Louis ........ June 1996 11 8
West Palm Beach . June 1996 (20) (19) 9
---------------- -------------- --------- -------
$ 50 $(15) $61 $14
================ ============== ========= =======
</TABLE>

(1) Assumes average rate of borrowing at 10%

(B) To reflect the income tax effect arising from the losses of the
Acquired Companies.

(D) To reflect the reduction of interest expense assuming that the net
proceeds of $5,000 from the sale of 199,124 shares of Common Stock of
the Company at an offering price of $27 has been applied
to the repayment of indebtedness at the beginning of the year and the
related income tax effect.

F-14

<PAGE>

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Family Golf Centers, Inc.
Melville, New York

We have audited the accompanying consolidated balance sheets of Family
Golf Centers, Inc. and subsidiaries as at December 31, 1994 and December 31,
1995 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 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 audits.

We conducted our audits 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 also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly,
in all material respects, the financial position of Family Golf Centers, Inc.
and subsidiaries at December 31, 1994 and December 31, 1995 and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles.

Richard A. Eisner & Company, LLP
New York, New York
March 15, 1996

F-15

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

DECEMBER 31, MARCH 31,
-------------------- 1996
1994 1995
--------- ---------
<S><C>
(UNAUDITED)
ASSETS
(NOTE F)
Current assets:
Cash and cash equivalents (Notes A[3] and A[11]) ......... $ 2,296 $23,121 $11,147
Inventories (Note A[4]) ................................... 462 1,941 3,019
Prepaid expenses and other current assets (Note D) ....... 222 999 2,358
Deferred tax asset (Note J) ............................... 65
--------- --------- -----------
Total current assets ..................................... 3,045 26,061 16,524
Property, plant and equipment (net of accumulated
depreciation of $733, $1,336 and $1,634 at December 31,
1994, December 31, 1995 and March 31, 1996, respectively)
(Notes A[5], B and C) ..................................... 11,726 33,330 44,027
Loan acquisition costs (net of accumulated amortization of
$105, $12 and $25 at December 31, 1994, December 31, 1995
and March 31, 1996, respectively) ......................... 376 234 222
Deferred tax asset (Note J) ................................ 116 116
Other assets ............................................... 519 1,205 1,567
Excess of cost over fair value of assets acquired (Note B). 411 636 674
--------- --------- -----------
TOTAL .................................................... $16,077 $61,582 $63,130
========= ========= ===========
LIABILITIES
Current liabilities:
Accounts payable, accrued expenses and other current
liabilities .............................................. $ 1,720 $ 3,044 $ 2,051
Income taxes payable (Note J) ............................. 569
Current portion of long-term obligations (Note G) ........ 1,074 1,850 1,523
Due to Officers (Note F) .................................. 455
--------- --------- -----------
Total current liabilities ................................ 3,249 5,463 3,574
Long-term obligations (less current portion) (Note G) ..... 5,254 6,343 7,229
Deferred rent (Note E) ..................................... 187 116 103
Other liabilities .......................................... 153 272 238
--------- --------- -----------
Total liabilities ........................................ 8,843 12,194 11,144
--------- --------- -----------
Commitments, contingencies and other matters
(Notes E and H)

STOCKHOLDERS' EQUITY
Preferred stock -- authorized 1,000,000 shares, none
outstanding
Common stock authorized 10,000,000 shares, $.01 par value;
4,830,000, 8,318,045 and 8,489,325 shares outstanding at
December 31, 1994, December 31, 1995 and March 31, 1996,
respectively (Notes B and I) .............................. 48 83 85
Additional paid-in capital (Note H[4]) ..................... 7,302 48,347 50,909
Retained earnings (Deficit) ................................ (116) 958 1,027
Treasury stock ............................................. (35)
--------- --------- -----------
Total stockholders' equity ............................... 7,234 49,388 51,986
--------- --------- -----------
TOTAL .................................................... $16,077 $61,582 $63,130
========= ========= ===========
</TABLE>

The accompanying notes to financial statements
are an integral part hereof.

F-16

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- --------- --------- ---------
(UNAUDITED)
<S><C>
Operating revenues ......................... $1,993 $5,342 $ 9,795 $1,360 $2,691
Merchandise sales .......................... 639 1,020 2,637 422 671
-------- -------- --------- --------- ---------
Total revenue ............................ 2,632 6,362 12,432 1,782 3,362
-------- -------- --------- --------- ---------
Operating expenses ......................... 2,247 4,215 6,614 1,061 2,252
Cost of merchandise sold ................... 459 750 1,779 295 457
Selling, general and administrative
expenses. ................................. 615 548 1,242 352 643
-------- -------- --------- --------- ---------
Total expenses ........................... 3,321 5,513 9,635 1,708 3,352
-------- -------- --------- --------- ---------
Operating income (loss) .................... (689) 849 2,797 74 10
Interest expense ........................... (192) (313) (939) (92) (100)
Other income (including insurance proceeds
of $104 in 1993) .......................... 106 16 66 22 197
-------- -------- --------- --------- ---------
Income (loss) before income taxes, minority
interest and extraordinary item ........... (775) 552 1,924 4 107
Income tax expense (benefit) (Notes A[8]
and J) .................................... -- (65) 669 2 38
-------- -------- --------- --------- ---------
Income (loss) before minority interest and
extraordinary item ........................ (775) 617 1,255 2 69
Minority interest in income (loss) ........ 12 (129) -- -- --
Extraordinary charge -- early
extinguishment of debt (net of tax effect) -- -- (181) -- --
-------- -------- --------- --------- ---------
NET INCOME (LOSS) .......................... $ (763) $ 488 $ 1,074 $ 2 $ 69
======== ======== ========= ========= =========
Net income (loss) per share before
extraordinary item (Note A[9]) ............ $ (.23) $ .13 $ .24 $ .00 $ .01
Extraordinary item ......................... (.04)
-------- -------- --------- --------- ---------
Net income (loss) per share ................ $ (.23) $ .13 $ .20 $ .00 $ .01
======== ======== ========= ========= =========
Weighted average shares outstanding ....... 3,272 3,636 5,271 4,938 8,648
======== ======== ========= ========= =========
</TABLE>

The accompanying notes to financial statements
are an integral part hereof.

F-17

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

CAPITAL STOCK
(PAR VALUE $.01)
---------------------
NUMBER OF ADDITIONAL RETAINED
SHARES PAID-IN TREASURY EARNINGS
ISSUED AMOUNT CAPITAL STOCK (DEFICIT) TOTAL
----------- -------- ------------ ---------- ---------- ---------
<S><C>
Balance -- January 1, 1993 ............... 110 $ 292 $ (23) $ 269
Conversion of debt to capital ............ 500 500
Issuance of stock ........................ 55 1,122 1,122
Net (loss) for the year .................. (763) (763)
----------- -------- ------------ ---------- ---------- ---------
Balance -- December 31, 1993 ............. 165 1,914 (786) 1,128
Issuance of stock ........................ 5,055
Issuance of warrants in connection with
bridge loan ............................. 18 18
Conversion of debt to capital ............ 500 500
Recapitalization ......................... 3,444,780 $34 (216) 182 0
Net proceeds from public offering ....... 1,380,000 14 5,396 5,410
S corporation distribution to
stockholders ............................ (310) (310)
Net income for the year .................. 488 488
----------- -------- ------------ ---------- ---------- ---------
Balance -- December 31, 1994 ............. 4,830,000 48 7,302 (116) 7,234
Issuance of stock (Note B) ............... 284,300 3 2,732 2,735
Net proceeds from public offering ....... 3,135,000 31 43,702 43,733
Public offering expenses ................. (1,317) (1,317)
Exercise of warrants ..................... 64,950 1 307 308
Exercise of employee options ............. 3,795 13 13
Preferential distribution to stockholders
of The Practice Tee, Inc. (Note H) ..... (4,392) (4,392)
Net income for the year .................. 1,074 1,074
----------- -------- ------------ ---------- ---------- ---------
Balance -- December 31, 1995 ............. 8,318,045 83 48,347 958 49,388
Issuance of stock ........................ 150,000 2 2,238 2,240
Issuance of warrants ..................... 245 245
Exercise of employee options ............. 21,280 79 79
Treasury Stock in exchange for note
receivable (2,200 shares) ............... $(35) (35)
Net income for the period ................ 69 69
----------- -------- ------------ ---------- ---------- ---------
Balance--March 31, 1996 (Unaudited) ..... 8,489,325 $85 $50,909 $(35) $1,027 $51,986
=========== ======== ============ ========== ========== =========
</TABLE>

The accompanying notes to financial statements
are an integral part hereof.

F-18

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- ---------------------
1993 1994 1995 1995 1996
--------- --------- ---------- --------- ----------
<S><C>
Cash flows from operating activities:
Net income (loss) ........................................... $ (763) $ 488 $ 1,074 $ 2 $ 69
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization ............................. 260 564 739 173 251
Deferred tax asset ........................................ (65) (51)
Extraordinary charge -- early extinguishment of debt --
loan acquisition cost write-off .......................... 302
Minority interest in net income (loss) .................... (12) 129
(Increase) in inventories ................................. (31) (289) (1,478) (430) (1,079)
(Increase) in prepaid expenses and other current assets .. (13) (124) (778) (513) (1,313)
(Increase) in other assets ................................ (80) (181) (749) (65) (205)
Increase (Decrease) in accounts payable and accrued
expenses ................................................. 405 239 655 444 (1,352)
Increase (Decrease) in deferred rent ...................... 209 (21) (71) (18) (12)
Increase (Decrease) in other liabilities .................. 25 123 119 (9) (35)
Increase (Decrease) in income taxes payable ............... 569 (569)
--------- --------- ---------- --------- ----------
Net cash provided by (used in) operating activities ...... 0 863 331 (416) (4,245)
--------- --------- ---------- --------- ----------
Cash flows from investing activities:
Acquisitions of property and equipment ...................... (4,287) (5,092) (15,213) (1,584) (6,668)
(Increase) in security deposits ............................. (26) (37) (100)
Acquisition of limited partnership minority interest ....... (1,280)
Acquisition of goodwill ..................................... (259)
--------- --------- ---------- --------- ----------
Net cash (used in) investing activities ................... (4,313) (6,409) (15,472) (1,684) (6,668)
--------- --------- ---------- --------- ----------
Cash flows from financing activities:
(Increase) Decrease in loan acquisition costs ............... (213) (246) 31
Increase (Decrease) in loans payable to stockholders ....... 75 25 (231)
Increase (Decrease) in due to officers ...................... (63) (95) (455) 479
Proceeds from loans -- bank and others ...................... 3,555 4,497 17,916
Repayment of loans -- bank and others ....................... (812) (2,185) (19,594) (302) (1,141)
Proceeds from issuance of bridge financing and warrants .... 499
Repayment of bridge financing ............................... (499)
Net proceeds from issuance of common stock .................. 1,872 5,410 42,416
Preferential distribution to stockholders of The Practice
Tee, Inc. .................................................. (4,392)
Proceeds from the exercise of warrants and options . . ..... 321 80
--------- --------- ---------- --------- ----------
Net cash provided by (used in) financing activities ...... 4,627 7,439 35,966 (23) (1,061)
--------- --------- ---------- --------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ 314 1,893 20,825 (2,123) (11,974)
Cash and cash equivalents -- beginning of period ............ 89 403 2,296 2,296 23,121
--------- --------- ---------- --------- ----------
CASH AND CASH EQUIVALENTS -- END OF PERIOD ................... $ 403 $ 2,296 $ 23,121 $ 173 $ 11,147
========= ========= ========== ========= ==========
Supplemental and noncash disclosures:
Acquisition of property in exchange for common stock ....... $ 2,734 $ 2,241
Acquisition of property subject to mortgage and notes ...... 1,700
Treasury stock in exchange for note receivable .............. 35
Issuance of warrants ........................................ 245
Conversion of amounts due to stockholders to common stock .. $ 500
Property additions accrued but not paid ..................... $ 207 662 669 359
Accrual of S corporation distribution to stockholders ...... 310
Interest paid ............................................... 276 476 1,296 225
Taxes paid .................................................. 53 954
</TABLE>

The accompanying notes to financial statements
are an integral part hereof.

F-19

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO MARCH 31, 1996 AND THREE MONTHS
ENDED MARCH 31, 1995 AND MARCH 31, 1996 IS UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(NOTE A) -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

[1] THE COMPANY:

Through an agreement with Golden Bear Golf Centers, Inc. ("GBGC"), the
Company is a non-exclusive licensee for Golden Bear Golf Centers in certain
territories. The license agreement is terminable by GBGC under certain
conditions. (See Note H[3].)

[2] PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of Family Golf
Centers, Inc. ("FGCI") and as of December 31, 1994, its wholly owned
subsidiaries, Orient Associates International, Inc. ("OAI"), Skydrive Co.,
Inc., Skydrive Willowbrook NJ, Inc., Skydrive Greenburgh Co., Inc., Skycon
Construction Co., Inc., Skydrive Alley Pond Company, Inc. ("Skydrive Alley
Pond"), (collectively, the "Operating Companies"), (the Operating Companies
and FGCI together, the "Company"). In addition, as of December 31, 1995 the
consolidated financial statements also include Hiland Family Golf Centers,
Inc., Pelham Family Golf Center, Inc., Alpharetta Family Golf Centers, Inc.,
Peachtree Family Golf Centers, Inc., Richmond Family Golf Centers, Inc.,
Valley View Family Golf Centers, Inc. and The Practice Tee, Inc., which were
formed in 1995 to acquire certain new golf facilities. In addition, as of
March 31, 1996, the consolidated financial statements also include Mesa
Family Golf Centers, Inc., Virginia Beach Family Golf Centers, Inc., and
Flemington Family Golf Centers, Inc., which were formed in 1996 to acquire
certain new golf facilities. All significant intercompany transactions and
accounts have been eliminated.

Upon the closing of the Company's initial public offering in November
1994, pursuant to an exchange agreement, FGCI acquired all of the outstanding
common stock of the Operating Companies, in exchange for 3,445,000 shares of
common stock of FGCI. The consolidated financial statements include the
results of the Operating Companies for all periods presented as the Operating
Companies were previously related through common ownership. The exchange
transaction is accounted for in a manner similar to a pooling of interests
and there was no change in the bases of the entities combined.

[3] CASH EQUIVALENTS:

The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.

[4] INVENTORIES:

Inventory consists of merchandise for sale in the pro shop at each
facility and food and beverage in the restaurants and is valued at the lower
of cost on a first-in, first-out basis or market.

[5] PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment is stated at cost. Depreciation and
amortization of the respective assets is computed using the straight-line
method over their estimated lives or the term of the lease, including
expected renewal options, if shorter. Leasehold improvements are amortized
using the straight-line method over the remaining life of the lease,
including expected renewal options.

F-20

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE A) -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(Continued)
[6] PRE-OPENING COSTS:

Costs associated with the opening of a new location are deferred and
amortized over one year.

Pre-opening costs consists of primarily employee recruitment and training
costs as well as pre-opening marketing expenditures.

[7] LOAN ACQUISITION COSTS:

Loan acquisition costs incurred in connection with debt financing are
amortized over the life of the applicable loan weighted in accordance with
the amount of debt outstanding.

[8] INCOME TAXES:

Certain of the Operating Companies elected to be treated as S corporations
pursuant to Section 1362(a) of the Internal Revenue Code for federal and
state income tax purposes. As a result of this election, the income of such
Operating Companies was taxed directly to the individual stockholders. Upon
the closing of the public offering in November, 1994, the Company became a C
corporation and adopted Statement of Accounting Standards No. 109,
"Accounting for Income Taxes" which requires the use of the liability method
of accounting for income taxes.

[9] NET INCOME (LOSS) PER SHARE:

Net income (loss) per share is computed using the weighted average number
of shares outstanding during the period as adjusted for the exchange ratio
for shares issued in the reorganization of the Company. The effect of
outstanding options and warrants is computed, if dilutive, using the
"treasury stock" method. In accordance with Securities and Exchange
Commission requirements, common shares, options and warrants issued in
certain of the Operating Companies during the twelve-month period prior to
the filing of the initial public offering have been included in the
calculation as if they were outstanding for all periods prior to the
offering.

[10] USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

[11] CONCENTRATION OF CREDIT RISK:

Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of temporary cash
investments. The Company places its temporary cash investments with high
credit qualified financial institutions and, by policy, limits the amount of
credit exposure to any one financial institution.

[12] RECENTLY ISSUED ACCOUNTING STANDARDS:

A recently issued accounting standard regarding impairments of long-lived
assets ("FAS 121") has not been adopted early by the Company. FAS 121
requires entities to review long-lived assets and certain identifiable
intangibles to be held and used, for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The impact of the adoption of this standard on financial
position and results of operations is not expected to be material.

F-21

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE A) -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(Continued)
[13] STOCK BASED COMPENSATION:

The Company accounts for stock based compensation including stock options
under the basis of Accounting Principles Board Opinion No. 25 and will
continue to do so in the future. The requirements of FAS 123 on stock based
compensation will require additional disclosures commencing in 1996. Stock
options issued in the quarter ended March 31, 1996 were not material and
accordingly, no additional disclosure has been presented.

[14] UNAUDITED FINANCIAL STATEMENTS:

The financial statements as of March 31, 1996 and for the three months
ended March 31, 1996 and March 31, 1995 are unaudited and are not necessarily
indicative of the results that may be expected for the year ending December
31, 1996. In the opinion of management, the financial statements include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the Company's financial position and results of operations.

[15] INTERIM FINANCIAL REPORTING:

Pursuant to APB Opinion No. 28, Interim Financial Reporting, certain
accounting principles and practices followed for annual reporting are
modified for interim reporting purposes, so that the reported results for
these interim periods better relate to the results of operations for the
annual periods. Therefore, certain costs and expenses other than merchandise
cost are allocated among interim periods based on an estimate of benefit
received or activity associated with the periods.

(NOTE B) -- ACQUISITION OF GOLF FACILITIES:

In April 1995, the Company acquired Pelham Enterprises, Inc. ("Pelham"),
an existing golf driving range. Pursuant to the purchase agreement, the
Company acquired the outstanding shares of Pelham Enterprises, Inc. for (i)
90,000 shares of FGCI common stock valued at $430 (ii) satisfaction of the
loan from the sole stockholder to Pelham of $512 and (iii) a promissory note
in favor of the sole stockholder for $230 in exchange for pro shop inventory
and other assets. In connection with the issuance of common stock, the
Company registered 45,000 shares in connection with the public offering in
December 1995 and has agreed to certain registration rights for the remaining
45,000 shares. Pelham's assets included land which was subject to an $818
mortgage. A portion of the purchase price for the acquisition ($512) was
financed with borrowings under a line of credit from Chemical Bank at an
interest rate of prime plus 1.5%, which was subsequently repaid with a
portion of the net proceeds of a public offering.

In May 1995, the Company acquired Hiland Park Golf Course ("Hiland"), a
distressed property which was in foreclosure, consisting of a golf course,
restaurant and catering facility. The purchase price for the assets was
$3,750. The Company financed a portion of the purchase price of Hiland with a
$3,000 loan from Orix USA Corp. at an interest rate of LIBOR plus 3.5%
(capped at 10.5%) and with borrowings under a line of credit from Chemical
Bank at an interest rate of prime plus 1.5%, which was subsequently repaid
with a portion of the net proceeds of a public offering.

In August 1995, the Company acquired RFC Enterprises, Inc. ("RFC"), an
existing golf center in Glen Allen, Virginia (near Richmond), in exchange for
7,500 shares of common stock valued at $96 and $454 in cash. RFC's assets
include land which is subject to a $170 mortgage. In connection with the
issuance of common stock, the Company has agreed that, if such common stock
does not have a current market price (as defined) of at least $10.00 per
share on August 25, 1997, the Company will, subject to adjustment under
certain circumstances, make up the difference between $10.00 per share and
such current market price in cash, stock or a combination thereof.

F-22

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE B) -- ACQUISITION OF GOLF FACILITIES: (Continued)
In August 1995, the Company purchased: (i) land in Duluth, Georgia (near
Atlanta) on which it intends to construct an executive golf course and (ii)
an existing driving range ("Peachtree"). The purchase price consisted of $500
in cash, a mortgage note in the amount of $1,600 bearing interest at the
prime rate payable on August 28, 2000 and a promissory note in the amount of
$1,000 which bears interest at 8% per annum payable on August 28, 1997 in
cash or common stock of the Company, at the Company's option.

In September 1995, the Company acquired an existing driving range
("McDivots") in Alpharetta, Georgia (near Atlanta) in exchange for 85,000
shares of common stock and an option to purchase up to 8,500 shares of the
common stock at an exercise price of $25.00 per share expiring in September
2000. The property is subject to a mortgage of $1,800.

In November 1995, the Company acquired a 5 acre property in Valley View,
Ohio ("Valley View") on which there is a domed indoor driving range. The
purchase price consisted of: (i) 101,800 shares of common stock and, (ii) an
option to purchase up to 10,000 shares of the Company's common stock at an
exercise price of $25.00 per share and (iii) cash. The property was subject
to a mortgage, due September 1997 and bearing interest at the greater of 8%
and 1% over National City Bank's base rate.

In November 1995, the Company acquired The Practice Tee, Inc. ("TPT"). TPT
operates a combination Golden Bear Golf Center and golf course facility in El
Segundo, California and a combination golf center and par-3 golf course
facility in Gilroy, California. The purchase price consisted of $4,000 and up
to $2,000 payable upon the achievement of certain operating targets.
<TABLE>
<CAPTION>

PELHAM HILAND RFC
-------- -------- -------
<S><C>
Property, plant and equipment . .......... $1,840 $3,850 $ 747
Other current assets ..................... 250
Excess of cost over fair value ........... 259
-------- -------- -------
Total assets ......................... 2,090 3,850 1,006
Assumption of mortgage payable ........... (818) (170)
Assumption of other liabilities .......... (246)
-------- -------- -------
Net assets acquired ...................... $1,272 $3,850 $ 590
======== ======== =======
Fair value of stock issued ............... $ 430 $ 96
Loan from selling stockholder ............ 512
Promissory note from selling stockholder 230
Mortgage from Orix USA Corp .............. $3,000
Borrowings from Chemical Bank ............ 750 451
Other liabilities ........................ 43
Acquisition costs ........................ 100 100
-------- -------- -------
$1,272 $3,850 $ 590
======== ======== =======

(RESTUBBED TABLE CONTINUED FROM ABOVE)

PEACHTREE MCDIVOTS VALLEY VIEW
----------- ---------- -------------
Property, plant and equipment . .......... $900 $ 3,140 $1,895
Other current assets .....................
Excess of cost over fair value ...........
----------- ---------- -------------
Total assets ......................... 900 3,140 1,895
Assumption of mortgage payable ........... (342)
Assumption of other liabilities .......... (1,813) (185)
----------- ---------- -------------
Net assets acquired ...................... $900 $ 1,327 $1,368
=========== ========== =============
Fair value of stock issued ............... $ 1,140 $1,069
Loan from selling stockholder ............
Promissory note from selling stockholder $900
Mortgage from Orix USA Corp ..............
Borrowings from Chemical Bank ............ 53 299
Other liabilities ........................ 105
Acquisition costs ........................ 29
----------- ---------- -------------
$900 $ 1,327 $1,368
=========== ========== =============
</TABLE>

In February and March 1996, the Company acquired a combination golf center
and par-3 golf course in Mesa, Arizona ("Mesa"), a combination golf center
and par-3 golf course located in Virginia Beach, Virginia ("Virginia Beach")
and a driving range, miniature golf course, batting cages, a pro shop and a
club house located in Flemington, New Jersey ("Flemington") and associated
land. The aggregate purchase price of these three properties was
approximately $8,500, consisting of cash, common stock of the Company or
notes, or a combination thereof.

In April 1996, the Company acquired an existing golf recreational practice
facility in Yorktown Heights, New York.

In May 1996, the Company consummated the purchase of a long-term leasehold
interest for property located in Indian River, Virginia on which there is an
existing golf recreational facility.

F-23

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE B) -- ACQUISITION OF GOLF FACILITIES: (Continued)
In June 1996, the Company consummated the purchases of leasehold
interests for properties located in Fairfield, Ohio and St. Louis, Missouri
on which there are existing golf recreational practice facilities and
acquired existing golf recreational facilities in Tucson, Arizona and West
Palm Beach, Florida.

The aggregate purchase price of the properties acquired in April 1996, May
1996 and June 1996 was approximately $9,220, consisting of cash, common stock
of the Company or notes, or a combination thereof.

The operating results of Pelham, Hiland, RFC, Peachtree, McDivots, TPT and
Valley View are included in the Company's results of operations for the year
ended December 31, 1995 from the date of acquisitions. The results of Mesa,
Virginia Beach and Flemington are included in the Company's results of
operations for the three months ended March 31, 1996 from the date of
acquisitions. These acquisitions were accounted for by the purchase method of
accounting.

The following pro forma information for the years ended December 31, 1995
and December 31, 1994 assumes that the acquisition of Pelham, Hiland, RFC,
McDivots, Valley View and TPT had taken place at the beginning of each of
those years and that the excess cost over the fair value of assets acquired
for RFC is being amortized over 20 years. The operations of the existing
driving range in Peachtree were not material to the operations of the
Company.

YEAR ENDED
DECEMBER 31,
--------------------
1995 1994
--------- ---------
Total revenue .......................... $14,522 $10,902
Net income (loss) ...................... $ 472 $ (481)
Net income (loss) per share (Note A[9]) $ .09 $ (0.11)

The following pro forma information for the year ended December 31, 1995
and for the three months ended March 31, 1996 assumes that, in addition to
those acquisitions noted above, the acquisitions of Virginia Beach,
Flemington, Yorktown Heights, Indian River, Fairfield, Tucson, St. Louis and
West Palm Beach had taken place at the beginning of 1995 and that the excess
of cost over the fair value of assets acquired is being amortized over 20
years. The operations of Mesa were not material to the operations of the
Company.

YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
Total revenue ................... $18,979 $3,973
Net (loss) ...................... $ (435) $ (63)
Net (loss) per share (Note A[9]) $ (.08) $ (.01)

F-24

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE C) -- PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are summarized as follows:
<TABLE>
<CAPTION>

DECEMBER 31, MARCH 31,
-------------------- 1996
1994 1995
--------- ---------
<S><C>
Golf driving range facilities ................ $ 5,123 $23,564 $29,431
Leasehold improvements ....................... 5,317 7,248 9,519
Machinery and equipment ...................... 827 1,617 2,077
Furniture and fixtures and computer equipment 70 219 750
Construction in progress ..................... 1,122 2,018 3,884
--------- --------- -----------
Total ...................................... 12,459 34,666 45,661
Accumulated depreciation and amortization ... 733 1,336 1,634
--------- --------- -----------
Balance .................................... $11,726 $33,330 $44,027
========= ========= ===========
</TABLE>

Substantially all of the Company's property, plant and equipment is
pledged as collateral for various loans (see Note G). Interest of $55, $150
and $387 has been capitalized during the years ended December 31, 1993,
December 31, 1994 and December 31, 1995, respectively, which amounts are
included in property, plant and equipment. Similarly $52 and $117 was
capitalized for the three months ended March 31, 1995 and March 31, 1996,
respectively.

(NOTE D) -- PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following:

DECEMBER 31, MARCH 31,
-------------- 1996
1994 1995
------ ------
Prepaid insurance ........................... $115 $276 $ 92
Prepaid taxes ............................... 3 58 451
Preopening expenses ......................... 173 502
Accounts receivable and interest receivable 6 177 438
Accounts receivable -- employees ............ 6 29 83
Other receivables and prepaids .............. 92 286 792
------ ------ -----------
Total ....................................... $222 $999 $2,358
====== ====== ===========

(NOTE E) -- LEASING ARRANGEMENTS:

Operating leases, which expire at various dates through 2038, are for land
at the facilities and for office space and, in some cases, are subject to
annual increases based on changes in the Consumer Price Index.

Future minimum lease payments, including expected renewal options, under
operating lease agreements that have initial or remaining noncancellable
lease terms in excess of one year are as follows:

DECEMBER 31, MARCH 31,
1995 1996
-------------- -----------
1996 .......................... $ 1,497
1997 .......................... 1,759 $ 1,532
1998 .......................... 1,831 1,800
1999 .......................... 1,898 1,867
2000 .......................... 1,927 1,930
2001 .......................... 1,967
Thereafter .................... 56,116 56,384
-------------- -----------
Total minimum lease payments $65,028 $65,480
============== ===========

F-25

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE E) -- LEASING ARRANGEMENTS: (Continued)
Operating lease rent expense for the years ended December 31, 1993,
December 31, 1994 and December 31, 1995 was $670, $1,372 and $1,527,
respectively, and for the three months ended March 31, 1995 and March 31,
1996 was $253 and $396, respectively.

Pursuant to certain of the Company's land leases, rent expense charged to
operations differs from rent paid because of the effect of free rent periods
and scheduled rent increases. Accordingly, the Company has recorded deferred
rent payable of $187, $116 and $103 at December 31, 1994, December 31, 1995
and March 31, 1996, respectively. Rent expense is calculated by allocating
total rental payments, including those attributable to scheduled rent
increases, on a straight-line basis, over the lease term.

(NOTE F) -- DUE TO RELATED PARTIES:

The Company was indebted to the Chief Executive Officer ("CEO") and the
Chief Financial Officer ("CFO") for loans in the aggregate amount of $455 at
December 31, 1994, due on demand and were paid off during 1995. The loans
bear interest at LIBOR (6.5% at December 31, 1994). Interest on such loans
aggregated $40 and $16 for the years ended December 31, 1995 and December 31,
1994, respectively.

(NOTE G) -- DEBT:

[1] SHORT-TERM BORROWING:

At March 31, 1996, the Company has a revolving line of credit of $5,000,
expiring on June 30, 1996, bearing interest at prime plus 1.5%. The line is
collateralized by certain properties of the Company.

F-26

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE G) -- DEBT: (Continued)
[2] LONG-TERM OBLIGATIONS CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>

DECEMBER 31,
------------------
MARCH 31,
1994 1995 1996
-------- -------- -----------
<S><C>
Small business term loan bearing interest at 7.45%, payable in
monthly installments through April 2002 ............................. $ 595 $ 529
Construction term loan for up to $1,700 bearing interest at the prime
rate plus 2%, payable in monthly installments through May 1997
(10.5% at March 31, 1996) ........................................... 1,457 $1,454
Mortgage payable bearing interest at LIBOR plus 3.5% (capped at
10.5%), interest only first year and payable in monthly installments
through May 2000 .................................................... 3,000 3,000
Promissory note due April 1996 bearing interest at bank's prime rate
(8.5% at March 31, 1996) ............................................ 231
Promissory note due August 1997 bearing interest payable monthly at
8% .................................................................. 998 998
Mortgage payable due August 2000 bearing interest payable monthly at
bank's prime rate (8.5% at March 31, 1996) .......................... 1,600 1,600
Mortgage payable bearing interest at the bank's prime rate plus 1%
payable in monthly installments through September 1997 (9.5% at
March 31, 1996) ..................................................... 341
Mortgage payable bearing interest at 9.8%, payable in monthly
installments through November 1996 .................................. 37
Mortgage payable due March 7, 2001 bearing interest at 5.25% ........ 1,700
Term loan bearing interest at the prime rate (8.5% at December 31,
1994) plus 2.5%, payable in varying monthly installments through May
1998 ................................................................ 71
Construction term loan for $2,500 bearing interest at the bank's
prime rate (8.5% at December 31, 1994) plus 2%, payable in monthly
installments through December 1999 .................................. 2,500
One-year revolving working capital line of credit expiring April 2,
1995, bearing interest at the bank's prime rate (8.5% at December
31, 1994) plus 1% ................................................... 250
Term loan bearing interest at the prime rate (8.5% at December 31,
1994) plus 4.5% payable in monthly installments beginning March 1995
through March 1998 .................................................. 250
Construction term loan bearing interest at the bank's prime rate
(8.5% at December 31, 1994) plus 3.5%, payable in monthly
installments through December 1999. First year interest only ....... 816
Term loan bearing interest at 5.8%, payable on April 17, 1995 ....... 100
Construction loan bearing interest at the bank's prime rate (8.75% at
December 31, 1994) plus 1.75%, payable in monthly installments
through May 1, 1998 ................................................. 1,746
-------- -------- -----------
Total .............................................................. 6,328 8,193 8,752
Less current portion ................................................. 1,074 1,850 1,523
-------- -------- -----------
Noncurrent portion ................................................... $5,254 $6,343 $7,229
======== ======== ===========
</TABLE>

F-27

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE G) -- DEBT: (Continued)
The above loans are collateralized by certain assets of the Company
including the Hiland golf club, golf driving range facilities, leasehold
improvements, machinery and equipment and other assets. The construction term
loan outstanding at December 31, 1995 and March 31, 1996 is personally
guaranteed by the CEO.

In August 1994, FGCI received the proceeds of bridge loans in the amount
of $499, bearing interest at 10% per annum. In connection with the issuance
of the loans payable, FGCI issued five year warrants to purchase 24,950
shares of common stock at a price of $3.50 per share, which were valued at
approximately $18. The issuance of such warrants resulted in a debt discount.
The warrants are immediately exercisable. The bridge loan was repaid with a
portion of the net proceeds of the initial public offering.

The long-term portion of the Company's debt at December 31, 1995 and March
31, 1996 is payable as follows:

DECEMBER 31, MARCH 31,
1995 1996
-------------- -----------
1997 ........ $1,477
1998 ........ 152 $1,070
1999 ........ 159 72
2000 ........ 1,765 72
2001 ........ 173 3,372
2002 ........ 72
Thereafter . 2,617 2,571
-------------- -----------
Total ..... $6,343 $7,229
============== ===========

(NOTE H) -- COMMITMENTS AND CONTINGENCIES:

[1] EMPLOYMENT AGREEMENTS:

The Company has employment agreements, as amended, expiring on December
31, 1999 with the CEO and the CFO, who are also stockholders of the Company,
which provide for aggregate annual base salaries of $220 in 1996, $260 in
1997 and 1998 and $300 in 1999.

[2] ALLEY POND AGREEMENT:

The Company has an agreement to manage a family golf center which is owned
by the City of New York.

The license agreement provides for the payment of fees to New York City,
of the greater of $900 or up to 50% of gross revenues (as defined), on an
annual basis. The Company will be obligated, as part of its license
agreement, to make improvements to the existing property of at least $1,200
and at December 31, 1995 this requirement has been met. Such improvements
will belong to the City of New York at the end of the license period, which
expires on December 31, 2006 or upon earlier termination. The agreement is
terminable at will by the City of New York.

[3] LICENSE AGREEMENT:

Pursuant to its license agreement with GBGC, the Company paid a one-time
facility development fee for each Golden Bear golf center. In addition, the
Company is required to pay annual royalty fees for each Golden Bear golf
center it operates based on Adjusted Gross Revenues ("AGR") as defined, equal
to 3%

F-28

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE H) -- COMMITMENTS AND CONTINGENCIES: (Continued)
[3] LICENSE AGREEMENT: (CONTINUED)

of AGR less than $2,000 plus 4% of AGR between $2,000 and $3,000, plus 5% of
AGR over $3,000. The minimum royalty fee for each Golden Bear golf center
shall not be less than $50 per year. The annual royalty fee for the Alley
Pond golf center is $40 for years 1 and 2, $45 for year 3, $50 for year 4 and
beginning in year 5 shall be at the above stated percentages of AGR with a
minimum annual royalty of $50.

On September 13, 1995 the Company's exclusive rights to open Golden Bear
Golf Centers in defined territories were terminated and the restrictions on
the Company's right to develop golf centers under its own name in such
territories were removed.

Royalty fees incurred for the years ended December 31, 1993, December 31,
1994 and December 31, 1995 amounted to $70, $120 and $184, respectively. Such
fees for the three months ended March 31, 1995 and March 31, 1996 were $27
and $64, respectively. All of such fees have been charged to operations.

[4] PURCHASE OF TPT AND RELATED PARTY TRANSACTIONS:

As stated in Note B, in November 1995, the Company acquired TPT. Prior to
the acquisition, the CEO and the CFO of the Company individually owned, in
aggregate, 70% of the shares of TPT. The purchase price of $4,000 plus excess
of cost over fair value of assets acquired was considered a preferential
distribution to certain stockholders. The purchase price included a
contingent payment up to $2.0 million, payable upon the achievement of
certain operating income targets. The contingent purchase price in respect of
the year ending December 31, 1996 will be determined by multiplying $1.0
million by the lesser of (i) 1.0 and (ii) the number obtained by dividing the
OIBITA (as defined below) during such year by $500 (the "1996 Multiplier").
The contingent purchase price in respect of the year ending December 31, 1997
will be determined by multiplying $1.0 million by the lesser of (i) 1.0 and
(ii) the number obtained by dividing the OIBITA during such year by $1.0
million (the "1997 Multiplier"). If the 1997 Multiplier is higher than the
1996 Multiplier, then the former TPT shareholders will also be entitled to
receive an amount equal to (a) the amount which they would have been entitled
to receive in respect of 1996 if the 1996 Multiplier had been as high as the
1997 Multiplier less (b) the contingent amount, if any that they received in
respect of 1996.

For purposes of this computation, OIBITA for any year shall mean the
operating income before interest, taxes and depreciation or amortization,
determined in accordance with generally accepted accounting principles
consistently applied, generated by all golf facilities owned by the Company
and located west of the Mississippi River.

Under an existing agreement with TPT, the Company had an option to acquire
TPT (the "TPT Option") for a price equal to 12.5 times the net after tax
income of TPT during the full 12 months immediately preceding the exercise of
such option. Such price was payable in shares of the Company's common stock.
The TPT Option may have been exercised at any time commencing on the earlier
of (i) January 1, 1998 or (ii) the date on which TPT has after-tax income of
at least $1,000 over a twelve-month period until the expiration date of such
option on December 31, 2003.

See Notes F and G for other related party transactions.

[5] OTHER COMMITMENTS:

At December 31, 1995 and March 31, 1996, the Company had letters of credit
outstanding totaling $500 and $500, respectively.

F-29

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE I) -- STOCKHOLDERS' EQUITY:

STOCK OPTION PLAN:

In July 1994, the Company adopted the 1994 Stock Option Plan (the "Plan").
Under the Plan, which provides for the issuance of either incentive stock
options or nonqualified options, the maximum number of shares of common stock
for which options may be granted is 300,000 shares. In 1994, stock options to
purchase 154,000 shares of common stock were granted at $3.50 per share.
Through December 31, 1995, the Company has issued additional options to
purchase 140,000 shares of common stock at prices ranging from $6.00 to
$14.875 per share. The options are exercisable in varying installments and
have a term of ten years. During 1995 and as of March 31, 1996, 3,795 and
21,280 options were exercised at an average exercise price of $3.50 and
$3.60, respectively.

In addition, on March 8, 1995, certain key employees were granted options
outside of the Plan to purchase an aggregate of 20,000 shares of common stock
at $6.75 per share (market value at the date of grant) pursuant to employment
agreements. These options are exercisable commencing in March 1996 through
March 2005.

On March 6, 1996, the Board of Directors of the Company, adopted, subject
to stockholder approval at the Annual Meeting, the Company's 1996 Stock
Incentive Plan (the "New Plan"). The New Plan is identical to the Plan,
except that the New Plan provides (i) for the grant of options to purchase up
to 500,000 shares of Common Stock and (ii) an automatic grant of
non-qualified stock options to purchase 10,000 shares to each non-employee
director upon his election or appointment to the Board of Directors and
annual grants (commencing on the date of the Annual Meeting if the New Plan
is approved) to each non-employee director of non-qualified stock options to
purchase 10,000 shares of Common Stock at the fair market value of the Common
Stock on the date of the grant.

In March 1996, certain employees were granted options outside of the Plan
to purchase an aggregate of 53,500 shares of common stock at $19.875 (market
value at the date of grant).

WARRANTS:

In connection with the initial public offering in November 1994, the
Company issued warrants to the representatives of the underwriters to
purchase 120,000 shares of common stock at $5.50 per share exercisable
through November 1999, of which 40,000 warrants to purchase shares were
exercised in connection with a public offering in December 1995. In April
1996, the remaining 80,000 warrants were exercised.

In connection with the public offering in December 1995, the Company has
granted warrants to the representatives of the underwriters to purchase from
the Company up to 300,000 shares of common stock at $20.25 per share
exercisable through December 2000.

In March 1996 the Company granted warrants to a consultant to purchase an
aggregate of 70,000 shares of common stock at $19.875 per share (market value
at the date of grant) pursuant to a three-year consulting agreement,
exercisable through March 1997.

F-30

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE J) -- INCOME TAXES:

The provision (benefit) for income taxes consists of the following:

THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
---------------- --------------
1994 1995 1995 1996
-------- ------ ------ ------
Current ..................... $ (65) $720 $2 $43
Deferred .................... (65) (51) -- (5)
-------- ------ ------ ------
(130) 669 2 38
Less valuation allowance ... (65)
-------- ------ ------ ------
Total provision (benefit) $ (65) $669 $2 $38
======== ====== ====== ======

At December 31, 1994, the Company had available net operating loss
carryforwards of approximately $180 for federal income tax purposes, which
were utilized in the year ended December 31, 1995. Temporary differences
arise due to differences between reporting for financial statement purposes
and for federal income tax purposes relating primarily to deferred rent
expense and depreciation methods.

The deferred tax assets (liabilities) are recorded as follows:

YEAR ENDED
DECEMBER 31, MARCH 31,
-------------- -----------
1994 1995 1996
------ ------ -----------
Deferred rent ...................... $ 65 $46 $41
Tax basis of assets over book basis 70 75
Net operating loss carryforward ... 65 -- --
------ ------ -----------
130 116 116
Less valuation allowance ........... 65 -- --
------ ------ -----------
Net deferred tax asset ............. $ 65 $116 $116
====== ====== ===========

Expected tax expense (benefit) based on the statutory rate is reconciled
with the actual expense as follows:
<TABLE>
<CAPTION>

PERCENT OF
PRE-TAX
EARNINGS (LOSS)
DECEMBER 31, MARCH 31,
------------------- ----------------
1994 1995 1995 1996
--------- -------- ------- -------
<S><C>
Expected tax expense ......................................... 34.0% 34.0% 34.0% 34.0%
Increase (reduction) in taxes resulting from:
Income attributable to S corporation ........................ (45.0)
State income tax (benefit) .................................. (2.0) 7.6 6.0 6.0
Decrease in valuation allowance in use of net operating loss (7.7)
Other ....................................................... 1.0 1.1 10.0 (4.0)
--------- -------- ------- -------
(12.0)% 35.0 % 50.0% 36.0%
========= ======== ======= =======
</TABLE>

F-31

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Officers and Directors
Owl's Creek Golf Center, Inc.
Virginia Beach, Virginia

I have audited the accompanying balance sheet of Owl's Creek Golf Center,
Inc. as of December 31, 1995, and the related statements of operations,
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.

I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe that my audit provides a
reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Owl's Creek Golf Center,
Inc. as of December 31, 1995, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted
accounting principles.
ANNE E. GORRY P.C.

February 12, 1996
Virginia Beach, Virginia

F-32

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>

1995
-------------
<S><C>
ASSETS
Current assets:
Cash on hand ...................................................................... $ 700
Cash in banks ..................................................................... 13,154
Utility deposits .................................................................. 2,231
-------------
16,085
-------------
Inventory (Note 1):
Maintenance supplies and parts ................................................... 7,724
Merchandise and snack bar ........................................................ 25,143
Range balls ...................................................................... 3,581
Gas and oil ...................................................................... 300
-------------
36,748
Prepaid expenses .................................................................. 21,564
-------------
Total current assets ........................................................... 74,397
-------------
Property & equipment (Note 1):
Golf course ....................................................................... 1,220,308
Cart paths ........................................................................ 208,741
Buildings ......................................................................... 391,258
Irrigation system ................................................................. 192,761
Parking lot ....................................................................... 195,798
Fences and landscaping ............................................................ 3,835
Bridges ........................................................................... 39,828
Equipment -- trucks, signs and fixtures ........................................... 338,361
Underground gas tanks ............................................................. 15,936
Golf clubs for rent ............................................................... 965
-------------
2,607,791
Less accumulated depreciation ..................................................... 746,809
-------------
1,860,982
-------------
Other assets:
Unamortized loan cost ............................................................ 19,488
Deferred interest expense ........................................................ 1,366
-------------
20,854
-------------
Total assets ................................................................... $ 1,956,233
=============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable .................................................................. $ 28,345
Payroll & sales taxes ............................................................. 1,718
Accrued interest payable .......................................................... 8,218
Notes payable to stockholders ..................................................... 498,056
Current portion of long term liabilities .......................................... 1,593,585
-------------
Total current liabilities ...................................................... 2,129,922
-------------
Long-term liabilities:
Banks (Note 2) .................................................................... 70,266
-------------
Total long-term liabilities .................................................... 70,266
-------------
Stockholders' equity:
Capital stock -- $1 par value; 5,000 shares authorized, 1,252 issued and
outstanding ....................................................................... 1,252
Additional paid-in capital ........................................................ 1,250,748
Retained earnings (deficit) ....................................................... (1,495,955)
-------------
Total stockholders' equity (deficit) ........................................... (243,955)
-------------
Total liabilities and stockholders' equity (deficit) ......................... $ 1,956,233
=============
</TABLE>

The accompanying notes are an integral part of these financial statements.
See accountant's report.

F-33

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1995

1995
---------
Income:
Sales -- pro shop ............... $ 92,137
Less -- cost of sales ........... 72,437
---------
Gross profit on pro shop sales 19,700
---------
Sales -- snack bar .............. 64,913
Less -- cost of sales ........... 30,466
---------
Gross profit on snack bar sales 34,447
---------
Green fees ...................... 272,174
Cart rentals .................... 134,526
Driving range ................... 75,014
Club and pullcart rentals ...... 11,684
Membership fees ................. 9,960
Tournament income ............... 42,122
Lessons ......................... 3,345
Hole sponsor .................... 1,350
Club repair ..................... 1,140
---------
Total operating income ...... 605,462
---------
Operating expenses:
Salaries:
Pro shop ....................... 22,837
Concessions .................... 10,551
Golf pros ...................... 41,482
Carts, attendants, starters ... 17,649
Range .......................... 15,400
Course maintenance ............. 66,482
---------
174,401
---------
Payroll tax .................... 15,380
---------
Pro shop:
Utilities ..................... 3,720
Supplies ...................... 5,955
Clubhouse maintenance ......... 1,435
Cash -- over or short ......... (420)
---------
10,690
---------
Concessions:
Utilities ..................... 3,483
Supplies ...................... 441
Repairs and maintenance ...... 40
Cash -- over or short ......... 401
---------
4,365
---------

The accompanying notes are an integral part of these financial statements.
See accountant's report

F-34

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) --(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995

1995
--------
Course operations:
Score cards .................... $ 896
Supplies ....................... 488
Range repair and maintenance .. 4,106
Range balls .................... 5,304
Carts -- gas and oil ........... 735
Carts -- repairs and
maintenance .................... 540
Cart rental .................... 35,973
Utilities ...................... 4,434
--------
52,476
--------
Course maintenance:
Golf course repair ............. 738
Chemicals ...................... 5,144
Equipment rental ............... 520
Equipment repair ............... 7,037
Fertilizer & lime .............. 4,908
Gas and oil .................... 4,828
Sand and top dressing .......... 105
Supplies ....................... 1,605
Water system repairs ........... 603
Educational .................... 35
Utilities ...................... 7,960
--------
33,483
--------
General expenses:
Accounting and legal ........... 6,000
Advertising .................... 6,824
Bad debts ...................... 3,923
Bank charges ................... 214
Contributions .................. 136
Cox cable ...................... 320
Credit card discount ........... 2,533
Dues and subscriptions ......... 573
Insurance -- general ........... 21,865
Insurance -- group ............. 2,817
Medical ........................ 298
Miscellaneous .................. 109
Office expense ................. 306
Personal property tax .......... 3,362
Pest control ................... 492
Postage, UPS, freight .......... 490
Real estate taxes .............. 9,431

The accompanying notes are an integral part of these financial statements.
See accountant's report

F-35

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) --(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995

1995
-------------
Refunds ..................................... $ 237
Rent -- land ................................ 43,000
Rent -- equipment ........................... 559
Security systems ............................ 525
Seminars and meetings ....................... 588
Supplies .................................... 157
Taxes and licenses .......................... 2,986
Telephone ................................... 3,533
Trade show .................................. 800
Trash removal ............................... 1,216
Amortization ................................ 6,519
Depreciation ................................ 82,974
-------------
202,787
-------------
Total operating expenses ................. 493,582
-------------
Net gain from operations .................... 111,880
-------------
Other income (loss):
Sales tax discount .......................... 362
Disposal of equipment ....................... (6,228)
Insurance claims ............................ 2,813
Putting course rent ......................... 1,720
Commissions, telephone and cigarettes ...... 200
-------------
(1,133)
-------------
Other expenses:
Interest .................................... 192,072
-------------
Net (loss) ................................... (81,325)
Retained earnings (deficit) beginning of year (1,426,484)
Prior period adjustments (Note 6) ............ 11,854
-------------
Retained earnings (deficit) end of year ..... $(1,495,955)
=============

The accompanying notes are an integral part of these financial statements.
See accountant's report

F-36

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>

1995
-----------
<S><C>
Cash flows provided from operating activities:
Net (loss) ...................................................................... $ (81,325)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .................................................. 89,493
Loss on sale of property and equipment ......................................... 6,228
Decrease in trade accounts receivable .......................................... 3,540
Decrease in utility deposit .................................................... 1,100
Decrease in inventories ........................................................ 8,570
Increase in prepaid expenses and other assets .................................. (2,516)
Decrease in accounts payable ................................................... (8,948)
Increase in accrued liabilities ................................................ 8,521
-----------
Net cash provided by operating activities .................................... 24,663
-----------
Cash flows from investing activities:
Purchase of property and equipment .............................................. (20,231)
Deferred interest ............................................................... (2,583)
-----------
Net cash provided (used) by investing activities ............................. (22,814)
-----------
Cash flows from financing activities:
Proceeds from long-term debt .................................................... 18,552
Proceeds from stockholders ...................................................... 106,250
Repayment of long-term debt ..................................................... (120,962)
-----------
Net cash provided (used) by financing activities ............................. 3,840
-----------
Net increase in cash ......................................................... 5,689
Cash at beginning of year .................................................... 8,165
-----------
Cash at end of year .......................................................... $ 13,854
===========
Supplemental disclosure of cash flow information:
Interest payments .............................................................. $ 183,854
===========
</TABLE>

The accompanying notes are an integral part of these financial statements.
See accountant's report

F-37

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Purpose

Owl's Creek Golf Center, Inc. was formed in 1985 under the laws of the
Commonwealth of Virginia for the purpose of developing and operating Owl's
Creek Golf Course.

Method of Accounting

The financial statements have been prepared using the accrued basis of
accounting in accordance with generally accepted accounting principles.

Inventory

Inventories of parts, maintenance supplies, gas, oil, merchandise and
snack bar supplies are stated at the lower of cost or market.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed
using MACRS over useful lives ranging from 15 to 31.5 years for buildings and
land improvements and 5 to 15 years for other property and equipment.

Income Taxes

The shareholders have elected to be taxed as an S-Corporation. Net income
or loss is passed through to shareholders. Therefore, there is no provision
for income taxes reflected in these financial statements.

Other Assets

Loan costs for bank loans are being amortized over 15 years.

NOTE 2 -- NOTES PAYABLE
<TABLE>
<CAPTION>

BANKS CURRENT LONG-TERM TOTAL
- ----------------------------------------------------------------- ------------ ----------- ------------
<S><C>
Central Fidelity -- secured by deed of trust and deed of trust
note on improvements. Payments of $6,000.00 principal, and prime
plus one and one-half percent (1 1/2 %) interest are due on the
first of each month for 32 months leaving a balance of
$1,545,761 at December 12, 1995. Central Fidelity has agreed to
extend this note for three months considering the pending sale.
In the event the assets of the corporation are not sold, Central
Fidelity has agreed to continue with the same terms for 36
months. ......................................................... $1,545,761 $ -- $1,545,761
Resource Bank -- note dated May 27, 1993. Interest rate is prime
plus one percent, with principal payments of $3,500 per month
plus interest beginning June 27, 1993. .......................... 42,000 64,442 106,442
Associates Commercial Corporation -- secured by one (1) Toro
Groundsmaster 325-D. Payments of $961.42 are due May through
October for 1995, 1996 and 1997. Liability $11,648 less deferred
interest ........................................................ 5,824 5,824 11,648
------------ ----------- ------------
$1,593,585 $70,266 $1,663,851
============ =========== ============
</TABLE>

See accountant's report.

F-38

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1995

NOTE 3 -- RELATED PARTY TRANSACTIONS

Merchandise

Inventory is bought and sold at cost between Owl's Creek Golf Center and
Hells Point Golf Course, a golf course owned in part by some of the officers
of the company.

NOTE 4 -- COMMITMENTS

Deed of Lease between Owl's Creek Golf Center, Inc. and City of Virginia
Beach, Virginia, for the 30.681 (plus or minus) acre tract of land on which
the golf center has been constructed. The lease term is for forty years
commencing April 1, 1987. In 1995 the due date was moved to August 1st for
the remaining years of the lease. The rent was prorated and paid at $1,500
per month for these four months. Schedule of annual rent is as follows:

1st 10 years $10,000 for 1st 2 years
$18,000 for last 8 years
2nd 10 years $22,000 yearly
3rd 10 years $25,000 yearly
4th 10 years $30,000 yearly

Deed of Lease between Owl's Creek Golf Center, Inc. and Robert H.
Braithwaite, Jr. and Nancy F. Braithwaite for the 41 (plus or minus) acre
tract of land on which the golf center has been constructed. The lease term
is for forty years commencing March 20, 1987. Schedule of annual rent is as
follows:

1st 10 years $15,000 for 1st 2 years
$25,000 for last 8 years
2nd 10 years $30,000 yearly
3rd 10 years $35,000 yearly
4th 10 years $40,000 yearly

NOTE 5 -- RENTALS UNDER OPERATING LEASES

The annual requirements to meet the lease commitment with Eastern Golf
Car, Inc. for 50 golf carts as of December 31, 1995, are as follows:

YEAR ENDING
DECEMBER 31,
- ------------------------------------
1996 .............................. $ 35,974
1997 .............................. 35,974
1998 .............................. 35,973
1999 .............................. 35,973
2000 .............................. 35,973
---------
Total minimum payments required $179,867
=========

NOTE 6 -- PRIOR PERIOD ADJUSTMENTS

Errors in accruals of prior year expenses have been corrected.

NOTE 7

The Company is under negotiations with an unrelated third party to sell
the assets of the company during February, 1996.

See accountant's report.

F-39

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE PERIOD FROM JANUARY 1, 1996 TO MARCH 5, 1996

Income:
Sales -- pro shop ............... $ 2,270
Less -- cost of sales ........... 1,785
--------
Gross profit on pro shop sales 485
--------
Sales -- snack bar .............. 3,179
Less -- cost of sales ........... 1,492
--------
Gross profit on snack bar sales 1,687
--------
Green fees ...................... 14,914
Cart rentals .................... 7,551
Driving range ................... 5,100
Club and pullcart rentals ...... 392
Membership fees ................. 750
Tournament income ............... 3,278
Lessons ......................... 33
Club repair ..................... 51
--------
Total operating income ...... 34,241
--------
Operating expenses:
Salaries:
Pro shop ....................... 4,531
Concessions .................... 451
Golf pros ...................... 8,095
Carts, attendants, starters ... 1,849
Range .......................... 1,623
Course maintenance ............. 13,813
--------
30,362
--------
Payroll tax .................... 3,061
--------
Pro shop:
Utilities ..................... 1,119
Supplies ...................... 351
Clubhouse maintenance ......... 638
Cash -- over or short ......... (82)
--------
2,026
--------
Concessions:
Utilities ..................... 342
Supplies ...................... 17
Repairs and maintenance ...... 225
Cash -- over or short ......... 13
--------
597
--------

(Continued)

F-40

<PAGE>

OWL'S CREEK GOLF CENTER, INC.
STATEMENT OF OPERATIONS -- (CONTINUED)
FOR THE PERIOD FROM JANUARY 1, 1996 TO MARCH 5, 1996

Course maintenance and operations:
Equipment repair ................. $ 239
Fertilizer & lime ................ 1,078
Gas and oil ...................... 350
Supplies ......................... 225
Repairs and Maintenance .......... 107
Utilities ........................ 278
----------
2,277
----------
General expenses:
Accounting and legal ............. 3,950
Advertising ...................... 68
Bad debts ........................ 70
Credit card discount ............. 190
Insurance -- general ............. 787
Insurance -- group ............... 1,143
Medical .......................... 27
Miscellaneous .................... 257
Other expense .................... 13,923
Pest control ..................... 171
Postage, UPS, freight ............ 84
Rent -- land ..................... 7,167
Security systems ................. 75
Taxes and licenses ............... 99
Telephone ........................ 1,163
Trash removal .................... 193
Amortization ..................... 447
Depreciation ..................... 10,712
----------
40,526
----------
Total operating expenses ..... 78,849
----------
Net (loss) from operations ...... (44,608)
----------
Other expenses:
Interest ......................... 34,645
----------
Net (loss) ........................ $(79,253)
==========

F-41

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Members
Flemington Golf and Sports Center, LLC
Flemington, New Jersey

We have audited the accompanying balance sheet of Flemington Golf and
Sports Center, LLC as of December 31, 1995, and the related statements of
operations and members' deficit 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.

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 financial statements referred to above present farily,
in all material respects, the financial position of Flemington Golf and
Sports Center, LLC as of December 31, 1995, and the results of its operations
and its cash flows for the year 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 3 to the
financial statements, the Company suffered recurring losses from operations
and has a net members' deficiency, which raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Ehrenkrantz and Company
Certified Public Accountants

February 28, 1996
(Except for Note 8, as to which
the date is March 7, 1996)
Roseland, New Jersey

F-42

<PAGE>

FLEMINGTON GOLF AND SPORTS CENTER, LLC
BALANCE SHEET
DECEMBER 31, 1995

ASSETS
Current Assets
Cash ................................. $ 715
----------
Total Current Assets ................. $ 715
Building and Equipment, at fair value 1,600,000
------------
$1,600,715
============
LIABILITIES AND MEMBERS' DEFICIT
Current Liabilities
Bank loans payable ................... $516,397
Note payable ......................... 744,152
Accounts payable and accrued expenses 521,583
Due to related parties ............... 107,814 $1,889,946
----------
Members' Deficit ...................... (289,231)
------------
$1,600,715
============

See notes to financial statements.

F-43

<PAGE>

FLEMINGTON GOLF AND SPORTS CENTER, LLC
STATEMENT OF OPERATIONS AND MEMBERS' DEFICIT
DECEMBER 31, 1995

Sales ............................. $ 500,657
Cost of Sales ..................... 486,053
-----------
Gross Profit ...................... $ 14,604
Operating Expenses ................ 413,381
-------------
Loss from Operations .............. (398,777)
Other Deductions
Impairment of facility ........... 2,448,045
Interest expense ................. 128,190 2,576,235
----------- -------------
Net Loss .......................... (2,975,012)
Members' Equity, beginning of year 2,696,408
-------------
(278,604)
Withdrawals ....................... 10,627
-------------
Members' Deficit, end of year .... $ (289,231)
=============

See notes to financial statements.

F-44

<PAGE>

FLEMINGTON GOLF AND SPORTS CENTER, LLC
STATEMENT OF CASH FLOWS
DECEMBER 31, 1995
<TABLE>
<CAPTION>

<S><C>
Cash Flows from Operating Activities
Net loss ................................................ $(2,975,012)
Adjustments to reconcile net loss to net cash provided
by operating activities
Impairment of facility ................................. 2,448,045
Depreciation and amortization .......................... 46,771
Decrease in operating assets
Inventories ........................................... 201,069
Increase in operating liabilities
Accounts payable and accrued expenses ................. 286,621
--------------
Net cash provided by operating activities ............. $ 7,494
Cash Flows from Investing Activities
Purchase of property and equipment ...................... (50,822)
--------------
Net cash used in investing activities ................. (50,822)
Cash Flows from Financing Activities
Repayment of bank loans ................................. (59,018)
Repayments of notes payable ............................. (46,828)
Withdrawals by members .................................. (10,625)
Borrowings from related parties ......................... 98,660
--------------
Net cash used in financing activities ................. (17,811)
----------
Net decrease in cash ..................................... (61,139)
Cash, beginning of year .................................. 61,854
----------
Cash, end of year ........................................ $ 715
==========
</TABLE>

See notes to financial statements.

F-45

<PAGE>

FLEMINGTON GOLF AND SPORTS CENTER, LLC
NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

The Company is a New Jersey limited liability company in the business of
operating and managing a golf and sports center.

Income Taxes

The Company is treated as a partnership for Federal income tax purposes.
Consequently, Federal income taxes are not payable by, or provided for the
Company. Members are taxed individually on their share of the Company's
earnings or losses. The Company's net income or loss is allocated among the
members in accordance with the operating agreement of the Company. The
financial statements do not reflect a provision for income taxes.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NOTE 2 -- IMPAIRMENT OF FACILITY

The Company has adopted Statement of Financial Accounting Standards No.
121 (Accounting for the impairment of long-lived assets and for long-lived
assets to be disposed of).

If the sum of the expected future cash flows is lesser than the carrying
amount of the asset, an impairment loss is recognized. The expected future
cash flows of the property, plant and equipment would be $1,600,000 compared
to the carrying amount of the asset of $4,048,045, resulting in an impairment
loss of $2,448,055 (see below).

On February 1, 1996, the Company received and accepted a letter of intent
from a public company, offering to acquire all of the assets and ownership
interests of the Flemington Golf and Sports Center. The consideration to be
paid consists of 100,000 shares of the acquiror's common stock, which has an
approximate fair market value of $2,000,000 at the balance sheet date. The
stock is deemed to be "restricted securities" as such term is defined under
Rule 144 of the Securities Act of 1933 and such shares can only be sold in
accordance with the provisions of this Rule including a holding period.

Management of the Company has advised that arrangements have been made
with a brokerage firm to immediately purchase the restricted stock at a
discount of 20% which would result in a payment to the Company of $1,600,000.

NOTE 3 -- CONTINGENCIES

Going Concern

As shown in the accompanying financial statement, the Company incurred a
net loss of $2,975,012 during the year ended December 31, 1995, and as of
that date, the Company's current liabilities exceeded its current assets by
$1,889,231 and its total liabilities exceeded its total assets by $289,231.
In addition, the Company has sustained significant operating losses since
inception.

Those factors, as well as the uncertain condition that the Company faces
regarding its loan agreements create an uncertainty about the Company's
ability to continue as a going concern.

F-46

<PAGE>

FLEMINGTON GOLF AND SPORTS CENTER, LLC
NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 3 -- CONTINGENCIES (Continued)
Management of the Company has accepted a letter of intent to sell the assets
(as discussed in Note 2), however, the ability of the company to continue as
a going concern is dependent on the successful completion of the sale and a
possible guarantee by the members to fund any shortfall of funds in order to
provide full payment to all the creditors. The financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.

NOTE 4 -- BANK LOANS PAYABLE

The obligations consist of the following:

Note payable, Valley National Bank, requiring monthly payments
of $44,167 plus interest at 1 1/2 % over the base commercial
lending rate of the bank. The loan matures May 18, 1998. The
loan is collateralized by the inventory and personally
guaranteed by the members and is in default at this date. (a) . $383,333
Note payable, Valley National Bank, requiring monthly payments
of $2,381 plus interest at 1 1/2 % over the base commercial
lending rate of the bank. The loan is collateralized by the
members and is in default at this date. (a) .................... 133,064
----------
$516,397
==========

- ------------

(a) There is currently pending litigation filed against the Company and
other defendants by Valley National Bank (because of loan covenant
violations). At present, no answer has been filed, however, it is
anticipated that the revenues from the proposed sale will resolve the
litigation.

NOTE 5 -- NOTE PAYABLE

The Company is obligated to a company affiliated with the
land-owner, requiring monthly payments of $9,496 to be applied
first to interest at 7 1/2 % per annum and the balance to
principal. The note matures on May 1, 1998 and is
collateralized by all assets of the Company (excluding the
inventory) and is in default at this date. ..................... $744,152
=========

NOTE 6 -- RELATED PARTY TRANSACTIONS

The company has purchased and sold merchandise from a related party on
open account and at no mark-up. Purchases for the year amounted to $9,932 and
sales for the year were $32,784.

F-47

<PAGE>

FLEMINGTON GOLF AND SPORTS CENTER, LLC
NOTES TO FINANCIAL STATEMENTS -- (Continued)

NOTE 7 -- LEASE COMMITMENTS

The Company is obligated under a ten year lease which terminates April 30,
2003. Rent expense for the year was $102,000. Under the negotiated terms of
the pending sale, the landlord will release the Company from this obligation
(see Note 2). Rental payments under the lease are as follows:

1996 ......... $102,000
1997 ......... 102,000
1998 ......... 102,000
1999 ......... 102,000
2000 ......... 102,000
Thereafter .. 238,000
----------
$748,000
==========

NOTE 8 -- SUBSEQUENT EVENT

In March 1996, the Company successfully completed the sale of all the
assets to a public company (see Note 2).

F-48

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
202 Golf Associates, Inc.
Yorktown Heights, New York

We have audited the balance sheet of 202 Golf Associates, Inc. as of
December 31, 1995 and the related statements of operations, changes in
shareholders' deficit 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 aforementioned financial statements present fairly the
financial position of 202 Golf Associates, Inc. at December 31, 1995 and the
results of its operations, changes in shareholders' deficit and cash flows
for the year ended December 31, 1995 in conformity with generally accepted
accounting principles.
MANGINI, TRAEGER & COMPANY, P.C.

April 8, 1996
Armonk, New York

F-49

<PAGE>

202 GOLF ASSOCIATES, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>

ASSETS
<S><C>
Current Assets:
Cash ....................................................................... $ 166,833
Construction bid bonds ..................................................... 41,710
------------
208,543
------------
Property and equipment -- net of accumulated depreciation of $147,916 ...... 2,130,220
Deferred charges -- net of accumulated amortization of $54,879 ............. 198,266
Deposits .................................................................... 2,900
------------
2,331,386
------------
Total Assets ............................................................ $2,539,929
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current portion of long term debt .......................................... $ 72,675
Accounts payable ........................................................... 47,856
------------
120,531
Long term debt, net of current portion ...................................... 2,445,472
Shareholders' loans payable ................................................. 504,807
------------
3,070,810
------------
Shareholders' Deficit:
Common stock -- no par value, 200 shares authorized, issued and outstanding 1,000
Accumulated deficit (of which $76,256 was accumulated during the
development stage) ........................................................ (402,831)
------------
(401,831)
Less: treasury stock, at cost .............................................. (129,050)
------------
(530,881)
------------
Total Liabilities and Shareholders' Deficit ............................. $2,539,929
============
</TABLE>

The accompanying notes are an integral part of this statement.

F-50

<PAGE>

202 GOLF ASSOCIATES, INC.
STATEMENT OF OPERATIONS & SHAREHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995

Revenues ......................................... $ 388,261
Cost of sales .................................... 88,768
-----------
Gross Profit ................................. 299,493
-----------
Operating Expenses:
Salaries ........................................ 59,181
Payroll taxes ................................... 6,046
Equipment lease ................................. 50,538
Telephone and utilities ......................... 28,367
Landscaping maintenance ......................... 8,785
Depreciation and amortization ................... 185,742
Advertising and marketing ....................... 26,620
Professional fees ............................... 5,011
Office expense and utilities .................... 21,302
Insurance ....................................... 27,892
Interest expense ................................ 172,790
Vehicle expense ................................. 2,071
Miscellaneous ................................... 3,622
Property taxes .................................. 27,725
State taxes ..................................... 376
-----------
626,068
-----------
Net Loss ..................................... (326,575)
Deficit accumulated during the development stage (76,256)
-----------
Accumulated Deficit -- Ending .................... $(402,831)
===========

The accompanying notes are an integral part of this statement.

F-51

<PAGE>

202 GOLF ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>

<S><C>
Cash Flows From Operating Activities:
Net loss .................................................................. $(326,575)
Adjustments to reconcile net loss to net cash used by operating
activities:
Amortization ............................................................ 50,629
Depreciation ............................................................ 135,113
Decrease in prepaid expenses ............................................. 6,150
Increase in accounts payable ............................................. 6,125
------------
Net Cash Used by Operating Activities ................................. (128,558)
------------
Cash Flows From Investing Activities:
Increase in bonds receivable .............................................. (41,710)
Acquisition of fixed assets ............................................... (67,301)
Decrease in deferred charges .............................................. 1,871
------------
Net Cash Used by Investing Activities ................................. (107,140)
------------
Cash Flows From Financing Activities:
Proceeds of shareholder loans ............................................. 302,903
Payments on long term debt ................................................ (70,903)
------------
Net Cash Provided by Financing Activities ............................. 232,000
------------
Net decrease in cash ....................................................... (3,698)
------------
Cash at beginning of period ........................................... 170,531
------------
Cash at end of period ...................................................... $ 166,833
============
Cash paid for interest ..................................................... $ 172,790
============
Cash paid for taxes ........................................................ $ 376
============
</TABLE>

The accompanying notes are an integral part of this statement.

F-52

<PAGE>

202 GOLF ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1995

NOTE A -- ORGANIZATION

The Company was formed in January, 1992. Operations of the golf driving
range began upon the completion of construction in December of 1994. Prior to
that time operations were devoted primarily to raising capital, obtaining
financing, constructing the facility, advertising, and administrative
functions.

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Property and Equipment

Property and equipment are carried at cost. Depreciation is charged to
expense over the estimated useful lives of the assets using straight-line and
accelerated methods.

Deferred Charges

Deferred charges are comprised of organization costs and financing costs
and are being amortized using the straight-line method over five years.
Amortization charged to operations was $50,629 for the period.

Income Taxes

The financial statements do not include a provision for income taxes
because the company has elected S corporation status for federal and state
purposes. Instead, its earnings and losses are included in the shareholders'
personal income tax returns.

Concentration of Credit Risk

The Company maintains cash balances at financial institutions which may
exceed federally insured amounts of $100,000. At the balance sheet date this
excess was $106,758.

NOTE C -- PROPERTY AND EQUIPMENT

The following is a summary of property and equipment, at cost, less
accumulated depreciation:

Land and improvements ......... $ 824,742
Buildings and improvements ... 1,314,278
Machinery and equipment ...... 127,951
Furniture and fixtures ........ 11,165
-----------
2,278,136
Less: accumulated depreciation 147,916
-----------
$2,130,220
===========

The useful lives of properly and equipment for computing depreciation are:

Land and improvements .........10-15 years
Buildings and improvements ... 20-30 years
Machinery and equipment ...... 3-5 years
Furniture and fixtures ........ 7 years

Depreciation charged to expense for the period was $135,113.

F-53

<PAGE>

202 GOLF ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS -- (Continued)
December 31, 1995

NOTE D -- LONG-TERM DEBT

The following is a summary of notes and mortgages payable as of December
31, 1995.
<TABLE>
<CAPTION>
<S><C>
Mortgage payable to bank with a fixed monthly payment of $4,596 plus interest at
2% above the banks prime lending rate on the unpaid balance; personally
guaranteed by all shareholders. The loan is due and payable in full in December
1999. .......................................................................... $1,444,843
Mortgage payable to shareholders, dated May 1994 with no stated terms for
principal or interest payments. This mortgage is subordinate to the bank
mortgage. Additional funds will be provided when required. ..................... 1,000,000
Note payable to former shareholders for the purchase of treasury stock for 100%
of the shareholders interest, bearing an interest rate of 9%; payable as
follows:
A principal installment in the sum of $5,325, together with accrued interest
of $4,675 payable on June 1, 1995.
The remaining principal balance is to be paid in equal monthly installments
of $2,083. ................................................................... 73,304
------------
2,518,147
Less: current portion ........................................................... 72,675
------------
Long-term debt, net of current portion .......................................... $2,445,472
============
</TABLE>

NOTE E -- TREASURY STOCK

In October 1994, the Company entered into an agreement to purchase all of
the stock of certain shareholders for a total of $129,050.

F-54

<PAGE>

202 GOLF ASSOCIATES, INC.
BALANCE SHEET

MARCH 31, 1996
--------------
ASSETS
Current Assets
Cash ........................................ $ 146,833
Construction bid bonds ...................... 41,710
--------------
Total current assets ........................ 188,543
Property and equipment ....................... 2,096,442
Deferred charges ............................. 189,290
Deposits ..................................... 2,900
--------------
Total Assets ............................. $2,477,175
==============

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Current portion of long term debt ........... $ 72,675
Accounts payable ............................ 58,056
--------------
Total current liabilities ................... 130,731
Long term debt (net of current portion) ..... 2,431,684
Shareholders' loans payable .................. 504,807
--------------
Total Liabilities ........................ 3,067,222
--------------
Shareholders Deficit
Common stock ................................ 1,000
Accumulated deficit ......................... (461,997)
--------------
Less: Treasury Stock ......................... (129,050)
--------------
Total Shareholders' Deficit .................. (590,047)
--------------
Total Liabilities and Shareholders
Deficit ..................................... $2,477,175
==============

F-55

<PAGE>

202 GOLF ASSOCIATES, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996

Revenues ....................... $ 77,254
Cost of sales .................. 12,806
----------
Gross Profit ............... 64,448
----------
Operating Expenses:
Salaries ...................... 18,137
Payroll taxes ................. 2,193
Equipment lease ............... 12,827
Telephone and utilities ...... 5,974
Landscaping maintenance ...... 799
Depreciation and amortization 42,754
Advertising and marketing .... 4,868
Professional fees ............. 132
Office expense and utilities . 2,893
Insurance ..................... 711
Interest expense .............. 26,359
Miscellaneous ................. 392
Property taxes ................ 5,575
----------
123,614
----------
Net Loss ................... $(59,166)
==========

F-56

<PAGE>

202 GOLF ASSOCIATES, INC.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>

Cash Flows From Operating Activities:
Net loss .................................................................. $(59,166)
Adjustments to reconcile net loss to net cash used by operating
activities:
Amortization ............................................................ 8,976
Depreciation ............................................................ 33,778
Increase in accounts payable ............................................. 10,200
Net Cash Used by Operating Activities ................................. (6,212)
-----------
Cash Flows From Financing Activities:
Payments on long term debt ................................................ (13,788)
-----------
Net Cash (Used in) Financing Activities ............................... (13,788)
-----------
Net decrease in cash ....................................................... (20,000)
-----------
Cash at beginning of period ........................................... 166,833
Cash at end of period ...................................................... $146,833
===========
Cash paid for interest ..................................................... $ 26,359
===========
</TABLE>

F-57

<PAGE>

202 GOLF ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996

NOTE A -- ORGANIZATION

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Property and Equipment

Property and equipment are carried at cost. Depreciation is charged to
expense over the estimated useful lives of the assets using straight-line and
accelerated methods.

Deferred Charges

Deferred charges are comprised of organization costs and financing costs
and are being amortized using the straight-line method over five years.

Income Taxes

Concentration of Credit Risk

The Company maintains cash balances at financial institutions which may
exceed federally insured amounts of $100,000.

NOTE C -- INTERIM FINANCIAL STATEMENTS

The financial statements as of March 31, 1996 and for the three months
then ended are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the
Partnership's financial position and results of operations.

F-58

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Shareholder of Indian River Golf-O-Rama, Inc.

We have audited the accompanying balance sheet of Indian River
Golf-O-Rama, Inc. (an "S" Corporation) as of December 31, 1995 and 1994, and
the related statements of operations, changes in shareholder's equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Indian River Golf-O-Rama,
Inc. as of December 31, 1995 and 1994, and the results of its operations and
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
SHANHOLT GLASSMAN HOFFMAN
KLEIN & CO., P.C.

New York, New York
February 7, 1996

F-59

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
(AN "S" CORPORATION)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>

1995 1994
------------- ------------
<S><C>
ASSETS
CURRENT ASSETS
Cash ............................................ $ 234 $ --
Inventory ....................................... 29,867 33,683
Prepaid expenses ................................ 7,369 7,342
Other receivable ................................ 3,985 --
Due from affiliate .............................. 85,150 76,400
Deposits ........................................ -- 4,000
------------- ------------
TOTAL CURRENT ASSETS .......................... 126,605 121,425
------------- ------------
Building, improvements and equipment
Cost of building, improvements and equipment ... 2,181,203 2,153,807
Less
Accumulated depreciation ....................... 632,323 434,812
------------- ------------
NET BUILDING, IMPROVEMENTS AND EQUIPMENT ..... 1,548,880 1,718,995
------------- ------------
OTHER ASSETS
Deposits ........................................ 300 300
------------- ------------
TOTAL ASSETS .................................. $ 1,675,785 $1,840,720
============= ============
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Bank overdraft .................................. $ 8,149 $ 9,802
Accounts payable and accrued expenses ........... 31,412 23,490
Deferred income ................................. 9,000 7,500
Building lease .................................. -- 19,922
Equipment lease ................................. 1,590 --
Due to affiliate ................................ 96,248 30,406
Due to Lenrich Associates ....................... 225,042 181,514
------------- ------------
TOTAL CURRENT LIABILITIES ..................... 371,441 272,634
------------- ------------
CONTINGENCIES
SHAREHOLDER'S EQUITY
Common stock, no par value 5,000 shares
authorized
100 shares issued and outstanding .............. 2,465,974 2,498,074
Retained deficit ................................ (1,161,630) (929,988)
------------- ------------
TOTAL SHAREHOLDER'S EQUITY .................... 1,304,344 1,568,086
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY ... $ 1,675,785 $1,840,720
============= ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-60

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
(AN "S" CORPORATION)
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

RETAINED
TOTAL COMMON STOCK DEFICIT
------------ ------------ -------------
BALANCE--JANUARY 1, 1994 $1,798,222 $2,498,074 $ (699,852)
Net loss for the year ended
December 31, 1994 ......... (230,136) -- (230,136)
------------ ------------ -------------
BALANCE--DECEMBER 31, 1994 1,568,086 2,498,074 (929,988)
Net loss for the year ended
December 31, 1995 ......... (231,642) -- (231,642)
Distribution to shareholder (32,100) (32,100) --
------------ ------------ -------------
BALANCE--DECEMBER 31, 1995 $1,304,344 $2,465,974 $(1,161,630)
============ ============ =============

The accompanying notes are an integral part of these financial statements.

F-61

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
(AN "S" CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED
<TABLE>
<CAPTION>

DECEMBER 31,
---------------------------
1995 1994
------------ -------------
<S><C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ................................................ $(231,642) $ (230,136)
Adjustments to reconcile net loss to net cash provided
by
operating activities:
Depreciation .......................................... 197,511 193,245
Increase in deferred income ........................... 1,500 7,500
Equipment sale ........................................ (16,500) --
(Increase) decrease in inventory ...................... 3,816 (3,063)
Increase in prepaid expenses .......................... (27) (2,938)
Increase in other receivable .......................... (3,985) --
(Increase) decrease in deposits ....................... 4,000 (300)
Increase in accounts payable and accrued expenses .... 7,922 10,869
Increase in due to Lenrich Associates
(rent and real estate taxes) ......................... 43,528 76,814
------------ -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........... 6,123 51,991
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment ......................... 16,500 --
Purchase of equipment ................................... (10,482) (45,889)
Advance and repayments--affiliates ...................... (8,750) (1,122)
------------ -------------
NET CASH USED BY INVESTING ACTIVITIES ................ (2,732) (47,011)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholders' distribution .............................. (32,100) --
Additional common stock proceeds ........................ -- 1,470,204
Repayment of equipment lease ............................ (15,324) --
Repayment of building lease ............................. (19,922) (31,306)
Advances and repayments--affiliates ..................... 65,842 (1,443,798)
------------ -------------
NET CASH USED BY FINANCING ACTIVITIES ................ (1,504) (4,900)
------------ -------------
NET INCREASE IN CASH ..................................... 1,887 80
Net cash overdraft--beginning of year .................... (9,802) (9,882)
------------ -------------
NET CASH OVERDRAFT--END OF YEAR .......................... $ (7,915) $ 9,802
============ =============
</TABLE>

SUPPLEMENT CASH FLOWS INFORMATION

No taxes were paid in 1995 and 1994. Interest expense totalled $642 and $130
in 1995 and 1994, respectively.

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

As described in Note 3B, the Corporation entered into an equipment lease.
Consequently, equipment and equipment lease obligations each increased by
$16,914.

The accompanying notes are an integral part of these financial statements.

F-62

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
(AN "S" CORPORATION)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED

DECEMBER 31,
-------------------------
1995 1994
------------ -----------
REVENUES
Driving range (net of discounts) .. $ 493,192 $ 469,247
Pro shop; food; batting; other .... 98,472 72,405
Equipment sale ..................... 16,500 --
------------ -----------
Total revenues .................... 608,164 541,652
------------ -----------
EXPENSES
Cost of pro shop goods and food ... 71,744 52,270
Payroll ............................ 165,724 144,670
Payroll taxes ...................... 14,337 13,403
Golf supplies ...................... 29,622 34,651
Golf professionals ................. 1,470 4,576
Advertising ........................ 84,881 85,374
Equipment rental ................... 4,578 10,956
Repairs, maintenance and supplies . 47,179 45,347
Landscaping ........................ 125 3,322
Sales and personal property taxes . 21,900 21,222
Real estate taxes .................. 25,630 25,913
Insurance .......................... 28,461 22,255
Utilities .......................... 22,874 18,442
Telephone .......................... 9,472 8,621
Other maintenance .................. 3,523 2,810
Accounting ......................... 9,691 10,825
Consulting and engineer ............ 9,321 521
Rent ............................... 56,898 50,900
Office ............................. 4,522 4,170
Payroll preparation ................ 3,689 3,864
Fees and permits ................... 3,478 2,701
Travel and entertainment ........... 14,493 4,661
Bank charges ....................... 5,264 5,511
Miscellaneous ...................... 3,419 1,558
------------ -----------
TOTAL EXPENSES BEFORE DEPRECIATION 642,295 578,543
------------ -----------
Loss before depreciation ............ (34,131) (36,891)
Less
Depreciation ....................... 197,511 193,245
------------ -----------
NET LOSS ............................ $(231,642) $(230,136)
============ ===========

The accompanying notes are an integral part of these financial statements.

F-63

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994

NOTE 1. ORGANIZATION

Indian River Golf-O-Rama, Inc. (the "Corporation") is a corporation that
was formed on January 31, 1992 for the purpose of operating a golf driving
range located in Virginia Beach, VA. In addition to the driving range, the
Corporation operates a pro shop, snack bar, mini-golf course and batting
cages.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION

The Corporation's policy is to prepare its financial statements on the
accrual basis of accounting.

B. REVENUE RECOGNITION

Membership dues are recorded as driving range revenue in the applicable
membership period. Dues received in advance for subsequent years are
reflected as deferred income. All other revenues are recognized as income
when received.

C. INVENTORIES

Inventories are stated at the lower of cost or market determined by the
first-in, first-out method. Inventories consist of the Corporation's prop
shop items as well as snack bar food.

D. DEPRECIATION

Building and improvements are depreciated over 40 years on a straight-line
method and equipment over a 10 year straight-line period. The Corporation
depreciates its tractor (see Note 3B) over a 5 year straight line period.

E. INCOME TAXES

The Corporation has elected to be taxed as an "S" Corporation under the
provisions of the Internal Revenue Code. Under such provision, the
Corporation does not pay federal or state corporate income taxes. Therefore,
no provisions for federal or state income taxes have been made. The
shareholder of the Corporation is to report his share of the Corporation's
loss to the extent allowable on his personal income tax return.

NOTE 3. LEASE PAYABLE

A. BUILDING LEASE

The Corporation is the lessee of certain trailer buildings under a capital
lease which matured in June, 1995. The asset and liability under the lease
was recorded at the minimum lease payments. The Corporation paid $19,922 and
$31,306 for 1995 and 1994, respectively, under this lease obligation.

The asset is being depreciated over 31 1/2 years. Depreciation expense for
the years ended December 31, 1995 and 1994 totalled approximately $3,500 per
annum.

B. EQUIPMENT LEASE

The Corporation is the lessee of a tractor under a capital lease. The
asset and liability under the lease was recorded at the minimum lease
payments. The Corporation paid approximately $15,500 of the obligation in
1995, and expects to remit the remaining balance of $1,590 during 1996.

The asset is being depreciated over 5 years. Depreciation expense for the
year ended December 31, 1995 totalled approximately $1,700.

F-64

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994--(Continued)

NOTE 4. RELATED PARTY TRANSACTION

A. AFFILIATE ADVANCES

The Corporation has made unsecured, short-term, non-interest bearing
advances from an entity which is owned by the shareholder. These advances
totalled $96,248 and $30,406 at December 31, 1995 and 1994, respectively.

B. MINIMUM LEASE PAYMENTS

The Corporation has entered into a lease agreement (the "Agreement") for
the driving range premises, dated May 1, 1992, with Lenrich Associates, which
is owned by the shareholder. The Agreement requires fixed lease payments in
the amount of $39,000 per annum, payable in monthly installments. Commencing
in the third year of the lease, the Corporation is required to remit
additional rent, as defined in the Agreement.

The Corporation has not paid all of its lease obligations as described
above. Additionally, Lenrich Associates has paid the Corporation's real
estate taxes.

Unpaid rent and real estate tax obligations totalled $225,042 and $181,514
at December 31, 1995 and 1994, respectively.

Minimum annual lease payments for the next five years, excluding
additional rent, are as follows:

YEAR ENDING
DECEMBER 31, AMOUNT
- -------------- ---------
1996 ......... $ 39,000
1997 ......... 39,000
1998 ......... 39,000
1999 ......... 39,000
2000 ......... 39,000
---------
$195,000
=========

Additional rent totalled approximately $17,900 and $11,900 for the years
ended December 31, 1995 and 1994, respectively.

NOTE 5. CONTINGENCIES

A. ENVIRONMENTAL

The Corporation discovered an unknown substance on its property and
retained an environmental engineering firm to test this substance. It is not
possible to predict, at this time, the extent of the Corporation's liability,
if any, in conjunction with the aforementioned unknown substance.

B. OTHER

As shown in the accompanying financial statements, the Corporation has
been incurring net operating losses and had working capital deficiencies at
December 31, 1995 and 1994. The Corporation's shareholder intends to
contribute additional capital to the Corporation to repay its rent and real
estate tax obligations (reference is made to Note 4(B)). The financial
statements do not include any adjustments that might be necessary should the
above mentioned additional capital not be contributed to the Corporation.

F-65

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
BALANCE SHEET

MARCH 31, 1996
--------------
ASSETS
Current Assets
Cash ........................................ $ 2,200
Inventory ................................... 29,195
Prepaid expenses ............................ 7,369
Other receivables ........................... 3,985
Due from affiliate .......................... 85,150
--------------
Total Current Assets ..................... 127,899
Building, improvements and equipment
Cost of building, improvements and equipment 2,181,203
Less
Accumulated depreciation ................... 681,701
--------------
Net building, improvements and equipment 1,499,502
Other assets
Deposits .................................... 300
--------------
Total assets ............................. $ 1,627,701
==============

LIABILITIES AND SHAREHOLDER'S DEFICIT
Current Liabilities:
Bank overdraft
Accounts payable and accrued expenses ...... $ 8,710
Deferred income .............................
Equipment lease .............................
Due to affiliate ............................ 96,248
Due to Lenrich Associates ................... 225,042
--------------
Total current liabilities ................ 330,000
--------------
Shareholders equity
Common stock ................................ 2,465,974
Retained deficit ............................ (1,168,273)
--------------
Total shareholder's equity ............... 1,297,701
--------------
Total liabilities and shareholder's
equity ...................................... $ 1,627,701
==============

F-66

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
(AN "S" CORPORATION)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996

REVENUES
Driving range (net of discounts) $52,470
Pro shop; food; batting; other . 4,719
---------
Total revenues ................. 57,189
---------
EXPENSES
Cost of pro shop goods and food 2,836
Payroll ......................... 15,547
Golf professionals .............. 9,308
Advertising ..................... 942
Repairs, maintenance and
supplies ....................... 710
Insurance ....................... 3,280
Utilities ....................... 5,346
Telephone ....................... 1,980
Legal & Accounting .............. 150
Office .......................... 46
Travel and entertainment ........ 703
Bank charges .................... 1,495
Miscellaneous ................... 8,203
---------
TOTAL EXPENSES BEFORE
DEPRECIATION .................. 50,546
---------
NET INCOME ...................... $ 6,643
=========

F-67

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
(AN "S" CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ...................................................................... $ (6,643)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation ................................................................ 49,378
Decrease in deferred income ................................................. (9,000)
Decrease in inventory ....................................................... 672
Decrease in accounts payable and accrued expenses ........................... (22,702)
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES .................................. 11,705
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of equipment lease .................................................. (1,590)
NET CASH (USED IN) FINANCING ACTIVITIES .................................... (1,590)

NET INCREASE IN CASH ........................................................... 10,115

Net cash overdraft--beginning of period ........................................ (7,915)

NET CASH--END OF PERIOD ........................................................ $ 2,200
==========
</TABLE>

F-68

<PAGE>

INDIAN RIVER GOLF-O-RAMA, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 1. ORGANIZATION

Indian River Golf-O-Rama, Inc. (the "Corporation") is a Corporation that
was formed on January 31, 1992 for the purpose of operating a golf driving
range located in Virginia Beach, VA. In addition to the driving range, the
Corporation operates a pro shop, snack bar, mini-golf and batting cages.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION

The Corporation's policy is to prepare its financial statements on the
accrual basis of accounting.

B. REVENUE RECOGNITION

C. INVENTORIES

Inventories are stated at the lower of cost or market determined by the
first-in, first-out method. Inventories consist of the Corporation's pro shop
items as well as snack bar food.

D. DEPRECIATION

Building and improvements are depreciated over 40 years on a straight-line
method and equipment over a 10-year straight-line period. The Corporation
depreciates its tractor over a 5-year straight-line period.

E. INCOME TAXES

The Corporation has elected to be taxed as an "S" Corporation under the
provisions of the Internal Revenue code. Under such provision, the
Corporation does not pay federal or state corporate income taxes. Therefore,
no provisions for federal or state income taxes have been made. The
shareholder of the Corporation is to report his share of the Corporation's
loss to the extent allowable on his personal income tax return.

NOTE 3. INTERIM FINANCIAL STATEMENTS

The financial statements as of March 31, 1996 and for the three months
then ended are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the Company's
financial position and results of operations.

F-69

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Owner
Catalina Golf Center

We have audited the accompanying balance sheet of Catalina Golf Center, as
of December 31, 1995, the related statements of income and proprietor's
capital and cash flows for the year then ended. These financial statements
are the responsibility of the management of Catalina Golf Center. Our
responsibility is to express an opinion on these financial statements based
on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Catalina Golf Center, as
of December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.

ROBERT DECKER,
C.P.A.

Tucson, Arizona
June 6, 1996

F-70

<PAGE>

CATALINA GOLF CENTER
BALANCE SHEET
DECEMBER 31, 1995

ASSETS
CURRENT ASSETS
Cash ....................................... $ 4,657
Inventory .................................. 1,523
-----------
TOTAL CURRENT ASSETS ...................... 6,180
PROPERTY AND EQUIPMENT
Property and equipment, net ................ 573,037
OTHER ASSETS
Loan origination fees, net ................. 32,204
-----------
TOTAL ASSETS .............................. $ 611,421
===========
LIABILITIES AND PROPRIETOR'S CAPITAL
CURRENT LIABILITIES
Notes payable .............................. $ 722,120
Street assessment payable .................. 44,267
Property taxes payable ..................... 43,126
Accrued payroll and payroll taxes .......... 6,248
Accounts payable ........................... 103,106
Accrued interest ........................... 53,574
Litigation payable ......................... 363,091
-----------
TOTAL CURRENT LIABILITIES ................. 1,335,532
PROPRIETOR'S CAPITAL (DEFICIT) .............. (724,111)
-----------
TOTAL LIABILITIES AND PROPRIETOR'S CAPITAL $ 611,421
===========

See notes to financial statements

F-71

<PAGE>

CATALINA GOLF CENTER
STATEMENT OF INCOME AND PROPRIETOR'S CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>

REVENUE
Sales .............................................................................. $ 156,515
-----------
COSTS AND EXPENSES
Salaries and benefits .............................................................. 51,682
Taxes .............................................................................. 45,071
Utilities .......................................................................... 24,847
Landscaping ........................................................................ 16,471
Depreciation and amortization ...................................................... 36,394
Commissions ........................................................................ 18,392
Operational and golf supplies ...................................................... 36,439
Repairs and maintenance ............................................................ 3,434
General and administrative ......................................................... 8,895
Advertising and promotion .......................................................... 5,453
-----------
TOTAL COSTS AND EXPENSES .......................................................... 247,078
-----------
OPERATING LOSS .................................................................. (90,563)
-----------
OTHER INCOME (EXPENSE)
Interest expense ................................................................... (132,398)
Rental income ...................................................................... 4,500
-----------
TOTAL OTHER INCOME (EXPENSE) ...................................................... (127,898)
-----------
LOSS BEFORE EXTRAORDINARY ITEM ...................................................... (218,461)
-----------
EXTRAORDINARY ITEM (Note 6)
Litigation judgment against owner related to original agreement to build golf
center ............................................................................. (363,091)
-----------
NET LOSS ......................................................................... (581,552)
PROPRIETOR'S CAPITAL (DEFICIT) -- BEGINNING OF YEAR ................................. (190,609)
Capital contributed ................................................................ 48,050
-----------
PROPRIETOR'S CAPITAL (DEFICIT) -- END OF YEAR ....................................... $(724,111)
===========
</TABLE>

See notes to financial statements

F-72

<PAGE>

CATALINA GOLF CENTER
STATEMENT OF CASH FLOW
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................... $(581,552)
Adjustments to reconcile net loss to net cash from operating
activities:
Extraordinary item .................................................... 363,091
Depreciation and amortization ......................................... 36,394
Decrease in current assets:
Inventory ............................................................ 477
Increase in current liabilities:
Property taxes payable ............................................... 43,126
Accrued payroll and payroll taxes .................................... 6,248
Accounts payable ..................................................... 56,528
Accrued interest ..................................................... 40,241
------------
Net cash used in operating activities ............................... (35,447)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on street assessment .......................................... (984)
Capital contributions .................................................. 48,050
Payment for loan origination fees ...................................... (10,000)
------------
Net cash provided by financing activities ........................... 37,066
------------
NET INCREASE IN CASH .................................................... 1,619
CASH -- BEGINNING OF YEAR ............................................... 3,038
------------
CASH -- END OF YEAR ..................................................... $ 4,657
============
SUPPLEMENTAL DISCLOSURES
Operating activities reflect the following cash payments:
Interest .............................................................. $ 92,157
============
</TABLE>

See notes to financial statements

F-73

<PAGE>

CATALINA GOLF CENTER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization:

Catalina Golf Center (the "Business"), is a proprietorship owned by Ruth
Perillo. The proprietorship owns and operates a golf driving range located in
Tucson, Arizona. Ruth Perillo's other personal assets have not been included
in these financial statements.

Basis of Accounting:

These financial statements reflect the accrual method of accounting.

Income Taxes:

No provision for income taxes has been made in these statements. All
income taxes are paid for by Ruth Perillo at the personal level.

Inventory:

Inventory consists of golf balls, related golf supplies and soft drinks
for sale and is stated at lower of cost or market on the FIFO basis.

Property and Equipment:

Property and equipment is carried at cost. The cost of property and
equipment is depreciated over the estimated useful lives of the related
assets. Depreciation is computed using the straight-line method for financial
reporting purposes and on the accelerated cost recovery system method for
income tax purposes. The estimated useful lives of the assets for purposes of
computing depreciation are as follows:

Building and improvements .... 40 years
Furniture and equipment ...... 5 years

Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.

Loan Origination Fees:

Costs of obtaining the development loan have been capitalized and are
being amortized over the life of the loan. During 1995, the Business incurred
a $10,000 fee to extend the loan for one year. Amortization expense was
$17,048 for the year ended December 31, 1995.

Accounts payable reserve:

In the normal course of business there arises various commitments and
contingent liabilities with various vendors. Since the Business is a sole
proprietorship, the liabilities of the owner and the Business become
difficult to separate. Management has estimated a reserve of $50,000 for such
liabilities which are included in accounts payable. The amount of reserve is
reflected in prior years earnings.

Statement of Cash Flows:

For purposes of the statement of cash flows, the Business considers all
highly liquid debt instruments purchased with a maturity of three months or
less, to be cash equivalents. There were no cash equivalents at December 31,
1995.

F-74

<PAGE>

CATALINA GOLF CENTER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995

NOTE 2 -- FUTURE FINANCING

As shown in the accompanying financial statements, the Business incurred a
net loss of $581,552 for the year ended December 31, 1995. The Business
continues to operate at a negative cash flow and finance charges and accounts
payable deficiencies continue to increase. Those factors, as well as the
litigation judgment placed against the Business owner and the Business
owner's inability to contribute additional capital, create an uncertainty
about the Business' ability to continue operations. Unless the Business
obtains significant additional financing, the Business will be unable to
continue operations in the near future. The financial statements do not
include any adjustments that might be necessary if the Business is unable to
continue as a going concern.

NOTE 3 -- PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Building and improvements $539,169
Furniture and equipment .. 10,785
Land ...................... 65,000
----------
614,954
Accumulated depreciation . (41,917)
----------
Net property and equipment $573,037
==========

Depreciation expense was $19,346 for the year ended December 31, 1995.

NOTE 4 -- LAND

The land upon which the Business operates is owned as follows:

Ruth Perillo ......27%
Lyn Perillo ....... 24%
Glenn Perillo ..... 24%
Oscar Ramirez ..... 25%
-------
100%
=======

The land has been recorded at the lower of cost or market. For the year
ended December 31, 1995, the Business is under no obligation to make lease
payments to the other owners for usage of the land.

F-75

<PAGE>

CATALINA GOLF CENTER
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995

NOTE 5 -- NOTES PAYABLE

Notes payable consists of the following at December 31, 1995:
<TABLE>
<CAPTION>
<S><C>

Note payable dated June 10, 1993, interest at 16% due monthly on
outstanding balance, originally matured June 1995, extended for
one year until June 10, 1996, secured by Business land, building
and improvements, property and equipment and by the assignment of
rents, income and receipts of the Business. The note is in
default and interest has been paid through October, 1995 ........ $500,000
Note payable to King & Frisch, P.C., Employees Profit Sharing
Plan, interest at 15%, original principal of $61,000, accrued
interest of $11,120 applied to the note, secured by deed of trust
on the Business land. The note is in default and is past due,
interest has been paid through September, 1994 ................... 72,120
Note payable to William D. King, interest at 13.5%, original
principal loaned of $200,000, secured by deed of trust on the
Business land. The note is in default and is past due, interest
has been paid through August, 1995 ............................... 150,000
----------
Total notes payable ............................................... $722,120
==========
</TABLE>

The owner of the Business has secured other loans with the land on which
the golf driving range operates.

NOTE 6 -- LITIGATION

The owner of the Business and other related parties were defendants in a
lawsuit in connection with the original agreement to build the Business. The
judgment was awarded in favor of the plaintiffs on their claims for breach of
contract, breach of fiduciary duty, breach of duty of good faith and fair
dealing, and racketeering in September, 1995. The judgment awarded was
$300,000 in compensatory damages and $63,091 in plaintiffs' legal fees, cost
of suit fees and jury fees. The judgment bears interest at 10% per annum from
the date of judgment until paid. The owner and other related parties are
filing an appeal to the Appellate Court. The land upon which the Business
operates is only subject to the owner's equity.

F-76

<PAGE>

CATALINA GOLF CENTER
BALANCE SHEET
MARCH 31, 1996

ASSETS
CURRENT ASSETS:
Checking account .............. $ 6,841.80
Petty cash .................... 250.00
Inventory ..................... 1,523.00
-------------
TOTAL CURRENT ASSETS ...... $ 8,614.80
PROPERTY AND EQUIPMENT:
Land .......................... $ 65,000.00
Property improvements ......... 539,169.21
Furniture and equipment ...... 10,785.00
Accumulated depreciation ..... (46,316.00)
-------------
TOTAL PROPERTY AND
EQUIPMENT ..................... $568,638.21
OTHER ASSETS:
Finance fees .................. $ 66,073.59
Accum amort -- Finance fees .. (39,174.00)
-------------
TOTAL OTHER ASSETS ......... $ 26,899.59
-------------
TOTAL ASSETS ............... $604,152.60

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ........... $ 98,484.54
Property taxes payable ..... 43,125.69
Street assessment payable .. 44,266.80
PAYROLL TAXES PAYABLE ...... 5,766.07
OTHER ACCRUED EXPENSES ..... 451,597.59
---------------
TOTAL CURRENT LIABILITIES . $ 643,240.69
NON-CURRENT LIABILITIES:
LONG-TERM DEBT NET OF CURRENT $ 722,120.20
---------------
TOTAL NON-CURRENT
LIABILITIES .............. $ 722,120.20
EQUITY:
Capital .................... $(724,111.28)
Capital contribution ....... 1,200.00
NET INCOME (LOSS) .......... (38,297.01)
---------------
TOTAL EQUITY .............. $(761,208.29)
---------------
TOTAL LIABILITIES AND
EQUITY ................... $604,152.60
============

F-77

<PAGE>

CATALINA GOLF CENTER
INCOME STATEMENT
FOR THE PERIOD(S)

JANUARY 1, 1996
TO MARCH 31,
1996 ACTUAL $
---------------
SALES:
Sales ......................... $ 38,775.48
---------------
TOTAL SALES .................. 38,775.48
COST OF SALES:
BEGINNING INVENTORY ........... 1,523.00
Golf supplies ................. 453.99
Beverages ..................... 812.55
Outside services .............. 1,100.50
Equipment rental .............. 315.57
Landscaping ................... 375.80
Wages ......................... 8,410.00
ENDING INVENTORY .............. (1,523.00)
---------------
TOTAL COST OF SALES .......... 11,468.41
---------------
GROSS PROFIT ................. 27,307.07
SELLING EXPENSES:
Commissions ................... 1,564.50
---------------
TOTAL SELLING EXPENSES ....... 1,564.50
GENERAL AND ADMINISTRATIVE:
Auto expense .................. 637.10
Amortization .................. 5,304.00
Bank service charges .......... 80.08
Bookkeeping fees .............. 559.00
Depreciation expense .......... 4,399.00
Utilities ..................... 357.33
Insurance--General ............ 46.00
Interest expense .............. 39,520.00
License and fees .............. 75.00
Miscellaneous expense ......... 17.00
Office expense ................ 240.92
Postage expense ............... 35.42
Repairs and maintenance ....... 208.97
Security ...................... 50.00
Taxes--Real estate ............ 11,045.41
Taxes--Payroll ................ 346.92
Telephone ..................... 662.43
Bad debts ..................... 455.00
---------------
TOTAL GENERAL AND
ADMINISTRATIVE .............. 64,039.58
---------------
NET OPERATING INCOME (LOSS) .. (38,297.01)
NET INCOME (LOSS) BEFORE TAX . $(38,297.01)
---------------
NET INCOME (LOSS) ............ $(38,297.01)
===============

F-78

<PAGE>

CATALINA GOLF CENTER
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................. $(38,297)
Adjustments to reconcile net loss to net cash from operating
activities:
Extraordinary item ................................................... --
Depreciation and amortization ....................................... 9,703
Decrease in current assets:
Inventory ............................................................
Increase (decrease) in current liabilities:
Accrued payroll and payroll taxes .................................... (482)
Accounts payable .................................................... (4,622)
Accrued expenses .................................................... 34,933
-----------
Net cash provided by operating activities ........................ 1,235
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions ................................................ 1,200
-----------
Net cash provided by financing activities ........................ 1,200
-----------
NET INCREASE IN CASH ................................................... 2,435
CASH -- BEGINNING OF PERIOD ............................................ 4,657
-----------
CASH -- END OF PERIOD .................................................. $ 7,092
===========
</TABLE>

F-79

<PAGE>

CATALINA GOLF CENTER
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization:

Catalina Golf Center, (the Business), is a proprietorship owned by Ruth
Perillo. The proprietorship owns and operates a golf driving range located in
Tucson, Arizona. Ruth Perillo's other personal assets have not been included
in these financial statements.

Basis of Accounting:

These financial statements reflect the accrual method of accounting.

Income Taxes:

No provision for income taxes has been made in these statements. All
income taxes are paid for by Ruth Perillo at the personal level.

Inventory:

Inventory consists of golf balls, related golf supplies and soft drinks
for sale and is stated at lower of cost or market on the FIFO basis.

Property and Equipment:

Building and improvements ...40 years
Furniture and equipment ..... 5 years

Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.

Loan Origination Fees:

Costs of obtaining the development loan have been capitalized and are
being amortized over the life of the loan.

Statement of Cash Flows:

NOTE 2 -- INTERIM FINANCIAL STATEMENTS

The financial statements as of March 31, 1996 and for the three months
then ended are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the Business'
financial position and results of operations.

F-80

PAGE>

Independent Auditors' Report

To the Board of Directors and
Stockholders of K.G. Golf, Inc.

We have audited the accompanying balance sheet of K.G. Golf, Inc. (an Ohio
Corporation) as of December 31, 1995, and the related statements of income,
retained earnings, 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 financial statements referred to above present fairly,
in all material respects, the financial position of K.G. Golf, Inc. as of
December 31, 1995 and the results of operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.

Goffena & Baker, CPA
Fairfield, Ohio
June 6, 1996

F-81

<PAGE>

K.G. GOLF, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>

ASSETS
CURRENT ASSETS
Cash ............................................................ $ 8,497
Accounts Receivable ............................................. 465
Inventory ....................................................... 94,184
---------
TOTAL CURRENT ASSETS ........................................... $ 103,146
PROPERTY AND EQUIPMENT
Furniture and Fixtures (Net of Accumulated Depreciation of
$31,742) ........................................................ $ 29,708
Equipment (Net of Accumulated Depreciation of $39,192) ......... 41,733
Leasehold Improvements (Net of Accumulated Depreciation of
$122,861) ...................................................... 955,240
---------
TOTAL PROPERTY AND EQUIPMENT ................................... 1,026,681
OTHER ASSETS
Organization Costs .............................................. $ 370
Deposits ........................................................ 900
---------
TOTAL OTHER ASSETS ............................................. 1,270
-----------
TOTAL ASSETS ..................................................... $1,131,097
===========

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable ....................................... $ 56,935
Payroll Taxes Withheld ................................. 765
Accrued Expenses ....................................... 12,991
Sales Tax Payable ...................................... 2,353
Note Payable--Bank ..................................... 850,000
-----------
TOTAL CURRENT LIABILITIES ............................. $ 923,044
LONG TERM DEBT
Notes payable--Officer ................................. 483,625
STOCKHOLDERS' EQUITY
Common Stock--750 shares authorized, 300 shares issued
and outstanding ....................................... $ 75,000
Retained Earnings ...................................... (350,572)
-----------
TOTAL STOCKHOLDERS' EQUITY ............................ (275,572)
-----------
TOTAL LIABILITIES AND EQUITY ............................ $1,131,097
===========
</TABLE>

The Accompanying Notes are an integral part of the Financial Statements.

F-82

<PAGE>

K.G. GOLF, INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
<S> <C> <C>
SALES ....................................... $ 79,182
COST OF SALES ............................... 283,712
---------
GROSS PROFIT ................................ $ 507,470
OPERATING EXPENSES
Wages and Payroll Tax ...................... $189,719
Interest ................................... 103,851
Rent ....................................... 65,680
Depreciation ............................... 60,636
Other Operating ............................ 200,513
--------
Total Operating Expenses ................. 620,399
---------
NET (LOSS) .................................. $(112,929)
=========
</TABLE>

K.G. GOLF, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995

BEGINNING BALANCE, JANUARY 1, 1995 $(237,643)
Net (Loss) for the year ended ... (112,929)
------------
ENDING BALANCE, DECEMBER 31, 1995 $(350,572)
============

The Accompanying Notes are an integral part of the Financial Statements.

F-83

<PAGE>

K.G. GOLF, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>

CASH FLOWS FROM OPERATING EXPENSES:
Net Loss ........................................................... $(112,929)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating
Activities:
Depreciation and Amortization ..................................... $61,079
Shareholder Interest not requiring cash ........................... 26,250
Decrease in Account Receivable .................................... 830
Decrease in Inventory ............................................. 4,737
Increase in Accounts Payable ...................................... 20,534
(Decrease) in Payroll Tax Withholding ............................. (237)
(Decrease) in Accrued Expenses .................................... (1,351)
(Decrease) in Sales Tax Payable ................................... (103)
(Decrease) in Accrued Interest .................................... (6,222) 105,517
--------- ------------
Net Cash Used by Operating Activities ........................... $ (7,412)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment ................................. (15,397)
CASH FLOWS FROM FINANCING ACTIVITIES ............................... -0-
NET CASH (DECREASE) IN CASH BALANCE ................................ (22,809)
CASH, JANUARY 1, 1995 .............................................. 31,306
------------
CASH, DECEMBER 31, 1995 ............................................ $ 8,497
============
SUPPLEMENTAL INFORMATION:
Cash Flows from operating activities include interest paid of
$77,601.
</TABLE>

The Accompanying Notes are an integral part of the Financial Statements.

F-84

<PAGE>

K.G. GOLF, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

K.G. Golf, Inc. (the "Company") was incorporated on September 30, 1991 and
operates a golf center consisting of a driving range, a golf supply shop, a
putt-putt center and golf instruction. The center is located in Fairfield,
Ohio.

Accounts Receivable

The Company does not sell on open account. Thus, trade receivables are
minor.

Inventory

Inventories are maintained through a perpetual inventory system. A
physical inventory is taken as of year end for financial statement purposes
and perpetual inventory quantities are adjusted to physical inventory counts.
Inventory on hand at December 31, 1995 was valued at the lower of cost or
market.

Property and Equipment

Physical assets are recorded at their original cost or at their fair
market value at the date of their contribution to the business, if lower.
Major additions and betterments are added to the property accounts while
maintenance and repairs which do not appreciably extend the useful lives of
the related assets are expensed when incurred. Management has not recorded
salvage value as it believes there will be negligible value to these assets
at the end of their useful lives.

Depreciation expense is computed for financial statement purposes using
the straight-line depreciation method over the anticipated useful lives of
owned assets. Leasehold improvements are amortized over the estimated useful
life of each property being leased.

Income Taxes

The Company has elected to be taxed under the provision of Subchapter S of
the Internal Revenue Code. Under those provisions, the Company does not pay
corporate income taxes on its taxable income (loss). Instead, the
stockholders are liable for individual income taxes on their respective
shares of the Company's net operating income (loss) in their individual
income tax returns. Therefore, no income tax expense appears on these
financial statements.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.

F-85

<PAGE>

K.G. GOLF, INC.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995

RELATED PARTY TRANSACTIONS

A note, dated October 31, 1992, was signed by each of the three
shareholders. The total amount due is $375,000. The notes are due October 31,
1997. Interest is payable annually at 7% on the unpaid balance. The notes are
unsecured, but are subordinated to a revolving line of credit to Fifth Third
Bank. Interest has accrued unpaid on the notes since 1992 and currently total
$83,125.

An additional $8,500 was loaned to the Company by each shareholder
totalling $25,500. This amount is unsecured and non-interest bearing.

The total of all amounts due shareholders is as stated on the balance
sheet of $483,625.

NOTE PAYABLE -- BANK

A note is payable to Fifth Third Bank in the amount of $850,000. Interest
accrues at the bank's "Prime Rate" and shall vary as changes are announced.
Interest is payable quarterly beginning March 27, 1996. Principal is due at
$4,000 per month for seven months beginning March 27, 1996, then $2,000 per
month for two months, then the entire balance is due on December 27, 1996.
The note is secured by Company assets and various securities held in Trust
and it is cross collateralized to other K.G. Golf, Inc. notes.

GROUND LEASE AGREEMENT

The Company entered into a ground lease agreement on October 17, 1991 for
the property on which the facility currently operates in Fairfield, Ohio. The
agreement details a primary term of five years beginning with the opening of
the facility. During this period, monthly rent is equal to 15% of gross
income collected by the lessee from the Fairfield operation, except for the
pro shop, which is 7 1/2 % of gross income. There is a minimum annual rental
of $48,000. The lessee will owe the lessor 35% of any sublease income, if
applicable, for the facility. There are three consecutive five year options
to renew the lease beginning after the end of the primary term. The minimum
annual rental will be adjusted for inflation during this period.

Future minimum rental payments required as of December 31, 1995 are as
follows:

1996 ..... $48,000
1997 ..... $40,000

F-86

<PAGE>

K.G. GOLF, INC.
BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>

ASSETS

CURRENT
Cash .................................................. $ 4,469
Accounts Receivable ................................... 2,255
Inventory ............................................. 106,024
---------
TOTAL CURRENT ASSETS ................................ $ 112,748
PROPERTY AND EQUIPMENT
Furniture and Fixtures (Net of Accumulated
Depreciation) ........................................ $ 39,652
Equipment (Net of Accumulated Depreciation) .......... 52,060
Leasehold Improvements (Net of Accumulated
Depreciation) ........................................ 901,699
TOTAL PROPERTY AND EQUIPMENT ........................ 993,411
-----------
TOTAL ASSETS ........................................... $1,106,159
===========

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts Payable ....................................... $ 113,599
Sales Tax Payable ...................................... 1,477
-----------
TOTAL CURRENT LIABILITIES ............................ $ 115,233
LONG TERM DEBT
Notes Payable .......................................... 1,302,480
STOCKHOLDERS' EQUITY
Common Stock--750 shares authorized, 300 shares issued
and outstanding ....................................... $ 75,000
Retained Earnings ...................................... (386,554)
TOTAL STOCKHOLDERS' EQUITY ........................... (311,554)
-----------
TOTAL LIABILITIES AND EQUITY ............................ $1,106,159
===========
</TABLE>

F-87

<PAGE>

K.G. GOLF, INC.
INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1996

SALES ..................... $119,991 $
COST OF SALES ............. 52,387
---------- ----------
GROSS PROFIT .............. 67,604 $
OPERATING EXPENSES
Wages and Payroll Tax ... 17,933
Interest ................. 24,453
Rent ..................... 8,804
Depreciation ............. 20,256
Other Operating .......... 32,140
----------
Total Operating Expenses 103,586
----------
NET (LOSS) ................ $(35,982)
==========

The Accompanying Notes are an integral part of the Financial Statements.

F-88

<PAGE>

K.G. GOLF, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>

CASH FLOWS FROM OPERATING EXPENSES:
Net (Loss) .................................................................................................... $ (35,982)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:
Depreciation and Amortization ................................................................................ 33,640
Shareholder Interest not requiring cash ...................................................................... 18,953
Increase in Account Receivable ............................................................................... (1,789)
Increase in Inventory ........................................................................................ (11,841)
Increase in Accounts Payable ................................................................................. 86,019
(Decrease) in Payroll Tax Withholding ........................................................................ (608)
(Decrease) in Accrued Expenses ............................................................................... (5,319)
(Decrease) in Sales Tax Payable .............................................................................. (876)
-----------
Net Cash provided by Operating Activities ................................................................... 82,197
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in Deposits .......................................................................................... 900
-----------
Net cash provided by investing activities ..................................................................... 900
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Notes Payable--Bank .............................................................................. (850,000)
Borrowings from Shareholders .................................................................................. 762,875
Net cash (used in) financing activities ..................................................................... (87,125)
===========
NET CASH (DECREASE) IN CASH BALANCE ........................................................................... (4,028)
CASH, JANUARY 1, 1996 ......................................................................................... 8,497
-----------
CASH, MARCH 31, 1996 .......................................................................................... $ 4,469
===========
SUPPLEMENTAL INFORMATION:
Cash Flows from operating activities include Interest Paid of $5,500
</TABLE>

F-89

<PAGE>

K.G. GOLF, INC.
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1996

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business

K.G. Golf was incorporated on September 30, 1991. They operate a Golf
Center consisting of a driving range, a golf supply shop, a putt-putt center
and golf instruction. The center is located in Fairfield, Ohio.

Accounts Receivable

The Company does not sell on open account. Thus, trade receivables are
minor.

Inventory

Property and Equipment

Income Taxes

Estimates

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or
less to be cash equivalents.

NOTE B -- INTERIM FINANCIAL STATEMENTS

The financial statements as of March 31, 1996 and for the three months
then ended are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the Company's
financial position and results of operations.

F-90

<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Tree Court Golf &
Recreational Complex, Inc.
St. Louis, Missouri

We have audited the accompanying balance sheet of Tree Court Golf &
Recreational Complex, Inc. (an S Corporation) as of December 31, 1995 and the
related statements of operations, stockholders' deficit 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.

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 financial statements referred to above present fairly,
in all material respects, the financial position of Tree Court Golf &
Recreational Complex, Inc. as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.

BDO Seidman, LLP

St. Louis, Missouri
June 5, 1996

F-91

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
<S><C>

DECEMBER 31,
1995
--------------
ASSETS
Leasehold Improvements and Equipment (Notes 2 and 6) ................ $ 927,308
Less accumulated depreciation ...................................... (301,523)
--------------
625,785
Cash ................................................................ 3,004
Due From Employees .................................................. 2,250
Organization Costs, net of accumulated amortization of $7,721 ...... 4,470
Deposits ............................................................ 12,700
--------------
$ 648,209
==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Notes Payable -- other (Note 5) ..................................... $ 555,557
Notes Payable -- related parties (Note 4) ........................... 548,500
Accounts Payable and Accrued Expenses (Note 3) ...................... 184,118
Unearned Revenue .................................................... 3,000
--------------
Total Liabilities ................................................... 1,291,175
==============
STOCKHOLDERS' DEFICIT
Common stock, $1 par -- shares authorized, 30,000; outstanding,
1,500 .............................................................. 1,500
Additional paid-in capital ......................................... 148,500
Accumulated deficit ................................................ (792,966)
--------------
Total Stockholders' Deficit ......................................... (642,966)
--------------
$ 648,209
==============
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-92

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF OPERATIONS

YEAR ENDING
DECEMBER 31,
1995
--------------
Revenue .............. $ 443,341
Cost of Revenue ...... 238,013
--------------
Gross Profit ......... 205,328
Operating Expenses .. 306,490
--------------
Loss from Operations (101,162)
--------------
Other Expense
Interest expense ... (76,839)
Miscellaneous ....... (2,438)
--------------
(79,277)
--------------
Net Loss ............. $(180,439)
==============

See accompanying summary of accounting policies and notes to financial
statements.

F-93

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
<S><C>

ADDITIONAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT DEFICIT
-------- ------------ ------------- ---------------
Balance, January 1, 1995 . $1,500 $148,500 $(612,527) $(462,527)
Net loss .................. -- -- (180,439) (180,439)
-------- ------------ ------------- ---------------
Balance, December 31, 1995 $1,500 $148,500 $(792,966) $(642,966)
======== ============ ============= ===============
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-94

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
<S><C>
YEAR ENDING
DECEMBER 31,
1995
--------------
Operating Activities
Net loss ...................................................................... $(180,439)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization ................................................ 86,299
Change in assets and liabilities:
Due from employees .......................................................... (850)
Accounts payable and accrued expenses ....................................... 95,494
Unearned revenue ............................................................ 3,000
--------------
Cash Provided by Operating Activities .......................................... 3,504
--------------
Financing Activities
Principal payments on notes payable ........................................... (7,537)
Proceeds from issuance of note payable ........................................ 6,000
--------------
Cash Used in Financing Activities .............................................. (1,537)
--------------
Net Increase in Cash ........................................................... 1,967
Cash, beginning of year ........................................................ 1,037
--------------
Cash, end of year .............................................................. $ 3,004
==============
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.

F-95

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
SUMMARY OF ACCOUNTING POLICIES

LEASEHOLD IMPROVEMENTS, EQUIPMENT AND DEPRECATION

Leasehold improvements and equipment are carried at cost. Leased equipment
acquired under capital leases is recorded at the present value of the future
minimum lease payments. Depreciation is computed using accelerated methods
over the useful life as determined by industry standards.

Leasehold improvements are depreciated over the lesser of their estimated
useful lives or the lease term.

ORGANIZATION COSTS AND AMORTIZATION

Organizations costs are carried at cost and are comprised of pre-opening
expenditures. Amortization is computed using the straight-line method over 60
months.

INCOME TAXES

The Company has elected to be taxed under Subchapter S of the Internal
Revenue Code. Accordingly, the current taxable income of the Company is
taxable to the stockholders who are responsible for the payment of taxes
thereon.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. The
carrying amounts of notes payable to stockholders and the bank approximate
their fair values.

F-96

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
NOTES TO FINANCIAL STATEMENTS

1. BUSINESS

The Company operates a family recreation center in St. Louis, Missouri
that offers a lighted golf driving range, an 18 hole miniature golf course
and a 9 hole executive golf course.

2. PROPERTY AND EQUIPMENT

The Company leased land in 1991 to develop the recreation center.
Development cost of the amenities and their associated financing costs were
capitalized during the construction period. Leasehold improvements and
equipment at December 31, 1995 consist of the following:

1995
------------
Leasehold improvements . $ 318,155
Miniature golf course .. 181,014
Building ................ 311,641
Equipment (Note 6) ...... 116,498
------------
927,308
Accumulated depreciation (301,523 )
------------
$ 625,785
============

3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

At December 31, 1995, accounts payable and accrued expenses consist of the
following:

1995
----------
Real estate taxes ........ $ 62,689
Accrued interest (Note 4) 53,917
Other .................... 67,513
----------
$184,119
==========

4. NOTES PAYABLE TO RELATED PARTIES

The Company has entered into unsecured notes payable agreements with each
of the stockholders and a related party totalling $548,500 at December 31,
1995. These notes payable are due upon demand and have an interest rate of
7%. Accrued interest on these notes payable at December 31, 1995 is $48,250.

5. NOTES PAYABLE--OTHER

Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
<S><C>

1995
----------
Note payable to bank with quarterly interest only payments.
Interest computed at the corporate base rate plus 1/2 % (9 1/4
% at December 31, 1995); due December 1, 1996, collateralized
by stockholder's personal residence ........................... $285,683
Notes payable to U.S. Small Business Administration (disaster
loans) with monthly principal and interest payments totalling
$1,177 to be paid over 30 years. Interest is at 4% per annum;
collateralized by stockholder's personal residence and assets
of the Company ................................................ 241,500
Capital leases (see Note 6) .................................... 24,822
Other .......................................................... 3,552
----------
$555,557
==========
</TABLE>

F-97

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Maturities of notes payable are as follows:

1996 ........ $301,964
1997 ........ 13,892
1998 ........ 12,417
1999 ........ 5,126
2000 ........ 5,335
Thereafter . 216,823
----------
$555,557
==========

6. LEASES

The Company conducts its operations on leased property which is accounted
for as an operating lease. The lease requires monthly payments of $2,000
through February 28, 1997. The Company has four, five-year renewal options
which can be exercised at the Company's discretion. The lease also provides
for a purchase option at any time during the lease term at fair market value.
This lease requires the Company to pay all maintenance, real estate taxes,
insurance and utility costs.

The Company also leases various equipment which is accounted for as a
capital lease. Monthly lease payments of $862 extend through 1998.

Rental expense, for operating leases, charged to operations was $22,564 in
1995.

As of December 31, 1995, future net minimum lease payments under capital
leases and future minimum rental payments required under operating leases
that have initial or remaining noncancellable terms in excess of one year are
as follows:

CAPITAL OPERATING
LEASES LEASES
--------- -----------
1996 ................................... $10,344 $24,000
1997 ................................... 10,344 4,000
1998 ................................... 6,068 --
--------- -----------
Total minimum lease payments ........... 26,756 28,000
Less amounts representing interest .... (1,934) --
--------- -----------
Present value of minimum lease payments $24,822 $28,000
========= ===========

7. SUBSEQUENT EVENT

On June 1, 1996, the Company entered into a letter of intent with Family
Golf Centers, Inc. to sell the leasehold improvements and equipment for
$1,300,000. This letter of intent does not include the sale of any other
assets, i.e., cash and receivables, or the assumptions of any liabilities.
This transaction is expected to close on June 7, 1996.

8. SUPPLEMENTAL CASH FLOW INFORMATION

The Company paid $41,350 for interest during 1995. The Company also had in
1995 non-cash activity of $9,655 relating to capital leases.

F-98

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
BALANCE SHEET
MARCH 31, 1996
UNAUDITED

Current Assets:
Cash ................................... $ 4,527
Employee advances ...................... 2,250
-----------
6,777
Property & Equipment:
Buildings .............................. 311,641
Leasehold improvements ................. 289,280
Miniature golf ......................... 181,014
Machinery & equipment .................. 116,498
Capitalized interest ................... 28,875
-----------
927,308
Less accumulated depreciation .......... (318,597)
-----------
608,711
Other Assets:
Organization costs ..................... 3,861
Deposits ............................... 12,700
-----------
16,561
-----------
Total Assets ........................... $ 632,049
===========
Current Liabilities:
Accounts payable ....................... 162,482
Accrued expenses ....................... 7,120
Unearned revenue ....................... 3,000
Current maturities of long-term debt .. 886,464
-----------
1,059,066
Long-term Debt, less current maturities 251,454
Total Liabilities ...................... 1,310,520
Common Stock ........................... 1,500
Additional Paid-in Capital ............. 148,500
Stockholders' Deficit .................. (828,471)
-----------
Total Liabilities and Equity ........... $ 632,049
===========

F-99

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
UNAUDITED

Revenue ..................... $ 63,281
Cost of Revenue ............. 13,139
----------
Gross Profit ................ 50,142
Operating Expenses .......... 46,167
----------
Income from Operations ..... 3,975
Other Income (Expense)
Interest expense ............ (21,795)
Depreciation & amortization (17,684)
----------
(39,479)
----------
Net Loss .................... $(35,504)
==========

F-100

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996
UNAUDITED
<TABLE>
<CAPTION>
<S><C>

Operating Activities
Net loss ...................................................................... $(35,504)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization ................................................ 17,683
Change in assets and liabilities:
Accounts payable and accrued expenses ....................................... (14,517)
-----------
Cash (used in) Operating Activities ............................................ (32,338)
-----------
Financing Activities
Proceeds from issuance of note payable ........................................ 33,861
-----------
Cash Provided by Financing Activities .......................................... 33,861
-----------
Net Increase in Cash ........................................................... 1,523
Cash, beginning of Period ...................................................... 3,004
-----------
Cash, end of Period ............................................................ $ 4,527
===========
</TABLE>

F-101

<PAGE>

TREE COURT GOLF & RECREATIONAL COMPLEX, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE A -- SUMMARY OF ACCOUNTING POLICIES

LEASEHOLD IMPROVEMENTS, EQUIPMENT AND DEPRECIATION

Leasehold improvements are depreciated over the lesser of their estimated
useful lives or the lease term.

ORGANIZATION COSTS AND AMORTIZATION

Organizations costs are carried at cost and are comprised of pre-opening
expenditures. Amortization is computed using the straight-line method over 60
months.

INCOME TAXES

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE B -- INTERIM FINANCIAL STATEMENTS

F-102

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Golf and Sports Center of the Palm Beaches, Inc.

I have audited the accompanying balance sheet of Golf and Sports Center of
the Palm Beaches, Inc. as of December 31, 1995, and the related statements of
loss, accumulated deficit, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Golf and Sports Center of
the Palm Beaches, Inc. as of December 31, 1995, and the results of its
operations and cash flows for the year then ended in conformity with
generally accepted accounting principles.
Charles W. Cairnes Jr. P.A.
Palm Beach Gardens, Florida

June 8, 1996

F-103

<PAGE>

GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>

ASSETS
CURRENT ASSETS:
Cash ..................................................................... $ 4,629
Inventory ................................................................ 10,761
Prepaid insurance ........................................................ 7,447
Employee advances ........................................................ 2,623
-----------
Total .................................................................. 25,460
UTILITY DEPOSITS .......................................................... 7,895
$ 33,355
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade ................................................... $ 36,512
Taxes payable ............................................................ 7,169
Unearned income .......................................................... 33,908
-----------
Total .................................................................. 77,589
DUE TO W.A.G.N. Partners .................................................. 76,369
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 1,000 shares authorized, 200 shares issued
and outstanding ......................................................... 200
Paid in capital in excess of par value ................................... 9,800
Accumulated deficit ...................................................... (130,603)
-----------
Total shareholders' equity ............................................. (120,603)
-----------
$ 33,355
===========
</TABLE>

Read the accountants' report and the Notes to Financial Statements.

F-104

<PAGE>

GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
STATEMENT OF LOSS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1995

Revenues ............................... $ 862,871
Cost of Revenues ....................... 154,694
-----------
Gross Profit .......................... 708,177
Operating Expenses ..................... 711,291
-----------
Net loss .............................. (3,114)
Accumulated Deficit -- January 1, 1995 (127,489)
Accumulated Deficit -- December 31,
1995 .................................. $(130,603)
===========

Read the accountants' report and the Notes to Financial Statements.

F-105

<PAGE>

GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>

Cash Flows from Operating Activities
Net loss .................................................................... $ (3,114)
Adjustments to reconcile net income to net cash used by operating
activities:
(Increase) decrease in:
Inventory ................................................................. 2,310
Prepaid insurance ......................................................... 838
Employee advances ......................................................... (2,100)
Increase (decrease) in:
Accounts payable .......................................................... (4,119)
Taxes payable ............................................................. 1,152
Unearned income ........................................................... (10,440)
Due to W.A.G.N. ........................................................... 15,954
----------
Net cash used by operating activities ....................................... 481
----------
Net Increase in Cash ........................................................ 481
Cash -- Beginning of year ................................................... 4,148
----------
Cash -- End of year ......................................................... $ 4,629
==========
</TABLE>

Read the accountants' report and the Notes to Financial Statements.

F-106

<PAGE>

GOLF AND SPORTS CENTER OF THE PALM BEACHES, INC.
NOTES TO THE FINANCIAL STATEMENTS
As of and for the Year ended December 31, 1995

1. FORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Formation

Golf & Sports Center of the Palm Beaches, Inc. (the "Company"), was formed
on March 12, 1990 to lease an executive public golf course in West Palm
Beach, Florida. The Company has entered into a lease with W.A.G.N. Partners
to operate and manage the golf course.

Basis of Accounting

The Company's policy is to prepare its financial statements on the accrual
basis of accounting; consequently, revenue is recognized when earned and
expenses are recognized when the obligation is incurred. Golf membership
income is recorded as income over the months in which it is earned.

Inventories

Inventories consist of merchandise for resale stated at the lower of cost
or market. The cost is determined by the first-in, first-out (FIFO) method.

Federal Income Taxes

The Company has made an election to be treated as an S Corporation whereby
profits and losses are passed directly to the shareholders for inclusion in
their personal income tax returns. Accordingly, no provision for income taxes
is made in these statements.

2. RELATED PARTY TRANSACTIONS

A related partnership, W.A.G.N. Partners, has leased the golf course to
the Company for a base rent of $277,000 per annum. There is a provision in
the lease that if the lessee is unable to pay rent the lessor can defer the
rent. The lessee has not been able to pay any rent as of December 31, 1995
and does not appear to be able to in the future so no rent expense has been
accrued.

3. BUSINESS CONDITION

The Company has experienced net losses and used cash in operating
activities since 1990. Loans from W.A.G.N. Partners have provided the
financial support necessary for the Company to satisfy its obligations
through 1995. The partners have indicated that they do not intend to continue
to provide financial support to fund the Company's 1996 projected cash flow
deficiency.

As of June 1, 1996 W.A.G.N. Partners has found a buyer and intends to
liquidate. The financial statements do not include any adjustments relating
to the recoverability of recorded asset amounts or the amounts of liabilities
that might be necessary should the Company be unable to continue as a going
concern.

F-107

<PAGE>

GOLF & SPORTS CENTER OF THE PALM BEACHES, INC.
BALANCE SHEET
MARCH 31, 1996
<TABLE>
<CAPTION>
<S><C>

ASSETS
Current Assets
Cash .................................................................... $ 6,380.25
Inventory ............................................................... 10,194.10
Due from WAGN ........................................................... 11,000.00
Employee advances ....................................................... 2,298.00
--------------
Total Current Assets ................................................. 29.872.35
Other assets
Utility deposits ........................................................ 7,895.00
--------------
Total other assets ................................................... 7,895.00
--------------
Total assets ......................................................... $ 37,767.35
==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable ........................................................ $ 29,586.43
Sales tax payable ....................................................... 4,919.78
Federal payroll taxes ................................................... 1,350.64
FUTA payable ............................................................ 611.64
SUTA payroll taxes ...................................................... 4,128.58
Unearned membership rev. ................................................ 24,909.88
Unearned bag storage rev. ............................................... 484.88
Unredeemed gift certif .................................................. 20,413.08
Due to WAGN ............................................................. 75,314.41
--------------
Total curent liabilities ............................................. 161,719.32
Shareholders' Equity .....................................................
Common stock, $1.00 par value, 1,000 shares authorized, 200 shares
issued
and outstanding ........................................................ 200.00
Additional paid-in capital .............................................. 9,800.00
Accumulated deficit ..................................................... (133,951.97)
--------------
Total shareholders' equity ........................................... (123,951.97)
--------------
Total liabilities and shareholders' equity ........................... $ 37,767.35
==============
</TABLE>

Read independent accountant's compilation report.

F-108

<PAGE>

GOLF & SPORTS CENTER OF THE PALM BEACHES, INC.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)

Revenue .................................... $220,867
Cost of Sales .............................. 35,665
----------
Gross Profit .............................. 185,202
Operating Expenses ......................... 154,921
Selling, General & Administrative Expenses 7,356
Net Income ................................ $ 22,925
==========

F-109

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Partners of
W.A.G.N. Partners

I have audited the accompanying balance sheet of W.A.G.N. Partners (a
partnership) as of December 31, 1995, and the related statements of loss,
partners' capital, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of W.A.G.N. Partners as of
December 31, 1995, and the results of its operations and cash flows for the
year then ended in conformity with generally accepted accounting principles.

Charles W. Cairnes Jr. P.A.
Palm Beach Gardens, Florida

June 8, 1996

F-110

<PAGE>

W.A.G.N. PARTNERS
BALANCE SHEET
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S><C>

ASSETS

CURRENT ASSETS:
Cash .................................................. $ 5,446
------------
Total .............................................. 5,446
PROPERTY AND EQUIPMENT, at cost
Land .................................................. $ 700,000
Buildings and improvements ............................ 3,238,196
Machinery and equipment ............................... 71,863
Furniture and fixtures ................................ 171,287
-----------
4,181,346
Less accumulated depreciation ......................... (644,880)
-----------
3,536,466
DUE FROM GOLF & SPORTS CENTER OF THE PALM BEACHES, INC. 76,369
OTHER ASSETS, net of ($30,878) accumulated amortization 47,450
------------
$3,665,731
============
LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
Mortgage payable ...................................... $1,609,643
Accrued interest ...................................... 41,773
Taxes payable ......................................... 21,527
------------
Total .............................................. 1,672,943
LOANS FROM PARTNERS .................................... 711,258
PARTNERS' CAPITAL ...................................... 1,281,530
------------
$3,665,731
============
</TABLE>

Read the accountants' report and the Notes to Financial Statements.

F-111

<PAGE>

W.A.G.N. PARTNERS
STATEMENT OF LOSS AND PARTNERS' CAPITAL
For the Year Ended December 31, 1995

AMORTIZATION .............................. $ 5,087
PROFESSIONAL FEES ......................... 13,444
INTEREST EXPENSE .......................... 182,309
TAXES ..................................... 21,527
DEPRECIATION .............................. 122,655
-----------
Net loss .............................. (345,022)
Add: Partners' Capital -- January 1, 1995 1,626,552
PARTNERS' CAPITAL -- December 31, 1995 ... $1,281,530
===========

Read the accountants' report and the Notes to Financial Statements.

F-112

<PAGE>

W.A.G.N. PARTNERS
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S><C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss .................................................................... $(345,022)
Adjustments to reconcile net income to net cash used by operating
activities:
Depreciation ............................................................... 122,655
Amortization ............................................................... 5,087
(Increase) decrease in:
Due from Golf and Sports .................................................. (15,954)
Increase (decrease) in:
Accrued interest .......................................................... 41,773
Taxes payable ............................................................. (234)
------------
Net cash used by operating activities ....................................... (191,695)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment ......................................... (2,969)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgage payable .............................................. (62,787)
Proceeds from loans from partners .......................................... 262,781
------------
Net cash provided by financing activities ................................... 199,994
------------
NET INCREASE IN CASH ........................................................ 5,330
Cash -- Beginning of year ................................................... 116
------------
Cash -- End of year ......................................................... $ 5,446
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest ..................................... $ 140,536
</TABLE>

Read the accountants' report and the Notes to Financial Statements.

F-113

<PAGE>

W.A.G.N. PARTNERS
NOTES TO THE FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995

1. FORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Formation

W.A.G.N. Partners, a Florida partnership (the "Partnership"), was formed
on January 1, 1990 to purchase an executive public golf course in West Palm
Beach, Florida. The Partnership has engaged a related corporation, Golf and
Sports Center of the Palm Beaches, Inc., to operate and manage the course.

Federal Income Taxes

The Partnership itself is not a taxpaying entity for purposes of Federal
income taxes. Federal income taxes on each partner are computed on total
income from all sources; accordingly, no provision for income taxes is made
in these statements.

Depreciation

Depreciation is calculated using the straight-line method over the useful
lives of the assets.

2. RELATED PARTY TRANSACTIONS:

A related corporation, Golf and Sports Center of the Palm Beaches, Inc.,
has leased the golf course from the Partnership for a base rent of $277,000
per annum. There is a provision in the lease that if the lessee is unable to
pay rent the lessor can defer the rent. The lessee has not been able to pay
any rent as of December 31, 1995 and does not appear to be able to in the
future so no rent income has been accrued.

3. MORTGAGE PAYABLE:

The First United Bank has started foreclosure proceedings against the
property so the entire amount of the mortgage and the accrued interest are
current liabilities.

4. BUSINESS CONDITION

The Partnership has experienced net losses and used cash in operating
activities since 1990. Capital calls to the partners and loans from the
partners have provided the financial support necessary for the Partnership to
satisfy its obligations through 1995. The partners have indicated that they
do not intend to continue to provide financial support to fund the
Partnership's 1996 projected cash flow deficiency.

As of June 1, 1996 the Partnership has found a buyer and intends to
liquidate. The financial statements do not include any adjustments relating
to the recoverability of recorded asset amounts or the amounts of liabilities
that might be necessary should the Partnership be unable to continue as a
going concern.

F-114

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Stockholder
Pelham Enterprises, Inc.
Greenville, South Carolina

We have audited the accompanying balance sheet of Pelham Enterprises, Inc.
as of December 31, 1994, and the related statements of income and retained
earnings 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 financial statements referred to above present fairly,
in all material respects, the financial position of Pelham Enterprises, Inc.
at December 31, 1994, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.

Bradshaw, Gordon & Clinkscales, P.A.
Greenville, South Carolina
April 25, 1995

F-115

<PAGE>

PELHAM ENTERPRISES, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND APRIL 30, 1995

ASSETS

APRIL 30,
DECEMBER 31, 1995
1994 (UNAUDITED)
-------------- -----------
CURRENT ASSETS:
Cash ............................. $ 12,183 $ 5,289
Inventory ........................ 226,360 225,534
Prepaid expenses ................. 5,452 2,504
-------------- -----------
Total current assets ............ 243,995 233,327
-------------- -----------
PROPERTY AND EQUIPMENT:
Land ............................. 779,564 779,564
Building and amusement facilities 752,135 754,684
-------------- -----------
1,531,699 1,534,248
Less: Accumulated depreciation .. 303,146 316,480
-------------- -----------
Net property and equipment ..... 1,228,553 1,217,768
-------------- -----------
TOTAL ASSETS ...................... $ 1,472,548 $1,451,095
============== ===========

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Accounts payable ............................. $ 18,741 $ 618
Sales tax and admissions tax payable ........ 2,954 --
Right-of-way deposit ......................... 19,100 24,000
Current portion of note payable .............. 33,596 34,800
------------ -----------
Total Current Liabilities ................... 74,391 59,418
Due to shareholder ............................ 511,591 511,591
LONG-TERM LIABILITY:
Note payable, less current portion ........... 789,890 780,305
------------ -----------
TOTAL LIABILITIES ............................. 1,375,872 1,351,314
------------ -----------
STOCKHOLDER'S EQUITY:
Common stock, no par value; 1,000 shares
authorized; 750 shares issued and
outstanding .................................. 52,300 52,300
Retained earnings ............................ 44,376 47,481
------------ -----------
Total stockholder's equity .................. 96,676 99,781
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ... $1,472,548 $1,451,095
============ ===========

The accompanying notes are an integral part of these financial statements.

F-116

<PAGE>

PELHAM ENTERPRISES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1994
AND THE FOUR MONTHS ENDED APRIL 30, 1995

APRIL 30,
DECEMBER 31, 1995
1994 (UNAUDITED)
-------------- -----------
REVENUES:
Driving range ............................... $303,970 $100,254
Batting cages ............................... 43,742 16,378
Golf instruction ............................ 23,157 287
Putting green ............................... 2,964
Golf pro shop ............................... 389,344 149,544
-------------- -----------
Net Revenues .............................. 763,177 266,463
-------------- -----------
COST OF REVENUES--GOLF PRO SHOP:
Inventory at beginning of year .............. 153,272 226,360
Purchases ................................... 349,545 109,837
-------------- -----------
Cost of goods available for sale ......... 502,817 336,197
Less: Inventory at end of year .............. 226,360 225,534
-------------- -----------
Total cost of revenues .................... 276,457 110,663
-------------- -----------
GROSS PROFIT ................................. 486,720 155,800
-------------- -----------
GENERAL AND ADMINISTRATIVE EXPENSES:
Salaries and wages .......................... 110,723 32,488
Driving range supplies ...................... 29,831 12,812
Utilities ................................... 17,689 5,999
Turf maintenance ............................ 13,176 2,259
Repairs and maintenance ..................... 26,409 10,889
Club repair costs ........................... 6,010 1,904
Operating supplies .......................... 13,488 1,541
Payroll taxes ............................... 10,543 3,177
Taxes and licenses .......................... 16,277 444
Professional fees ........................... 13,853 17,178
Advertising ................................. 22,142 6,456
Insurance ................................... 20,885 5,198
Equipment rental ............................ 13,678 2,945
Travel ...................................... 7,290 4,166
Telephone ................................... 2,034 1,027
Office supplies ............................. 1,053 390
Miscellaneous ............................... 6,976 4,267
Depreciation ................................ 41,620 13,333
-------------- -----------
Total general and administrative expenses 373,677 126,473
-------------- -----------
INCOME FROM OPERATIONS ....................... 113,043 29,327
-------------- -----------
OTHER EXPENSES:
Interest expense ............................ 66,490 16,222
Abandonment of putting greens ............... 44,721
-------------- -----------
Total other expenses ...................... 111,211 16,222
-------------- -----------
NET INCOME ................................... 1,832 13,105
RETAINED EARNINGS, Beginning of year ........ 51,044 44,376
DIVIDENDS .................................... (8,500) (10,000)
-------------- -----------
RETAINED EARNINGS, End of year ............... $ 44,376 $ 47,481
============== ===========

The accompanying notes are an integral part of these financial statements.

F-117

<PAGE>

PELHAM ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994 AND
FOR THE FOUR MONTHS ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
<S><C>

APRIL 30,
DECEMBER 31, 1994
1995 (UNAUDITED)
-------------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 1,832 $ 13,105
Adjustments to reconcile net income to net cash provided by (used
by) operating activities:
Depreciation ....................................................... 41,620 13,333
Loss on abandonment of putting greens .............................. 44,721 --
Increase (decrease) in inventory ................................... (73,088) 826
Increase (decrease) in prepaid expenses ............................ (5,452) 2,948
Decrease in accounts payable ....................................... (22,844) (18,123)
Increase in other liabilities ...................................... 19,627 1,946
-------------- -----------

NET CASH PROVIDED BY OPERATING ACTIVITIES ............................ 6,416 14,035
-------------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets ............................................ (12,915) (2,549)
-------------- -----------

NET CASH USED BY INVESTING ACTIVITIES ................................ (12,915) (2,549)
-------------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable .......................................... (835,259) (8,380)
Loans from stockholders ............................................. 5,000 --
Proceeds from borrowings ............................................ 845,000 --
Dividends paid ...................................................... (8,500) (10,000)
-------------- -----------

NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES .................. 6,241 (18,380)
-------------- -----------

DECREASE IN CASH ..................................................... (258) (6,894)

CASH, Beginning of year .............................................. 12,441 12,183
-------------- -----------

CASH, End of year .................................................... $ 12,183 $ 5,289
============== ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes ....................................................... $ -0- $ -0-
============== ===========
Interest ........................................................... $ 66,490 $ 16,222
============== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-118

<PAGE>

PELHAM ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994

Pelham Enterprises, Inc. operates an entertainment facility under the name
of Pelham Tees. The facility is open to the public and features a golf pro
shop and driving range and batting cages. During 1994, the Company ceased
operating its putting greens.

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Property and Equipment:

Property and equipment are stated at cost, less accumulated depreciation.
Maintenance and repair costs are charged directly to expense accounts as
incurred.

When property and equipment are disposed of, the applicable cost and
accumulated depreciation are removed from the related asset and accumulated
depreciation accounts. The resulting gain or loss is included in operations.

The cost of property and equipment is depreciated over the estimated
useful lives of the assets using straight-line and accelerated depreciation
methods. The same lives and rates are used for book and tax purposes. The
estimated useful lives of the assets are as follows:

Buildings ........... 31.5 years
All other assets ... 7 years

Inventory:

Inventory is stated at the lower of cost, determined by the first-in,
first-out (FIFO) method, or market. Inventory consists of items purchased for
resale in the golf pro shop.

Income Taxes:

The Company, with the consent of its shareholder, has elected under the
Internal Revenue Code to be an S corporation. In lieu of corporation income
taxes, the shareholders of an S corporation are taxed on their proportionate
share of the Company's taxable income. Therefore, no provision or liability
for income taxes has been included in these financial statements.

NOTE 2--DUE TO SHAREHOLDER

The amount owed to the sole shareholder is non-interest bearing. The
amount cannot be repaid without the permission of the bank described in Note
3.

NOTE 3--NOTE PAYABLE
<TABLE>
<CAPTION>
<S><C>

APRIL 30,
DECEMBER 31, 1995
1994 (UNAUDITED)
-------------- -----------
7.5% note payable to a bank; maturing April 1997; monthly
payments of $7,854, including principal and interest;
secured by a mortgage on all real property of the
Company and the guarantee of the shareholder ............ $823,486 $815,105
Less: Current portion .................................... 33,596 34,800
-------------- -----------
$789,890 $780,305
============== ===========
Schedule of maturities due fiscal year ending April 30,
1996 ..................................................... $ 34,800
1997 ..................................................... 780,305
==============
$815,105
==============
</TABLE>

F-119

<PAGE>

PELHAM ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Company was subject to certain covenants relating to the $815,105
note payable. Under the terms of the note agreement, the Company is required
to maintain specific insurance coverages and debt service ratios and to
provide the bank with periodic financial information. At December 31, 1994
and April 30, 1995, respectively, the Company was in compliance with the
covenants.

NOTE 4--SUBSEQUENT EVENTS

In 1994, the Company received $19,100 from the State of South Carolina as
a deposit for a portion of the Company's land the state needed for highway
right-of-way. The Company appealed the amount the state was willing to pay
for the land, and in 1995 settled with the state for a total of $24,000.

In May 1995, Family Golf Centers, Inc. (FGCI) purchased 100% of the
Company's issued and outstanding common stock from the Company's sole
shareholder. The Company's stock was converted into FGCI stock, and the
Company's separate identity ceased.

F-120

<PAGE>

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Family Golf Centers, Inc.
225 Broadhollow Road
Melville, NY 11747

We have audited the accompanying Balance Sheet of Hiland Park Golf Course
(an operating component of Newmark Investments, Inc., a wholly owned
subsidiary of Evergreen Bank, N.A.) as of April 30, 1995 and the related
Statements of Income, Equity, and Cash Flows for the eleven months then
ended. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based
on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hiland Park Golf Course
as of April 30, 1995 and the results of its operations and its cash flows for
the eleven months then ended in conformity with generally accepted accounting
principles.

July 12, 1995
Queensbury, New York
Silverstein, Loftus & Ross, CPAs, P.C.

F-121

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
BALANCE SHEET
APRIL 30, 1995

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...... $ 2,170
Accounts receivable ............. 34,409
Inventory (A) ................... 64,679
------------
TOTAL CURRENT ASSETS .......... 101,258
PROPERTY AND EQUIPMENT: (A)
Leasehold improvements .......... 1,480
Furniture and fixtures .......... 4,908
Machinery and equipment ......... 104,702
Dishes, glassware, silverware .. 18,062
Real and personal property ..... 3,650,000
------------
TOTAL ......................... 3,779,152
Accumulated Depreciation ........ 92,131
------------
NET PROPERTY AND EQUIPMENT ... 3,687,021
------------
TOTAL ASSETS .................. $3,788,279
============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Cash overdraft .................. $ 64,774
Accounts payable ................ 55,790
Accrued expenses ................ 20,295
Gift certificates payable ...... 8,831
Customer deposits ............... 35,557
Sales tax payable ............... 228
Deferred revenue (B) ............ 165,887
------------
TOTAL CURRENT LIABILITIES .... 351,362
EQUITY:
Equity (A) ...................... $3,436,917
------------
TOTAL LIABILITIES AND EQUITY $3,788,279
============

See Notes to Financial Statements

F-122

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
STATEMENT OF INCOME
FOR THE ELEVEN MONTHS ENDED APRIL 30, 1995

SALES:
Member dues (C) ............ $ 27,447
Greens and tournament fees 409,763
Range fees ................. 17,346
Merchandise sales .......... 98,478
Cart rentals ............... 137,002
Food and beverage sales ... 710,377
Comedy club admission ..... 22,739
Miscellaneous .............. 12,803
------------
TOTAL SALES .............. $1,435,955
------------
COST OF SALES:
Inventory--beginning ....... 0
Purchases--pro shop ........ 132,046
Purchases--food and
beverage ................... 285,211
Range balls ................ 1,048
Entertainment .............. 64,244
------------
TOTAL .................... 482,549
LESS: inventory--ending ... 64,679
------------
TOTAL COST OF SALES ..... 417,870
------------
GROSS PROFIT ON SALES ... 1,018,085
OPERATING EXPENSES .......... 1,537,327
------------
NET (LOSS) ............... $ (519,242)
============

See Notes to Financial Statements

F-123

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
STATEMENT OF EQUITY
FOR THE ELEVEN MONTHS ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
<S><C>

TOTAL
-----------
Balance--June 1, 1994 ................................................... $ 0
Add:
Cash contributions by Evergreen Bank, N.A. and Newmark Investments,
Inc., its wholly owned subsidiary (A) ................................. 204,453
Contribution of Assets by Evergreen Bank, N.A. and Newmark Investments,
Inc., its wholly owned subsidiary (A) ................................. 3,751,706
Less:
Net (loss) for the eleven months ended April 30, 1995 .................. (519,242)
-----------
Balance--April 30, 1995 ................................................. $3,436,917
===========
</TABLE>

See Notes to Financial Statements

F-124

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
STATEMENT OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
<S><C>

CASH PROVIDED BY (USED FOR):
Operating Activities:
Net (loss) ............................................................ $(519,242)
Items not affecting cash:
Depreciation ......................................................... 92,131
Accounts receivable ................................................... (34,409)
Inventory ............................................................. (64,679)
Accounts payable ...................................................... 55,790
Accrued expenses ...................................................... 20,295
Customer deposits ..................................................... 35,557
Deferred revenue ...................................................... 165,887
Other current liabilities ............................................. 9,059
------------
NET OPERATING ACTIVITIES ............................................. (239,611)
------------
INVESTING ACTIVITIES:
Additions To Property and Equipment ................................... (27,446)
------------
NET INVESTING ACTIVITIES ............................................. (27,446)
FINANCING ACTIVITIES:
Cash Overdraft ......................................................... 64,774
Cash Contributed by Evergreen Bank, N.A. and Newmark Investments, Inc. 204,453
------------
NET FINANCING ACTIVITIES ............................................. 269,227
------------
INCREASE IN CASH ....................................................... 2,170
CASH AND CASH EQUIVALENTS:
Beginning of Period ................................................... 0
------------
End of Period ......................................................... $ 2,170
============
</TABLE>

See Notes to Financial Statements

F-125

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
STATEMENT OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED APRIL 30, 1995
<TABLE>
<CAPTION>
<S><C>

NON-CASH INVESTING ACTIVITIES:
Contribution of assets by Evergreen Bank, N.A. and
Newmark
Investments, Inc. .................................... $(3,751,706)
Increase in Equity ..................................... 3,751,706
--------------
NET CASH TRANSACTION ................................ 0
==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .............................................. $ 0
Income taxes .......................................... 0
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
</TABLE>

See Notes to Financial Statements

F-126

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995

(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Hiland Park Golf Course
is presented to assist in understanding the operation's financial statements.
The financial statements and notes are representations of management, which
is responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.

Business Activity

Hiland Park Golf Course is an operating component of Evergreen Bank, N.A.
(Evergreen) and Newmark Investments, Inc. (Newmark), a wholly owned
subsidiary of Evergreen. The business operations include a golf course,
driving range, pro shop, and restaurant and banquet facilities.

On June 1, 1994, Evergreen obtained possession of the assets of Hiland
Park, Inc. and several related entities through foreclosure proceedings.
Evergreen retained title to all the assets obtained through the foreclosure
and assigned the business operations to Newmark. At the date of foreclosure,
the assets of Hiland Park, Inc. were valued at their fair value of
$3,650,000, using the purchase method of accounting in accordance with APB
Opinion No. 16 and were contributed by Evergreen to the Hiland Park Golf
Course. These financial statements present the activity of Hiland Park Golf
Course for the eleven month period beginning June 1, 1994, the date of
foreclosure, through April 30, 1995.

Evergreen and Newmark invested cash and property and equipment and paid
certain expenses directly to facilitate the running of the operations. These
amounts are included in these financial statements as increases to equity.

These financial statements were prepared using the accounting and other
internal records of Evergreen and Newmark. These financial statements are
only indicative of the ongoing operations of Hiland Park Golf Course under
the oversight and funding from both Evergreen and Newmark.

Inventory

Inventory is stated at the lower of cost (average value) or market value.

Property and Equipment

Property and equipment are carried at cost. Depreciation of property and
equipment is computed using straight-line or accelerated methods at rates
based on the estimated useful lives.

Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.

Certain assets used at the Hiland Park Golf Course, including restaurant
equipment, furniture and fixtures are the subject of a dispute between the
owner prior to foreclosure and Evergreen Bank, N.A. as to who actually owns
the assets. No value has been placed on these assets.

Income Taxes

Income from Hiland Park Golf Course is combined with the income and
expenses of Newmark Investments, Inc. from other sources and reported in the
corporation's federal and state tax returns. Hiland Golf Course is not a
taxpaying entity for the purposes of federal and state income taxes, and
thus, no income taxes have been recorded in the statements.

(B) DEFERRED REVENUE

Deferred revenue at April 30, 1995, in the amount of $165,887, represents
golf club member dues received prior to April 30, 1995, prorated for the
months of May through November 1995.

F-127

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Prior to foreclosure in May 1994, the prior owner had received a
substantial amount of member dues for the 1994 golf season. Member dues for
the period June 1, 1994 through April 30, 1995, does not reflect any
proration of annual dues paid prior to foreclosure for months after
foreclosure. Management estimates that total membership dues for the year
ended April 30, 1995 should be $135,000.

(D) SUBSEQUENT EVENTS

On May 16, 1995, the golf course operation, related land, buildings,
equipment, furniture and fixtures were sold by Evergreen Bank, N.A. to Family
Golf Centers, Inc.

F-128

<PAGE>

INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders
RFC Enterprises, Inc.
Glen Allen, Virginia 23060

We have audited the accompanying balance sheet of RFC Enterprises, Inc.,
Glen Allen, Virginia (an S corporation) as of December 31, 1994, and the
related statements of income and accumulated deficit, 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 financial statements referred to above present fairly,
in all material respects, the financial position of RFC Enterprises, Inc. as
of December 31, 1994, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.

Drunagel, Johnson, Rutherford & Wilkins, P.C.
Warrenton, Virginia
August 8, 1995

F-129

<PAGE>

RFC ENTERPRISES, INC.
Glen Allen, Virginia

BALANCE SHEET
AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S><C>

ASSETS

CURRENT ASSETS:
Cash ..................................................................... $ 22,603
Accounts receivable--Banc Marc ........................................... 3,336
-----------
TOTAL CURRENT ASSETS .................................................... 25,939
-----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land ..................................................................... 257,319
Office furniture, fixtures and equipment ................................. 134,163
Recreational facilities and buildings .................................... 594,216
Transportation equipment ................................................. 20,041
-----------
1,005,739
Less: Accumulated depreciation ........................................... 258,555
-----------
PROPERTY, PLANT AND EQUIPMENT--NET ...................................... 747,184
-----------
OTHER ASSETS:
Loan costs ............................................................... 11,577
Less: Accumulated amortization ........................................... 5,095
-----------
TOTAL OTHER ASSETS ...................................................... 6,482
-----------
$ 779,605
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable--trade .................................................. $ 26,538
Notes payable--due currently ............................................. 235,111
Accrued interest ......................................................... 12,492
Accrued expenses ......................................................... 6,365
-----------
TOTAL CURRENT LIABILITIES ............................................... 280,506
-----------
DEFERRED LIABILITIES:
Notes payable ............................................................ 642,426
-----------
TOTAL LIABILITIES ....................................................... 922,932
-----------
STOCKHOLDERS' DEFICIT:
Common stock, $1 par value, 5,000 shares authorized; 100 shares issued
and outstanding ......................................................... 100
Additional paid in capital ............................................... 19,909
Accumulated deficit ...................................................... (163,336)
-----------
TOTAL STOCKHOLDERS' DEFICIT ............................................. (143,327)
-----------
$ 779,605
===========
</TABLE>

See Notes to Financial Statements

F-130

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1994

REVENUES:
Net sales ........................... $ 643,666
-----------
COST AND EXPENSES:
Cost of sales ....................... 124,458
Advertising and promotion ........... 38,229
Insurance ........................... 22,087
Interest ............................ 97,432
Depreciation ........................ 68,692
Repairs and maintenance ............. 41,065
Utilities and telephone ............. 19,197
Taxes ............................... 25,313
Salaries ............................ 209,700
Other expenses ...................... 34,444
Loss on disposition of assets ...... 24,927
-----------
TOTAL COST AND EXPENSES ........... 705,544
-----------
NET LOSS .......................... (61,878)
ACCUMULATED DEFICIT--BEGINNING OF
YEAR ................................ (79,130)
Less: Dividends ...................... (22,328)
-----------
ACCUMULATED DEFICIT--END OF YEAR . $(163,336)
===========

See Accompanying Notes to Financial Statements

F-131

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S><C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................................ $(61,878)
-----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ................................................................... 68,692
Loss on sale of fixed asset .................................................... 24,927
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable .......................................................... (700)
Increase (decrease) in:
Accounts payable ............................................................. 13,989
Accrued expenses ............................................................. 1,358
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................... 46,388
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets ........................................................ (86,439)
Proceeds from sale of fixed assets .............................................. 5,000
-----------
NET CASH (USED) BY INVESTING ACTIVITIES ..................................... (81,439)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable ..................................................... 72,500
Principal payments on notes payable ............................................. (29,039)
Additional loan cost ............................................................ (1,699)
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................................... 41,762
-----------
NET INCREASE IN CASH ............................................................. 6,711
-----------

CASH AT BEGINNING OF YEAR ................................................... 15,892
-----------
CASH AT END OF YEAR ......................................................... $ 22,603
===========
</TABLE>

See Accompanying Notes to Financial Statements

F-132

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The accounting policies of a company are the principles of accounting and
the methods of applying those principles which management feels are most
appropriate in preparing their financial reports. The policies adopted can
significantly affect a company's reported results of operations. To
facilitate an understanding of the data presented in the financial
statements, the significant accounting policies are summarized below:

The Company's primary line of business is operating a family recreation
center. Facilities available to the public include an arcade, miniature golf
course, golf driving range and baseball batting cages. The Company has
recreational facilities and an office in Glen Allen, Virginia.

Property and equipment are recorded at cost less applicable depreciation.
For recreational facilities and buildings, depreciation is calculated on the
straight-line method based upon estimated useful lives ranging from 15 years
to 31 1/2 years. For office furniture, fixtures and equipment, and
transportation equipment, depreciation is calculated using accelerated
methods based upon estimated useful lives ranging from 5 to 7 years.

The Company, with the consent of its shareholders, has elected to have its
income taxed under Section 1372 of the Internal Revenue Code, which provides
that, in lieu of corporation income taxes, the shareholders are taxed on
their proportionate share of the company's taxable income. Therefore, no
provision or liability for federal income taxes is included in these
financial statements.

Points and loan fees are capitalized and amortized over the loan term.

2. FIXED ASSETS:

A schedule of office furniture, fixtures and recreational facilities and
transportation equipment at December 31, 1994 is presented below:

ACCUMULATED
COST DEPRECIATION
---------- --------------
Office furniture, fixtures and equipment $134,163 $ 55,940
Recreational facilities and buildings ... 594,216 186,774
Transportation equipment ................. 20,041 15,841
---------- --------------
$748,420 $258,555
========== ==============

Cost of maintenance and repairs is charged to expense as incurred.

3. LONG-TERM DEBT AND ASSETS PLEDGED:

A summary of long-term debt outstanding at December 31, 1994 is set forth
below in the following tabulation:

F-133

<PAGE>

3. LONG-TERM DEBT AND ASSETS PLEDGED: (Continued)
<TABLE>
<CAPTION>
<S><C>

Note payable to S.H. Guza Company, monthly payments of $2,098.92, due until
maturity on December 12, 1996 with interest at 10% annually, secured
by land and improvements at 11000 Washington Highway, Glen Allen,
Virginia ............................................................. $175,631
Note payable to Ellis Financial Corporation, original amount $100,000
dated November 20, 1992, monthly payments of $2,548.00 required until
maturity at November 20, 1995, interest at 18% annually, secured by
second deed of trust for land and improvements at 11000 Washington
Highway, Glen Allen, Virginia ........................................ 87,625
Note payable to Ellis Financial Corporation, original amount $50,000
dated November 16, 1993, monthly payments of $1,272.80, due until
maturity at November 20, 1996, interest at 18% annually, secured by
second deed of trust for land and improvements at 11000 Washington
Highway, Glen Allen, Virginia ........................................ 50,000
Note payable to Susan Stockstill dated August 1992, original amount
$270,575, monthly payments of $3,575.67, due until maturity at August
2002, interest at 10% annually ....................................... 251,451
Demand note payable to Mary Margaret Mathews for advances made during
1993 and 1994, interest payable periodically at 10% annually ......... 52,500
Note payable to Susan Stockstill for advances made during 1993 and
1994, interest at 10% annually ....................................... 34,000
Note payable to Ellis Financial Corporation dated February 15, 1994,
interest only payable monthly until maturity at February 15, 1997,
interest at 18% annually ............................................. 25,000
Installment notes payable to Lease Card .............................. 5,406
----------
877,537
Less: Current maturities on long-term debt ........................... 235,111
----------
$642,426
==========
</TABLE>

The following is a schedule by years of future debt payments as of
December 31, 1994:

YEAR ENDING DECEMBER 31:
- ------------------------
1995 $235,111
1996 255,755
1997 197,068
1998 25,076
1999 27,702
Thereafter 136,825
----------
$877,537
==========

F-134

<PAGE>

4. LEASED ASSETS AND LEASE COMMITMENTS:

The Company leases adjacent property which enhances road front visibility
and serves as a covered picnic area. The monthly rent is $500 on a month to
month basis.

On November 15, 1993, the Company entered an agreement related to coin
operated amusement machines. The vendor purchases, installs and maintains
coin operated amusement games in the arcade. Tokens are sold by the Company
and proceeds are collected weekly and payment made to the coin machine
vendor. Certain minimum revenues are stipulated and machine location
adjustments can be made. The term of the agreement is 60 months with certain
renewal options. The minimum rent due is not available since amounts due
fluctuate with volume.

5. FINANCIAL INSTRUMENT DISCLOSURE:

The Company maintains its cash account in a Virginia financial
institution. The cash balance is insured by the FDIC up to $100,000 and all
funds are within the FDIC insurance provided.

6. SUPPLEMENTARY STATEMENT OF CASH FLOWS INFORMATION:

Cash paid for:
Interest ........................................................... $92,159
Noncash investing activities:
Noncash distributions to shareholders by note receivable reduction $22,328

F-135

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
BALANCE SHEET
(UNAUDITED)
JULY 31, 1995
<TABLE>
<CAPTION>
<S><C>

ASSETS
CURRENT ASSETS:
Cash ..................................................................... $ 10,127
Accounts receivable--Banc Marc ........................................... 2,570
Prepaid insurance ........................................................ 920
Notes Receivable--Shareholder ............................................ 29,460
-----------
TOTAL CURRENT ASSETS ................................................... 43,077
-----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land ..................................................................... 257,319
Office furniture, fixtures and equipment ................................. 139,663
Recreational facilities and buildings .................................... 596,813
-----------
993,795
Less: Accumulated depreciation ........................................... 277,304
-----------
PROPERTY, PLANT AND EQUIPMENT--NET ..................................... 716,491
-----------
OTHER ASSETS:
Loan costs ............................................................... 11,577
Less: Accumulated amortization ........................................... 7,715
-----------
TOTAL OTHER ASSETS ..................................................... 3,862
-----------
$ 763,430
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable--trade .................................................. $ 130,660
Notes payable--due currently ............................................. 213,270
Accrued expenses ......................................................... 4,599
-----------
TOTAL CURRENT LIABILITIES .............................................. 348,529
-----------
DEFERRED LIABILITIES:
Notes payable ............................................................ 607,936
-----------
TOTAL LIABILITIES ...................................................... 956,465
-----------
STOCKHOLDERS' DEFICIT:
Common stock, $1 par value, 5,000 shares authorized; 100 shares issued
and outstanding .......................................................... 100
Additional paid in capital ............................................... 19,909
Accumulated deficit ...................................................... (213,044)
-----------
TOTAL STOCKHOLDERS' DEFICIT ............................................ (193,035)
-----------
$ 763,430
===========
</TABLE>

F-136

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
(UNAUDITED)
SEVEN MONTHS ENDED JULY 31, 1995

REVENUES
Net sales .............................. $363,593
----------
COST AND EXPENSES:
Cost of sales .......................... 89,379
Advertising and promotion .............. 27,055
Insurance .............................. 5,844
Interest ............................... 60,723
Depreciation ........................... 36,771
Repairs and maintenance ................ 30,189
Utilities and telephone ................ 13,750
Taxes .................................. 10,745
Salaries ............................... 105,798
Other expenses ......................... 24,996
----------
TOTAL COST AND EXPENSES .............. 405,250
----------
NET LOSS ............................. 41,657
ACCUMULATED DEFICIT--BEGINNING OF PERIOD 163,336
Less: Dividends ......................... 8,051
----------
ACCUMULATED DEFICIT--END OF PERIOD .. $213,044
==========

F-137

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
STATEMENT OF CASH FLOWS
(UNAUDITED)
SEVEN MONTHS ENDED JULY 31, 1995
<TABLE>
<CAPTION>
<S><C>

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ...................................................................... $(41,657)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ................................................................ 36,771
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable--trade ................................................ 766
Prepaid assets ............................................................ (920)
Other receivables ......................................................... (29,460)
Increase (decrease) in:
Accounts payable .......................................................... 104,122
Accrued expenses .......................................................... (14,258)
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................ 55,364
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of recreational facilities ........................................... (3,458)
-----------
NET CASH (USED) BY INVESTING ACTIVITIES .................................. (3,458)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ........................................... (56,331)
Cash distributions to shareholders ............................................ (8,051)
-----------
NET CASH (USED) BY FINANCING ACTIVITIES .................................. (64,382)
-----------
NET DECREASE IN CASH ............................................................ (12,476)
-----------
CASH AT BEGINNING OF PERIOD .............................................. 22,603
-----------
CASH AT END OF PERIOD .................................................... $ 10,127
===========
</TABLE>

F-138

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company, with the consent of its shareholders, has elected to have its
income taxed under Section 1372 of the Internal Revenue Code, which provides
that, in lieu of corporation income taxes, the shareholders are taxed on
their proportionate share of the Company's taxable income. Therefore, no
provision or liability for federal income taxes is included in these
financial statements.

Loan Fees--Points and loan fees are capitalized and amortized over the
loan term.

2. FIXED ASSETS:

A schedule of office furniture, fixtures and recreational facilities at
July 31, 1995 is presented below:

ACCUMULATED
COST DEPRECIATION
---------- --------------
Office furniture, fixtures and equipment $139,663 $ 71,695
Recreational facilities and buildings ... 596,813 205,609
---------- --------------
$736,476 $277,304
========== ==============

Cost of maintenance and repairs is charged to expense as incurred.

F-139

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. LONG-TERM DEBT AND ASSETS PLEDGED:

A summary of long-term debt outstanding at July 31, 1995 is set forth
below in the following tabulation:
<TABLE>
<CAPTION>
<S><C>

Note payable to Security Bank Corporation, monthly payments of $1,939.84,
due until maturity at December 21, 1997, interest computed monthly at 2 1/2
% above Wall Street Journal published rate, secured by security agreement
on machinery and equipment owned by RFC Enterprises, Incorporated and deed
of trust on property owned by shareholders in Louisa County ................ $182,345
Note payable to S. H. Guza Company, monthly payments of $2,098.92, due until
maturity on December 12, 1996 with interest at 10% annually, secured by
land and improvements at 11000 Washington Highway, Glen Allen, Virginia ... 171,071
Note payable to Ellis Financial Corporation, original amount $100,000 dated
November 20, 1992, monthly payments of $2,548.00 required until maturity at
November 20, 1995, interest at 18% annually, secured by second deed of
trust for land and improvements at 11000 Washington Highway, Glen Allen,
Virginia ................................................................... 86,391
Note payable to Ellis Financial Corporation, original amount $50,000 dated
November 16, 1993, monthly payments of $1,272.80, due until maturity at
November 20, 1996, interest at 18% annually, secured by second deed of
trust for land and improvements at 11000 Washington Highway, Glen Allen,
Virginia ................................................................... 41,176
Note payable to Susan Stockstill dated August 1992, original amount
$270,575, monthly payments of $3,575.67, due until maturity at August 2002,
interest at 10% annually ................................................... 245,559
Demand note payable to Mary Margaret Mathews for advances made during 1993
and 1994, interest payable periodically at 10% annually .................... 42,500
Note payable to Susan Stockstill for advances made during 1993 and 1994,
interest at 10% annually ................................................... 23,500
Note payable to Ellis Financial Corporation dated February 15, 1994,
interest only payable monthly until maturity at February 15, 1997, interest
at 18% annually ............................................................ 25,000
Installment notes payable to Lease Card ..................................... 3,664
----------
821,206
Less: Current maturities on long-term debt .................................. 213,270
----------
$607,936
==========
</TABLE>

F-140

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

3. LONG-TERM DEBT AND ASSETS PLEDGED: (Continued)
The following is a schedule by years of future debt payments as of July
31, 1995:

PERIOD ENDING JULY 31:
- ----------------------
1996 ............. $213,270
1997 ............. 265,127
1998 ............. 157,995
1999 ............. 24,276
2000 ............. 26,704
2001 and
thereafter ....... 133,834
----------
$821,206
==========

4. LEASED ASSETS AND LEASE COMMITMENTS:

The Company leases adjacent property which enhances road front visibility
and serves as a covered picnic area. The monthly rent is $500.

On November 15, 1993, the Company entered an agreement related to coin
operated amusement machines. The vendor purchases, installs and maintains
coin operated amusement games in the arcade. Tokens are sold by the Company
and proceeds are collected weekly and payment made to coin machine vendor.
Certain minimum revenues are stipulated and machine location adjustments can
be made. The term of the agreement is 60 months with certain renewal options.
The minimum rent due is not available since amounts due fluctuate with
volume.

5. FINANCIAL INSTRUMENT DISCLOSURE:

The Company maintains its cash account in a Virginia financial
institution. The cash balance is insured by the FDIC up to $100,000 and all
funds are within the FDIC insurance provided.

6. SUPPLEMENTARY STATEMENT OF CASH FLOWS INFORMATION:

Cash paid for:
Interest ............................................... $67,381
Noncash investing activities:
Noncash distributions to shareholders by note
receivable reduction-vehicle distributed .............. $ 3,544

F-141

<PAGE>

To the Partners
UPPER HEMBREE PARTNERS, L.P.
(a Georgia limited partnership)
1360 Upper Hembree Road
Roswell, Georgia 30076

INDEPENDENT ACCOUNTANT'S REPORT

I have audited the accompanying balance sheet of UPPER HEMBREE PARTNERS,
L.P. (a Georgia limited partnership) as of December 31, 1994 and the related
statements of income, partners' capital, and cash flows for the years ended
December 31, 1994 and December 31, 1993, respectively. These financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based
on my audits.

I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe that my audits provides a
reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of UPPER HEMBREE PARTNERS,
L.P. (a Georgia limited partnership) as of December 31, 1994 and the results
of its operations and its cash flows for the years ended December 31, 1994
and December 31, 1993, respectively, in conformity with generally accepted
accounting principles.

We previously audited and reported on the financial statements of UPPER
HEMBREE PARTNERS, LP as of December 31, 1994 and for the year then ended in
our report dated September 7, 1995. That audit and those financial statements
have been updated by this report to include comparative prior year
information as to income and cash flows for the year ended December 31, 1993.
No change to the previously issued financial statements has resulted.

Ernest T. Northrup
Certified Public Accountant
September 7, 1995

F-142

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
BALANCE SHEETS
<TABLE>
<CAPTION>
<S><C>

DECEMBER 31, JULY 31,
1994 1995
-------------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash in bank .................................................... $ 11,607 $ 18,742
Cash--change funds .............................................. 1,500 1,400
Miscellaneous account receivable (Note 2) ....................... -- 704
Inventory (Note 2) .............................................. 2,500 500
Prepaid expenses ................................................ 3,561 10,518
-------------- ------------
Total current assets .......................................... 19,168 31,864
-------------- ------------
FIXED ASSETS (Note 1):
Land ............................................................ 2,605,573 2,605,573
Land improvements ............................................... 835,787 829,154
Furniture and fixtures .......................................... 34,765 37,208
Machinery and equipment ......................................... 652,342 667,922
Buildings and structures ........................................ 275,551 280,911
Less: accumulated depreciation .................................. (540,149) (659,648)
-------------- ------------
Fixed assets--net ............................................. 3,863,869 3,761,120
-------------- ------------
OTHER ASSETS:
Intangible assets (Note 1) ...................................... 29,052 29,052
Less: accumulated amortization .................................. (13,762) (18,302)
Utility deposit ................................................. 5,500 5,500
-------------- ------------
Other assets--net ............................................. 20,790 16,250
-------------- ------------
Total Assets .................................................. $3,903,827 $3,809,234
============== ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable ................................................ $ 22,145 $ 20,336
Accrued property taxes .......................................... 24,836 17,105
Accrued interest payable ........................................ 15,791 15,966
Other accrued liabilities ....................................... 3,789 12,801
Installment notes and capitalized leases--current portion (Note
4) .............................................................. 8,214 7,054
Notes payable to banks--current portion (Note 3) ................ 107,100 130,173
-------------- ------------
Total current liabilities ..................................... 181,875 203,435
-------------- ------------
LONG-TERM LIABILITIES:
Notes payable to banks--long-term portion (Note 3) ............. 1,792,423 1,756,470
Installment notes and capitalized leases--long-term portion
(Note 4) ....................................................... 1,632 4,468
General partners' preference loan (Note 6) ...................... 290,000 290,000
-------------- ------------
Total long-term liabilities ................................... 2,084,055 2,050,938
-------------- ------------
PARTNERS' CAPITAL 1,637,897 1,554,861
Total Liabilities and Partners' Capital ....................... $3,903,827 $3,809,234
============== ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-143

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
<S><C>

DECEMBER 31, FOR THE YEAR ENDED FOR THE SEVEN MONTHS ENDED
1993 DECEMBER 31, 1994 JULY 31, 1995 (UNAUDITED)
-------------- ------------------ --------------------------
REVENUES:
Sports park sales ................... $ 636,250 $ 672,759 $385,998
Miscellaneous income ................ 2,841 4,516 5,625
Interest income ..................... 4 2,405 --
-------------- ------------------ --------------------------
Total revenues ..................... 639,095 679,680 391,623
-------------- ------------------ --------------------------
DIRECT COSTS:
Driving range and golfing activities 43,594 68,608 32,173
Batting cages ....................... 782 4,829 381
Pro shop ............................ 12,263 19,748 1,687
Food and beverage ................... 16,728 32,012 12,356
Video arcade ........................ 0 7,934 812
Other direct costs .................. 68,661 7,318 2,743
-------------- ------------------ --------------------------
Total direct costs ................. 142,028 140,449 50,152
-------------- ------------------ --------------------------

GENERAL AND ADMINISTRATIVE EXPENSE:
Employee and personnel expense ..... 272,850 266,256 90,596
Advertising ......................... 28,182 36,145 9,969
Contributions ....................... 659 1,296 275
Dues and subscriptions .............. 655 3,277 780
Entertainment ....................... 356 0 0
Insurance ........................... 34,412 34,374 14,717
Office supplies ..................... 3,730 2,248 872
Professional fees ................... 9,229 23,678 14,048
Repairs and maintenance ............. 23,010 20,283 8,964
Taxes--property ..................... 9,702 49,701 14,000
Telephone ........................... 7,194 4,879 4,440
Utilities ........................... 34,239 46,837 19,438
Other general and administrative ... 16,387 11,735 10,673
-------------- ------------------ --------------------------
Total general and administrative .. 440,605 500,709 188,772
-------------- ------------------ --------------------------
Operating income .................. 56,462 38,522 152,699

NONOPERATING EXPENSE:
Amortization ........................ 19,874 20,148 4,540
Depreciation ........................ 179,221 194,055 119,499
Interest ............................ 212,685 162,262 111,697
Penalties ........................... 718 48
-------------- ------------------ --------------------------
Total nonoperating expense ......... 412,498 376,513 235,736
-------------- ------------------ --------------------------
NET INCOME (LOSS) .................... $(356,036) $(337,991) $(83,037)
============== ================== ==========================
</TABLE>

The accompanying notes are an integral part
of these financial statements.

F-144

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1993, DECEMBER 31, 1994
AND THE SEVEN MONTHS ENDED JULY 31, 1995
<TABLE>
<CAPTION>
<S><C>

GENERAL LIMITED
TOTAL PARTNERS PARTNERS
------------ ----------- ------------
BALANCE--January 1, 1993 ...................... $1,317,071 $ 154,037 $1,163,034
Net loss--1993 ............................... (356,036) (178,018) (178,018)
------------ ----------- ------------
BALANCE--January 1, 1994 ...................... $ 961,035 $ (23,981) $ 985,016
Capitalization of Partners' loans and accrued
interest (Note 6) ........................... 764,853 379,860 384,993
Partners' capital contribution ............... 250,000 250,000
Net loss--1994 ............................... (337,991) (152,096) (185,895)
------------ ----------- ------------
BALANCE--December 31, 1994 .................... $1,637,897 $ 203,783 $1,434,114
Net loss--seven months ended July 31, 1995 .. (83,037) (37,367) (45,670)
------------ ----------- ------------
Balance--July 31, 1995 ....................... $1,554,860 $ 166,416 $1,388,444
============ =========== ============
</TABLE>

The accompanying notes are an integral part
of these financial statements.

F-145

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, DECEMBER 31, 1994
AND THE SEVEN MONTHS ENDED JULY 31, 1995
<TABLE>
<CAPTION>
<S><C>

DECEMBER 31, DECEMBER 31, JULY 31,
1993 1994 1995
-------------- -------------- -----------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers .......................... $ 639,095 $ 679,680 $ 390,919
Cash paid to suppliers and employees .................. (588,040) (622,928) (244,408)
Interest paid ......................................... (144,965) (149,386) (111,522)
-------------- -------------- -----------
Net cash provided by (used in) operating activities . (93,910) (92,634) 34,989
-------------- -------------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets .............................. (61,178) (175,071) (16,750)
-------------- -------------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from partners' preference loans .............. 193,200 35,000
Partners' capital contribution ........................ 0 250,000
Proceeds from short and long-term borrowings ......... 11,550 81,721 56,970
Repayment of partners' loans .......................... (8,200) 0 0
Principal repayments on short and long-term borrowings (58,710) (75,193) (68,174)
Loan costs incurred ................................... 0 (6,573)
-------------- -------------- -----------
Net cash provided by (used in) financing activities . 137,840 284,955 (11,204)
-------------- -------------- -----------

NET INCREASE IN CASH ................................... (17,248) 17,250 7,035

CASH BALANCE--beginning ................................ 13,105 (4,143) 13,107
-------------- -------------- -----------

CASH BALANCE--ending ................................... $ (4,143) $ 13,107 $ 20,142
============== ============== ===========
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED) IN OPERATING ACTIVITIES:
Net income (loss) ..................................... (356,036) $(337,991) $ (83,037)
Adjustments:
Depreciation and amortization ........................ 199,095 214,203 124,039
Add back 1994 capitalized interest on partners' loans 0 17,533 (704)
Net increase in miscellaneous accounts receivable
Net increase in inventory and prepaid expenses ...... (968) (1,383) (4,957)
Net increase (decrease) in accounts payable and
accrued liabilities ................................... (3,721) 19,661 (527)
Net increase (decrease) in accrued interest ......... 67,720 (4,657) 175
-------------- -------------- -----------
Net cash provided by (used) in operating activities .. (93,910) $ (92,634) $ 34,989
============== ============== ===========
</TABLE>

DISCLOSURE IN FINANCIAL STATEMENTS OF NONCASH FINANCING ACTIVITY

CAPITALIZATION OF LOANS PAYABLE TO PARTNERS

See Note 6 in Notes to Financial Statements concerning capitalization of
$764,853 of partner loans and accrued interest on March 31, 1994.

The accompanying notes are an integral part
of these financial statements.

F-146

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995 AND DECEMBER 31, 1994

1. DESCRIPTION OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Organization

UPPER HEMBREE PARTNERS, L.P. (the "PARTNERSHIP") was formed on December
20, 1990 for the purpose of owning and operating a 26 acre golf driving
range, including ancillary operations such as golf lessons, miniature golf,
batting cages, video arcade, snack bar, etc., in Fulton County, Georgia. The
PARTNERSHIP consists of five general and 31 limited partners as of December
31, 1994. It filed as a limited partnership under the laws of the state of
Georgia on December 11, 1991.

Method of Accounting

The financial statements are prepared, and the books are maintained, on
the accrual method of accounting.

Allocation of Net Income (Loss) and Partner Distributions

The Partnership Agreement was amended and restated on March 31, 1994.
Under the amended agreement, profits and losses are allocated 45 percent to
the general partners and 55 percent to the limited partners. Distributions of
available cash flow from operations or the sale or refinance of the business
are distributed at the discretion of the general partners and in accordance
with the Partnership Agreement. The Agreement calls for three classes of
distribution priority and, thereafter, 45 percent to general partners and 55
percent to limited partners in proportion to their respective ownership
percentages.

Fixed Assets and Depreciation

All property is stated at cost. Depreciation is provided using
straight-line methods of computation over the estimated useful lives of the
assets, as follows:

Furniture and fixtures ..... 5 years
Machinery and equipment .... 5 years
Buildings and structures ... 25 years
Land improvements ........... 15 years

All land, buildings, structures, and improvements are pledged as
collateral on the note payable to bank (see Note 3).

Intangible Assets

Intangible assets consist of organization costs and deferred loan costs.
These assets are being amortized on the straight-line method, as follows:

Organization costs .... 5 years (60 months)
Deferred loan costs ... 2 years (24 months)

Income Taxes

UPPER HEMBREE PARTNERS, LP is organized under the laws of the state of
Georgia as a limited partnership and qualifies to file as a partnership
organization under Federal and state income tax law. Accordingly, no income
taxes are payable by the partnership entity and each partner is required to
report his pro rata share of partnership income or loss.

F-147

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. DESCRIPTION OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
No current or deferred income taxes are recognized for this entity.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the PARTNERSHIP has
reflected cash flows and changes only with respect to cash on deposit. There
are no cash equivalents for the PARTNERSHIP.

2. INVENTORY

Inventory is minor and incidental in nature. It relates to the snack bar
and pro shop operations. Inventories are stated at the lower of cost or net
realizable value.

In March, 1995, the PARTNERSHIP divested itself of direct ownership and
management of the pro shop, by selling its then-existing inventory and
entering into a month-to-month management agreement with an individual who
continued to run the pro shop on the premises.

3. NOTES PAYABLE TO BANKS

The PARTNERSHIP'S notes payable to banks consist of the following:
<TABLE>
<CAPTION>
<S><C>

DECEMBER 31, JULY 31,
1994 1995
-------------- ------------
Term-balloon note payable to a commercial bank, dated
November 14, 1994, fixed interest rate of 9.8 percent,
payable over a two year term in equal monthly installments
of $19,859, principal and interest included, with remaining
principal of $1,755,450 due in a balloon payment on November
1, 1996, collateralized by land, buildings, and structures
of the PARTNERSHIP and by the personal guarantee of a
general partner ............................................. $1,849,523 $1,816,643
Floating line of credit payable to a commercial bank,
interest rate
9.75 percent at December 31, 1994 and prime plus one percent
at July 31, 1995 (see renewal on August 31, 1995 under
subsequent events, Note 7), guaranteed by the personal
guarantee of two general partners ........................... 50,000 70,000
-------------- ------------
Total .................................................... 1,899,523 1,886,643
Less current maturities:
Term-balloon ................................................ 57,100 60,173
Line of credit .............................................. 50,000 70,000
-------------- ------------
Total current ............................................ 107,100 130,173
-------------- ------------
Total long-term maturities ............................... $1,792,423 $1,756,470
============== ============
Maturity of long-term debt:
1996 (due November 1, 1996) ................................. $1,792,423 $1,756,470
</TABLE>

F-148

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. INSTALLMENT NOTES AND CAPITALIZED LEASES

The installment notes and capitalized leases represent equipment financing
arrangements, requiring monthly payments of principal and interest (finance
charge) over terms that extend as far as July 1998. There were two such
arrangements in force at December 31, 1994. Monthly payment obligations
ranged from $200 to $430 during the period under audit and until the final
term date. Current and long-term principal maturities at December 31, 1994
were as follows:
<TABLE>
<CAPTION>
<S><C>

DECEMBER 31, JULY 31,
1994 1995
-------------- ----------
Total principal balance outstanding under installment notes
and capitalized leases ....................................... $9,846 $11,522
Less current maturities (due within one year) ................. 8,214 7,054
-------------- ----------
Total long-term maturities ................................ $1,632 $ 4,468
============== ==========
</TABLE>

The equipment financed under these arrangements is pledged as collateral
on the various outstanding obligations.

5. OTHER ACCRUED LIABILITIES

Other accrued liabilities consists of accrued salaries, accrued payroll
taxes, sales taxes payable and (at July 31, 1995) an insurance note payable.

The insurance note payable at July 31, 1995 represents a premium financing
arrangement for the currently in-force general and liability insurance
policy. The note is payable in monthly amounts of $1,614 over a remaining
term of three months.

6. RELATED PARTY TRANSACTIONS

General Partners' Preference Loans

As of each respective balance sheet date, $290,000 was owed to the five
general partners for monies advanced by them to the PARTNERSHIP. These loans
are non-interest bearing and, under the terms of the Partnership Agreement,
are considered to represent a priority distribution upon the eventual sale or
refinance of the PARTNERSHIP.

Capitalization of Loans Payable to Partners

As of March 31, 1994, in connection with adopting an amended Partnership
Agreement (see Note 1), partners' loans in the amount of $606,000 plus
accrued interest of $158,853 were capitalized into the partners' capital
accounts. These loans had been made by both general and limited partners
during 1992 and had accrued interest at the rate of 12 percent. Interest on
these loans was $17,533 for the year ended December 31, 1994. After
capitalizing this indebtedness, no further interest was accrued. See
Statement of Changes in Partners' Capital.

Limited Partner as Employee

Effective March 31, 1994, one of the limited partners was employed on a
full-time basis as general manager of the sports park operation. This partner
was paid wages of $22,500 during 1994 and $17,500 during the seven months
ended July 31, 1995.

F-149

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. RELATED PARTY TRANSACTIONS (Continued)
Account Payable to General Partner

At December 31, 1994, $973 was owed for a miscellaneous piece of sporting
equipment obtained for the PARTNERSHIP by a general partner. The equipment
originally cost $3,791. This account payable had no specific repayment terms.
The sum of $2,818 was repaid to the general partner during 1994 and the
account was fully retired during 1995.

7. COMMITMENTS, CONTINGENCIES, AND OPERATING LEASES

Commitments and Contingencies

The PARTNERSHIP was contractually obligated to the extent of approximately
$5,000 at December 31, 1994 and $6,800 at July 31, 1995 for various
cancelable and noncancelable service and maintenance agreements and a
name-licensing agreement. These obligations are not reflected in these
financial statements because the exact amount of the liability has not been
precisely fixed and determined.

OPERATING LEASES

The PARTNERSHIP had entered into various operating lease agreements for
telephone equipment and credit card equipment. Future minimum commitments
under these leases for each of the next five years as of December 31, 1994
and July 31, 1995, respectively, are as follows:

DECEMBER 31, JULY 31,
1995 1995
-------------- ----------
Year ending in 1995 $ 792 $ --
Year ending in 1996 715 869
Year ending in 1997 609
Year ending in 1998 318

-------------- ----------
Total .......... $1,507 $1,796
============== ==========

Rent expense under operating leases was approximately $1,900 during 1994
and $850 during the seven months ended July 31, 1995.

8. SUBSEQUENT EVENTS

Renewal of Line of Credit

The line of credit note payable (see Note 3) was renewed on August 31,
1995 with a maturity date of September 30, 1995. Under the renewed note
agreement, the credit limit was $70,000, interest rate was 9.75 percent, and
the note was guaranteed by the personal guarantee of two general partners.

F-150

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. SUBSEQUENT EVENTS (Continued)
Sale of Partnership Assets

Effective August 1, 1995, the PARTNERSHIP entered into an intent agreement
to sell all of the assets and the business operations of UPPER HEMBREE
PARTNERS, L.P. to an unrelated purchaser, with the closing of the sale to be
prior to the end of September, 1995. The consideration for the sale would
satisfy all outstanding liabilities of the PARTNERSHIP and, in addition,
would result in final liquidating distributions of net proceeds to all
partners under the terms of the Partnership Agreement dated March 31, 1994
(see Note 1).

9. UNAUDITED FINANCIAL STATEMENTS

The financial statements as of July 31, 1995 and for the nine months ended
July 31, 1995 are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the Company's
financial position and results of operations.

F-151

<PAGE>

INDEPENDENT AUDITOR'S REPORT

Board of Directors
The Practice Tee, Inc.
El Segundo, California

I have audited the accompanying consolidated balance sheet of The Practice
Tee, Inc. and subsidiary as of December 31, 1994 and the related consolidated
statement of operations and accumulated deficit, and cash flows for the
period from February 8, 1994 (inception) to December 31, 1994. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.

I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from 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. I believe that my audit provides a
reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Practice Tee, Inc.
and subsidiary as of December 31, 1994, and the results of its operations and
its cash flows for the period then ended in conformity with generally
accepted accounting principles.

Robert Del Riego
Manhattan Beach, California
September 14, 1995

F-152

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S><C>

ASSETS
Current Assets
Cash ......................................................................... $ 16,514
Cash--payroll fund (restricted) .............................................. 9,950
Accounts receivable .......................................................... 36,671
Inventory .................................................................... 971
Prepaid expenses ............................................................. 2,073
-----------
Total Current Assets ....................................................... 66,179
Property, Plant and Equipment
Computer equipment ........................................................... 10,148
Office equipment ............................................................. 372
Allowance for depreciation ................................................... (4,132)
-----------
Total Property, Plant and Equipment ........................................ 6,388
Other Assets
Organization costs, net ...................................................... 4,128
-----------
Total Assets ............................................................... $ 76,695
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable ............................................................. $ 7,066
License fees payable ......................................................... 17,500
Accrued expenses ............................................................. 37,054
Franchise tax payable ........................................................ 800
Accrued rent ................................................................. 7,800
Accrued commissions .......................................................... 6,602
Deposits--payroll fund ....................................................... 9,950
-----------
Total Current Liabilities .................................................. 86,772
Loans payable--shareholder ..................................................... 201,191
Stockholders' Equity
Capital stock, no par value, 100,000 shares authorized, 10,000 shares issued
and outstanding ............................................................ 1,000
Accumulated deficit .......................................................... (212,268)
-----------
Total Stockholders' Equity ................................................. (211,268)
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ................................... $ 76,695
===========
</TABLE>

See accountant's report and notes to financial statements.

F-153

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FEBRUARY 8, 1994 (INCEPTION) TO DECEMBER 31, 1994

Revenues:
Management fees ......................... $ 101,974
Sublicensee fees ........................ 9,382
Beer & wine sales ....................... 18,862
-----------
Total Revenues ........................ 130,218
Cost of Sales ............................. 7,346
-----------
Gross Profit .............................. 122,872
General and Administrative:
Salaries and wages ...................... 175,153
Travel and entertainment ................ 16,546
Rent .................................... 20,053
Commissions ............................. 6,602
Licensing fees .......................... 17,500
Site development ........................ 7,736
Other general & administrative expenses . 78,098
-----------
Total General & Administrative ........ 321,688
-----------
Income (Loss) From Operations ............. (198,816)
Other Income (Expense):
Interest income ......................... 308
Interest expense ........................ (12,160)
-----------
Total Other Income (Expense) .......... (11,852)
-----------
Income (Loss) Before Income Taxes ........ (210,668)
Income Taxes .............................. 1,600
-----------
Net Income (Loss) and Accumulated Deficit $(212,268)
===========

See accountant's report and notes to financial statements.

F-154

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOW
FEBRUARY 8, 1994 (INCEPTION) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S><C>

Cash Flows from Operating Activities:
Net Income ..................................................................... $(212,268)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ................................................ 4,958
Increase (decrease) in cash resulting from changes in:
Accounts receivable ......................................................... (36,671)
Inventory ................................................................... (971)
Prepaid expenses ............................................................ (2,073)
Accounts payable ............................................................ 7,066
License fees payable ........................................................ 17,500
Accrued expenses ............................................................ 37,054
Franchise tax payable ....................................................... 800
Accrued rent ................................................................ 7,800
Accrued commissions ......................................................... 6,602
------------
Net cash used in operating activities ....................................... (170,203)
------------
Cash Flows from Investing Activities:
Purchase of equipment .......................................................... (10,520)
Organization costs ............................................................. (4,954)
------------
Net cash used in investing activities ....................................... (15,474)
------------
Cash Flows from Financing Activities:
Proceeds from issuance of capital stock ........................................ 1,000
Loans from shareholder ......................................................... 201,191
------------
Net cash from financing activities .......................................... 202,191
------------
Net Increase in Cash ............................................................. 16,514
Cash at Beginning of Period ...................................................... 0
------------
Cash at End of Period ............................................................ $ 16,514
============

Supplemental Cash Flow Information:
Cash paid (refunded) during the year for:
Income taxes .................................................................. $ 800
Interest ...................................................................... 0
</TABLE>

See accountant's report and notes to financial statements.

F-155

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994

NOTE A--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

[1] THE COMPANY:

The Company was formed in February, 1994 for the purpose of constructing
and operating golf learning centers and golf courses in the western United
States.

The Company presently manages golf courses in El Segundo and Gilroy,
California.

Through an assignment agreement with Orient Associates International, Inc.
and Golden Bear Golf Centers, Inc. ("GBGC") the Company is a licensee for a
Golden Bear Golf Center in California. The license agreement is terminable by
GBGC under certain conditions.

Through agreements with the City of El Segundo ("The City"), The Practice
Tee, Inc. ("TPT") manages a golf course located in that city ("The Lakes at
El Segundo") and TPT El Segundo, Inc. owns and operates the liquor concession
in the facility's restaurant. These agreements are for a period of five years
and are terminable by either party under certain conditions expiring June 30,
1998.

[2] PRINCIPLES OF CONSOLIDATION:

The consolidated financial statements include the accounts of TPT and its
wholly owned subsidiary TPT El Segundo, Inc. All significant intercompany
transactions have been eliminated.

[3] INVENTORIES:

Inventories consist of beer and wine for sale at the El Segundo facility
and is stated on a first in first out basis.

[4] PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are stated at cost. Depreciation is computed
using the double declining balance method over an estimated useful life of
five years. Depreciation expense for the year ended December 31, 1994
amounted to $4,132.

[5] ORGANIZATION COSTS:

Organization costs are being amortized over five years using the straight
line method. Amortization expense for the year ended December 31, 1994 was
$826.

[6] INCOME TAXES:

The Company has adopted Statement of Accounting Standards No. 109,
"Accounting for Income Taxes" which requires the use of the liability method
of accounting for income taxes.

For income tax purposes, TPT uses the cash method to compute taxable
income. TPT El Segundo, Inc. reports on the accrual basis for income tax
purposes. The Companies file separate tax returns. The tax returns as filed
by the Companies reported combined losses of $171,000 for the year ended
December 31, 1994. These losses may be carried forward to offset future
taxable income.

NOTE B--CASH--RESTRICTED:

As part of the management agreement between TPT and the City of El
Segundo, TPT El Segundo, Inc. pays the salaries and wages of the operating
staff of The Lakes of El Segundo golf course. The City reimburses the Company
for such payments. These funds are held in a separate account and their use
is restricted to the payment of operating salaries, wages, payroll taxes and
related administrative costs.

The liability shown as "Deposits--payroll fund" represents the balance of
these restricted funds as of December 31, 1994.

F-156

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE C--LOANS PAYABLE--SHAREHOLDER:

Pursuant to a shareholder agreement with the Company, one of the
shareholders has committed to lending the Company up to $400,000 for working
capital requirements. As of December 31, 1994, these loans totaled $201,191.
There is no stated interest rate on this debt. The Company has recorded
interest expense of $12,160 on these loans using an interest rate of eight
percent. The agreement specifies payments of principal and interest based on
the Company's cash availability.

In 1995, the shareholder loaned $125,000 of his commitment to the Company.
This debt falls under a separate agreement which specifies a two year term
and an interest rate of 10.5% to be paid monthly.

NOTE D--LEASING ARRANGEMENTS:

Operating leases, which expire at various dates through 1997, are for
office and restaurant space, and office equipment.

Future minimum lease payments under operating lease agreements that have
initial or remaining noncancelable lease terms in excess of one year are as
follows:

Year Ending December 31,

1995 .......................... $ 37,365
1996 .......................... 37,365
1997 .......................... 32,918
1998 .......................... 18,000
1999 .......................... 4,500
---------
Total minimum lease payments $130,148
=========

NOTE E--STOCKHOLDERS' EQUITY:

Stock Option:

The president of the Company, who is a shareholder, has been granted a
stock option which allows him to acquire 5% of the Company's outstanding
stock from the majority shareholder at a price specified in the agreement.
The option expires in February, 1999. If the option is not exercised by that
time, an alternate shareholder has the right to exercise the option until May
of 1999.

NOTE F--COMMITMENTS AND CONTINGENCIES:

[1] EMPLOYMENT AGREEMENT:

The shareholders agreement provides for the president of the Company, who
is also a shareholder, to receive an annual salary of $100,000.

[2] PROPOSED ACQUISITION OF GLOBAL GOLF/GAVILAN, INC. BY THE PRACTICE TEE,
INC.

The Company has agreed in principle to acquire Global Golf/Gavilan for
nominal consideration.

[3] PROPOSED ACQUISITION OF COMPANY BY FAMILY GOLF CENTERS, INC.:

The Company has agreed in principle to be acquired by Family Golf Centers,
Inc. ("FGCI").

[4] OPERATING ARRANGEMENT:

The Company operates a golf course in Gilroy, California for Global
Golf/Gavilan and retains 87.5% of the net profits of such golf course. The
income from this operation for the year ended December 31, 1994 was $14,653
and is included in management fee income.

F-157

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE F--COMMITMENTS AND CONTINGENCIES: (Continued)
[5] SUBLICENSE AGREEMENT:

In consideration for excluding Moreno Valley from the territory covered by
the GBI/GBGC agreement, GBGC pays the Company one half of the licensing fees
GBGC receives from the Moreno Valley facility. Total sublicense fees recorded
for the year ended December 31, 1994 were $9,382.

[6] LOSS CONTINGENCY:

Potential Legal Action:

A former employee has asserted a claim against the Company alleging
harassment and discrimination during her employment. To date, no formal
complaint has been filed. The former employee made a settlement demand of
$50,000 which was rejected by the Company. The Company disputes the
allegations and intends a vigorous defense. No estimate of the possible loss
or range of loss has been made.

NOTE G--ECONOMIC DEPENDENCY

The Company receives a substantial portion of its revenues from activities
pursuant to agreements with the City of El Segundo. If these agreements were
to be terminated prematurely, there would be a materially adverse effect on
the Company.

F-158

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS AT SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
<S><C>

ASSETS
Current Assets:
Cash ......................................................................... $ 27,703
Cash--payroll fund (restricted) .............................................. 4,197
Accounts receivable .......................................................... 92,721
Inventory .................................................................... 1,017
Prepaid expenses ............................................................. 60,239
-----------
Total Current Assets ........................................................ 185,877
Property, Plant and Equipment:
Computer equipment ........................................................... 13,408
Office equipment ............................................................. 2,204
Allowance for depreciation ................................................... (6,154)
-----------
Total Property, Plant and Equipment ......................................... 9,458
Other Assets:
Organization costs, net ...................................................... 3,385
-----------
TOTAL ASSETS ................................................................ $ 198,720
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................................. $ 20,753
Accrued expenses ............................................................. 114,501
Accrued rent ................................................................. 12,000
Accrued commissions .......................................................... 14,193
Deposits--payroll fund ....................................................... 4,197
-----------
Total Current Liabilities ................................................... 165,644
Loans payable--shareholder ..................................................... 301,191
Stockholders' Equity:
Capital stock, no par value, 100,000 shares authorized, 10,000 shares issued
and outstanding ............................................................ 1,000
Accumulated deficit .......................................................... (269,115)
-----------
Total Stockholders' Equity .................................................. (268,115)
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY .................................... $ 198,720
===========
</TABLE>

F-159

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)

Revenues:
Management fees ........................ $ 151,920
Sublicensee fees ....................... 15,000
Beer and wine sales .................... 36,492
-----------
Total Revenues ....................... 203,412
Cost of Sales ............................ 13,594
-----------
Gross Profit ............................. 189,818
General and Administrative:
Salaries and wages ..................... 99,634
Travel and entertainment ............... 22,078
Rent ................................... 22,591
Commissions ............................ 12,772
Licensing fees ......................... 26,250
Site development ....................... 3,368
Other general and administrative
expenses ............................. 36,951
-----------
Total General and Administrative ..... 223,644
-----------
Income (Loss) From Operations ............ (33,826)
Other Income (Expense):
Interest income ........................ 286
Interest expense ....................... (23,307)
-----------
Total Other Income (Expense) ......... (23,021)
-----------
Income (Loss) Before Income Taxes ....... (56,847)
Income Taxes ............................. --
-----------
Net Income (Loss) ........................ (56,847)
Accumulated Deficit, December 31, 1994 .. (212,268)
-----------
Accumulated Deficit, June 30, 1995 ...... $(269,115)
===========

F-160

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Golf Masters Limited Partnership,

We have audited the accompanying balance sheet of Golf Masters Limited
Partnership (an Ohio partnership) as of December 31, 1994, and the related
statements of income, changes in partners' capital, 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 financial statements referred to above present fairly,
in all material respects, the financial position of Golf Masters Limited
Partnership as of December 31, 1994, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
Respectfully submitted,

Sewell & Co., Inc.
Certified Public Accountants

Cleveland, Ohio
November 2, 1995

This report contains nine pages.

F-161

<PAGE>

GOLF MASTERS LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
<S><C>

DECEMBER 31, SEPTEMBER 30,
ASSETS 1994 1995
- --------------------------------------------------- --------------- ---------------
(UNAUDITED)
CURRENT ASSETS
Cash on hand and on deposit ....................... $ 48,632.85 $ 3,976.43
Accounts receivable--Trade ........................ 84,205.42 74,875.30
Accounts receivable--Employees .................... 200.00
Inventory ......................................... 24,909.24 22,039.74
Prepaid insurance ................................. 4,091.38 3,215.05
--------------- ---------------
Total Current Assets ............................. $ 162,038.89 $ 104,106.52
PROPERTY AND EQUIPMENT
Land .............................................. $ 500,000.00 $ 500,000.00
Leasehold improvements ............................ 592,034.89 596,280.82
Range equipment ................................... 67,595.36 67,595.36
Computers and office equipment .................... 39,745.55 40,157.50
Furniture and fixtures ............................ 59,119.40 59,119.40
--------------- ---------------
Total ............................................ $1,258,495.20 1,263,153.08
Less depreciation provision ....................... 67,025.61 102,108.51
--------------- ---------------
Remaining Value .................................. 1,191,469.59 1,161,044.57
OTHER ASSETS
Deposits .......................................... $ 1,273.14 $ 1,273.14
Organization and start-up costs--Net of
accumulated amortization of $118,794.21 and
$167,391.87 at
December 31, 1994 and September 30, 1995 ........ 205,189.83 156,592.17
--------------- ---------------
Total Other Assets ............................... 206,462.97 157,865.31
--------------- ---------------
TOTAL ASSETS ....................................... $1,559,971.45 $1,423,016.40
=============== ===============
</TABLE>

The appended notes are an integral part of this financial statement.

F-162

<PAGE>

EXHIBIT A

GOLF MASTERS LIMITED PARTNERSHIP

BALANCE SHEETS

LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>
<S><C>

DECEMBER 31, SEPTEMBER 30,
1994 1995
--------------- ---------------
(UNAUDITED)
CURRENT LIABILITIES
Accounts payable--Trade .................. $ 68,387.17 $ 102,406.72
Notes payable--Current portion ........... 93,170.29 278,537.77
Withheld and accrued payroll taxes ...... 3,526.43 1,211.48
Accrued payroll .......................... 14,417.78 5,355.86
Accrued sales tax ........................ 1,016.35
Accrued real estate interest ............. 3,237.97 3,237.97
Deferred lesson income ................... 291,689.16 244,401.91
--------------- ---------------
Total Current Liabilities ............... $ 475,445.15 $ 635,151.71

LONG-TERM LIABILITIES
Notes payable--Deferred portion .......... $ 529,491.18 $ 334,495.55
Loan payable--Golf Masters, Inc. ........ 135,465.44 169,411.59
Loan payable--Air Dome Limited
Partnership .............................. 615.11
--------------- ---------------
Total Long-term Liabilities ............. 665,571.73 503,907.14
PARTNERS' CAPITAL ......................... 418,954.57 283,957.55
--------------- ---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL .. $1,559,971.45 $1,423,016.40
=============== ===============
</TABLE>

The appended notes are an integral part of this financial statement.

F-163

<PAGE>

EXHIBIT B

GOLF MASTERS LIMITED PARTNERSHIP

STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1994

Partners' capital--January 1, 1994 .................... $ 535,047.72
Prior period adjustment (Note 8) ..................... (7,636.88)
--------------
Partners' capital--January 1, 1994, as restated ...... $ 527,410.84
Partners' contributions .............................. 92,733.00
Net loss for the year ended December 31, 1994 ....... (201,189.27)
--------------
PARTNERS' CAPITAL--DECEMBER 31, 1994 .................. $ 418,954.57
Net loss for the nine months ended September 30, 1995 (134,997.02)
--------------
PARTNERS' CAPITAL--SEPTEMBER 30, 1995 (UNAUDITED) .... $ 283,957.55
==============

The appended notes are an integral part of this financial statement.

F-164

<PAGE>

EXHIBIT C

GOLF MASTERS LIMITED PARTNERSHIP

STATEMENTS OF INCOME AND EXPENSE
FOR THE YEAR ENDED DECEMBER 31, 1994 AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1995

DECEMBER 31, SEPTEMBER 30,
1994 1995
--------------- ---------------
REVENUES (UNAUDITED)
Sales--Merchandise ........... $ 58,705.56 $ 40,786.00
Cost of sales ................ 35,439.84 31,247.00
--------------- ---------------
Gross Profit ................ $ 23,265.72 $ 9,539.00
OTHER OPERATING INCOME
Lessons ...................... $ 459,658.01 $ 338,258.00
Memberships .................. 111,477.63 66,049.00
Practice range ............... 208,677.33 160,372.00
--------------- ---------------
Total Other Operating Income 779,812.97 564,679.00
--------------- ---------------
NET REVENUES .................. $ 803,078.69 $ 574,218.00
OPERATING EXPENSE
Advertising .................. 55,417.32 46,906.44
Contributions ................ 120.00 30.00
Depreciation ................. 46,008.75 35,082.90
Employee benefits ............ 17,615.55 13,890.12
Insurance .................... 9,124.00 10,546.33
Interest expense ............. 59,549.19 37,078.33
Maintenance .................. 19,888.55 17,698.65
Miscellaneous expense ........ 2,924.82 --
Office expense ............... 36,194.24 14,841.30
Practice range expense ...... 9,758.51 --
Professional fees ............ 15,999.65 24,051.48
Rent ......................... 56,849.24 45,000.00
Salaries and wages ........... 329,125.27 213,138.06
Selling expense .............. 118,968.48 95,162.18
Taxes--Payroll ............... 49,177.20 37,454.43
Taxes--Other ................. 10,311.40 8,154.57
Telephone .................... 20,056.83 9,639.78
Utilities .................... 83,237.10 53,433.08
--------------- ---------------
Total Operating Expense .... 940,326.10 662,107.65
--------------- ---------------
NET LOSS FROM OPERATIONS ..... $(137,247.41) $ (87,889.65)
OTHER INCOME (EXPENSE)
Interest income .............. $ 854.95 $ 1,490.29
Amortization ................. (64,796.81) (48,597.66)
--------------- ---------------
Total Other Income (Expense) (63,941.86) (47,107.37)
--------------- ---------------
NET LOSS ...................... $(201,189.27) $(134,997.02)
=============== ===============

The appended notes are an integral part of this financial statement.

F-165

<PAGE>

EXHIBIT D

GOLF MASTERS LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S><C>

FOR THE YEAR FOR THE NINE
ENDED DECEMBER MONTHS ENDED
31, 1994 SEPTEMBER 30, 1995
----------------- ------------------
OPERATIONS:
Net loss ................................................ $(201,189.27) $(134,997.02)
Adjustments needed to reconcile to net cash provided
by operations:
Depreciation ............................................ 46,008.75 35,082.90
Amortization ............................................ 64,796.81 48,597.66
Change in current assets and liabilities net of
purchased amounts:
Decrease in accounts receivable ........................ 28,211.08 9,530.12
Decrease in prepaid expenses ........................... 8,994.13 876.33
Increase in deposits ................................... (773.14) --
Decrease in inventory .................................. 8,602.05 2,869.50
Decrease in accounts payable--Trade .................... (42,222.13) 34,019.55
Increase in accrued expenses ........................... 204.25 (12,393.22)
Decrease in accrued interest ........................... (3,056.48) --
Increase (Decrease) in deferred income ................. 8,811.91 (47,287.25)
----------------- ------------------
Net Cash Flow From Operations ......................... $ (81,612.04) $ (63,701.43)
INVESTING ACTIVITIES
Inflows: ................................................ $ 0.00 $ 0.00
Outflows:
Purchase of equipment for cash ......................... (10,552.70) (4,657.88)
Leasehold improvements ................................. (20,775.64) --
Payments to contractors ................................ (53,753.57) --
----------------- ------------------
Net Investing Outflows ................................ (85,081.91) (4,657.88)
FINANCING ACTIVITIES
Inflows:
Cash contributed by partners ........................... $ 92,733.00
Loans from affiliated companies--net ................... 152,993.93 $ 218,698.52
Outflows:
Long-term debt repaid .................................. (83,768.34) (194,995.63)
----------------- ------------------
Net Financing Inflows ................................. 161,958.59 23,702.89
----------------- ------------------
Decrease in cash and cash equivalents .................... $ (4,735.36) $ (44,656.42)
Beginning cash and cash equivalents ...................... 53,368.21 48,632.85
----------------- ------------------
ENDING CASH AND CASH EQUIVALENTS ......................... $ 48,632.85 $ 3,976.43
================= ==================
Supplemental Disclosure of Cash Flow Information
Cash paid for interest .................................. $ 62,605.67 $ 37,078.33
</TABLE>

- ------------

For purposes of the statement of cash flows, the Partnership considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be equivalents.

The appended notes are an integral part of this financial statement.

F-166

<PAGE>

GOLF MASTERS LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1994

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization -- The limited partnership was organized in 1992 and issued a
confidential private placement memorandum pursuant to which a total offering
of $540,000 was consummated for the purpose of leasing, and operating an
indoor, year-round, golf learning center and practice facility in Valley
View, Ohio.

Accounts Receivable -- Management has determined that all receivables are
collectable. No provision for uncollectable amounts has been recorded.

Inventories -- The inventory is valued at lower of cost or market using
the first-in, first-out (FIFO) method.

Property and Equipment -- are carried at cost. Depreciation is computed on
the straight-line basis for financial statement purposes and on the modified
accelerated cost recovery system for federal income tax purposes.
Depreciation is computed over the estimated useful life of the assets as
follows:

Leasehold improvements ............10-30 years
Range equipment ................... 10 years
Computers and office equipment ... 7-10 years
Furniture and fixtures ............ 10 years

Organization and Start-up Costs -- have been capitalized and are being
amortized over a five year period using the straight-line method.

Federal Income Taxes -- the partners are taxed on their proportionate
share of the Partnership's taxable income. Therefore, no provision or
liability for federal income taxes has been included in the financial
statements.

Accounting Method and Revenue Recognition -- The financial statements are
prepared on the accrual basis of accounting.

Deferred lesson income represents the portion of the lesson programs sold
that the students have not completed as of the balance sheet date.

Lesson income represents the portion of the lesson programs sold that the
students have completed or that have been forfeited based on the student
contract time limitations of either one year or six months.

NOTE 2--LEASES WITH COMPANY AS LESSEE

The partnership entered into a lease with ORIX Leasing Company for the use
of telephone equipment. The lease meets the criteria of a capital lease and,
accordingly, has been recorded as such.

NOTE 3--NOTES PAYABLE
<TABLE>
<CAPTION>
<S><C>

CURRENT DEFERRED TOTAL
------------ ------------- -------------
Note payable -- Independence Bank (Term
Loan) ...................................... $84,705.96 $197,646.91 $282,352.87
Note Payable -- JSN Holdings (Mortgage) .... 5,991.01 331,225.90 337,216.91
Capital lease -- ORIX Leasing ............... 2,473.32 618.37 3,091.69
------------ ------------- -------------
Total ..................................... $93,170.29 $529,491.18 $622,661.47
============ ============= =============
</TABLE>

Independence Bank (Term Loan) consists of $360,000.00 note with principal
payments of $7,058.83 for fifty-one consecutive months with interest computed
at a rate of 1.5% above the bank prime rate. The note is collateralized by
accounts receivable, inventory and equipment of the partnership, a second
mortgage on the condominium owned by Bruce and Kathleen Ferris and the
personal guarantee of Louie J. Zeitler and Bruce and Kathleen Ferris.

F-167

<PAGE>

GOLF MASTERS LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

JSN Holdings (Mortgage) consists of a $350,000.00 note with payments of
$2,927.54, per month including interest at a rate of 8% or 1% above the
National City Bank prime rate, whichever is greater. The note is amortized
over a 20 year life with a balloon payment after five years. The note is
collateralized by land. On May 10, 1995, the payment will increase to
$3,359.33 per month with an interest rate of 10%.

Long-term liabilities will mature as follows:

1995 . $ 93,170.29
1996 . 93,304.89
1997 . 407,951.30
1998 . 28,234.99

NOTE 4--LEASING ARRANGEMENTS -- RELATED PARTY

The partnership is currently renegotiating the lease for their facility
with Air Dome Limited Partnership. The terms of the proposed lease are as
follows:

1995 .........$5,000.00 per month
1996 ......... 7,500.00 per month
1997-2009 .... 14,040.15 per month

The partnership will have the option to purchase the building at the end
of the lease based on fair market value.

Golf Masters Limited Partnership and Airdome Limited Partnership have
substantially the same individuals as limited partners.

NOTE 5--MANAGEMENT AGREEMENT

Under the management agreement the partnership agrees to pay Bruce Ferris
5% of gross revenues collected from the operation of the facility. The
initial term of the agreement is for ten years and shall automatically renew
year to year thereafter.

NOTE 6--LOANS -- AFFILIATED COMPANIES

Golf Masters Inc. (the general partner) repaid its loan to Golf Master
Limited Partnership of $17,528.49 and loaned an additional $135,465.44 during
1994. The interest on the loan is computed at a rate of 9%.

Air Dome Limited Partnership loaned Golf Masters Limited Partnership
$615.11 in 1993.

It is anticipated that these loans will not be repaid within one year and
therefore are listed as long-term liabilities on the balance sheet.

NOTE 7--TAX ABATEMENTS

The partnership was granted a tax abatement on real estate and personal
property taxes from the Ohio Department of Development and the Village of
Valley View for the period of three years commencing January 1, 1993.

F-168

<PAGE>

GOLF MASTERS LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8--PRIOR PERIOD ADJUSTMENTS

The December 31, 1993 financial statements were not audited or reviewed by
an independent accountant. As a result of the examination of the balance
sheet amounts at January 1, 1994, it was determined that partners' capital
needed to be restated at December 31, 1993. Therefore, the following
adjustment was made to the beginning balance of partners' capital at January
1, 1994:

Adjust Accounts payable for:

Utilities ........................................... $8,458.91
Telephone ........................................... (822.03)
-----------
Net decrease in partners' capital at December 31, 1994 $7,636.88
===========

NOTE 9--UNAUDITED FINANCIAL STATEMENTS

The financial statements as of September 30, 1995 and for the nine months
ended September 30, 1995 and September 30, 1994 are unaudited and are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1995. In the opinion of management, the financial
statements include all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the Company's financial position and
results of operations.

F-169

<PAGE>

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Airdome Limited Partnership,

We have audited the accompanying balance sheet of Airdome Limited
Partnership (an Ohio partnership) as of December 31, 1994, and the related
statements of income, changes in partners' capital, 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 financial statements referred to above present fairly,
in all material respects, the financial position of Airdome Limited
Partnership as of December 31, 1994, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
Respectfully submitted,

Sewell & Co., Inc.
Certified Public Accountants

Cleveland, Ohio
November 2, 1995
This report contains seven pages.

F-170

<PAGE>

EXHIBIT A
AIRDOME LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S><C>

ASSETS
CURRENT ASSETS
Cash on deposit ................................... $ 2,531.54
PROPERTY
Building .......................................... $1,134,467.10
Less depreciation provision ....................... 105,175.25
---------------
Remaining value .................................. 1,029,291.85
OTHER ASSETS
Loan receivable -- Golf Masters Limited
Partnership ....................................... 615.11
---------------
TOTAL ASSETS ....................................... $1,032,438.50
===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Loan payable -- General partner ................... $ 2,970.98
PARTNERS' CAPITAL .................................. 1,029,467.52
---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ............ $1,032,438.50
===============
</TABLE>

The appended notes are an integral part of this financial statement.

F-171

<PAGE>

EXHIBIT B

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1994

Partners' capital -- January 1, 1994 ......... $1,076,510.63
Net loss for the year ended December 31, 1994 (14,391.76)
Distributions to partners' .................... (32,651.35)
---------------
Partners' capital -- December 31, 1994 ....... $1,029,467.52
===============

The appended notes are an integral part of this financial statement.

F-172

<PAGE>

EXHIBIT C

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF INCOME AND EXPENSE
FOR THE YEAR ENDED DECEMBER 31, 1994

INCOME
Rental Income ............ $ 56,849.24
OPERATING EXPENSE
Depreciation ............. $ 70,427.25
Professional fees ........ 900.00
Bank charges ............. 19.16
--------------
Total Operating Expense 71,346.41
--------------
NET LOSS FROM OPERATIONS . $(14,497.17)
OTHER INCOME
Interest ................. 105.41
--------------
NET LOSS .................. $(14,391.76)
==============

The appended notes are an integral part of this financial statement.

F-173

<PAGE>

EXHIBIT D

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994

OPERATIONS
Net loss .............................................. $(14,391.76)
Adjustments needed to reconcile to net cash provided
by operations:
Depreciation .......................................... 70,427.25
--------------
Net Cash Flow From Operations ........................ $ 56,035.49
INVESTING ACTIVITIES
Inflows: .............................................. $ 0.00
Outflows:
Cash payments of use tax on building construction ... (36,202.10)
--------------
Net Investing Outflows .............................. (36,202.10)
FINANCING ACTIVITIES
Inflows: .............................................. $ 0.00
Outflows:
Distributions to partners ............................ (29,680.37)
--------------
Net Financing Outflows .............................. (29,680.37)
--------------
Decrease in cash and cash equivalents .................. $ (9,846.98)
Beginning cash and cash equivalents .................... 12,378.52
--------------
Ending cash and cash equivalents ....................... $ 2,531.54
==============

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:

A distribution to the general partner of $2,970.98 was recorded in the
financial statements without a cash payment, therefore a loan from the
general partner was created in the same amount.

The appended notes are an integral part of this financial statement.

F-174

<PAGE>

AIRDOME LIMITED PARTNERSHIP

NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1994

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization--The limited partnership was organized in 1992 and issued a
confidential private placement memorandum pursuant to which a total offering
of $990,000 was consummated for the purpose of constructing and leasing an
airdome structure in Valley View, Ohio.

Property--Buildings are carried at cost. Depreciation is computed on the
straight-line basis for financial statement purposes and on the modified
accelerated cost recovery system for federal income tax purposes.
Depreciation is computed over the estimated useful life of the assets as
follows:

ORIGINAL COST LIFE
--------------- ------------
Building:
Structure .................... $603,765.00 31.5 years
Airdome fabric and components 530,702.10 10.0 years

Federal Income Taxes--The partners are taxed on their proportionate share
of the Partnership's taxable income. Therefore, no provision or liability for
federal income taxes has been included in the financial statements.

Accounting Method--The financial statements are prepared on the accrual
basis of accounting.

NOTE 2--LEASING ARRANGEMENTS--RELATED PARTY

The partnership is currently renegotiating the lease of the facility with
Golf Masters Limited Partnership. The terms of the proposed leases are as
follows:

1995 .........$5,000.00 per month
1996 ......... $7,500.00 per month
1997-2009 .... $14,040.15 per month

Golf Masters Limited Partnership has the option to purchase the building
at the end of the lease based on fair market value.

Airdome Limited Partnership and Golf Masters Limited Partnership have
substantially the same individuals as limited partners.

NOTE 3--TAX ABATEMENTS

The partnership was granted a tax abatement on real estate taxes from the
Ohio Department of Development and the Village of Valley View for the period
of three years commencing January 1, 1993.

NOTE 4--LOANS--AFFILIATED COMPANIES

Air Dome Limited Partnership loaned Golf Masters Limited Partnership
$615.11 in 1993.

It is anticipated that this loan will not be repaid within one year and
has been listed in the other assets section of the balance sheet.

F-175

<PAGE>

AIRDOME LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1995

ASSETS
CURRENT ASSETS:
Cash on deposit ...................................... $ 1,685.61
Accounts receivable -- Golf Masters Limited
Partnership .......................................... 45,000.00
---------------
Total Current Assets ................................ $ 46,685.61
PROPERTY:
Building ............................................. $1,134,467.10
Less depreciation provision .......................... (157,995.68)
---------------
Remaining Value ..................................... 976,471.42
OTHER ASSETS:
Loan receivable -- Golf Masters Limited Partnership . 615.11
---------------
TOTAL ASSETS .......................................... $1,023,772.14
===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Loan payable -- General partner ...................... $ 2,970.98
PARTNERS' CAPITAL ..................................... 1,020,801.16
---------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL ............... $1,023,772.14
===============

The appended notes are an integral part of this financial statement.

F-176

<PAGE>

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995

Partners' capital--January 1, 1995 ................... $1,029,467.52
Net loss for the nine months ended September 30, 1995 (8,666.36)
---------------
Partners' capital--September 30, 1995 ................ $1,020,801.16
===============

The appended notes are an integral part of this financial statement.

F-177

<PAGE>

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF INCOME AND EXPENSE
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995

INCOME
Rental Income ............ $45,000.00
OPERATING EXPENSE
Depreciation ............. $52,820.43
Professional fees ........ 900.00
-------------
Total Operating Expense 53,720.43
-------------
NET LOSS FROM OPERATIONS . $(8,720.43)
OTHER INCOME
Interest ................. 54.07
-------------
NET LOSS .................. $(8,666.36)
=============

The appended notes are an integral part of this financial statement.

F-178

<PAGE>

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
<S><C>

OPERATIONS
Net loss .......................................................... $ (8,666.36)
Adjustments needed to reconcile to net cash provided by
operations:
Depreciation ..................................................... 52,820.43
Change in current assets and liabilities net of purchase amounts:
Increase in accounts receivable .................................. (45,000.00)
-------------
Net Cash Flow From Operations ................................... $ (845.93)
INVESTING ACTIVITIES
None: ............................................................. 0.00
FINANCING ACTIVITIES
None: ............................................................. 0.00
-------------
Decrease in cash and cash equivalents .............................. $ (845.93)
Beginning cash and cash equivalents ................................ 2,531.54
-------------
Ending cash and cash equivalents ................................... $ 1,685.61
=============
</TABLE>

The appended notes are an integral part of this financial statement.

F-179

<PAGE>

AIRDOME LIMITED PARTNERSHIP

NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1995

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORIGINAL COST LIFE
--------------- -------------
Building:
Structure .................... $603,765.00 31.5 years
Airdome fabric and components 530,702.10 10.0 years

Accounting Method--The financial statements are prepared on the accrual
basis of accounting.

NOTE 2--LEASING ARRANGEMENTS--RELATED PARTY

The partnership is currently renegotiating the lease of the facility with
Golf Masters Limited Partnership. The terms of the proposed lease are as
follows:

1995 ..........$5,000.00 per month
1996 .......... $7,500.00 per month
1997-2009 ..... $14,040.15 per month

Golf Masters Limited Partnership has the option to purchase the building
at the end of the lease based on fair market value.

Airdome Limited Partnership and Golf Masters Limited Partnership have
substantially the same individuals as limited partners.

NOTE 3--TAX ABATEMENTS

The partnership was granted a tax abatement on real estate taxes from the
Ohio Department of Development and the Village of Valley View for the period
of three years commencing January 1, 1993.

NOTE 4--LOANS--AFFILIATED COMPANIES

Air Dome Limited Partnership loaned Golf Masters Limited Partnership
$615.11 in 1993.

It is anticipated that this loan will not be repaid within one year and
has been listed in the other asset section of the balance sheet.

NOTE 5--INTERIM FINANCIAL STATEMENTS

The financial statements as of September 30, 1995 and for the nine months
then ended are unaudited and are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. In the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the
Partnership's financial position and results of operations.

F-180

<PAGE>

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY
OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

TABLE OF CONTENTS

PAGE
------

Prospectus Summary ......................... 3
Risk Factors ............................... 7
Use of Proceeds ............................ 12
Price Range of Common Stock ................ 12
Dividend Policy ............................ 12
Capitalization ............................. 13
Selected Financial Data .................... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 16
Business ................................... 23
Management ................................. 35
Principal Stockholders ..................... 40
Certain Relationships and Related
Transactions .............................. 42
Description of Capital Stock ............... 44
Underwriting ............................... 46
Legal Matters .............................. 47
Experts .................................... 47
Available Information ...................... 49
Index to Financial Statements .............. F-1

3,000,000 SHARES

[FAMILY GOLF CENTERS LOGO]

FAMILY GOLF CENTERS, INC.

COMMON STOCK

PROSPECTUS

JEFFERIES & COMPANY, INC.

HAMPSHIRE SECURITIES
CORPORATION

JULY 3, 1996