FAMILY GOLF CENTERS INC, SB-2, 1996-05-24

FAMILY GOLF CENTERS INC
SB-2, 1996-05-24
MEMBERSHIP SPORTS & RECREATION CLUBS

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1996

REGISTRATION NO. 333-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
- -----------------------------------------------------------------------------
FAMILY GOLF CENTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 7999 11-3223246
(State or jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)

</TABLE>

FAMILY GOLF CENTERS, INC.
225 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
(516) 694-1666

(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

COPIES TO:

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<CAPTION>
<S> <C>
KENNETH R. KOCH, ESQUIRE PAUL JACOBS, ESQUIRE FULBRIGHT &
SQUADRON, ELLENOFF, PLESENT & SHEINFELD, LLP JAWORSKI L.L.P.
551 FIFTH AVENUE 666 FIFTH AVENUE
NEW YORK, NEW YORK 10176 NEW YORK, NEW YORK 10103
(212) 661-6500 (212) 318-3000 (212) 752-5958 (FAX)
(212) 697-6686 (FAX)
</TABLE>

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
- ---------------------------- --------------- ------------------ ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01
per share .................. 2,300,000(2) $28.75 $66,125,000 $22,801.73
- ---------------------------- --------------- ------------------ ------------------ ----------------
</TABLE>

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

(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act.

(2) Includes 300,000 shares of Common Stock which the Underwriters have the
option to acquire solely to cover over-allotments, if any.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR

DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.

<PAGE>

CROSS REFERENCE SHEET

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<CAPTION>
ITEM NUMBER OF FORM SB-2 LOCATION OR CAPTION IN PROSPECTUS

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

<S> <C> <C>
1. Front of Registration Statement and
Outside Front Cover Page of Prospectus Outside Front Cover Page

2. Inside Front and Outside Back Cover
Pages of Prospectus .................... Inside Front Cover Page; Outside Back Cover Page

3. Summary Information and Risk Factors .. Prospectus Summary; Risk Factors

4. Use of Proceeds ........................ Use of Proceeds

5. Determination of Offering Price ....... Not Applicable

6. Dilution ............................... Not Applicable

7. Selling Security-Holders ............... Principal Stockholders

8. Plan of Distribution ................... Outside Front Cover Page; Underwriting

9. Legal Proceedings ...................... Business--Legal Proceedings

10. Directors, Executive Officers,
Promoters and Control Persons .......... Management--Executive Officers and Directors

11. Security Ownership of Certain
Beneficial Owners and Management ...... Principal Stockholders

12. Description of Securities .............. Outside Front Cover Page; Description of Capital Stock

13. Interest of Named Experts and Counsel . Legal Matters; Experts

14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ............................ Description of Capital Stock; Part II

15. Organization Within Last Five Years ... Management's Discussion and Analysis of Financial Condition and
Results of Operations

16. Description of Business ................ Business

17. Management's Discussion and Analysis or
Plan of Operation ...................... Management's Discussion and Analysis of Financial Condition and
Results of Operations

18. Description of Property ................ Business--Properties

19. Certain Relationships and Related
Transactions ........................... Certain Relationships and Related Transactions

20. Market for Common Stock and Related
Stockholder Matters .................... Dividend Policy; Description of Capital Stock

21. Executive Compensation ................. Management--Executive Compensation

22. Financial Statements ................... Financial Statements

23. Changes in and Disagreement with
Accountants on Accounting and Financial
Disclosure ............................. Not Applicable

24. Indemnification of Directors and
Officers ............................... Description of Capital Stock; Part II

25. Other Expenses of Issuance and
Distribution ........................... Part II

26. Recent Sales of Unregistered Securities Part II

27. Exhibits ............................... Part II; Exhibits

28. Undertakings ........................... Part II
</TABLE>

<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.

SUBJECT TO COMPLETION, DATED MAY 24, 1996

PROSPECTUS

2,000,000 SHARES

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GRAPHIC OMITTED

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FAMILY GOLF CENTERS, INC.

COMMON STOCK

All of the 2,000,000 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 May 23, 1996, the last
sale price of the Common Stock as reported by the Nasdaq National Market was
$25 5/8 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.

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<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
---------------- ------------------ -----------------
<S> <C> <C> <C>
Per Share ..... $ $ $
Total(3) ...... $ $ $

</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
.

(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted the Underwriters a 30-day option to purchase up to 300,000
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 $ , $ , $ and $ , 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 , 1996, in New York, New York.

JEFFERIES & COMPANY, INC.

HAMPSHIRE SECURITIES CORPORATION

, 1996

<PAGE>

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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

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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 (i) the Underwriters' over-allotment option is
not exercised, and (ii) the proposed increase of authorized shares of Common
Stock from 10,000,000 to 50,000,000, the proposed increase of authorized
shares of preferred stock from 1,000,000 to 2,000,000 and the Company's
proposed 1996 stock incentive plan are approved at the Company's annual
meeting of stockholders scheduled for June 7, 1996 (the "Annual Meeting"). 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 20 golf
facilities, comprised of 15 golf centers and five combination golf center and
golf course facilities located in eight 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
five combination golf center and golf course facilities, four 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 16
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.

<PAGE>

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, 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

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<CAPTION>
<S> <C>
Common Stock offered by the Company ...................2,000,000shares

Common Stock to be outstanding after the Offering .... 10,598,025shares(1)

Use of proceeds ....................................... 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 730,705 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 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., The Practice Tee, Inc., Golf Masters Limited
Partnership and Air Dome Limited Partnership, Owl's Creek Golf Center, Inc.,
Flemington Golf and Sports Center, LLC and associated land and 202 Golf
Associates, Inc. as if they had been consummated as of January 1, 1995. The
"As Adjusted" Balance Sheet Data does not include the effects of the
acquisition of 202 Golf Associates, Inc., which was acquired in April 1996.
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.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------- ----------------------------
PRO PRO
HISTORICAL FORMA HISTORICAL FORMA
---------------------------------------- --------- ------------------ --------
1992 1993 1994 1995 1995 1995 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 $16,118 $1,782 $3,362 $3,473
Operating expenses ........ 1,128 2,247 4,215 6,614 9,556 1,061 2,252 2,413
Cost of merchandise sold .. 320 459 750 1,779 2,150 295 457 459
Selling, general and
administrative expenses .. 351 615 548 1,242 2,404 352 643 692
-------- --------- -------- --------- --------- -------- -------- --------
Operating income (loss) ... 88 (689) 849 2,797 2,008 74 10 (91)
Interest expense .......... (111) (192) (313) (939) (1,805) (92) (100) (100)
Other income .............. 1 106 16 66 73 22 197 165
-------- --------- -------- --------- --------- -------- -------- --------
Income (loss) before income
taxes, minority interest
and extraordinary item ... (22) (775) 552 1,924 276 4 107 (26)
Income tax expense
(benefit) ................ -- -- (65) 669 100 2 38 (9)
-------- --------- -------- --------- --------- -------- -------- --------
Income (loss) before
minority interest and
extraordinary item ....... (22) (775) 617 1,255 176 2 69 (17)
Minority interest in
(income) loss ............ -- 12 (129) -- -- -- -- --
Extraordinary item (net of
tax effect) .............. -- -- -- 181 -- -- -- --
-------- --------- -------- --------- --------- -------- -------- --------
Net income (loss) ......... $ (22) $ (763) $ 488 $ 1,074 $ 176 $ 2 $ 69 $ (17)
======== ========= ======== ========= ========= ======== ======== ========
Net income (loss) per share
before extraordinary item $(0.23) $ 0.13 $ 0.24 $ 0.03 $ 0.00 $ 0.01 $ 0.00
Extraordinary item ........ -- -- (.04) -- -- -- --
--------- -------- --------- --------- -------- -------- --------
Net income (loss) per share $(0.23) $ 0.13 $ 0.20 $ 0.03 $ 0.00 $ 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
========= ======== ========= ========= ======== ======== ========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT MARCH 31, 1996
-------------------- ----------------------------
HISTORICAL HISTORICAL AS ADJUSTED(1)
-------------------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .... $23,121 $11,147 $ 58,309
Working capital ............... 20,598 12,950 60,112
Total assets .................. 61,582 63,130 110,292
Total long-term debt,
including current maturities 8,193 8,752 8,752
Total stockholders' equity ... 49,388 51,986 99,148
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, 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>
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(1) Assumes the sale by the Company, as of March 31, 1996, of 2,000,000
shares of Common Stock in the Offering at an offering price of $25.625
per share.

(2) Subsequent to March 31, 1996, the Company acquired two 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 income before extraordinary item of $176,000
(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
$17,000 (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."

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

<PAGE>

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. 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 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

<PAGE>

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--Employees," "Business-- Operations" and
"Management."

DILUTION

Purchasers in the Offering will experience immediate and substantial
dilution of $16.25 in net tangible book value per share of the Common Stock.

<PAGE>

CONTROL BY CURRENT STOCKHOLDER

Following the completion of the Offering, Dominic Chang will beneficially
own 2,822,750 shares of Common Stock, constituting approximately 26.6% of the
outstanding shares (or if the Underwriters' over-allotment option is
exercised in full, Mr. Chang will beneficially own 2,656,468 shares of Common
Stock, constituting approximately 25.0% 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 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 10,598,025 shares of Common Stock outstanding after the Offering,
6,980,075 shares will be freely tradeable without restrictions following
completion of the Offering, unless held by "affiliates" of 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

<PAGE>

(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 33,718 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 1,000,000 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
Board of Directors has approved, subject to stockholder approval at the
Annual Meeting, amendments to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 10,000,000 to
50,000,000 and to increase the number of authorized shares of preferred stock
from 1,000,000 to 2,000,000. 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
2,000,000 shares of Common Stock being offered by the Company are estimated
to be approximately $47.2 million, after deducting underwriting discounts and
estimated offering expenses payable by the Company, based upon an assumed
offering price of $25.625 per share. The Company intends to use all 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 (through May 23, 1996) ....... 29 25-5/8
-------- --------
</TABLE>

On May 23, 1996, the last reported sale price for the Company's Common
Stock on the Nasdaq National Market was $25 5/8 per share. As of May 17,
1996, there were 98 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 capitalization and
other consolidated balance sheet data of the Company on an actual basis and
as adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered hereby by the Company at an assumed offering price of $25.625 per
share. This table should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
Company's Financial Statements and notes thereto, each included elsewhere
herein.

<TABLE>
<CAPTION>
AT MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED
--------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of long-term obligations ........ $ 1,523 $ 1,523
========= =============
Long-term obligations ............................ $ 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 as adjusted, 10,489,325 ............ 85 105
Additional paid-in capital ...................... 50,909 98,051
Retained earnings ............................... 1,027 1,027
--------- -------------
Treasury stock .................................. (35) (35)
Total stockholders' equity ..................... 51,986 99,148
--------- -------------
Total capitalization .......................... $60,738 $107,900
========= =============
</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 at the Annual Meeting.

<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 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., The Practice Tee, Inc., Golf Masters Limited
Partnership and Air Dome Limited Partnership, Owl's Creek Golf Centers, Inc.,
Flemington Golf and Sports Center, LLC and associated land and 202 Golf
Associates, Inc. as if they had been consummated as of January 1, 1995. The
"As Adjusted" Balance Sheet Data does not include the effects of the
acquisition of 202 Golf Associates, Inc., which was acquired in April 1996.
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.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
---------------------------------------------------- -------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
--------------------------------------- ----------- ------------------ -----------
1992 1993 1994 1995 1995 1995 1996 1996
-------- --------- -------- --------- ----------- -------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue ............. $1,887 $2,632 $6,362 $12,432 $16,118 $1,782 $3,362 $3,473
Operating expenses ........ 1,128 2,247 4,215 6,614 9,556 1,061 2,252 2,413
Cost of merchandise sold .. 320 459 750 1,779 2,150 295 457 459
Selling, general and
administrative expenses . 351 615 548 1,242 2,404 352 643 692
-------- --------- -------- --------- ----------- -------- -------- -----------
Operating income (loss) ... 88 (689) 849 2,797 2,008 74 10 (91)
Interest expense .......... (111) (192) (313) (939) (1,805) (92) (100) (100)
Other income .............. 1 106 16 66 73 22 197 165
-------- --------- -------- --------- ----------- -------- -------- -----------
Income (loss) before income
taxes, minority interest
and extraordinary item .. (22) (775) 552 1,924 276 4 107 (26)
Income tax expense
(benefit) ............... -- -- (65) 669 100 2 38 (9)
-------- --------- -------- --------- ----------- -------- -------- -----------
Income (loss) before
minority interest and
extraordinary item ...... (22) (775) 617 1,255 176 2 69 (17)
-----------
Minority interest in
(income) loss ........... -- 12 (129) -- -- -- -- --
Extraordinary item (net of
tax effect) ............. -- -- -- 181 -- -- -- --
-------- --------- -------- --------- ----------- -------- -------- -----------
Net income (loss) ......... $ (22) $ (763) $ 488 $ 1,074 $ 176 $ 2 $ 69 $ (17)
======== ========= ======== ========= =========== ======== ======== ===========
Net income (loss) per share
before extraordinary item $(0.23) $ 0.13 $ 0.24 $ 0.03 $ 0.00 $ 0.01 $ 0.00
Extraordinary item ........ -- -- (.04) -- -- -- --
--------- -------- --------- ----------- -------- -------- -----------
Net income (loss) per share $(0.23) $ 0.13 $ 0.20 $ 0.03 $ 0.00 $ 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
========= ======== ========= =========== ======== ======== ===========
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31, 1995 AT MARCH 31, 1996
-------------------- ----------------------------
HISTORICAL HISTORICAL AS ADJUSTED(1)
-------------------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .......................... $23,121 $11,147 $ 58,309
Working capital .................................... 20,598 12,950 60,112
Total assets ....................................... 61,582 63,130 110,292
Total long-term debt, including current maturities 8,193 8,752 8,752
Total stockholders' equity ......................... 49,388 51,986 99,148
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, 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 the sale by the Company, as of March 31, 1996, of 2,000,000
shares of Common Stock in the Offering at an offering price of $25.625
per share.

(2) Subsequent to March 31, 1996, the Company acquired two 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 20 golf facilities, comprised of 15 golf centers and
five combination golf center and golf course facilities. Of the five
combination golf center and golf course facilities, four 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:

<TABLE>
<CAPTION>
OWNED LEASED MANAGED TOTAL

<S> <C> <C> <C> <C>
Owned Leased Managed Total
--------- ---------- ----------- ---------
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 ............................................... 1 1 - 2
--------- ---------- ----------- ---------
AT MAY 23, 1996 ................................................ 9 9 2 20
========= ========== =========== =========
</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
16

<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 March 31, 1996 of $8.75
million bears interest at fixed and variable rates currently ranging from
5.25% to 10.5%. The Company entered into 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 March 31, 1996,
the Company had drawn down an aggregate amount of $1.5 million under this
loan.

The Company has a $5.0 million line of credit with Chemical Bank. As of
March 31, 1996, the Company had no amounts outstanding under this line of
credit. Amounts outstanding under this credit line bear interest at prime
plus 1.5%.

<PAGE>

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 The
Practice Tee, Inc. ("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 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 income before extraordinary item of $176,000 (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 $17,000 (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 and Yorktown Heights, New
York golf centers.

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

<PAGE>

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, 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 20 golf facilities, comprised of 15 golf
centers and five combination golf center golf course facilities located in
eight states. Of the golf centers, seven are currently operated under the
name "Golden Bear Golf Centers." Of the five combination golf center and golf
course facilities, four 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 16 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 20 golf facilities in eight
states. Set forth below is information concerning each of them:

<TABLE>
<CAPTION>
SIZE OF
PROPERTY
(APPROXIMATE PGA CERTIFIED PRO
LOCATION OF FACILITY TYPE OF FACILITY ACRES) INSTRUCTORS SHOP
- -------------------- ---------------------------- ------------- ---------- ---------
<S> <C> <C> <C> <C>
FARMINGDALE, NY GOLDEN BEAR GOLF CENTER 13 X X
WAYNE, NJ GOLDEN BEAR GOLF CENTER 16 X X
DOUGLASTON, NY GOLDEN BEAR GOLF CENTER 12 X X
ELMSFORD, NY GOLDEN BEAR GOLF CENTER 27 X X
UTICA, NY FAMILY GOLF CENTER 18 X X
CLAY, NY GOLDEN BEAR GOLF CENTER 23 X X
(NEAR SYRACUSE)
QUEENSBURY, NY FAMILY GOLF CENTER AND 200 X X
(NEAR ALBANY) 18-HOLE GOLF COURSE
GREENVILLE, SC FAMILY GOLF CENTER 24 X X
GLEN ALLEN, VA FAMILY GOLF CENTER 10 X X
(NEAR RICHMOND)
DULUTH, GA FAMILY GOLF CENTER(4) 56 X X
(NEAR ATLANTA)
ALPHARETTA, GA FAMILY GOLF CENTER 26 X X
(NEAR ATLANTA)
EL SEGUNDO, CA GOLDEN BEAR GOLF CENTER AND 28 X X
PAR-3 GOLF COURSE
GILROY, CA FAMILY GOLF CENTER AND PAR-3 36 X X
GOLF COURSE
VALLEY VIEW, OH FAMILY GOLF CENTER 19 X X
(NEAR CLEVELAND)
HENRIETTA, NY GOLDEN BEAR GOLF CENTER 28 X X
MESA, AZ FAMILY GOLF CENTER AND PAR-3 39 X X
GOLF COURSE
VIRGINIA BEACH, VA FAMILY GOLF CENTER AND PAR-3 81 X X
GOLF COURSE
FLEMINGTON, NJ FAMILY GOLF CENTER 17 X X
YORKTOWN HEIGHTS, NY FAMILY GOLF CENTER 14 X X
INDIAN RIVER, VA FAMILY GOLF CENTER 14 X X
</TABLE>

(RESTUB TABLE)

MINIATURE NO. OF OWNED, DATE OPENED
GOLF HITTING LEASED OR OR
LOCATION OF FACILITY COURSES TEES MANAGED ACQUIRED(1)
- -------------------- ----------- --------- ------------ ------------
<S> <C> <C> <C> <C>
FARMINGDALE, NY ONE 80 LEASED MARCH 1992
WAYNE, NJ TWO 80 LEASED JULY 1993
DOUGLASTON, NY ONE 70 MANAGED(2) DEC. 1993
ELMSFORD, NY TWO 80 LEASED JULY 1994
UTICA, NY ONE 60 LEASED DEC. 1994
CLAY, NY ONE 132 LEASED JAN. 1995
(NEAR SYRACUSE)
QUEENSBURY, NY -- 40 OWNED MAY 1995
(NEAR ALBANY)
GREENVILLE, SC ONE(3) 100 OWNED MAY 1995
GLEN ALLEN, VA ONE 50 OWNED AUG. 1995
(NEAR RICHMOND)
DULUTH, GA ONE(3) 60 OWNED AUG. 1995
(NEAR ATLANTA)
ALPHARETTA, GA TWO 60 OWNED AUG. 1995
(NEAR ATLANTA)
EL SEGUNDO, CA -- 58 MANAGED(5) NOV. 1995

GILROY, CA -- 20 LEASED NOV. 1995

VALLEY VIEW, OH ONE(3) 130(6) OWNED/ LEASED NOV. 1995
(NEAR CLEVELAND)
HENRIETTA, NY ONE(3) 132(7) LEASED JAN. 1996
MESA, AZ -- 80 OWNED FEB. 1996

VIRGINIA BEACH, VA -- 36 LEASED MARCH 1996

FLEMINGTON, NJ TWO 67 OWNED MARCH 1996
YORKTOWN HEIGHTS, NY -- 54 OWNED APRIL 1996
INDIAN RIVER, VA ONE 60 LEASED MAY 1996

</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.

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

<PAGE>

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 four par-3 practice golf
courses (Mesa, Arizona, Virginia Beach, Virginia and El Segundo and Gilroy,
California). 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.

The par-3 golf course at Mesa, Arizona, 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.

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.

<PAGE>

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 16 golf
facilities, including one regulation 18-hole golf course and four 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, Alpharetta and Duluth,
Georgia (both of which are near Atlanta), and Valley View, Ohio (near
Cleveland). The regulation golf 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 and El Segundo and Gilroy, California. 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.

<PAGE>

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 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

<PAGE>

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 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.

<PAGE>

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 located 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 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.

<PAGE>

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 on which there is an existing golf
recreational facility.

The Company acquired the Mesa, Arizona, the Virginia Beach, Virginia, the
Indian River, Virginia, the Yorktown Heights, New York and the Flemington,
New Jersey golf facilities for the aggregate purchase price of approximately
$12.3 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) or notes, 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 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 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.

<PAGE>

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.

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. In addition, 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

<PAGE>

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.

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) and its Valley View, Ohio (near Cleveland) golf
center (approximately five acres) are located. The Company also leases the
land on which eight 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:

<TABLE>
<CAPTION>
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) .. 62 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. 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 Plan" 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>
Dominc 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

<TABLE>
<CAPTION>
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
- -------------- ------------ --------------- ------------- ---------------
<S> <C>
Dominic Chang 10,000 6.5% $6.75 March 8, 2005
</TABLE>

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

(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

<TABLE>
<CAPTION>
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
- -------------- ------------- --------------- ------------- ---------------
<S> <C>
Dominic Chang -- 10,000 -- $115,000
</TABLE>

- ------------
(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 PLAN

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,
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.

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 provides 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. Such automatic grants will cease and be replaced by the
automatic grants under the New Plan if the New Plan is approved at the Annual
Meeting.

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

<PAGE>

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.

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 no options to purchase 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) 26.6%
Janus Capital Corporation (3) 1,015,875 11.8% 1,015,875 9.6%
George Soros (4) ............. 500,000 5.8% 500,000 4.7%
Jimmy C.M. Hsu (2) ............ 191,084(7)(8) 2.2% 191,084(7)(8)(9) 1.8%
Krishnan P. Thampi (2) ........ 181,950(10) 2.1% 181,950(10)(11) 1.7%
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) 27.8%
(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 and Upper Hembree Partners, L.P., will sell an aggregate of 300,000
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). 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. If the Underwriters' over-allotment option is exercised in
full, 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 0.54% 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.

(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).

<PAGE>

(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.
Information regarding the aggregate 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 166,282 shares of Common Stock and after the Offering will
beneficially own 2,656,468 shares of Common Stock, representing 25.0% 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 266,282 shares of Common Stock. Assuming such exercise,
after the Offering the directors and executive officers of the Company as a
group will beneficially own 2,967,004 shares of Common Stock, representing
27.8% 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, as amended (the "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

<PAGE>

foregoing provisions could have the 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
360,705 shares of Common Stock at prices ranging from $3.50 to $25.00 per
share, with a weighted average price per share of $11.23. Of such options,
options to purchase 342,425 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 Plan." 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 2,000,000 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>
UNDERWRITERS NUMBER OF SHARES
- --------------------------------- ----------------
<S> <C>
Jefferies & Company, Inc. ........
Hampshire Securities Corporation
----------------

Total ........................... 2,000,000
================

</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 $ per
share. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of $ 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.

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
300,000 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 29.8% of the then outstanding
Common Stock (or, if the Underwriters' over-allotment option is exercised in
full, 2,895,668 shares of Common Stock or 27.3% 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.

<PAGE>

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 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

<PAGE>

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
Yorktown 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.

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 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.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PRO FORMA: FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
Pro Forma Unaudited Condensed Statement of Operations for the Year Ended December 31,
1995 ..................................................................................... F-4
Notes to Pro Forma Unaudited Condensed Statement of Operations ........................... F-6
Pro Forma Unaudited Condensed Statement of Operations for the
Three Months Ended March 31, 1996 ....................................................... F-7
HISTORICAL:
FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
Report of Independent Auditors ........................................................... F-9
Consolidated Balance Sheets as at December 31, 1994, December 31, 1995 and
March 31, 1996 (Unaudited) .............................................................. F-10
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-11
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1993, December 31, 1994 and December 31, 1995 and the Three Months Ended
March 31, 1996 (Unaudited) ............................................................... F-12
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-13
Notes to Financial Statements ............................................................ F-14
OWL'S CREEK GOLF CENTER, INC.
Independent Auditor's Report ............................................................. F-26
Balance Sheet as of December 31, 1995 .................................................... F-27
Statement of Operations and Retained Earnings (Deficit) for the year ended
December 31, 1995 ....................................................................... F-28
Statement of Cash Flows for the year ended December 31, 1995 ............................. F-31
Notes to Financial Statements ............................................................ F-32
Statement of Operations for the period from January 1, 1996 to March 5, 1996 ............ F-34
FLEMINGTON GOLF AND SPORTS CENTER, LLC
Independent Auditor's Report ............................................................. F-36
Balance Sheet as of December 31, 1995 .................................................... F-37
Statement of Operations and Members' Deficit as of December 31, 1995 ..................... F-38
Statement of Cash Flows as of December 31, 1995 .......................................... F-39
Notes to Financial Statements ............................................................ F-40

F-1

<PAGE>

PAGE
---------
202 GOLF ASSOCIATES, INC.
Independent Auditors' Report ............................................................. F-43
Balance Sheet as of December 31, 1995 .................................................... F-44
Statement of Operations & Shareholders' Deficit for the year ended
December 31, 1995 ....................................................................... F-45
Statement of Cash Flows for the year ended December 31, 1995 ............................. F-46
Notes to Financial Statements ............................................................ F-47
Statement of Operations for the three months ended March 31, 1996 ........................ F-49
PELHAM ENTERPRISES, INC.
Independent Auditors' Report ........................................................... F-50
Balance Sheets at December 31, 1994 and April 30, 1995 ................................. F-51
Statements of Income and Retained Earnings for the Year Ended December 31, 1994 and for
the Four Months Ended April 30, 1995 ................................................... F-52
Statements of Cash Flows for the Year Ended December 31, 1994 and for the Four Months
Ended April 30, 1995 .................................................................. F-53
Notes to Financial Statements .......................................................... F-54
HILAND PARK GOLF COURSE
Independent Auditors' Report ........................................................... F-56
Balance Sheet at April 30, 1995 ........................................................ F-57
Statement of Income for the Eleven Months Ended April 30, 1995 ......................... F-58
Statement of Equity for the Eleven Months Ended April 30, 1995 ......................... F-59
Statement of Cash Flows for the Eleven Months Ended April 30, 1995 ..................... F-60
Notes to Financial Statements .......................................................... F-62
RFC ENTERPRISES, INC.
Independent Auditors' Report ........................................................... F-64
Balance Sheet at December 31, 1994 ..................................................... F-65
Statement of Income and Accumulated Deficit for the Year Ended December 31, 1994 ....... F-66
Statement of Cash Flows for the Year Ended December 31, 1994 ........................... F-67
Notes to Financial Statements .......................................................... F-68
Balance Sheet at June 30, 1995 ......................................................... F-71
Statement of Income and Accumulated Deficit for the Six Months Ended June 30, 1995 ..... F-72
Statement of Cash Flows for the Six Months Ended June 30, 1995 ......................... F-73
Notes to Financial Statements .......................................................... F-74
UPPER HEMBREE PARTNERS, L.P.
Independent Accountant's Report ........................................................ F-77
Balance Sheets at December 31, 1994 and July 31, 1995 .................................. F-78
Statements of Income for the Years Ended December 31, 1993, December 31, 1994 and the
Seven Months Ended July 31, 1995 ...................................................... F-79

F-2

<PAGE>

PAGE
---------
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-80
Statements of Cash Flows for the Years Ended December 31, 1993, December 31, 1994 and
the Seven Months Ended July 31, 1995 .................................................. F-81
Notes to Financial Statements .......................................................... F-82
THE PRACTICE TEE, INC.
Independent Auditor's Report ........................................................... F-87
Consolidated Balance Sheet at December 31, 1994 ........................................ F-88
Consolidated Statement of Operations and Accumulated Deficit for the Period February 8,
1994 (Inception) to December 31, 1994 ................................................. F-89
Consolidated Statement of Cash Flow for the Period February 8, 1994 (Inception) to
December 31, 1994 ..................................................................... F-90
Notes to Financial Statements .......................................................... F-91
Consolidated Balance Sheet at September 30, 1995 ....................................... F-93
Consolidated Statement of Operations and Accumulated Deficit for the Nine Months Ended
September 30, 1995 ..................................................................... F-94
GOLF MASTERS LIMITED PARTNERSHIP
Independent Auditors' Report ........................................................... F-96
Balance Sheets at December 31, 1994 and September 30, 1995 ............................. F-97
Statements of Changes in Partners' Capital for the Year ended December 31, 1994 and the
Nine Months Ended September 30, 1995 .................................................. F-99
Statements of Income and Expense for the Year Ended December 31, 1994 and for the Nine
Months Ended September 30, 1995 ........................................................ F-100
Statements of Cash Flows for the Year Ended December 31, 1994 and for the Nine Months
Ended September 30, 1995 .............................................................. F-101
Notes to Financial Statements .......................................................... F-102
AIR DOME LIMITED PARTNERSHIP
Independent Auditors' Report ........................................................... F-105
Balance Sheet at December 31, 1994 ..................................................... F-106
Statement of Changes in Partners' Capital for the Year Ended December 31, 1994 ......... F-107
Statement of Income and Expense for the Year Ended December 31, 1994 ................... F-108
Statement of Cash Flows for the Year Ended December 31, 1994 ........................... F-109
Notes to Financial Statements .......................................................... F-110
Balance Sheet at September 30, 1995 .................................................... F-111
Statement of Changes in Partners' Capital for the Nine Months Ended September 30, 1995 . F-112
Statement of Income and Expense for the Nine Months Ended September 30, 1995 ........... F-113
Statement of Cash Flows for the Nine Months Ended September 30, 1995 ................... F-114
Notes to Financial Statements .......................................................... F-115
</TABLE>

F-3

<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
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 and 202 Golf Associates Inc. ("Yorktown") (collectively, the "Acquired
Companies") acquired during 1995 and 1996 as if the Acquired Companies had
been acquired on January 1, 1995. 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-4

<PAGE>

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

<TABLE>
<CAPTION>
ACQUIRED COMPANIES
------------------------------------------------------------------
PELHAM HILAND PARK UPPER HEMBREE
THE ENTERPRISES, GOLF RFC 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 PRO FORMA
TPT(a) VIEW(a) BEACH(b) FLEMINGTON(b) YORKTOWN(b) ADJUSTMENTS PRO FORMA
------ ------ -------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues ................... $ 244 $ 668 $616 $ 501 $ 388 $13,178
Merchandise sales .................... 44 92 2,940
------ ------ -------- ----------- --------- ----------- ---------
Total revenue ....................... 244 712 708 501 388 16,118
------ ------ -------- ----------- --------- ----------- ---------
Operating expenses ................... 86 395 404 900 393 $ (171)(A) 9,556
Cost of merchandise
sold ................................ 36 72 2,150
Selling, general and administrative
expenses ............................ 264 404 119 101 35 (A) 2,404
------ ------ -------- ----------- --------- ----------- ---------
Operating income (loss) .............. (106) (123) 113 (399) (106) 136 2,008
Interest expense ..................... 3 34 192 128 164 156 (A) 1,805
Other (income) expense ............... (1) (2) 2 2,448 (2,448)(A) (73)
------ ------ -------- ----------- --------- ----------- ---------
Income (loss) before income taxes and
extraordinary item .................. (108) (155) (81) (2,975) (270) 2,428 276
Income tax expense (benefit) ......... 1 (570)(B) 100
------ ------ -------- ----------- --------- ----------- ---------
INCOME (LOSS) before extraordinary
item ................................ $(109) $(155) $(81) $(2,975) $(270) $ 2,998 $ 176
====== ====== ======== =========== ========= =========== =========
Income (loss) per share before
extraordinary item .................. 0.03
=========
Weighted average shares outstanding . 366 (C) 5,637
=========== =========
</TABLE>

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

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

F-5

<PAGE>

FAMILY GOLF CENTERS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA UNAUDITED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT 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 January 1, 1995:

<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 ...................... April 1996 4 5
------------- -------------- -------------- ------------
$(156) $(171) $35 $(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.

F-6

<PAGE>

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

<TABLE>
<CAPTION>
ACQUIRED COMPANIES
---------------------------------------------
THE VIRGINIA BEACH PRO FORMA
COMPANY (A) FLEMINGTON (B) YORKTOWN(C) ADJUSTMENTS
--------- ---------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Operating revenues ................. $2,691 $ 35 -- $ 74 --
Merchandise sales .................. 671 2 -- -- --
--------- ---------------- -------------- ----------- -------------
Total revenue ..................... 3,362 37 -- 74 --
--------- ---------------- -------------- ----------- -------------
Operating expenses ................. 2,252 39 25 88 9 (A)
Cost of merchandise sold ........... 457 2 -- --
Selling, general and administrative
expenses .......................... 643 27 -- 22 --
--------- ---------------- -------------- ----------- -------------
Operating income (loss) ............ 10 (31) (25) (36) (9)
Interest expense ................... 100 34 -- 26 (60)(A)

Other (income) expense ............. (197) 14 -- (3) 21 (A)
--------- ---------------- -------------- ----------- -------------
Income (loss) before income taxes . 107 (79) (25) (59) 30
Income tax expense (benefit) ...... 38 -- -- (47)(B)
--------- ---------------- -------------- ----------- -------------
NET INCOME (LOSS) .................. $ 69 $(79) $(25) $(59) $77
========= ================ ============== =========== =============
Net income (loss) per share ....... $ 0.01
=========
Weighted average shares outstanding 8,648 131 (C)
========= =============
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
PRO FORMA
-----------
<S> <C>
Operating revenues ................. $2,800
Merchandise sales .................. 673
-----------
Total revenue ..................... 3,473
-----------
Operating expenses ................. 2,413
Cost of merchandise sold ........... 459
Selling, general and administrative
expenses .......................... 692
-----------
Operating income (loss) ............ (91)
Interest expense ................... 100

Other (income) expense ............. (165)
-----------
Income (loss) before income taxes . (26)
Income tax expense (benefit) ...... (9)
-----------
NET INCOME (LOSS) .................. $ (17)
===========
Net income (loss) per share ....... $ 0.00
===========
Weighted average shares outstanding 8,779
===========
</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-7

<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 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 January 1, 1996:

<TABLE>
<CAPTION>
DATE INTEREST DEPRECIATION OTHER OTHER
COMPANY ACQUIRED ADJUSTMENT(1) ADJUSTMENT INCOME EXPENSE
- -------------- ------------ ------------- -------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Virginia Beach March 1996 $(34) $9 $15 $(14)
Flemington .... March 1996 -- -- -- --
Yorktown ...... April 1996 (26) -- $20 --
------------- -------------- -------- ---------
$(60) $9 $35 $(14)
============= ============== ======== =========
</TABLE>
- ------------
(1) Assumes average rate of borrowing at 10%.

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

F-8

<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-9

<PAGE>

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

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- 1996
1994 1995 ---------
--------- --------- (UNAUDITED)

<S> <C> <C> <C>
ASSETS
(NOTE F)
Current assets:
Cash and cash equivalents (Notes A<F3> and A<F11>) ......... $ 2,296 $23,121 $11,147
Inventories (Note A<F4>) ................................... 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<F5>, 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<F4>) ..................... 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-10

<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> <C> <C> <C> <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<F8>
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<F9>) ............ $ (.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-11

<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> <C> <C> <C> <C> <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-12

<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> <C> <C> <C> <C> <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 (used in) by operating activities ...... -- 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-13

<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 FGGI 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-14

<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 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-15

<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-16

<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 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> <C> <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
======== ======== =======
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
PEACHTREE MCDIVOTS VALLEY VIEW
----------- ---------- -------------
<S> <C> <C> <C>
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.

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

F-17

<PAGE>

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

(NOTE B) -- ACQUISITION OF GOLF FACILITIES: (Continued)
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.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
Total revenue .......................... $14,522 $10,902
Net income (loss) ...................... $ 472 $ (481)
Net income (loss) per share (Note A[F9]) $ .09 $ (0.11)
</TABLE>

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 and Yorktown Heights 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.

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Total revenue .......................... $16,118 $3,473
Net income (loss) ...................... $ 176 $ (17)
Net income (loss) per share (Note A[F9]) $ .03 $ .00
</TABLE>
F-18

<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> <C> <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:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 31,
1994 1995 1996
------ ------ -----------
<S> <C> <C> <C>
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 receivable and prepaids ............... 92 286 792
------ ------ -----------
Total ....................................... $222 $999 $2,358
====== ====== ===========
</TABLE>

(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:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
-------------- -----------
<S> <C> <C>
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
============== ===========
</TABLE>

F-19

<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. 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-20

<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> <C> <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-21

<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:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
-------------- -----------
<S> <C> <C>
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
============== ===========
</TABLE>

(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-22

<PAGE>

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

(NOTE H) -- COMMITMENTS AND CONTINGENCIES: (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.

(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

F-23

<PAGE>

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

(NOTE I) -- STOCKHOLDERS' EQUITY: (Continued)
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 1977.

(NOTE J) -- INCOME TAXES:

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

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

F-24

<PAGE>

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

(NOTE J) -- INCOME TAXES: (Continued)
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:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, MARCH 31,
-------------- -----------
1994 1995 1996
------ ------ -----------
<S> <C> <C> <C>
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
====== ====== ===========
</TABLE>

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> <C> <C> <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>

(NOTE K) -- SUBSEQUENT EVENTS:

On May 20, 1996, the Company acquired an existing recreational facility in
Norfolk, Virginia.

F-25

<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 statement of operations,
retained earnings, and cash flow 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-26

<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-27

<PAGE>

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

<TABLE>
<CAPTION>
1995
---------
<S> <C>
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 ......... (402)
---------
10,690
---------
Concessions:
Utilities ..................... 3,482
Supplies ...................... 441
Repairs and maintenance ...... 40
Cash -- over or short ......... 401
---------
4,365
---------

</TABLE>

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

F-28

<PAGE>

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

<TABLE>
<CAPTION>
1995
--------
<S> <C>
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

</TABLE>

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

F-29

<PAGE>

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

<TABLE>
<CAPTION>
1995
-------------
<S> <C>
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)
=============
</TABLE>

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

F-30

<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 income ...................................................................... $ (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 ........................................................ 8,750
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 .................................... 105,988
-----------
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 flow 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-31

<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> <C> <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-32

<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 betwen 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:

<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>

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:

<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>

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:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------------
<S> <C>
1996 .............................. $ 35,974
1997 .............................. 35,974
1998 .............................. 35,973
1999 .............................. 35,973
2000 .............................. 35,973
---------
Total minimum payments required $179,867
=========
</TABLE>

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-33

<PAGE>

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

<TABLE>
<CAPTION>
<S> <C>
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
--------

</TABLE>

(Continued)

F-34

<PAGE>

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

<TABLE>
<CAPTION>
<S> <C>
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)
==========
</TABLE>

F-35

<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-36

<PAGE>

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

<TABLE>
<CAPTION>
<S> <C> <C>
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
============
</TABLE>

See notes to financial statements.

F-37

<PAGE>

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

<TABLE>
<CAPTION>
<S> <C> <C>
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)
=============
</TABLE>

See notes to financial statements.

F-38

<PAGE>

FLEMINGTON GOLF AND SPORTS CENTER, LLC
STATEMENT OF CASH FLOWS
DECEMBER 31, 1995

<TABLE>
<CAPTION>
<S> <C> <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-39

<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-40

<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:

<TABLE>
<CAPTION>
<S> <C>
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
==========
</TABLE>

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

(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

<TABLE>
<CAPTION>
<S> <C>
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
=========
</TABLE>

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-41

<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:

<TABLE>
<CAPTION>
<S> <C>
1996 ......... $102,000
1997 ......... 102,000
1998 ......... 102,000
1999 ......... 102,000
2000 ......... 102,000
Thereafter .. 238,000
----------
$748,000
==========
</TABLE>

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-42

<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-43

<PAGE>

202 GOLF ASSOCIATES, INC.
BALANCE SHEET
DECEMBER 31, 1995

<TABLE>
<CAPTION>
<S> <C>
ASSETS
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-44

<PAGE>

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

<TABLE>
<CAPTION>
<S> <C>
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)
===========
</TABLE>

The accompanying notes are an integral part of this statement.

F-45

<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-46

<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:

<TABLE>
<CAPTION>
<S> <C>
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
===========
</TABLE>

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

<TABLE>
<CAPTION>
<S> <C>
Land and improvements .........10-15 years
Buildings and improvements ... 20-30 years
Machinery and equipment ...... 3-5 years
Furniture and fixtures ........ 7 years
</TABLE>

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

F-47

<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-48

<PAGE>

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

<TABLE>
<CAPTION>
<S> <C>
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)
==========
</TABLE>

F-49

<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-50

<PAGE>

PELHAM ENTERPRISES, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND APRIL 30, 1995

ASSETS

<TABLE>
<CAPTION>
APRIL 30,
DECEMBER 31, 1995
1994 (UNAUDITED)
-------------- -----------
<S> <C> <C>
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
============== ===========
</TABLE>

LIABILITIES AND STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
<S> <C> <C>
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
============ ===========
</TABLE>

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

F-51

<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

<TABLE>
<CAPTION>
APRIL 30,
DECEMBER 31, 1995
1994 (UNAUDITED)
-------------- -----------
<S> <C> <C>
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
============== ===========
</TABLE>

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

F-52

<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>
APRIL 30,
DECEMBER 31, 1994
1995 (UNAUDITED)
-------------- -----------
<S> <C> <C>
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-53

<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:

<TABLE>
<CAPTION>
<S> <C>
Buildings ........... 31.5 years
All other assets ... 7 years
</TABLE>

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>
APRIL 30,
DECEMBER 31, 1995
1994 (UNAUDITED)
-------------- -----------
<S> <C> <C>
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-54

<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-55

<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-56

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
BALANCE SHEET
APRIL 30, 1995

<TABLE>
<CAPTION>
<S> <C>
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
============
</TABLE>

See Notes to Financial Statements

F-57

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
STATEMENT OF INCOME
FOR THE ELEVEN MONTHS ENDED APRIL 30, 1995

<TABLE>
<CAPTION>
<S> <C>
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)
============
</TABLE>

See Notes to Financial Statements

F-58

<PAGE>

HILAND PARK GOLF COURSE
QUEENSBURY, NEW YORK
STATEMENT OF EQUITY
FOR THE ELEVEN MONTHS ENDED APRIL 30, 1995

<TABLE>
<CAPTION>
TOTAL
-----------
<S> <C>
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-59

<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-60

<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-61

<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-62

<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-63

<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-64

<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-65

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
YEAR ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
<S> <C>
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)
===========
</TABLE>

See Accompanying Notes to Financial Statements

F-66

<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-67

<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:

<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION
---------- --------------
<S> <C> <C>
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
========== ==============
</TABLE>

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-68

<PAGE>

3. LONG-TERM DEBT AND ASSETS PLEDGED: (Continued)

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:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- ------------------------
<S> <C>
1995 $235,111
1996 255,755
1997 197,068
1998 25,076
1999 27,702
Thereafter 136,825
----------
$877,537
==========
</TABLE>

F-69

<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:

<TABLE>
<CAPTION>
<S> <C>
Cash paid for:
Interest ........................................................... $92,159
Noncash investing activities:
Noncash distributions to shareholders by note receivable reduction $22,328
</TABLE>

F-70

<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-71

<PAGE>

RFC ENTERPRISES, INC.
GLEN ALLEN, VIRGINIA
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
(UNAUDITED)
SEVEN MONTHS ENDED JULY 31, 1995

<TABLE>
<CAPTION>
<S> <C>
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
==========
</TABLE>

F-72

<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-73

<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:

<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION
---------- --------------
<S> <C> <C>
Office furniture, fixtures and equipment $139,663 $ 71,695
Recreational facilities and buildings ... 596,813 205,609
---------- --------------
$736,476 $277,304
========== ==============
</TABLE>

Cost of maintenance and repairs is charged to expense as incurred.

F-74

<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-75

<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:

<TABLE>
<CAPTION>
PERIOD ENDING JULY 31:
- ----------------------
<S> <C>
1996 ............. $213,270
1997 ............. 265,127
1998 ............. 157,995
1999 ............. 24,276
2000 ............. 26,704
2001 and
thereafter ....... 133,834
----------
$821,206
==========
</TABLE>

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:

<TABLE>
<CAPTION>
<S> <C>
Cash paid for:
Interest ............................................... $67,381
Noncash investing activities:
Noncash distributions to shareholders by note
receivable reduction-vehicle distributed .............. $ 3,544
</TABLE>

F-76

<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-77

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1994 1995
-------------- ------------
(UNAUDITED)
<S> <C> <C>
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-78

<PAGE>

UPPER HEMBREE PARTNERS, L.P.
(A GEORGIA LIMITED PARTNERSHIP)
D/B/A MCDIVOT'S SPORTS PARK
STATEMENTS OF INCOME

<TABLE>
<CAPTION>
DECEMBER 31, FOR THE YEAR ENDED FOR THE SEVEN MONTHS ENDED
1993 DECEMBER 31, 1994 JULY 31, 1995 (UNAUDITED)
-------------- ------------------ --------------------------
<S> <C> <C> <C> <C>
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-79

<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>
GENERAL LIMITED
TOTAL PARTNERS PARTNERS
------------ ----------- ------------
<S> <C> <C> <C>
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-80

<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>
DECEMBER 31, DECEMBER 31, JULY 31,
1993 1994 1995
-------------- -------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
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-81

<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:

<TABLE>
<CAPTION>
<S> <C>
Furniture and fixtures ..... 5 years
Machinery and equipment .... 5 years
Buildings and structures ... 25 years
Land improvements ........... 15 years
</TABLE>

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:

<TABLE>
<CAPTION>
<S> <C>
Organization costs .... 5 years (60 months)
Deferred loan costs ... 2 years (24 months)
</TABLE>

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-82

<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>
DECEMBER 31, JULY 31,
1994 1995
-------------- ------------
<S> <C> <C>
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-83

<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>
DECEMBER 31, JULY 31,
1994 1995
-------------- ----------
<S> <C> <C>
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-84

<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:

<TABLE>
<CAPTION>
DECEMBER 31, JULY 31,
1995 1995
-------------- ----------
<S> <C> <C>
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
============== ==========
</TABLE>

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-85

<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-86

<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-87

<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-88

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FEBRUARY 8, 1994 (INCEPTION) TO DECEMBER 31, 1994

<TABLE>
<CAPTION>
<S> <C>
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)
===========
</TABLE>

See accountant's report and notes to financial statements.

F-89

<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-90

<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-91

<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,

<TABLE>
<CAPTION>
<S> <C>
1995 .......................... $ 37,365
1996 .......................... 37,365
1997 .......................... 32,918
1998 .......................... 18,000
1999 .......................... 4,500
---------
Total minimum lease payments $130,148
=========
</TABLE>

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-92

<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-93

<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-94

<PAGE>

THE PRACTICE TEE, INC. & SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)

<TABLE>
<CAPTION>
<S> <C>
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)
===========
</TABLE>

F-95

<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-96

<PAGE>

GOLF MASTERS LIMITED PARTNERSHIP
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS 1994 1995
- --------------------------------------------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C>
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-97

<PAGE>

EXHIBIT A

GOLF MASTERS LIMITED PARTNERSHIP

BALANCE SHEETS

LIABILITIES AND PARTNERS' CAPITAL

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
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-98

<PAGE>

EXHIBIT B

GOLF MASTERS LIMITED PARTNERSHIP

STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
<S> <C>
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
==============
</TABLE>

The appended notes are an integral part of this financial statement.

F-99

<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

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
--------------- ---------------
<S> <C> <C>
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)
=============== ===============
</TABLE>

The appended notes are an integral part of this financial statement.

F-100

<PAGE>

EXHIBIT D

GOLF MASTERS LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE NINE
ENDED DECEMBER MONTHS ENDED
31, 1994 SEPTEMBER 30, 1995
----------------- ------------------
<S> <C> <C>
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-101

<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:

<TABLE>
<CAPTION>
<S> <C>
LEASEHOLD IMPROVEMENTS ............ 10-30 years
Range equipment ................... 10 years
Computers and office equipment ... 7-10 years
Furniture and fixtures ............ 10 years
</TABLE>

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>
CURRENT DEFERRED TOTAL
------------ ------------- -------------
<S> <C> <C> <C>
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-102

<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:

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:

<TABLE>
<CAPTION>
<S> <C>
1995 .........$ 5,000.00 PER MONTH
1996 ......... 7,500.00 per month
1997-2009 .... 14,040.15 per month
</TABLE>

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-103

<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:

<TABLE>
<CAPTION>
<S> <C>
ADJUST ACCOUNTS PAYABLE FOR:
Utilities ........................................... $8,458.91
Telephone ........................................... (822.03)
-----------
Net decrease in partners' capital at December 31, 1994 $7,636.88
===========
</TABLE>

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-104

<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-105

<PAGE>

EXHIBIT A
AIRDOME LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1994

<TABLE>
<CAPTION>
<S> <C> <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-106

<PAGE>

EXHIBIT B

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
<S> <C>
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
===============
</TABLE>

The appended notes are an integral part of this financial statement.

F-107

<PAGE>

EXHIBIT C

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF INCOME AND EXPENSE
FOR THE YEAR ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
<S> <C>
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)
==============
</TABLE>

The appended notes are an integral part of this financial statement.

F-108

<PAGE>

EXHIBIT D

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
<S> <C>
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
==============
</TABLE>

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-109

<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:

<TABLE>
<CAPTION>
ORIGINAL COST LIFE
--------------- ------------
<S> <C> <C>
Building:
Structure .................... $603,765.00 31.5 years
Airdome fabric and components 530,702.10 10.0 years
</TABLE>

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:

<TABLE>
<CAPTION>
<S> <C>
1995 ......... $ 5,000.00 per month
1996 ......... $ 7,500.00 per month
1997-2009 .... $14,040.15 per month
</TABLE>

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-110

<PAGE>

AIRDOME LIMITED PARTNERSHIP
BALANCE SHEET
SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
<S> <C>
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
===============
</TABLE>

The appended notes are an integral part of this financial statement.

F-111

<PAGE>

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
<S> <C>
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
===============
</TABLE>

The appended notes are an integral part of this financial statement.

F-112

<PAGE>

AIRDOME LIMITED PARTNERSHIP
STATEMENT OF INCOME AND EXPENSE
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
<S> <C>
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)
=============
</TABLE>

The appended notes are an integral part of this financial statement.

F-113

<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-114

<PAGE>

AIRDOME LIMITED PARTNERSHIP

NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 1995

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

<TABLE>
<CAPTION>
ORIGINAL COST LIFE
--------------- -------------
<S> <C> <C>
Building:
Structure .................... $603,765.00 31.5 years
Airdome fabric and components 530,702.10 10.0 years
</TABLE>

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:

<TABLE>
<CAPTION>
<S> <C>
1995 .......... $ 5,000.00 per month
1996 .......... $ 7,500.00 per month
1997-2009 ..... $14,040.15 per month
</TABLE>

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-115

<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

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 7
Use of Proceeds ............................ 12
Price Range of Common Stock ................ 13
Dividend Policy ............................ 13
Capitalization ............................. 14
Selected Financial Data .................... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 17
Business ................................... 24
Management ................................. 34
Principal Stockholders ..................... 38
Certain Relationships and Related
Transactions .............................. 40
Description of Capital Stock ............... 42
Underwriting ............................... 44
Legal Matters .............................. 45
Experts .................................... 45
Available Information ...................... 46
Index to Financial Statements .............. F-1
</TABLE>

2,000,000 SHARES

[LOGO]

FAMILY GOLF CENTERS, INC.
COMMON STOCK
PROSPECTUS
JEFFERIES & COMPANY, INC.
HAMPSHIRE SECURITIES
CORPORATION

, 1996

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS

Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation, or an amendment thereto validly
approved by stockholders, to eliminate or limit personal liability of members
of its Board of Directors for violations of a director's fiduciary duty of
care. However, the elimination or limitation shall not apply where there has
been a breach of the duty of loyalty, failure to act in good faith,
intentional misconduct or a knowing violation of a law, the payment of a
dividend or approval of a stock repurchase which is deemed illegal or an
improper personal benefit is obtained. The Company's Certificate of
Incorporation includes the following language:

No director of the Corporation shall be liable to the Corporation or any
of its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate the liability of
the director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of Title 8 of the Delaware code, or (iv) for any
transaction from which the director derived an improper personal benefit.

Article Eighth of the Certificate of Incorporation of the Company permits
indemnification of, and advancement of expenses to, among others, officers
and directors of the Corporation. Such Article provides as follows:

"(a) Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director,
officer, employee, or agent of the Corporation or any of its direct or
indirect subsidiaries or is or was serving at the request of the Corporation
as a director, officer, employee, or agent of any other corporation or of a
partnership, joint venture, trust, or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an official
capacity as a director, officer, employee, or agent or in any other capacity
while serving as a director, officer, employee, or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), against all expense,
liability, and loss (including attorney's fees, judgments, fines, excise or
other taxes assessed with respect to an employee benefit plan, penalties, and
amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith, and such indemnification shall continue
as to an indemnitee who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the indemnitee's heirs, executors,
and administrators; provided, however, that, except as provided in paragraph
(c) of this Article Eighth with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.

(b) The right to indemnification conferred in paragraph (a) of this
Article Eighth shall include the right to be paid by the Corporation the
expenses incurred in defending for which such right to indemnification is
applicable in advance of its final disposition (hereinafter an "advancement
of expenses"); provided, however, that, if the Delaware General Corporation
Law requires, an advancement of expenses incurred by an indemnitee in his or
her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf
of such indemnitee, to repay all amounts so advanced if it shall ultimately
be determined by final judicial decision from which there is not further to
appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Article Eighth or
otherwise.

II-1

<PAGE>

(c) The rights to indemnification and to the advancement of expenses
conferred in paragraphs (a) and (b) of this Article Eighth shall be contract
rights. If a claim under paragraph (a) or (b) of this Article Eighth is not
paid in full by the Corporation within sixty days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking,
the indemnitee shall be entitled to be paid also the expense of prosecuting
or defending such suit. In (i) any suit brought by the indemnitee to enforce
a right to indemnification hereunder (but not in a suit brought by an
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware Corporation Law, and (ii) any suit
by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Coporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of
the indemnitee is proper in the circumstances because the indemnitee has met
the applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders) that
the indemnitee has not met such applicable standard of conduct, shall create
a presumption that the indemnitee has not met the applicable standard of
conduct or, in the case of such a suit brought by the indemnitee, be a
defense to such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses hereunder, or by
the Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the burden of proving that the indemnitee is not entitled
to be indemnified, or to such advancement of expenses, under this Article
Eighth or otherwise, shall be on the Corporation.

(d) The rights to indemnification and to the advancement of expenses
conferred in this Article Eighth shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, this
certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.

(e) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee, or agent of the Corporation or
another corporation, partnership, joint venture, trust, or other enterprise
against any expense, liability, or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability, or
loss under the Delaware General Corporation Law.

(f) The Corporation's obligation, if any, to indemnify any person who was
or is serving as a director, officer, employee, or agent of any direct or
indirect subsidiary of the Corporation or, at the request of the Corporation,
of any other corporation or of a partnership, joint venture, trust, or other
enterprise shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture,
trust, or other enterprise.

(g) Any repeal or modification of the foregoing provisions of this Article
Eighth shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification."

II-2

<PAGE>

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is an itemization of all expenses incurred or expected to be
incurred by the Company in connecton with the issuance and distribution of
the securities being offered hereby (items marked with an asterisk (*)
represent estimated expenses):

<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee .................. $ 22,081.73
Legal Fees and Expenses ............... 150,000.00*
Blue Sky Fees (including counsel fees) 25,000.00*
NASD Filing Fees ...................... 7,113.00
Nasdaq National Market Fee ............ 17,500.00
Accounting Fees and Expenses .......... 100,000.00*
Transfer Agent and Registrar Fees .... 5,000.00*
Printing and Engraving Expenses ...... 100,000.00*
Miscellaneous ......................... 73,305.27*
-------------
Total ............................... $ 500,000.00
=============
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

Set forth below in chronological order is information regarding the number
of shares of Common Stock sold by the Company, since inception, the
consideration received by the Company for such shares, and information
relating to the section of the Securities Act of 1933, as amended (the
"Securities Act"), or rule of the Securities and Exchange Commission under
which exemption from registration was claimed. None of these securities was
registered under the Securities Act. No sales of securities involved the use
of an underwriter and no commissions were paid in connection with the sale of
any securities.

In July 1994, the Company issued 5,000 shares of Common Stock to Dominic
Chang, the Chairman of the Board, President and Chief Executive Officer of
the Company, for nominal consideration in connection with the initial
organization of the Company.

On August 15, 1994 the Company borrowed $499,000 from six individuals,
each of whom represented that he was an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act, pursuant to a
series of promissory notes. Such promissory notes bore interest at a rate of
10% per annum and were due and paid in full upon the closing of the Company's
initial public offering. In connection with such loans, the Company issued a
series of Common Stock Purchase Warrants entitling the individuals to
purchase an aggregate of 24,950 shares of the Company's common stock, at a
price of $3.50 per share, any time prior to August 14, 1999, which warrants
were exercised in connection with the Secondary Offering and the 24,950
shares underlying such warrants were registered and sold in the Secondary
Offering.

Pursuant to an Exchange Agreement, dated as of September 11, 1994, between
the Company Dominic Chang, Krishnan P. Thampi, John Chen, Jimmy C.M. Hsu and
Tommy Hsu, upon the closing of the initial public offering of the Company,
the Company received all of the issued and outstanding shares of stock of
Orient Associates International, Inc., Skycon Construction Company, Inc.,
Skydrive Company, Inc., Skydrive Greenburgh Co., Inc., Skydrive Willowbrook
NJ, Inc. and Skydrive Alley Pond Company, Inc., in exchange for an aggregate
of 3,445,000 shares of the Company's common stock.

On March 8, 1995 Dominic Chang and Krishnan Thampi were each granted
options outside of the 1994 Stock Option Plan ("Plan") to purchase 10,000
shares of Common Stock at $6.75 per share in connection with amendments to
their respective employment agreements.

In connection with the Company's acquisition on May 1, 1995 of the entity
which owned the golf center in Greenville, South Carolina, the Company issued
90,000 shares of Common Stock to the selling stockholder of such entity. See
"Business--Recently Opened or Acquired Facilities."

In connection with the acquisition on August 25, 1995 by the Company of
the entity which owned the golf center in Glen Allen, Virginia (near
Richmond), 7,500 shares of Common Stock of the Company were issued to the two
selling shareholders. See "Business--Recently Opened or Acquired Facilities."

II-3

<PAGE>

In connection with the acquisition by the Company of the golf center in
Alpharetta, Georgia, which closed on September 28, 1995, 85,000 shares of
Common Stock and an option to purchase up to 8,500 shares of Common Stock of
the Company (subsequently reduced to 8,280 shares in accordance with the
purchase contract) (at an exercise price of $25.00 per share and exercisable
until September 28, 2000) were issued to the seller. See "Business--Recently
Opened or Acquired Facilities."

In connection with the acquisition by the Company of the golf center in
Valley View, Ohio, which closed November 8, 1995, 101,800 shares of Common
Stock and an option to purchase up to 10,000 shares of Common Stock (at an
exercise price of $25.00 per share and exercisable until November 8, 2000)
were issued to the sellers. See "Business--Recently Opened or Acquired
Facilities."

In connection with the acquisition by the Company of the golf center in
Virginia Beach, Virginia, which closed on March 6, 1996, 50,000 shares of
Common Stock were issued to the seller. See "Business -- Recently Opened or
Acquired Facilities."

In connection with the acquisition by the Company of the golf center in
Flemington, New Jersey, which closed on March 7, 1996, 100,000 shares of
Common Stock were issued to the seller. See "Business -- Recently Opened or
Acquired Facilities."

In connection with the acquisition by the Company of the golf center in
Yorktown Heights, New York, which closed on April 8, 1996, 30,900 shares of
Common Stock were issued to the seller. See "Business -- Recently Opened or
Acquired Facilities."

In connection with the entry by the Company into a consulting agreement
dated as of March 7, 1996, warrants to purchase up to 70,000 shares of Common
Stock (at an exercise price of $19.875 per share and exercisable until March
7, 1997) were issued to the consultant.

As of May 10, 1996, options to purchase 294,000 shares of Common Stock
have been granted under the Plan and options to purchase 53,500 shares of
Common Stock have been granted outside of both the Plan and the New Plan at
prices ranging from $3.50 to $19.875 per share.

Each of the foregoing transactions was exempt from registration under the
Securities Act by virtue of the provisions of Section 4(2) and/or Section
3(b) of the Securities Act. None of such transactions involved any general
solicitation. Each purchaser of the securities described above has
represented that such purchaser understands that the securities acquired may
not be sold or otherwise transferred absent registration under the Securities
Act or the availability of an exemption from the registration requirements of
the Securities Act, and each certificate evidencing the securities owned by
each purchaser bears or will bear upon issuance a legend to that effect.

ITEM 27. EXHIBITS

The following exhibits are filed herewith:

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1* Certificate of Incorporation.
3.2 By-laws, as amended.
4.1***** Pages 7 and 8 of the Certificate of Incorporation defining rights of security holders.
4.2***** Pages 1, 3, 4, 6 and 9 of the By-laws defining rights of security holders.

II-4

<PAGE>

EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
5.1+++ Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP.

10.1* Agreement to Exchange, dated as of September 11, 1994, by and among Family Golf Centers, Inc. and
Dominic Chang, Jimmy C.M. Hsu, Krishnan Thampi, Tommy Hsu, and John Chen.

10.2* Purchase Agreement, dated as of September 11, 1994, by and among Family Golf Centers, Inc. and
Golf Range, Inc. and Abbington Holdings, Inc.

10.3* Option Agreement by and among Ken Simonds, William Schickler III, Dominic Chang, Krishnan Thampi,
The Practice Tee, Inc. and Family Golf Centers, Inc.

10.4* Employment Agreement, dated as of September 11, 1994, between Family Golf Centers, Inc. and
Dominic Chang.

10.4.1***** Amendment No. 1, dated March 8, 1995 to the Employment Agreement, dated as of September 11, 1994,
between Family Golf Centers, Inc. and Dominic Chang, filed as Exhibit 10.4.

10.5* Employment Agreement, dated as of September 11, 1994, between Family Golf Centers, Inc. and
Krishnan Thampi.

10.5.1***** Amendment No. 1, dated March 8, 1995 to the Employment Agreement, dated as of September 11, 1994,
between Family Golf Centers, Inc. and Krishnan P. Thampi, filed as Exhibit 10.5.

10.6* Agreement, dated as of August 12, 1992 by and between Golden Bear International, Inc. and Orient
Associates International, Inc., as amended by an Assignment and Amendment entered into February
16, 1994, by and among Golden Bear International, Inc., Golden Bear Golf Centers, Inc. and Orient
Associates International, Inc., as further amended by an Assignment and Assumption by and among
Golden Bear Golf Centers, Inc., Orient Associates International, Inc. and The Practice Tee, Inc.

10.6.1** Amendment entered into November 9, 1994 to Agreement dated as of August 12, 1992, by and between
Golden Bear International, Inc. and Orient Associates International, Inc.

10.6.2***** Amendment entered into December 2, 1994 to Agreement dated as of August 12, 1992, by and between
Golden Bear International, Inc. and Orient Associates International, Inc., filed as Exhibit 10.6.

10.7* License Agreement, dated September 14, 1994, between Orient Associates International, Inc. and
City of New York Parks & Recreation Department.

10.8 Family Golf Centers, Inc. 1996 Stock Incentive Plan.

10.9* Family Golf Centers, Inc. 1994 Stock Option Plan.

10.10++ Purchase Agreement, dated March 6, 1996 between Owl's Creek Golf Center, Inc. and Virginia Beach
Family Golf Centers, Inc., a wholly owned subsidiary of Family Golf Centers, Inc.

10.11++ Escrow Agreement dated March 6, 1996 among Family Golf Centers, Inc., Owl's Creek Golf Center,
Inc. and Continental Stock Transfer & Trust Company.

10.12++ Registration Rights Agreement, dated March 6, 1996, between Family Golf Centers, Inc. and certain
stockholders of Owl's Creek Golf Center, Inc. listed on Schedule 1 thereto.

10.13++ Deed of Assignment dated February 27, 1996 between Owl's Creek Golf Center, Inc. and Virginia
Beach Family Golf Centers, Inc. and the City of Virginia Beach, Virginia.

10.14++ Deed of Assignment dated March 1, 1996 between Owl's Creek Center, Inc. and Virginia Beach Family
Golf Centers, Inc.

II-5

<PAGE>

EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
10.15* Building Loan Contract and Building Loan Mortgage, dated October 20, 1994, between Orient
Associates International, Inc., as Borrower, and Grand Pacific Finance Corp., as Lender.

10.16++ Deed for Improvements, dated as of March 1, 1996, between Owl's Creek Golf Center, Inc. and
Virginia Beach Family Golf Centers, Inc.

10.17** Collateral Note and Security Agreements, dated September 28, 1994 and September 30, 1994, between
Bank of New York, as Lender, and Skydrive Co., Inc., as Borrower.

10.18*** Purchase and Sale Contract, dated May 1, 1995, between Evergreen Bank, N.A. f/k/a The First
National Bank of Glens Falls and Family Golf Centers, Inc.

10.19*** Mortgage and Security Agreement, dated May 15, 1995 between Family Golf Centers, Inc., as
Mortgagor and Orix USA Corporation, as Mortgagee.

10.20*** Purchase Money Note, dated May 15, 1995, made by Family Golf Centers, Inc. in favor of Orix USA
Corporation in the principal amount of $3,000,000.

10.21*** Statement of Purpose for an Extension of Credit Secured by Margin Stock, dated April 28, 1995,
between Family Golf Centers, Inc. and Chemical Bank.

10.22*** Promissory Note, dated May 4, 1995, made by Family Golf Centers, Inc. in favor of Chemical Bank
in the principal amount of $850,000.

10.23***** Registration Rights Agreement, dated April 28, 1995 between Kenneth Gurley and Family Golf
Centers, Inc.

10.24++ Bill of Sale, dated as of March 6, 1996, between Owl's Creek Golf Center, Inc. and Virginia Beach
Family Golf Centers, Inc.

10.25++ Purchase Agreement, dated March 7, 1996, between Flemington Equities VII and Flemington Family
Golf Centers, Inc., a wholly-owned subsidiary of Family Golf Centers, Inc.

10.26***** Warrant to purchase 80,000 shares of Common Stock, dated November 23, 1994, issued to Hampshire
Securities Corporation by Family Golf Centers, Inc.

10.27++ Guaranty dated March 7, 1996, by Family Golf Centers, Inc., in favor of Flemington Equities VII.

10.28***** Form of Representatives' Warrants.

10.29***** TPT/FGC Purchase Agreement, dated as of September 28, 1995, between Family Golf Centers, Inc.,
Dominic Chang, Krishnan Thampi, Ken Simonds and William Schickler III.

10.30***** Registration Rights Agreement, dated August 24, 1995 between Thomas Matthews, J.L. Matthews, Jr.
and Family Golf Centers, Inc.

Purchase Contract, dated September 28, 1995, between Upper Hembree Partners, L.P., each of the
10.31**** general partners of Upper Hembree Partners, L.P. and Alpharetta Family Golf Centers, Inc., a
wholly owned subsidiary of Family Golf Centers, Inc.

10.32**** Escrow Agreement, dated September 28, 1995, between Family Golf Centers, Inc., Upper Hembree
Partners, L.P. and Continental Stock Transfer & Trust Company.

10.33**** Stock Option Agreement, dated September 28, 1995, between Family Golf Centers, Inc. and Upper
Hembree Partners, L.P.

10.34**** Registration Rights Agreement, dated September 28, 1995, between Family Golf Centers, Inc. and
Upper Hembree Partners, L.P.

II-6

<PAGE>

EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
10.35**** Form of Promissory Note, dated September 28, 1995, in the principal amount of $35,000 made by
Upper Hembree Partners, L.P. in favor of Family Golf Centers, Inc.

10.36**** Assignment & Assumption Agreement, dated October 16, 1995, between Upper Hembree Partners, L.P.,
Alpharetta Family Golf Centers, Inc. and Bank South.

10.37**** Renewal Promissory Note, dated November 14, 1994, in the principal amount of $1,860,770.07 made
by Upper Hembree Partners, L.P. in favor of Bank South, N.A.

10.38**** Form of Guaranty Agreement from Dominic Chang in favor of Bank South.

10.39**** Form of Guaranty Agreement from Family Golf Centers, Inc. in favor of Bank South.

10.40****** Promissory Note, dated November 8, 1995, in the principal amount of $4,000,000 made by Family
Golf Centers, Inc. in favor of Dominic Chang, as the representative of the shareholders of The
Practice Tee, Inc.

10.41****** Purchase Agreement, dated as of November 8, 1995 by and between Golf Masters Limited Partnership
and Air Dome Limited Partnership, as Sellers, each of the general partners of Sellers and Valley
View Family Golf Centers, Inc., a wholly owned subsidiary of Family Golf Centers, Inc.

10.42****** Escrow Agreement, dated as of November 8, 1995, among Family Golf Centers, Inc., Golf Masters
Limited Partnership, Air Dome Limited Partnership and Continental Stock Transfer & Trust Company.

10.43****** Registration Rights Agreement, dated as of November 8, 1995, between Golf Masters Limited
Partnership, Air Dome Limited Partnership and Family Golf Centers, Inc.

10.44****** Stock Option Agreement, dated as of November 8, 1995, among Family Golf Centers, Inc., Golf
Masters Limited Partnership and Air Dome Limited Partnership.

10.45++ Purchase Agreement, dated March 7, 1996, between Flemington Golf and Sports Center, LLC and
Flemington Family Golf Centers, Inc., a wholly-owned subsidiary of Family Golf Centers, Inc.

10.46++ Mortgage Note, dated March 7, 1996, in the principal amount of $1,700,000 made by Flemington
Family Golf Centers, Inc. in favor of Flemington Equities VII and related Mortgage Deed.

10.47++ Cash Escrow Agreement, dated March 7, 1996 among Flemington Family Golf Centers, Inc., Flemington
Golf and Sports Center, LLC and Continental Stock Transfer and Trust Company.

10.48++ Purchase Agreement, dated April 8, 1996 among 202 Golf Associates, Inc., Family Golf Centers,
Inc. and Yorktown Family Golf Centers, Inc., a wholly owned subsidiary of Family Golf Centers,
Inc.

10.49++ Escrow Agreement dated April 8, 1996 among Family Golf Centers, Inc., 202 Golf Associates, Inc.,
Yorktown Family Golf Centers, Inc. and Continental Stock Transfer & Trust Company.
Registration Rights Agreement, dated April 8, 1996, between Family Golf Centers, Inc. and 202

10.50++ Golf Associates, Inc.
Assignment and Assumption Agreement, dated April 8, 1996 between 202 Golf Associates, Inc. and

10.51++ Yorktown Family Golf Centers, Inc.

10.52++ Bill of Sale dated April 8, 1996 by 202 Golf Associates, Inc.

Indenture, dated April 8, 1996 between 202 Golf Associates, Inc. and Yorktown Family Golf
10.53++ Centers, Inc.

II-7

<PAGE>

EXHIBIT NO. DESCRIPTION
- --------------- -------------------------------------------------------------------------------------------------
10.54 Form of Warrants to purchase an aggregate of 70,000 shares of Common Stock, dated as of March 7,
1996, issued to Monness, Crespi & Hardt & Co. by Family Golf Centers, Inc.

10.55*** Purchase Agreement, dated May 20, 1996 among Indian River Golf-O-Rama, Inc., Indian River Family
Golf Centers, Inc. and Lenrich Associates, L.L.C.

11.1 Statement re: Computation of Earnings Per Share.

21.1 Subsidiaries of the Company.

23.1 Consent of Richard A. Eisner & Company, LLP. Consent of Anne E. Gorry. Consent of Ehrenkrantz and
Company. Consent of Mangini, Traeger & Company, P.C. Consent of Silverstein, Loftus & Ross, CPAs,
P.C. Consent of Bradshaw, Gordon & Clinkscales, P.A. Consent of Drunagel, Johnson, Rutherford &
Wilkins, P.C. Consent of Ernest T. Northrup. Consent of Robert Del Riego. Consent of Sewell &
Co., Inc.

23.2*** Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained in the Opinion filed as
Exhibit 5.1).

23.3 Consent of Houlihan Lokey Howard & Zukin.

24.1 Power of Attorney (Reference is made to the signature page of the Registration Statement).

99.1+ Opinion of Houlihan Lokey Howard & Zukin.
</TABLE>

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

* Incorporated by reference to the Company's Registration Statement on
Form SB-2 dated September 12, 1994 (Registration No. 33-83910).

** Incorporated by reference to the Pre-Effective Amendment No. 2 to
the Company's Registration Statement on Form SB-2 dated November 10,
1994 (Registration No. 33-83910).

*** Incorporated by reference to the Company's Current Report on Form
8-K/A (Amendment No. 1), dated June 6, 1995.

**** Incorporated by reference to the Company's Current Report on Form
8-K, dated October 11, 1995.

***** Incorporated by reference to the Company's Registration Statement
(Registration No. 33-97686) filed on October 3, 1995.

******Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement (Registration No. 33-97686) filed on November
9, 1995.

+ Incorporated by reference to Amendment No. 2 to the Company's
Registration Statement (Registration No. 33-97686) filed on November
29, 1995.

++ Incorporated by reference to the Company's Current Report on Form
8-K/A (Amendment No. 1), dated May 20, 1996 amending the Reports on
Form 8-K dated March 6, 1996 and April 8, 1996.

+++ To be filed by amendment.

II-8

<PAGE>

ITEM 28. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(b) The Registrant hereby undertakes that it will:

(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.

(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and the offering of the securities at that time as the initial
bona fide offering of those securities.

II-9

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Melville, State of New York on May 24, 1996

FAMILY GOLF CENTERS, INC.

By: /s/ Dominic Chang
-------------------------------
Dominic Chang
Chairman of the Board,
President,
and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dominic Chang and Krishnan P. Thampi, or any
one of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all pre-or post-effective
amendments to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises, as full to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitutes, may lawfully do or cause
to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, this to
the Registration Statement has been signed by the following persons in the
capacities and on the dates stated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------- ---------------------------------------- ----------------
/S/ Dominic Chang CHAIRMAN OF THE BOARD, PRESIDENT AND
-------------------------- CHIEF EXECUTIVE OFFICER (PRINCIPAL
Dominic Chang EXECUTIVE OFFICER) MAY 24, 1996
<S> <C> <C>
/s/ Krishnan P. Thampi Chief Financial Officer and Director
-------------------------- (Principal Financial and Accounting
Krishnan P. Thampi Officer) May 24, 1996
/s/ James Ganley
--------------------------
James Ganley Director May 24, 1996
/s/ Jimmy C.M. Hsu
--------------------------
Jimmy C.M. Hsu Director May 24, 1996
/s/ Yupin Wang
--------------------------
Yupin Wang Director May 24, 1996
</TABLE>

II-10

<PAGE>

EXHIBIT INDEX

3.1* Certificate of Incorporation.

3.2 By-laws, as amended.

4.1***** Pages 7 and 8 of the Certificate of Incorporation defining rights of security holders.

4.2***** Pages 1, 3, 4, 6 and 9 of the By-laws defining rights of security holders.

5.1+++ Opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP.

10.1* Agreement to Exchange, dated as of September 11, 1994, by and among Family Golf Centers, Inc. and
Dominic Chang, Jimmy C.M. Hsu, Krishnan Thampi, Tommy Hsu, and John Chen.

10.2* Purchase Agreement, dated as of September 11, 1994, by and among Family Golf Centers, Inc. and Golf
Range, Inc. and Abbington Holdings, Inc.

10.3* Option Agreement by and among Ken Simonds, William Schickler III, Dominic Chang, Krishnan Thampi,
The Practice Tee, Inc. and Family Golf Centers, Inc.

10.4* Employment Agreement, dated as of September 11, 1994, between Family Golf Centers, Inc. and Dominic
Chang.

10.4.1***** Amendment No. 1, dated March 8, 1995 to the Employment Agreement, dated as of September 11, 1994,
between Family Golf Centers, Inc. and Dominic Chang, filed as Exhibit 10.4.

10.5* Employment Agreement, dated as of September 11, 1994, between Family Golf Centers, Inc. and Krishnan
Thampi.

10.5.1***** Amendment No. 1, dated March 8, 1995 to the Employment Agreement, dated as of September 11, 1994,
between Family Golf Centers, Inc. and Krishnan P. Thampi, filed as Exhibit 10.5.

10.6* Agreement, dated as of August 12, 1992 by and between Golden Bear International, Inc. and Orient
Associates International, Inc., as amended by an Assignment and Amendment entered into February 16,
1994, by and among Golden Bear International, Inc., Golden Bear Golf Centers, Inc. and Orient
Associates International, Inc., as further amended by an Assignment and Assumption by and among
Golden Bear Golf Centers, Inc., Orient Associates International, Inc. and The Practice Tee, Inc.

10.6.1** Amendment entered into November 9, 1994 to Agreement dated as of August 12, 1992, by and between
Golden Bear International, Inc. and Orient Associates International, Inc.

10.7* License Agreement, dated September 14, 1994, between Orient Associates International, Inc. and City
of New York Parks & Recreation Department.

10.8 Family Golf Centers, Inc. 1996 Stock Incentive Plan.

10.9* Family Golf Centers, Inc. 1994 Stock Option Plan.
Purchase Agreement, dated March 6, 1996 between Owl's Creek Golf Center, Inc. and Virginia Beach

10.10++ Family Golf Centers, Inc., a wholly owned subsidiary of Family Golf Centers, Inc.

<PAGE>

EXHIBIT NO. DESCRIPTION PAGE
NO.
- --------------- ---------------------------------------------------------------------------------------------------- ------------
Escrow Agreement dated March 6, 1996 among Family Golf Centers, Inc., Owl's Creek Golf Center, Inc.
10.11++ and Continental Stock Transfer & Trust Company.
Registration Rights Agreement, dated March 6, 1996, between Family Golf Centers, Inc. and certain
10.12++ stockholders of Owl's Creek Golf Center, Inc. listed on Schedule 1 thereto.
Deed of Assignment dated February 27, 1996 between Owl's Creek Golf Center, Inc. and Virginia Beach
10.13++ Family Golf Centers, Inc. and the City of Virginia Beach, Virginia.
Deed of Assignment dated March 1, 1996 between Owl's Creek Center, Inc. and Virginia Beach Family
10.14++ Golf Centers, Inc.
Building Loan Contract and Building Loan Mortgage, dated October 20, 1994, between Orient Associates
10.15* International, Inc., as Borrower, and Grand Pacific Finance Corp., as Lender.
Deed for Improvements, dated as of March 1, 1996, between Owl's Creek Golf Center, Inc. and Virginia
10.16++ Beach Family Golf Centers, Inc.
Collateral Note and Security Agreements, dated September 28, 1994 and September 30, 1994, between
10.17** Bank of New York, as Lender, and Skydrive Co., Inc., as Borrower.
Purchase and Sale Contract, dated May 1, 1995, between Evergreen Bank, N.A. f/k/a The First National
10.18*** Bank of Glens Falls and Family Golf Centers, Inc.
Mortgage and Security Agreement, dated May 15, 1995 between Family Golf Centers, Inc., as Mortgagor
10.19*** and Orix USA Corporation, as Mortgagee.
Purchase Money Note, dated May 15, 1995, made by Family Golf Centers, Inc. in favor of Orix USA
10.20*** Corporation in the principal amount of $3,000,000.
Statement of Purpose for an Extension of Credit Secured by Margin Stock, dated April 28, 1995,
10.21*** between Family Golf Centers, Inc. and Chemical Bank.
Promissory Note, dated May 4, 1995, made by Family Golf Centers, Inc. in favor of Chemical Bank in
10.22*** the principal amount of $850,000.
Registration Rights Agreement, dated April 28, 1995 between Kenneth Gurley and Family Golf Centers,
10.23***** Inc.
Bill of Sale, dated as of March 6, 1996, between Owl's Creek Golf Center, Inc. and Virginia Beach
10.24++ Family Golf Centers, Inc.
Purchase Agreement, dated March 7, 1996, between Flemington Equities VII and Flemington Family Golf
10.25++ Centers, Inc., a wholly-owned subsidiary of Family Golf Centers, Inc.
Warrant to purchase 80,000 shares of Common Stock, dated November 23, 1994, issued to Hampshire
10.26***** Securities Corporation by Family Golf Centers, Inc.
10.27++ Guaranty dated March 7, 1996, by Family Golf Centers, Inc., in favor of Flemington Equities VII.
10.28***** Form of Representatives' Warrants.
TPT/FGC Purchase Agreement, dated as of September 28, 1995, between Family Golf Centers, Inc.,
10.29***** Dominic Chang, Krishnan Thampi, Ken Simonds and William Schickler III.
Registration Rights Agreement, dated August 24, 1995 between Thomas Matthews, J.L. Matthews, Jr. and
10.30***** Family Golf Centers, Inc.

<PAGE>

EXHIBIT NO. DESCRIPTION PAGE
NO.
- --------------- ---------------------------------------------------------------------------------------------------- -----------
Purchase Contract, dated September 28, 1995, between Upper Hembree Partners, L.P., each of the
general partners of Upper Hembree Partners, L.P. and Alpharetta Family Golf Centers, Inc., a wholly
10.31**** owned subsidiary of Family Golf Centers, Inc.
Escrow Agreement, dated September 28, 1995, between Family Golf Centers, Inc., Upper Hembree
10.32**** Partners, L.P. and Continental Stock Transfer & Trust Company.
Stock Option Agreement, dated September 28, 1995, between Family Golf Centers, Inc. and Upper
10.33**** Hembree Partners, L.P.
Registration Rights Agreement, dated September 28, 1995, between Family Golf Centers, Inc. and Upper
10.34**** Hembree Partners, L.P.
Form of Promissory Note, dated September 28, 1995, in the principal amount of $35,000 made by Upper
10.35**** Hembree Partners, L.P. in favor of Family Golf Centers, Inc.
Assignment & Assumption Agreement, dated October 16, 1995, between Upper Hembree Partners, L.P.,
10.36**** Alpharetta Family Golf Centers, Inc. and Bank South.
Renewal Promissory Note, dated November 14, 1994, in the principal amount of $1,860,770.07 made by
10.37**** Upper Hembree Partners, L.P. in favor of Bank South, N.A.
10.38**** Form of Guaranty Agreement from Dominic Chang in favor of Bank South.
10.39**** Form of Guaranty Agreement from Family Golf Centers, Inc. in favor of Bank South.
Promissory Note, dated November 8, 1995, in the principal amount of $4,000,000 made by Family Golf
Centers, Inc. in favor of Dominic Chang, as the representative of the shareholders of The Practice
10.40****** Tee, Inc.
Purchase Agreement, dated as of November 8, 1995 by and between Golf Masters Limited Partnership and
Air Dome Limited Partnership, as Sellers, each of the general partners of Sellers and Valley View
10.41****** Family Golf Centers, Inc., a wholly owned subsidiary of Family Golf Centers, Inc.
Escrow Agreement, dated as of November 8, 1995, among Family Golf Centers, Inc., Golf Masters
10.42****** Limited Partnership, Air Dome Limited Partnership and Continental Stock Transfer & Trust Company.
Registration Rights Agreement, dated as of November 8, 1995, between Golf Masters Limited
10.43****** Partnership, Air Dome Limited Partnership and Family Golf Centers, Inc.
Stock Option Agreement, dated as of November 8, 1995, among Family Golf Centers, Inc., Golf Masters
10.44****** Limited Partnership and Air Dome Limited Partnership.
Purchase Agreement, dated March 7, 1996, between Flemington Golf and Sports Center, LLC and
10.45++ Flemington Family Golf Centers, Inc., a wholly-owned subsidiary of Family Golf Centers, Inc.
Mortgage Note, dated March 7, 1996, in the principal amount of $1,700,000 made by Flemington Family
10.46++ Golf Centers, Inc. in favor of Flemington Equities VII and related Mortgage Deed.
Cash Escrow Agreement, dated March 7, 1996 among Flemington Family Golf Centers, Inc., Flemington
10.47++ Golf and Sports Center, LLC and Continental Stock Transfer and Trust Company.
Purchase Agreement, dated April 8, 1996 among 202 Golf Associates, Inc., Family Golf Centers, Inc.
10.48++ and Yorktown Family Golf Centers, Inc., a wholly owned subsidiary of Family Golf Centers, Inc.

<PAGE>

EXHIBIT NO. DESCRIPTION PAGE
NO.
- --------------- ---------------------------------------------------------------------------------------------------- ------------
Escrow Agreement dated April 8, 1996 among Family Golf Centers, Inc., 202 Golf Associates, Inc.,
10.49++ Yorktown Family Golf Centers, Inc. and Continental Stock Transfer & Trust Company.
Registration Rights Agreement, dated April 8, 1996, between Family Golf Centers, Inc. and 202 Golf
10.50++ Associates, Inc.
Assignment and Assumption Agreement, dated April 8, 1996 between 202 Golf Associates, Inc. and
10.51++ Yorktown Family Golf Centers, Inc.
10.52++ Bill of Sale dated April 8, 1996 by 202 Golf Associates, Inc.
Indenture, dated April 8, 1996 between 202 Golf Associates, Inc. and Yorktown Family Golf Centers,
10.53++ Inc.
Form of Warrants to purchase an aggregate of 70,000 shares of Common Stock, dated as of March 7,
10.54 1996, issued to Monness, Crespi & Hardt & Co. by Family Golf Centers, Inc.
Purchase Agreement, dated May 20, 1996 among Indian River Golf-O-Rama, Inc., Indian River Family
10.55+++ Golf Centers, Inc. and Lenrich Associates, L.L.C.
11.1 Statement re: Computation of Earnings Per Share.
21.1 Subsidiaries of the Company.
Consent of Richard A. Eisner & Company, LLP. Consent of Anne E. Gorry. Consent of Ehrenkrantz and
Company. Consent of Mangini, Traeger & Company, P.C. Consent of Silverstein, Loftus & Ross, CPAs,
P.C. Consent of Bradshaw, Gordon & Clinkscales, P.A. Consent of Drunagel, Johnson, Rutherford &
Wilkins, P.C. Consent of Ernest T. Northrup. Consent of Robert Del Riego. Consent of Sewell & Co.,
23.1 Inc.
Consent of Squadron, Ellenoff, Plesent & Sheinfeld, LLP (contained in the Opinion filed as Exhibit
23.2+++ 5.1).
23.3 Consent of Houlihan Lokey Howard & Zukin.
24.1 Power of Attorney (Reference is made to the signature page of the Registration Statement).
99.1+ Opinion of Houlihan Lokey Howard & Zukin.
</TABLE>