SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                            -----------------------
                                   FORM 10-KSB

(MARK ONE)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

For the fiscal year ended         DECEMBER 31, 1999
                          ----------------------------------------------------
                                       OR

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to _______________________

                        Commission file number: 333-53757

                            MCHENRY METALS GOLF CORP.
             (Exact name of Registrant as specified in its charter)

              NEVADA                                     87-0429261
    ----------------------------               --------------------------------
      (State of Incorporation)                 (IRS Employer Identification No.)

               1945 CAMINO VIDA ROBLE, SUITE J, CARLSBAD, CA 92008
         ---------------------------------------------------------------
          (Address of principal executive offices, including zip code)

Registrant's telephone number, including area code:        (760) 929-0015
                                                    ---------------------------

Securities Registered Pursuant To Section 12(b) Of The Act:

      TITLE OF EACH CLASS             NAME OF EACH EXCHANGE ON WHICH REGISTERED
      -------------------             -----------------------------------------
            NONE                                       NONE

Securities Registered Pursuant To Section 12(g) Of The Act:   NONE

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

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant, as of April 3, 2000 was approximately $10,156,800 (based upon
the closing price for shares of the Registrant's Common Stock as quoted by the
OTC Bulletin Board for the last trading date prior to that date). Shares of
Common Stock held by each officer, director and holder of 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

On March 31, 2000, 18,616,100 shares of the Registrant's Common Stock, par value
of $0.001, were outstanding.

Documents Incorporated By Reference.

                                      NONE

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                                     PART I

ITEM 1.       BUSINESS

THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-KSB.

HISTORY AND DEVELOPMENT OF THE COMPANY

McHenry Metals Golf Corp. (the "Company") designs, develops and markets
innovative, high-quality golf clubs. The clubs are being sold at premium prices
to both average and skilled golfers on the basis of high performance, ease of
use and attractive appearance. The Company has formulated several unique and
proprietary concepts which are being used in the design and manufacture of the
clubs. During 1997, the Company was a development stage company, devoting its
time to raising capital, promotion of future products and administrative
functions. The Company began shipments of its products during the first quarter
of 1998.

The Company was incorporated in Utah on October 31, 1985, originally under the
name of White Pine, Inc. The Company was organized initially for the purpose of
creating a vehicle to obtain capital and to seek out, investigate and acquire
interests in products and businesses with the potential for profit. In 1986, the
Company completed a public offering of common stock, conducted pursuant to the
exemption from the registration requirements of the Securities Act of 1933
provided by Rule 504 of Regulation D promulgated thereunder and was registered
by qualification in the State of Utah. The Company changed its corporate
domicile to the State of Nevada in March, 1994.

McHenry Metals, Inc. ("MMI") was incorporated in January, 1997, under the laws
of the State of Illinois. The principal business office of the Company and MMI
are located at 1945 Camino Vida Roble, Suite J, Carlsbad, California, 92008. MMI
was founded by the late Gary V. Adams who, as founder and former chairman of
Taylor Made Golf Company, became known as "the father of the metalwood." Mr.
Adams assembled a management team along with a carefully selected group of
investors, consultants and advisors to launch MMI as a golf equipment company
developing and marketing unique, proprietary golf clubs.

On April 1, 1997, the Company (which was then known as Micro-ASI International,
Inc.) entered into an Agreement and Plan of Reorganization with MMI and changed
its name to McHenry Metals Golf Corp. Pursuant to the Agreement, the Company
forward split its common stock on a 2.2 for 1 basis, increasing the number of
shares outstanding from 577,770 shares to 1,271,094 shares. The Company then
issued 5,650,000 post split shares of its authorized but previously unissued
common stock to acquire all the issued and outstanding stock of MMI in a stock
for stock exchange (the "Acquisition") whereupon MMI became a wholly-owned
subsidiary of the Company. The Acquisition is treated as a "reverse merger" for
accounting purposes and MMI is deemed to be the successor entity with a
recapitalization of the stockholders equity portion of its financial statements.
In conjunction with the Acquisition, the Company declared a distribution to
shareholders of the Company, of record as of March 31, 1997, (immediately prior
to the Acquisition) of 1,271,094 Series A Warrants to be distributed in the
future, upon effectiveness of a registration statement covering the offer and
sale of shares issuable upon exercise of such warrants.

Effective December 31, 1998, the assets and liabilities of MMI were assumed by
the Company and MMI was dissolved.

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INDUSTRY OVERVIEW

The development and introduction of new golf club designs and technological
advances have dramatically influenced the golf club industry. In the late
1960's, cavity-backed, perimeter-weighted irons were successfully introduced.
The "sweet spot" on these irons was significantly increased, making the club
more forgiving to off-center hits and providing the opportunity for many golfers
to make better golf shots. The golf club market was further advanced by the
Company's founder, Gary Adams, in the late 1970's with the introduction of metal
woods, which increased the distance golfers could achieve with drivers or
fairway woods. In the early 1990's, oversized metal wood clubs were introduced.

Recently, the industry has experienced a return to mid-sized metal wood clubs to
provide greater control, reduced wind resistance, and improved club aesthetics.
The Company's TOURPURE driver is an example of this shift in product design
which has been stimulated by customer demand.

A publication by the National Golf Foundation entitled Trends in the Golf
Industry 1986-1995 has stated that the number of golfers in the U.S. rose by
more than five million between 1986 and 1995 and that the annual expenditure on
golf clubs saw a 10.6% increase in 1995 (over 1994) and 16.6% increase in 1996
(over 1995). The explanation for these increases, generally, is the well-being
of the U.S. economy, shifting age concentration of the population and overall
increased recreational spending. The publication indicates that "the long-term
growth potential for golf spending is very encouraging."

Avid golfers, which number approximately 6 million of the 27 million golfers in
the U.S. and account for the majority of premium golf equipment expenditures,
continue to drive equipment sales. According to trade estimates, avid golfers,
on average, purchase a new driver or fairway wood every twelve to eighteen
months, as they seek the latest in golf club design, technology, and
performance.

Sales of golf clubs in the U.S. in 1999 were approximately $2.5 billion
according to trade estimates. Growth rates in golf equipment purchasing have
been flat the past two seasons, but in the fourth quarter of 1999, a modest
increase in sales was experienced. In the premium metal wood category, which is
the Company's initial focus, industry sales for 1999 were estimated at over $1
billion. The dominant competitors in this category are Callaway Golf Company,
Taylor Made Golf Company and Titleist/Cobra.

The golf club business is highly competitive. The industry has been
characterized by widespread imitation of popular club designs. The preferences
of golf club purchasers may also be subject to rapid and unanticipated changes.
There are some golf club manufacturers that, although they do not currently
manufacture premium-quality golf clubs, could, in light of their substantial
resources, pose competition to the Company if they were to enter the market for
premium-quality golf clubs.

The Company's principal competition comes from several large well-established
and recognized leaders in the sale of premium golf clubs. Each of these
companies has substantially more financial, management and technical resources
than does the Company. The Company competes based on its own designs and
concepts and focused business strategies.

A general decline in the golf equipment industry which began during the second
quarter of 1998 had a significant impact on the Company's sales for the years
ended December 31, 1999 and 1998. This decline was marked by three of the major
golf equipment manufacturers announcing price reductions at the wholesale level
as well as the fact that they were carrying a significant amount of excess
inventory. As a result, other manufacturers of premium golf equipment, including
the Company, were forced to reduce their selling prices in order to remain
competitive.

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BUSINESS STRATEGY

Several important elements of the Company's business strategy are intended to
enhance its growth potential:

MANAGEMENT DEPTH AND EXPERTISE - The Company has recruited a strong and dynamic
management team, and has assembled a qualified and talented board of directors
with relevant experience and accomplishments.

PREMIUM BRAND FRANCHISE - The Company has focused on building a premium brand
franchise to reflect the innovation, performance and quality of its products.
Consistent with the premium quality image, the Company's products are
competitively priced with other premium golf equipment. The Company has
attempted to reinforce a premium brand positioning by actively advertising and
promoting its products, entering into endorsement arrangements with leading
professional golfers, and selecting distribution partners, both "brick and
mortar" and Internet-based, that support the Company's pricing strategies and
present its product in an appropriate manner with high-quality customer service.

QUALITY - The Company believes that product quality and responsiveness to
customers are critical factors for success in the market for premium golf clubs.
The Company has adopted a number of quality improvement and measurement
techniques to establish standards and monitor its business. To achieve
excellence in product quality, McHenry has emphasized inspection throughout the
production process, and has committed resources to maintain close relations with
key suppliers and manufacturers. The Company has also staffed a customer service
function to provide adequate support and enhance its reputation for producing
high-quality golf clubs.

PRODUCTS

The Company currently markets and distributes a complete line of TourPure
drivers and fairway metalwoods, the first to combine the forgiveness of titanium
with the power of tungsten.

The comprehensive TourPure(R) line includes five drivers (7.5, 8.5, 9.5, 10.5,
and 12-degree loft), and 6 fairway woods (strong 3-wood, regular 3, 4, 5, 7, and
9-wood). Left-handed versions of the driver are produced in two models, and
shorter shafts and smaller grips are used for ladies clubs. Six shafts are
available to match player swing speeds (70, 80, 90, 100, 110, and 120 mph).

The TourPure(R) driver's proprietary Tungsten Power Ring replaces unwieldy club
head volume with 16 grams of high-density mass precisely positioned behind a
huge titanium sweet spot. The Tungsten Power Ring produces optimal launch angles
and reduces backspin, resulting in more roll and distance down the fairway. This
innovative use of exotic metals and strategic weighting creates a driver that is
exceptionally forgiving, easy to hit and impressively long. The TourPure driver
also incorporates an ultra-thin, beta-titanium face for improved feel and
responsiveness and an LTLF (low torque, low frequency) for maximum control and
greater distance. The LTLF shaft is a proprietary design made by Grafalloy,
maker of the #1 ultra-light shaft on tour.

Like the extraordinary, multi-metal TourPure(R) drivers, TourPure(R) fairway
woods are the first to combine the forgiveness of titanium with the power of
tungsten. It's a well-documented fact that a club with a lower center of gravity
gets the golf ball airborne faster and easier. By integrating a lightweight cast
titanium shell, a super-strong and ultra-thin Beta titanium face, and the
72-gram, high-density Tungsten Power Rails, the Company's design team achieved a
breakthrough in fairway wood performance. The fairway woods also utilize the
proprietary LTLF shaft made by Grafalloy for improved control and playability.

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MANUFACTURING- The manufacturing of premium golf clubs involves a number of
specialized processes required by the unique design of the products. The Company
has its products manufactured by outside manufacturers. The Company believes
that there are numerous suppliers which can manufacture the Company's products
to the high standards developed by the Company. Clubheads, shafts, grips and
other components are supplied by independent vendors with whom the Company has
established working relationships.

All of the Company's products are being manufactured to the Company's precise
specifications by highly competent manufacturers based in part on processes
which are proprietary to the Company. The Company works closely with its casting
houses, which enable it to monitor the quality and reliability of clubhead
productions. Any significant delay or disruption in the supply of clubheads by
the casting houses or graphite shaft manufacturers would have a material adverse
effect on the Company's business. In such event, the Company believes that
suitable heads and shafts could be obtained from other manufacturers, although
the transition to another supplier could result in production delays of several
months. The Company is currently in discussions with suppliers of product
components and manufacturers in an effort to find ways of producing products at
a lower cost while maintaining the quality standards set by the Company. The
product assembly function also is currently out-sourced to a high-quality
supplier to avoid fixed costs associated with facilities, equipment, and
staffing.

PRODUCT DEVELOPMENT

The Company plans to lead the industry in the development of new and innovative
products, offering superior quality and performance. While the Company's initial
focus is on its premium TOURPURE(R) multi-metal drivers and fairway woods,
research and product development efforts are underway to broaden the product
line to ultimately include one or more of the following: premium innovative
irons, wedges and putters.

The Company does not limit itself in its research efforts by trying to duplicate
designs that are traditional or conventional and has created an environment in
which new ideas are valued and explored. Product development is the result of
the integrated efforts of its sales and product development staff and outside
manufacturers, all of which work together to generate new ideas for golf
equipment. The Company's product development department refines these ideas and
works with outside firms to create prototypes, masters and the necessary
tooling.

The design of new golf clubs is greatly influenced by rules and interpretations
of the United States Golf Association ("USGA"). Although the golf equipment
standards established by the USGA generally apply only to competitive events
sanctioned by that organization, it has become critical for designers of new
clubs to assure compliance with USGA standards. The Company's product design and
development process involves coordination with the USGA staff regarding such
compliance. The Company has been notified by the USGA that its existing
TOURPURE(R) drivers and fairway metal woods conform to their standards.

OTHER CLUBS AND PRODUCTS - The Company plans to follow its development of metal
drivers and fairway woods with irons, putters and wedges until it offers a
complete line of innovative, premium golf clubs. The Company also expects to
offer a limited line of other golf products including golf bags, apparel and
other accessories.

Expenditures for research and development were approximately $113,600 and
$287,100 for the years ended December 31, 1999 and 1998, respectively.

SALES AND MARKETING

Management expects that the brand equity established during 1998 and 1999 will
be beneficial as the Company's product line is expanded over time to irons,
wedges, and putters. Management believes that the

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McHenry Metals(R) brand will be enhanced during 2000 through its 30-minute
TOURPURE(R) infomercial In addition to reinforcing thE brand's premium
positioning, the infomercial is designed to generate significant consumer demand
and sales, via direct and retail channels.

DIRECT RESPONSE MARKETING - The Company utilizes various forms of direct
response marketing to generate increased awareness and demand for its products.
These include television and print advertising, Internet advertising, direct
response catalogs, outbound telesales, and targeted outbound e-mail strategies.
Special online promotions and contests are also planned in conjunction with the
Company's Internet-based marketing and distribution partners. On the Company's
proprietary web site, which also has e-commerce capabilities, the Company plans
to use "streaming" video and audio to enhance the viewership experience and
generate interest, demand, and sales. In essence, the web site becomes the
"pitchman" for the product, describing its innovative features and performance
benefits. Over the past two years, the Company has utilized 8-time Emmy Award
winning broadcaster Dick Enberg as its primary spokesman. Enberg's career
includes work with the Olympics, Super Bowl, Wimbledon, and golf's U.S. Open and
Ryder Cup.

LEADERSHIP ON PROFESSIONAL TOURS - Management understands and appreciates the
correlation between leadership on professional tours to validate product
performance and drive market share among consumers. Historically in the golf
equipment industry, companies establishing a leadership position on the major
professional golf tours have the greatest opportunity to create demand among
consumers and capture the greatest market share. The Company has committed
significant resources toward promoting its products on selected golf tours and
has achieved a substantial presence on the Senior PGA Tour, in particular. In
1998, its first season on the professional tours, the TOURPURE(R) driver soared
to the #2 position on the Senior PGA Tour, and recorded four wins on the PGA anD
Senior PGA Tours. In 1999, the TOURPURE(R) driver became the #1 driver model on
the Senior PGA Tour and was #1 iN Driving Accuracy on the PGA Tour. Leadership
on professional tours will continue to be an important part of the Company's
strategy, providing validation that the Company's products offer superior
technology and performance and also helps to differentiate the Company's
products from its leading competitors.

DISTRIBUTION CHANNELS - The Company intends its advertising and marketing
efforts to drive traffic to traditional "brick and mortar" retail locations
(sporting goods stores, golf retailers, and on-course golf shops); telephone
call centers staffed to provide information and sell the Company's products;
Internet-based sporting goods and golf retailers; and the Company's proprietary
web site. The Company currently has approximately 2,000 selected points of
distribution via traditional "brick and mortar" locations. The Company has
established marketing and distribution agreements with several Internet-based
retailers, such as Fogdog.com, Chipshot.com, DWQuailGolf.com, XLSports.com and
TGW.com and others who, according to their statistics, aggregately achieve for
the Company a specific reach close to its monthly target of six million avid
golf and sporting goods consumers. The Company plans to aggressively pursue
additional partnerships to further enhance its significant presence online.

The Company's products are sold to golf retailers who sell professional quality
golf clubs and provide the level of customer service appropriate for the sale of
premium golf clubs. This includes "green grass" golf pro shops as well as
off-course golf specialty stores. In addition, the Company's products are sold
directly to the consumer through the use of a direct-response infomercial, the
Company's website and national premium golf catalogs.

E-COMMERCE - The Company believes that its strategy of achieving greater
exposure for its product online and generating incremental sales via e-commerce
is a major key to achieving rapid growth in sales and market share. The Company
believes it is well-positioned to leverage the power of the Internet through its
current and prospective online marketing and distribution partners. The Company
also intends to increase e-commerce activity on its proprietary web site, giving
the Company the opportunity to capture 100% of the revenues generated from sales
direct to consumers.

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INTELLECTUAL PROPERTY

The Company intends to aggressively seek to protect its intellectual property,
such as product designs, manufacturing processes, new product research and
concepts and trademarks. These rights will be protected through the acquisition
of trademark registrations, the maintenance of trade secrets, the development of
trade dress, and, when necessary and appropriate, litigation against those who
are, in the Company's opinion, unfairly competing.

The Company has applied for trademark registration for McHenry Metals and
TourPure and for several other product names and descriptions. There is no
assurance that, prior to a court of competent jurisdiction validating them, any
of these trademarks will be approved and, if so, enforceable. The Company
intends to aggressively assert its rights against infringers. There can be no
assurance that other golf club manufacturers will not be able to produce
successful golf clubs which imitate the Company's designs without infringing any
of the Company's intellectual property rights.

The Company has developed stringent procedures to maintain the secrecy of its
confidential business information, which it believes gives it a distinct
competitive advantage. These procedures include a "need to know" criteria for
dissemination of information and written confidentiality agreements from
visitors and employees. Suppliers, when engaged in joint research projects are
required to enter into additional confidentiality agreements.

McHenry Metals has an exclusive license from Grafalloy to promote the LTLF (low
torque, low frequency) shaft, which has patents pending.

SEASONALITY

Golf is generally regarded as a warm weather sport. Sales of golf equipment have
historically been strongest during the second and third quarters. Although the
golf club business generally follows this seasonal trend, the Company
anticipates its year-round direct response marketing strategy will tend to
mitigate the impact of seasonality. No assurances can be given, however, that
the Company will be able to successfully offset the impact of seasonality.

PRODUCT WARRANTIES

The Company currently supports all of its golf clubs with a one year
manufacturer's warranty. The Company closely monitors the level and nature of
any product breakage and, where appropriate, incorporates design and production
changes to assure its customers of the highest quality available on the market.
The Company has not experienced significant problems with product quality or
breakage, however, if the Company's clubs were to experience a significant
increase in the incidence of breakage or other product problems, the Company's
sales and image with golfers could be materially adversely affected.

BACKLOG

As of March 31, 2000, the Company's backlog was approximately $20,000 compared
with approximately $511,000 as of December 31, 1999. All product orders are
subject to cancellation or rescheduling by the customer with limited or no
penalties. Because the Company generally ships products within 60 days of
receipt of the order, and because of possible changes in delivery schedules,
cancellations or rescheduling of orders and potential delays in product
shipments, the Company's backlog at any particular date is not representative of
actual sales for any succeeding period.

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EMPLOYEES

As of March 31, 2000, the Company had a total of 6 employees, 5 of which were
full-time, including persons employed in sales (1), operations (1),
administration and support (4). As of that date, the Company also utilized 10
outside sales representatives (which are consultants paid on commission only)
and a total of 6 independent contractors, including persons serving in sales
(2), marketing (2) and administration and support (2). The Company's president
and a board member are also filling sales and marketing roles. All of the
Company's employees are located in the United States. None of the employees are
expected to be represented by union, and the Company has not experienced any
work stoppages. The Company considers its employee relations to be good.

ITEM 2.   PROPERTIES

The Company's principal executive offices are located in Carlsbad, California.
The Company leases approximately 5,800 square feet of office space which serves
as its corporate headquarters, for $3,914 per month plus common area expenses.
The lease on this facility expired on December 31, 1999 and the Company has
negotiated quarterly renewals which extend through June 30, 2000. During 1998
and 1999, the Company also leased approximately 3,060 square feet of warehouse
space for $2,509 per month. The warehouse lease expired December 31, 1999, at
which time the warehouse operations were consolidated into the corporate
headquarters space.

ITEM 3.   LEGAL PROCEEDINGS

The Company is involved in various claims arising in the ordinary course of
business; none of these claims, in the opinion of management, is expected to
have a material adverse impact on the financial position, cash flows or overall
trends in the results of operations of the Company.

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

There have not been any items submitted to a vote of security holders.

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                                     PART II

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


The Company's Common Stock has been quoted on the OTC Bulletin Board under the
symbol BB-GLFN. The following table sets forth the range of high and low per
share bid information, as reported on the OTC Bulletin Board for each quarter
during the two-year period ended December 31, 1999. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions. On March 31, 2000, the average of the highest and
lowest trading price per share was $0.797. On March 31, 2000, the Company had
585 holders of record of its Common Stock and 18,616,100 shares outstanding.

                QUARTER ENDED                HIGH          LOW

                March 31, 1998               $8.625       $3.875
                June 30, 1998                $6.172       $4.750
                September 30, 1998           $4.969       $1.500
                December 31, 1998            $2.313       $0.875

                March 31, 1999               $2.813       $1.000
                June 30, 1999                $1.375       $0.531
                September 30, 1999           $1.063       $0.406
                December 31, 1999            $0.625       $0.188

During 1998, the Company sold, to qualified investors, 3,130,500 shares of the
Company's unregistered common stock. Certain of the sales included warrants to
purchase common stock at an exercise price of $5.00, expiring through March
2001. A total of 319,000 of such warrants were issued through these sales. The
Company received net proceeds of approximately $4,739,800 after deduction of
commissions and transaction related expenses.

During 1998, the Company issued 521,600 shares of unregistered common stock as
compensation for services. The fair value of the common stock issued was
approximately $1,514,600, of which $1,377,300 was expensed during 1998. The
remaining fair value of $137,300 relates to services that have not yet been
provided (see Note 6) and will be charged to expense over the applicable future
service periods.

On November 3, 1998 the Company registered, with the U.S. Securities and
Exchange Commission:

o    1,271,094 redeemable warrants ("Series A Warrant") for distribution to
     common stockholders of record as of March 31, 1997. Each warrant is
     exercisable at $1.00 per share during the first year, $1.50 per share
     during the second year, and $2.00 per share during the third year following
     the date of registration. All such warrants were distributed. There were no
     proceeds from the issuance of these warrants.

o    1,300,000 redeemable warrants ("Shop Warrants" and "Pro Warrants") to be
     granted to certain dealers of the Company's products, and to golf
     professionals who use and endorse the Company's products. Each warrant is
     exercisable at $1.48 per share. During 1998, 260,375 shop warrants were
     distributed with a fair value of $268,700 determined in accordance with
     SFAS No. 123 (see Note 9) which is reflected as selling expenses in the
     accompanying statement of operations. No pro warrants were distributed in
     1998.

During 1998, the Company issued 117,500 "series WO" (holder incurs cost
associated with subsequent registration) unregistered common stock purchase
warrants and 254,213 "series W" (Company incurs cost

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associated with subsequent registration) unregistered common stock purchase
warrants to suppliers and board members in lieu of cash payments for services.
Each warrant entitles the holder to purchase, for a period of three to five
years after the date of issuance, one share of common stock at a price equal to
the fair market value of the Company's common stock on the date the warrant was
issued with exercise prices ranging from $.75 to $4.13 per share. Warrants
issued in lieu of cash payments for services were valued at $720,600, determined
in accordance with SFAS No. 123 (see Note 9). Of this amount $340,200 was
expensed in 1998 and $190,200 was expensed in 1999. The balance of $190,200 will
not be charged to expense because the underlying warrant was forfeited when the
board member resigned prior to the warrant vesting.

During 1998, the Company repriced 445,000 options to non-employee directors of
the Company. In connection with the repricing, the Company recognized
approximately $101,000 of expense in 1998. The expense represents the excess of
the fair value of the options after repricing over the fair value of the options
immediately before repricing.

During 1998, the Company borrowed $279,000 from the Vice Chairman of the Board
of Directors. In December 1998, the Company repaid this loan through the
issuance of 418,500 shares of the Company's common stock and 139,500 warrants to
purchase the Company's common stock, exercisable at $1.00 per share which expire
in November, 2001. Interest at a rate of 6% totaling $3,700, was accrued as of
December 31, 1998.

During 1999, the Company issued 1,616,000 shares of the Company's unregistered
common stock to qualified investors for approximately $1,200,000. The Company
also issued 1,715,100 shares of the Company's unregistered common stock to
qualified investors in exchange for goods and services provided to the Company
which were valued at $1,034,900. Certain holders of unregistered warrants
elected to convert their warrants into 275,000 shares of Company's unregistered
common stock. Each of these warrants were convertible at $1.00 per share
(proceeds to the Company totaled $275,000). Holders of registered "Shop/Pro"
warrants received 4,125 shares of the Company's registered common stock upon the
conversion of their warrants. Each of these warrants were convertible at $1.48
per share, resulting in proceeds to the Company of $6,100. The Company also
issued 756,000 shares of the Company's unregistered common stock to employees in
exchange for services rendered, which were valued at $244,200.

Pursuant to state laws, the Company is currently restricted, and may be
restricted for the foreseeable future, from paying dividends to its stockholders
a result of its accumulated deficit as of December 31, 1999.

During the past year, the Company did not declare or pay any cash dividends on
its Common Stock. The Company currently plans to retain all of its earnings to
support the development and expansion of its business and has no present
intention of paying any dividends on Common Stock in the foreseeable future.

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ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE SUBSTANTIAL RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN THIS SECTION AND ELSEWHERE IN THIS ANNUAL
REPORT ON FORM 10-KSB.

MANAGEMENT'S PLAN OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Company's financial statements and the notes associated with them contained in
Item 7. The financial statements of the Company referred to in this discussion
include and reflect the financial condition and operating results of McHenry
Metals Golf Corp. for the two years ended December 31, 1999. This discussion
should not be construed to imply that the results discussed herein will
necessarily continue into the future or that any conclusion reached herein will
necessarily be indicative of actual operating results in the future.

YEARS ENDED DECEMBER 31, 1999 AND 1998

NET SALES

Net sales for the year ended December 31, 1999 ("1999") were $3,552,500,
representing an increase of $255,500 or 7.7% over net sales of $3,297,000 for
the year ended December 31, 1998 ("1998"). The Company began shipments of its
products during the first quarter of 1998. During 1997, the Company was a
development stage company and thus, had no revenues.

Due to the Company's limited operating history, management has elected to defer
recognition of revenue on product sales until the related accounts receivable
have been collected. This basis of revenue recognition is expected to continue
until, in the opinion of management, there exists sufficient history of customer
payments and returns to provide a reasonable basis to conclude that revenue is
earned at the point of shipment. As a result of this policy, net sales do not
include the sales value of shipments for which the Company has not yet been
paid. The Company will likely continue to report revenues on this basis
throughout the year ending December 31, 2000.

Several factors affected sales of the Company's products in 1999 and 1998, the
most significant of which was a general decline in the golf equipment industry,
which began during the second quarter of 1998. This decline was marked by three
of the major golf equipment manufacturers announcing price reductions at the
wholesale level as well as the fact that they were carrying a significant amount
of excess inventory. As a result, other manufacturers of premium golf equipment,
including the Company, were forced to reduce their selling prices in order to
remain competitive.

The Company believes that, to a certain degree, this reduction in demand by
consumers and excess inventory may signal a saturation of the market by three of
the major golf equipment manufacturers. Thus, an opportunity exists for a
company with an innovative design that out-performs the larger, established
products to penetrate the premium golf equipment market. There can, however, be
no assurance that the Company's products will achieve significant market
penetration or generate increased revenues in future years.

                                       10
<PAGE>

COST OF GOODS SOLD

For 1999, cost of goods sold was $2,571,800 or 72.4% of net sales, which
represents an improvement of $634,600 or 19.8% over 1998. For 1998, cost of
goods was $3,206,400 or 97.3% of net sales. New production processes, innovative
designs, use of high-tech materials and the Company's initial year of operations
all combined to generate costs in excess of that which would otherwise be
expected (cost of goods sold in the golf equipment industry generally runs in
the range of 40% to 60% of net sales). The Company expects cost of goods sold
for 2000, as a percent of net sales, to drop from 1999 levels, but will remain
above industry averages until the Company is able to significantly increase its
production levels.

The Company manufactures an innovative, high quality product with
state-of-the-art materials which results in a golf club that is expensive to
produce. Since this was the Company's first year of sales, it was difficult to
anticipate, with any degree of certainty, the demand for the Company's products.
Sales forecasting was further frustrated by the first significant reduction in
golf equipment purchases in more than ten years. The result was an ever-changing
production schedule for the Company, its suppliers and subcontractors, which
resulted in the Company incurring additional costs to produce the finished
product. In addition, due to the reduced demand for the Company's product,
cost-effective production levels were not achieved.

GROSS PROFIT.

Gross profit for 1999 was $980,700 or 27.6% of net sales, as compared to a gross
profit for 1998 of $90,600 or 2.7% of net sales. The Company believes that it
can improve its margins by working to control costs, finding ways of producing
products more cost-effectively and exploring direct-to-consumer sales via direct
response advertising and the internet to increase sales volume.

SELLING EXPENSES

Selling expenses were $4,144,500 for 1999 as compared to $7,067,400 for 1998,
representing a decrease of approximately $2.9 million or 41.4%. The decrease in
selling expenses is directly related to the Company's lack of sufficient capital
resources preventing the Company from fully-executing its marketing and
advertising plans for 1999. The Company hopes to be able to raise additional
capital during 2000 that will permit the Company to resume a significant direct
response advertising campaign. The Company anticipates that selling expenses
during 2000 will be approximately the same as 1999, assuming the Company can
raise additional capital.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses were $1,530,900 for 1999 as compared to
$2,839,400 for 1998, representing a decrease of approximately $1.3 million or
46.1%. The decrease in general and administrative expenses is directly related
to the Company's lack of sufficient capital resources which caused the Company
to significantly reduce its overhead expenses during 1999. General and
administrative expenses in 2000 are expected to be below 1999 levels, with the
Company primarily reducing expenses in the areas of payroll and condensing the
warehouse and corporate offices into one facility.

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses were $113,600 for 1999 as compared to $287,100
for 1998, representing a decrease of approximately $200,000 or 60.4%. A majority
of the Company's research and development occurred in 1997 prior to production
of the Company's first products in 1998. The Company expects that expenditures
in this area will increase in 2000 and in future years in order for the Company
to remain competitive with new product introductions.

                                       11
<PAGE>

OTHER EXPENSE

In August 1998, the Company entered into a Joint Development Agreement with one
of its suppliers to develop a forged series of metal woods and scoring irons in
accordance with the Company's designs and utilizing proprietary technology
developed by the supplier. The Company issued 194,944 shares of its common stock
(valued at $694,000) in exchange for the rights to use the supplier's
proprietary technology as well as to compensate the supplier for engineering
costs, tooling and equipment called for under the Joint Development Agreement.

In December 1998, the supplier advised the Company that it would be unable to
make the necessary acquisitions of equipment and tooling due to financial
difficulties experienced by the supplier. As a result of the uncertainty of the
value of this investment, the Company has fully-reserved the value of its common
stock given to the supplier and charged that amount to "other expense."

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based upon the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year(s) in which the
differences are expected to reverse.

A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. As a result of
the Company's significant losses in 1999 and 1998 and uncertainties surrounding
the realization of the net operating loss carryforwards which were generated
during 1999 and 1998, management has determined that the realization of deferred
tax assets is not more likely than not. Accordingly, a 100% valuation allowance
of $5,085,600 has been recorded as of December 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

The Company primarily financed its operations in 1999 and 1998 through the sale
of common stock and product, thereby reducing inventories by approximately $1.8
million. During 1999, operating activities used $1,635,500, investing
activities, consisting of purchases of equipment and leasehold improvements,
used $36,900, and financing activities provided $1,097,900, which consisted of
the sale of common stock ($1,481,100) and the reduction of debt and capital
leases ($358,300 and $24,900, respectively).

During 1998, operating activities used $8,227,800, investing activities,
consisting of purchases of equipment and leasehold improvements, used $172,000,
and financing activities provided $8,073,800. The Company also used bank and
other borrowings and equipment lease financings in 1998.

In November 1998, the Company was advised by its principal supplier of club
heads that, due to changes in the golf industry, the supplier had decided to
cease production of golf club heads. As of December 9, 1998, the Company owed
this supplier $556,300 for golf club heads which had been received and had open
purchase orders for golf club heads with a value of approximately $2,350,000.
The Company was able to negotiate a one-time buy-out of the balance owing to the
supplier plus the open purchase orders for $1,090,000 as of December 11, 1998.
This transaction represented a discount of 62% from the total commitment to the
original vendor of $2,906,300. As the Company did not have the financial
resources to complete the buy-out discussed above, the Company entered into an
agreement with a related party to purchase these golf club heads from the
supplier. Pursuant to the agreement, the Company purchases golf club heads on a
COD basis, as-needed from the related party. In exchange for financing the
purchase of these golf club heads, the Company pays a 20% mark-up over cost (see
Note 11 to the Financial Statements) resulting in a significant reduction in the
cost for 1999 and 2000 over what had been paid in previous years.

At December 31, 1999, the Company had a working capital deficiency of
$2,355,600, an accumulated deficit of $18,340,400 and $541,700 outstanding under
a bank line of credit which was in default.

FUTURE OPERATIONS - STATUS AS A GOING CONCERN

The financial statements of the Company have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company is newly formed, has incurred
losses since its inception and has not yet been successful in establishing
profitable operations. The Company's independent certified public accountants
have included an explanatory paragraph in their audit report with respect to the
Company's 1999 and 1998 financial statements related to a substantial doubt with
respect to the Company's ability to continue as a going concern. In this regard,
management is proposing to raise any necessary additional funds not provided by
its planned operations through loans and/or through additional sales of its
equity securities pursuant to the exercise of warrants or otherwise. Between
January 1, 2000 and March 31, 2000 the Company has satisfied

                                       12
<PAGE>


approximately $104,000 of current obligations through the issuance of common
stock. However, there is no assurance that the Company will be successful in
raising additional capital or achieving profitable operations. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. There can be no assurance that the Company's future financial
statements will not include another going concern explanatory paragraph if the
Company is unable to raise additional funds and become profitable. The factors
leading to, and the existence of, the explanatory paragraph will have a material
adverse effect on the Company's ability to obtain additional financing. See
"Future Capital Needs; Need for Additional Financing -- Liquidity and Capital
Resources --Financial Statements."

RISK OF BANKRUPTCY

The Company may need to be reorganized under Chapter 11 of Title 11 of the
United States Code or liquidated under Chapter 7 of Title 11 of the United
States Code. There can be no assurance that if the Company decides to reorganize
under the applicable laws of the United States that such reorganizational
efforts would be successful or that shareholders would receive any distribution
on account of their ownership of shares of the Company's stock. Similarly, there
can be no assurances that if the Company decides to liquidate under the
applicable laws of the United States that such liquidation would result in the
shareholders receiving any distribution on account of their ownership of shares
of the Company's stock. In fact, if the Company were to be reorganized or
liquidated under the applicable laws of the United States, the bankruptcy laws
would require (with limited exceptions) that the creditors of the Company be
paid before any distribution is made to the shareholders.

FUTURE CAPITAL NEEDS; NEED FOR ADDITIONAL FINANCING

The Company estimates that it may need substantial funding, in addition to its
present capital, to be able to fully develop and expand its business. The
Company's future capital requirements will depend upon many factors, including
the extent and timing of acceptance of the Company's products in the market,
commitments to third parties to develop and manufacture products, the progress
of the Company's product development efforts, the Company's operating results
and the status of competitive products. Between January 1, 2000 and March 31,
2000 the Company has satisfied approximately $104,000 of current obligations
through the issuance of common stock. However, the Company has no commitment for
additional funding and may have to seek further equity financing in order to
continue to develop and expand its business. There is no assurance that the
Company will be able to obtain such funding and if obtained it could dilute the
ownership of present shareholders.

BANK LINE OF CREDIT

In July, 1998, the Company obtained a $3,000,000 bank line of credit that
provides an advance on eligible accounts receivable and is secured by the assets
of the Company. Due to slow customer payments, the Company became over-advanced
in its position with the bank. The line of credit was reduced to $930,000 and
the expiration date of the line of credit changed from July 30, 1999 to November
11, 1998. As of December 31, 1998, the Company was not in compliance with most
of its loan covenants of the line of credit agreement. On January 29, 1999, the
Company and the bank negotiated an amended line of credit agreement which
revised the maturity date from February 11, 1999 to the earlier of the Company's
sale of $2,000,000 in additional equity or May 11, 1999, increased the interest
rate to prime plus 7%, reduced the amount which can be borrowed to $870,000 (the
outstanding balance as of that date) and required principal payments should the
Company's borrowing base be insufficient to support the outstanding balance on
the dates payments were due: $125,000 as of March 31, 1999 (which was paid on
March 31, 1999); $150,000 as of April 30, 1999 (which was not paid); and
$175,000 on May 10, 1999 (which was not paid). On July 30, 1999, the Company and
the bank negotiated an additional amendment (when it appeared the Company would
be able to secure another line of credit from another source) which reduced the
line of credit to $665,000, set the maturity date to July 15, 1999, established
a repayment schedule of $50,000 per week until the debt is paid in full and
stipulated that the bank

                                       13
<PAGE>


would receive a three year warrant for 10,000 shares if the loan was not paid in
full by July 16, 1999 and an additional three year warrant for 10,000 shares
weekly thereafter until all debt is repaid. When it became apparent that the
Company would not be able to obtain a replacement line of credit, the bank
permitted the Company to make payments in the amount of 20% of its daily cash
collections on trade receivables. Payments under this unwritten plan continued
until the end of October 1999, when the Company advised the bank that it would
require all cash collections at that time in order to meet its monthly expenses.

On February 14, 2000, the bank formally demanded payment, however, since that
time, discussions have continued regarding a forbearance agreement and an
extension in connection with an agreed-upon payment schedule. A term sheet has
been negotiated between the bank and the Company and as of April 11, 2000, the
Company is finalizing a forbearance agreement with the bank (see Note 5 to the
Financial Statements).

FUTURE OPERATING RESULTS

The Company is newly formed, has incurred losses since its inception and has not
yet been successful in establishing profitable operations. Operating results
will continue to fluctuate significantly in the future depending upon a variety
of factors, including creditor relationships, downward pressure on gross
margins, delayed market acceptance, if any, of new and enhanced versions of the
Company's products, delays, cancellations or reschedulings of orders, delays in
product development, defects in products, integration of acquired businesses,
relationships with and conditions of customers, subcontractors, and suppliers,
price competition, seasonality in the golf industry and general conditions in
the golf industry. In addition, operating results will fluctuate significantly
based upon several other factors, including the Company's ability to attract new
customers and changes in pricing by the Company, its competitors,
subcontractors, customers or suppliers. The absence of significant backlog for
an extended period of time will also limit the Company's ability to plan
production and inventory levels, which could lead to substantial fluctuations in
operating results. Accordingly, the failure to receive anticipated orders, or
delays in shipments due, for example, to unanticipated shipment reschedulings or
defects or to cancellations by customers, or to unexpected manufacturing
problems may cause net sales in a particular quarter to fall significantly below
the Company's expectations, which would materially adversely affect the
Company's operating results for such quarter. The impact of these and other
factors on the Company's net sales and operating results in future periods
cannot be forecasted with any certainty. In addition, the fixed overhead costs
at the Company's facilities, the need for continued expenditures for product
development and other commitments of the Company, among other factors, will make
it difficult for the Company to reduce its expenses in a particular period if
the Company's sales goals for such period are not met. A large portion of the
Company's operating expenses are fixed and are difficult to reduce or modify
should revenues not meet the Company's expectations, thus magnifying the
material adverse impact of any such revenue shortfall. Accordingly, there can be
no assurance that the Company will not incur losses in the future or that such
losses will not have a material adverse effect on the Company's business,
financial condition and results of operations.

SEASONALITY AND QUARTERLY FLUCTUATIONS

Golf generally is regarded as a warm weather sport and sales of golf equipment
historically have been strongest during the second and third quarters, with the
weakest sales occurring during the fourth quarter. In addition, sales of golf
clubs are dependent on discretionary consumer spending, which may be affected by
general economic conditions. A decrease in consumer spending generally could
result in decreased spending on golf equipment, which could have a material
adverse effect on the Company's business, operating results and financial
condition. In addition, the Company's future results of operations could be
affected by a number of other factors, such as unseasonal weather patterns;
demand for and market acceptance of the Company's existing and future products;
new product introductions by the Company's competitors; competitive pressures
resulting in lower than expected average selling prices; reliance on third
parties including suppliers; and the volume of orders that are received and that
can be fulfilled in a quarter. Any one or more of these factors could result in
the Company failing to achieve its expectations as to future sales or net
income.

                                       14
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HIGHLY COMPETITIVE INDUSTRY; SIGNIFICANT PRICE COMPETITION

The market for premium-quality golf clubs is highly competitive and is served by
a number of well-established, well-financed companies with recognized brand
names. In addition, there are several golf club manufacturers with substantial
resources that, although they do not currently manufacture premium-quality golf
clubs, could pose significant competition to the Company if they were to enter
the market for premium-quality golf clubs. The golf club industry, in general,
has been characterized by widespread imitation of popular club designs. A
company's ability to compete is in part dependent upon its ability to satisfy
various subjective requirements of golfers, including the golf club's look and
"feel" and the level of acceptance that the golf club has among professional and
other golfers. The subjective preferences of golf club purchasers may also be
subject to rapid and unanticipated changes. There can be no assurances as to
whether or how long the Company's golf clubs will receive market acceptance. A
decline in the size of the golf club market, whether from a decrease in the
popularity of golf or otherwise would have a material adverse effect on the
Company's proposed business.

DEPENDENCE ON GOLF INDUSTRY

The financial performance of the Company is dependent in large part upon the
current and anticipated market demand for golf equipment. Recently, the golf
equipment industry has experienced periods of oversupply. The Company believes
that the golf equipment industry will continue to be subject to this period of
oversupply into 2000. The golf equipment industry has experienced significant
growth but lately has demonstrated a slowdown in demand. There can be no
assurance that such growth will return and that the slowdown will not continue.
A reduced rate of growth in the demand for golf equipment due, for example, to
competitive factors, technological change or otherwise, may materially adversely
affect the markets for the Company's products. Accordingly, any factor adversely
affecting the golf equipment industry may materially adversely affect the
Company's business, financial condition and results of operations. There can be
no assurance that the Company's net sales and results of operations will not be
materially adversely affected if downturns or slowdowns in the golf equipment
industry continue or occur again in the future.

CREDIT RISK

The Company sells a significant percentage its products to golf equipment
retailers. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral from these customers.
The recent downturn in the retail golf equipment market has resulted in
delinquent or uncollectible accounts for some of the Company's customers. As a
result, during 1998 the Company elected to defer revenues on uncollected sales
(see Note 1 to the Financial Statements). Management does not foresee any
significant improvement in the golf equipment market during 2000, and therefore
expects this trend to continue. Accordingly, there can be no assurance that the
Company's results of operations or cash flows will not be adversely impacted by
the failure of its customers to meet their obligations to the Company.

IMPORTANCE OF TIMELY PRODUCT INTRODUCTION; UNCERTAINTY OF MARKET ACCEPTANCE

The basis of the Company's future is the introduction of new, innovative golf
clubs. New models and basic design changes are frequently introduced into the
golf club market but are often met with consumer rejection. No assurances can be
given that the Company will be able to design and market golf clubs that meet
with market acceptance. In addition, prior successful designs may be rendered
obsolete within a relatively short period of time as new products are introduced
into the market. The design of new golf clubs is also greatly influenced by
rules and interpretations of the United States Golf Association ("USGA").
Although the golf equipment standards established by the USGA generally apply
only to competitive events sanctioned by that organization, it has become
critical for designers of new clubs to assure compliance with USGA standards.
Although the Company has been notified by the USGA that its TOURPURE(R) driver
conforms with its standards, and believes that all its clubs wilL comply with
USGA standards, no assurance can be given that any new products will receive
USGA approval or that USGA existing standards will not be altered in ways that
adversely affect the future sales of the Company's products.

                                       15
<PAGE>

TECHNOLOGICAL CHANGES

The manufacture and design of golf clubs has undergone significant changes with
respect to design and materials in recent years. The introduction of new or
enhanced technologies or designs by competitors could render the Company's
products less marketable. The ability of the Company to compete successfully
will depend to a large degree on its ability to innovate and respond to changes
and advances in its industry. There can be no assurance that the Company will be
able over the long term to keep pace with the demands of the marketplace.

DEPENDENCE ON CERTAIN SUPPLIERS

The Company intends to purchase most of its metal wood club heads from certain
well-known casting houses on a purchase order basis and to purchase club shafts
from certain shaft manufacturers which may have to make modifications in their
standard products to accommodate the Company's golf club designs. Any
significant delay or disruption in the supply of club heads or shafts would have
a material adverse effect on the company's business. In such event, the Company
believes that suitable club heads and shafts could be obtained from other
manufacturers, although the transition to another supplier could result in
production delays of several weeks. The Company currently is dealing with
approximately ten different suppliers of its product components, but has only a
limited experience with such suppliers.

RISKS OF TECHNICAL PROBLEMS OR PRODUCT DEFECTS

There is no assurance, despite testing and quality assurance efforts that may be
performed by the Company and/or its industry partners, that technical problems
or product defects will not be found, resulting in loss of or delay in market
acceptance and sales, diversion of development resources, injury to the
Company's reputation or increased service and support costs, any of which could
have a material adverse effect on the Company's business. Moreover, there is no
assurance that the Company will not experience difficulties that could delay or
prevent the development and introduction of its products and services, that new
or enhanced products and services will meet with market acceptance, or that
advancements by competitors will not erode the Company's position or render the
Company's products and services obsolete.

ABILITY TO MANAGE GROWTH

The Company intends to pursue a strategy of rapid growth. The Company plans to
continue to expand marketing efforts and to devote substantial resources to
operations and support areas, including administrative services. There can be no
assurance that the Company will attract qualified personnel or will successfully
manage such expanded operations. The failure to properly manage growth could
have a material adverse effect on the Company.

DEVELOPING MARKETS

The market for the Company's proposed products has experienced recent growth and
appears to be rapidly evolving as new products are regularly being introduced.
The market is characterized by a few dominant entrants with widely accepted and
recognized products. Because the markets for the Company's products are evolving
and because the Company has no operating experience, it is difficult to assess
or predict with any assurance the growth rate, if any, and the size of the
market for the Company's products. There can be no assurance that a market for
the Company's products will develop. If such a market fails to develop or
develops more slowly than anticipated, the Company's business, operating results
and financial condition will be materially adversely affected.

DEPENDENCE ON PROPRIETARY TECHNOLOGY

The Company's success will be heavily dependent upon a combination of
proprietary design and technology developed internally. The Company has pursued
trademark and patent protection and also expects to rely on a combination of
trade secrecy, non-disclosure agreements and contractual provisions with respect
to the proprietary nature of its technology. However, there can be no assurance
that any steps taken by the Company will prevent misappropriation of this
technology. Effective legal protection of these technologies may be

                                       16
<PAGE>

unavailable or limited in certain foreign countries. Third parties could
independently develop competing technologies that are substantially equivalent
or superior to the Company's technologies. Although the Company believes that
its products and the proprietary rights developed by it do not infringe upon any
proprietary rights of others, an infringement claim was filed against the
Company, but was subsequently settled and dismissed. Whether or not this or any
claim has merit, there is no assurance regarding the outcome of litigation,
which could have a material adverse effect upon the Company. See "Legal
Proceedings"

GROWTH STRATEGY THROUGH ACQUISITIONS

As part of its growth strategy, the Company has in the past sought and may in
the future continue to seek to increase sales and achieve growth through the
acquisition of comparable or complementary businesses. The implementation of
this strategy will depend on many factors, including the availability of
acquisitions at attractive prices and the ability of the Company to make
acquisitions, the integration of acquired businesses into existing operations,
the expansion of the Company's customer base and the availability of required
capital. Acquisitions by the Company may result in the issue of equity
securities that will have a dilutive effect upon existing shareholders, and an
increase in debt and the amortization of goodwill and other intangible assets
that could adversely affect the Company's profitability. Any inability to
control and manage growth effectively could have a material adverse effect on
the Company's business, financial condition and results of operations. There can
be no assurance that the Company will successfully expand or that growth and
expansion will result in profitability or that the Company's growth plans
through acquisitions will not be inhibited by the Company's current lack of
resources.

DEPENDENCE ON KEY PERSONNEL

The Company is dependent upon the management and leadership skills of its
management team. There is intense competition for qualified personnel in the
golf club industry, and the loss of key personnel or an inability to attract,
retain and motivate key personnel could adversely affect the Company's business.
There is no assurance that the Company will be able to retain its existing
management personnel or to attract additional qualified personnel. The Company
has no key man life insurance on members of management. There is no assurance
that the Company will be able to retain its existing management personnel or to
attract additional qualified personnel.

NASDAQ NATIONAL MARKET LISTING REQUIREMENTS

The Company intends to apply as soon as possible for listing of its common stock
on the NASDAQ Small-cap Market. There is no assurance when, if ever, the Company
will meet the requirements for such listing or, in any event, be accepted for
such listing. Furthermore, if the Company's common stock were to qualify for
listing there is no assurance that the Company would be able to continue to
satisfy the listing requirements. In the event of delisting or failure to
qualify initially, trading in the Company's common stock is expected to continue
on the Electronic Bulletin Board. As a result, investors may find it more
difficult to dispose of, or to obtain quotations as to the price of the common
stock.

VOLATILITY OF STOCK PRICE

A limited public market has developed for the common stock of the Company, and
market prices have fluctuated significantly. Market prices will be influenced by
many factors, and will be subject to significant fluctuation in response to
variations in operating results of the Company and other factors such as
investor perceptions of the Company, supply and demand, interest rates, general
economic conditions and those specific to the industry, international political
conditions, developments with regard to the Company's activities, future
financial condition and management.

                                       17
<PAGE>

YEAR 2000 ISSUE

Historically, many computer programs have been written using two digits rather
than four to define the applicable year, which could result in the program
failing to properly recognize a year that begins with "20" instead of "19."
This, in turn, could result in major system failures or miscalculations, and is
generally referred to as the "Year 2000" or "Y2K" issue. While the Company's own
products do not contain date-based functionality and are not susceptible to the
Y2K issue, much of the Company's operations incorporate or are affected by
systems which may contain date-based functionality.

The Company found that its systems are Y2K compliant and has not experienced any
interruptions in any of its internal systems during the change to the new year
or subsequently. In addition, the Company has not experienced any lack of supply
of raw materials or lack of payments from customers due to the Y2K issue. The
Company did not incur a significant amount of time or cost to bring its systems
into compliance.

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<PAGE>


ITEM 7.           FINANCIAL STATEMENTS

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
McHenry Metals Golf Corp.
Carlsbad, California

We have audited the accompanying balance sheet of McHenry Metals Golf Corp. as
of December 31, 1999 and the related statements of operations, stockholders'
equity (deficit), and cash flows for the year ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of McHenry Metals Golf Corp. at
December 31, 1999 and the results of its operations and its cash flows for the
year ended December 31, 1999 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 2 to the
financial statements, the Company suffered a net loss of $4,937,100 for the year
ended December 31, 1999 and, as of December 31, 1999, has a working capital
deficiency of $2,355,600, an accumulated deficit of $18,340,400 and is in
default of its line of credit agreement. These matters raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 2. Continuation of the
Company is dependent on the Company's ability consummate a forbearance agreement
which is currently being negotiated with its lender, raise sufficient capital,
achieve sufficient cash flow to meet its debt obligations and achieve
profitability. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

                     CLUMECK, STERN, PHILLIPS & SCHENKELBERG
                     CERTIFIED PUBLIC ACCOUNTANTS

Encino, California
March 10, 2000 except as to
Notes 5, 6, 11 and 13
which are as of
April 11, 2000

                                       19
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
McHenry Metals Golf Corp.
Carlsbad, California

We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit), and cash flows of McHenry Metals Golf Corp. for
the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of McHenry Metals Golf Corp. for the year ended December 31, 1998 in
conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company suffered a net loss of
$10,803,500 for the year ended December 31, 1998 and, as of December 31, 1998,
had a working capital deficiency of $780,300, an accumulated deficit of
$13,403,300 and was in default of it's line of credit agreement. These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. Continuation of the Company is dependent on the Company's ability to
negotiate arrangements with its lender, raise sufficient capital, achieve
sufficient cash flow to meet its debt obligations and achieve profitability. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

                                      BDO SEIDMAN, LLP

Costa Mesa, California
March 19, 1999,


                                       20

<PAGE>


<TABLE>
<CAPTION>
                            MCHENRY METALS GOLF CORP.
                                  BALANCE SHEET
                                DECEMBER 31, 1999

-----------------------------------------------------------------------------------------------------
ASSETS

Current Assets

<S>                                                                                 <C>
     Cash                                                                           $        20,600
     Accounts receivable, net                                                                53,200
     Inventories                                                                            549,800
     Deferred costs on unrecognized sales                                                    41,600
     Other current assets                                                                    59,900
------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                                        725,100
Equipment and leasehold improvements, net                                                   224,100
Other non-current assets                                                                     26,900
------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                        $       976,100
======================================================================================================

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities

     Line of credit borrowings, in default                                          $       541,700
     Current portion of leases payable                                                       24,800
     Accounts payable and accrued liabilities                                             2,251,700
     Accrued compensation                                                                   209,300
     Deferred revenue                                                                        53,200
------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                                 3,080,700
------------------------------------------------------------------------------------------------------
Leases payable, less current portion                                                         11,500
------------------------------------------------------------------------------------------------------
Commitments and Contingencies
Subsequent Event

Shareholders' Deficit

     Preferred stock, $0.001 par value; 5,000,000 shares authorized;
        no shares issued or outstanding                                                        --
     Common stock, $0.001 par value; 50,000,000 shares authorized; 17,865,700
        issued and outstanding                                                               17,900
     Additional paid-in capital                                                          16,206,400
     Accumulated deficit                                                                (18,340,400)
------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT                                                              (2,116,100)
------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                         $       976,100
======================================================================================================
</TABLE>

                                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                       21
<PAGE>



<TABLE>
<CAPTION>
                            MCHENRY METALS GOLF CORP.
                            STATEMENTS OF OPERATIONS

                                                                    Year Ended December 31,
                                                       --------------------------------------------------
                                                                1999                      1998
---------------------------------------------------------------------------------------------------------
<S>                                                       <C>                       <C>
Net sales                                                 $        3,552,500        $     3,297,000
Cost of goods sold                                                 2,571,800              3,206,400
---------------------------------------------------------------------------------------------------------
Gross profit                                                         980,700                 90,600
Selling expenses                                                   4,144,500              7,067,400
General and administrative expenses                                1,530,900              2,839,400
Research and development costs                                       113,600                287,100
---------------------------------------------------------------------------------------------------------
Loss from operations                                              (4,808,300)           (10,103,300)
Interest expense, net                                               (123,000)                (3,500)
Other expense                                                         (5,800)              (696,700)
---------------------------------------------------------------------------------------------------------

Net loss                                                  $       (4,937,100)       $   (10,803,500)
=========================================================================================================


Basic and diluted loss per share                          $            (0.31)        $        (0.99)
=========================================================================================================
</TABLE>

                                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                       22
<PAGE>


<TABLE>
<CAPTION>
                            MCHENRY METALS GOLF CORP.
                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                                           Additional

                                   Common Stock              Paid-In         Unearned        Accumulated
                               Shares        Amount          Capital       Compensation        Deficit           Total
 ---------------------------------------------------------------------------------------------------------------------------
 Balance,
<S>                           <C>           <C>              <C>           <C>              <C>               <C>
    December 31, 1997          8,790,800     $   8,800       $ 3,759,400   $     (88,400)   $    (2,599,800)  $   1,080,000
 Stock and warrants

    issued for cash            3,768,600         3,800         6,905,800              --                 --       6,909,600
 Stock issued for debt
    conversion                   418,500           400           278,600              --                 --         279,000
 Stock issued
    as compensation              521,600           500         1,514,100        (137,300)                --       1,377,300
 Options and warrants
    issued as compensation            --            --         1,090,300        (380,400)                --         709,900
 Amortization of
    unearned compensation             --            --                --          88,400                 --          88,400
 Net loss                             --            --                --              --        (10,803,500)    (10,803,500)
 ---------------------------------------------------------------------------------------------------------------------------
 Balance,
    December 31, 1998         13,499,500        13,500        13,548,200        (517,700)       (13,403,300)       (359,300)
 Stock issued for cash         1,616,000         1,600         1,076,400              --                 --       1,078,000
 Stock issued upon
    exercise of warrants         279,100           300           280,800              --                 --         281,100
Stock issued for goods
    and services               1,715,100         1,700         1,033,200              --                 --       1,034,900
 Stock issued
    as compensation              756,000           800           243,400        (104,500)                --         139,700
 Options and warrants
    issued as compensation            --            --            24,400          10,700                 --          35,100
 Amortization of
    unearned compensation             --            --                --         611,500                 --         611,500
 Net loss                             --            --                --              --         (4,937,100)     (4,937,100)
 ---------------------------------------------------------------------------------------------------------------------------
 Balance,
    December 31, 1999         17,865,700     $  17,900    $   16,206,400   $          --    $   (18,340,400)  $  (2,116,100)
 ===========================================================================================================================
</TABLE>

                                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                       23
<PAGE>



<TABLE>
<CAPTION>
                            MCHENRY METALS GOLF CORP.
                            STATEMENTS OF CASH FLOWS

                                                                         Year Ended December 31,
                                                                 -----------------------------------------
                                                                        1999                 1998
----------------------------------------------------------------------------------------------------------
CASH FLOWS USED IN OPERATING ACTIVITIES:

<S>                                                                <C>                  <C>
Net loss                                                           $     (4,937,100)    $    (10,803,500)

Adjustments to reconcile net loss to
 cash used in operating activities:
    Stock issued as compensation                                            139,700            1,377,300
    Warrants issued as compensation                                         (86,900)             709,900
    Amortization of unearned compensation                                   611,500               88,400
    Deferred costs on unrecognized sales                                    257,000             (298,600)
    Provision for inventory obsolescence                                   (408,200)             502,900
    Depreciation and amortization                                           244,600              191,800
Changes in operating assets and liabilities:

    Inventories                                                           1,865,300           (2,305,300)
    Other current assets                                                     97,600              (47,000)
    Other non-current assets                                                     --              (17,500)
    Accounts payable and accrued liabilities                                585,300            2,229,200
    Accrued compensation                                                     (4,300)             144,600
----------------------------------------------------------------------------------------------------------
Cash used in operating activities                                        (1,635,500)          (8,227,800)
----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchases of equipment and leasehold improvements                       (36,900)            (172,000)
----------------------------------------------------------------------------------------------------------
Cash used in investing activities                                           (36,900)            (172,000)
----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Net borrowings (repayments) under line of credit                       (358,300)             900,000
    Proceeds from note payable                                                   --              279,000
    Principal payments on leases payable                                    (24,900)             (14,800)
    Net proceeds from sale of common stock                                1,481,100            6,909,600
----------------------------------------------------------------------------------------------------------
Cash provided by financing activities                                     1,097,900            8,073,800
----------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH                                                       (574,500)            (326,000)
CASH AT BEGINNING OF PERIOD                                                 595,100              921,100
----------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD                                              $         20,600     $        595,100
==========================================================================================================
</TABLE>

                                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                       24
<PAGE>


                            MCHENRY METALS GOLF CORP.
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1  -  DESCRIPTION OF COMPANY AND SUMMARY OF ACCOUNTING POLICIES

McHenry Metals Golf Corp. (the "Company") was incorporated in 1985 in Utah under
the name of White Pine, Inc. In 1986, the name was changed to Symphony Holding
Company. In 1993, the corporate domicile was changed from Utah to Nevada and the
corporation changed its name to Symphony Ventures, Inc. In 1996, the name was
changed to Micro-ASI International, Inc. On April 1, 1997, the Company entered
into an Agreement and plan of Reorganization with McHenry Metals, Inc. ("MMI")
and changed its name to McHenry Metals Golf Corp. MMI was incorporated under the
laws of Illinois on January 13, 1997, to engage in the manufacture and sale of a
new line of golf related equipment.

Pursuant to the Agreement, the Company forward split its common stock on a 2.2
for 1 basis, increasing the number of shares outstanding from 577,770 shares to
1,271,094 shares. The Company then issued 5,650,000 post split shares of its
authorized but previously unissued common stock to acquire all the issued and
outstanding stock of MMI in a stock for stock exchange (the "Acquisition")
whereupon MMI became a wholly-owned subsidiary of the Company. The Acquisition
is treated as a "reverse merger" for accounting purposes and MMI is deemed to be
the successor entity with a recapitalization of the stockholders equity portion
of its financial statements. In conjunction with the Acquisition, the Company
declared a distribution to shareholders of the Company, of record as of March
31, 1997, (immediately prior to the Acquisition) of 1,271,094 Series A Warrants
(see Note 8) to be distributed in the future, upon effectiveness of a
registration statement covering the offer and sale of shares issuable upon
exercise of such warrants.

Prior to 1998, the Company was a development stage company. In 1998, the Company
started to manufacture, market and sell its line of golf clubs.

On December 31, 1998, the Company assumed all assets and liabilities of MMI and
dissolved MMI. The financial statements for 1998 are consolidated. All
significant intercompany balances and transactions have been eliminated in
consolidation.

REVENUE RECOGNITION - Due to the Company's limited operating history, management
has elected to defer recognition of revenue on product sales until the related
accounts receivable have been collected. This basis of revenue recognition is
expected to continue until, in the opinion of management, there exists
sufficient history of customer payments and returns to provide a reasonable
basis to conclude that revenue is earned at the point of shipment.

The revenue that is deferred is equal to the net accounts receivable balance,
and is classified as a current liability. The cost of the deferred revenues make
up the balance of deferred costs on unrecognized sales, which are classified as
current assets.

INVENTORIES - Inventories are stated at the lower of cost (determined using the
first-in, first-out method) or market (net realizable value). The industry in
which the Company operates is characterized by intense competition and rapid
technological changes. Should demand for the Company's products prove to be
significantly less than anticipated, the ultimate realizable value of the
Company's inventory would be less than the amounts reflected in the accompanying
balance sheet. See Note 11 for additional inventory net realizable value and
concentration of risk considerations.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Equipment and leasehold improvements are
stated at cost, less accumulated depreciation. Depreciation is computed using
the straight-line method over estimated useful lives generally ranging from two
to seven years. Leasehold improvements and assets under capital leases are
amortized over the shorter of the estimated useful lives of the assets or the
life of the lease.

                                       25
<PAGE>

LONG-LIVED ASSETS - The Company reviews the carrying amount of its long-lived
assets and identifiable intangible assets for possible impairment whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

INTANGIBLE ASSETS - Intangible assets are included in other non-current assets
in the accompanying balance sheet and were comprised of trademarks and patents
as of December 31, 1998. As of December 31, 1999, the Company determined that it
would be unable to obtain a patent for the products for which applications had
been filed. Thus, the unamortized balance of $15,600 was written-off in 1999.
The amortization of such amounts is computed using the straight-line method over
an estimated useful life of 17 years.

INCOME TAXES - The Company and its subsidiary filed consolidated returns through
December 31, 1998 (see Note 7) for U.S. federal income tax purposes and combined
returns for California income tax purposes.

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109. SFAS 109 requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the Company's financial statements or tax returns.
Under this method, deferred tax assets and liabilities are determined based upon
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year(s) in which the
differences are expected to reverse. This requires that the Company record a
deferred tax asset related to the future income tax benefits associated with tax
loss and credit carryforwards, and certain temporary differences for which tax
benefits have not previously been recognized. Deferred tax assets are to be
reduced by a valuation allowance when it is more likely than not that a portion
or all of the deferred tax asset will not be realized. In addition, under SFAS
109, the tax benefit associated with the utilization of operating loss
carryforwards is included in the regular provision for income taxes.

STOCK-BASED COMPENSATION - The Company applies APB Opinion 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
stock-based compensation plans. Accordingly, no compensation cost is recognized
for its employee stock option grants, unless the exercise price of options
granted is less than fair market value on the date of grant. The Company has
adopted the disclosure provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (see Note 9).

FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount of cash, accounts
receivable, accounts payable and accrued expenses are reasonable estimates of
their fair value because of the short maturity of these items. The carrying
amounts of the Company's short-term credit facilities approximate fair value
because the interest rates on these instruments are subject to change with
market interest rates.

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

PRODUCT WARRANTY - The Company supports all of its golf clubs with a limited one
year written warranty. Provision for estimated warranty costs is recorded at the
time of sale and periodically adjusted to reflect actual experience.

ADVERTISING COSTS - The Company expenses advertising costs when incurred. Trade
and consumer ad space and event sponsorships was approximately $1,892,500 and
$3,133,000 for 1999 and 1998, respectively.

                                       26
<PAGE>

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, including the
inventory obsolescence provision, 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.

CONCENTRATIONS OF CREDIT RISK - The Company operates in one reportable business
segment with a single product line within that segment. The Company sells a
significant percentage of its products to golf pro shops and golf equipment
dealers, but also sells products to a select number of golf and specialty
catalogs as well as direct to customers through an infomercial and the internet,
resulting in concentrated credit risk with respect to the Company's accounts
receivable. The Company performs ongoing credit evaluations of its customers but
does not require collateral for credit purchases. The Company maintains
allowances for potential credit losses, and such losses have been within
management's expectations. During 1999 and 1998, the Company did not have any
customers accounting for 10% or more of total sales.

LOSS PER SHARE - Loss per share is calculated pursuant to the Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). Basic
loss per share includes no dilution and is computed by dividing loss available
to common shareholders by the weighted average number of shares outstanding
during the period. Diluted loss per share reflects the potential dilution of
securities that could share in the earnings of the Company.

The following table illustrates the computation of basic and diluted loss per
share:

<TABLE>
<CAPTION>
                                                                        Year ended December 31,
                                                           --------------------------------------------------
                                                                     1999                     1998
                                                           --------------------------------------------------
NUMERATOR:

<S>                                                           <C>                      <C>
      Net loss available for common stockholders              $      (4,937,100)       $     (10,803,500)
                                                           ==================================================
DENOMINATOR:

Weighted average number of common shares outstanding
   during the period                                                 16,075,900               10,896,700
                                                           ==================================================
Basic and diluted loss per share                             $             (0.31)      $            (.99)
                                                           ==================================================
</TABLE>

The computation of diluted loss per share excludes the effect of incremental
common shares attributable to the exercise of outstanding common stock options
and warrants because their effect would be antidilutive due to losses incurred
by the Company during periods presented. See summary of outstanding stock
options and warrants in Note 9.

COMPREHENSIVE INCOME - In June 1997, the Financial Accounting Standards Board
issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS No. 130"). This
statement establishes standards for reporting the components of comprehensive
income and requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be included in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income includes net income as well as
certain items that are reported directly within a separate component of
stockholders' equity and bypass net income. The Company adopted the provisions
of this statement in 1998. These disclosure requirements had no impact on
financial position or results of operations. The Company has no elements of
other comprehensive income, as defined by SFAS No. 130.

SEGMENT INFORMATION - In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, DISCLOSURES OF AN ENTERPRISE AND RELATED INFORMATION. The
provisions of this statement require disclosures


                                       27
<PAGE>

of financial and descriptive information about an enterprise's operating
segments in annual and interim financial reports issued to stockholders. The
statement defines an operating segment as a component of an enterprise that
engages in business activities that generate revenue and incur expense, whose
operating results are reviewed by the chief operating decision maker in the
determination of resource allocation and performance, and for which discrete
financial information is available. The Company adopted the provisions of this
statement for 1998 annual reporting. These disclosure requirements had no impact
on financial position or results of operations, or the Company's existing
segment disclosures.

RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform
to the current year presentation.

NOTE 2  -  OPERATING RESULTS, CAPITAL RESOURCES AND GOING CONCERN

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. A number of factors, including the Company's
history of significant losses, negative working capital, its accumulated deficit
and the need to restructure debt which is currently in default raise substantial
doubts about the Company's ability to continue as a going concern. As of
December 31, 1999, the Company has an accumulated deficit of $18,340,400 and a
working capital deficiency of $2,355,600. The Company is currently in default
under the terms of its revolving line of credit with a bank. The Company does
not possess sufficient cash resources to repay this obligation and the Company
would be unable to repay this loan in the event that such demand was made by the
Company's creditor (see Note 5). These factors raise substantial doubt about the
ability of the Company to continue as a going concern.

In this regard, management is proposing to raise any necessary additional funds
not provided by its planned operations through additional sales of its equity
securities pursuant to the exercise of outstanding warrants or otherwise.
Management plans to utilize additional capital for the implementation of its
marketing and distribution strategy which includes direct response television
advertising and the internet. Management has also updated its sales programs and
policies relative to retail golf stores and on-course golf shops. The Company
now receives payment in advance on any orders less than 6 units and provides
payment terms only to accounts which have established a history of prompt
payments or have demonstrated strong financial resources. There is no assurance
that the Company will be successful in raising this additional capital or
achieving profitable operations. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

NOTE 3  -  COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

<TABLE>
<CAPTION>
       Accounts receivable consist of:
<S>                                                                                     <C>
          Trade receivables.........................................................    $       814,500
          Allowance for doubtful accounts...........................................           (761,300)
                                                                                        -------------------
                                                                                        $        53,200
                                                                                        ===================

       Inventories consist of:
          Raw materials.............................................................    $       107,100
          Finished goods............................................................            442,700
                                                                                        -------------------
                                                                                        $       549,800
                                                                                        ===================
</TABLE>

                                       28
<PAGE>

<TABLE>
<CAPTION>
       Other current assets consist of:

<S>                                                                                     <C>
          Golf bags, caps and shirts (as promotional product).......................    $        53,100
          Prepaid insurance.........................................................              4,700
          Other.....................................................................              2,100
                                                                                        -------------------
                                                                                        $        59,900
                                                                                        ===================

       Equipment and leasehold improvements consist of:

          Machinery, equipment and tooling..........................................    $       289,600
          Office equipment and furniture............................................            117,600
          Computer equipment and software...........................................            129,200
          Show booth................................................................             81,500
          Leasehold improvements....................................................             36,500
          Vehicle...................................................................             15,500
                                                                                        -------------------
                                                                                                669,900

       Accumulated depreciation and amortization....................................           (445,800)
                                                                                        -------------------
                                                                                        $       224,100
                                                                                        ===================
</TABLE>


NOTE 4  -  OTHER EXPENSE - WRITE-DOWN OF ASSET

In August 1998, the Company entered into a Joint Development Agreement with one
of its suppliers to develop a forged series of metal woods and scoring irons in
accordance with the Company's designs and utilizing proprietary technology
developed by the supplier. The Company issued 194,944 shares of its common stock
(valued at $694,000) in exchange for the rights to use the supplier's
proprietary technology as well as to compensate the supplier for engineering
costs, tooling and equipment called for under the Joint Development Agreement.

In December 1998, the supplier advised the Company that it would be unable to
make the necessary acquisitions of equipment and tooling due to financial
difficulties experienced by the supplier. As a result of the uncertainty of the
value of this investment, the Company has fully-reserved the value of its common
stock given to the supplier and charged that amount to "other expense" in 1998.

NOTE 5  -  LINE OF CREDIT

The Company has a $665,000 line of credit agreement with a bank bearing interest
at the bank's prime rate plus 7% (total of 15.5% at December 31, 1999). The line
of credit is secured by accounts receivable and was due on July 15, 1999. As of
December 31, 1999, the Company was not in compliance with most of its loan
covenants of the line of credit agreement.

On February 14, 2000, the bank formally demanded payment, however, since that
time, discussions have continued regarding a forbearance agreement and an
extension in connection with an agreed-upon payment schedule. A term sheet has
been negotiated between the bank and the Company and as of April 11, 2000, the
Company is finalizing a forbearance agreement with the bank.


                                       29
<PAGE>

NOTE 6  -  COMMITMENTS AND CONTINGENCIES

LEASES

Following is a schedule of estimated future minimum lease payments under capital
lease agreements:

<TABLE>
<CAPTION>
        YEAR ENDED
        DECEMBER 31,                                                          AMOUNT
        -------------------------------------------------------------------------------
<S>     <C>                                                                 <C>
        2000                                                                $   28,500
        2001                                                                    11,600
        2002                                                                       700
        2003                                                                        --
        -------------------------------------------------------------------------------
        Total minimum lease payments                                            40,800
        Amount representing interest                                            (4,500)
        -------------------------------------------------------------------------------
        Present value of net minimum lease payments                             36,300
        Current portion                                                        (24,800)
        -------------------------------------------------------------------------------
        Long-term portion                                                   $   11,500
        ===============================================================================
</TABLE>

Certain equipment and vehicle leases are classified as capital leases for
financial reporting purposes. These capital leases are payable in monthly
installments of approximately $2,600 with interest rates from 14.6% to 14.9%.
The leases are secured by the related leased equipment and vehicle.

At December 31, 1999, $78,600 of such leased equipment and vehicle are included
in equipment and leasehold improvements. Amortization expense related to assets
under capital leases was approximately $17,800 and $14,800 in 1999 and 1998,
respectively.

The Company was also committed under noncancelable operating agreements for the
lease of office space during 1999 and 1998. Rent expense for 1999 and 1998 was
approximately $72,600 and $72,800, respectively (see Note 11).

AGREEMENTS

Certain of the Company's warrant holders have been granted certain registration
rights; the costs of any such offering, exclusive of any underwriting discount,
would be borne by the Company.

The Company has entered into endorsement agreements with touring golf
professionals ("Golf Pros") for periods extending through December 31, 1999.
Under these contracts, the Company is required to make payments which include a
base retainer which totaled approximately $467,000 and $483,000 during 1999 and
1998, respectively. In some cases, the base retainer was paid in the form of
restricted common stock of the Company. A total of 92,000 shares were issued
during 1998, under such contracts with a total value of $384,000. Of these
amounts, $137,300 and $246,700 is included in selling expenses in the
accompanying statement of operations for 1999 and 1998, respectively. Bonuses
are also available based on the Golf Pro's winning tournaments and their final
placement on the final "PGA Money List." Bonus payments totaled approximately
$88,000 and $75,000 in 1999 and 1998, respectively. In addition, the Company
also paid $38,000 for a "player pool" as of December 31, 1999. Subsequent to
December 31, 1999, the Company entered into additional contracts which required
the Company to make additional base retainer payments in the form of restricted
shares of common stock totaling 375,000 shares with a total value of $201,700.


                                       30
<PAGE>

The Company is in default under a contract with a company, whose executive vice
president was also a board member of the Company (until September 1999), that
required the Company to purchase golf club heads with a total purchase price of
approximately $1,410,000 no later than June 30, 1999. As of March 31, 2000, the
Company's remaining obligation totaled approximately $675,000 (see Note 11).

The Company has outstanding purchase orders with another supplier of golf club
heads that it is unable to take delivery on which total approximately $215,000
as of March 31, 2000.

On April 1, 1997, the Company entered into an employment agreement with Mr. Gary
Adams, Chairman and CEO, which terminated upon the death of Mr. Adams on January
2, 2000. Mr. Adams was required to devote his full-time business efforts to the
Company for which he was paid an annual salary, initially at a rate of $120,000
per year, which was later increased to $150,000 per year and was eliminated as
of May 31, 1999. In addition, Mr. Adams was to be paid a royalty upon the sale
or license of "metal woods" designed by him at the rate of $1.00 per club for
the first 500,000 clubs; at $.50 per club for the next 500,000 clubs; and $.25
per club for all sales in excess of 1,000,000 clubs. During 1998, the Company
paid a royalty advance to Mr. Adams in the amount of $59,900. Of this amount,
$9,200 was earned during the year ended December 31, 1999 and $23,400 had been
earned as of December 31, 1998. These amounts are included in cost of goods sold
for the respective fiscal years. The balance of $27,300 has been written-off to
bad debt expense in the accompanying balance sheet as of December 31, 1999, due
to the Company's concern over collection of the balance due from Mr. Adams'
estate.

The Company has entered into an employment agreement with Mr. Bradley J. Wilhite
for a period of one year commencing in April 1997. This agreement automatically
renews for succeeding terms of one year unless either party gives notice to the
other at least sixty (60) days prior to the expiration of any term of his or its
intention not to renew. Mr. Wilhite is required to devote his full-time business
efforts to the Company for which he is paid an annual salary, initially at a
rate of $5,000 per month for the months of May and June 1997 and thereafter at
the rate of $94,800 per year. Mr. Wilhite's salary was later increased to
$135,000 per year. This agreement also provided Mr. Wilhite with 100,000 shares
of the Company's restricted common stock.

LITIGATION

The Company is involved in various claims arising in the ordinary course of
business; none of these claims, in the opinion of management, is expected to
have a material adverse impact on the financial position, cash flows or overall
trends in the results of operations of the Company.

NOTE 7  -  INCOME TAXES

A reconciliation of the provision for income taxes to the amount computed by
applying the statutory Federal income tax rate to income before income taxes
follows:

<TABLE>
<CAPTION>
                                                                                       Year ended December 31,
                                                                         ---------------------------------------------------
                                                                                   1999                      1998
                                                                         ---------------------------------------------------
<S>                                                                         <C>                        <C>
         Amounts computed at Federal statutory rate.....................    $     (1,777,200)          $     (3,673,000)
         State income taxes.............................................                 800                      1,600
         Non-deductible expenses........................................              15,500                    583,000
         Losses for which no current benefits are available.............           1,761,700                  3,090,000
                                                                         ---------------------------------------------------

         Provision for income taxes.....................................    $            800           $          1,600
                                                                         ===================================================
</TABLE>

                                       31
<PAGE>

The components of deferred income taxes:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31, 1999
                                                                             ------------------------
        Deferred tax assets:
<S>                                                                              <C>
        Net operating loss carryforwards.................................        $     5,077,700
        Accrued liabilities and reserves.................................                 12,300
        Deferred income..................................................                 18,100
                                                                             ------------------------
                                                                                       5,108,100

        Deferred tax liabilities:
        Book and tax depreciation differences............................                (22,500)
                                                                             ------------------------
                                                                                       5,085,600

        Valuation allowance..............................................             (5,085,600)
                                                                             ------------------------

        Deferred taxes...................................................        $         --
                                                                             ========================
</TABLE>

At December 31, 1999, a 100% valuation allowance has been provided on the total
deferred income tax assets as they are not more likely than not to be realized.

The Company has not recorded provisions for Federal income taxes in 1999 and
1998. At December 31, 1999, the Company had net operating loss carryforwards of
approximately $13,705,000 for Federal tax reporting purposes and approximately
$7,944,000 for California tax purposes. The net operating loss carryforwards for
tax purposes expire between 2000 and 2019.

As a result of the significant equity transactions in 1997 and 1998, the Company
could have experienced a more than 50% ownership change for Federal income tax
purposes. As a result, an annual limitation could be placed upon the Company's
ability to realize the benefit of its net operating loss carryforwards. The
amount of this limitation has not been definitively determined at this time.

NOTE 8  -  STOCKHOLDERS' EQUITY

The Company issued 422,700 shares of common stock for the purchase of furniture
and as compensation during 1997. These shares were valued at $288,900. Of this
amount, $88,400 was deferred and included in unearned compensation (a reduction
of stockholders' equity) as of December 31, 1997. The amount deferred as
December 31, 1997 was charged against income as compensation expense during
1998.

On December 12, 1997 the Company offered qualified investors, by means of
confidential private placement, a minimum of 250,000 units and a maximum of
650,000 units. A unit is defined as two shares of the Company's unregistered
common stock and one unregistered common stock purchase warrant. Each warrant
entitles the holder to purchase, for a period of three years, one share of
common stock for $5.00. No units were sold in 1997. The Company sold 319,033
units for $7.00 in March 1998. The Company received net proceeds of
approximately $2,169,800 after deduction of commissions and transaction related
expenses.

During 1998, the Company sold, to qualified investors, 3,130,500 shares of the
Company's unregistered common stock. Certain of the sales included warrants to
purchase common stock at an exercise price of $5.00, expiring through March
2001. A total of 319,000 of such warrants were issued through these sales. The
Company received net proceeds of approximately $4,739,800 after deduction of
commissions and transaction related expenses.

During 1998, the Company issued 521,600 shares of unregistered common stock as
compensation for services. The fair value of the common stock issued was
approximately $1,514,600, of which $1,377,300 was expensed during 1998. The
remaining fair value of $137,300 relates to services that have not yet been
provided (see Note 6) and will be charged to expense over the applicable future
service periods.

On November 3, 1998 the Company registered, with the U.S. Securities and
Exchange Commission:

o    1,271,094 redeemable warrants ("Series A Warrant") for distribution to
     common stockholders of record as of March 31, 1997. Each warrant is
     exercisable at $1.00 per share during the first year, $1.50 per share
     during the second year, and $2.00 per share during the third year following
     the date of registration. All such warrants were distributed. There were no
     proceeds from the issuance of these warrants.

                                       32
<PAGE>

o    1,300,000 redeemable warrants ("Shop Warrants" and "Pro Warrants") to be
     granted to certain dealers of the Company's products, and to golf
     professionals who use and endorse the Company's products. Each warrant is
     exercisable at $1.48 per share. During 1998, 260,375 shop warrants were
     distributed with a fair value of $268,700 determined in accordance with
     SFAS No. 123 (see Note 9) which is reflected as selling expenses in the
     accompanying statement of operations. No pro warrants were distributed in
     1998.

During 1998, the Company issued 117,500 "series WO" (holder incurs cost
associated with subsequent registration) unregistered common stock purchase
warrants and 254,213 "series W" (Company incurs cost associated with subsequent
registration) unregistered common stock purchase warrants to suppliers and board
members in lieu of cash payments for services. Each warrant entitles the holder
to purchase, for a period of three to five years after the date of issuance, one
share of common stock at a price equal to the fair market value of the Company's
common stock on the date the warrant was issued with exercise prices ranging
from $.75 to $4.13 per share. Warrants issued in lieu of cash payments for
services were valued at $720,600, determined in accordance with SFAS No. 123
(see Note 9). Of this amount $340,200 was expensed in 1998 and $190,200 was
expensed in 1999. The balance of $190,200 will not be charged to expense because
the underlying warrant was forfeited when the board member resigned prior to the
warrant vesting.

During 1998, the Company repriced 445,000 options to non-employee directors of
the Company. In connection with the repricing, the Company recognized
approximately $101,000 of expense in 1998. The expense represents the excess of
the fair value of the options after repricing over the fair value of the options
immediately before repricing.

During 1998, the Company borrowed $279,000 from the Vice Chairman of the Board
of Directors. In December 1998, the Company repaid this loan through the
issuance of 418,500 shares of the Company's common stock and 139,500 warrants to
purchase the Company's common stock, exercisable at $1.00 per share which expire
in November, 2001. Interest at a rate of 6% totaling $3,700, was accrued as of
December 31, 1998.

During 1999, the Company issued 1,616,000 shares of the Company's unregistered
common stock to qualified investors for approximately $1,200,000. The Company
also issued 1,715,100 shares of the Company's unregistered common stock to
qualified investors in exchange for goods and services provided to the Company
which were valued at $1,034,900. Certain holders of unregistered warrants
elected to convert their warrants into 275,000 shares of Company's unregistered
common stock. Each of these warrants were convertible at $1.00 per share
(proceeds to the Company totaled $275,000). Holders of registered "Shop/Pro"
warrants received 4,125 shares of the Company's registered common stock upon the
conversion of their warrants. Each of these warrants were convertible at $1.48
per share, resulting in proceeds to the Company of $6,100. The Company also
issued 756,000 shares of the Company's unregistered common stock to employees in
exchange for services rendered, which were valued at $244,200.

Pursuant to state laws, the Company is currently restricted, and may be
restricted for the foreseeable future, from paying dividends to its stockholders
a result of its accumulated deficit as of December 31, 1999.

During the past year, the Company did not declare or pay any cash dividends on
its Common Stock. The Company currently plans to retain all of its earnings to
support the development and expansion of its business and has no present
intention of paying any dividends on Common Stock in the foreseeable future.

NOTE 9  -  STOCK OPTION PLAN AND WARRANTS

STOCK OPTION PLAN - The Company maintains a stock option plan under which
incentive stock options may be granted to employees of the Company and
nonqualified stock options may be granted to non-employee directors of the
Company. Under the terms of the plan, qualified nontransferable options may be
granted for terms of up to 10 years or 5 years for individuals with more than
10% ownership. Vesting terms and

                                       33
<PAGE>


exercisable rate for qualified stock options and grant terms for nonqualified
stock options are determined at the discretion of the Board of Directors.
Options are generally granted with an exercise price not less than the fair
market value of the common stock at the date of grant. A total of 2,295,000
shares of common stock have been reserved for issuance under the plan. Options
may be granted under the plan until it is terminated by the Board of Directors,
applicable law, or after the passage of ten years from plan approval or
adoption.

Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," requires the Company to provide pro forma
information regarding net income and earnings per share as if such compensation
cost for the Company's stock option and issuance plans had been determined in
accordance with the fair value based method prescribed in SFAS 123. The Company
estimates the fair value of each stock option at the grant date by using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1999 and 1998, respectively: 0% and 0% dividend
yield; expected volatility of 106% to 111% and 28% to 123%, risk free interest
rates of 4.91% to 5.84% and 4.10% to 5.64%; and expected lives of 5 years and 2
to 5 years (determined on an option-by-option basis).

Under the accounting provisions of SFAS 123, the Company's net loss per share
would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                              1999                 1998
                                                                       -------------------  -------------------
          NET LOSS:

<S>                                                                      <C>                  <C>
              As reported ............................................   $    (4,937,100)     $   (10,803,500)
                                                                       ===================  ===================

              Pro forma ..............................................   $    (5,109,600)     $   (11,152,000)
                                                                       ===================  ===================

          BASIC AND DILUTED EPS:

              As reported ............................................   $       (0.31)       $        (.99)
                                                                       ===================  ===================

              Pro forma ..............................................   $       (0.32)       $       (1.02)
                                                                       ===================  ===================
</TABLE>

A summary of the status of the Company's stock option plan as of December 31,
1999 and 1998, and changes during the periods ending on those dates is presented
below:

<TABLE>
<CAPTION>
                                                               1999                                    1998
                                               -------------------------------------- ---------------------------------------
                                                                   WEIGHTED-AVG.                           Weighted-Avg.
                                                    SHARES         EXERCISE PRICE          Shares         Exercise Price
                                               --------------------------------------  --------------------------------------
<S>                                                  <C>            <C>                      <C>           <C>
Outstanding at beginning of period...........        2,195,000      $        0.72            1,250,000     $        1.09
Granted......................................           20,000      $        1.41            1,920,000     $        1.50
Cancelled....................................         (470,000)     $        1.02             (975,000)    $        2.74
                                               -----------------                       ----------------
Outstanding at end of period.................        1,745,000      $        0.83            2,195,000     $        0.72
                                               =================                       ================
Options exercisable at end of period.........        1,520,000      $        0.80            1,395,000     $        0.86
                                               =================                       ================
Weighted-average fair value of
   options granted during the period.........                       $        1.06                          $       $1.16
</TABLE>

                                       34
<PAGE>

The following table summarizes information about stock options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>
                                            Options Outstanding                            Options Exercisable
                               Number        Weighted-Average                   e        Number          Weighted-
                           Outstanding at        Remaining       Weighted-Average    Exercisable at       Average
         Prices               12/31/99       Contractual Life     Exercise Price        12/31/99      Exercise Price
----------------------------------------------------------------------------------  ----------------------------------
<S>                             <C>                 <C>                <C>              <C>              <C>
         $ 0.50                   600,000           0.2 years          $  0.50             600,000       $    0.50
         $ 1.00                 1,145,000           3.9                   1.00             920,000            1.00
                          --------------------------------------------------------  ----------------------------------
  $ 0.50  to  $ 1.00            1,745,000           2.6 years          $  0.83           1,520,000       $    0.80
                          ========================================================  ==================================
</TABLE>

WARRANTS - From time to time, the Company grants common stock purchase warrants
as a form of payment for services to non-employee directors of the Company,
suppliers and customers. Generally, warrants are granted for terms of up to 5
years. In addition, the Company issues warrants in connection with the issuance
of common stock or for other purposes (see Note 8).

A summary of the status of the Company's common stock purchase warrants as of
December 31, 1998 and 1997, and changes during the periods ending on those dates
is presented below (all warrants are included below, except for the caption
"Weighed average fair value of warrants granted during the year," which only
includes warrants issued as compensation to non-employee directors of the
Company, suppliers and customers):

<TABLE>
<CAPTION>
                                                                   1999                                  1998
                                                   -------------------------------------  -----------------------------------
                                                                      WEIGHTED-AVG.                        Weighted-Avg.
                                                       SHARES         EXERCISE PRICE         Shares        Exercise Price
                                                   -------------------------------------  -----------------------------------
<S>                                                    <C>               <C>                     <C>          <C>
Outstanding at beginning of period...............      2,872,700         $    1.78               35,000       $    3.66
Granted..........................................        220,000         $    0.76            2,837,700       $    1.76
Exercised........................................       (279,100)        $    1.01                --               --
Cancelled........................................       (300,000)        $    1.00                --               --
                                                   ----------------                       --------------
Outstanding at end of period.....................      2,513,600         $    1.87            2,872,700       $    1.78
                                                   ================                       ==============
Warrants exercisable at end of period............      2,513,600         $    1.87            2,597,700       $    1.86
                                                   ================                       ==============
</TABLE>

The following table summarizes information about common stock purchase warrants
outstanding at December 31, 1999.

<TABLE>
<CAPTION>
                                             Warrants Outstanding                           Warrants Exercisable
                            --------------------------------------------------------  ----------------------------------
                                 Number        Weighted-Average                            Number         Weighted-
                             Outstanding at       Remaining       Weighted-Average     Exercisable at      Average
          Prices                12/31/99       Contractual Life    Exercise Price         12/31/99      Exercise Price
------------------------------------------------------------------------------------  ----------------------------------
<S>                               <C>                 <C>               <C>                <C>             <C>
  $ 0.40    to  $  1.00             921,400           2.2 years         $  0.92               921,400      $    0.92
  $ 1.38    to  $  2.50           1,223,900           1.9                  1.68             1,223,900           1.68
  $ 4.13    to  $  5.00             368,300           1.2                  4.88               368,300           4.88
                            --------------------------------------------------------  ----------------------------------
  $ 0.40    to  $  5.00           2,513,600           1.9 years         $  1.87             2,513,600      $    1.87
                            ========================================================  ==================================
</TABLE>

Holders of warrants convertible into 279,100 shares exercised their warrants
during 1999 providing proceeds to the Company totaling $281,100.

                                       35
<PAGE>

NOTE 10  -  SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS

Cash paid for interest during 1999 and 1998 totaled $115,200 and $35,800
respectively and cash paid for income taxes was $800 in 1999 and 1998. In 1998,
the Company entered into capital lease obligations to acquire equipment and a
vehicle totaling $26,800. In 1998, the Company converted $279,000 of debt owed
to a related party for shares of common stock and warrants to purchase the
Company's common stock (Note 8).

NOTE 11  -  RELATED PARTY TRANSACTIONS

In November 1998, the Company was advised by its principal supplier of club
heads that, due to changes in the golf industry, the supplier had decided to
cease production of golf club heads. As of December 9, 1998, the Company owed
this supplier $556,300 for golf club heads which had been received and had open
purchase orders for golf club heads with a value of approximately $2,350,000.
The Company was able to negotiate a one-time buy-out of the balance owing to the
supplier plus the open purchase orders for $1,090,000 as of December 11, 1998.
This transaction represented a discount of 62% from the total commitment to the
original vendor of $2,906,300.

As the Company did not have the financial resources to complete the buy-out
discussed above, the Company entered into an agreement with a company, whose
Executive Vice President is a Director of the Company, to purchase the golf club
heads that the Company purchased, but had not yet paid for, from the supplier,
plus the remaining golf club heads on open purchase orders as they are completed
by the supplier. Pursuant to the agreement, the Company purchases golf club
heads on a COD basis, as-needed from the related party. In exchange for
financing the purchase of these golf club heads, the Company pays a 20% mark-up
over cost. The total purchase price of these golf club heads at December 31,
1998 was approximately $1,410,000 and was to have been paid no later than June
30, 1999. Additionally, the agreement with the related party required the
Company to purchase a certain minimum number of golf club heads each month from
January through June 1999. Since the Company failed to complete the buy-out by
June 30, 1999, the related party is under no obligation to sell the remaining
golf club heads to the Company and has the right to sell the heads or may
complete them into finished clubs, and sell them whomever they choose. In
September 1999, the Director resigned his position with the Company.

As of March 31, 2000, the former related party has not sold any of the club
heads to anyone other than the Company. The Company is currently attempting to
negotiate a revised delivery schedule with the former related party that would
result in the Company purchasing the remaining finished club heads for
approximately $675,000 between April and June, 2000. There is no assurance,
however, that the Company will be successful in its negotiations, which could
result in the Company's clubs being sold by the former related party at a
substantial discount over the Company's current market price.

The former Senior Vice President of Marketing and current Director of the
Company was the owner of the media (print & television) agency used by the
Company in 1998. The suppliers of this media discounted their billings to the
agency by 15%, as is standard in the industry. The Company then paid the agency
the net amount plus 3%. The total amount paid to the agency in 1998 for media
time and commissions was approximately $391,300.

The Company rented office space in McHenry, Illinois from a Director of the
Company, subject to a lease agreement which expired on December 31, 1998. Total
rent and related expenditures paid were approximately $15,600 during 1998.

                                       36
<PAGE>

NOTE 12  -  EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution retirement savings plan which is
intended to qualify under section 401(k) of the Internal Revenue Code. The Plan
covers substantially all full-time U.S. employees. Participants may contribute a
percentage of their salaries subject to statutory annual limitations. The
Company currently does not make any contributions to the plan, except to pay for
the expense of maintaining the plan.

NOTE 13  -  SUBSEQUENT EVENT

Subsequent to year end, the Company had the following equity transactions:

On January 5, 2000, the Stock Option Committee of the Company cancelled
Incentive Stock Options for two Named Executive Officers totaling 550,000 shares
exercisable at $1.00 per share which were due to expire in November, 2003. Of
the 550,000 shares, 225,000 shares were unvested on January 5, 2000. In
exchange, these two Named Executive Officers were granted Incentive Stock
Options totaling 975,000 shares which are exercisable at $0.20 per share, were
fully-vested on January 5, 2000 and expire in January, 2005.

On January 5, 2000, the Stock Option Committee of the Company cancelled the
following Non-Statutory Stock Options for three Board Members totaling 595,000
shares exercisable at $1.00 per share which were due to expire in November,
2003. All 595,000 shares were vested on January 5, 2000. In exchange, these
three Board Members were granted Non-Statutory Stock Options totaling 695,000
shares which are exercisable in a range of $0.20 to $0.50 per share, were
fully-vested on January 5, 2000 and expire from January, 2002 through January,
2005.

On January 5, 2000, the Stock Option Committee of the Company also cancelled a
Non-Statutory Stock Option originally granted to Mr. Gary V. Adams (which was
held by his estate after his death on January 2, 2000) for 600,000 shares
exercisable at$0.50 per share which expired on March 31, 2000. In exchange, the
estate of Mr. Adams was granted a Non-Statutory Stock Option for 600,000 shares
which is exercisable at $0.50 per share, were fully-vested on January 5, 2000
and expire on January 5, 2001.

A Board Member converted $187,500 owing to him at December 31, 1999 into 562,500
shares of restricted common stock on April 7, 2000.

                                       37
<PAGE>


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


Prior to November 23, 1999, McHenry Metals Golf Corp.'s ("the Company")
independent accountants were BDO Seidman, LLP ("BDO"). BDO had audited the
Company's financial statements as of December 31, 1998 and for the year then
ended. By letter dated November 23, 1999 BDO notified the Company that the
client-auditor relationship between the Company and BDO had ceased. Prior to
terminating the client-auditor relationship, BDO delivered to the Company its
Report of Independent Certified Public Accountants dated March 19, 1999, except
as to the second paragraph of Note 5, which was as of March 31, 1999, on the
Company's consolidated financial statements for the year ended December 31,
1998. This report was modified as to the company's ability to continue as a
going concern due to net losses suffered, working capital deficiencies,
accumulated deficit and the default with regard to its line of credit agreement.

In connection with the audit of the Company's consolidated financial statements
for the year ended December 31, 1998, and during the subsequent unaudited
interim period since December 31, 1998 through November 23, 1999, there were no
disagreements with BDO on matters as to accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which if not
resolved to the satisfaction of BDO would have caused BDO to made reference to
the matter in their report.

On December 1, 1999, the Company appointed Clumeck, Stern, Phillips &
Schenkelberg ("CSPS") as its independent accounting firm. Prior to the
appointment of CSPS, the Company did not consult with CSPS regarding either: the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the registrant's financial statements.

                                       38
<PAGE>


                                    PART III

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

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The following table sets forth the directors, executive officers and other
significant employees of the Company, their ages, terms of office and all
positions. Directors are elected for a term of one year, and serve until the
next annual meeting or until their successors are duly elected by the
stockholders and qualify. Officers and other employees serve at the will of the
Board of Directors. Disclosure relating to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is not applicable, as the Company does not have
a class of equity securities registered pursuant to Section 12 of the Exchange
Act.

<TABLE>
<CAPTION>
Name of Director, Officer
or Significant Employee               Age     Served Since    Positions and Offices Held With The Company
-------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>       <C>           <C>
Gary V. Adams(1)...................   --        Apr. 1997     Chairman of the Board and Chief Executive Officer
Theodore Aroney(1)(3)..............    60       Apr. 1997     Acting Chairman of the Board and Secretary
Mark Bergendahl(2)(3)..............    39       Apr. 1997     Director
Henry J. Fleming, Jr.(2)...........    56       Apr. 1997     Director
Sal Lupo...........................    66       Apr. 1997     Director
Bradley J. Wilhite(1)..............    35       May 1997      President, Acting Chief Executive Officer and Director
Gary L. Moles......................    47       Apr. 1997     Chief Operating Officer
</TABLE>
(1)      Member of the Executive Committee
(2)      Member of the Audit Committee
(3)      Member of the Compensation/Stock Option Plan Committee

Except for Messrs. Adams, Aroney, Bergendahl, Fleming and Lupo, each of these
individuals devoted full time to the Company as employees during 1999. In
January, 2000, Mr. Adams, the founder of the Company passed away. There are no
family relationships among executive officers or directors of the Company. A
brief description of these individuals and their background and business
experience follows:

GARY V. ADAMS - Mr. Adams passed away on January 2, 2000. Mr. Adams established
the Company in early 1997. Previously, Mr. Adams was President and CEO of
Founders Club Golf Company (1989 - 1994) which he established in 1989. As
chairman of Taylor Made Golf Co. (1979 - 1989), which he founded in 1979, he
became known as the "Father of the Metal Wood." During his accomplished career
over the past three decades, Mr. Adams received numerous awards for his
industry-leading innovations. Most notably, he received the PGA of America's
highest honor, the Ernie Sabayrac Award, for lifetime contributions to the
industry. The elite class of recipients recognized with this award includes
Karsten Solheim, founder of Karsten Manufacturing and PING golf clubs, and Ely
Callaway, founder and chairman of Callaway Golf. Mr. Adams was also elected to
the Illinois PGA Hall of Fame in 1994, and was named "Man of the Year" by the
National Golf Association in 1994, and "Golf Innovator of the Decade" by the
International Network of Golf in 1995.

                                       39
<PAGE>

THEODORE ARONEY. Mr. Aroney and the Company's founder, the late Gary V. Adams,
established McHenry Metals in early 1997. Aroney was also a founding director
and private investor in Odyssey Golf, a golf equipment company which was started
in the early 1990s, developed an innovative putter which became #1 in the world,
and was later sold to Callaway Golf for $130 million. Aroney is currently the
owner of Halo Farms Breeding and Racing Operation for thoroughbred horses, an
operation he has been associated with since 1970. Aroney is a private investor
and consultant with experience in many other businesses.

MARK A. BERGENDAHL. Mr. Bergendahl is a founding board member and private
investor in McHenry Metals. Bergendahl was also a director and private investor
in Odyssey Golf, a golf equipment company which was started in the early 1990s,
developed an innovative putter which became #1 in the world, and was later sold
to Callaway Golf for $130 million. Bergendahl is currently the president of
Redfield Taylor & Associates, Inc, an investment firm that focuses on emerging
growth companies. He is also president of Jacobson, Larson Management, Inc., and
managing partner of Edie-Wig-BB, a California limited partnership. Since 1986,
he has held various posts including director of marketing, corporate managing
director, and president of Gloria Marshall Figure Salons of Australia, Pty,
Ltd., one of Australia's leading weight loss companies. Bergendahl is a graduate
of the Entrepreneurship Program at the University of Southern California.

HENRY J. FLEMING, JR. Mr. Fleming is a founding board member of McHenry Metals
and the former treasurer of Taylor Made Golf Company, a position he held during
the company's formative years. Mr. Fleming is currently the president of Fleming
and Company, Certified Public Accountants. Practicing as a certified public
accountant since 1973, Fleming has had extensive experience working with private
industry. He has also been involved with Allison America, a manufacturer of
tanning beds, Ex-Tec Plastics and Advantage Rental, Inc. Fleming serves on the
board of directors of Amcore Bank Northwest and with various closely held
corporations. Fleming graduated with a bachelor of arts degree in accounting
from Lewis College in Lockport, Illinois.

SAL LUPO. Mr. Lupo is a founding board member of McHenry Metals and assisted the
late Gary V. Adams with the launch of the McHenry Metals brand in 1997. Lupo
also provided marketing planning and execution support for the introduction and
development of the Taylor Made Golf Company. In addition to the work with Taylor
Made, Lupo and Associates provided strategic planning and marketing development
for other golf equipment companies such as Aldila, United Sports Technologies,
Wilson, Cleveland Golf, and Tiger Shark. Lupo previously held marketing and
management posts at Helene Curtis Industries, including new products manager,
corporate director of marketing, and president of the Hair Fashions Division.

BRADLEY J. WILHITE. Mr. Wilhite, the Company's president, has led the growth and
development of the Company as the business has emerged from a start-up entity to
a fully operational company. Mr. Wilhite's professional career includes strong
management, finance, sales, and marketing experience with two of the nation's
largest banking organizations - NationsBank (now BankAmerica) (from 1988 to
1994) and First Union Corporation (from 1994 to 1997). During his career in the
financial services industry, he served as a corporate banker working with
emerging growth companies, managed several lines of business, directed
successful product launches and brand development programs, and led merger and
acquisition teams. Mr. Wilhite is the son of a PGA golf professional, and he
played college golf at Oklahoma State University and Texas Christian University
where his teammates included several current PGA Tour players. Mr. Wilhite
received a bachelor's degree in business administration and finance from Texas
Christian University and a master's degree in business administration and
marketing from Wichita State University.

GARY L. MOLES. Mr. Moles, the Company's chief operating officer, managed all
product development associated with the TOURPURE line of drivers and fairway
metalwoods and was responsible for establishing the Company's operational
infrastructure. Moles is a seasoned industry expert with experience in product
development, materials sourcing, manufacturing, operations, supplier management,
and international business.

                                       40
<PAGE>

He held a variety of operations and management positions with Wilson Sporting
Goods from 1973 to 1990. During 1991 to 1992, Moles served as director of
purchasing of Sunbeam-Oster Household Products. During 1993 to1995, Moles served
as vice president of operations of Founders Club Golf Company. He received a
Bachelor of Science Degree in business administration from Tennessee
Technological University, in Cookeville, Tennessee.

ITEM 10.      EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table provides certain summary information concerning compensation
earned, for services rendered in all capacities to the Company, for the fiscal
year ended December 31, 1999 and 1998, by all persons who served as the
Company's Chief Executive Officer during 1999. There was only one (1) other
executive officer of the Company who earned more than $100,000 in compensation
during 1999. These persons are collectively referred to as "Named Executive
Officers."

<TABLE>
<CAPTION>
                                                                                   LONG TERM COMPENSATION
                                                          ANNUAL COMPENSATION              AWARDS
                                                       -------------------------- -------------------------------------------
                                                                   OTHER ANNUAL   RESTRICTED
                                                                   COMPEN-          STOCK       SECURITIES   ALL OTHER
                                                          SALARY      SATION       AWARD(S)     UNDERLYING     COMPEN-
NAME AND PRINCIPAL POSITION                      YEAR      ($)          ($)         ($)(5)      OPTIONS(#)    SATION ($)
---------------------------------------------------------------------------------------------------------------------------

<S>                                              <C>     <C>        <C>           <C>            <C>          <C>
Gary V. Adams, Chairman of the Board             1999    $  67,500         --           --             --            --
   and Chief Executive Officer.................. 1998      134,600         --           --             --            --
                                                 1997       95,000         --           --        600,000            --

Bradley J. Wilhite, President, Acting Chief      1999    $ 140,300         --     $   40,000           --            --
   Executive Officer and Director............... 1998       83,700         --          --         325,000(3)         --
                                                 1997       64,200   $  1,200(2)       --         100,000      $  9,800(4)

                                                 1999    $  32,100         --           --         50,000            --
Sal Lupo,(1) Director........................... 1998      105,400         --           --             --            --
                                                 1997       64,200         --           --             --            --

Gary Moles,                                      1999    $  99,800         --     $   30,000           --         --
   Chief Operating Officer...................... 1998       95,800         --          --         225,000         --
                                                 1997       70,800         --          --              --      $ 17,500(6)
</TABLE>


(1)      Mr. Lupo was a Director of the Company and served as Senior Vice
         President-Marketing from April 1997 through June 30, 1998 and then as
         Executive Vice President until March 31, 1999. Subsequent to March 31,
         1999, Mr. Lupo continues to serve as a Director of the Company.

(2)     Other Annual Compensation for Mr. Wilhite is comprised of an auto
        allowance provided by the Company.

(3)     Includes 100,000 shares originally granted on September 29, 1997 with a
        five (5) year term and an exercise price of $4.125 per share which were
        cancelled and regranted pursuant to the November 20, 1998
        cancellation/regrant program.

(4)     All Other Compensation for Mr. Wilhite is comprised of a moving
        allowance.

                                       41
<PAGE>

(5)     Indicated below is a list of each Named Executive Officer along with the
        number and value of restricted stock holdings as of December 31, 1999.
        The value has been calculated using the closing market price of the
        Company's unrestricted stock on December 31, 1999:

    (a)  Mr. Adams held 1,259,250 shares with a value of $255,000.

    (b)  Mr. Wilhite held 305,000 shares with a value of $61,900.

    (c)  Mr. Lupo held 358,333 shares with a value of $72,700.

    (d)  Mr. Moles held 250,000 shares with a value of $50,800.

(6)      All Other Compensation includes amounts paid to Mr. Moles as a
         consultant prior to his becoming an employee of the Company.

OPTION GRANTS IN LAST FISCAL YEAR

There were no stock option grants made to the Company's Chief Executive Officer
or each of the other Named Executive Officers during the fiscal year ended
December 31, 1999. No stock appreciation rights were granted or exercised during
such fiscal year.

AGGREGATED OPTION EXERCISES AND FISCAL YEAR END VALUES

No options were exercised by the Company's Chief Executive Officer or the other
Named Executive Officers during the fiscal year ended December 31, 1999. The
following table sets forth information concerning option holdings for such
fiscal year with respect to the Company's Chief Executive Officer and each of
the other Named Executive Officers. The fair market value of the Common Stock at
fiscal year-end was $0.235 per share, based on the average of the highest bid
and lowest ask price as quoted on the OTC Bulletin Board. No stock appreciation
rights were exercised or outstanding during such fiscal year.

<TABLE>
<CAPTION>
                                                          NUMBER OF SECURITIES                 VALUE OF UNEXERCISED
                                                         UNDERLYING UNEXERCISED                IN-THE-MONEY OPTIONS
                                                     OPTIONS AT FISCAL YEAR END(#)            AT FISCAL YEAR END($)
                                                  --------------------------------------------------------------------------
 NAME                                                EXERCISABLE      UNEXERCISABLE       EXERCISABLE      UNEXERCISABLE
 ---------------------------------------------------------------------------------------------------------------------------

<S>                                                      <C>              <C>             <C>               <C>
 Gary V. Adams ..................................        600,000                --        $     --          $    --

 Bradley J. Wilhite..............................        212,500           112,500        $     --          $    --

 Sal Lupo........................................         52,667                --        $     --          $    --

 Gary Moles......................................        112,500           112,500        $     --          $    --
</TABLE>

COMPENSATION OF DIRECTORS

FEES AND EXPENSES

Directors are reimbursed for expenses incurred in connection with attending
Board and Committee meetings. Directors receive no additional remuneration for
serving as Directors.

During 1998, the Company paid fees to the following Directors in their capacity
as a Director and in connection with consulting services provided to the
Company: Mr. Aroney accrued, but was not paid, $75,000. (For further information
regarding consulting services provided to the Company by such Directors, See
"Certain Relationships and Related Transactions.")

                                       42
<PAGE>

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

EMPLOYMENT AGREEMENT WITH GARY V. ADAMS

On April 1, 1997, the Company entered into an employment agreement with Mr. Gary
Adams, Chairman and CEO, which terminated upon the death of Mr. Adams on January
2, 2000. Mr. Adams was required to devote his full-time business efforts to the
Company for which he was paid an annual salary, initially at a rate of $120,000
per year, which was later increased to $150,000 per year and was eliminated as
of May 31, 1999. In addition, Mr. Adams was to be paid a royalty upon the sale
or license of "metal woods" designed by him at the rate of $1.00 per club for
the first 500,000 clubs; at $.50 per club for the next 500,000 clubs; and $.25
per club for all sales in excess of 1,000,000 clubs. During 1998, the Company
paid a royalty advance to Mr. Adams in the amount of $59,900. Of this amount,
$9,200 was earned during the year ended December 31, 1999 and $23,400 had been
earned as of December 31, 1998. These amounts are included in cost of goods sold
for the respective fiscal years. The balance of $27,300 has been written-off to
bad debt expense in the accompanying balance sheet as of December 31, 1999, due
to the Company's concern over collection of the balance due from Mr. Adams'
estate.

EMPLOYMENT AGREEMENT WITH BRADLEY J. WILHITE

The Company has entered into an employment agreement with Mr. Bradley J. Wilhite
for a period of one year commencing in April 1997. This agreement automatically
renews for succeeding terms of one year unless either party gives notice to the
other at least sixty (60) days prior to the expiration of any term of his or its
intention not to renew. Mr. Wilhite is required to devote his full-time business
efforts to the Company for which he is paid an annual salary, initially at a
rate of $5,000 per month for the months of May and June 1997 and thereafter at
the rate of $94,800 per year. Mr. Wilhite's salary was later increased to
$135,000 per year. This agreement also provided Mr. Wilhite with 100,000 shares
of the Company's restricted common stock.

CHANGE IN CONTROL ARRANGEMENTS

The Company currently has no compensatory plan or arrangement for the benefit of
any officer, director or employee resulting from the resignation, retirement or
any other termination of such officer, director or employee or from a
change-in-control of the Company.

COMPENSATION COMMITTEE REPORT - SPECIAL OPTION REGRANT PROGRAM

On January 5, 2000, the Stock Option Committee of the Company cancelled
Incentive Stock Options for two Named Executive Officers totaling 550,000 shares
exercisable at $1.00 per share which were due to expire in November, 2003. Of
the 550,000 shares, 225,000 shares were unvested on January 5, 2000. In
exchange, these two Named Executive Officers were granted Incentive Stock
Options totaling 975,000 shares which are exercisable at $0.20 per share, were
fully-vested on January 5, 2000 and expire in January, 2005.

On January 5, 2000, the Stock Option Committee of the Company cancelled the
following Non-Statutory Stock Options for three Board Members totaling 595,000
shares exercisable at $1.00 per share which were due to expire in November,
2003. All 595,000 shares were vested on January 5, 2000. In exchange, these
three Board Members were granted Non-Statutory Stock Options totaling 695,000
shares which are exercisable in a range of $0.20 to $0.50 per share, were
fully-vested on January 5, 2000 and expire from January, 2002 through January,
2005.

On January 5, 2000, the Stock Option Committee of the Company also cancelled a
Non-Statutory Stock Option originally granted to Mr. Gary V. Adams (which was
held by his estate after his death on January 2, 2000) for 600,000 shares
exercisable at$0.50 per share which expired on March 31, 2000. In exchange, the
estate of Mr. Adams was granted a Non-Statutory Stock Option for 600,000 shares
which is exercisable at $0.50 per share, were fully-vested on January 5, 2000
and expire on January 5, 2001.

                                       43

<PAGE>

ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to the Company regarding the
ownership of the Company's Common Stock as of March 31, 2000 for (i) each
Director and nominee who owns Common Stock, (ii) all persons or entities who
were known by the Company to be beneficial owners of five percent (5%) or more
of the Company's Common Stock, (iii) the Chief Executive Officer and the other
executive officers whose compensation for 1999 were each in excess of $100,000
and (iv) all executive officers and Directors of the Company as a group.

<TABLE>
<CAPTION>
                                                            NUMBER OF SHARES                  PERCENT OF TOTAL SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER                      BENEFICIALLY OWNED(1)           OUTSTANDING BENEFICIALLY OWNED
------------------------------------                      ------------------              ------------------------------
<S>                                                             <C>                                    <C>
Estate of Gary V. Adams (2)
2532 La Costa Avenue
Carlsbad, California 92008.........................             1,859,250                              9.7%

Theodore Aroney (3)
7220 Arenal Lane
Carlsbad, California 92009 ........................             2,205,000                              11.6%

Mark Bergendahl (4)
3505 Cadillac Avenue, #O-208A
Costa Mesa, California 92626.......................               699,500                               3.7%

Henry J. Fleming, Jr. (5)
1322 Surrey Court
Alonquin, Illinois 60102 ..........................               295,000                               1.6%

Sal Lupo (6)
41 Antigua
Dana Point, California 92629.......................               408,333                               2.2%

Bradley J. Wilhite (7)
1736 Woodbine Place
Oceanside, California 92054 .......................               905,000                               4.7%

Gary Moles (8)
31718 Corte Rosario
Temecula, California 92592 ........................               625,000                               3.3%

ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (7 PERSONS).............................             6,997,083                              33.1%

Sidney Craig
11355 N. Torrey Pines
La Jolla, California 92037  .......................             1,300,000                               7.0%
-----------
</TABLE>

(1)    Beneficial ownership is determined in accordance with the rules of the
       Securities and Exchange Commission and generally includes voting or
       investment power with respect to securities. Percentage beneficially
       owned is based on a total of 18,616,100 shares of Common Stock issued and
       outstanding as of March 31, 2000. Shares of Common Stock subject to
       options or warrants currently exercisable or convertible, or exercisable
       or convertible within 60 days of March 31, 2000 are deemed outstanding
       for computing the percentage of the person holding such options or
       warrants but are not outstanding for computing the percentage of any
       other person. Except as indicated in the footnotes to this table and

                                       44
<PAGE>

       pursuant to applicable community property laws, the persons named in the
       table have sole voting and investment power with respect to all shares of
       Common Stock beneficially owned.

(2)    Includes 600,000 shares not presently outstanding, which the Estate of
       Gary V. Adams (former Chairman of the Board and Chief Executive Officer
       passed away January 2, 2000) has the right to acquire through the
       exercise of outstanding options and are exercisable at $.50 per share for
       one year from the date of Mr. Adams' passing.

(3)    Includes 350,000 shares not presently outstanding, which Mr. Theodore
       Aroney (Acting Chairman) has the right to acquire as follows: 150,000
       shares through the exercise of outstanding options at $0.22 per share
       through January 5, 2005; and 200,000 shares through the exercise of
       outstanding warrants at $1.00 per share through November 19, 2001.

(4)    Includes 154,000 shares not presently outstanding which Mr. Mark
       Bergendahl (Director) has the right to acquire as follows: 150,000 shares
       through the exercise of outstanding options at $0.20 per share through
       January 5, 205; and 4,000 shares through the exercise of outstanding
       warrants at $5.00 per share through March 16, 2001.

(5)    Includes 295,000 shares not presently outstanding, which Henry J.
       Fleming, Jr. (Director) has the right to acquire through the exercise of
       outstanding options at $0.50 per share through January 5, 2002.

(6)    Includes 50,000 shares not presently outstanding, which Sal Lupo
       (Director) has the right to acquire through the exercise of outstanding
       warrants at $1.38 per share through March 31, 2004.

(7)    Includes 600,000 shares not presently outstanding, which Mr. Bradley J.
       Wilhite (President, Acting Chief Executive Officer and Director) has the
       right to acquire through the exercise of outstanding options at $0.20 per
       share through January 5, 2005.

(8)    Includes 375,000 shares not presently outstanding, which Mr. Gary Moles
       (Chief Operating Officer) has the right to acquire through the exercise
       of outstanding options at $0.20 per share through January 5, 2005.

To the Company's knowledge, based solely upon representations from such
shareholders, each beneficial owner of more than ten percent of the Company's
capital stock and all officers and directors filed all reports and reported all
transactions on a timely basis with the Securities and Exchange Commission (the
"Commission"), the NASD and the Company.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In November 1998, the Company was advised by its principal supplier of club
heads that, due to changes in the golf industry, the supplier had decided to
cease production of golf club heads. As of December 9, 1998, the Company owed
this supplier $556,300 for golf club heads which had been received and had open
purchase orders for golf club heads with a value of approximately $2,350,000.
The Company was able to negotiate a one-time buy-out of the balance owing to the
supplier plus the open purchase orders for $1,090,000 as of December 11, 1998.
This transaction represented a discount of 62% from the total commitment to the
original vendor of $2,906,300.

As the Company did not have the financial resources to complete the buy-out
discussed above, the Company entered into an agreement with
Bignell-Ward-Bignell, whose President is Phillip A. Ward, a Director of the
Company, to purchase the golf club heads that the Company purchased, but had not
yet paid for, from the supplier, plus the remaining golf club heads on open
purchase orders as they are completed by the supplier. Pursuant to the
agreement, the Company purchases golf club heads on a COD basis, as-needed from
Bignell-Ward-Bignell. In exchange for financing the purchase of these golf club
heads, the Company pays a 20%

                                       45
<PAGE>

mark-up over cost. The total purchase price of these golf club heads is
approximately $1,410,000 and must be paid no later than June 30, 1999.
Additionally, the agreement with Bignell-Ward-Bignell requires the Company to
purchase a certain minimum number of golf club heads each month from January
through June 1999. If the Company fails to make these purchases,
Bignell-Ward-Bignell is under no obligation to sell the remaining golf club
heads to the Company and the Company would lose any value-added costs previously
paid for by the Company.

As of March 31, 2000, Bignell-Ward-Bignell has not sold any of the club heads to
anyone other than the Company. The Company is currently attempting to negotiate
a revised delivery schedule that would result in the Company purchasing the
remaining finished club heads for approximately $675,000 between April and June,
2000. There is no assurance, however, that the Company will be successful in its
negotiations, which could result in the Company's clubs being sold by
Bignell-Ward-Bignell at a substantial discount over the Company's current
market price.

Sal Lupo, former Senior Vice President of Marketing and Director of the Company
was the owner of the media (print & television) agency used by the Company in
1998. The suppliers of this media discounted their billings to the agency by
15%, as is standard in the industry. The Company then paid the agency the net
amount plus 3%. The total amount paid to the agency in 1998 for media and
commissions was approximately $391,300.

                                       46
<PAGE>



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

(A)      EXHIBITS

The following exhibits are referenced or included in this report:

        EXHIBIT         DESCRIPTION

           2.1*         Agreement & Plan of Reorganization
           3.1*         Articles of Incorporation
           3.2*         Articles of Amendment
           3.3*         Articles of Amendment
           3.4*         By-Laws
           4.1*         Common Stock Specimen Certificate
           4.2*         Form of Warrant Agreement
           4.3*         Form of Warrant Certificate
           5.1*         Opinion of Counsel
          10.1*         Lease Agreement - Carlsbad, CA
          10.2*         Lease Agreement - McHenry, IL
          10.3*         Stock Option Plan
          10.4*         Employment Agreement - Gary Adams
          10.5*         Employment Agreement - Bradley Wilhite
          10.6*         Employment Agreement - Mario Cesario
          10.7*         Employment Agreement - Thomas Grimley
          10.8*         Employment Agreement - Eddie Langert
          16.1*         Letter from Clumeck, Stern, Phillips & Schenkelberg
                            on change in certifying accountant
          16-1*         Letter from BDO Seidman, LLP on change in certifying
                            accountant
          24.1*         Power of Attorney (see page 45)
          27.1*         Financial Data Schedule - 1999
---------------------
*        Exhibits previously filed.

(B)      REPORTS ON FORM 8-K

The following reports on Form 8-K were filed during the fourth quarter of 1999
and the first quarter of 2000:

   o     On December 2, 1999, the Company filed a Current Report on Form 8-K
         reporting that, effective November 23, 1999, BDO Seidman, LLP resigned
         as the independent accountants and that the Board of Directors
         appointed Clumeck, Stern, Phillips & Schenkelberg and the Company's
         independent auditors effective December 1, 1999.

   o     On December 29, 1999, the Company filed a Current Report on Form 8-K to
         submit a copy of the letter of agreement with Form 8-K filed with the
         Commission on December 2, 1999 from BDO Seidman, LLP.

   o     On December 30, 1999, the Company filed a Current Report on Form 8-K to
         submit a copy of the letter of agreement with Form 8-K filed with the
         Commission on December 2, 1999 from BDO Seidman, LLP.

                                       47
<PAGE>



                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      MCHENRY METALS GOLF CORP.


Date:    April 12, 2000             By:    /S/ BRADLEY J. WILHITE
                                        ---------------------------------------
                                           Bradley J. Wilhite
                                           President, Acting Chief Executive
                                           Officer, Director

Date:    April 12, 2000             By:    /S/ THEODORE ARONEY
                                        --------------------------------------
                                           Theodore Aroney
                                           Vice President of Finance

                                       48