Exhibit 21

<TABLE>
<CAPTION>
                         Subsidiaries of the Registrant




                               State or Other
                               Jurisdiction of
Name  of                       Incorporation     Percent
Subsidiary                     or Organization   Owned
-----------------------------  ----------------  -------

<S>                            <C>              <C>

Gear Fit Golf Company          California         100

GGI, Inc.                      Nevada             100

Pacific Golf Holdings, Inc.    California         100

Bel Air - Players Group, Inc.  California         100
</TABLE>

                          INDEX TO FINANCIAL STATEMENTS


Report  of  Independent  Auditors
     for  the  years  ended  December  31,  1999  and  1998           F-1

Consolidated  Balance  Sheets  at  December  31,  1999  and  1998     F-2

Consolidated  Statements  of  Operations
     for  the  years  ended  December  31,  1999  and  1998           F-3

Consolidated  Statements  of  Shareholders  Equity
     for  the  years  ended  December  31,  1999  and  1998           F-4

Consolidated  Statements  of  Cash  Flows
     for  the  years  ended  December  31,  1999  and  1998           F-5

Notes  to  Consolidated  Financial  Statements                        F-7









<PAGE>
                         REPORT OF INDEPENDENT AUDITORS


To  the  Board  of  Directors  and  Shareholders
GolfGear  International,  Inc.

We  have  audited  the  accompanying  consolidated  balance  sheets  of GolfGear
International,  Inc.  and subsidiaries as of December 31, 1999 and 1998, and the
related  consolidated  statements  of  operations, shareholders' equity and cash
flows  for  the  years  then  ended.  These  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  audit.

We  conducted  our  audits  in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit 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  financial  position of
GolfGear  International, Inc. and subsidiaries as of December 31, 1999 and 1998,
and  the  consolidated  results of their operations and cash flows for the years
then  ended,  in  conformity  with  generally  accepted  accounting  principles.


                                             HOLLANDER,  LUMER  &  CO.

Los  Angeles,  California
March  17,  2000


<PAGE>
<TABLE>
<CAPTION>
                       GOLFGEAR INTERNATIONAL, INC. AND SUBSIDIARIES
                                CONSOLIDATED BALANCE SHEETS

                                                                      December 31,
                                                                      ------------
                                                                    1999          1998
                                                                ------------  -------------
<S>                                                             <C>           <C>
                                         ASSETS
CURRENT ASSETS
Cash                                                            $   793,262   $     31,771

  Accounts receivable, net of allowance
     for doubtful accounts of $40,000 in 1999,
     and $42,000 in 1998                                            446,214        280,241
Inventories                                                         452,272        424,420
Prepaid expenses                                                     20,610          6,495
                                                                ------------  -------------
TOTAL CURRENT ASSETS                                              1,712,358        742,927
PROPERTY AND EQUIPMENT, NET                                         122,046        116,967
OTHER ASSETS
Patents and trademarks, net                                         156,504        173,380
Deposits                                                             23,025         10,126
                                                                ------------  -------------
TOTAL OTHER ASSETS                                                  179,529        183,506
                                                                ------------  -------------
                                                                $ 2,013,933   $  1,043,400
                                                               =============  =============

                               LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Bank credit line payable                                     $    16,020   $     47,261
   Notes payable to shareholders                                     35,434         72,397
   Notes payable                                                     70,631         16,203
   Accounts payable and accrued expenses                            641,498        674,048
   Accrued product warranties                                        36,000         43,904
   Accrued interest                                                  12,448         11,753
   Accrued officer's compensation                                   124,000         65,000
                                                                ------------  -------------
TOTAL CURRENT LIABILITIES                                           936,031        930,566
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value;
      authorized - 10,000,000 shares:
      Series A Senior Convertible Stock:
      issued and outstanding - 216,626 shares
      (stated value - $9.50 per share)                                  217
Common stock, $.001 par value; authorized-
      50,000,000 shares; issued and outstanding-
      12,816,348 shares in 1999, and 12,497,027
      shares in 1998                                                 12,816         12,497
   Additional paid-in capital                                     7,981,695      5,633,949
   Accumulated deficit                                           (6,916,826)    (5,533,612)
                                                                ------------  -------------
       TOTAL SHAREHOLDERS' EQUITY                                 1,077,902        112,834
                                                                ------------  -------------
                                                                $ 2,013,933   $  1,043,400
                                                                ============  =============

  See accompanying Notes to Consolidated Financial Statements


<PAGE>
                         GOLFGEAR INTERNATIONAL, INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF OPERATIONS

  Years Ended
                                                                        December 31,
                                                                    1999           1998
                                                                ------------  -------------

SALES                                                           $ 2,302,407   $  1,244,119

COST OF GOODS SOLD                                                1,379,855        937,734
                                                                ------------  -------------

GROSS PROFIT                                                        922,552        306,385
                                                                ------------  -------------

EXPENSES

   Selling and marketing                                            573,933        657,853
   Tour and pro contracts                                           191,315        479,561
   Infomercial                                                                     503,567
   Write off of Rugg assets                                                        135,000
   Bad debt expense                                                 240,069         39,448
   General and administrative                                     1,177,268      1,130,242
   Depreciation and amortization                                     51,898         56,659
   Interest expense                                                  55,701         37,213
   Interest income                                                   (6,633)        (2,988)
                                                                ------------  -------------
    TOTAL EXPENSES                                                2,283,551      3,036,555
                                                                ------------  -------------
NET LOSS                                                        $(1,360,999)  $( 2,730,170)
                                                                ============  =============

NET LOSS APPLICABLE TO COMMON  SHAREHOLDERS

   Net loss                                                     $(1,360,999)  $( 2,730,170)
   Less dividends on preferred stock                                (22,215)
                                                                ------------  -------------
 NET LOSS APPLICABLE TO COMMON
    SHAREHOLDERS                                                $(1,383,214)  $ (2,730,170
                                                                ============  =============

LOSS PER COMMON SHARE - BASIC AND DILUTED                       $     (0,11)  $      (0,24)
                                                                ============  =============


WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING             12,573,152     11,558,995
                                                                ============  =============


</TABLE>


     See  accompanying  Notes  to  Consolidated  Financial  Statements


<PAGE>
<TABLE>
<CAPTION>
                                       GOLFGEAR INTERNATIONAL, INC. AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                           YEARS ENDED DECEMBER 31, 1999 AND 1998

                                           PREFERRED STOCK         COMMON STOCK      ADDITIONAL
                                           ---------------         ------------      ----------
                                                                                                   PAID-IN     ACCUMULATED
                                           SHARES   AMOUNT      SHARES      AMOUNT    CAPITAL      DEFICIT        TOTAL
                                           -------  -------  ------------  --------  ----------  ------------  ------------
<S>                                        <C>      <C>      <C>           <C>       <C>         <C>           <C>

BALANCE, DECEMBER 31, 1997                          $         10,250,876  $ 10,251  $ 3,260,132  $(2,803,442)   $ 466,941
CONVERSION OF ACCOUNTS PAYABLE
INTO COMMON STOCK                                                100,000       100       99,900                    100,000
ISSUANCE OF COMMON STOCK FOR SERVICES                            256,033       256      275,379                    275,635
ISSUANCE OF COMMON STOCK FOR ACQUISITION                         125,000       125      124,875                    125,000
FAIR VALUE OF OPTIONS AND WARRANTS ISSUED
 TO NON-EMPLOYEES                                                                       449,128                    449,128
ISSUANCE OF COMMON STOCK IN PRIVATE
 PLACEMENTS, NET                                               1,747,500     1,747    1,413,303                  1,415,050
EXERCISE OF STOCK OPTIONS                                         17,618        18       11,232                     11,250
NET LOSS FOR THE YEAR                                                                             (2,730,170)   (2,730,170)
                                           -------  -------  ------------  --------  ----------  ------------  ------------

BALANCE, DECEMBER 31, 1998                                    12,497,027    12,497    5,633,949   (5,533,612)      112,834

ISSUANCE OF COMMON STOCK FOR SERVICES                             33,500        33       22,352                     22,385

ISSUANCE OF COMMON STOCK IN PRIVATE
 PLACEMENTS, NET                                                  66,667        67       49,933                     50,000

ISSUANCE OF PREFERRED STOCK IN PRIVATE
 PLACEMENT, NET                            210,526      211                           1,785,241                  1,785,452
ISSUANCE OF STOCK RELATED TO ACQUISITION
 OF BEL AIR INVENTORY                        3,761        4      275,000       275      168,655                    168,934
PREFERRED STOCK DIVIDEND                     2,339        2                              22,213      (22,215)
FAIR VALUE OF OPTIONS AND WARRANTS
 ISSUED TO NON-EMPLOYEES                                                                299,296                    299,296
ADJUST SHARES OUTSTANDING                                        (55,846)      (56)          56
NET LOSS FOR THE YEAR                                                                             (1,360,999)   (1,360,999)
                                           -------  -------  ------------  --------  ----------  ------------  ------------

BALANCE, DECEMBER 31, 1999                 216,626  $   217   12,816,348   $ 12,816  $ 7,981,695  $(6,916,826) $ 1,077,902
                                           =======  =======  ============  ========  ==========  ============  ============
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                     GOLFGEAR INTERNATIONAL, INC., AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                     Years Ended
                                                                    December  31,
                                                            ----------------------------
                                                                 1999           1998
                                                            --------------  ------------
<S>                                                         <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                 $  (1,360,999)  $(2,730,170)

   Adjustments to reconcile net loss
      to net cash used in operating activities:
         Depreciation and amortization                             51,898        56,659
         Provision for bad debts                                  240,069        39,448
         Common stock issued for services                          22,385       275,635
         Common stock issued for assets written off                             125,000

         Fair value of options and  warrants
            issued to non-employees                               299,296       449,128

         Changes in operating assets and liabilities:
            (Increase) decrease in:
   Accounts receivable                                           (406,042)     (243,080)
   Inventories                                                    141,082      (142,624)
   Prepaid expenses                                               (14,115)       61,302
   Deposits                                                       (12,899)       (3,226)

            Increase (decrease) in
   Accounts payable                                                37,372       582,211

   Accrued product warranties                                      (7,904)       (4,164)
   Accrued interest                                                   695         5,994
   Accrued officer's compensation                                  59,000        15,000

   NET CASH USED IN
      OPERATING ACTIVITIES
                                                            $    (950,162)  $(1,512,887)
                                                            --------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES

    Purchases of property and equipment                           (40,101)      (88,654)
    Additions to patents and trademarks                                         (16,355)
                                                            --------------  ------------
  NET CASH USED IN
     INVESTING ACTIVITIES                                   $     (40,101)  $  (105,009)
                                                            --------------  ------------


<PAGE>
                     GOLFGEAR INTERNATIONAL, INC., AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS  (CONTINUED)

                                                                     Years Ended
                                                                    December  31,
                                                            ----------------------------
                                                                 1999           1998
                                                            --------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES

      Sales of equity securities in private
         placements, net                                    $   1,835,452   $ 1,415,050
      Decrease in notes payable to shareholders                   (36,963)
      Exercise of stock options                                                  11,250
      Increase (decrease) in bank credit line                     (31,241)        4,769
      Proceeds from short-term borrowings                          50,000        65,000
      Repayments on short-term borrowings                         (65,494)      (34,797)
                                                            --------------  ------------
NET CASH PROVIDED BY
   FINANCING ACTIVITIES                                         1,751,754     1,461,272
                                                            --------------  ------------
NET INCREASE (DECREASE) IN CASH                                   761,491      (156,624)
CASH, BEGINNING OF PERIOD                                          31,771       188,395
                                                            --------------  ------------
CASH, END OF PERIOD                                         $     793,262   $    31,771
                                                            ==============  ============

CASH PAID FOR:
   Interest                                                 $      40,406   $    16,553

NON-CASH INVESTING AND FINANCING ACTIVITIES:

      Conversion of accounts payable
         into common stock                                                  $   100,000

      Issuance of preferred shares for payment of dividend  $      22,215
     Common stock issued for inventory                      $     168,934

      Conversion of accounts payable into
         notes payable                                      $      69,922


           See accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>
         GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Description of Business - GolfGear International, Inc. and its subsidiaries
     ----------------------
     (collectively,  "GolfGear" or the "Company") designs,  develops and markets
     golf clubs and related golf products.

     GolfGear,  formerly Harry Hurst,  Jr., Inc. ("HHI") was incorporated  under
     the laws of the State of Nevada  on  October  9,1997.  The  Company  is the
     successor entity resulting from a December 5, 1997  reorganization  between
     GolfGear  International,  Inc.  ("GGI"),  which has been active in the golf
     business since 1990, and HHI, a non-operating public shell corporation. HHI
     changed its name to GolfGear International,  Inc., and GGI changed its name
     to GGI, Inc. and remains a  wholly-owned  subsidiary  of the Company.  Each
     share of Common  Stock of GGI was  exchanged  for  3.5235  shares of common
     stock  of HHI.  The  shareholders  of  GGI,  constituting  90% of the  then
     outstanding  common  stock,  became  the  controlling  shareholders  of the
     Company.

     For accounting purposes,  the acquisition of GGI by HHI has been treated as
     a  reverse  acquisition  of GGI  with  GGI  considered  the  acquirer.  The
     historical financial statements prior to December 5, 1997 are those of GGI.
     All  information  in  the  accompanying   financial   statements  has  been
     retroactively restated to reflect this transaction.

     Segment and Geographic  Information - The Company  operates in one business
     -----------------------------------
     segment. Sales are to customers in both the United States and the Far East.
     Sales for the fiscal  year ended  December  31,  1998 to  customers  in the
     United States and the Far East were $1,203,309  (96.7%) and $40,810 (3.3%),
     respectively.  Sales  for  the  fiscal  year  ended  December  31,  1999 to
     customers in the United States and the Far East were $1,800,805 (78.2%) and
     $501,602 (21.8%), respectively.

     Principles of Consolidation - The consolidated financial statements include
     ---------------------------
     the accounts of the Company,  its wholly-owned  subsidiary,  GGI, Inc., and
     GGI,  Inc.'s  wholly-owned  subsidiaries,  GearFit Golf Company and Pacific
     Golf Holdings, Inc. All significant inter-company transactions and balances
     have been eliminated in consolidation.

     Use of Estimates - The  preparation  of financial  statements in conformity
     ---------------
     with generally accepted  accounting  principles requires management to make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities, 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.

     Inventories. Inventories are stated at lower of cost (average) or market.
     -----------
     Property  and  Equipment  -  Property  and  equipment  are  stated at cost.
     ------------------------
     Depreciation  is computed on the  straight-line  method over the  estimated
     useful lives of the assets which range from five to seven years.  Leasehold
     improvements are amortized on the straight-line method over the term of the
     lease or the useful life of the asset, whichever is shorter.

     Property  and  equipment  are reviewed for  impairment  whenever  events or
     circumstances  indicate that the assets non-discounted  expected cash flows
     are not  sufficient  to recover its carry amount.  The Company  measures an
     impairment  loss by  comparing  the fair value of the asset to its carrying
     amount.  Fair  value of an  asset is  calculated  as the  present  value of
     expected future cash flows.

     Patents and Trademarks - Patents and trademarks are being  amortized on the
     ----------------------
     straight-line method over a seventeen and ten year life, respectively.

     Revenue  Recognition - Revenue is  recognized  when products are shipped to
     --------------------
     customers.  The  Company  generally  provides a lifetime  warranty  against
     defects.  The Company makes a provision for warranty costs in the period of
     sale. The Company  periodically reviews the adequacy of the accrued product
     warranties.

     Stock-Based  Compensation  - The Company  periodically  issues common stock
     ------------------------
     options and common stock purchase  warrants to employees and  non-employees
     in  non-capital  raising  transactions  for  services  rendered  and  to be
     rendered, and as financing costs.

     The Company adopted Statement of Financial Accounting Standards ("SFAS) No.
     123,  "Accounting for Stock-Based  Compensation",  which establishes a fair
     value method of accounting for stock-based compensation plans.


<PAGE>
         GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

     The  provisions  of SFAS No.  123 allow  companies  to either  expense  the
     estimated  fair  value  of stock  options  or to  continue  to  follow  the
     intrinsic value method set forth in Accounting Principles Board Opinion No.
     25,  "Accounting  for Stock Issued to  Employees",  but to disclose the pro
     forma effect on net income  (loss) and net income  (loss) per share had the
     fair value of the stock options been exercised.  The Company has elected to
     continue  to account  for  stock-based  compensation  plans  utilizing  the
     intrinsic value method. Accordingly, compensation cost for stock options is
     measured as the excess,  if any, of the fair market price of the  Company's
     common stock at the date of grant above the amount an employee  must pay to
     acquire the common stock.

     In  accordance  with  SFAS No.  123,  the  Company  has  provided  footnote
     disclosure with respect to stock-based employee  compensation.  The cost of
     stock-based  employee  compensation  is measured at the grant date based on
     the value or the award and is recognized over the vesting period. The value
     of the  stock-based  award is determined  using the  Black-Scholes  pricing
     model  whereby  compensation  cost is the  excess of the fair  value of the
     award  as  determined  by the  pricing  model  at the  grant  date or other
     measurement  date above the  amount an  employee  must pay to  acquire  the
     stock.  The  resulting  amount is charged  to expense on the  straight-line
     basis over the  period in which the  Company  expects  to receive  benefit,
     which is generally  the vesting  period.  Beginning  in 1999,  stock option
     issued to  non-employee  directors at fair market value are  accounted  for
     under  the  intrinsic  value  method.  Prior to  1999,  such  options  were
     accounted for as an expense at estimated fair market value.

     With respect to shares of common  stock issued for services  rendered or to
     be rendered,  or for financing  costs,  such shares are valued based on the
     fair market  price on the  transaction  date,  adjusted for factors such as
     trading  restrictions,  registration  rights,  trading  volume  and  market
     liquidity,  which generally  results in a reduction ranging from 25% to 33%
     to the fair market price at the transaction date.

     Income Taxes - The Company  accounts for income taxes  utilizing the assets
     ------------
     and liability  approach,  which  requires the  recognition  of deferred tax
     assets  and  liabilities  for  the  expected  future  tax  consequences  of
     temporary  differences  between  the basis of assets  and  liabilities  for
     financial reporting purposes and tax purposes.

     Net Loss Per Common  Share -  Effective  December  31,  1997.  the  Company
     --------------------------
     adopted  Statement  of  Financial  Accounting  Standards  ("SFAS") No. 128.
     "Earnings  Per  Share;"  which  establishes  standards  for  computing  and
     presenting  earnings per share.  SFAS No. 128 replaces the  presentation of
     primary  earnings per share and fully diluted earnings per share with basic
     earnings  per share and diluted  earnings  per share,  respectively.  Basic
     earnings per share excludes the dilutive effects of options and convertible
     securities, if any, and is computed by dividing net income (loss) available
     to common  stockholders  by the weighted  average  number of common  shares
     outstanding  during the  period.  Diluted  earnings  per share is  computed
     assuming  the  exercise  or  conversion  of common  equivalent  shares,  if
     dilutive,  consisting of unissued shares under stock options,  warrants and
     debt  instruments.  In  accordance  with SFAS No.  128,  all prior  periods
     presented have been restated to conform to the new presentation.

     At December 31, 1999 and 1998,  potential dilutive securities  representing
     4,079,582 shares and 3,045,508 shares of common stock,  respectively,  were
     not included in the earnings per share calculation since their effect would
     be  anti-dilutive.  At December 31,  1999,  potential  dilutive  securities
     consisted of 1,979,903  outstanding stock options and 2,099,679 outstanding
     common stock purchase  warrants.  At December 31. 1998,  potential dilutive
     securities  consisted of 1,359,904  outstanding stock options and 1,685,604
     outstanding common stock purchase warrants.

     Basic  and  diluted  earnings  per  share  are the  same  for  all  periods
     presented.

     Concentration  of Credit Risk - The Company  maintains  its accounts with a
     ----------------------------
     financial  institution with a high credit rating.  As of December 31, 1999,
     the  Company had an account in one bank with a balance of  $746,685,  which
     exceeded the Federally insured limit.

     Allowance for Doubtful Accounts - The Company makes periodic evaluations of
     ------------------------------
     the  creditworthiness  of its  customers  and  generally  does not  require
     collateral.  As of  the  balance  sheet  dates  presented,  management  has
     determined that an adequate provision has been made for doubtful accounts.

     Dependence  on Major  Suppliers - The Company is  dependent  on three major
     -------------------------------
     suppliers for the production of golf club heads and tooling used to produce
     the heads.  However,  management  believes that any risk is mitigate due to
     the large number of alternative suppliers.

     Major Customers - Four customers  accounted for  approximately 68% of total
     --------------
     sales in 1999. Two customers accounted for approximately 49% of total sales
     in 1998.

     Reclassifications - Certain prior period balances have been reclassified to
     -----------------
     conform with current years presentation.


<PAGE>
          GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

     Comprehensive Income - A statement of comprehensive income is not presented
     --------------------
     as the  Company  has no  items  of  comprehensive  income  for the  periods
     presented.

     Working Capital  Requirements - The Company has incurred  operating  losses
     -----------------------------
     and negative cash flows from operations  during the past few years, and has
     relied on the sale of its securities to fund its operations since 1997. The
     Company believes that the anticipated cash flows from operations,  combined
     with the net  proceeds  from the recent sale of  preferred  stock,  will be
     adequate  to fund  operations  for 2000.  However,  to the extent  that the
     Company  experiences a  substantial  increase in revenues  and/or  acquires
     other golf operations or companies, the Company may seek additional debt or
     equity  financing.  Should  the  cash  flows  generated  by  operating  and
     financing   activities  be  insufficient  to  fund  the  Company's   future
     operations,  the  Company  believes  that it will  be  able to  adjust  its
     expenditures  and/or reduce its level of operations,  as it has in previous
     periods, to correlate its cash flows to its available cash resources.

2. ACQUISITIONS

     Bel Air Golf  Companies - On October 1, 1999,  the Company  entered into an
     ----------------------
     agreement to acquire all of the operating assets of Bel Air Golf Companies,
     including  the "Bel Air Golf" and "Players  Golf" trade names.  The Bel Air
     Golf Companies were acquired by new management in 1997 and had consolidated
     unaudited revenues of approximately  $2,000,000 for the year ended December
     31, 1998. Players Golf offers a full line of junior golf clubs, and Bel Air
     Golf is known  primarily for golf glove  products that offer both value and
     quality.  Bel Air Golf and  Players  Golf will be  operated  as a  separate
     division of Golf Gear.

     In  consideration  for  acquiring  these  assets,  the  Company  assumed
     liabilities  of  approximately  $50,000  and  issued  400,000 shares of its
     restricted common stock.  The Company also agreed to issue 255,000 warrants
     exercisable  at  $1.00  per  share for a period of six months from closing,
     100,000  warrants  exercisable  at $1.00 per share for a period of one year
     from closing,  and 100,000 warrants exercisable at $1.00 per share, 100,000
     warrants  exercisable at $2.00 per share and $100,000 warrants exercisable
     at $3.00  per  share, vesting and exercisable only if net revenues from Bel
     Air  Golf  and  Players Golf reach $1,500,000, $2,000,000 and $2,500,000 in
     2000, 2001,  2002, respectively.  The Company issued 250,000 of the 400,000
     shares  on  November 29, 1999 as an advance, in order to be able to operate
     the  Bel  Air  Golf Companies on an interim basis.  The Company also issued
     10%  of  the  securities  described above as a finder's fee with respect to
     this transaction.  This transaction closed on April 11, 2000.

     Douglas Rugg - On May 16, 1998,  the Company  entered into an agreement for
     ------------
     the  purchase of assets with Douglas  Rugg for the  acquisition  of certain
     assets.  This agreement covers the purchase of: (i) all rights and interest
     in and to the  design of  certain  golf bags and a golf bag  carrying  case
     which includes technology know-how, and all documentation thereto; (ii) the
     design of all related eye-wear; (iii) the name "Executive Trail Blazer Golf
     Bag;" (iv) all books,  records and customer and supplier  lists used in the
     business; (v) all rights and interest in and to patents, trademarks, rights
     under  contracts,  leases,  and claims or causes of action related to these
     assets  or the  business;  (vi) all  inventory  relating  to golf  bags and
     sunglasses;  and (vii) all machinery and equipment relating to the assembly
     and/or shipping of the inventory.

     In  consideration  for  purchasing  these  assets,  the  Company  paid  the
     following:  (i) the sum of $10,000;  (ii) 125,000  shares of the  Company's
     restricted  common  stock  (valued at $1.00 per  share);l and (iii) a three
     percent royalty on gross sales of all the merchandise and products  covered
     by this agreement. In connection with this acquisition,  Mr. Rugg agreed to
     furnishing certain consulting services to the Company.  The acquisition was
     completed  on  November  11,  1998 and the  Company  wrote  off the  assets
     acquired as of December  31, 1998.  No royalties  have been paid under this
     agreement.

3. INVENTORIES

Inventories consisted of the following at December 31, 1999 and 1998:

                                           December 31,
                                     ------------------------
                                         1999         1998
                                     ------------  ----------
                  Components parts   $  296,847  $  274,319
                  Finished goods        155,425     150,101
                                     $  452,272  $  424,420


<PAGE>
<TABLE>
<CAPTION>
         GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

4.     PROPERTY  AND  EQUIPMENT

Property and equipment consisted of the following at December 31. 1999 and 1998:

                                                 December 31,
                                           ----------------------
                                              1999        1998
                                           ----------  ----------
<S>                                        <C>         <C>
     Machinery and equipment               $    5,850  $    5,850
     Office equipment                          12,909       6,056
     Computers and software                    51,110      50,111
     Furniture and fixtures                    40,295      40,295
     Automobile                                41,143       7,818
     Trade show booths                         57,499      64,824
     Tooling                                  170,876     164,626
     Leasehold improvement                      1,913       1,913
                                              381,595     341,493
                                           ----------  ----------
     Less accumulated depreciation and
     amortization                             259,549     224,526
                                           ----------  ----------
                                           $  122,046  $  116,967
                                           ==========  ==========
</TABLE>

5.   BANK CREDIT LINE PAYABLE

     At December  31, 1998,  the Company had an  unsecured  $70,000 bank line of
     credit with Wells Fargo Bank.  The line of credit matured in November 1999,
     and was renewed with a maturity date of November 2000.  Interest is payable
     monthly  at the  rate of prime  plus 3%  (12.75%  at  December  31,  1999).
     Outstanding  borrowings  at  December  31,  1999 and 1998 were  $16,020 and
     $47,261,  respectively.  The line is personally guaranteed by the Company's
     President and Chief Executive Officer.

6.   NOTES PAYABLE

     The Company had notes payable to shareholders  totaling $35,434 and $72,397
     as of December 31, 1999 and 1998, respectively.  The notes bear interest at
     10% and are payable on demand.

     In October  1997, a certain  creditor  converted the balance of its account
     payable  into a note  payable in the amount of $25,000.  As of December 31,
     1998, the note had an outstanding balance of $16,203, which was paid-off in
     1999.

     On January 8, 1999, the Company  borrowed  $50,000 from a third-party at 9%
     interest, due on April 8, 1999. In connection therewith, the Company issued
     a warrant to purchase  20,000 shares of common stock  exercisable  at $1.06
     per share through January 8, 2004. This note was paid off in October 1999.

     On February 3, 1999, the Company  borrowed $10.000 from a third party at 9%
     interest,  due on February 3, 2000.  At December  31,  1999,  the  original
     balance remained outstanding.

7.   COMMITMENTS AND CONTINGENCIES

     Operating Leases - The Company leases its facilities and various  equipment
     ----------------
     under  non-cancelable  operating  leases.  Future  minimum  lease  payments
     required under non-cancelable operating leases with initial terms in excess
     of one year were as follows at December 31, 1999:


              Year Ending
              December 31,
           ------------------
                  2000                  $  69,630
                  2001                     77,630
                  2002                     78,990
                  2003                      8,732
                                        ----------
                                        $ 234,982
                                        ==========


<PAGE>
         GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

     Rent expense under operating  leases  included in the financial  statements
     for the years ended  December  31, 1999 and 1998 were  $43,115 and $40,550,
     respectively.

     Employment  Agreements  -  The  Company  has  entered  into  an  employment
     ----------------------
     agreement  with Donald A.  Anderson,  its president and major  shareholder,
     dated July 1, 1998,  which expires on December 31, 2002. This agreement has
     an automatic  renewal  provision which allows renewal for a one year period
     on the same terms and  conditions  unless  either party gives notice to the
     other party of at least ninety days prior to the  expiration of the term of
     their  intention  to  renew  the  agreement.  The  agreement  may  only  be
     terminated by the Company if there is a willful breach or habitual  neglect
     of duties  relating to performing  terms of the agreement or there are acts
     of dishonesty,  fraud and  misrepresentation.  The agreement provides for a
     base salary of $90,000 per year and an automobile expense allowance of $750
     per month.  During 1999, the Company also paid $3,822 for health  insurance
     ($3,924  in 1998) and $2,388  for life  insurance  ($2,546 in 1998) for Mr.
     Anderson.

     In addition to the fixed salary, Mr. Anderson is to receive under the terms
     of this agreement a sum equal to five percent (5%) of the net earnings,  as
     defined,  of the  Company for each fiscal  year  (provided,  however,  such
     additional  compensation  for any fiscal  year will not  exceed  $200,000).
     Since the date of this  agreement,  there  have been no net  earnings  upon
     which to pay such additional amount.

     Corporate Development Agreement - In October 1997, the Company entered into
     ------------------------------
     a  Corporate   Development   Agreement  with  The  Michelson  Group,   Inc.
     ("Michelson")  whereby Michelson would perform certain  corporate  advisory
     services.  During 1998,  the Company  issued  160,000  shares of its common
     stock pursuant to and in full satisfaction of this agreement.

     Consulting  Agreement  -  On  October  1,  1998,  the  Company  executed  a
     --------------------
     consulting  agreement  with  Sports  Opportunities  International,  a South
     Carolina corporation, owned by Parker Smith, a director of the Company. The
     agreement  required a payment of  $40,000 a year  commencing  on January 1,
     1999.  The agreement  also granted stock options  entitling the purchase of
     50,000  shares of common stock at $2.00 per shares,  20,000 of which vested
     upon  execution  of the  agreement;  15,000 of which vest six months  after
     execution of the agreement and the remaining  15,000 of which vest one year
     after  execution of the agreement.  The consulting  agreement also provided
     for a 0.25% royalty to be paid for each golf club sold through companies or
     distributors  introduced to the Company by Mr.  Smith.  The agreement had a
     term of one year, and expired without being renewed on October 19, 1999.

     Legal  Proceedings  - A  claim  has  been  asserted against the Company for
     ------------------
     breach  of  contract, as well as certain other claims, by Peter Alliss, who
     has asserted damages in excess of $600,000 arising out of contract  between
     the parties dated January 1, 1998.  The  Company  and  Mr.  Alliss  are  in
     discussions  regarding  the  validityof the claims and the actual amount of
     damages,  if  any.  The  Company believes that the claims are substantially
     without merit, and intends to vigorously contest any litigation that may be
     filed.  As  this  matter  is  in  an  early stage, the Company is currently
     unable  to  predict  the  ultimate outcome of this matter or the effect, if
     any,  that  its  resolution  may have on the Company's  financial position,
     results of operations and cash flows.

8.   LICENSE AGREEMENTS

     On  August  12,  1998,  the  Company  executed  a  License  Agreement  with
     Confidence Golf, Inc., a California corporation formerly owned by Robert J.
     Williams,  who is a former  Officer and a Director,  and  currently a major
     shareholder of the Company.  Confidence  Golf, Inc. was purchased by Family
     Golf Centers, Inc. in December 1997. Pursuant to the License Agreement, the
     Company has licensed to Confidence  Golf,  Inc. a  non-exclusive  worldwide
     right to utilize the Company's  patented  forged  insert  technology in the
     manufacture  and sale of golf clubs.  The License  Agreement  provides  for
     royalties  to be paid at the rate of $2.00  per iron and $2.50 per wood for
     each  golf  club,  component  made,  used or sold  worldwide.  The  License
     Agreement expires upon termination of all patents and patent  applications,
     or in the event that  royalty  payments  are not timely  made or there is a
     material breach of this agreement.

     On  November  19,  1998,  the  Company  entered  into a  similar  licensing
     agreement  with Wilson  Sporting  Goods  Company to also use the  Company's
     forged insert technology.  Under the terms of this agreement, Wilson agreed
     to pay  royalties as follows:  (a) for irons:  $1.00 per club for the first
     250,000 sold, $0.75 per club for the next 250,000 up to 500,000,  and $0.50
     for over  500,000,  and (b) for wood:  $1.00 per club for the first 500,000
     and $0.75 per club over 500,000.

     On November 22, 1999, the Company  entered into a licensing  agreement with
     PowerBilt  Golf,  a division  of  Hillerich  and  Bradsby  Co. The  license
     agreement  grants  PowerBilt  Golf  the  non-exclusive   right  to  utilize
     GolfGear's patented insert technology in its product lines in all non-Asian
     countries (except for Korea,  which is included in the license),  including
     the United  States.  The license  agreement  is for an initial term of five
     years, and is renewable at PowerBilt's  option for an additional  five-year
     term.

     On  September  27,  1999  the Company entered into a Distribution Agreement
     With  MC Corporation (see Note 11).  The agreement grants MC Corporation an
     exclusive  distribution  right for all Golf Gear products in Japan and Asia
     excluding South Korea.  The initial term of the agreement is five years and
     it  is  renewable  thereafter.  The  agreement contains minimum performance
     guarantees  on  the part of MC Corporation.  The agreement also licences to
     MC  Corporation the right to use the Golf Gear name on apparel, bags, shoes
     And other accessories for a six (6) percent royalty based on the price that
     the distributor pays for such goods.


<PAGE>
         GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

9.   RELATED PARTY TRANSACTIONS

     On June 17, 1997, the Company entered into a Financial  Services  Agreement
     with Bridgewater  Capital Corporation  ("Bridgewater")  whereby Bridgewater
     would arrange and help consummate a merger between the Company and a public
     shell  corporation  and also assist the Company to analyze,  negotiate  and
     advise on obtaining  equity capital or debt financing.  Upon the successful
     completion  of  the$500,000  financing  in October  1997,  the Company paid
     Bridgewater  a fee of $60,000 and issued  499,002  shares of the  Company's
     common stock, representing 4.99% of the post-reorganized public company. In
     December 1997,  the Company  completed a  reorganization  with Harry Hurst,
     Jr., Inc. (see Note 1). The Financial Services Agreement also required that
     Bridgewater  be paid a consulting fee of $72,000  payable  $6,000  monthly,
     have the right to  appoint  one  person to the Board of  Directors  for two
     years, and be paid a 10% finders fee and 2% unaccountable expense allowance
     on all capital, cash, equity or debt infused into the Company by or through
     Bridgewater.  This  agreement  expired in  October  1998.  During  1998 the
     Company paid $6,900 to Bridgewater as a capital raising fee. Mr.  Peschong,
     a  former  director  of the  Company,  is an  officer  and  shareholder  of
     Bridgewater.

     On January 27, 1999, the Company  executed a letter of  understanding  with
     Bridgewater  whereby,  among other  things,  the Company  agreed to issue a
     promissory  note to Bridgewater in the amount of $50,000 due and payable no
     later  than  April 1, 1999 and to issue  common  stock  warrants  entitling
     Bridgewater  to purchase  105,705 shares of common stock at $0.62 per share
     which expire October 2002.  The agreement to issue the promissory  note and
     warrants  arise out of ostensible  obligations  in the  Financial  Services
     Agreement. The execution of the letter of understanding was in anticipation
     of  and  contingent  upon  an  expected  equity  financing  which  did  not
     materialize.  In the opinion of  management,  all  obligations  relating to
     these  agreements  have been  recorded  on the books of the  Company  as of
     December 31, 1999.

     In March 1998, the Company recorded a liability of $65,000 to the spouse of
     the Company's President and major shareholder as a finders fee with respect
     to a $650,000 equity  investment in the Company during 1998. As of December
     31,  1999,  the balance  remaining  of the $65,000  obligation  was $35,434
     ($39,000  at  December  31,  1998)  and is  included  in notes  payable  to
     shareholders in the accompanying financial statements.

10.  INCOME TAXES

     As of December  31,  1999,  the Company  has  federal  net  operating  loss
     carry-forwards  of  approximately  $4,786,000,  which can be used to offset
     future  taxable  income.  The  utilization  of such  carryforwards  will be
     limited by the Internal  Revenue Code due to the change in ownership of the
     Company.  No deferred  asset  benefit for these  operating  losses has been
     recognized in the financial  statements  due to the  uncertainty  as to the
     realizability of these in the future periods.

11.  SHAREHOLDERS' EQUITY

     Preferred  Stock - On  September  27,  1999,  the Company  entered  into an
     ----------------
     agreement for the sale of 210,526 shares of its Series A Senior Convertible
     Preferred  Stock,  par value $.001,  for $2,000,000,  which was received in
     cash during October 1999.  The following fees were paid in connection with
     this financing (a) a finders fee in the amount of $200,000, (b) warrants to
     purchase 20,000 shares of common stock at $1.00 per share, and (c) 1% of
     all royalties to be received by the Company pursuant to a related
     Distribution Agreement.

     The 210,526 shares of preferred stock are convertible into 2,105,260 shares
     of  the   Company's   common  stock   currently   equal  to  14.3%  of  the
     post-converted outstanding common stock of the Company. The preferred stock
     votes on an "as if  converted"  basis and may be  converted  in whole or in
     part for a period of two years after which it  automatically  converts into
     common  stock.  A 6%  annual  dividend  is  payable  quarterly  in  cash or
     additional  shares of preferred stock at the option of the Company.  During
     1999 dividends on preferred stock in the amount of $22,215 were paid in the
     form of 2.339 additional shares of preferred stock.

     Anti-dilution  provisions permit the buyer to purchase additional preferred
     stock so as to  maintain  it 14.3%  interest in the Company for a period of
     five years.  Furthermore,  additional  preferred  shares are required to be
     issued for no  additional  consideration  in order to maintain  the buyer's
     14.3%  interest  in the  Company  as a  result  of the Bel Air  acquisition
     described in Note 2 above.  Pursuant to this clause,  on November 29, 1999,
     3,761  additional  shares of preferred stock were issued as a result of the
     Bel Air inventory  acquisition.  Additional  preferred shares of stock will
     also be issued upon completion of the Bel Air transaction.

     Common stock  purchase  warrants  entitling the holder to purchase  330,000
     shares of common  stock were also issued to the buyer.  Such  warrants  are
     exercisable at a price of $1.00 per share for a period of three years.

     The Company  also  executed a  Distribution  Agreement  with the  purchaser
     granting the  purchaser  an exclusive  right to  distribute  the  Company's
     products in Japan for an initial period of five years. Due to the valuation
     place upon the preferred stock sold, no accounting  value was attributed to
     the Distribution Agreement.

<PAGE>
         GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

     Common  Stock - On June 16,  1999,  the Company  sold 66,667  shares of its
     -------------
     common stock to an investor for $50,000 pursuant to an agreement to sell up
     to 500,000 shares to that same investor.  On August 31. 1999. the agreement
     expired with no further sales being made.

     During 1998,  the Company  raised gross proceed of $1,587,500  from private
     placements of 1,587,500  shares of its common stock at a price of $1.00 per
     share.  In  connection  with these  private  placements,  the Company  paid
     commissions  and fees of $12,450,  issued  160,000  shares of common  stock
     valued at $160,000  for services  rendered and issued  warrants to purchase
     217,000 shares of common stock exercisable at $2.00 per share through March
     1, 2001, and warrants to purchase 31,050 shares of common stock exercisable
     at $1.20 per share through December 12, 2000.

     During 1997, the Company  raised gross proceeds of $1.037,500  from private
     placements  of its common  stock that  commenced  on September 1, 1997 at a
     price of $.57 per share and $50,000 from private  placements that commenced
     on December  12,  1997 at a price of $1.00 per share.  In  connection  with
     these  private  placements,  the  Company  paid  commissions  and  fees  of
     $101,250,  issued  499,002  shares of common  stock  valued at $282,000 for
     services  rendered  and issued  warrants  to purchase  1,057,500  shares of
     common stock  exercisable  at $.28 per share through  October 1, 2000,  and
     warrants to purchase 5,000 shares of common stock  exercisable at $1.20 per
     share through December 29, 2000.  Effective February 15, 1999 the Stock and
     Warrant  Purchase  Agreement dated September 1997 with Berkeley  Investment
     Group Ltd., that  originally  resulted in the sale of 880,875 shares of its
     common stock and 1,057,050  warrants to acquire  shares of its common stock
     for a total  consideration  of $500,000  was amended to reflect  changes to
     registration  rights and penalties  related thereto.  The amendment granted
     Berkeley warrants to purchase an additional  105,075 shares of common stock
     at $.28 per share  which  expires in  October  2000 in full  settlement  of
     registration related penalty rights.

     During 1998,  accounts  payable in the  aggregate  amount of $100,000  were
     converted into 100,000 shares of the Company's common stock.

     During 1998,  the Company paid $10,000 in cash and issued 125,000 shares of
     its common stock  valued at $125,000  for the purchase of a golf  accessory
     business. (Note.2)

     During 1999 and 1998,  the Company  issued  33,500 shares valued at $22,385
     and 256,033 shares valued at $275,635, respectively, for services rendered.

     Warrants - During  1999 and 1998,  warrants to  purchase  59,000  shares of
     --------
     common stock, and 150,000 shares of common stock,  respectively,  at prices
     ranging  from $0.50 to $2.00 per share  were  issued to  non-employees  for
     services rendered.

     During 1999,  warrants to purchase  20,000  shares of common stock at $1.06
     per share were issued as loan fees.


<PAGE>
Information  regarding  the  Company's  warrants  is  as  follows:

         GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

                                   Weighted                Aggregate
                        Shares     Average    Weighted     Exercise
                      Underlying   Exercise    Average      Price
                      Options      Price      Fair Value
                      -----------  ---------  -----------  -----------
BALANCE
   DECEMBER 31, 1997   1,287,554        0.31         0.48     398,800
Granted                  398,050        1.87         2.75     746,260
Canceled                     ---         ---          ---         ---
Exercised                    ---         ---          ---         ---
                      -----------  ---------  -----------  -----------

BALANCE
   DECEMBER 31, 1998   1,685,604        0.68         1.02   1,145,060
Granted                  514,075        0.94         0.64     485,121
Canceled                (100,000)       2.00         0.76    (200,000)
Exercised                    ---         ---          ---         ---
                      -----------  ---------  -----------  -----------
BALANCE
  DECEMBER 31, 1999    2,099,679   $    0.68  $      0.94  $1,430,181
                      ===========  =========  ===========  ===========


     The following table summarizes the information  about warrants  outstanding
     at December 31, 1999:

                                Shares    Weighted Average
                              Underlying     Remaining
       Exercise Price          Warrants   Contractual Life
       --------------         ---------   ----------------
          $  0.28             1,303,065         2.7 years
          $  0.50                 9,000           2 years
          $  0.62                84,564         2.2 years
          $  1.00               330,000         2.7 years
          $  1.06                20,000           4 years
          $  1.20                36,050           3 years
          $  1.75               100,000          .5 years
          $  2.00               217,000         1.2 years
                              ---------
                              2,099,679
                              =========

     The Company  accounted for warrants  granted to non-employees in accordance
     with  SFAS  No.  123  which  requires  non-cash   compensation  expense  be
     recognized over the expected  period of benefit.  During 1999 and 1998, the
     Company recognized non-cash compensation expense of $53,770 and $76,000 for
     warrants to purchase 79,000 shares and 150,000 shares, respectively, of the
     Company's common stock. The remaining  435,075 warrants in 1999 and 248,050
     warrants in 1998 were issued in  connection  with the sale of common stock.
     The offering costs  associated  with these warrants were netted against the
     proceeds from the sale of the Company's common stock.

     Stock  Options - in October of 1997,  the Board of Directors of the Company
     --------------
     approved a stock option plan entitled  "GolfGear  International,  Inc. 1997
     Stock  Option  Plan"  ("Plan").  This Plan is intended to allow  designated
     officers and employees and certain  non-employees of the Company to receive
     stock options to purchase the Company's  common stock and to receive grants
     of common stock subject to certain  restrictions as more fully described in
     the Plan. The Plan has reserved  2,642,625  shares of the Company's  common
     stock, subject to adjustments, that may be issued under the Plan.

     The Plan  provides for the granting to employees  (including  employees who
     are also  directors  and  officers)  of  options  intended  to  qualify  as
     incentive  stock options  within the meaning of Section 422 of the Internal
     Revenue Code of 1986,  as amended,  and for the  granting of  non-statutory
     stock  options  to  directors,  employees  and  consultants.  The  plan  is
     currently administered by the Board of Directors of the Company.


<PAGE>
         GOLFGEAR  INTERNATIONAL  INC.  AND  SUBSIDIARIES
     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS  (CONTINUED)

     The exercise price per share of incentive  stock options  granted under the
     Plan must be at least equal to the fair market value of the common stock on
     the date of the grant.  With  respect to any  participant  who owns  shares
     representing  more  than  10% of the  voting  power of all  classes  of the
     Company's outstanding capital stock, the exercise price of any incentive or
     non-statutory  stock  options  must be equal  to at least  110% of the fair
     market value of the grant date, and the maximum term of the option must not
     exceed five years.  Upon a merger of the  Company,  the option  outstanding
     under  the  Plan  will  terminate  unless  assumed  or  substituted  be the
     successor corporation. As of December 31, 1999, 1,242,085 options have been
     granted under the Plan,  including 502,350 options granted to the Company's
     President as follows: 352,350 during 1997 that are exercisable at $0.62 and
     expire in October 2002,  and 150,000  during 1999 that are  exercisable  at
     $0.275 and expire in August 2001.

Information  regarding  the  Company's  stock  option  is  as  follows:

                                   Weighted                Aggregate
                        Shares      Average    Weighted     Exercise
                      Underlying   Exercise     Average      Price
                        Options      Price    Fair Value
                      -----------  ---------  -----------  ----------
BALANCE
   DECEMBER 31, 1997   1,137,522        0.62         0.43    702,500
Granted                  240,000        3.78         2.35    907,500
Canceled                     ---           -            -          -
Exercised                (17,618)       0.64            -    (11,250)
                      -----------  ---------  -----------  ----------

BALANCE
   DECEMBER 31, 1998   1,359,904        1.18         0.78  1,598,750
Granted                  620,000        0.32         0.14    195,625
Canceled                     ---         ---          ---        ---
Exercised                    ---         ---          ---        ---
                      -----------  ---------  -----------  ----------

BALANCE
   DECEMBER 31, 1999   1,979,904   $    0.91  $      0.58  1,794,375
                      ===========  =========  ===========  ==========

The following table summarizes the information about stock option outstanding at
December  31,  1999:
                               Shares     Weighted Average
                             Underlying      Remaining
    Exercise Price            Warrants    Contractual Life
    --------------           ---------    ----------------
       $  0.25               375,000         1.7 years
       $  0.275              225,000         1.7 years
       $  0.57               704,700         2.7 years
       $  0.62               352,350         2.7 years
       $  0.64                52,854         1.7 years
       $  2.00                70,000            1 year
       $  3.75                10,000           3 years
       $  4.25               190,000            1 year
                           ---------
                           1,979,904
                           =========

     The Company accounted for stock options granted to employees,  officers and
     directors  under APB  Opinion  No.  25.  "Accounting  for  Stock  Issued to
     Employees," under which no compensation  cost has been recognized.  Options
     granted to non-employee directors are accounted for in accordance with SFAS
     No. 123. Had the  compensation  cost for the options been determined  based
     upon the fair  value at the  grant  date  consistent  with the  methodology
     prescribed under SFAS No. 123, the Company's net loss and basic and diluted
     loss per share in 1999 would have been increased by  approximately  $61,500
     and  $.005  per  share,   respectively   ($48,000   and  $0.04  per  share,
     respectively, in 1998).

     The fair value of the warrants and option  granted is estimated on the date
     of grant  using the  Black-Scholes  option  pricing  model  with  following
     weighted  average  assumptions:  dividend yield of 0%,  volatility of 100%,
     risk-free interest rate of 6.7% and an expected life of five years.

     The effect of  applying  SFAS No. 123 in this pro forma  disclosure  is not
     indicative of future results.

12.  INFOMERCIAL COSTS

     During 1998, the Company incurred  aggregate costs of $503,567 with respect
     to the  preparation  and filming of an  informercial  at December 31, 1998,
     management  reviewed  the  Company's  informercial  marketing  program  and
     determined  that it was unlikely to be successful  and,  accordingly,  such
     costs were charged to operations during 1998.


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