SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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


For the fiscal year ended December 31, 1997      Commission File Number: 0-21089


                             GOLDEN BEAR GOLF, INC.
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             (Exact name of Registrant as specified in its charter)


            FLORIDA                                    65-0680880
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(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)


 11780 U.S. HIGHWAY ONE, NORTH PALM BEACH, FLORIDA                  33408
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(Address of principal executive offices)                          (Zip Code)

                                 (561) 626-3900
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              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  NONE.

Securities registered pursuant to Section 12(g) of the Act:

                 CLASS A COMMON STOCK, $.01 PAR VALUE PER SHARE
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                                (Title of class)


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 the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___

Indicate by 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 the 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. [ ]

The aggregate market value of Class A Common Stock held by non-affiliates of the
Registrant as of March 6, 1998 was $21,798,980. The Registrant had outstanding
2,744,962 shares of Class A Common Stock (par value $.01 per share) and
2,760,000 shares of Class B Common Stock (par value $.01 per share) as of March
6, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive proxy statement relative to the 1998
Annual Meeting of Shareholders are incorporated by reference in Part III to the
extent provided in Items 10, 11, 12 and 13 hereof.

<PAGE>

                                     PART I


ITEM 1.  BUSINESS

GENERAL

Golden Bear Golf, Inc., together with its wholly owned subsidiaries
(collectively, "Golden Bear" or the "Company") is a diversified, international
brand name golf products and services company engaged in the development,
marketing and management of golf-related businesses, including the licensing,
ownership and operation of golf practice and instruction facilities, the
operation of golf instructional schools, the construction of golf courses and
resort-related facilities, and the licensing, distribution and sale of
golf-related consumer products. As part of a recent organizational restructuring
to refocus on its core businesses, the operations and financial activity
associated with the Company's former Golf and Marketing Divisions have been
consolidated into a new Consumer Division. Through its two divisions, the
Consumer Division and Construction Division, the Company provides high quality
products and services in over 40 countries, primarily under the NICKLAUS, JACK
NICKLAUS and GOLDEN BEAR brand names.

The Company was formed on June 7, 1996 to enter into an exchange agreement which
was consummated on August 1, 1996 upon the closing of an initial public offering
of the Company's Class A Common Stock. Parties to the plan of reorganization
included, among others, the Company's affiliates, Golden Bear Golf Centers, Inc.
("Golf Centers"), Paragon Construction International, Inc. ("Paragon")
(collectively, the "Constituent Companies") and Golden Bear International, Inc.
("International"), a privately owned company controlled by Jack Nicklaus.
Pursuant to the exchange agreement, the Company acquired all of the outstanding
common stock of the Constituent Companies in exchange for shares of its Class A
and Class B Common Stock. In addition, the Company acquired certain assets and
assumed certain liabilities of International in exchange for shares of the
Company's Class B Common Stock. The transaction was accounted for on a
historical cost basis in a manner similar to a pooling of interests as Golden
Bear and the Constituent Companies had common stockholders and management.
Although Jack Nicklaus beneficially owns 91.7% of the total voting power of the
Company's outstanding Common Stock, the Company has no equity interest in
International.

The Company's strategy is to increase its worldwide revenue and operating income
by capitalizing on the growth and popularity of the game of golf and on Mr.
Nicklaus' reputation, image and accomplishments as one of the greatest golfers
ever to play the game. Specific components of the Company's growth strategy
include (i) acquiring, leasing or entering into joint ventures for well-located
golf practice and instruction facilities that have the potential for
improvement; (ii) developing new golf practice and instruction facilities in
locations where suitable acquisition opportunities are not available; (iii)
capitalizing on the demand for the construction of new golf courses and resort
related facilities along with the renovation of existing courses; and (iv)
broadening the Company's base of branded consumer product offerings under the
NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand names. The Company believes that
cross-marketing of its products and services will provide it with opportunities
to maximize its operating performance. To this end, it is anticipated that the
acquisition and development of new golf practice and instruction facilities will
provide the Company with additional opportunities to market its Nicklaus Flick
Golf School programs and to sell licensed products at retail pro shops
established at such facilities.

CONSUMER DIVISION

The Consumer Division is involved in the operation and licensing of the
Company's golf practice and instruction facilities under the JACK NICKLAUS GOLF
CENTER, JACK NICKLAUS ACADEMY OF GOLF and GOLDEN BEAR GOLF CENTER brand names.
The Company believes that its owned and licensed golf facilities are
differentiated from its competitors on the basis of consumers' recognition of
the JACK NICKLAUS and GOLDEN BEAR brand names, the quality of the facilities of
Nicklaus Flick golf instruction, and the availability at its facilities of the
unique and individualized golf instruction programs designed by Jack Nicklaus
and Jim Flick, a world renowned instructor.

                                       1

<PAGE>

In addition, the Consumer Division is also involved in the licensing of
NICKLAUS, JACK NICKLAUS and GOLDEN BEAR branded products and services throughout
the world, the operation of the NICKLAUS FLICK GOLF SCHOOLS, the management of
corporate marketing alliances with select corporations targeting a golf
audience and the generation of marketing fees related to Jack Nicklaus' personal
endorsements. In this regard, the Company focuses its efforts on combining the
marketing power associated with the recognition and reputation of the Jack
Nicklaus brand names with high quality products and services in the markets it
serves.

Through December 31, 1997, the Consumer Division was also involved in the
marketing of golf course design services on behalf of designers, primarily
Nicklaus Design, and provided golf course management and consulting services to
various golf courses and golf related businesses. However, as part of its
organizational restructuring effective January 1, 1998, the Company terminated
the design services marketing agreement pursuant to which it marketed the design
services and is no longer directly involved in providing golf course management
and consulting services.

GOLF CENTERS AND ACADEMIES

The Company's golf centers and academies are comprised of golf practice and
instruction facilities designed to provide golf practice opportunities,
affordable golf instruction and related recreational activities. At December 31,
1996, the Company owned 10 existing golf practice and instruction facilities and
had one facility under development which subsequently opened for business in
July 1997. During the first quarter of fiscal 1997, the Company acquired three
additional golf center facilities in separate, unrelated transactions, bringing
to 14 the total golf centers owned and operated by the Company. Many of the
existing facilities acquired by the Company required renovations and the
construction of additional features such as miniature golf and pro shops to
upgrade such facilities to the Company's standards. Delays associated with the
completion of the conversion process at certain acquired golf centers and the
integration of the retail operations of the golf centers had a negative impact
on the profitability of the Company's golf center operations. The Company has
delayed its acquisition of additional facilities in the near-term until such
time as it improves the operating performance and profitability of its existing
golf center facilities.

All of the golf centers acquired by the Company to-date are located within the
United States. In addition, there are presently seven licensed GOLDEN BEAR GOLF
CENTERS being operated by a licensee of the Company in the United States, with
one additional licensed facility scheduled to open in fiscal 1998.
Internationally, the Company's licensees operate eight facilities under the name
JACK NICKLAUS GOLF CENTERS and JACK NICKLAUS ACADEMY OF GOLF that are located in
the Pacific Rim and England, along with two additional facilities under
development that are expected to open in 1998. While the Company intends to
continue to support its existing licensee network, the Company is currently
focusing its efforts on the direct ownership and operation of its facilities and
intends to pursue new licenses and enter into additional territory development
agreements only in locations and territories where the Company does not intend
to acquire or develop its own facilities.

DOMESTIC OPERATIONS. The owned and licensed domestic golf centers are generally
centered around a practice range designed with target greens, bunkers and traps
to simulate golf course conditions. The ranges generally feature both covered
and uncovered hitting stations to maximize usage under all weather conditions
and are lighted to permit nighttime use. In addition to the practice range, the
golf centers typically include short game practice areas, including putting
greens and sand traps, comprehensive instruction programs designed by the
internationally recognized NICKLAUS FLICK GOLF SCHOOL and JACK NICKLAUS COACHING
STUDIO (a proprietary multimedia video and computer swing analysis system) and a
clubhouse facility that typically includes a full-line retail pro shop. The
domestic golf centers may also include other recreational amenities such as
miniature golf courses and baseball batting areas.

In addition to the 14 centers currently owned by the Company, the Company
intends to acquire additional centers in the future subject to obtaining
appropriate financing and subject to the improving the operations and
profitability of its current golf centers. Although there is no assurance that
it will successfully do so, the Company currently seeks to add an additional six
facilities by the end of 1998 bringing the total to 20 facilities.

                                       2

<PAGE>

The Company anticipates that it will add golf centers either by acquiring or
converting existing golf centers or practice facilities or by acquiring
undeveloped sites and constructing new golf center facilities. The Company has
identified numerous markets within the United States that it believes can
support one or more golf practice and instruction facilities of the type
operated by the Company. The Company believes the highly fragmented golf range
industry presents advantageous opportunities for the Company to acquire, upgrade
and renovate golf centers and driving ranges over the next five years and that
its GOLDEN BEAR branding and its instruction programs provide a competitive
advantage and differentiate GOLDEN BEAR GOLF CENTERS from other range operators.

Currently, there are seven licensed GOLDEN BEAR GOLF CENTERS in the United
States that are operated by one owner, who is not affiliated with the Company.
The licensee has been provided an exclusive license in specified territories to
operate GOLDEN BEAR GOLF CENTERS and is able to utilize certain of the Company's
trademarks, servicemarks and other rights relating to the operation of the
facilities. Additionally, the Company has agreements with a licensee and a
multiunit development that grants certain rights to develop five GOLDEN BEAR
GOLF CENTERS within the Baltimore, Maryland, and Fairfax, Virginia, areas, and
one facility in the Albany, New York area.

Licensees are required to operate their GOLDEN BEAR GOLF CENTERS in compliance
with the Company's methods, standards and specifications regarding such matters
as facility design, site approval, layout and design of teaching and
practice-related facilities, fixtures and furnishings, decor and signage,
merchandise type, presentation and customer service. Licensees are not required
to purchase supplies or products from the Company other than the workbooks,
software and manuals associated with the teaching studios which must be included
in each facility. Licensees pay a facility license fee of $35,000 for each
facility opened by the licensee within the designated territory, and pay
continuing monthly royalty fees of 3% to 5% of adjusted gross revenues, subject
to a minimum guaranteed royalty of between $35,000 and $50,000 per year. In some
instances, generally for facilities in less populated areas, in lieu of monthly
revenue-based royalty fees, fixed annual fees generally are paid, ranging
between $35,000 and $50,000, subject to increases based on the consumer price
index.

Set forth below is a list of the Company's existing domestic licensees and the
facilities operated by them, along with those that the Company's licensees have
informed the Company that they anticipate opening.

   LICENSEE GROUP                 EXISTING FACILITIES    ANTICIPATED FACILITIES
   Family Golf Centers, Inc.      Henrietta, NY
                                  Farmingdale, NY
                                  Elmsford, NY
                                  Douglaston, NY
                                  Liverpool, NY
                                  Wayne, NJ
                                  El Segundo, CA

   KRIM & Associates, LLC         None                   Albany, NY

INTERNATIONAL OPERATIONS. The Company has entered into license agreements for
the development and operation of golf center facilities outside of the United
States under the brand names JACK NICKLAUS GOLF CENTER and JACK NICKLAUS ACADEMY
OF GOLF. The latter generally provides more substantial practice facilities and
practice golf holes on a larger site. In some territories, the Company has
granted a master license for a country or region that gives the master licensee
the exclusive right within defined territories to own, operate or sublicense to
others the right to own and operate golf centers and golf academies in the
territory. In other cases, the Company has granted a site specific license
similar to its domestic franchise agreements giving the site licensee the right
to open a single golf center or golf academy at a specific location. The Company
generally has granted its foreign licensees an exclusive radius around the site
of each facility.

                                       3

<PAGE>

The Company's foreign licensees currently have seven operating facilities along
with two additional facilities under development that are anticipated to be
operational by the end of 1998. The Company has an agreement with a corporate
affiliate of its British licensee to market the Company's golf facility
licensing program, contact and identify prospective licensees within the
European Economic Community, and assist the Company in negotiating license
agreements with such prospects. Outside the United States, the Company currently
intends to continue to pursue licensing agreements, rather than direct ownership
of golf centers, although there is no assurance that the Company will be
successful in these efforts.

LICENSING

The Company manages Jack Nicklaus' brands and marketing relationships. The
Company's activities include the licensing and marketing of a wide variety of
Jack Nicklaus branded consumer products and services, primarily under the
NICKLAUS, JACK NICKLAUS, and GOLDEN BEAR brand names. These three separate
brands are targeted at distinct markets segmented by product design,
distribution channels and price. The Company believes that the continued growth
in the popularity of golf worldwide represents a strong opportunity to grow the
NICKLAUS, JACK NICKLAUS, and GOLDEN BEAR brand names. In addition, the Company
believes that the trend toward casual dress in the workplace and the growing
importance of leisure activities within its target markets should enhance the
growth potential of its brands.

The Company currently licenses the Jack Nicklaus brands to more than 20
companies that distribute products in over 35 countries. The largest markets for
the Company's branded products currently are the United States, Korea and Japan.
Licensed product categories includes men's and women's sportswear, men's
tailored clothing, neckwear, luggage, socks, headwear, belts, small leather
goods, eyewear, furniture, calendars, and various forms of artwork and
commemoratives.

The Company's licensing of apparel in the Far East is conducted exclusively
through Jack Nicklaus Apparel International ("JNAI"), a joint venture with an
affiliate of Hartmarx Corporation. This joint venture has in turn entered into
separate licensing arrangements through partnerships relating to Japan ("JNJ")
and the rest of Asia ("JNAI/FE"). Pursuant to such arrangements, JNAI will
receive from 50% to 75% of the revenues of JNJ and approximately 66-2/3% of
amounts distributed by JNAI/FE.

MARKETING

The Company also has developed two types of "marketing partnerships" with
selected companies worldwide. These partnerships involve either Mr. Nicklaus'
personal endorsement and use of his likeness or strategic marketing alliances
that utilize golf and the Company's marketing capabilities to help market a
partner's products or services. Such marketing partnerships involving Nicklaus'
personal endorsement have been established with, among others, Lincoln-Mercury,
a division of Ford Motor Company, Gulfstream Aerospace Corporation, Rolex,
Textron, Golf Magazine and Griptec. Such partnerships are important to the
Company in that they increase the exposure and reinforce the image of Mr.
Nicklaus in the Company's target markets. The Company receives a percentage of
all revenues received by Mr. Nicklaus for personal endorsement services obtained
through the marketing efforts of the Company equal to (i) 30% of all such
revenues under any contract or arrangement existing as of the reorganization of
the Company on August 1, 1996 or any renewal thereof and (ii) no less than 20%
of all such revenues received under any new contract or arrangement. The Company
receives 100% of any revenues associated with strategic marketing alliances.
Such marketing alliances have been established with companies such as VISA,
Pepsi, Citibank and American Airlines.

The Company's marketing and licensing strategy is to (i) expand the worldwide
sales of the Company's products, particularly throughout the United States,
Europe and Asia; (ii) selectively expand its licensed product lines,
particularly in accessories and women's sportswear; (iii) work with existing
licensees to maximize brand advertising and promotional exposure; and (iv)
develop new licensing relationships for product categories that are appropriate
for Jack Nicklaus brands, such as home furnishings and skincare. The Company
also is considering several retail strategies, including stand-alone retail
shops devoted primarily to the Company's branded products and the creation of
dedicated areas in golf shops and better department stores. No assurances can be
given that any such retail strategies will be undertaken or if undertaken, will
be successful. The Company has created dedicated areas for the sale of the
Company's branded products within the pro shops of GOLDEN BEAR GOLF CENTERS and
at certain Nicklaus designed golf courses.

                                       4

<PAGE>
<TABLE>
<CAPTION>

The following table sets forth the Company's principal licensees and products:

 -------------------------------- ------------------------------------ ----------------- ---------------- -----------
                                                                       Licensed                           Licensee
 Licensee                         Products                             Brands            Territories      Since
 -------------------------------- ------------------------------------ ----------------- ---------------- -----------
<S>                               <C>                                  <C>               <C>              <C>
 Hart, Schaffner & Marx,          Slacks, sportscoats, blazers,        JACK NICKLAUS     United States    1969
   a business unit of Hartmarx    woven dress shirts
   Corporation
 Trans-Apparel Group,             Men's and women's shirts, slacks,    NICKLAUS          North America    1990
   a business unit of Hartmarx    shorts, blazers, socks,                                Europe
   Corporation                    sweatshirts, outerwear, rainwear,
                                  headwear
 The Rockport Corporation         Casual and dress shoes, golf shoes   JACK NICKLAUS     Worldwide        1992
                                                                       GOLDEN BEAR
 Brookville Corporation           Neckwear                             NICKLAUS          United States    1995
 Italian Design Group             Belts and small leather goods        NICKLAUS          United States    1995
                                                                                         Great Britain
 Gargoyles Corporation            Eyewear                              NICKLAUS          Worldwide        1997
                                                                                         except Japan
 Drexel Heritage, Inc.            Furniture                            NICKLAUS          North America    1997
 JNAI:                            Men's and ladies' sportswear         JACK NICKLAUS     Japan            1973
   Partnership with                                                    NICKLAUS          Southeast Asia
   Hartmarx Corporation                                                GOLDEN BEAR       Australia
                                                                                         South Africa
                                                                                         South America
 JNAI/FE:                         Men's and ladies' sportswear and     JACK NICKLAUS     Thailand         1973
   Partnership between JNAI       accessories                          NICKLAUS          Indonesia
   and Kosugi Sangyo to                                                GOLDEN BEAR       Korea
   license Jack Nicklaus                                                                 Malaysia
   brands in Asia                                                                        Singapore
                                                                                         Philippines
 JNJ:                             Hats, ties,                          JACK NICKLAUS     Japan            1995
   Partnership between JNAI       men's/ladies'/children's             NICKLAUS
   and Kosugi Sangyo to           sportswear, gloves, belts,           GOLDEN BEAR
   serve as master apparel        luggage, casual and business bags    MUIRFIELD
   licensee in Japan              and eyewear
 -------------------------------- ------------------------------------ ----------------- ---------------- -----------
</TABLE>

NICKLAUS FLICK GOLF SCHOOLS

The Company operates golf schools principally under the NICKLAUS FLICK GOLF
SCHOOL ("NFGS") brand name. Jack Nicklaus and Jim Flick, a world renowned
instructor, collaborated to develop a program that has been recognized by major
golf publications for its leadership role in the golf instruction industry since
the school's inception in 1991. The Company believes that growth in the golf
instruction industry is driven by existing golfers' desire to continually
improve their golf games and by new golfers seeking to learn the game.
Historically, instruction was provided by local golf professionals. In recent
years, technological changes have made possible the development of sophisticated
instruction products and computer programs for use in teaching. The Company has
developed a proprietary teaching methodology that includes instruction books and
a computer-assisted video swing analysis device. This teaching methodology is
the basis for the JACK NICKLAUS COACHING STUDIOS included within the Company's
golf practice and instruction facilities as well as teaching at the NFGS.

                                       5

<PAGE>

The NFGS offers more than 130 golf instruction programs including several
specialty programs targeted at women, corporations and special alumni groups.
NFGS currently operates as an independent contractor at two resort clubs located
in the United States: Desert Mountain Golf Club located in Carefree, Arizona and
the Boca Raton Resort and Club located in Boca Raton, Florida. The Company
currently is pursuing additional venues for its NFGS operations.

The target market for the NFGS retail schools is consumers who have significant
disposable income. NFGS has historically priced its package offerings at the
upper end of golf school pricing, which is consistent with other Company product
offerings. The Company commenced operation of a moderately priced golf school
under the NICKLAUS FLICK FAULTS & CURES brand name in 1997 and is commencing
operation of a premium priced school exclusively for women under the GOLF FOR
WOMEN brand name in 1998. The Company currently markets retail schools
principally through: (i) direct response media advertising; (ii) direct mail
programs targeted at NFGS graduates and high net worth golfers; (iii)
word-of-mouth referrals; and (iv) telemarketing.

The NFGS teaching faculty currently is comprised of 30 teaching professionals
selected by Jack Nicklaus and Jim Flick, four of whom were included in GOLF
MAGAZINE'S list of the top 100 golf instructors in the United States in 1997.
These professionals have been trained in a philosophy that is consistent with
Jack Nicklaus' approach to playing the game and Jim Flick's approach to
teaching. Most of NFGS' instruction staff are independent outside contractors
and their agreements with NFGS are negotiated annually.

In addition to its regular one, two and three-day consumer packages, NFGS
provides businesses and corporations with a wide range of program alternatives,
including three-day executive golf programs, one-day golf outings, charity golf
events and hospitality programs at select professional tour events. These
corporate programs, which operate under the brand name NICKLAUS FLICK EXECUTIVE
GOLF, are designed specifically for corporations as an effective way to
entertain clients, strengthen business relationships, reward top performers and
raise funds for charitable organizations. The corporate programs also expose a
wide variety of people to the Company's golf programs, which provide future
referral sources for the NFGS retail sessions.

JACK NICKLAUS INTERNATIONAL GOLF CLUB

The Jack Nicklaus International Golf Club ("Golf Club") was founded in 1995 to
provide additional benefits to Nicklaus Design golf courses. The Golf Club is a
proprietary membership club that offers its members an opportunity to obtain a
variety of member services, including golf playing privileges at prestigious
private clubs worldwide that feature a Jack Nicklaus Signature or Nicklaus
Design golf course. Membership in the Golf Club is restricted to members of the
golf clubs that agree to participate in the program ("Host Clubs"). There
currently are approximately 70 Host Clubs. Members enjoy reciprocal playing and
guest privileges at each of the Host Clubs. The current membership fee is $295
per year. There is no membership fee to the participating Host Clubs and each is
permitted to impose a direct charge for golf playing privileges extended to Golf
Club members.

TICKETMASTER GOLF

During 1997, the Company entered into an agreement with Ticketmaster Group, Inc.
to establish a joint venture that contracts with golf courses across the United
States to offer golfers advance ticketing for specific tee times. The joint
venture, called Ticketmaster Golf is based in Orlando, Florida and commenced
operations in the summer of 1997. Ticketmaster Golf utilizes Ticketmaster's
proprietary computerized distribution system to offer available tee times at
leading daily fee and resort golf courses. Under the program, Golfers are able
to purchase tee times by phone or through the Internet as much as one year in
advance, depending on the golf course. Under the terms of the joint venture
agreement, the Company is required to provide certain marketing services and has
a 50% participation interest in the operations of the joint venture. In
addition, under the terms of the agreement, the Company has a financial
commitment for an initial capital contribution of approximately $500,000, of
which $300,000 had been invested through March 6, 1998.

                                       6

<PAGE>

CONSTRUCTION DIVISION

Through its wholly owned subsidiary, Paragon, the Company provides comprehensive
golf course and other resort-related construction services. These services
include project management, shaping, renovation and golf course construction.
While the Company originally only provided services for Nicklaus designed golf
courses, the Company began offering its golf course construction services to
other golf course designers and architects in 1995. Paragon has furnished golf
construction and renovation services on approximately 65 golf courses since
1983, 27 domestically and 38 internationally. The Company completed 21
construction projects in 1997. The Company is currently involved in more than 30
projects around the world in various capacities, including 21 projects in
process located in six countries, including the United States, where the Company
is actively providing construction, shaping and project management services.

The level of construction services provided during the fourth quarter of 1996
and the first quarter of 1997 was limited based on management's decision to
curtail such activities pending the implementation of new systems and the
integration of new staff. The Company believes that the improved processes and
controls that have been put in place will facilitate the future growth of its
Construction Division. During 1997, the Company continued to receive significant
new project awards, bringing Paragon's total backlog as of December 31, 1997 to
over $170 million, compared to a backlog of less than $10 million at December
31, 1996.

The Company's construction services generally are offered pursuant to a general
construction contract. The Company also may supply specialized golf construction
services to third parties on a subcontracting or consulting basis where
warranted by the needs of the customer. The general construction contract
generally offers developers and owners comprehensive management of the entire
course construction process on a cost-plus-fee or a fixed-price basis. Payments
for construction services generally are made in installments over the term of
the contract based on the progress made towards completion of the project.

A portion of Paragon's revenues and earnings are generated through fixed price
contracts for the construction of golf courses. Such fixed price contracts may
expose the Company to the risks of cost overruns and inflation as well as credit
risks associated with the customer. The Company recognizes revenues and expenses
on a percentage-of-completion basis whereby revenue and expenses, and thereby
profit, in a given period are determined based on the Company's estimates as to
the status of the costs remaining to complete a particular project. To the
extent that the Company underestimates the remaining cost to complete a project,
it may overstate the revenues and profit in a particular period. In addition,
Paragon's construction contracts generally provide for warranties that obligate
Paragon to remedy certain construction defects that may arise in the ordinary
course of providing such construction services. Such warranties, which are
customary in the construction industry, are usually effective for a period of
one year from the completion date of the respective projects. However, there is
no assurance that expenses relating to such warranty obligations will not have a
material adverse effect on the Company. In addition, the nature of Paragon's
construction activities expose it to potential risks associated with weather or
other acts of nature that could have a material adverse effect on the Company.

COMPETITION AND SEASONALITY

The Company's competition varies among its business lines. The markets in which
the Company competes with respect to its golf center operations generally are
highly competitive. The Company's golf practice and instruction facilities
compete against other golf centers, traditional golf ranges, golf courses and
other recreational pursuits. Competition for prime locations is intense.
Competition associated with the Company's golf practice and instruction
facilities primarily relates to the location, the quality of the facilities and
services offered, marketing of the facilities and proximity to other golf
centers. While many of the Company's competitors and potential competitors in
this area have considerably greater financial resources and experience than the
Company, the Company believes that its well recognized brand names and its
reputation for providing high quality, innovative products and services will
distinguish it from its competitors.

                                       7

<PAGE>

The consumer markets for goods and services in which the Company's marketing and
licensing operations compete are extremely competitive, with the Company's
products and services competing against a mix of established brand name consumer
products and services, products and services licensed or endorsed by sports and
entertainment celebrities, private-label products and generic products that have
not established a distinct brand identity. Competition in these products and
services is primarily centered on styling, quality, price, brand recognition and
service. In order for the Company to be competitive in these marketplaces, the
Company must effectively maintain and promote the unique brand image of its
services and its licensed products among consumers and establish strong
marketing relationships with manufacturers and distributors of products which
enhance that brand image. While the Company believes that its strong brand name
recognition and established licensing and distribution networks will enable it
to compete effectively, the Company and its licensees compete with a number of
manufacturers and marketers of sporting goods, recreational products, apparel
and other consumer products and services, many of which have substantially
greater resources than the Company and its licensees and many of which have well
recognized brand names and broader and more established distribution networks.
These markets also face competition from other leisure and recreational
activities, and sales of leisure and recreational products and services are
affected by changes in consumer preferences, which are difficult to predict.

In the providing of golf course construction services, the Company faces
competition both domestically and internationally from several national golf
course construction firms, as well as from smaller regional firms. Competition
in golf course construction is based primarily on reputation, quality of
service, experience and price. The Company believes that its well recognized
brand names and its reputation for providing high quality, innovative
construction services distinguishes it from its competitors.

Certain of the Company's golf centers are located in northern states that
experience decreased demand for the services and products offered through such
golf center facilities in the winter months. In addition, the Company's
construction projects are located throughout the world in many geographically
diverse locations, many of which are subject to constraints on the amount and
type of construction that can be performed during certain months of the year.

EMPLOYEES

As of December 31, 1997, the Company had approximately 348 full-time employees
and 180 part-time employees. The number of part-time employees typically
increases during peak seasonal periods. The Company has no collective bargaining
agreements covering any of its employees, has not experienced any material labor
disruption and is unaware of any efforts or plans to organize its employees. The
Company considers relations with its employees to be good.

INTELLECTUAL PROPERTY RIGHTS

The Company's NICKLAUS, JACK NICKLAUS and GOLDEN BEAR brand names are believed
by the Company to be well-recognized by consumers and therefore important in the
sales of its products. The public identification of these brands has been
developed historically through their association with the personal rights of
Jack Nicklaus as a living individual to commercialize his personality under
common law and various statutes enacted in certain domestic states and foreign
countries. The Company has obtained the exclusive royalty-free rights to utilize
and license the major trademarks and service marks that have been previously
developed under common law, including marks previously registered in the United
States and various foreign countries in which products or services currently are
sold by the Company and its licensees. Subject to the approval of International,
the Company also has the right to obtain the registration of additional
trademarks and service marks for the future expansion of its businesses. The
Company also has the rights to utilize certain customer lists, trade secrets,
know-how, and certain copyrighted materials necessary or useful in the conduct
of its business, including intellectual property that previously was provided to
the predecessors of the Company under a license from International.

                                       8

<PAGE>

GOVERNMENTAL REGULATION

The Company's golf centers and its golf course construction operations are
subject to various federal, state, local and foreign laws and regulations
designed to protect the environment from waste emissions, the handling,
treatment and disposal of solid and hazardous wastes and the remediation of
contaminates associated with the use and disposal of hazardous substances.
Although the Company believes that it is in substantial compliance with all such
laws, ordinances and regulations applicable to its properties and operations,
there can be no assurance that compliance with such requirements in the future
will not have a material adverse effect on the Company's financial condition. It
is the Company's general practice to hire environmental consultants to conduct
environmental assessments on golf center facilities it owns, operates or intends
to acquire or develop. However, in some cases only limited procedures are
conducted on such properties. Accordingly, there may be environmental
liabilities or conditions associated with such properties of which the Company
is not aware.

The Company is also subject to the Federal Occupancy Safety and Health Act and
other laws and regulations affecting the safety and health of employees.
Further, the Company is subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. Additionally, certain
restaurants and snack bars at the Company's golf facilities serve alcoholic
beverages and are subject to certain state "dram shop" laws, which provide a
person injured by an intoxicated individual the right to recover damages from an
establishment that wrongfully served such beverages to the intoxicated
individual. The Company is also subject to foreign immigration, labor, safety
and environmental laws in those jurisdictions where the Company performs
services.

                                       9

<PAGE>

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information as of March 6, 1998 with
respect to the executive officers of the Company. The executive officers serve
at the discretion of the Company's Board of Directors.
<TABLE>
<CAPTION>

NAME                              AGE      POSITION WITH THE COMPANY
----                              ---      -------------------------
<S>                               <C>      <C>

Jack W. Nicklaus                  58       Chairman of the Board

Richard P. Bellinger              46       President, Chief Executive Officer and Director

Stephen S. Winslett               46       Senior Vice President and Chief Financial Officer

Thomas P. Hislop                  41       Senior Vice President and Director
</TABLE>

JACK W. NICKLAUS serves as the Chairman of the Board of the Company. Mr.
Nicklaus founded International, a predecessor of the Company in 1970 and has
served as Chairman of International's Board since inception. Mr. Nicklaus, who
has been a professional golfer for over 35 years, continues to be one of
professional golf's most recognized players. Mr. Nicklaus also has over 25 years
experience as a golf course designer, having designed 147 courses in 24
countries. Mr. Nicklaus received the Athlete of the Decade Award (1970-1979)
from SPORTS ILLUSTRATED magazine and the Golfer of the Century Award in 1988.

RICHARD P. BELLINGER is a member of the Company's Board of Directors and has
served as the President and Chief Executive Officer of the Company since the
Company's inception. Mr. Bellinger joined International in 1979 as Controller
for the golf course and real estate development areas of International. In 1981,
he was promoted to Treasurer, and in 1984, became International's Chief
Financial Officer. Mr. Bellinger was promoted to Chief Operating Officer of
International in 1985 and was named President in 1989 and served in such
capacities prior to the formation of the Company. Because Mr. Bellinger
currently devotes all of his efforts exclusively to the Company, he no longer
serves as an officer of International. Mr. Bellinger graduated from the
University of Miami where he earned both his BBA in accounting and his MBA.

STEPHEN S. WINSLETT joined the Company in October 1997 as Senior Vice President
and Chief Financial Officer. Mr. Winslett is responsible for all financial
matters of the Company. Prior to his employment with Golden Bear, Mr. Winslett
was Vice President of Finance and Administration for the North American
operations of The Albert Fisher Group PLC, a multinational corporation listed on
the London Stock Exchange. Mr. Winslett graduated from the University of North
Texas where he earned a BBA in Marketing and an MBA in Finance. Mr. Winslett is
also a Certified Public Accountant.

THOMAS P. HISLOP is a member of the Company's Board of Directors and has served
as a Senior Vice President of the Company since its inception. Mr. Hislop has
primary responsibility for the Company's Consumer Division. Mr. Hislop joined
International in 1984 as Director of Marketing. Mr. Hislop became Vice President
of Marketing in 1985 with the responsibility for Jack Nicklaus' marketing and
endorsement relationships. Mr. Hislop was named General Manager of Jack Nicklaus
Marketing Services in 1986, Senior Vice President of International in 1992 and a
member of International's Executive Committee in 1994. Because Mr. Hislop
currently devotes all of his efforts exclusively to the Company, he no longer
serves as an officer of International. Mr. Hislop completed his undergraduate
education at Bucknell University and obtained his MBA from Harvard Business
School.

                                       10

<PAGE>

ITEM 2.  PROPERTIES

The Company's principal executive and administrative offices are located in
North Palm Beach, Florida in approximately 35,000 square feet of space leased
under an agreement with a term that expires in 2007. The Company also leases
approximately 430 square feet of space in Singapore that is utilized for
administrative offices under a lease that expires in 1999. The Company considers
its executive and administrative offices to be adequate and suitable for its
current needs.

As of December 31, 1997, the Company operated 14 separate golf instruction and
practice facilities located throughout the United States. With the exception of
one Company owned facility located on approximately 40.8 acres of land in
Pittsburgh, Pennsylvania, the underlying real property associated with all of
these golf instruction and practice facilities is leased under long-term lease
arrangements.


ITEM 3.  LEGAL PROCEDINGS

The Company is a party to various legal proceedings which have arisen in the
ordinary course of its business. While the ultimate outcome of these matters
cannot be predicated with certainty, the Company does not believe that it is
currently involved in any legal proceedings which, individually or in the
aggregate, could be expected to have a material adverse effect on the Company's
business.


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

No matters were submitted to a vote of the stockholders of the Company during
the fourth quarter of the fiscal year ended December 31, 1997.

                                       11

<PAGE>

                                     PART II


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

The Company's Class A Common Stock, which was issued to the public in its
initial public offering on August 1, 1996, is traded on the Nasdaq Stock Market
under the symbol "JACK." The following table sets forth, for the periods
indicated, the high and low closing prices per share of the Class A Common Stock
as reported by Nasdaq.
<TABLE>
<CAPTION>

                                                           1997                            1996
                                                  ------------------------        ------------------------
                                                    HIGH           LOW              HIGH           LOW
                                                  ----------    ----------        ---------     ----------
<S>                                               <C>           <C>               <C>           <C>

   First Quarter                                   $  15-1/2     $  11-1/4             ---            ---
   Second Quarter                                     13             9-3/4             ---            ---
   Third Quarter                                      14-3/4         9-1/2         $ 21-1/8      $  16-7/8
   Fourth Quarter                                     13-7/8         8               20-1/2         11
</TABLE>

As of March 6, 1998, there were 2,744,962 shares of the Company's Class A Common
Stock outstanding and 522 registered shareholders of record.

The Company's Class B Common Stock is not publicly traded. All of the
outstanding shares of the Class B Common Stock are beneficially owned by members
of the Nicklaus family, which includes: (i) Jack W. Nicklaus, Barbara B.
Nicklaus and their estates, guardians, conservators, committees or
attorneys-in-fact; (ii) each lineal descendant of Jack W. Nicklaus and Barbara
B. Nicklaus and their respective guardians, conservators, committees or
attorneys-in-fact; (iii) each entity controlled by such family members; and (iv)
the trustee, in their respective capacities, as such, of each trust established
for the benefit of such family members (collectively, such family members herein
defined as "Nicklaus Family Members"). See Note 7 to the Consolidated Financial
Statements included at Item 8 of this Form 10-K.

No cash dividends have been declared on the Company's Class A Common Stock and
Class B Common Stock since the initial public offering on August 1, 1996.
Moreover, the Company currently intends to retain any earnings to finance the
development and expansion of its business and does not anticipate paying any
cash dividends in the foreseeable future.

                                       12

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The selected financial data set forth below was derived from the respective
year's audited financial statements and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included at Item 7 herein, together with the Consolidated Financial
Statements, including the Notes thereto, included at Item 8 of this Form 10-K.
As part of an organizational restructuring, the operations and financial
activity associated with the Company's former Golf and Marketing Divisions have
been consolidated into a new Consumer Division and the revenues previously
presented for the former two divisions have been consolidated to conform to the
current year's presentation.
<TABLE>
<CAPTION>
                                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                  ------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:                       1997          1996          1995          1994           1993
                                                  ----------    ----------    ----------    ----------     ---------
Revenues:                                                   (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                               <C>           <C>           <C>           <C>            <C>

   Consumer division                              $ 27,988     $  13,053     $   9,604     $   8,381       $  7,031
   Construction division                            39,755        20,454        19,177         5,599          2,177
                                                  ----------    ----------    ----------    ----------     ---------
     Total revenues                                 67,743        33,507        28,781        13,980          9,208
                                                  ----------    ----------    ----------    ----------     ---------

Operating costs and expenses:
   Construction and shaping costs                   32,107        17,052        16,500         4,737          1,894
   Operating expenses                               30,730        11,995         7,327         6,693          5,440
   Compensation recorded on sale of shares
      to management(1)                                 ---         3,000            ---           ---           ---
   Corporate administration                          5,258         3,479         3,121         3,051          2,994
   Depreciation and amortization                     2,846           485           233           199            243
                                                  ----------    ----------    ----------    ----------     ---------
       Total operating costs and expenses           70,941        36,011        27,181        14,680         10,571
                                                  ----------    ----------    ----------    ----------     ---------

Income (loss) from operations                       (3,198)       (2,504)        1,600          (700)        (1,363)
Other income (expense)                              (1,105)          322            (1)          (10)             2
                                                  ----------    ----------    ----------    ----------     ---------
Income (loss) before income taxes                   (4,303)       (2,182)        1,599          (710)        (1,361)
Provision (benefit) for income taxes                (1,372)          248           365           155             43
                                                  ----------    ----------    ----------    ----------     ---------
Net income (loss)                                 $ (2,931)       (2,430)        1,234          (865)        (1,404)
                                                  ==========
Pro forma income tax benefit(2)                                     (127)         (135)         (764)          (923)
                                                                ----------    ----------    ----------     ---------
Pro forma net income (loss)                                     $ (2,303)      $ 1,369      $   (101)      $   (481)
                                                                ==========    ==========    ==========     =========

Earnings per share - basic and diluted:
   Net loss per share                               $ (0.53)
                                                  ==========
   Pro forma net income (loss) per share                          $(0.57)     $   0.46       $ (0.03)      $ (0.16)
                                                                ==========    ==========    ==========     =========

Weighted average common shares outstanding            5,505         4,040         3,000         3,000         3,000
                                                  ==========    ==========    ==========    ==========     =========
</TABLE>

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                  ------------------------------------------------------------------
                                                    1997         1996(3)        1995          1994           1993
                                                  ----------    ----------    ----------    ----------     ---------

BALANCE SHEET DATA (AT YEAR-END):                                      (DOLLARS IN THOUSANDS)
<S>                                                <C>           <C>           <C>           <C>           <C>
Working capital (deficit)                          $16,450     $  20,593     $     368      $   (462)       $   314
Total assets                                        69,241        51,407         7,287         3,290          2,499
Long-term debt                                      18,776         5,557            44           113            ---
Shareholders' equity                                35,329        38,254         1,030           256          1,110
</TABLE>

(1)  Represents compensation deemed to have been received by certain executives
     in connection with their purchase of shares in Golf Centers. See Note 13 to
     the Consolidated Financial Statements included at Item 8 herein.
(2)  See Note 1 to the Consolidated Financial Statements included at Item 8
     herein.
(3)  The significant increases in the respective balance sheet data amounts for
     1996 are primarily attributable to the Company's initial public offering of
     2.484 million shares of its Class A Common Stock on August 1, 1996.

                                       13

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS


The following is a discussion of the financial condition and results of
operations of the Company for the years ended December 31, 1997, 1996 and 1995.
This discussion and analysis should be read in conjunction with the Selected
Financial Data and the accompanying audited Consolidated Financial Statements of
the Company and the related Notes thereto which are included elsewhere in this
10-K.

OVERVIEW

As part of an organizational restructuring during the fourth quarter of 1997 to
refocus on its core businesses, the operations and financial activity associated
with the Company's former Golf and Marketing Divisions have been consolidated
into a new Consumer Division. Accordingly, the Company now operates its business
through two divisions comprised of the Consumer Division and the Construction
Division. The Consumer Division owns, operates and licenses the Company's golf
practice and instruction facilities under the JACK NICKLAUS GOLF CENTER, JACK
NICKLAUS ACADEMY OF GOLF and GOLDEN BEAR GOLF CENTER brand names. In addition,
the Consumer Division is involved in the licensing of NICKLAUS, JACK NICKLAUS
and GOLDEN BEAR branded products throughout the world, the operation of the
NICKLAUS FLICK GOLF SCHOOLS and the generation of marketing fees related to Jack
Nicklaus' personal endorsements. Through December 31, 1997, the Consumer
Division was also involved in the marketing of golf course design services on
behalf of designers, primarily Nicklaus Design, and provided golf course
management and consulting services to various golf courses and golf related
businesses. However, as part of its organizational restructuring, the Company
terminated the design services marketing agreement pursuant to which it marketed
the design services and is no longer directly involved in providing golf course
management and consulting services effective January 1, 1998. Concurrent with
the termination of the design services agreement, the Company secured a ten year
exclusive commitment from International to continue the marketing of Paragon's
golf course construction services to Nicklaus Design clients and prospects. The
arrangement between the parties will permit Paragon to utilize the services of
Nicklaus Design's sales staff as needed on an independent contract basis and to
obtain compensation from Nicklaus Design for design leads generated through
Paragon's construction marketing activities. The Construction Division provides
technical construction services principally in connection with the construction
and renovation of golf courses and resort related facilities.

Consistent with the Company's strategy to increase its ownership and operation
of golf practice and instruction facilities, the Company has entered into
purchase and lease agreements pursuant to which it has acquired a total of 14
facilities to-date. Many of the existing facilities acquired by the Company
required renovations and the construction of additional features such as
miniature golf and pro shops to upgrade such facilities to the Company's
standards. Certain of these golf center facilities are not expected to
contribute to the Company's operating performance in the near term.

During the latter part of 1997, management made a decision to delay the
acquisition of additional golf centers so that the Company could direct its
efforts at improving the performance and profitability of its existing golf
centers. Although the Company currently intends to continue it's strategy of
increasing the number of golf center facilities that it owns and operates, the
timing of new centers will depend on many factors, including obtaining
sufficient financing and the successful integration of the operations of the
golf centers which have been acquired. New acquisitions will be deferred as the
Company focuses on improving the profitability of its existing golf centers. The
Company is also evaluating the benefits associated with constructing new
facilities rather than acquiring existing facilities. However, any future
additions of golf center facilities will be subject to obtaining sufficient
financing and there is no assurance that the Company will obtain appropriate
financing on favorable terms, or at all.

With respect to its construction activities, the Company has continued to
receive new project awards, bringing Paragon's total backlog as of December 31,
1997 to over $170 million, compared to a backlog of less than $10 million at
December 31, 1996. Paragon is currently involved in more than 30 projects around
the world.

                                       14

<PAGE>

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996

For the year ended December 31, 1997, total revenues increased to $67.7 million,
up 102.2% compared to revenues of $33.5 million for the comparable period of
1996. The $34.2 million increase in total revenues during the current year was
principally the result of a $19.3 million or 94.4% increase in Construction
Division revenues, coupled with a $14.9 million or 114.4% increase in Consumer
Division revenues. Construction Division revenues increased during 1997 as the
Company commenced work on several new large projects that were obtained during
the current fiscal year. The increase in Consumer Division revenues was
primarily attributable to the acquisition of 14 golf centers since April 15,
1996, which contributed to revenues starting with their respective acquisition
dates. In contrast, the Company owned only 11 golf centers as of the end of last
year, two of which were acquired on December 31, 1996 and one which was still
under development as of such date. Also contributing to the increase in Consumer
Division revenues for the current year were new revenues associated with a
recent strategic marketing alliance that the Company entered into with VISA USA,
Inc. and an increase in revenues from golf instruction operations.

The Company incurred net operating losses of $3.2 million and $2.5 million
during the years ended December 31, 1997 and 1996, respectively. The operating
loss incurred for the year ended December 31, 1996 included a one-time, non-cash
charge of $3.0 million representing compensation deemed to have been received by
certain executive officers in connection with their purchase of shares in Golf
Centers prior to the Company's initial public offering.

Exclusive of the effects of the $3.0 million charge, the $3.7 million increase
in the net operating loss incurred during the current year was primarily
attributable to an increase in operating expenses, which as a percentage of
total revenues, were 45.4% and 35.8% for the years ended December 31, 1997 and
1996, respectively. The increase in operating expenses was due primarily to the
relative increase in golf centers operations, which incur higher levels of
operating expenses than the Company's other operations. Additionally, the
Company incurred certain non-typical charges associated with the integration of
the golf centers' retail operations, severance costs and a computer system
conversion, which aggregated in excess of $1.5 million during 1997. In addition,
the Company recorded provisions for bad debts of $2.2 million for various
accounts receivable, including certain receivables attributable to its
operations in the Far East.

The increase in the operating loss incurred during the current year was also
impacted by an increase in the amounts charged to depreciation and amortization
expense along with an increase in the level of spending on corporate
administration, offset in part, by an increase in the gross margin realized by
the Construction Division. Such gross margin increased to 19.2% for 1997 from
16.6% during 1996 due primarily to services performed on certain significant new
projects obtained during the current year.

Corporate administration expenses, which are comprised primarily of personnel
related costs, increased to $5.3 million for the year ended December 31, 1997
from $3.5 million for the year ended December 31, 1996. The increase in
corporate administration expenses was attributable to additions of personnel and
systems upgrades, together with the increased costs associated with the
expansion of the Company's businesses and operating the Company as a separate
public company.

Charges to depreciation and amortization increased to $2.8 million during the
year ended December 31, 1997 from $0.5 million for the comparable period of 1996
due primarily to the increase in property and equipment associated with the
acquisition and conversion of golf center facilities.

                                       15

<PAGE>

Interest income, which decreased to $0.3 million during fiscal 1997 from $0.5
million for fiscal 1996, was comprised primarily of earnings on the unexpended
proceeds from the Company's initial public offering which were invested in
short-term commercial paper instruments and repurchase agreements. Interest
expense for the current year increased to $1.1 million from $0.2 million for the
comparable period of 1996, attributable primarily to greater outstanding
indebtedness related to the Company's acquisition of golf centers. Increased
amounts of indebtedness were also outstanding under the Company's new revolving
credit facility during the fourth quarter of 1997.

Prior to becoming a C Corporation upon the reorganization of the Company on
August 1, 1996, the various entities that comprised its operations were S
Corporations and therefore not subject to United States Federal and state income
taxes. Prior to the reorganization, such entities generally paid only foreign
income taxes. Accordingly, a pro forma income tax benefit has been included in
the pro forma net loss and pro forma net loss per share amounts presented for
the year ended December 31, 1996 to show the effects on the Company's operations
as if the relevant entities had been C Corporations for all of the years
presented. The pro forma taxes reflect consideration of all permanent
differences between book and tax income at the Company's estimated effective tax
rate of 39%. Such pro forma taxes do not reflect a deduction for the $3.0
million non-cash charge, which was not deductible for Federal and state income
tax purposes.

YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995

Total revenues increased 16.4% to $33.5 million in 1996 from $28.8 million in
1995. The increase in total revenues was principally the result of an increase
in Consumer Division revenues to $13.1 million in 1996 from $9.6 million in
1995, attributable primarily to the acquisition of 10 existing golf centers,
including two on December 31, 1996, that contributed to revenues starting with
their respective acquisition dates. Revenues attributable to the Consumer
Division also increased during 1996 due to increased revenues from licensing
operations, together with increased income from the operations of JNAI, which
were offset in part by a decrease in golf instruction revenues.

The Company's Construction Division revenues increased to $20.5 million in 1996
from $19.2 million in 1995. The Company limited the number of new construction
contracts that it undertook during 1996 in an effort to complete the
implementation of new systems and the integration of new staff to properly
position it for future growth.

The Company incurred a net operating loss for 1996 due primarily to a one-time,
non-cash charge of $3.0 million representing compensation deemed to have been
received by certain executive officers in connection with their purchase of
shares of Golf Centers. Exclusive of the effects of this one-time charge,
operating income would have decreased approximately $1.1 million in 1996 as
compared to 1995. The $1.1 million decrease was primarily a result of increased
operating expenses, which as a percentage of total revenues increased to 35.8%
for 1996 from 25.5% during 1995. The increase in operating expenses for 1996
resulted primarily from operating the 10 newly acquired golf center facilities,
which incur higher levels of operating expenses than the Company's other
operations. In addition, the Company incurred additional costs attributable to
the implementation of new systems and the expansion of its businesses.

The gross margin realized by the Construction Division increased to 16.6% for
1996 from 14.0% during 1995, due primarily to a differing mix of projects in
process during 1996. Corporate administration costs increased to $3.5 million in
1996 from $3.1 million in 1995 due to planned systems upgrades and additions of
personnel, together with the increased costs associated with operating the
Company as a separate public company.

Interest income of $0.5 million in 1996 was primarily attributable to earnings
on the unexpended proceeds from the Company's initial public offering which had
been invested in short-term commercial paper instruments and repurchase
agreements. Interest income for 1995 was not material to the Company's results
of operations.

                                       16

<PAGE>

Prior to becoming a C Corporation upon the reorganization of the Company on
August 1, 1996, the various entities that comprised its operations were S
Corporations and therefore not subject to United States Federal and state income
taxes. Prior to the reorganization, such entities generally paid only foreign
income taxes. Accordingly, a pro forma income tax benefit has been included in
the pro forma net income (loss) and pro forma net income (loss) per share
amounts presented for the years ended December 31, 1996 and 1995 to show the
effects on the Company's operations as if the relevant entities had been C
Corporations for all of the years presented. The pro forma taxes reflect
consideration of all permanent differences between book and tax income at the
Company's estimated effective tax rate of 39%. Such pro forma taxes do not
reflect a deduction for the $3.0 million non-cash charge in fiscal 1996, which
was not deductible for Federal and state income tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

On August 1, 1996, Golden Bear closed an initial public offering of 2,484,000
shares of its Class A Common Stock and received net proceeds (after deducting
underwriting discounts and offering costs) of approximately $35.2 million. The
net proceeds, which had been fully expended by the Company as of December 31,
1997, were utilized for the following purposes, (i) approximately $13.6 million
was used to fund the acquisition of golf centers, (ii) approximately $10.2
million was utilized for working capital purposes, (iii) approximately $9.0
million was used for capital improvements to the acquired golf center facilities
and other capital expenditures, (iv) approximately $1.6 million was utilized to
repay indebtedness incurred by the Company in connection with the acquisition of
the Cool Springs Golf Center which had been funded by Jack Nicklaus and (v)
approximately $0.8 million was used for the repayment of other indebtedness.

As of December 31, 1997 and 1996, the Company had working capital of $16.4
million and $20.6 million, respectively, along with cash and cash equivalents of
$2.7 million and $16.5 million, respectively.

To provide for additional liquidity, the Company entered into a definitive
credit agreement with a financial institution on September 26, 1997 for a $10
million revolving credit facility. Advances under such facility are used to
finance the working capital requirements of the Company. The credit agreement
provides for an initial term of two years. Borrowings under the facility are
secured by Company assets excluding various golf center properties and certain
other assets pledged to secure other long-term indebtedness. At December 31,
1997, the outstanding balance of borrowings under the facility was approximately
$8.9 million. The credit agreement contains customary conditions and covenants
with respect to the conduct of the Company's business, including dividend
payment limitations, and requires the maintenance of various financial ratios.
Effective as of December 31, 1997, certain of the ratios associated with the
financial covenants were amended by the financial institution, bringing the
Company into compliance with all required financial covenants under the credit
agreement as of that date.

To provide additional interim working capital financing to fund Paragon's
continued growth, the Company entered into a second definitive credit agreement
with this same lender on February 27, 1998 for an additional short-term $5
million revolving credit facility. Borrowings under the new facility are limited
to a percentage of Paragon's eligible trade receivables and net costs and
estimated earnings in excess of billings on uncompleted construction contracts,
subject to certain limitations and stipulations as set forth in the credit
agreement. The new credit agreement provides for a term of 90 days and
borrowings thereunder bear interest at the greater of (i) the prime rate or (ii)
the Federal Funds rate plus 1/2% per annum, payable at maturity. Outstanding
borrowings are cross-collateralized with related indebtedness under the $10
million revolving credit facility previously provided to the Company by this
same lender, whereby all advances payable to such lender are secured by Company
assets excluding various golf center properties and certain other assets pledged
to secure other long-term debt.

In addition, the Company repaid outstanding indebtedness and terminated future
availability under a previously existing revolving credit note. Such
indebtedness was repaid in September 1997 using proceeds from the new $10
million credit facility. The Company also modified the terms of certain
obligations previously incurred in connection with the acquisition of Oasis Golf
Center. For further details regarding these and other transactions involving
Company indebtedness, see Note 6 of the Consolidated Financial Statements
included herein under Part II, Item 8.

                                       17

<PAGE>

Actual spending on the acquisition or construction of additional golf centers in
the future will depend on, among other things, the availability of funds, the
identification and availability of suitable properties or facilities on terms
satisfactory to the Company, the location and condition of existing facilities
(i.e. whether significant capital improvements are necessary), whether the
Company acquires or leases the related land, competitive developments and
strategic marketing decisions.

The Company believes that its current cash position, together with availability
under its new revolving credit facility and cash provided by operations will be
sufficient to meet its operating needs through fiscal 1998. However, the
acquisition or development of additional golf centers will be subject to
obtaining additional financing. The Company is considering obtaining additional
funds through various means, including public offerings or private placements of
debt or equity securities. The Company may also finance acquisitions by entering
into leasing arrangements or by utilizing seller financing with deferred payment
terms which might reduce the initial up-front cash requirements on the part of
the Company. Leasing arrangements and seller financing have previously been
utilized by the Company to fund all or a portion of the purchase price
associated with the acquisition of certain golf centers. There is no assurance
that the Company will be able to obtain additional financing in a timely manner,
on favorable terms, or at all. To the extent that the Company is not able to
obtain additional funds, the Company may be required to delay or reduce its
acquisition and expansion strategy.

CURRENCY FLUCTUATIONS

Although substantially all of the Company's contracts are denominated in United
States dollars, fluctuations in the value of foreign currencies relative to the
United States dollar could impact the Company's results of operations. A
substantial portion of the revenues of the Company's overseas licensees are
generated in foreign currencies and accordingly, fluctuations in the value of
these currencies relative to the United States dollar could adversely affect the
Company's profitability. Royalty payments received by the Company or by its JNAI
equity investee relating to foreign licensing arrangements are generally based
on the exchange rate at the time of payment. In addition, the Company's
construction contracts outside of the United States are also generally
denominated in United States dollars and accordingly, the effective cost to
customers for construction services performed overseas will increase or decrease
as foreign currencies fluctuate relative to the United States dollar, unless the
Company changes its United States dollar prices to reflect the fluctuations in
currency. Starting in fiscal 1997, the Company's JNAI joint venture entered into
futures contracts to hedge its anticipated receipt of certain royalty payments
denominated in Japanese Yen. Apart from these futures contracts on the part of
JNAI which were not material to the Company's results of operations, the Company
does not currently engage in hedging activities with respect to currency
fluctuations, but may do so in the future. Furthermore, the Company has
historically engaged in significant business activities in Japan and Asia. To
the extent that markets in these geographic areas are volatile and unfavorably
impact the Company's customers, such events could have an adverse effect on the
Company's operations in the region going forward.

INFLATION

The Company does not believe that the relatively moderate rates of inflation
experienced in the United States over the last three years have had a
significant effect on its revenues or profitability. Although higher rates of
inflation have been experienced in a number of foreign countries in which the
Company does business, the Company does not believe that such rates have had a
material effect on the Company's revenues or profitability.

                                       18

<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income is defined as the
change in equity during the financial reporting period of a business enterprise
resulting from non-owner sources. SFAS No. 131 establishes standards for the
reporting of operating segment information in both annual financial reports and
interim financial reports issued to shareholders. Operating segments are
components of an entity for which separate financial information is available
and is evaluated regularly by the entity's chief operating management. Both
statements require adoption in fiscal 1998.

YEAR 2000

The Year 2000 issue exists because many computer systems and applications
currently use two-digit fields to designate a year. As the century date change
occurs, date-sensitive systems may recognize the year 2000 as 1900, or not at
all. This inability to properly treat the Year 2000 issue may cause systems to
process critical financial and operational information incorrectly.

The Company has evaluated the modifications required to ensure that its computer
systems are Year 2000 compliant. Such modifications are not anticipated to be
significant and the costs associated with such modifications will be expensed as
incurred. In the opinion of management, the conversions required to comply with
the Year 2000 issue are not expected to have a material effect on the Company's
results of operations.

MARKET RISK

The Company is exposed to market risks, including changes in interest rates and
currency exchange rates. Based on the Company's interest rate and foreign
exchange rate exposure at December 31, 1997, a 10% change in the current
interest rate or historical currency rate movements would not have a material
effect on the Company's financial position or results of operations over the
next fiscal year.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

This Annual Report on Form 10-K contains forward-looking statements made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties, including
but not limited to, economic, competitive and other factors affecting the
Company's operations, markets, products and services, expansion strategies and
other factors discussed elsewhere in this report and the documents filed by the
Company with the Securities and Exchange Commission. Many of these factors are
beyond the Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this report
will, in fact, occur. The Company does not undertake any obligation to revise
these forward-looking statements to reflect future events or circumstances.

                                       19

<PAGE>
<TABLE>
<CAPTION>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                    INDEX TO CONSOLDATED FINANCIAL STATEMENTS



                                                                                                                       PAGE
<S>                                                                                                                    <C>
FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants...................................................................   21
Consolidated Balance Sheets as of December 31, 1997 and 1996.........................................................   22
Consolidated Statements of Operations for the Years
   Ended December 31, 1997, 1996 and 1995............................................................................   23
Consolidated Statements of Shareholders' Equity for the Years
   Ended December 31, 1997, 1996 and 1995............................................................................   24
Consolidated Statements of Cash Flows for the Years
   Ended December 31, 1997, 1996 and 1995............................................................................   25
Notes to Consolidated Financial Statements...........................................................................   27

FINANCIAL STATEMENT SCHEDULE:
Schedule II - Valuation and Qualifying Accounts for the Years
   Ended December 31, 1997, 1996 and 1995............................................................................   55
</TABLE>

                                       20

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Shareholders and Board of Directors of Golden Bear Golf, Inc.:

We have audited the accompanying consolidated balance sheets of Golden Bear
Golf, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Golden Bear Golf,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for the purpose of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.



ARTHUR ANDERSEN LLP

West Palm Beach, Florida,
   February 18, 1998 (except with respect
   to the matter discussed in Note 18, as
   to which the date is February 27, 1998).

                                       21

<PAGE>
<TABLE>
<CAPTION>

                             GOLDEN BEAR GOLF, INC.

                           CONSOLIDATED BALANCE SHEETS


                                                                                            DECEMBER 31,
                                                                                --------------------------------------
                                                                                      1997                 1996
                                                                                -----------------    -----------------
<S>                                                                             <C>                  <C>
                                     ASSETS

CURRENT ASSETS:
   Cash and cash equivalents                                                      $   2,711,014        $  16,477,420
   Accounts receivable, net of allowances of $2,460,266 in 1997
      and $540,806 in 1996                                                           13,787,145            5,352,224
   Due from International                                                               184,502              843,235
   Costs and estimated earnings in excess of billings on uncompleted contracts       11,462,323            3,341,500
   Inventory                                                                          2,445,465            1,953,857
   Prepaid expenses and other current assets                                            994,844              221,800
                                                                                -----------------    -----------------

           Total current assets                                                      31,585,293           28,190,036

PROPERTY AND EQUIPMENT, net                                                          28,355,232           18,347,927

INTANGIBLES AND OTHER ASSETS, net                                                     9,300,154            4,868,919
                                                                                -----------------    -----------------

           Total assets                                                           $  69,240,679        $  51,406,882
                                                                                =================    =================

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                                               $   5,877,231        $   3,542,187
   Accrued liabilities                                                                7,264,307            1,871,915
   Billings in excess of costs and estimated earnings on uncompleted contracts           90,610              419,705
   Deferred revenue                                                                     689,816              449,515
   Current portion of notes payable and capital leases                                1,213,707            1,313,383
                                                                                -----------------    -----------------

           Total current liabilities                                                 15,135,671            7,596,705
                                                                                -----------------    -----------------

NOTES PAYABLE AND CAPITAL LEASES, net of current portion                             18,776,107            5,556,667
                                                                                -----------------    -----------------

COMMITMENTS AND CONTINGENCIES (Note 12)

SHAREHOLDERS' EQUITY:
   Preferred stock, $.01 par value, 20,000,000 shares authorized,
     no shares issued and outstanding                                                       ---                  ---

   Common stock-
     Class A, $.01 par value, 70,000,000 shares authorized, 2,744,962 and
       2,744,812 shares issued and outstanding in 1997 and 1996, respectively             27,450              27,448
     Class B, $.01 par value, 10,000,000 shares authorized, 2,760,000
       shares issued and outstanding                                                      27,600              27,600
   Additional paid-in capital                                                         40,856,943          40,850,358
   Retained deficit                                                                   (5,583,092)         (2,651,896)
                                                                                -----------------    -----------------

           Total shareholders' equity                                                 35,328,901          38,253,510
                                                                                -----------------    -----------------

           Total liabilities and shareholders' equity                              $  69,240,679       $  51,406,882
                                                                                =================    =================
</TABLE>
        The accompanying notes are an integral part of these statements.

                                       22

<PAGE>
<TABLE>
<CAPTION>

                             GOLDEN BEAR GOLF, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                          FOR THE YEARS ENDED DECEMBER 31,
                                                                ------------------------------------------------------
REVENUES:                                                            1997                1996               1995
                                                                ---------------     ---------------    ---------------
<S>                                                              <C>                 <C>                 <C>
   Consumer Division-
     Golf centers, golf instruction and related revenues         $  20,925,725       $   6,992,240       $  4,522,234
     Licensing and other revenues                                    4,110,592           2,704,108          2,235,135
     Income from operations of JNAI                                  1,080,892           1,431,616          1,056,069
     Related party commissions and management fees                   1,870,735           1,924,913          1,790,523
                                                                ---------------     ---------------    ---------------
       Total Consumer Division                                      27,987,944          13,052,877          9,603,961

   Construction Division                                            39,755,343          20,454,052         19,177,460
                                                                ---------------     ---------------    ---------------

       Total revenues                                               67,743,287          33,506,929         28,781,421
                                                                ---------------     ---------------    ---------------

OPERATING COSTS AND EXPENSES:
   Construction and shaping costs                                   32,107,305          17,052,253         16,500,035
   Operating expenses                                               30,730,112          11,994,477          7,326,740
   Compensation recorded on sale of shares to management                   ---           3,000,000                ---
   Corporate administration                                          5,257,947           3,479,181          3,121,257
   Depreciation and amortization                                     2,846,006             485,362            233,041
                                                                ---------------     ---------------    ---------------
       Total operating costs and expenses                           70,941,370          36,011,273         27,181,073
                                                                ---------------     ---------------    ---------------

       Income (loss) from operations                                (3,198,083)         (2,504,344)         1,600,348
                                                                ---------------     ---------------    ---------------

OTHER INCOME (EXPENSE):
   Interest income                                                     289,201             525,388             37,166
   Interest expense                                                 (1,120,148)           (210,226)           (25,255)
   Other                                                              (273,883)              6,568            (12,954)
                                                                ---------------     ---------------    ---------------
       Total other income (expense)                                 (1,104,830)            321,730             (1,043)
                                                                ---------------     ---------------    ---------------

       Income (loss) before income taxes                            (4,302,913)         (2,182,614)         1,599,305

PROVISION (BENEFIT) FOR INCOME TAXES                                (1,371,717)            247,919            365,430
                                                                ---------------     ---------------    ---------------

       Net income (loss)                                         $  (2,931,196)         (2,430,533)         1,233,875
                                                                ===============

PRO FORMA INCOME TAX BENEFIT (Note 1)                                                     (127,331)          (135,080)
                                                                                    ---------------    ---------------

       Pro forma net income (loss) (Note 1)                                          $  (2,303,202)      $  1,368,955
                                                                                    ===============    ===============

EARNINGS PER SHARE - BASIC AND DILUTED:

       Net loss per share                                        $       (0.53)
                                                                ===============

       Pro forma net income (loss) per share                                         $       (0.57)      $       0.46
                                                                                    ===============    ===============

Weighted average common shares outstanding                           5,505,200           4,040,378          3,000,000
                                                                ===============     ===============    ===============
</TABLE>
        The accompanying notes are an integral part of these statements.

                                       23

<PAGE>
<TABLE>
<CAPTION>

                             GOLDEN BEAR GOLF, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


                                         CLASS A         CLASS B        ADDITIONAL         RETAINED
                                          COMMON          COMMON         PAID-IN           EARNINGS
                                          STOCK           STOCK          CAPITAL          (DEFICIT)           TOTAL
                                        -----------     -----------    -------------     -------------     -------------
<S>                                     <C>              <C>             <C>              <C>                <C>    <C>

BALANCE, December 31, 1994              $    2,400       $  27,600       $  840,000       $  (614,384)       $  255,616

Divisional transfers to International          ---             ---              ---          (459,173)         (459,173)

Net income                                     ---             ---              ---         1,233,875         1,233,875
                                        -----------     -----------    -------------     -------------     -------------

BALANCE, December 31, 1995                   2,400          27,600          840,000           160,318         1,030,318

Sale of shares to management                   ---             ---        1,500,000               ---         1,500,000

Compensation recorded on sale
   of shares to management                     ---             ---        3,000,000               ---         3,000,000

Initial public offering, net                24,840             ---       35,177,574               ---        35,202,414

Exercise of stock options                      208             ---          332,784               ---           332,992

Divisional transfers to International
   prior to initial public offering            ---             ---              ---          (381,681)         (381,681)

Net loss                                       ---             ---              ---        (2,430,533)       (2,430,533)
                                        -----------     -----------    -------------     -------------     -------------

BALANCE, December 31, 1996                  27,448          27,600       40,850,358        (2,651,896)       38,253,510

Repurchase and retirement of
   common stock                                (30)            ---          (43,783)              ---           (43,813)

Exercise of stock options                       32             ---           50,368               ---            50,400

Net loss                                       ---             ---              ---        (2,931,196)       (2,931,196)
                                        -----------     -----------    -------------     -------------     -------------

BALANCE, December 31, 1997               $  27,450       $  27,600      $40,856,943       $(5,583,092)      $35,328,901
                                        ===========     ===========    =============     =============     =============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       24

<PAGE>

<TABLE>
<CAPTION>
                             GOLDEN BEAR GOLF, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                          FOR THE YEARS ENDED DECEMBER 31,
                                                                ------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:                                1997                1996               1995
                                                                ---------------     ---------------    ---------------
<S>                                                              <C>                 <C>                 <C>
   Net income (loss)                                             $  (2,931,196)      $  (2,430,533)      $  1,233,875
   Adjustments to reconcile net income (loss) to net
      cash provided by (used in) operating activities:
      Depreciation and amortization                                  2,846,006             485,362            233,041
      Provision for uncollectible accounts                           2,174,718              45,870             98,046
      Compensation recorded on sale of shares to management                ---           3,000,000                ---
      Changes in assets and liabilities:
         Accounts receivable                                       (10,609,639)           (669,633)        (3,271,756)
         Due from International                                        658,733            (196,089)          (617,057)
         Costs and estimated earnings in excess of billings
            on uncompleted contracts                                (8,120,823)         (2,675,162)          (472,161)
         Inventory                                                    (491,608)         (1,923,621)           (30,236)
         Prepaid expenses and other current assets                    (773,044)            (59,549)            79,074
         Intangibles and other assets                                 (737,344)           (399,507)            70,783
         Deferred tax asset                                         (1,748,202)                ---                ---
         Accounts payable                                            2,335,044             (52,049)         2,993,965
         Accrued liabilities                                         5,392,392             764,715            536,410
         Billings in excess of costs and estimated earnings
            on uncompleted contracts                                  (329,095)           (183,285)          (226,802)
         Deferred revenue                                              240,301            (240,200)          (168,304)
                                                                ---------------     ---------------    ---------------

           Net cash provided by (used in) operating activities     (12,093,757)         (4,533,681)           458,878
                                                                ---------------     ---------------    ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of golf centers                                      (1,515,236)        (15,036,093)               ---
   Capital expenditures, net                                        (7,017,869)         (2,976,002)          (179,514)
                                                                ---------------     ---------------    ---------------

           Net cash used in investing activities                    (8,533,105)        (18,012,095)          (179,514)
                                                                ---------------     ---------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from initial public offering, net                              ---          35,202,414                ---
   Proceeds from sale of shares to management                              ---           1,500,000                ---
   Proceeds from exercise of stock options                              50,400             332,992                ---
   Proceeds from note payable - shareholder                                ---           1,625,000                ---
   Repayment of note payable - shareholder                                 ---          (1,625,000)               ---
   Proceeds from notes payable                                             ---           1,800,000                ---
   Payments on notes payable and capital leases                     (1,192,565)           (453,515)           (62,975)
   Proceeds from revolving credit facilities, net                    8,046,434             675,976            150,000
   Divisional transfers to International                                   ---            (381,681)          (459,173)
   Repurchase and retirement of common stock                           (43,813)                ---                ---
                                                                ---------------     ---------------    ---------------

           Net cash provided by (used in) financing activities       6,860,456          38,676,186           (372,148)
                                                                ---------------     ---------------    ---------------

           Net increase (decrease) in cash and cash equivalents   (13,766,406)          16,130,410           (92,784)

CASH AND CASH EQUIVALENTS, beginning of year                        16,477,420             347,010            439,794
                                                                ---------------     ---------------    ---------------

CASH AND CASH EQUIVALENTS, end of year                           $   2,711,014       $  16,477,420       $    347,010
                                                                ===============     ===============    ===============
</TABLE>

                                   (CONTINUED)

                                       25

<PAGE>
<TABLE>
<CAPTION>
                                              GOLDEN BEAR GOLF, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)


                                                                          FOR THE YEARS ENDED DECEMBER 31,
                                                                ------------------------------------------------------
                                                                     1997                1996               1995
                                                                ---------------     ---------------    ---------------
<S>                                                             <C>                 <C>                <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH
   OPERATING AND INVESTING ACTIVITIES:
      Compensation recorded on sale of shares to management     $           --       $   3,000,000     $        --
      Golf center acquisitions accounted for as capital leases  $           --       $   2,465,757     $        --
      Notes payable issued in acquisition of golf centers       $    3,074,000       $   1,700,000     $        --
      Deferred profit participation obligation issued in
         connection with acquisition of golf center             $           --       $     419,097     $        --
      Acquisitions of equipment and furniture accounted for
         as capital leases                                      $    2,054,152       $          --     $        --
      Notes payable issued in acquisition of equipment          $    1,137,743       $          --     $        --

SUPPLEMENTAL DISCLOSURE OF
   CASH FLOW INFORMATION:
      Cash paid for interest                                    $      938,012       $     210,226     $    24,962
      Cash paid for income taxes                                $      376,485       $     201,835     $    57,500
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       26

<PAGE>

                             GOLDEN BEAR GOLF, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

The accompanying Consolidated Financial Statements include the accounts of
Golden Bear Golf, Inc. and its subsidiaries ("Golden Bear" or the "Company").
All significant intercompany accounts and transactions have been eliminated. In
order to maintain consistency and comparability between periods presented,
certain amounts have been reclassified from the previously reported financial
statements in order to conform with the financial statement presentation of the
current year. As part of an organizational restructuring, the operations and
financial activity associated with the Company's former Golf and Marketing
Divisions have been consolidated into a new Consumer Division.

Golden Bear was formed on June 7, 1996 to enter into an exchange agreement which
was consummated on August 1, 1996 upon the closing of an initial public offering
of Golden Bear's Class A Common Stock. Parties to the plan of reorganization
included, among others, Golden Bear's affiliates, Golden Bear Golf Centers, Inc.
("Golf Centers"), Paragon Construction International, Inc. ("Paragon")
(collectively, the "Constituent Companies") and Golden Bear International, Inc.
("International"), a privately owned company controlled by Jack Nicklaus.
Pursuant to the exchange agreement, Golden Bear acquired all of the outstanding
common stock of the Constituent Companies in exchange for an aggregate of
1,668,000 shares of its Class A and Class B Common Stock. In addition, Golden
Bear acquired certain assets and assumed certain liabilities of International in
exchange for 1,332,000 shares of Class B Common Stock. The transaction was
accounted for on a historical cost basis in a manner similar to a pooling of
interests as Golden Bear and the Constituent Companies had common stockholders
and management. Therefore, the financial statements of Golden Bear and the
Constituent Companies for all periods prior to the reorganization are presented
in a combined format.

Golf Centers was incorporated in December 1992 to offer franchise opportunities
for the operation of golf instruction and practice facilities that consist of
practice stations and the teaching techniques developed by Jack Nicklaus, Jim
Flick and the International staff. In connection with the franchise program,
Golf Centers enters into various agreements with franchisees including, but not
limited to, development and license agreements which provide for the
establishment and operation of golf centers and use of various trademarks, trade
names and associated logos and symbols. In addition, Golf Centers also owns and
operates its own golf instruction and practice facilities at numerous locations
in several states.

Paragon was incorporated in October 1992 to provide golf course construction,
shaping and consulting services to customers located throughout the world.
Construction and shaping work is performed under both cost-plus-fee contracts
and fixed-price contracts. Paragon also manages or supervises, for a fee, the
construction projects of others. The length of Paragon's contracts varies but
typically is less than two years.

The Company licenses the brand names of NICKLAUS, JACK NICKLAUS and GOLDEN BEAR,
develops and conducts golf instruction, and manages the personal endorsement
services provided by Jack Nicklaus. The Company is generally entitled to
approximately 20% - 30% of all revenues received by Jack Nicklaus for personal
endorsement services with various companies. The Company also received a 10%
management fee based on the golf course design fees received by International
through December 31, 1997. See Note 13.

International is primarily involved in golf course design and consulting, along
with the development of residential communities and daily fee golf courses.

                                       27

<PAGE>

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

The financial statements attributable to the operations acquired from
International for all periods prior to the reorganization, which are included in
the accompanying Consolidated Financial Statements, have been prepared from the
books and records of International. As such, the consolidated statements of
operations include allocations of expenses between the operations acquired from
International and the other divisions of International which are material in
amount. Such expenses include allocations for corporate overhead, payroll,
facilities, administration and other overhead which were allocated to the
Company using a proportional cost method of allocation because specific
identification of such expenses was not practicable. Management believes that
such allocations are representative of the respective stand-alone expenses based
on the operations acquired from International, and are further supported by
agreements that were entered into in connection with the reorganization of the
Company. The equity of the Company includes transfers to International,
representing cash generated by the Company that was used in other operations of
International. In the opinion of management, the results of operations and cash
flows of the operations acquired from International are properly reflected in
the accompanying Consolidated Financial Statements.

CASH AND CASH EQUIVALENTS

Cash equivalents are comprised of highly liquid investment instruments with a
maturity of three months or less when purchased. Such investments, totaling $0
and $13.9 million at December 31, 1997 and 1996, respectively, are comprised
primarily of interest bearing short-term commercial paper and repurchase
agreements.

ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION

GOLF CENTERS

Revenues attributable to the operations of the Company's golf instruction and
practice facilities include practice range fees, miniature golf fees, batting
cage fees, lessons, food and beverage operations, and retail merchandise sales.
Such revenues are recognized concurrent with the time the services or products
are provided.

Revenues also include franchise fees and royalty fees received from franchisees.
Franchise fees relate to the establishment of the golf centers and royalty fees
relate to the providing of assistance by Golf Centers with marketing, training
and other operational issues. Accordingly, franchise fees are recognized as
revenue when substantially all such services required under the development
agreement have been performed. Royalty fees are based upon franchisees' adjusted
gross revenues, as defined, and are recognized as revenues when earned. Deferred
revenue includes franchise fees due or collected in excess of amounts earned of
$30,000 and $86,275 as of December 31, 1997 and 1996, respectively.

PARAGON

Paragon records profits on long-term construction and shaping contracts using
the percentage-of-completion method, measured primarily by the actual physical
progress towards completion on each contract. This method is used as management
considers work performed and costs incurred to be the best available measures of
progress on these contracts. Provision for estimated losses on uncompleted
contracts are made in the period in which the Company determines that such
losses are probable. To the extent that the Company underestimates the remaining
cost to complete a project, it may overstate the revenues and profit in a
particular period. In addition, Paragon's construction contracts generally
provide for warranties that obligate Paragon to remedy certain construction
defects that may arise in the ordinary course of providing such construction
services. Such warranties, which are customary in the construction industry, are
usually effective for a period of one year from the completion date of the
respective projects. Furthermore, a portion of Paragon's revenues and earnings
are generated through fixed priced contracts for the construction of golf
courses. Such fixed price contracts may expose the Company to the risks of cost
overruns and inflation as well as credit risks associated with the customer.

                                       28

<PAGE>

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

Construction and shaping costs include all direct material and labor costs and
those indirect costs related to contract performance, such as indirect labor,
supplies, tools and repairs and depreciation costs. Operating expenses are
charged to expense as incurred. Accounts receivable are principally from owners
of golf courses under construction. Paragon performs periodic reviews to
determine the collectability of its receivables and maintains allowances for
potential credit losses.

During 1997, the Company did not have sales to any individual unaffiliated
customer in excess of 10% of its consolidated revenues for the year. However,
during 1996, revenues from two unaffiliated customers of Paragon, SEG Hangzhou
Development Corporation ("SEG") and Aspen Glen Golf Company ("Aspen") comprised
approximately 24% of the Company's total consolidated revenues. Accounts
receivable at December 31, 1996 included $599,531 due from SEG and $874,209 due
from Aspen.

OPERATIONS ACQUIRED FROM INTERNATIONAL

Fees received for golf management services are generally received and recorded
over the life of the related contracts. Golf academy and golf instruction
revenues are recognized concurrent with the time the services are rendered.
License revenue is recognized over the term of the underlying license agreement,
generally from five to ten years. Revenues attributable to strategic marketing
agreements are recognized over the contract period as the goods and services
required thereunder are provided.

Revenues attributable to personal endorsement fees are recognized as Jack
Nicklaus becomes entitled to receive such fees and the commissions on marketing
golf course design services are recognized as International receives its design
fees. International generally receives deposits ranging from 10% to 50% for its
design services. The remaining design fee is received in installments over the
period of the design contract.

INVENTORY

Inventory is comprised primarily of finished goods such as golfing apparel, golf
clubs and accessories that are held for retail sale in the pro shops of the
Company's golf center facilities. Such inventory is valued at the lower of cost
or market based on the first-in, first-out inventory method.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Construction in progress is
comprised of ongoing development costs associated with the planned upgrades and
additions to golf center facilities acquired by the Company that have yet to be
placed in service. Expenditures for major additions and improvements are
capitalized, while minor replacements, maintenance and repairs are charged to
expense as incurred. When property is retired or otherwise disposed of, the cost
and accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized currently.

The Company revises the estimated useful lives of property and equipment
acquired through its golf center acquisitions to conform with its policies
regarding property and equipment. Depreciation is provided over the estimated
useful lives of the assets involved using the straight-line and accelerated
methods. The estimated useful lives generally are: ten to thirty years for
buildings and improvements, three to seven years for leasehold improvements and
five to ten years for equipment, furniture and fixtures. The buildings and
improvements acquired in connection with the Company's acquisition of golf
centers are depreciated over periods that do not exceed the terms of the related
ground leases for the underlying real property, including options to extend the
respective terms.

                                       29

<PAGE>

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

INTANGIBLES AND OTHER ASSETS

Intangibles and other assets consist primarily of the cost of acquired golf
center facilities in excess of the fair value of the net tangible assets
acquired. The cost in excess of the fair value of net tangible assets is
amortized over periods ranging from ten to thirty years on a straight-line
basis. Such costs acquired in connection with the Company's acquisition of golf
centers are amortized over periods that do not exceed the terms of the related
ground leases for the underlying real property, including options to extend the
respective terms.

In 1995, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121
requires that long-lived assets, including certain identifiable intangibles, and
the goodwill related to those assets, be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. The Company continually evaluates whether
events and circumstances have occurred that may warrant revision of the
estimated useful life of its long-lived assets or whether the remaining balance
of such long-lived assets should be evaluated for possible impairment. The
Company uses an estimate of the related undiscounted cash flows over the
remaining life of the long-lived assets in measuring their recoverability.

USE OF ESTIMATES

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

FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," requires
disclosure of the fair value of certain financial instruments. Cash and cash
equivalents, accounts receivable, costs and estimated earnings in excess of
billings on uncompleted contracts, inventory, prepaid expenses and other current
assets, accounts payable, accrued liabilities, billings in excess of costs and
estimated earnings on uncompleted contracts, deferred revenue, together with
notes payable and capital leases are reflected in the accompanying Consolidated
Financial Statements at cost which approximates fair value. The estimated fair
value of fixed rate indebtedness at December 31, 1997 was approximately $7.2
million, which approximates the carrying value. The estimated fair value of such
indebtedness was determined based on the expected future payments discounted at
risk adjusted rates for debt of similar terms and remaining maturities.

MARKET RISK

The Company is exposed to market risks, including changes in interest rates and
currency exchange rates. Based on the Company's interest rate and foreign
exchange rate exposure at December 31, 1997, a 10% change in the current
interest rate or historical currency rate movements would not have a material
effect on the Company's financial position or results of operations over the
next fiscal year.

DEBT ISSUE COSTS

Debt issue costs have been deferred and are amortized using the straight-line
method over the term of the related indebtedness of 24 months.

                                       30

<PAGE>

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

DEFERRED INCOME TAXES

Included in intangibles and other assets on the accompanying Consolidated
Balance Sheet as of December 31, 1997 is a net deferred income tax asset of
$1,748,202, comprised primarily of the unrealized net operating loss
carryforwards generated by the operating loss incurred for fiscal 1997.
Management believes the Company will generate sufficient taxable income in
future periods to absorb such net operating loss carryforwards and that it is
more likely than not that the net deferred tax asset as of December 31, 1997
will be realized. Accordingly, no valuation allowance was established against
the net deferred tax asset as of such date. See Note 9.

PRO FORMA INCOME TAXES

Prior to becoming a C Corporation upon the reorganization of the Company on
August 1, 1996, Golf Centers and Paragon were S Corporations for Federal and
state income tax reporting purposes and International was also an S Corporation.
As S corporations prior to the reorganization, Golf Centers, Paragon and
International have historically only paid foreign income taxes and have not paid
United States Federal and state income taxes. Accordingly, pro forma income
taxes have been reflected in the pro forma net income (loss) and pro forma net
income (loss) per share data presented in the accompanying Consolidated
Statements of Operations to show the effects on the Company's operations as if
the relevant entities had been C Corporations during all of the years presented.
The pro forma taxes reflect consideration of all permanent differences between
book and tax income at the Company's estimated effective tax rate of 39%. See
Note 9.

EARNINGS PER SHARE

In 1997, the FASB issued SFAS No. 128, "Earnings per Share," which among other
changes, requires that basic earnings per share be computed without regard to
any outstanding common equivalent shares. Earnings per share in the accompanying
Consolidated Statements of Operations is computed by dividing the net loss or
pro forma net income (loss) by the weighted average common shares outstanding
for the respective years. Diluted earnings per share as computed under SFAS No.
128 includes the effects of common stock equivalents, including the dilutive
effect of all outstanding stock options using the treasury stock method. Diluted
earnings per share does not differ from the basic earnings per share amounts
presented in the accompanying Consolidated Statements of Operations.

ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
which is required to be adopted in 1998. This statement establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. This statement requires that an
enterprise (i) classify items of other comprehensive income by their nature in
financial statements and (ii) display the accumulated balance of other
comprehensive income separately from retained deficit and additional paid-in
capital in the equity section of the balance sheets. Comprehensive income is
defined as the change in equity during the financial reporting period of a
business enterprise resulting from non-owner sources. The adoption of SFAS No.
130 is not expected to have a material impact on the Company's financial
statements.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which is required to be adopted in fiscal
1998. This statement requires that a public business enterprise report financial
and descriptive information about its reportable operating segments including,
among other things, a measure of segment profit or loss, certain specific
revenue and expense items, and segment assets. The Company does not believe that
the adoption of SFAS No. 131 will have a significant effect on its financial
statements.

                                       31

<PAGE>

2.  COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings on uncompleted construction and shaping contracts
consist of the following for contracts recognized under the
percentage-of-completion method of accounting:
<TABLE>
<CAPTION>

                                                                           DECEMBER 31,
                                                               -------------------------------------
                                                                    1997                 1996
                                                               ----------------     ----------------

<S>                                                              <C>                  <C>
      Costs incurred on uncompleted contracts                    $  32,470,873        $  23,604,746
      Estimated earnings                                             7,175,348            2,446,337
                                                               ----------------     ----------------

                                                                    39,646,221           26,051,083
      Less billings to date                                         28,274,508           23,129,288
                                                               ----------------     ----------------

                                                                 $  11,371,713        $   2,921,795
                                                               ================     ================
</TABLE>
<TABLE>
<CAPTION>
The amounts associated with costs and estimated earnings on uncompleted
construction and shaping costs are included in the accompanying Consolidated
Balance Sheets under the following captions:

                                                                           DECEMBER 31,
                                                               -------------------------------------
                                                                    1997                 1996
                                                               ----------------     ----------------
<S>                                                              <C>                 <C>
      Costs and estimated earnings in excess of
        billings on uncompleted contracts                        $  11,462,323        $   3,341,500

      Billings in excess of costs and estimated
        earnings on uncompleted contracts                              (90,610)            (419,705)
                                                               ----------------     ----------------

                                                                 $  11,371,713        $   2,921,795
                                                               ================     ================
</TABLE>
<TABLE>
<CAPTION>
Construction contract revenues included in the accompanying Consolidated
Statements of Operations consist of the following:

                                                     YEARS ENDED DECEMBER 31,
                                    -----------------------------------------------------------
                                          1997                 1996                 1995
                                    -----------------    -----------------    -----------------

<S>                                 <C>                   <C>                 <C>
      Completed contracts           $      4,348,929      $    13,182,139     $      4,255,046
      Uncompleted contracts               35,406,414            7,271,913           14,922,414
                                    -----------------    -----------------    -----------------

                                     $    39,755,343      $    20,454,052     $     19,177,460
                                    =================    =================    =================
</TABLE>
<TABLE>
<CAPTION>
The construction and shaping costs associated with construction contract
revenues included in the accompanying Consolidated Statements of Operations
consist of the following:

                                                     YEARS ENDED DECEMBER 31,
                                    -----------------------------------------------------------
                                          1997                 1996                 1995
                                    -----------------    -----------------    -----------------

<S>                                 <C>                   <C>                 <C>
      Completed contracts           $      6,115,177      $    11,655,967     $      3,391,505
      Uncompleted contracts               25,992,128            5,396,286           13,108,530
                                    -----------------    -----------------    -----------------

                                    $     32,107,305      $    17,052,253     $     16,500,035
                                    =================    =================    =================
</TABLE>

                                       32

<PAGE>
<TABLE>
<CAPTION>

3.  PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

                                                                           DECEMBER 31,
                                                               -------------------------------------
                                                                    1997                 1996
                                                               ----------------     ----------------

<S>                                                              <C>                  <C>
      Land                                                       $   1,918,000        $   1,918,000
      Buildings and leasehold improvements                          19,104,251           12,293,099
      Equipment, furniture and fixtures                             11,000,073            3,443,209
                                                               ----------------     ----------------

                                                                    32,022,324           17,654,308
      Construction in progress                                         350,856            2,329,931
                                                               ----------------     ----------------

                                                                    32,373,180           19,984,239
      Less accumulated depreciation and amortization                (4,017,948)          (1,636,312)
                                                               ----------------     ----------------

                                                                 $  28,355,232        $  18,347,927
                                                               ================     ================
</TABLE>

<TABLE>
<CAPTION>
4.  INTANGIBLES AND OTHER ASSETS

Intangibles and other assets consist of the following:

                                                                           DECEMBER 31,
                                                               -------------------------------------
                                                                    1997                 1996
                                                               ----------------     ----------------

<S>                                                              <C>
      Costs in excess of tangible net assets acquired            $   6,873,030        $   4,126,000
      Deferred income taxes, net                                     1,748,202                  ---
      Investment in JNAI                                               289,496              328,604
      Debt issue costs                                                 382,204                  ---
      Deposits                                                         371,698              120,000
      Other                                                            105,100              380,123
                                                               ----------------     ----------------

                                                                     9,769,730            4,954,727
      Less accumulated amortization                                   (469,576)             (85,808)
                                                               ----------------     ----------------

                                                                 $   9,300,154        $   4,868,919
                                                               ================     ================
</TABLE>

<TABLE>
<CAPTION>
5.  ACCRUED LIABILITIES

Accrued liabilities consist of the following:

                                                                           DECEMBER 31,
                                                               -------------------------------------
                                                                    1997                 1996
                                                               ----------------     ----------------

<S>                                                              <C>               <C>
      Payroll and related costs                                  $   1,101,346     $        312,369
      Foreign taxes                                                    266,214              266,214
      Construction related job costs                                 4,062,702                  ---
      Other                                                          1,834,045            1,293,332
                                                               ----------------     ----------------

                                                                 $   7,264,307        $   1,871,915
                                                               ================     ================
</TABLE>

                                       33

<PAGE>
<TABLE>
<CAPTION>

6.  NOTES PAYABLE AND CAPITAL LEASES

Notes payable and capital leases consist of the following:

                                                                                     DECEMBER 31,
                                                                         --------------------------------------
                                                                               1997                 1996
                                                                         -----------------    -----------------
<S>                                                                        <C>                  <C>
      Note payable to financial institution, due in monthly principal
         installments of $10,000 plus interest at prime + 3/4%, with
         balloon payment due at maturity in August, 2003                   $   1,640,000        $   1,760,000

      Notes payable to sellers of golf centers, with interest generally
         ranging up to prime + 1 1/4%, maturing through June, 2004(1)          3,780,723            1,367,008

      Capital lease obligations secured by certain golf center facilities,
         maturing through April, 2025                                          2,424,751            2,454,457

      Deferred profit participation obligation, payable quarterly,
         discounted at an effective rate of 9%, matures December, 2006           398,940              419,097

      Capital lease obligations secured by equipment and furniture,
         maturing through September, 2002(2)                                   1,804,047                  ---

      Revolving credit facility with a bank, with interest at prime
         payable quarterly, matures in September, 1999(3)                      8,872,410                  ---

      Revolving credit note with a bank, with interest at 8 1/2%
         payable monthly, repaid in September, 1997(4)                               ---              825,976

      Notes payable, with principal and interest ranging from 8 3/4% to
         10 3/4% payable monthly, maturing through December, 2002(5)           1,068,943                  ---

      Secured credit note, with principal and interest at 9 1/2%
         payable monthly, matured in July, 1997                                      ---               43,512
                                                                         -----------------    -----------------

                                                                              19,989,814            6,870,050
      Less current portion                                                    (1,213,707)          (1,313,383)
                                                                         -----------------    -----------------

                                                                          $   18,776,107        $   5,556,667
                                                                         =================    =================
</TABLE>

(1)  In September 1996, the Company issued non-interest bearing notes payable of
     $600,000 in connection with the purchase of East Coast Facilities. Such
     notes, which had certain defined payment terms and an outstanding principal
     balance of $267,008 at December 31, 1996, were repaid in full at their
     maturity in September 1997. Also in September 1996, the Company issued a
     note payable for $750,000 in connection with its acquisition of Highlander
     Facilities. The note is secured by certain property and equipment of the
     golf center and bears interest at 8% payable monthly, with the entire
     principal due in August 2001.

     In December 1996, the Company issued a note payable for $350,000 in
     connection with the purchase of MacDivott's Golf Center. The note is
     secured by certain property and equipment of the golf center and bears
     interest at prime + 1/2% payable quarterly, with the entire principal due
     in December 1999. In August 1997, the Company purchased a mini-golf
     facility located adjacent to MacDivott's Golf Center and issued a
     promissory note for $175,000 in connection with such acquisition. The
     promissory note is secured by certain property and equipment of the
     mini-golf facility and requires quarterly principal payments of $6,250 plus
     interest at prime + 1%. Based on such required quarterly payments, the note
     will be fully amortized in June 2004. The outstanding principal balance on
     the note was $162,500 at December 31, 1997. See Note 14.

                                       34

<PAGE>

6.  NOTES PAYABLE AND CAPITAL LEASES - (CONTINUED)

(1)  In January 1997, the Company incurred certain secured indebtedness
     aggregating approximately $2.1 million in connection with the purchase of
     Oasis Golf Center. In August 1997, the Company repaid a $200,000
     non-interest bearing installment due on such indebtedness and in September
     1997, the Company made another $200,000 payment and modified the terms of
     the remaining obligations. The remaining obligations were consolidated into
     a $1.8 million promissory note requiring monthly payments of principal and
     interest at prime + 1 1/4% calculated on a ten year amortization schedule.
     In addition to such recurring monthly installments, the Company is also
     obligated to make additional annual $50,000 principal payments in September
     of each year through 2002 at which time any remaining outstanding principal
     is payable in a balloon payment. The outstanding principal balance on the
     note was $1.8 million at December 31, 1997. See Note 14.

     In February 1997, the Company issued a note payable for $800,000 in
     connection with the purchase of Caddy-Shack Golf Dome. The note is secured
     by certain property and equipment of the golf center and requires quarterly
     payments of $38,820 representing the amortization of principal and interest
     at 9%. Based on such required quarterly payments, the note will be fully
     amortized in March 2004. The outstanding principal balance on the note was
     $736,123 at December 31, 1997. See Note 14.

(2)  During the period May through October of 1997, the Company acquired certain
     construction equipment, office furniture and phone systems equipment by
     entering into financing arrangements that were accounted for as capital
     leases. Such capital lease obligations have terms of up to five years and
     require monthly payments representing principal and interest at rates
     ranging from 9% to 9.6%.

(3)  In September 1997, the Company entered into a definitive credit agreement
     with a bank for a $10 million revolving credit facility to be used to
     finance the working capital required to fund the Company's continued growth
     as well as for general corporate purposes. The credit agreement provides
     for a term of two years. Outstanding borrowings, which bear interest at the
     prime rate payable quarterly, are secured by Company assets excluding
     various golf center properties and certain other assets pledged to secure
     other long-term debt. See Note 18.

(4)  In September 1997, the Company repaid outstanding borrowings and terminated
     future availability under a previously existing revolving credit note. The
     borrowings were repaid using proceeds from the new $10 million revolving
     credit facility that the Company entered into in September 1997.

(5)  During the period June through December of 1997, the Company financed the
     purchase of certain construction equipment and vehicles by issuing notes
     payable secured by the assets purchased. Such notes payable have terms of
     up to five years and require monthly payments representing principal and
     interest at rates ranging from 8 3/4% to 10 3/4%.

In addition to the foregoing indebtedness, the Company also had indebtedness
that originated and was repaid in full during 1996. In June 1996, Jack Nicklaus
advanced the Company $1.625 million and the Company issued a note payable to
Jack Nicklaus for such amount. The proceeds were used to fund the Cool Springs
Golf Center acquisition. See Note 14. The note payable was repaid in full in
August 1996 from the proceeds of the initial public offering.

The credit agreement for the $10 million revolving credit facility contains
customary conditions and covenants with respect to the conduct of the Company's
business, including dividend payment limitations, and requires the maintenance
of various financial ratios. Effective as of December 31, 1997, certain of the
ratios associated with the financial covenants were amended by the financial
institution, bringing the Company into compliance with all required financial
covenants as of that date.

                                       35

<PAGE>

6.  NOTES PAYABLE AND CAPITAL LEASES - (CONTINUED)

The following table sets forth the future minimum lease payments under capital
lease obligations and the future minimum payments required under the deferred
profit participation obligation, together with the present value of the net
minimum lease payments and profit participation payments, as of December 31,
1997.
<TABLE>
<CAPTION>

                                                                                     DEFERRED PROFIT
                                                                CAPITAL LEASE         PARTICIPATION
      Years ending December 31:                                  OBLIGATIONS           OBLIGATION
                                                               ----------------     ------------------

<S>                                                            <C>                   <C>
      1998                                                     $       787,284       $       64,000
      1999                                                             788,745               64,000
      2000                                                             776,907               64,000
      2001                                                             723,522               64,000
      2002                                                             450,920               64,000
      Thereafter                                                     4,237,597              272,000
                                                               ----------------     ------------------

      Total minimum payments                                         7,764,975              592,000
      Less amounts representing interest(1)                         (3,536,177)            (193,060)
                                                               ----------------     ------------------

      Present value of minimum payments                          $   4,228,798        $     398,940
                                                               ================     ==================
</TABLE>

(1)  Represents amounts necessary to reduce the net minimum payments to present
     value calculated at the Company's estimated incremental borrowing rate at
     the inception of the respective obligations.

The aggregate maturities of notes payable and borrowings under the revolving
credit facility were as follows, at December 31, 1997:

                                                                MATURITIES OF
      Years ending December 31:                                 INDEBTEDNESS
                                                               ----------------

      1998                                                       $     769,462
      1999                                                           9,999,321
      2000                                                             692,761
      2001                                                           1,294,191
      2002                                                           1,347,182
      Thereafter                                                     1,259,159
                                                               ----------------

                                                                 $  15,362,076
                                                               ================

7.  COMMON STOCK

The shares of Class A Common Stock and Class B Common Stock are identical in all
respects, except for voting rights and certain conversion rights and transfer
restrictions in respect of the shares of the Class B Common Stock. Each share of
Class A Common Stock entitles the holder to one vote on each matter submitted to
a vote of Golden Bear's shareholders and each share of Class B Common Stock
entitles the holder to ten votes on each such matter, including the election of
directors. Neither the Class A Common Stock nor the Class B Common Stock have
cumulative voting rights.

Holders of Class A Common Stock and Class B Common Stock are entitled to receive
dividends at the same rate if and when declared by the Board of Directors out of
funds legally available therefore, subject to the dividend and liquidation
rights of any Preferred Stock that may be issued and outstanding.

                                       36

<PAGE>

7.  COMMON STOCK - (CONTINUED)

There are certain restrictions with respect to the transfer of Class B Common
Stock. All of the shares of Class B Common Stock are held by Nicklaus family
members or by entities controlled by or established for the benefit of such
members ("Nicklaus Family Members"). If a holder of Class B Common Stock
transfers such shares, whether by sale, assignment, gift, bequest, appointment
or otherwise, to a person other than a Nicklaus Family Member, such shares will
be converted automatically into shares of Class A Common Stock.

Class A Common Stock has no conversion rights. Class B Common Stock is
convertible into unregistered shares of Class A Common Stock, in whole or in
part, at any time and from time to time at the option of the holder, on the
basis of one share of Class A Common Stock for each share of Class B Common
Stock converted.

In the event of liquidation, after payment of the debts and other liabilities of
Golden Bear and after making provision for the holders of Preferred Stock, if
any, the remaining assets of the Company will be distributable ratably among the
holders of the Class A Common Stock and Class B Common Stock treated as a single
class.

Upon the merger or consolidation of Golden Bear, holders of Class A Common Stock
and Class B Common Stock each are entitled to receive equal per share payments
or distributions, except that in any transaction in which shares of capital
stock are distributed, such shares may differ as to voting rights to the extent
and only to the extent that the voting rights of the Class A Common Stock and
Class B Common Stock differ at that time.

8.  OPERATIONS OF JNAI

The apparel licensing activities of the Company in the Far East are conducted
through Jack Nicklaus Apparel International ("JNAI") and its various
partnerships. The Company serves as a 50% general partner and is generally
entitled to receive 50% of the cash distributions of the various partnerships'
operations. The Company's investment in JNAI is recorded on the equity method.

<TABLE>
<CAPTION>
The following is a condensed summary of the operating results of JNAI:

                                                                  FOR THE YEARS ENDED NOVEMBER 30,
                                                        -----------------------------------------------------
                                                            1997                1996               1995
                                                        --------------     ---------------    ---------------

<S>                                                     <C>                 <C>                <C>
      Licensing revenues                                $   2,927,236       $   3,929,392      $   3,820,125
      Operating expenses                                      755,052             818,877          1,095,232
      Provision for income taxes                               10,400             247,283            644,882
                                                        ==============     ===============    ===============
      Net income                                        $   2,161,784       $   2,863,232      $   2,080,011
                                                        ==============     ===============    ===============
</TABLE>

9.  INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements.

The Company files a consolidated Federal income tax return which includes the
operations of the Company and its subsidiaries. Prior to the reorganization of
the Company on August 1, 1996, the respective entities comprising the current
Company were S Corporations for Federal income tax reporting purposes, and
therefore not subject to Federal income taxes.

                                       37

<PAGE>

<TABLE>
<CAPTION>

9.  INCOME TAXES - (CONTINUED)

The components of the provision for income taxes for the respective fiscal years
consisted of the following:

                                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                        -----------------------------------------------------
                                                            1997                1996               1995
                                                        --------------     ---------------    ---------------
<S>                                                       <C>                <C>                <C>

      Current:
         State                                            $   145,363        $     64,474       $       ---
         Foreign                                              231,122             183,445            365,430
      Deferred:
         Federal                                           (1,605,816)           (515,282)               ---
         State                                               (142,386)            (23,718)               ---
      Change in valuation allowance                               ---             539,000                ---
                                                        --------------     ---------------    ---------------

      Provision (benefit) for income taxes               $ (1,371,717)      $    247,919       $    365,430
                                                        ==============     ===============    ===============
</TABLE>

<TABLE>
<CAPTION>
A reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate for the respective fiscal years is shown below:

                                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                        -----------------------------------------------------
                                                            1997                1996               1995
                                                        --------------     ---------------    ---------------

<S>                                                         <C>              <C>                  <C>
Statutory Federal income tax rate                         (34.0)%            (34.0)%              ---%
Non-deductible expenses                                     2.1                1.8                ---
State income taxes                                          ---                2.9                ---
Foreign income taxes                                        ---                8.5               22.8
Change in valuation allowance                               ---               (9.1)               ---
Tax rate on pre- C Corporation earnings                     ---               42.2                ---
Other, net                                                  ---               (0.9)               ---
                                                        --------------     ---------------    ---------------

Effective tax rate                                        (31.9)%             11.4%              22.8%
                                                        ==============     ===============    ===============
</TABLE>

                                       38

<PAGE>
<TABLE>
<CAPTION>

9.  INCOME TAXES - (CONTINUED)

The net deferred income tax asset is comprised of the following:

                                                                  DECEMBER 31,
                                                        ----------------------------------
                                                            1997                1996
                                                        --------------     ---------------
<S>                                                       <C>                <C>
      Deferred income tax assets:
         Allowance for doubtful accounts                  $   802,738        $    211,000
         Tax basis capitalized costs                          132,413              52,000
         Tax basis in property and equipment
            in excess of book basis                            82,533              68,000
         Accruals not currently deductible                     71,114              47,000
         Net operating loss carryforwards                     931,535             286,000
         Foreign tax credit carryforwards                     368,027             112,000
                                                        --------------     ---------------

                                                            2,388,360             776,000
                                                        --------------     ---------------
      Deferred income tax liabilities:
         Book basis in intangible assets over tax basis         7,526               7,000
         Book basis of investment in JNAI
            over tax basis                                    118,367             223,000
         Deferred revenue                                     (24,735)              7,000
                                                        --------------     ---------------

                                                              101,158             237,000
                                                        --------------     ---------------

      Net deferred income tax asset                         2,287,202             539,000

      Valuation allowance                                    (539,000)           (539,000)
                                                        --------------     ---------------

                                                          $ 1,748,202        $       ---
                                                        ==============     ===============
</TABLE>

At December 31, 1997, the Company had available Federal net operating loss
carryforwards of approximately $2.6 million which expire in the year 2012, along
with approximately $368,027 of foreign tax credit carryforwards which expire in
2002.

In assessing the realizability of deferred tax assets, management must consider
whether is is more likely than not that some portion or all of the deferred tax
assets will not be realized. At December 31, 1996, the Company provided a
valuation allowance to offset the entire net deferred tax asset due to
uncertainty surrounding the future realization of such deferred tax assets.
Since the Company's initial public offering was completed on August 1, 1996, the
Company had only limited historical experience operating as a public company as
of December 31, 1996. Additionally, the Company's consolidated operations were
not expected to generate profitable results in the early part of fiscal 1997.
Accordingly, management established a valuation reserve against the net deferred
tax asset outstanding as of December 31, 1996. As of December 31, 1997,
management believes that the Company will generate sufficient taxable income in
future periods to absorb the net operating loss and foreign tax credit
carryforwards, and that it is more likely than not that other components of the
net deferred tax asset outstanding as such date will be realized. Accordingly,
no additional provisions to the valuation allowance were recorded for the fiscal
year ended December 31, 1997. The Company will adjust the valuation allowance in
the period management determines it is more likely than not that components of
the net deferred tax asset will or will not be realized.

                                       39
<PAGE>

10.  STOCK OPTIONS

A total of 675,000 shares of the Company's Class A Common Stock may be issued
under the Golden Bear 1996 Stock Option Plan ("Option Plan"), which was adopted
in July 1996. Options under the Option Plan are granted at an exercise price
equal to the fair market value of the Class A Common Stock at the date of grant
and generally have a term of ten years from the date of grant. Such options
generally become fully vested five years from the grant date although certain
options granted to employees on December 31, 1997 are exercisable one year after
the date of grant and the options granted to Jack Nicklaus pursuant to his
employment agreement with the Company vest immediately upon being granted.

<TABLE>
<CAPTION>
A summary of stock option  transactions  for the fiscal years ended  December 31, 1997 and 1996 is set forth in the
table below.

                                                                 FOR THE YEARS ENDED DECEMBER 31,
                                                  ---------------------------------------------------------------
                                                             1997                               1996
                                                  ---------------------------        ----------------------------
                                                                  WEIGHTED                           WEIGHTED
                                                                   AVERAGE                             AVERAGE
                                                                   EXERCISE                           EXERCISE
                                                    SHARES          PRICE              SHARES           PRICE
                                                  ------------    -----------        ------------    ------------
<S>                                                   <C>             <C>                <C>           <C>
Options outstanding at beginning of year              383,688         $ 16.00                ---          $   ---
Granted                                               383,150         $  9.92            404,500          $ 16.00
Exercised                                              (3,150)        $ 16.00            (20,812)         $ 16.00
Canceled                                              (93,538)        $ 15.36                ---              ---
                                                  ------------                       ------------
Options outstanding at end of year                    670,150         $ 12.61            383,688          $ 16.00
                                                  ============                       ============

Options exercisable at year-end                       122,600         $ 13.28             16,688          $ 16.00
                                                  ============                       ============

Options available for future grants                       ---                            270,500
                                                  ============                       ============
</TABLE>

<TABLE>
<CAPTION>
The following table summarizes information about outstanding and exercisable
stock options at December 31, 1997.

                                                  OUTSTANDING                                EXERCISABLE
                                 ----------------------------------------------      ----------------------------
                                                   WEIGHTED
                                                    AVERAGE         WEIGHTED                         WEIGHTED
                                                   REMAINING         AVERAGE                           AVERAGE
EXERCISE PRICE OR RANGE                           CONTRACTUAL        EXERCISE                         EXERCISE
   OF EXERCISE PRICES              SHARES        LIFE (YEARS)         PRICE            SHARES           PRICE
----------------------------     -----------     --------------     -----------      ------------    ------------
<S>                                 <C>                   <C>          <C>             <C>             <C>
$  8.00                             185,550               10.00        $   8.00           ---          $   ---
$10.63 - $11.50                     137,600                8.94         $ 11.00        65,000          $ 10.88
$12.75                               30,000                9.81         $ 12.75           ---          $   ---
$16.00                              317,000                8.59         $ 16.00        57,600          $ 16.00
                                 ===========                                         =========
                                    670,150                9.11         $ 12.61       122,600          $ 13.28
                                 ===========                                         =========
</TABLE>

In connection with his employment agreement with the Company, Jack Nicklaus is
entitled to receive options to purchase 65,000 shares of Class A Common Stock
each year for a period of four years, commencing on August 1, 1997. Such
options, which are issued with an exercise price equal to the fair market value
of the Class A Common Stock on the date of grant, are immediately exercisable
upon grant and expire in 2006.

The Option Plan also provides for options to be granted to each non-employee
director of Golden Bear on the first business day following the annual meeting
of shareholders of the Company. Each non-employee director is granted options
for the purchase of 1,000 shares of Class A Common Stock with an exercise price
equal to the fair market value of the Class A Common Stock on the date of grant,
which expire 10 years from the date of grant.

                                       40

<PAGE>

10.  STOCK OPTIONS - (CONTINUED)

The Option Plan is administered by the Compensation Committee of the Company's
Board of Directors which is authorized to determine the provisions of future
grants, including selecting the recipients, exercise price, terms and vesting
schedules for such options.

The Company applies Accounting Principals Board Opinion No. 25, "Accounting for
Stock Issued to Employees" in accounting for stock-based compensation
arrangements whereby no compensation costs attributable to stock options is
deducted in determining net income (loss). Had compensation costs for the
Company's Option Plan been determined pursuant to SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net loss and net loss per share would
have increased accordingly. Using the Black-Scholes option pricing model for all
options granted, the Company's pro forma net loss, pro forma net loss per share
and pro forma weighted average fair value of options granted, with related
assumptions, are as follows for the fiscal periods since inception of the Option
Plan through December 31, 1997.
<TABLE>
<CAPTION>

                                                               FOR THE YEARS ENDED DECEMBER 31,
                                                           ----------------------------------------
                                                                 1997                   1996
                                                           -----------------      -----------------

<S>                                                          <C>                    <C>
      Pro forma net loss                                     $  (3,601,972)         $  (2,523,317)
      Pro forma net loss per share - basic and diluted               (0.65)                 (0.63)
      Pro forma weighted average fair
         value of options granted                                     7.26                  11.80
      Risk free interest rate                                          7.0%                   7.0%
      Expected lives                                              10 years               10 years
      Expected volatility                                             55.0%                  55.0%
</TABLE>

11.  RETIREMENT SAVINGS PLAN

The Company participates in a retirement savings plan ("Savings Plan") sponsored
by International. The Savings Plan operates as a defined contribution plan and
is qualified under Section 401(k) of the Internal Revenue Code. The Savings Plan
covers all employees who have completed one year of service. The Company matches
the employees' contributions, up to a maximum of $1,500 per employee per Savings
Plan year. A participant's individual contribution is limited to the maximum
amount for such year under the Internal Revenue Code. Discretionary
contributions can also be made to the Savings Plan. All employees who have
completed one year of service and are employed at year-end are eligible for this
contribution. Company contributions to the Savings Plan were $102,318, $121,942
and $118,979 during the years ended December 31, 1997, 1996 and 1995,
respectively.

12.  COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company generally leases the real property underlying its golf center
facilities under long-term lease arrangements. The lease terms typically provide
for minimum rentals to be paid each year along with certain additional
contingent rentals based on a percentage of sales. Although such lease
arrangements may include certain related buildings and improvements, the
substantial majority of the lease payments attributable to the operations of the
Company's golf centers are for the real property underlying the respective golf
centers. At December 31, 1997, the Company had such long-term operating lease
agreements associated with 13 of its golf center facilities, with terms expiring
at various dates through December, 2017. Most of these leases contain one or
more renewal options, generally for five or ten-year periods. Total rent expense
under such leases was $2.3 million during 1997 of which approximately $1.6
million represented minimum required rentals and the balance reflected
contingent rentals based on a percentage of the respective golf centers' sales.
Rent expense under such ground leases was $506,844 for 1996, substantially all
of which was comprised of minimum rentals. Because the Company did not start
acquiring golf centers until fiscal 1996, no such rent expense attributable to
site ground leases was incurred during fiscal 1995.

                                       41

<PAGE>

12.  COMMITMENTS AND CONTINGENCIES - (CONTINUED)

In addition to the operating leases associated with its golf centers, the
Company also leases its corporate executive and administrative office facilities
and leases certain other office space, office equipment, construction equipment
and vehicles. The rent expense incurred under these leases was approximately
$3.3 million, $1.2 million and $0.6 million during the years ended December 31,
1997, 1996 and 1995, respectively. Future minimum lease payments required under
noncancelable operating lease obligations at December 31, 1997, are as follows:

                                                                   MINIMUM
                                                                    LEASE
      Years ending December 31:                                   PAYMENTS
                                                               ----------------

      1998                                                       $   2,691,346
      1999                                                           2,748,249
      2000                                                           2,742,496
      2001                                                           2,735,716
      2002                                                           2,639,980
      Thereafter                                                    24,215,676
                                                               ----------------

                                                                 $  37,773,463
                                                               ================

CLAIMS AND ASSESSMENTS

In the normal course of business, the nature of the Company's operations may
result in claims for damages. In the opinion of management, there are no pending
legal proceedings that would have a material effect on the Consolidated
Financial Statements of the Company.

In August 1995, Paragon brought an arbitration claim against a customer for
breach of contract. Paragon alleges it has properly completed the construction
relating to the renovation of the customer's golf course and is seeking final
payment of retainage and related amounts due, together with additional damages,
totaling approximately $350,000. Simultaneous to this claim of arbitration, the
customer filed a counterclaim of arbitration against Paragon for alleged
construction defects in the renovation of its golf course. Although the customer
recently claimed its damages were in excess of $1.2 million, the initial claim
submitted by the customer in arbitration was for $750,000. The ultimate outcome
of this matter is not determinable at this time; accordingly no provision for
loss regarding this matter had been established at December 31, 1997. The
ultimate disposition of this matter is not expected to have a material effect on
the Consolidated Financial Statements of the Company.

CONSTRUCTION CONTRACT WARRANTIES

Paragon's construction contracts generally provide for warranties that obligate
Paragon to remedy certain construction defects that may arise in the ordinary
course of providing such construction services. Such warranties, which are
customary in the construction industry are usually effective for a period of one
year from the completion date of the respective projects. The Company's
management does not expect the costs associated with corrective action or
penalties incurred pursuant to these warranties, if any, to have a material
impact on its results of operations.

CAPITAL CONTRIBUTION COMMITMENT

During 1997, the Company entered into a joint venture agreement to provide
certain marketing services to a business that contracts with golf courses across
the United States to offer golfers the benefits of convenient advance ticketing
for specific tee times. Under the terms of the agreement, pursuant to which the
Company is entitled to a 50% participation interest in the operations of the
venture, the Company is required to make an initial capital contribution of
approximately $500,000, of which $300,000 has already been invested. The
Company's participation in the joint venture was not material to its results of
operations for the year ended December 31, 1997.

                                       42

<PAGE>

13.  RELATED PARTY TRANSACTIONS

The balances included in the accompanying Consolidated Balance Sheets under the
caption "Due from International" consists of the net amounts owed to Golden Bear
Golf, Inc. and its subsidiaries. At December 31, 1997 and 1996, the Company had
net amounts due from International of $184,502 and $843,235, respectively.
Substantially all of the $184,502 balance due at December 31, 1997 was comprised
of commissions payable under a design services marketing agreement, whereby the
Company had marketed golf course designs worldwide for Nicklaus Design, a
division of International. As part of an organizational restructuring to refocus
on its core businesses, the Company terminated the design services marketing
agreement and will no longer be involved in marketing such services effective
January 1, 1998. Concurrent with the termination of the design services
agreement, the Company secured a ten year exclusive commitment from
International to continue the marketing of Paragon's golf course construction
services to Nicklaus Design clients and prospects. The arrangement between the
parties will permit Paragon to utilize the services of Nicklaus Design's sales
staff as needed on an independent contract basis and to obtain compensation from
Nicklaus Design for design leads generated through Paragon's construction
marketing activities.

The $843,235 balance due as of December 31, 1996 was comprised primarily of
International's allocable portion of certain costs associated with maintaining
shared office space in Singapore, together with reimbursements for certain legal
expenses and commissions on specific design related revenues collected by
Nicklaus Design.

Under the design services marketing agreement, the Company generally had been
entitled to 10% of the gross design fees collected by Nicklaus Design for its
role in marketing such design services. The Company earned commissions in this
capacity of approximately $1.3 million each year during fiscal 1997, 1996 and
1995.

International has retained the Company as the exclusive manager and
representative to market the personal endorsement services of Jack Nicklaus,
pursuant to which the Company is generally entitled to approximately 20% - 30%
of the personal endorsement fees received by Mr. Nicklaus. During fiscal 1997,
1996 and 1995, the Company earned management fee revenues for such services of
$565,905, $643,587 and $480,000, respectively.

Pursuant to an office sharing agreement, the Company had subleased its corporate
office facilities from International for the period from August 1, 1996 through
July 31, 1997. The rent expense incurred under such sublease for the first seven
months of fiscal 1997 was $358,755 and such rent expense for the five months
ended December 31, 1996 was $248,862. Effective August 1, 1997, the Company
entered into a separate lease agreement for its corporate office facilities
directly with the owner of such facilities.

In addition, the Company had maintained certain office space in Singapore
through October 31, 1997 that was shared with International. During the ten
months ended October 31, 1997, a total of $239,000 of costs associated with
maintaining such facilities was allocated to International. During fiscal 1996,
a total of $277,818 of such costs were allocated to International. Effective
November 1, 1997, the Company relocated its office facilities in Singapore and
entered into a lease for its new facilities that are no longer shared with
International.

The Company has an office staff sharing agreement with International which
provides for the sharing of the services of certain specifically identified
office staff and personnel that can effectively serve the needs of both
organizations. Such agreement was established effective with the reorganization
of the Company on August 1, 1996. A total of $458,964 attributable to payroll
and related costs associated with such shared employees was allocated to
International during fiscal 1997, and a total of $255,000 in such costs were
allocated to International during the five months ended December 31, 1996.

During fiscal 1997, the Company paid a $100,000 investment banking fee to
International for services rendered by Golden Bear Financial Services, a
division of International, in connection with negotiating the $10 million
revolving credit facility that the Company obtained during the year. The fee is
equal to 1% of the total facility commitment.

                                       43

<PAGE>
<TABLE>
<CAPTION>

13.  RELATED PARTY TRANSACTIONS - (CONTINUED)

An analysis of the activity in "Due from International" is as follows:

                                                                   FOR THE YEARS ENDED DECEMBER 31,
                                                      ---------------- --- ---------------- --- -----------------
                                                           1997                 1996                  1995
                                                      ---------------- --- ---------------- --- -----------------
<S>                                                     <C>                  <C>                  <C>
      Balance at beginning of year                      $     843,235        $     647,146        $      30,089
      Management fees and commissions                       1,870,735            1,999,913            1,790,523
      Reimbursement for shared employees                      458,964              255,000                  ---
      Reimbursement for Singapore office costs                239,000              277,818                  ---
      Reimbursement of legal fees                                 ---              209,000                  ---
      Sublease of corporate office facilities                (358,755)            (248,862)                 ---
      Investment banking fee                                 (100,000)                 ---                  ---
      Payments received                                    (2,768,677)          (2,296,780)           (1,173,466)
                                                      ----------------     ----------------     -----------------
      Balance at end of year                            $     184,502        $     843,235        $     647,146
                                                      ================     ================     =================
</TABLE>

In the ordinary course of business, the Company purchases golf equipment
manufactured by Nicklaus Golf Equipment Company, L.C., a privately owned company
in which Jack Nicklaus has a 50% equity interest. Such equipment is purchased
primarily for resale in the pro shops of the Company's golf centers and for
promotional programs associated with the Company's Nicklaus Flick Golf Schools.
During fiscal 1997, golf equipment at an aggregate cost of $405,205 was
purchased through this source. Such purchases for 1996 were not significant to
the Company's results of operations.

During the year ended December 31, 1997, the Company paid Executive Sports
International ("ESI"), formerly a division of International, $125,101 for
certain printing and graphics services. In October of 1997, ESI was sold by
International to outside parties which included a Nicklaus Family Member.

In June 1996, members of management and certain Nicklaus Family Members
purchased capital stock of Golf Centers for an aggregate price of $1.5 million,
of which $600,000 related to the shares purchased by members of management. For
financial statement reporting purposes, the fair value of the shares sold to
management at the date of issuance was deemed to be the estimated initial public
offering price of $15 per share which resulted in the recognition of
compensation expense in the amount of $3 million.

Accounts receivable at December 31, 1997 includes $204,154 due from JNAI for
certain costs associated with a brand marketing research project that were
previously paid by the Company on behalf of JNAI.

14.  ACQUISITIONS

On April 15, 1996, the Company entered into a long-term lease agreement for
McDain Golf Center of Monroeville (an existing golf practice and instruction
facility located in the greater Pittsburgh, Pennsylvania area). The portion of
the long-term lease attributable to building and improvements has been accounted
for as a capital lease totaling approximately $1.2 million.

On June 17, 1996, the Company purchased Cool Springs Golf Center (an existing
golf practice and instruction facility located in Pittsburgh, Pennsylvania) for
approximately $2.9 million. The fair value of the net assets acquired
(substantially all land, property and equipment) was approximately $2.6 million,
resulting in the recording of goodwill in the amount of $300,000 which is being
amortized over a term of 30 years. The purchase price was funded in part, by a
$1.625 million shareholder loan which was repaid from the proceeds of the
Company's initial public offering. In September 1996, the Company refinanced
these facilities with a secured, long-term loan from a financial institution.
See Note 6.

                                       44

<PAGE>

14.  ACQUISITIONS - (CONTINUED)

On August 7, 1996, the Company purchased certain assets utilized in connection
with Tom's River Golf Center (an existing golf practice and instruction facility
located in Tom's River, New Jersey) for approximately $1.9 million, which was
paid in cash at the closing. The purchase price was funded from the proceeds of
the Company's initial public offering. Concurrent with the purchase of assets,
the Company entered into a long-term ground lease for the related real property
which provides for an initial term of 20 years that may be extended for two
additional five-year terms.

On September 9, 1996, the Company purchased certain assets utilized in
connection with Rollandia Golf Park Plus (an existing golf practice and
instruction facility located in the Dayton, Ohio area) and entered into a
long-term 20 year lease arrangement for certain buildings and improvements along
with the real property underlying the facilities. The portion of the long-term
lease attributable to buildings and improvements has been accounted for a
capital lease totaling approximately $1.2 million. The purchase price for the
assets was $1.1 million, which was paid in cash at the closing from the proceeds
of the Company's initial public offering.

On September 11, 1996, the Company purchased East Coast Facilities (comprised of
an existing Golden Bear Golf Center located in Columbus, Ohio and a Golden Bear
Golf Center in Fort Lauderdale, Florida which commenced operations in November,
1996) for approximately $5.9 million, of which $5.3 million was paid in cash at
the closing and $600,000 is evidenced by promissory notes. The $5.3 million paid
at closing was funded from the proceeds of the Company's initial public
offering. The fair value of the net assets acquired (substantially all property
and equipment) was approximately $4.2 million, resulting in the recording of
goodwill in the amount of $1.7 million which is being amortized over the 20 year
term of the related ground leases.

On September 13, 1996, the Company consummated the acquisition and lease of
certain assets utilized in connection with Highlander Facilities (comprised of
an existing Golden Bear Golf Center located in Carrollton, Texas and an existing
Golden Bear Golf Center located in Moreno Valley, California). The Company
purchased the facility located in Texas for $2.25 million, of which $1.5 million
was paid at closing and $750,000 is evidenced by a promissory note. The $1.5
million paid at closing was funded from the proceeds of the Company's initial
public offering. The fair value of the net assets acquired (substantially all
property and equipment) was approximately $1.4 million, resulting in the
recording of $816,000 of goodwill which is being amortized over the expected 25
year term (including renewal options) of the related ground lease. With respect
to the facility located in California, the Company entered into a ground lease
for the real property and an operating lease of the facility. Both the ground
lease and the operating lease are for a period of ten years, renewable for two
additional five year terms.

On November 20, 1996, the Company entered into an agreement to assume a
long-term lease for certain real property located in College Park, Maryland,
upon which the Company plans to build a golf center. The remaining term of the
lease expires on December 29, 2015. Rent due under the lease is based upon
certain minimum annual amounts plus a percentage of the project's sales. In
addition, under the terms of a related finder's agreement, the Company will be
obligated to pay a percentage (as defined) of the project's annual gross
revenues for the duration of such periods as the Company owns and operates the
facility.

On December 31, 1996, the Company purchased Pop's Golf Center (an existing golf
practice and instruction facility located in Lake Park, Florida) for
approximately $762,000 in cash and a profit participation obligation payable to
one of the former shareholders of the golf center, requiring payment of amounts
equal to the greater of $64,000 per year or 4.5% of the project's gross annual
revenues for the duration of such periods as the Company owns and operates the
facility. For financial statement purposes, the net present value of the minimum
payments anticipated to be made under the profit participation agreement of
$419,097 has been recorded as a deferred acquisition obligation. The cash
portion of the purchase price was paid at the closing from proceeds of the
Company's initial public offering. The fair value of net assets acquired
(substantially all property and equipment) was approximately $1.031 million,
which resulted in the recording of goodwill in the amount of $150,000 which is
being amortized over the 10 year term of the related ground lease.

                                       45

<PAGE>

14.  ACQUISITIONS - (CONTINUED)

On December 31, 1996, the Company consummated the acquisition of MacDivott's
Wood and Putter (an existing golf practice and instruction facility located in
Royal Oak, Michigan) in a stock purchase transaction and assumed the ground
lease for the underlying real property. The total purchase price of the common
shares was $1.45 million, of which $1.1 million was paid in cash at the closing
and the remainder is evidenced by a $350,000 promissory note. The cash portion
of the purchase price was funded from the proceeds of the Company's initial
public offering. The fair value of net assets acquired (substantially all
property and equipment) by the stock purchase was approximately $350,000, which
resulted in the recording of $1.1 million of goodwill which is being amortized
over the expected 27 year term (including renewal options) of the related ground
lease.

Effective January 1, 1997, the Company entered into a long-term lease agreement
for certain assets and the underlying real property utilized in connection with
the Sunset Golf Center (an existing golf practice and instruction facility
located in Beaverton, Oregon). The lease term is for a period of 20 years and
provides for annual rentals equal to the greater of a minimum base rent or a
percentage rent calculated based on the gross revenues of the project. Under the
terms of the lease agreement, the Company is required to invest at least
$500,000 in improvements to the property prior to the end of the second lease
year.

On January 31, 1997, the Company purchased Oasis Golf Center (an existing "dome"
type golf practice and instruction facility located in Plymouth, Michigan) for
$3.2 million of which $1.0 million was paid in cash at the closing and the
remainder was evidenced by a $1.0 million secured promissory note and certain
other obligations to pay $1.2 million. The cash portion of the purchase price
was funded from the proceeds of the Company's initial public offering. The fair
value of net assets acquired (substantially all property and equipment) was
approximately $1.8 million, resulting in the recording of goodwill in the amount
of $1.4 million which will be amortized over the 20 year term of the related
ground lease for the underlying property.

On February 28, 1997, the Company purchased Caddy-Shack Golf Dome (an existing
golf practice and instruction facility located in Williamsville, New York) for
approximately $1.1 million of which $300,000 was paid in cash at the closing and
$800,000 was evidenced by certain secured promissory notes. The $300,000 paid at
the closing was funded from the proceeds of the Company's initial public
offering. The fair value of net assets acquired (substantially all property and
equipment) was approximately $500,000, resulting in the recording of goodwill in
the amount of $600,000 which will be amortized over the expected 20 year term
(including renewal options) of the related ground lease for the underlying
property.

On August 12, 1997, the Company purchased a mini-golf facility located adjacent
to the previously acquired MacDivott's Golf Center located in Royal Oak,
Michigan, for $225,000 of which $50,000 was paid in cash at closing and $175,000
was represented by a promissory note. In connection with the acquisition, the
Company entered into a ground lease for the underlying real property for an
initial term of approximately 11 years, with three options to renew for
additional five year terms each.

Apart from the acquisition of MacDivott's Wood and Putter which was represented
by a stock purchase transaction, all of the above acquisitions were acquired
pursuant to asset purchase agreements. In addition, all of the foregoing
acquisitions were accounted for under the purchase method of accounting.
Accordingly, the results of operations of these golf centers are included in the
accompanying Consolidated Statements of Operations for all periods starting with
their respective acquisition dates. Had these acquisitions occurred as of
January 1, 1996, the Company's summarized unaudited pro forma results of
operations for the respective years, would have been as follows.
<TABLE>
<CAPTION>

                                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                               ---------------------------------------
                                                                    1997                   1996
                                                               ----------------      -----------------
<S>                                                            <C>                   <C>
      Pro forma total revenues                                 $  68,102,121         $  41,303,451
      Pro forma loss  from operations                          $  (3,127,879)        $  (2,755,902)
      Pro forma net loss                                       $  (2,900,911)        $  (3,175,996)
      Pro forma net loss per share - basic and diluted         $       (0.53)        $       (0.79)
</TABLE>

                                       46

<PAGE>

14.  ACQUISITIONS - (CONTINUED)

The unaudited pro forma results have been prepared for comparative purposes only
and include certain adjustments, such as additional amortization expense as a
result of goodwill, increased interest expense on acquisition indebtedness, and
related income tax effects. The pro forma results do not purport to be
indicative of results that would have occurred had the acquisitions been in
effect for the periods presented, nor do they purport to be indicative of the
results that will be obtained in the future.

15.  SEGMENT REPORTING

The Company's revenue generating operations are conducted through two divisions,
comprised of the Consumer Division and the Construction Division. The Consumer
Division primarily includes the operations of the Company's golf practice and
instruction facilities, golf instruction activities along with the development
of the licensed products and marketing endorsement relationships. The
Construction Division reflects the operating activities of Paragon, which is
primarily engaged in the construction and shaping of golf courses.

<TABLE>
<CAPTION>
The operating results and capital expenditures of the respective segments are
set forth below.

                                                                       FOR THE YEARS ENDED DECEMBER 31,
                                                             -----------------------------------------------------
                                                                  1997               1996               1995
                                                             ---------------    ---------------     --------------
<S>                                                           <C>                <C>                  <C>
      Revenues:
         Consumer division                                    $  27,987,944      $  13,052,877        $ 9,603,961
         Construction division                                   39,755,343         20,454,052         19,177,460
                                                             ---------------    ---------------     --------------
                                                              $  67,743,287      $  33,506,929       $ 28,781,421
                                                             ===============    ===============     ==============
      Operating income (loss):
         Consumer division                                    $  (1,546,150)     $   2,360,933       $  3,176,440
         Construction division                                    3,938,510          1,721,916          1,634,509
         Corporate administration(1)                             (5,590,443)        (6,587,193)        (3,210,601)
                                                             ---------------    ---------------     --------------
                                                              $  (3,198,083)     $  (2,504,344)       $ 1,600,348
                                                             ===============    ===============     ==============
      Depreciation and amortization:
         Consumer division                                    $   2,148,054      $     353,993        $   118,690
         Construction division                                      365,456             23,357             25,007
         Corporate administration                                   332,496            108,012             89,344
                                                             ---------------    ---------------     --------------
                                                               $  2,846,006       $    485,362        $   233,041
                                                             ===============    ===============     ==============
      Capital expenditures:
         Consumer division                                    $   5,658,872      $   2,504,064       $       ---
         Construction division                                    1,157,282             92,275             88,239
         Corporate administration                                   201,715            379,663             91,275
                                                             ---------------    ---------------     --------------
                                                              $   7,017,869      $   2,976,002       $    179,514
                                                             ===============    ===============     ==============
</TABLE>

(1)  The costs attributable to corporate administration for the year ended
     December 31, 1996 include $3.0 million representing the compensation deemed
     to have been received by certain executives in connection with their
     purchase of shares in Golf Centers. See Note 13.

                                       47

<PAGE>
<TABLE>
<CAPTION>

15.  SEGMENT REPORTING - (CONTINUED)

Information with respect to identifiable assets of the respective segments is
set forth below.

                                                                     DECEMBER 31,
                                                           ----------------------------------
                                                                1997               1996
                                                           ---------------    ---------------
<S>                                                         <C>                <C>
      Identifiable assets:
         Consumer division                                  $  35,535,513      $  36,018,319
         Construction division                                 28,539,674          7,228,719
         Corporate administration                               5,165,492          8,159,844
                                                           ---------------    ---------------
                                                            $  69,240,679      $  51,406,882
                                                           ===============    ===============
</TABLE>

16.  INTERNATIONAL OPERATIONS

The Company derives a portion of its revenues from foreign sources, primarily
through certain operations of Paragon and the apparel licensing activities of
JNAI, an unconsolidated joint venture. The foreign operations of Paragon are
primarily attributable to projects located in the Asia Pacific region.
Substantially all of Paragon's construction contracts are denominated in U.S.
currency and accordingly, its historical results of operations have generally
not been subject to foreign currency fluctuations. Although JNAI conducts its
operations in the United States, substantially all of its revenues are received
from licensees located in the Asia Pacific region, primarily Japan and Korea.
All of the revenues of JNAI's licensees are generated in foreign currencies. The
licensees pay their license fees to JNAI in U.S. dollars based on the exchange
rate on the date of payment. Although foreign currency fluctuations have not
been significant historically, fluctuations in the values of these currencies
relative to the U.S. dollar could have a material adverse effect on the
Company's future profitability. Furthermore, the Company has historically
engaged in significant business activities in Japan and Asia. To the extent that
markets in these geographic areas are volatile and unfavorably impact the
Company's customers, such events could have an adverse effect on the Company's
operations in the region going forward.

Certain information with respect to the foreign operations of Paragon and the
Company's net investment in, and net equity in the earnings of JNAI is set forth
below.
<TABLE>
<CAPTION>

                                                                  AS OF AND FOR THE YEARS ENDED DECEMBER 31,
                                                             -----------------------------------------------------
                                                                  1997               1996               1995
                                                             ---------------    ---------------     --------------
<S>                                                           <C>                <C>                  <C>
         Assets                                               $  10,414,711      $   1,605,598        $ 2,583,569
                                                             ===============    ===============     ==============

         Revenues                                             $  17,257,870      $   8,528,800        $ 6,821,478
                                                             ===============    ===============     ==============

         Contribution to operating income before
            allocation of corporate overhead                  $   7,389,765      $   1,852,314        $ 3,034,988
                                                             ===============    ===============     ==============
</TABLE>

                                       48

<PAGE>

<TABLE>
<CAPTION>
17.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial information for the years ended December 31, 1997
and 1996 is presented below.

                                                                        QUARTER ENDED
                                           -------------------------------------------------------------------------
                                             MARCH 31,           JUNE 30,          SEPTEMBER 30,       DECEMBER 31,
                                                1997               1997                1997               1997
                                           ---------------     --------------     ---------------    ---------------
<S>                                         <C>                 <C>                <C>                <C>
Revenues:
   Consumer division                        $   5,550,081       $  9,368,837       $   7,929,802      $   5,139,224
   Construction division                        1,270,498         12,929,712           9,722,403         15,832,730
                                           ---------------     --------------     ---------------    ---------------
                                                6,820,579         22,298,549          17,652,205         20,971,954
                                           ---------------     --------------     ---------------    ---------------
Operating costs and expenses:
   Construction and shaping costs               1,582,142         11,889,210           7,102,439         11,533,514
   Operating expenses                           6,172,775          8,136,145           7,820,904          8,600,288
   Corporate administration                     1,305,960          1,313,973             983,070          1,654,944
   Depreciation and amortization                  289,695            690,113             709,964          1,156,234
                                           ---------------     --------------     ---------------    ---------------
                                                9,350,572         22,029,441          16,616,377         22,944,980
                                           ---------------     --------------     ---------------    ---------------
Income (loss) from operations                  (2,529,993)           269,108           1,035,828         (1,973,026)
Other income (expense)                             18,841           (228,638)           (437,425)          (457,608)
                                           ---------------     --------------     ---------------    ---------------
Income (loss) before income taxes              (2,511,152)            40,470             598,403         (2,430,634)
Provision (benefit) for income taxes             (908,510)            37,160             234,986           (735,353)
                                           ---------------     --------------     ---------------    ---------------
Net income (loss)                           $  (1,602,642)      $      3,310       $     363,417      $  (1,695,281)
                                           ===============     ==============     ===============    ===============

Earnings per share - basic and diluted:
   Net income (loss) per share              $       (0.29)      $         --       $        0.07      $      (0.31)
                                           ===============     ==============     ===============    ===============
</TABLE>

<TABLE>
<CAPTION>

                                                                        QUARTER ENDED
                                           -------------------------------------------------------------------------
                                             MARCH 31,           JUNE 30,          SEPTEMBER 30,       DECEMBER 31,
                                                1996               1996                1996               1996
                                           ---------------     --------------     ---------------    ---------------
<S>                                         <C>                 <C>                <C>                <C>
Revenues:
   Consumer division                        $   2,276,719       $  3,326,502       $   3,394,752      $   4,054,904
   Construction division                        2,055,894          5,116,729           6,482,256          6,799,173
                                           ---------------     --------------     ---------------    ---------------
                                                4,332,613          8,443,231           9,877,008         10,854,077
                                           ---------------     --------------     ---------------    ---------------
Operating costs and expenses:
   Construction and shaping costs               1,505,531          4,481,026           5,311,901          5,753,795
   Operating expenses                           1,974,760          2,528,784           3,251,833          4,239,100
   Compensation on sales of shares                    ---          3,000,000                 ---                ---
   Corporate administration                       750,467            911,267           1,083,863            733,584
   Depreciation and amortization                   72,207             91,579              46,022            275,554
                                           ---------------     --------------     ---------------    ---------------
                                                4,302,965         11,012,656           9,693,619         11,002,033
                                           ---------------     --------------     ---------------    ---------------
Income (loss) from operations                      29,648         (2,569,425)            183,389           (147,956)
Other income (expense)                              4,130            (30,294)            160,481            187,413
                                           ---------------     --------------     ---------------    ---------------
Income (loss) before income taxes                  33,778         (2,599,719)            343,870             39,457
Provision for income taxes                            586             24,790             187,992             34,551
                                           ---------------     --------------     ---------------    ---------------
Net income (loss)                                  33,192         (2,624,509)            155,878      $       4,906
                                                                                                     ===============
Pro forma income tax provision (benefit)          (45,600)            30,984            (112,715)
                                             -------------     --------------     ---------------
Pro forma net income (loss)                 $      78,792       $ (2,655,493)      $     268,593
                                           ===============     ==============     ===============

Earnings per share - basic and diluted:
   Net income per share                                                                               $         ---
                                                                                                     ===============
   Pro forma net income (loss) per share    $        0.03       $     (0.89)       $        0.06
                                           ===============     ==============     ===============
</TABLE>
                                       49

<PAGE>

18.  SUBSEQUENT EVENT

On February 27, 1998, the Company entered into a second definitive credit
agreement with the financial institution that previously in September 1997 had
provided a $10 million revolving credit facility to the Company. The new credit
facility provides for additional short-term borrowings of up to $5 million to be
used to finance the working capital required to fund Paragon's continued growth.
Such borrowings are limited to a percentage of Paragon's eligible trade
receivables and net costs and estimated earnings in excess of billings on
uncompleted construction contracts, subject to certain limitations and
stipulations as set forth in the credit agreement. The new credit agreement
provides for a term of 90 days and borrowings thereunder bear interest at the
greater of (i) the prime rate or (ii) the Federal Funds rate plus 1/2% per
annum, payable at maturity. Outstanding borrowings are cross-collateralized with
related indebtedness under the $10 million revolving credit facility previously
provided to the Company by this same lender, whereby all advances payable to
such lender are secured by Company assets excluding various golf center
properties and certain other assets pledged to secure other long-term debt. See
Note 6.

                                       50

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.

                                       51

<PAGE>

                                    PART III


The information required in Items 10, 11, 12 and 13 is incorporated by reference
to the Company's definitive proxy statement for the 1998 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission on or
before April 30, 1998.

                                       52

<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)     (1)  Financial Statements of the Company are set forth in Part II,
             Item 8 of this report.

        (2)  Financial Statement Schedule II, Valuation and Qualifying Accounts
             for the Years Ended December 31, 1997, 1996 and 1995 is submitted
             herein.

             Separate Financial Statements of Subsidiary Not Consolidated - Jack
             Nicklaus Apparel International, as of and for the Year Ended
             December 31, 1997.

        (3)  Exhibits are set forth in the Index to Exhibits included elsewhere
             herein.

(b)    Reports on Form 8-K

      There were no reports on Form 8-K filed during the fourth quarter of the
      fiscal year ended December 31, 1997.

(c)    Exhibits

  EXHIBIT
  NUMBER                       DESCRIPTION OF EXHIBITS
  -------                      -----------------------
       2        Agreement and Plan of Reorganization (incorporated by reference
                to Exhibit 2.1 to the Registrant's Registration Statement on
                Form S-1, Commission File No. 0-21089).

       3.1      Articles of Incorporation of the Registrant (incorporated by
                reference to Exhibit 3.1 to the Registrant's Registration
                Statement on Form S-1, Commission File No. 0-21089).

       3.2      Bylaws of the Registrant (incorporated by reference to Exhibit
                3.3 to the Registrant's Registration Statement on Form S-1,
                Commission File No. 0-21089).

       4        Form of Class A Common Stock Certificate (incorporated by
                reference to Exhibit 4.1 to the Registrant's Registration
                Statement on Form S-1, Commission File No. 0-21089).

      10.1      Form of Registration Rights Agreement (incorporated by reference
                to Exhibit 10.1 to the Registrant's Registration Statement on
                Form S-1, Commission File No. 0-21089).

      10.2      The Golden Bear Golf, Inc. 1996 Stock Option Plan (incorporated
                by reference to Exhibit 10.2 to the Registrant's Registration
                Statement on Form S-1, Commission File No. 0-21089).

      10.3      Employment Agreement, dated June 7, 1996, between Golden Bear
                Golf, Inc. and Richard P. Bellinger (incorporated by reference
                to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K
                for the fiscal year ended December 31, 1996).

      10.4      Employment Agreement, dated June 7, 1996, between Golden Bear
                Golf, Inc. and Mark F. Hesemann (incorporated by reference to
                Exhibit 10.4 to the Registrant's Annual Report on Form 10-K for
                the fiscal year ended December 31, 1996).

      10.5      Employment Agreement, dated June 7, 1996, between Golden Bear
                Golf, Inc. and Thomas P. Hislop (incorporated by reference to
                Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for
                the fiscal year ended December 31, 1996).

      10.6      Employment Agreement, dated June 7, 1996, between Golden Bear
                Golf, Inc. and Jack P. Bates (incorporated by reference to
                Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for
                the fiscal year ended December 31, 1996).

      10.7      Form of Indemnification Agreement between Golden Bear Golf, Inc.
                and each of its Directors and Executive Officers (incorporated
                by reference to Exhibit 10.7 to the Registrant's Registration
                Statement on Form S-1, Commission File No. 0-21089).

      10.8      Amended and Restated Joint Venture Agreement, dated June 1, 1994
                of Jack Nicklaus Apparel International, a joint venture between
                Seaford Clothing Company and Golden Bear International, Inc.
                (incorporated by reference to Exhibit 10.8 to the Registrant's
                Registration Statement on Form S-1, Commission File No.
                0-21089).

      10.9      Master Apparel Agreement, dated June 1, 1993, by and between
                Golden Bear International, Inc., Hart Schaffner & Marx and
                Hartmarx Corporation (incorporated by reference to Exhibit 10.9
                to the Registrant's Registration Statement on Form S-1,
                Commission File No. 0-21089).

      10.10     Trademark License Agreement, dated June 7, 1996, between Golden
                Bear International, Inc. and Golden Bear Golf, Inc.
                (incorporated by reference to Exhibit 10.10 to the  Registrant's
                Annual Report on Form 10-K for the fiscal year ended December
                31, 1996).

      10.11     Design Services Marketing Agreement, dated June 7, 1996, between
                Nicklaus Design (a division of Golden Bear International, Inc.)
                and Golden Bear Golf, Inc. (incorporated by reference to Exhibit
                10.11 to the Registrant's Annual Report on Form 10-K for the
                fiscal year ended December 31, 1996).

      10.12     Personal Services Management Agreement, dated June 7, 1996,
                between Golden Bear Golf, Inc., Golden Bear International, Inc.
                and Jack W. Nicklaus (incorporated by reference to Exhibit 10.12
                to the Registrant's Annual Report on Form 10-K for the fiscal
                year ended December 31, 1996).

      10.13     Marketing Consulting and Cooperation Agreement, dated June 7,
                1996, between Golden Bear International, Inc., Golden Bear Golf,
                Inc. and Nicklaus Golf Equipment Company, L.C. (incorporated by
                reference to Exhibit 10.13 to the Registrant's Annual Report on
                Form 10-K for the fiscal year ended December 31, 1996).

      10.14     Office Staff and Equipment Service Agreement, dated June 7,
                1996, between Golden Bear International, Inc. and Golden Bear
                Golf, Inc. (incorporated by reference to Exhibit 10.14 to the
                Registrant's Annual Report on Form 10-K for the fiscal year
                ended December 31, 1996).

      10.15     Sublease and Sharing Agreement, dated June 7, 1996, between
                Golden Bear International, Inc. and Golden Bear Golf,  Inc.
                (incorporated by reference to Exhibit 10.15 to the Registrant's
                Annual Report on Form 10-K for the fiscal year ended December
                31, 1996).

      10.16     Agreement, dated July 31, 1996, between East Coast Golf Centers
                of Columbus, Ltd. and Golden Bear Golf Centers, Inc.
                (incorporated by reference to Exhibit 10.2 to the Registrant's
                Current Report on Form 8-K, dated September 9, 1996).

      10.17     Agreement, dated July 31, 1996, between East Coast Golf Centers
                of Fort Lauderdale, Inc. and Golden Bear Golf Centers, Inc.
                (incorporated by reference to Exhibit 10.3 to the Registrant's
                Current Report on Form 8-K, dated September 9, 1996).

      10.18     Agreement, dated July 31, 1996, between East Coast Golf Centers,
                Inc. and Golden Bear Golf Centers, Inc. (incorporated by
                reference to Exhibit 10.4 to the Registrant's Current Report on
                Form 8-K, dated September 9, 1996).

      10.19     Agreement, dated January 27, 1997, between Golden Bear Golf
                Centers, Inc., All in Fun Enterprises, Inc. and Brian Ashley
                (incorporated by reference to Exhibit 10 to the Registrant's
                Current Report on Form 8-K, dated January 31, 1997).

      10.20     Shareholders' Agreement, dated July 15, 1996, among Nicklaus
                Family Members and Golden Bear Golf, Inc. (incorporated by
                reference to Exhibit 10.20 to the Registrant's Annual Report on
                Form 10-K for the fiscal year ended December 31, 1996).

      10.21     Shareholders' Agreement, dated July 15, 1996, among certain
                executives of Golden Bear Golf, Inc., Jack W. Nicklaus and
                Golden Bear Golf, Inc. (incorporated by reference to Exhibit
                10.21 to the Registrant's Annual Report on Form 10-K for the
                fiscal year ended December 31, 1996).

      10.22     Credit Agreement for $10 Million Revolving Credit Facility,
                dated as of September 26, 1997, among Golden Bear Golf, Inc.,
                SunTrust Bank, South Florida, N.A., as Agent and the Lenders
                Party Thereto (incorporated by reference to Exhibit 10 to the
                Registrant's Quarterly Report on Form 10-Q for the period ended
                September 30, 1997).

      21        Subsidiaries of the Registrant.

      23        Consent of Arthur Andersen LLP.

      27        Financial Data Schedule (for SEC use only).

(d)    Financial Statement Schedules

       See (a) (2) above.

                                       53

<PAGE>

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 27, 1998.


                                     GOLDEN BEAR GOLF, INC.


                                     By:   /S/  RICHARD P. BELLINGER
                                           -------------------------------------
                                           Richard P. Bellinger
                                           President and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March 27, 1998.


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

/S/  JACK W. NICKLAUS         Director and Chairman of the Board
---------------------
Jack W. Nicklaus


/S/  RICHARD P. BELLINGER     President, Chief Executive Officer and Director
-------------------------     (Principal Executive Officer)
Richard P. Bellinger

/S/  STEPHEN S. WINSLETT      Senior Vice President and Chief Financial Officer
------------------------      (Principal Financial and Accounting Officer)
Stephen S. Winslett


/S/  THOMAS P. HISLOP         Senior Vice President and Director
---------------------
Thomas P. Hislop


/S/  ROGER E. BIRK            Director
------------------
Roger E. Birk


/S/  RICHARD F. CHAPDELAINE   Director
---------------------------
Richard F. Chapdelaine


/S/  JOHN F. MCGOVERN         Director
---------------------
John F. McGovern

                                       54

<PAGE>
<TABLE>
<CAPTION>

                                                                    SCHEDULE II

                             GOLDEN BEAR GOLF, INC.

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS



                                                                    ADDITIONS          DEDUCTIONS
                                                                  ---------------    ---------------
                                                 BALANCE AT         CHARGED TO                             BALANCE AT
                                                 BEGINNING          COSTS AND           AMOUNTS               END
               DESCRIPTION                        OF YEAR            EXPENSES         WRITTEN OFF           OF YEAR
------------------------------------------     ---------------    ---------------    ---------------     ---------------
<S>                                             <C>                <C>                <C>                 <C>
YEAR ENDED DECEMBER 31, 1995:
   Allowance for uncollectible accounts         $     572,999      $      98,046      $     159,212       $     511,833
                                               ===============    ===============    ===============     ===============


YEAR ENDED DECEMBER 31, 1996:
   Allowance for uncollectible accounts         $     511,833      $      45,870      $      16,897       $     540,806
   Valuation allowance for deferred
      tax assets                                          ---            539,000                ---             539,000
                                               ---------------    ---------------    ---------------     ---------------
                                                $     511,833      $     584,870      $      16,897       $   1,079,806
                                               ===============    ===============    ===============     ===============


YEAR ENDED DECEMBER 31, 1997:
   Allowance for uncollectible accounts         $     540,806      $   2,174,718      $     255,258       $   2,460,266
   Valuation allowance for deferred
      tax assets                                      539,000                ---                ---             539,000
                                               ---------------    ---------------    ---------------     ---------------
                                                $   1,079,806      $   2,174,718      $     255,258       $   2,999,266
                                               ===============    ===============    ===============     ===============
</TABLE>

                                       55

<PAGE>

                                                SEPARATE FINANCIAL STATEMENTS OF
                                                     SUBSIDIARY NOT CONSOLIDATED









                       JACK NICKLAUS APPAREL INTERNATIONAL

                              FINANCIAL STATEMENTS


                                  TOGETHER WITH

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                                NOVEMBER 30, 1997




                                       56

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Joint Venture Partners of Jack Nicklaus Apparel International:

We have audited the accompanying balance sheet of Jack Nicklaus Apparel
International as of November 30, 1997 and the related statements of operations,
partners' equity and cash flows for the fiscal year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jack Nicklaus Apparel
International as of November 30, 1997 and the results of its operations and its
cash flows for the fiscal year then ended, in conformity with generally accepted
accounting principles.



ARTHUR ANDERSEN LLP

West Palm Beach, Florida,
   February 18, 1998.

                                       57

<PAGE>

                       JACK NICKLAUS APPAREL INTERNATIONAL

                                  BALANCE SHEET


                                                               NOVEMBER 30,
                                                                  1997
                                                             ----------------
                                     ASSETS

CURRENT ASSETS:
   Cash                                                        $      76,979
   Accounts receivable                                               979,775
                                                             ----------------

           Total current assets                                    1,056,754

OTHER ASSETS, net                                                     84,253

INVESTMENT IN AFFILIATED COMPANY                                      33,898
                                                             ----------------

           Total assets                                        $   1,174,905
                                                             ================

                     LIABILITIES AND PARTNERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable                                            $     319,418
   Accrued liabilities                                               276,485
                                                             ----------------

           Total current liabilities                                 595,903

COMMITMENTS AND CONTINGENCIES (Note 4)

PARTNERS' EQUITY                                                     579,002
                                                             ----------------

           Total liabilities and partners' equity              $   1,174,905
                                                             ================

         The accompanying notes are an integral part of this statement.

                                       58

<PAGE>

                       JACK NICKLAUS APPAREL INTERNATIONAL

                             STATEMENT OF OPERATIONS


                                                                 FISCAL YEAR
                                                                    ENDED
                                                                  NOVEMBER 30,
                                                                     1997
                                                                ---------------

REVENUES                                                         $   2,927,236
                                                                ---------------

OPERATING EXPENSES:
   Selling, general and administrative expenses                        728,592
   Amortization                                                         26,460
                                                                ---------------
       Total operating expenses                                        755,052
                                                                ---------------

       Income before income taxes                                    2,172,184

PROVISION FOR INCOME TAXES                                              10,400
                                                                ---------------

       Net income                                                $   2,161,784
                                                                ===============



         The accompanying notes are an integral part of this statement.

                                       59

<PAGE>
                       JACK NICKLAUS APPAREL INTERNATIONAL

                          STATEMENT OF PARTNERS' EQUITY


                                                          FISCAL YEAR
                                                             ENDED
                                                          NOVEMBER 30,
                                                              1997
                                                       -------------------

BALANCE, November 30, 1996                              $         657,218

Net income                                                      2,161,784

Distributions to partners                                      (2,240,000)
                                                       -------------------

BALANCE, November 30, 1997                              $         579,002
                                                       ===================


         The accompanying notes are an integral part of this statement.

                                       60

<PAGE>

<TABLE>
<CAPTION>


                       JACK NICKLAUS APPAREL INTERNATIONAL

                             STATEMENT OF CASH FLOWS


                                                                                                   FISCAL YEAR
                                                                                                      ENDED
                                                                                                   NOVEMBER 30,
                                                                                                       1997
                                                                                                  ---------------
<S>                                                                                                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                                      $   2,161,784
   Adjustments to reconcile net income to net cash provided by operating activities:
      Amortization                                                                                        26,460
      Changes in assets and liabilities:
         Accounts receivable                                                                             769,225
         Other assets                                                                                   (110,713)
         Accounts payable                                                                                293,112
         Accrued liabilities                                                                            (839,186)
                                                                                                  ---------------

           Net cash provided by operating activities                                                   2,300,682

CASH FLOWS FROM FINANCING ACTIVITIES:
   Distributions to partners                                                                          (2,240,000)
                                                                                                  ---------------

           Net increase in cash                                                                           60,682

CASH, beginning of year                                                                                   16,297
                                                                                                  ---------------

CASH, end of year                                                                                  $      76,979
                                                                                                  ===============


SUPPLEMENTAL DISCLOSURE OF
   CASH FLOW INFORMATION:

      Cash paid for interest                                                                       $        ---
                                                                                                  ===============

      Cash paid for income taxes                                                                   $     480,515
                                                                                                  ===============
</TABLE>
         The accompanying notes are an integral part of this statement.

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<PAGE>

                       JACK NICKLAUS APPAREL INTERNATIONAL

                          NOTES TO FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

Jack Nicklaus Apparel International ("JNAI") is a joint venture between Golden
Bear Apparel International, Inc. and another company. The joint venture was
formed on March 29, 1983 for the purpose of securing licensees and entering into
license agreements for the use of the name and likeness of Jack Nicklaus,
including the facsimile signature of JACK NICKLAUS and the GOLDEN BEAR
trademarks in connection with the manufacture, advertisement, promotion and sale
of wearing apparel and other products throughout the world, except the United
States, Mexico and Puerto Rico. JNAI licenses the JACK NICKLAUS and GOLDEN BEAR
trademarks under a sublicense agreement with Golden Bear Golf, Inc., an
affiliate of Golden Bear Apparel International, Inc.

The joint venture agreement provides that any capital contributions required by
JNAI be made in equal amounts by each of its two partners. Additionally,
substantially all items of net income earned or net losses incurred by JNAI are
allocated to its two partners in equal shares. JNAI may set aside reasonable
cash reserves for working capital purposes and for the payment of the expenses
of the venture along with other obligations and contingencies. However, all
remaining funds of JNAI are required to be distributed at least annually to the
partners. Neither partner of JNAI may assign or otherwise transfer any of its
interest in JNAI without the consent of the other partner.

The joint venture agreement provides that JNAI shall continue until December 31,
2000, unless otherwise terminated prior to that date by the mutual consent of
both partners or by operation of law. However, the termination date set forth in
the joint venture agreement can be extended by mutual consent of both partners.
Upon termination of JNAI, its net remaining assets are to be distributed to its
two partners in the manner set forth in the joint venture agreement, which
generally provides for distributions of equal amounts.

Although JNAI conducts its operations in the United States, substantially all of
its revenues are received from licensees located in the Asia Pacific region,
primarily Japan and Korea. All of the revenues of JNAI's licensees are generated
in foreign currencies. The licensees pay their license fees to JNAI in U.S.
dollars based on the exchange rate on the date of payment. Although foreign
currency fluctuations have not been significant historically, fluctuations in
the values of these currencies relative to the U.S. dollar could have a material
adverse effect on JNAI's future profitability. To the extent that the Asia
Pacific markets are volatile and unfavorably impact JNAI's customers, such
events could have an adverse effect on JNAI's operations in future periods.

CASH

Cash is comprised of funds on deposit in a non-interest bearing checking account
with a bank.

ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION

Revenues are recognized based on the licensing agreements with licensees, which
generally provide that JNAI is entitled to a percentage of the sales of
qualifying apparel and other products as reported by the licensees. JNAI
collects its licensing fees from customers based on various predetermined
intervals of time throughout its fiscal year, as set forth in the respective
agreements with its licensees.

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<PAGE>

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES- (CONTINUED)

OTHER ASSETS

Other assets include certain promotional costs totaling $110,713 incurred in
connection with a specific licensing agreement which have been deferred and are
being amortized over the 36 month term of the related arrangement using the
straight-line method. Accumulated amortization totaled $26,460 at November 30,
1997.

In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121
requires that long-lived assets, including certain identifiable intangibles, be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset in question may not be recoverable. JNAI
continually evaluates whether events and circumstances have occurred that may
warrant revision of the estimated useful life of its long-lived assets or
whether the remaining balance of such long-lived assets should be evaluated for
possible impairment. JNAI uses an estimate of the related undiscounted cash
flows over the remaining life of the long-lived assets in measuring their
recoverability. Management has reviewed the Company's long-lived assets and has
determined that there are no events requiring impairment loss recognition.

INCOME TAXES

For Federal income tax purposes, JNAI is treated as a partnership and
accordingly, the components of its taxable income or loss are allocated to the
two partners in accordance with the joint venture agreement, which generally
provides that such items are to be allocated in equal amounts to each partner.
As such, JNAI as an entity is not subject to Federal income taxes. However,
JNAI's licensees typically deduct amounts attributable to foreign income taxes
payable to their respective foreign taxing authorities from the licensing fees
otherwise due to JNAI. The partners of JNAI receive a pro-rata credit for such
foreign taxes paid against their taxable income for U.S. Federal income tax
purposes.

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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," requires
disclosure of the fair value of certain financial instruments. Cash, accounts
receivable, accounts payable and accrued liabilities are stated at cost which
approximates fair value.


2.  INVESTMENT IN AFFILIATED COMPANY

JNAI has a 30% equity interest in certain operations of JNJ, Inc. (`JNJ"), which
receives specific royalties from other licensees of JNAI in exchange for
providing certain marketing and advertising services. JNAI's net equity earnings
in the operations of JNJ for the fiscal year ended November 30, 1997 were not
material to the results of its operations for the fiscal year then ended.

                                       63

<PAGE>


3.  RELATED PARTY TRANSACTIONS

Certain administrative functions are performed for JNAI by its partners for
which no amounts are charged to JNAI. Additionally, certain administrative
expenses of JNAI are paid directly by the partners. Management does not believe
the costs related to the administrative functions or administrative expenses are
material to the financial position of JNAI.


4.  COMMITMENTS AND CONTINGENCIES

In the normal course of business, the nature of JNAI's operations may result in
claims for damages. In the opinion of management, there are no pending legal
proceedings that would have a material effect on the Financial Statements of
JNAI.

                                       64

<PAGE>

                                 EXHIBIT INDEX

  EXHIBIT
  NUMBER                       DESCRIPTION OF EXHIBITS
  -------                      -----------------------

      21        Subsidiaries of the Registrant.

      23        Consent of Arthur Andersen LLP.

      27        Financial Data Schedule.