SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, DC 20549

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

                                   FORM 10-KSB

[X]Annual report pursuant to Section 13 or 15(d) of the Securities  Exchange Act
   of 1934 for the fiscal year ended December 31, 1998.

[_]Transition report pursuant to Section 13 or 15(d) of the Securities
   Exchange Act of 1934 for the transition period from        to       .

                           Commission File No. 0-24812

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

                            Divot Golf Corporation
          (Name of small business issuer as specified in its charter)

               Delaware                                56-1781650
    (State or other jurisdiction of       (I.R.S. Employer Identification No.)
    incorporation or organization)

               927 Lincoln Road, Suite 200 Miami Beach, FL 33139
                   (Address of principal executive offices)

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

                                 (305) 538-2727

                           (Issuer's telephone number)

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

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

                                      NONE

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

                          Common Stock, $.001 par value

                                (Title of class)

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

  Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act  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 [_] No
[X]

  Check if there is no disclosure  of delinquent  filers in response to Item 405
of Regulation S-B in this form and no disclosure will be contained,  to the best
of  issuer's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [_]

  The issuer's revenues for the most recent fiscal year were $130,860.

  As of March 13, 2000,  the aggregate  market value of the common stock held by
non-affiliates  of the issuer was  $15,914,102,  based upon the  average bid and
asked price of such common stock as of such date.  As of March 13,  2000,  there
were  100,779,740  shares of common stock  outstanding and 0 shares of preferred
stock outstanding.

                       Documents Incorporated by Reference

                                      None.

  Transitional small business disclosure format Yes [_] No [X]



<PAGE>



                             DIVOT GOLF CORPORATION

                                   FORM 10-KSB

                          YEAR ENDED DECEMBER 31, 1998



                                       1
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

                                                                            ----

                                     PART I

 ITEM 1.  Description of Business........................................     3

 ITEM 2.  Description of Property........................................    19

 ITEM 3.  Legal Proceedings..............................................    19

 ITEM 4.  Submission of Matters to a Vote of Security holders............    21

                                     PART II

 ITEM 5.  Market for the Common Equity and Related Stockholder Matters...    23

 ITEM 6.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations..........................................    24

 ITEM 7.  Financial Statements...........................................    32

 ITEM 8.  Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure...........................................    32

                                    PART III

 ITEM 9.  Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of The Exchange Act..............    33

 ITEM 10. Executive Compensation.........................................    34

 ITEM 11. Security Ownership of Certain Beneficial Owners and
          Management.....................................................    37

 ITEM 12. Certain Relationships and Related Transactions.................    37

 ITEM 13. Exhibits and Reports on Form 8-K...............................    39

 SIGNATURES...............................................................   42




                                       2
<PAGE>

             CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

  Some of the  information  contained  in this Annual  Report on Form 10-KSB may
contain  forward-looking  statements.  Such statements  include,  in particular,
statements  about  our  plans,  strategies  and  prospects  under  the  headings
"Description of Business" and "Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations."  You  can  identify  forward-  looking
statements  by our use of  forward-looking  terminology  such as "may,"  "will,"
"expect," "anticipate,"  "estimate," "continue" or other similar words. Although
we believe that our plans, intentions and expectations reflected in or suggested
by such forward-looking statements are reasonable, we cannot assure you that our
plans,  intentions  or  expectations  will be achieved.  When  considering  such
forward-looking  statements,  you should  keep in mind the  following  important
factors  that could  cause our actual  results to differ  materially  from those
contained in any forward-looking statement:

  .  we have a limited operating history as an e-commerce company;

  .  we have a limited operating history as a company that specializes in
     Internet travel distribution;

  .  we may  not  be  able  to  complete  our  acquisition  activity,  including
     acquiring  the 3D animation  asset from  AnimInet,  the stock of Wilhelmina
     TravelFile.com  and the GDS and ancillary  contracts and related  furniture
     and equipment  from Orbit Network,  as quickly or on as favorable  terms as
     anticipated, if at all;

  .  we may not be able to hire and retain qualified employees;

  .  we may experience difficulties in maintaining our competitiveness if we
     are unable to keep up with technological advancements;

  .  we may not be able to integrate our acquired assets quickly or
     successfully into our existing business plan or corporate structure;

  .  we may not be able to meet our short-term or long-term liquidity needs
     on terms favorable to us, if at all;

  .  we may experience technological difficulties in our delivery of
     application software products;

  .  our operating performance and business strategy depends upon the
     continued viability and growth of the Internet and the travel business;

  .  we compete in a highly competitive industry with low barriers to entry;
     and

  .  we may have  incorrectly  assessed our potential  monetary  liabilities and
     expenses  with  respect  to  various  court  proceedings  in  which  we are
     currently involved.

  Given  these  uncertainties,  we caution  you not to place  undue  reliance on
forward-looking  statements.  We undertake no obligation to publicly release the
results of any revisions to these forward-looking statements that may be made to
reflect  any future  events or  circumstances  or to reflect the  occurrence  of
unanticipated events.

ITEM 1. DESCRIPTION OF BUSINESS

General

  We were incorporated in Delaware on November 12, 1991 under the name "Longview
Golf  Corporation."  We changed our name to  "Brassie  Golf  Holdings,  Ltd." on
September  18,  1992,  and then  again,  on March 29,  1993,  to  "Brassie  Golf
Corporation." On June 2, 1998, we changed our name to "Divot Golf  Corporation."
We  expect to ask our  stockholders  to  approve  at our next  annual  meeting a
proposal to change our name to "Orbit  Travel.com  Corporation."  Our  executive
offices are located at 927 Lincoln Road,  Suite 200, Miami Beach, FL 33139,  and
our telephone number is (305) 538-2727.

Recent Developments

  Acquisition Activity. On October 5, 1999, California-based Orbit Network, Inc.
publicly issued a press release stating that we had announced that we had signed
a definitive  merger  agreement to acquire  California-based  Orbit Network in a
stock for stock exchange.  However,  upon completion of our due diligence review
of Orbit  Network,  we and Orbit Network  mutually  agreed to cancel this merger
agreement and agreed to enter into the transactions we discuss below.



                                       3
<PAGE>



  We entered into a right to use agreement  with Orbit Network as of November 1,
1999 pursuant to which we paid $500,000 in cash for a six-month right to use and
operate Orbit  Network's  Global  Distribution  Systems  ("GDS")  contracts with
Amadeus Marketing,  S.A., The Sabre Group, Inc., Galileo  International,  L.L.C.
and  WorldSpan,  L.P.,  its services  agreement  with America OnLine and related
furniture and equipment.  As part of this right to use agreement, we operate the
"TravelFile"  website that provides  travel  suppliers and Internet users travel
planning  services.  We are entitled  under the right to use agreement to retain
any  revenues  for a  six-month  period that may be  generated  from the GDS and
ancillary  contracts.  Also,  as part of the  right  to use  agreement,  we paid
$100,000  (included  in the  $500,000  paid  November  1,  1999)  for an  option
(exercisable  in our sole and absolute  discretion) to purchase Orbit  Network's
rights under the GDS and ancillary contracts and related furniture and equipment
for the assumption of $5.1 million of Orbit Network debt.  This purchase  option
expires on May 1, 2000,  unless extended by us for an additional six months.  We
cannot assure you that we will  exercise  this  purchase  option or that we will
otherwise  acquire the GDS and  ancillary  contracts  and related  furniture and
equipment nor can we assure you that, if we do not acquire the GDS and ancillary
contracts and related  furniture and  equipment,  that we will be able to extend
the term of the right to use agreement.  See "--Risk Factors--We may not be able
to implement our acquisition growth strategy, which would have an adverse effect
on our business and competitive position in the industry."

  On November 17,  1999,  our wholly owned  subsidiary,  OrbitTravel.com,  Inc.,
entered into a joint venture  agreement with Web Travel Systems,  Ltd., a wholly
owned subsidiary of British Airways, pursuant to which we and Web Travel Systems
formed  Bonveno.com,  Ltd. We each own a 50%  interest  in  Bonveno.  Bonveno is
intended to be a European-based online travel information and reservation system
for the  distribution  of  travel-related  information  and services to European
travel product  providers and the traveling  public.  Also on November 17, 1999,
OrbitTravel entered into an operational agreement with Bonveno pursuant to which
we would  provide  technical  support,  licenses and  technical  maintenance,  a
software  development  agreement  pursuant  to which we would  develop  software
applications,  and a  management  agreement  which  sets  forth  an  operational
management structure, marketing policy, content sharing and product distribution
policy for our joint venture.

  On January 27, 2000,  Spartan  Capital  Management,  LLC, a limited  liability
company  controlled  by  David  Noosinow,  one of our  directors  and  executive
officers,  entered into an asset purchase agreement with Mark Savoretti pursuant
to which Spartan  Capital  agreed to acquire the  intellectual  property  assets
related to the TravelFile website previously owned by Orbit Network for $600,000
in cash  and the  issuance  of 3.0  million  shares  of our  common  stock.  Mr.
Savoretti, a creditor of Orbit Network, acquired these assets from Orbit Network
through a judicial  foreclosure  proceeding  on  January  13,  2000 after  Orbit
Network failed to pay $771,000 owed to Mr. Savoretti. Immediately upon execution
of this asset purchase agreement,  Spartan Capital Management,  LLC assigned all
of its rights and  obligations  under the  agreement  to us for $10.  One of the
obligations  assigned is an obligation to enter into consulting  agreements with
Mark Savoretti and another person,  under which we would pay a total of $450,000
over three years.  We  thereafter  acquired  the  intellectual  property  assets
related to the TravelFile  website  directly from Mr.  Savoretti in exchange for
$60,000 in cash, a note payable in the amount of $540,000 and 3.0 million shares
of common stock,  which would represent  approximately  0.4% of our common stock
assuming all of the transactions  and issuances  described in this Annual Report
are consummated.

  On February 24, 2000,  we executed a  non-binding  letter of intent to acquire
from  AnimInet,  Inc.  intellectual  property  assets  related to AnimInet's 3-D
Internet asset for approximately 473.9 million shares of our common stock, which
would  represent  approximately  52.6% of our common  stock  assuming all of the
transactions  and  issuances  described in this Annual  Report are  consummated.
These  intellectual   property  assets  primarily  include  the  software  being
developed  by  AnimInet  to create  "Streaming  Intelligent  Beings,"  which are
digital 3D  computerized  personalities  that would  communicate  directly  with
Internet users.  AnimInet is a corporation  formed solely by Dean Miller, one of
our executive  officers.  We currently expect the stockholders of Orbit Network,
who are each  accredited  investors  under Rule 501 of the  Securities  Act,  to
individually  purchase all of  AnimInet's  common  stock.  This letter of intent
expires  on May 1,  2000.  We  currently  do not  have a  sufficient  number  of
authorized and unissued shares available under our charter to consummate such an
acquisition.  Although we currently  expect to ask our stockholders to approve a
reverse stock split on an up to 20-for-1 basis,



                                       4
<PAGE>



we cannot assure you that we would be successful in obtaining such approval.  We
cannot assure you that this  acquisition  will be consummated or that it will be
consummated  on the  terms  set  forth in the  letter  of  intent.  See  "--Risk
Factors--We may not be able to implement our acquisition growth strategy,  which
would have an adverse  effect on our  business and  competitive  position in the
industry."

  On January 31,  2000,  we entered  into an agreement  with  Wilhelmina  Artist
Management LLC pursuant to which we would acquire all of the outstanding  common
stock of its wholly owned subsidiary, WilhelminaTravelFile.com,  in exchange for
approximately  80.0 million  shares of our common stock,  which would  represent
approximately  9.0% of our common  stock  assuming all of the  transactions  and
issuances  described  in this Annual  Report are  consummated.  We believe  that
Wilhelmena is one of the world's leading talent management agencies.  Wilhelmina
and WilhelminaTravelFile.com  have entered into an exclusive license pursuant to
which WilhelminaTravelFile would showcase Wilhelmena-provided content through an
Internet website  dedicated to travel  information and services.  We expect that
Wilhelmena  models and other celebrities would act as on-screen hosts for travel
destinations  providing  travel tips and inside  information,  offering  special
promotions and branded  product  offerings.  Unless the  transaction has closed,
either party may terminate the  Wilhelmina  agreement at any time after February
15,  2000.  We  cannot  assure  you  that we will  be  able to  consummate  this
acquisition.  We  currently do not have a sufficient  number of  authorized  and
unissued  shares  available under our charter to consummate such an acquisition.
Although we currently  expect to ask our stockholders to approve a reverse stock
split  on an up to  20-for-1  basis,  we  cannot  assure  you  that we  would be
successful in obtaining  stockholder  approval for any such actions. See "--Risk
Factors--We may not be able to implement our acquisition growth strategy,  which
would have an adverse  effect on our  business and  competitive  position in the
industry."

  On January 9, 2000, OrbitTravel.com,  our wholly owned subsidiary, executed an
exclusive content distribution  agreement with  AsiaGateway.com,  Ltd. Under the
terms of this agreement,  we were required to issue 200,000 shares of our common
stock 30 days from the  execution  date of this  agreement.  As of February  16,
2000,  since we have not issued such  shares,  either party may  terminate  this
agreement. Assuming consummation of this transaction,  Asiagateway.com would act
as  our  distribution,  marketing  and  sales  partner  for  the  Asian  region.
Asiagateway.com  is a provider of commerce,  community and content for the Asian
marketplace.   Content  produced  and  compiled  by  Asiagateway.com   would  be
integrated into our online travel services. Our online travel services, in turn,
would be featured in Asiagateway.com.

  On February 7, 2000, OrbitTravel.com,  our wholly owned subsidiary, executed a
three-year  consulting  services  agreement  and joint  content  agreement  with
Laspata/Decaro   Studio   Corporation,   an   organization   of  designers   and
photographers,  pursuant  to which  Laspata/Decaro  would  provide us with media
consulting  services  regarding  brand  building  and  promotion.  In  addition,
Laspata/Decaro would contribute their library of destination images, photography
and  other  content  for use  within  our  TravelFile  service.  We also  expect
LaSpata/Decaro  to assist us in the  creation  of new  video,  multi-media,  and
rich-media  content for our online services.  We are required to issue under the
agreement  2.5  million  shares of our  common  stock  vesting  in equal  annual
installments  over the three-year  term of the agreement,  which would represent
approximately  0.3% of our common  stock  assuming all of the  transactions  and
issuances described in this Annual Report are consummated. In addition, we would
issue to  Laspata/Decaro  an  additional  100,000  shares upon  Laspata/Decaro's
completion  of  each  of  the  following   tasks:   (1)  the   development   and
implementation  of a promotion  and  marketing  plan;  and (2) the  provision of
additional   proprietary  content  and  the  implementation  of  an  agreed-upon
operations strategy.

  Financing  Activity.  On  February  15,  2000,  Teakwood  Ventures,   LLC,  an
accredited  investor under Rule 501 of the Securities  Act, agreed to fund up to
$10 million pursuant to a funding  commitment letter and subscription  agreement
whereby  Teakwood  Ventures  agreed to purchase:  (1)  11,223,334  shares of our
common stock at $0.1782 per share on or before March 30,  2000;  (2)  11,223,334
shares of our common stock at $0.1782 per share on or before June 30, 2000;  and
(3)  18,856,065  shares of our common  stock at  $0.3182  per share on or before
September 30, 2000. Teakwood Ventures' agreement to purchase our common stock on
these  varying dates is subject to several  conditions,  including the condition
that the shares to be issued to Teakwood Ventures must be freely  tradeable.  We
cannot assure you that these conditions will be met. Therefore, we cannot assure



                                       5
<PAGE>



you that we will consummate all or part of this transaction. In addition, if our
total equity market capitalization is less than $200 million on any of the dates
that Teakwood  Ventures  purchases our shares of common stock, we have agreed to
proportionally reduce the per share price of the common stock to be purchased by
Teakwood  Ventures.  For example,  if our total equity market  capitalization is
$100  million on  September  30,  2000,  the  purchase  price per share would be
$0.1591 and we would  consequently  be required  to issue  37,712,130  shares to
Teakwood  Ventures.  In addition,  our agreement with Teakwood Ventures requires
that we appoint two  directors  who are  nominated  by Teakwood  Ventures to our
board.

  Since the end of 1999, we have issued or agreed to issue  approximately  113.8
million shares of common stock for no cash  consideration  to various  executive
officers,  employees,  consultants  and other third parties.  A portion of these
shares  have  been  issued or will be issued  to  settle  various  disputes  and
contingent  liabilities.  See "Legal  Proceedings." We have issued, or expect to
issue,  these shares in a series of unrelated  registered and private offerings.
See also "--Risk Factors--Future issuances and sales into the market of up to an
additional  166.5  million  shares of our common  stock will  dilute our current
stockholders and may depress the market price of our common stock."

  In addition,  we have offered to issue  approximately  52.7 million additional
shares of our common stock to existing  security  holders in exchange for all of
our outstanding convertible preferred stock and convertible debt, other than the
notes that  OrbitTravel.com,  our wholly  owned  subsidiary,  has issued.  As of
February 25, 2000, the holders of all of our convertible preferred stock and all
of our convertible  debt have accepted this offer. We currently  expect to issue
these  shares  within 10 business  days after the date we have filed this Annual
Report on Form 10-K. See also "--Risk  Factors--Future  issuances and sales into
the market of up to an additional  166.5 million shares of our common stock will
dilute our current  stockholders  and may depress the market price of our common
stock."

  Since  its  inception  on  October  6,  1999,  our  wholly  owned  subsidiary,
OrbitTravel.com,   has  issued  approximately  $3.2  million  of  debt  that  is
convertible into approximately 6.4 million shares of our common stock.  However,
we  currently  expect to exchange  these notes for  approximately  70.3  million
shares of our  common  stock.  See  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations--Liquidity and Capital Resources."

  On January 9, 2000, OrbitTravel executed a content distribution agreement with
AsiaGateway.com,  Ltd.  Under the terms of this  agreement,  we were required to
issue 200,000 shares of our common stock 30 days from the execution date of this
agreement. As of February 16, 2000, since we have not issued such shares, either
party may terminate this agreement.

  We currently  expect to ask our  stockholders to approve a reverse stock split
on an up to 20-for-1  basis.  We cannot assure you that we will be successful in
obtaining such approval. See "Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations--Liquidity  and Capital  Resources"  for a
table setting forth our expected capitalization assuming all of the transactions
and issuances  described in this Annual Report are  consummated  and we effect a
reverse stock split on an up to 20-for-1 basis.

Our History

  Golf Course Ownership, Design, and Management. By mid-1997, we owned four golf
courses and managed more than 20 others.  Through April 1998, we were engaged in
acquiring, designing, developing,  constructing,  owning, operating and managing
private, semi-private and public golf courses in the United States.

  World Golf  Village.  We were also  focused on business  opportunities  in the
World Golf Village resort, a destination golf resort located near  Jacksonville,
Florida. We anticipated becoming actively involved in the development of various
amenities,  including  a  restaurant,  spa,  rental  properties,  and a  laundry
facility, at the World Golf Village. We acquired one parcel of land in the World
Golf  Village  and  various  license  agreements  at the World  Golf  Village in
December 1996 and a second parcel of land in January 1998. We developed a unique
platform  for  sales  of  consumer  products,   called  Interactive  Information
Technology and Entertainment  (IIT&E),  via the virtual golf pro shop, a product
and  service  based  portal  with  direct  access to the  Intranet at World Golf
Village and the Internet.



                                       6
<PAGE>



  Refocusing  on Golf Related  Products and  Services.  Due to labor and capital
intensive  programs  associated with golf courses and the poor operating results
of our golf course ownership,  design, and management activities,  we decided to
refocus our business  strategy.  We elected to continue our efforts in the World
Golf Village.  Instead of focusing on the  ownership,  design and  management of
golf courses,  we decided to focus on developing,  licensing and marketing golf-
related  products and services.  In July 1997, we sold the division  responsible
for managing the third  party-owned  golf  courses.  In August 1997, we sold our
golf course  design  subsidiary.  From November 1997 through April 1998, we sold
the golf courses we owned.

  To implement that new strategic focus, we acquired the following golf- related
products companies in April 1998:

  .  Divot Golf Corporation, a designer and supplier of golf accessories,  Divot
     Development  Corporation  and Divot  Corporation.  Our acquisition of Divot
     Golf Corporation gave us a patent on a uniquely-  designed golf ball, and a
     patented  divot repair tool that  contains a built-in  ball marker and club
     head face  cleaner.  In addition,  we acquired the assets of Divot Spa WGV,
     Inc.

  .  Miller  Golf,  Inc.,  a supplier of golf  accessory  products.  Miller Golf
     offered a wide range of logoed golf  products,  including  bag tags,  tees,
     ball markers, divot tools, score cards, towels, rainwear,  umbrellas, hats,
     head covers, tournament prizes and awards.

  .  Talisman  Tools  Incorporated,  a  manufacturer  of  greens  repair  tools.
     Talisman produced an upscale, divot repair tool.

  Citizens  Bank Loan.  We  acquired  Miller  subject  to a line of credit  with
Citizens  Bank of  Massachusetts.  The credit  agreement  from  Citizens Bank to
Miller was entered into immediately  prior to our closing the purchase of Miller
and  provided  for a $2 million  line of  credit,  of which  approximately  $0.8
million was outstanding at the time we acquired Miller. This new credit facility
was secured by Miller's assets and included a covenant  prohibiting  Miller from
paying  more than  $100,000  in  dividends  or  intercompany  advances to us (as
Miller's parent company) without Citizen Bank's consent.

  In late 1998, we were  contemplating  another  acquisition.  Citizens Bank was
planning on providing financing for that acquisition and was planning on being a
minority equity holder in that to-be-acquired  company.  In September,  Citizens
Bank orally agreed to advance $500,000  directly to us (Miller's parent company)
against  the Miller line of credit to help  finance  the final  payment due on a
promissory  note  held by the  sellers  of  Miller.  Subsequently,  the  parties
terminated  the  acquisition  discussions.  Citizens  Bank then sent a notice of
default citing a breach of the covenant prohibiting an advance from Miller to us
in excess of $100,000 without the bank's permission. At that time, including the
$500,000  advance,  only $1.3  million  was  outstanding  on the Miller  line of
credit. However, as a result of the purported default,  Citizens Bank refused to
advance Divot or Miller any further funds under our line of credit.

  By February  1999,  we were  substantially  out of cash and unable to take any
legal action with respect to the purported  default.  We therefore  negotiated a
forbearance  agreement  whereby Citizens Bank agreed to refrain from foreclosing
on  Miller's  assets  if the loan was  repaid by May 25,  1999.  As part of that
forbearance agreement, Miller reaffirmed its grant of a security interest in its
assets,  and we (the parent company)  pledged our stock of Miller to the bank as
security for the loan.

  Foreclosure and Write-off of Assets.  We were unable to repay or refinance the
loan.  We  negotiated  a sale of the assets of Miller.  However,  Citizens  Bank
failed to accept the sale of its note to the new purchaser.  In June 1999, after
Citizens  Bank  sold  the  note to  other  third  parties,  such  third  parties
foreclosed on our interest in Miller.  Since the purported  event of default and
notice of default  were in 1998,  we wrote off the Miller  assets as of December
31, 1998.

  After we acquired Talisman Tools Incorporated, a third party threatened to sue
us for patent infringement if we sold products based on the design of the repair
tool acquired in the Talisman  transaction.  We subsequently refused to make the
final payments due to the parties from whom we purchased Talisman. Although this
third



                                       7
<PAGE>

party has since  stopped  threatening  to sue us for  patent  infringement,  the
former  Talisman  shareholders  then  sued  us  for  failing  to  pay  them  the
consideration  still due  under the  acquisition  agreement.  The molds  that we
acquired from Talisman Tools were ultimately  seized as part of the Miller asset
foreclosure.  We have written off the  investment in Talisman as of December 31,
1998. We have engaged local counsel to vigorously  defend this claim and to seek
to rescind the original acquisition agreement and recover amounts we paid on the
closing date.

  Certain  Additional  History.  In or around  January 1998, we determined  that
Internet technology strategies developed under our IIT&E platform could increase
our  growth  and  utilize  licenses  we had at the  World  Golf  Village.  IIT&E
incorporated  golf and spa destination  travel  packages and consumer  products;
products and services to be offered ranged from logo premiums,  travel  packages
for golf,  spa,  fishing and residence club share offered via the Internet,  the
Intranet at the World Golf Village and a web based  portal,  www.divot.com,  our
virtual golf pro shop.

  We developed  www.divot.com,  the virtual golf pro shop, in  association  with
Hitachi PC and other strategic  partners.  The  www.divot.com  website was under
development to enable IIT&E to sell golf,  spa and travel  related  products and
services,  since we owned the  parcels  and the World Golf  Village,  along with
world class  amenities,  and  anticipated  the purchase of Miller Golf Inc. from
which the logo products would be delivered in a business-to-business e- commerce
platform. In mid-1998, we acquired the exclusive rights to golf- related content
on the  www.freeride.com  Internet  community.  We also retained the services of
Internet  service  provider  Rare  Medium to assist  in the  development  of our
website and to serve as host of www.divot.com.

  Through a press  release,  we announced  that we would launch live at the golf
PGA Show held in January 1999 in Orlando, Florida. We had successfully initiated
a soft launch of the website at the PGA Show held in Las Vegas, Nevada in August
1998.

  At our board of directors  meeting in November  1998,  Mr.  Cellura  presented
concerns  regarding  soft sales and potential  problems in the golf industry and
slower absorption of developed amenities at the World Golf Village.  Mr. Cellura
addressed  our high cost of ownership  of factories  and land and the absence of
available  capital to fund our  operations.  There was a proposal  to refocus on
IIT&E Internet strategies, close our headquarters in Tampa, Florida, and move to
New York  City  where  we had  relationships  with  various  Internet  companies
interested in www.divot.com.

  In June 1999, Mr. Cellura, reassumed the position of our CEO. Upon Mr.
Cellura's reassuming his position as CEO, funding commitments were established
to take us forward, providing for the deployment of IIT&E Internet strategies.

Our New Strategy

  We have ceased our operations as a golf related  products and services company
and are repositioning  ourselves as a value-added services provider specializing
in business to  business  e-commerce  applications  and  providing  distribution
services  and on-line  marketing  solutions  to the travel  industry  worldwide.
Through our wholly owned  subsidiary,  "OrbitTravel.com,"  we are an independent
travel  distribution and e-commerce company that specializes in assisting travel
suppliers  and  tourism  destinations  to  promote,  distribute  and sell  their
products  electronically to travel buyers worldwide,  via the Internet,  airline
Global  Distribution  Systems  ("GDSs"),  America Online,  Private Intranets and
other electronic distribution networks.

  You should carefully review our "Risk Factors" beginning on page 11.

Marketing

  Our target customers are travel suppliers,  which include  independent hotels,
leisure   resorts,   cruise  lines,   tour  operators,   destination   marketing
organizations, entertainment venues, and tourism attractions worldwide. Our goal
is to create an on-line  travel  marketplace  or "Travel  Exchange"  that allows
travel suppliers to post on-line displays of product and service  offerings to a
global  travel  purchasing  audience  consisting  of travel  agents  and  travel
planning consumers.



                                       8
<PAGE>



  We believe that our existing technology and global distribution  network allow
travel suppliers to  cost-effectively  reach a much broader,  global market than
would otherwise be available to them. The primary  products and services that we
provide are based on the distribution  network and technology behind our branded
on-line distribution  channel TravelFile,  an on-line leisure travel information
and  reservation  service.  On January 27, 2000,  we acquired  the  intellectual
property  assets related to the  TravelFile  website  previously  owned by Orbit
Network from Mark Savoretti, a creditor of Orbit Network who acquired the assets
in a judicial foreclosure proceeding, for $60,000 in cash, a note payable in the
amount of $540,000 and the issuance of 3.0 million shares of our common stock.

  We believe that we have strong  relationships  in place and provide a range of
services to a number of leading travel  industry trade and  professional  groups
including  the  Caribbean  Tourism  Organization,  the  Caribbean  Coalition for
Tourism,  Advanstar  Publishing  (publishers  of Travel  Agent  Magazine and the
Premier Hotel & Resort Guides) and the American Society of Travel Agents.

  We charge travel  suppliers for access to our global  distribution  system and
for promotional and advertising  opportunities that are available throughout the
service.  We also charge  travel  suppliers  transaction  fees for referrals and
booking  transactions using our e-commerce  systems and for production  services
associated  with creating and maintaining  client's  on-line sales and marketing
systems.

  Our marketing plan is to focus initially on establishing  long-term  strategic
relationships with key travel industry participants that provide access to large
groups of customers, large inventories of bookable travel products and services,
and valuable endorsements to our targeted market segments. We believe that these
relationships  will provide us with the core content  required to build and grow
the user community and to drive e-commerce to participating travel suppliers.

Products and Services

  TravelFile,  which we  acquired  on January 27,  2000,  is an on-line  leisure
travel  destination  information  and  reservation  service  which allows travel
suppliers  to  continually  post and manage  product and service  offerings to a
global travel purchasing  audience through the GDS and ancillary  contracts that
we license  from Orbit  Network.  TravelFile  is a content  provider for the AOL
Travel Channel.

  In addition,  we currently  offer the  following  other  products and services
through our right to use Orbit Network's GDS and ancillary contracts:

  Caribbean  Vacation  Planner Online.  Carribean  Vacation Planner Online is an
on-line sales and marketing service for travel suppliers and destinations of the
Caribbean region.  This service is produced in cooperation with the Ministers of
Tourism for each of the countries of the Caribbean region, under the auspices of
their   official   tourism   promotion   association,   the  Caribbean   Tourism
Organization.

  Bonveno.  We have entered  into a joint  venture  with Web Travel  Systems,  a
wholly  owned  subsidiary  of British  Airways,  pursuant  to which we expect to
jointly create a  European-based  full service on-line travel  supplier  branded
"Bonveno."  Bonveno expects to develop and provide access for us to the European
on-line  travel market by  incorporating  our  technology  to deliver  worldwide
destination  information and provide the ability for travel suppliers to promote
their products and services and directly accept and process on-line bookings.

  WilhelminaTravelFile.com:  Through our subsidiary,  OrbitTravel.com,  Inc., we
have   arranged   to  acquire   all  the  issued   and   outstanding   stock  of
WilhelminaTravelFile.com,  Inc. a wholly owned  subsidiary of Wilhelmina  Artist
Management, LLC, which has granted WilhelminaTravelFile.com an exclusive license
to showcase Wilhelmina-provided content through an Internet Website dedicated to
travel information and services, which we anticipate will be marketed in part by
professional models and celebrity talent.

  AsiaGateway.com: Our subsidiary, OrbitTravel.com, Inc., has entered into a
content distribution agreement with AsiaGateway.com, Ltd., which provides for
the integration of Asia-related Internet content



                                       9
<PAGE>



produced and compiled by AsiaGateway.com into our online travel services,  which
in turn will be prominently featured in Asiagateway.com.

  Laspata/Decaro  Studios:  Our subsidiary,  OrbitTravel.com,  Inc., has entered
into a  Consulting  Services and Joint  Content  Agreement  with  Laspata/Decaro
Studio  Corporation,  which calls for the provision of media consulting services
regarding brand building and promotion,  and also calls for the  contribution by
Laspata/Decaro  of their library of destination  images,  photography  and other
content for use within the  TravelFile  service,  along with the creation of new
video, multi-media, and rich-media content for our online services.

  TripRequest.com.  TripRequest.com  is an on-line  service that allows Internet
users to place an order for travel by completing an on-line "trip request" order
form. Trip requests are then posted to the TravelFile server,  pursuant to which
participating  travel  suppliers and travel agents that pay us a subscriber  fee
can access, bid on, and respond to the trip requests posted.

  Custom Branded On-line Travel Products and Services. We provide travel content
and services that can be "private labeled" for distribution and integration into
a wide variety of other on-line services and e-commerce applications.

  Consulting/Production  Services.  Our consulting and production services focus
on travel automation, data processing, e-commerce, and Internet applications. We
operate as an application service provider to the travel industry.

  Other  Services.  As part of our evolution  from a golf company to an Internet
travel business, we are developing www.divot.com, which we expect to be a portal
for the sale of golf, spa and travel-related products and services. In addition,
we own the  exclusive  right to provide and manage  golf-related  content on the
www.freeride.com  Internet community.  We have been exploring the development of
these  golf-related  services  since  1998  as an  ancillary  part  of our  golf
business.

Competition

  Online  travel is still at a very early stage of growth and there is no single
dominant  company or  business  model that has yet  emerged as  dominant  in the
marketplace. We compete with the following:

  .  Direct competitors such as Vacations.com (formerly TravelOn),
     VacationSpot.com, Destinations.com, WorldRes, Online Vacation Mall, Mark
     Travel Corporation, Atlas Travel Technologies and Preview Travel;

  .  The major on-line travel sites such as Travelocity, Expedia, and
     Preview;

  . The major Internet "portals" such as Yahoo, Excite, Lycos, etc.;

  .  Secondary  on-line travel sites such as Trip.com,  OneTravel,  TravelScape,
     BizTravel.com,      Travelbyus.com,      GetThere.com,      CheapFares.com,
     TravelNavigator.com, ByeByeNow.com and VacationSpot.com;

  .  Travel agency driven distribution systems such as Vacations.com,
     Uniglobe.com, Carlson Wagonlits, PositiveSpace.com, The Travel Company,
     Global Vacation Group, Rosenbluth Travel and Liberty/Go Go Travel;

  .  Niche  players  in  specific  areas of  interest  such as ski,  golf,  spa,
     lifestyle  or other  areas of interest  such as  TravelWeb,  WorldRes,  Ski
     Travel Online.com, Golf Travel Online.com and Great Outdoors.com; and

  . Global Distribution Systems (GDSs) such as SABRE, Galileo and Preview.

Technology

  Our  TravelFile  data is stored in a  proprietary  data  management  system of
inter-related  index  files and memory  resident  indices.  The data  management
system operates on Compaq Digital Alphaserver machines which



                                       10
<PAGE>



are powered by the Digital Alpha AXP  processor  and a Hitachi 8 Way Server.  We
also maintain  multiple 56Kb digital  links to provide  connectivity  to the GDS
vendors and T1 digital links to America Online and the World Wide Web.

  Currently,  we support  systems that operate 24  hours-a-day  within a central
computer  system  located at our leased  facility  in  Whitefish,  Montana.  The
systems incorporate the following elements:

  Hardware/Network:

  .  Compaq Digital Alpha Server Host Platform (similar to those used by
     Amazon.com and Yahoo.com.), Hitachi 8 Way Server.

  . Fully RAIDed drive sets for added reliability and performance.

  . Redundant power supplies.

  . Load balanced servers.

  . Full UPS support.

  .  100Base-T and 10Base-T Ethernet.

  .  T1 connection to the Internet and AOL and four dedicated 56k connections to
     GDS distribution partners.

  . Year 2000 compliance.

  Software:

  . NT, Unix, and Open VMS operating systems.

  . Custom code ANSI C compliant.

  . Year 2000 compliance.

  .  C++, Java program foundation

Employees

  At February 16, 2000,  we have 35 full-time  employees.  None of our employees
belong to any unions, and we believe we have good relations with our employees.

Risk Factors

  Investing  in our  securities  involves  a high  degree  of risk.  You  should
carefully  consider the following  factors and other  information in this Annual
Report on Form 10-KSB,  including our consolidated  financial statements and the
related notes, before making a decision to invest in our securities.  Additional
risks and uncertainties, including those generally affecting the market in which
we operate or that we currently deem immaterial,  may also impair our current or
future business.

 We have not filed any periodic  reports  required under the federal  securities
laws since the third quarter of 1998.

  We have not filed any periodic reports that we were required to file under the
federal  securities  laws since the third  quarter of 1998. We cannot assure you
that claims asserting violations of federal securities laws will not be asserted
even if we file with the SEC these required  reports.  In addition,  the SEC may
impose fines,  penalties or assessments  against us. We may not have  sufficient
funds to pay such fines,  penalties or  assessments  against us. We may not have
sufficient funds to pay such fines, penalties or assessments or to defend claims
against us by third parties.



                                       11
<PAGE>



 We have a history of losses  and  therefore  cannot  assure you that we will be
profitable.

  We have recently  experienced  operating and net losses. We lost approximately
$16.0 million in 1998 and approximately  $7.7 million in 1999. In the future, we
may not be able to generate sufficient revenue from operations to pay all of our
operating or other  expenses.  If we fail to generate  sufficient  cash from our
operations to pay these  expenses,  our  management  will need to identify other
sources of funds.  We may not be able to borrow  money or issue  more  shares of
common  stock to meet our cash needs.  Even if we can  complete  such  financing
transactions,  they may not be on terms  favorable  to us.  If we  cannot  raise
sufficient  capital to fund our  operations,  we may not be able to continue our
business and the value of our securities could decline or even become worthless.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations"  for a more  complete  description  of  our  historical  results  of
operations and liquidity and capital needs.

 If we fail to attract  and  retain  qualified  employees,  our  revenues  could
decrease.

  Our future  success  depends in large part upon our ability to attract,  train
and retain  additional  highly skilled  executive-level  management and creative
technical,  consulting,  marketing and sales  personnel.  The competition in the
Internet  business for such personnel is intense,  and we cannot be sure that we
will be successful in attracting,  training and retaining such personnel.  If we
fail to attract and retain qualified employees, our revenues could decrease.

 Potential   fluctuations  in  quarterly  results  make  financial   forecasting
difficult and could affect our common stock price.

  As a result of our limited  operating history in the Internet business and the
emerging nature of our markets, we believe that  quarter-to-quarter  comparisons
of results of operations are not necessarily  meaningful.  Also, it is difficult
to forecast quarterly results due to the difficulty in predicting the amount and
timing of client expenditures,  acquisitions and employee utilization. Quarterly
results of operations may fluctuate significantly in the future as a result of a
variety of  factors,  many of which are  outside of  management's  control.  You
should not rely on the  results of any one  quarter as an  indication  of future
performance.

 Our business  depends on our network  infrastructure,  including our ability to
obtain sufficient network capacity.

  The success of our business depends on the capacity,  reliability and security
of our  network  infrastructure.  We may  need  to  use  substantial  financial,
operational   and   management   resources  to  expand  and  adapt  our  network
infrastructure. We may not be able to expand or adapt our network infrastructure
to meet  additional  demand on a timely basis and at a  commercially  reasonable
cost, or at all.

 Our lack of an  operating  history in the  Internet  travel  business  makes it
difficult for you to evaluate our business.

  Prior  to  November  1,  1999,  we  were a  manufacturer  and  seller  of golf
accessories.  We have only been in the Internet business and the travel business
since  November 1, 1999. Our business and prospects must therefore be considered
in light of the risks and uncertainties  frequently  encountered by companies in
their early stages of development. These risks are further amplified by the fact
that we are operating in the new and rapidly evolving  Internet services market.
You should be aware that:

  .  our business model and strategy is new and evolving; and

  .  we may not be able to successfully implement our business models and
     strategies.

  We cannot assure you that we will be  successful  in meeting these  challenges
and  addressing  these risks and  uncertainties.  If we are unable to do so, our
business will not be successful.



                                       12
<PAGE>



 We may incur significant  losses and generate  negative  operating cash flow in
the future.

  We may incur significant  losses and generate negative operating cash flow. We
will use  significant  amounts of cash as we continue to enhance our product and
service  offerings.  The extent to which we  experience  negative cash flow will
depend upon a number of factors, including the following:

  .  the number and size of future acquisitions and investments, if any;

  .  the expense and time required to integrate prior and future acquired
     assets;

  .  the time and effort required to capture integrated marketing synergies;

  .  our ability to generate increased revenues and cash flow; and

  .  potential regulatory developments that may apply to our operations.

 We may be unable to implement our acquisition growth strategy, which would have
an adverse effect on our business and competitive position in the industry.

  We have entered into an agreement to acquire AnimInet's 3D animation asset and
acquire the stock of  Wilhelmina  TravelFile.com  and have an option to purchase
Orbit Network's GDS and ancillary contracts and related furniture and equipment.
Acquiring these assets are important to our business strategy.  In addition,  we
are required to repay a $540,000 note due to Mark Savoretti for our  acquisition
of the  TravelFile  intellectual  property  assets.  If we  cannot  successfully
complete  the  acquisitions  of  these  assets,  we  may  not be  successful  in
repositioning  our company as an Internet service  company.  We currently do not
have a  sufficient  number of  authorized  but  unissued  shares of common stock
available  for  issuance  under our charter to  consummate  these  acquisitions.
Although we currently  expect to ask our stockholders to approve a reverse stock
split  on an up to  20-for-1  basis,  we  cannot  assure  you  that  we  will be
successful  in obtaining  such  approval so that we would be able to  consummate
these acquisitions.

  Our business  strategy  includes  acquiring  and growing other assets that fit
within our operating  model.  We may not be able to complete or identify  future
acquisitions or realize the anticipated results of future acquisitions.  Some of
the risks that we may encounter in implementing our acquisition  growth strategy
include:

  .  expenses and difficulties in identifying potential targets and the costs
     associated with acquisitions that we fail to consummate;

  .  expenses, delays and difficulties of integrating acquired assets into
     our existing organization;

  .  diversion of management's attention;

  .  impact on our financial condition due to the timing of the acquisition;
     and

  .  expenses of any undisclosed or potential legal liabilities of any
     acquired company.

  Additionally, in pursuing acquisition opportunities, we may compete with other
companies  with similar growth  strategies,  some of which may be larger than us
and that have greater  financial and other resources.  Some of these competitors
may have equity  securities  that trade in more liquid  markets or at higher per
share prices and therefore may be able to use equity  consideration more readily
than we  could.  Competition  for  acquisition  targets  could  also  result  in
increased  prices for  acquisition  targets and a  diminished  pool of companies
available for acquisition.

 A failure to successfully  integrate the assets that we have acquired or expect
to acquire could result in increased operating costs and lost revenues.

  Our success  depends in large part on our ability to integrate the  operations
and management of the  independent  Internet  operations and assets that we have
acquired  or  expect  to  acquire  in  the  future.  If  we  fail  to  integrate
acquisitions  successfully,  we could suffer increased  operating costs and lost
revenues. We will have to



                                       13
<PAGE>



expend  substantial  managerial,  operating,  financial  and other  resources to
integrate these  businesses and implement our business model. In particular,  to
integrate newly acquired Internet assets successfully, we must:

  .  install and standardize adequate operational control systems;

  .  employ qualified personnel to provide technical and marketing support in
     new as well as existing locations;

  .  eliminate redundancies in overlapping systems and personnel;

  .  obtain sufficient working capital to integrate newly acquired assets,
     including hardware and software platforms;

  .  incorporate acquired technology and products into our existing service
     offerings;

  .  implement and maintain uniform standards, procedures and policies;

  .  standardize marketing and sales efforts under common brand names; and

  .  expand our managerial, operational, technical and financial resources.

  The process of consolidating  and integrating  acquired  operations and assets
takes a significant period of time, places a significant strain on resources and
could prove to be even more expensive and time-consuming than we predict. We may
increase  expenditures in order to accelerate the integration and  consolidation
process with the goal of achieving  longer-term  revenue  increases and improved
profitability.  We  cannot  assure  you that  our  projected  long-term  revenue
increases  and improved  profitability  can or will be realized.  We also cannot
assure you that our  resources  will be  sufficient  to manage the growth in our
business or that we will be successful in implementing our expansion  program in
whole or in part.  In  addition,  we cannot  assure  you that we will be able to
integrate  additional  employees  into our  organization  or to manage  combined
operations effectively.

 Our growth may strain our resources,  which could adversely affect our business
performance.

  Our growth may strain our managerial and operational  resources. A key part of
our strategy is to grow,  primarily by acquiring other companies and assets.  We
cannot assure you that our executive  officers will be able to manage our growth
effectively.  To manage future growth,  our management must establish  effective
operational and financial  systems,  procedures and controls and expand,  train,
retain and manage our employee base. If our systems, procedures and controls are
inadequate  to support our  operations,  our expansion  could be halted,  and we
could lose  opportunities  to increase  our  revenues.  Any  inability to manage
growth effectively could adversely affect our business performance.

  We may not be able to generate sufficient cash flow from operations to finance
our future acquisition  strategy.  We may seek to raise additional funds through
public or private financing, strategic relationships or other arrangements. Such
additional funding may not be available on terms acceptable to us, or at all. We
may have to sell stock at prices lower than those paid by existing stockholders,
which  would  result in  dilution,  or we may have to sell  stock or bonds  with
rights  superior to rights of holders of our common  stock.  Any debt  financing
might involve restrictive covenants that would limit our operating  flexibility.
If adequate  funds are not  available on acceptable  terms,  we may be unable to
develop  or  enhance  our  services  and  products,  take  advantage  of  future
opportunities or respond to competitive pressures.

 Your securities could experience wide fluctuations in trading price and volume.

  Publications  indicate  that the stock of  Internet  companies  often trade at
overly inflated prices. If investor interest in these stocks declines, the price
for  our  common  stock  could  drop  suddenly  and  significantly,  even if our
operating  results are positive.  In addition,  the trading  volume of Internet-
related  stocks is often  volatile.  If the trading  volume of our common  stock
experiences  significant  changes,  the  price  of our  common  stock  could  be
adversely affected.



                                       14
<PAGE>



  Wide  fluctuations  in the trading  price or volume of our common  stock could
also be caused by:

  .  actual or anticipated variations in our results of operations;

  .  announcements of technological innovations;

  .  new services introduced by us or our competitors;

  .  changes in clients' purchasing habits;

  .  changes in financial estimates by financial analysts; and

  .  conditions and trends in the Internet industry.

 Difficulties  with regard to the delivery of application  software products via
the Internet could adversely affect our ability to grow our business.

  We believe that our business could suffer if problems arise in the delivery of
application  software products via the Internet.  Recent innovations have led to
an  increasing  market for the  delivery  of widely  used  application  software
products  over the  Internet.  We expect to offer  services  related to this new
market.  However,  the market for delivery of application  software  products is
relatively new and uncertain. We may not be able to generate revenues related to
this market if it cannot develop or acquire effective  technology to deliver and
host products demanded by our clients.  In addition,  existing  capabilities and
bandwidth  across the industry may not be  sufficient  to handle the  increasing
demand for application software products.  Finally, we cannot assure you that we
will be able to attract application providers to our services.

 We have anti-takeover provisions in our charter documents that could prevent or
delay a change in control  or  adversely  affect the market  price of our common
stock.

  Our charter  gives our board of  directors  the  authority  to issue up to one
million shares of preferred stock and to determine the rights and preferences of
the preferred stock without  obtaining  shareholder  approval.  The existence of
this  preferred  stock could make it more  difficult or discourage an attempt to
obtain  control  of us by means of a tender  offer,  merger,  proxy  contest  or
otherwise.  Furthermore,  the preferred stock could be issued with other rights,
including economic rights, senior to our common stock, and, therefore,  issuance
of the preferred  stock could have an adverse  effect on the market price of our
common stock. We do not have any present plans to issue preferred stock.

  In addition,  our bylaws  provide for  staggering  our board of directors into
three classes of directors.  Generally,  stockholders  elect each director class
for a three-year term. The staggered  directors' terms may affect the ability of
our  stockholders to change control of us even if such a change in control would
be in  your  best  interest.  However,  since  all of our  directors  have  been
appointed since the last annual meeting of stockholders, the terms of all of our
current directors expire at the next meeting of stockholders.

  Some provisions of Delaware law could make it more difficult for a third party
to  acquire  us or  hinder  a  change  in  management  even if doing so would be
beneficial to our  shareholders.  In addition,  we may in the future adopt other
measures  that may have the  effect of  delaying,  deferring  or  preventing  an
unsolicited  takeover,  even if such a change in control were at a premium price
or favored by a majority of  unaffiliated  shareholders.  These  measures may be
adopted without any further vote or action by our shareholders.

 We compete in a new and highly  competitive  market  that has low  barriers  to
entry.

  We compete in the relatively new and intensely  competitive Internet business.
We  expect  competition  to  intensify  as  the  market  evolves.  Many  of  our
competitors  have  longer  operating  histories,  larger  client  bases,  longer
relationships with clients,  greater brand or name recognition and significantly
greater  financial,   technical,  marketing  and  public  resources.  There  are
relatively  few  barriers  preventing  competitors  from  entering  the Internet
business.  As a result, new market entrants pose a threat to our business. We do
not own any patented  technology  that  precludes or inhibits  competitors  from
entering  the  information  technology  services  market.   Existing  or  future
competitors  may develop or offer  services that are comparable or superior at a
lower price, which could significantly reduce our revenues.



                                       15
<PAGE>



 Our business depends on continued growth in the use of the Internet and the use
of Internet related travel products.

  Our future success is substantially dependent upon continued growth in the use
of the Internet because both companies  primarily use Internet-based  technology
to create solutions.  To the extent that businesses do not consider the Internet
a viable  commercial  medium,  our client base may not grow.  For companies that
have historically  relied upon alternative means of commerce and communications,
adoption of the Internet as a tool requires the  understanding and acceptance of
a new way of doing business and exchanging information. In particular, companies
that have already  invested  substantial  resources in other means of conducting
commerce  and  exchanging  information  may be reluctant or slow to adopt a new,
Internet-based   strategy   that  may  make   their   existing   personnel   and
infrastructure obsolete.

  In addition, our business may be indirectly impacted if the number of users on
the Internet  does not increase or if commerce over the Internet does not become
more  accepted and  widespread.  The use and  acceptance of the Internet may not
increase for a number of reasons, including:

  .  actual or perceived lack of security of information, such as credit card
     numbers;

  .  high cost or lack of availability of access;

  .  congestion of traffic or other usage delays on the Internet;

  .  inconsistent quality of service or the lack of availability of cost-
     effective, high-speed service;

  .  governmental regulation;

  .  uncertainty regarding intellectual property ownership; and

  .  lack of high-speed modems and other communications equipment.

  Published  reports have also  indicated  that capacity  constraints  caused by
growth in the use of the Internet may impede further development of the Internet
to the extent that users experience shutdowns,  delays,  transmission errors and
other  difficulties.  If the  necessary  infrastructure,  products,  services or
facilities  are not  developed,  or if the Internet does not become a viable and
widespread commercial medium, we could suffer a significant loss of revenues.

 We need to keep  pace with  changing  communications  technologies  in order to
compete effectively in the Internet services market.

  Our  success  depends  on our  ability  to keep pace  with the  rapid  changes
occurring in  communications  technologies  and the new and improved devices and
services that result from these  changes.  Any inability to respond  quickly and
cost-effectively to changing communications  technologies and devices could make
existing and planned future service offerings  non-competitive  and may cause us
to lose significant revenues.  For example, if the Internet is rendered obsolete
or less important by faster, more efficient technologies, we must be prepared to
offer non-Internet-based solutions or risk losing current and potential clients.

 Government  regulation and legal  uncertainties  could add additional  costs to
doing business on the Internet, which could adversely affect our business.

  There  are  currently  few  laws or  regulations  that  specifically  regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address  issues  relevant to the  Internet  business,
including user privacy,  pricing and the characteristics and quality of products
and services. For example, the Telecommunications Act of 1996 sought to prohibit
transmitting various types of information and content over the Internet. Several
telecommunications  companies  have  petitioned  the  FCC to  regulate  Internet
service  providers  and on-line  service  providers in a manner  similar to long
distance telephone  carriers and to impose access fees on those companies.  This
could  increase  the cost of  transmitting  data over the  Internet.  Also,  the
European Union is currently considering the adoption of new laws and regulations
that could restrict widespread use of the Internet.  Moreover, it may take years
to determine the extent to which existing laws



                                       16
<PAGE>



relating to issues such as property ownership, libel and personal privacy issues
apply to the Internet.  Any new laws or regulations  relating to the Internet or
the manner in which  existing laws are applied to the Internet  could  adversely
affect our business.

  After  Orbit  Network  publicly  issued a press  release  stating  that we had
announced  that we had signed a definitive  merger  agreement  to acquire  Orbit
Network,  we  subsequently  canceled  the  previously  announced  agreement  and
modified the structure of the intended transaction with Orbit Network.

  On October 5, 1999, Orbit Network publicly issued a press release stating that
we had  announced  that we had signed a definitive  merger  agreement to acquire
Orbit  Network  in a  stock  for  stock  exchange.  Upon  completion  of our due
diligence  review of Orbit  Network,  we and Orbit  Network  mutually  agreed to
cancel this  previously  announced  agreement.  Subsequently,  we entered into a
right to use  agreement  with Orbit  Network as of November 1, 1999  pursuant to
which  we  currently  have a right  to use  Orbit  Network's  GDS and  ancillary
contracts  and related  furniture  and  equipment and have an option to purchase
such  contracts.  In addition,  we acquired  the  intellectual  property  assets
related to Orbit Network's TravelFile website from Mark Savoretti, a creditor of
Orbit  Network who had acquired  such  intellectual  property  assets  through a
judicial foreclosure proceeding on January 13, 2000.

 Future issuances and sales into the market of up to an additional 166.5 million
shares of our common stock will dilute our current  stockholders and may depress
the market price of our common stock.

  As of February  16, 2000,  we had  approximately  13.8  million  shares of our
common stock  outstanding.  In addition,  we have agreed to issue an  additional
113.8  million  shares of  common  stock for no cash  consideration  to  various
executive officers, employees, consultants and other third parties. A portion of
these shares have been issued or will be issued to settle various disputes.  See
"Legal  Proceedings."  We have  issued,  or expect to issue,  these  shares in a
series of unrelated public and private offerings.

  In addition,  we have offered to issue  approximately  52.7 million additional
shares of our common stock to existing  security  holders in exchange for all of
our outstanding  convertible  preferred stock and convertible  notes, other than
the notes that  OrbitTravel.com,  our wholly owned subsidiary,  has issued since
its inception on October 6, 1999. As of February 25, 2000, the holders of all of
our convertible  preferred  stock and all of our convertible  debt have accepted
this offer. We currently  expect to issue these shares on, or within 10 business
days after, the date we have filed this Annual Report on Form 10- KSB.

  The issuance of all of these shares of common stock,  particularly  the shares
that we have agreed to issue for no cash consideration, will result in immediate
and severe  dilution in net  tangible  book value to our  current  stockholders.
Since we currently have a shareholders'  deficit, we are unable to calculate the
dilution  in  net  tangible  book  value  to  our  current   stockholders.   See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations--Liquidity and Capital Resources."

  In addition,  when we issue these shares of common stock,  the market price of
our common stock could fall.  These  issuances also might make it more difficult
for us to sell equity or  equity-related  securities in the future at a time and
price  that we deem  appropriate  or to use equity as  consideration  for future
acquisitions.

  All of the shares  that are issued in  exchange  for  outstanding  convertible
preferred  stock and  convertible  notes are  restricted but may be eligible for
resale if the  holders  comply with Rule 144 of the  Securities  Act. We believe
that all or substantially all of the holders of our convertible  preferred stock
and convertible debt securities have held such securities in excess of one year.
Therefore, upon issuance of the common stock, such holders may be deemed to have
complied with Rule 144(d) of the  Securities  Act since their holding period for
the  common  stock may  "tack"  with their  holding  period for the  convertible
security as permitted by Rule 144(d)(ii) of the Securities Act. Persons who have
held  these  securities  for more  than two years  will be able to resell  their
shares under Rule 144(k) of the Securities Act.



                                       17
<PAGE>



 Since up to 27.4% of our common stock is or will be  concentrated  in the hands
of our executive  officers and directors,  these persons may be able to directly
control our future.

  Upon our issuance of an additional  166.5 million shares of common stock,  our
Board of Directors and executive  officers will  collectively own up to 27.4% of
our common  stock,  assuming none of the  acquisitions  that we describe in this
Annual Report are consummated.  Joseph R. Cellura,  our chief executive officer,
will individually own approximately 15.2% of our common stock,  assuming none of
the acquisitions  that we describe in this Annual Report are  consummated.  As a
result,  Mr.  Cellura and our other  executive  officers may be able to exercise
significant influence over all matters requiring stockholder approval, including
the election of directors and approval of  significant  corporate  transactions.
This  concentration  of  ownership  also may  have the  effect  of  delaying  or
preventing a change in control of us.

 We may  not be  able  to  satisfy  our  obligations  under  various  settlement
agreements.

  During 1998 and 1999,  we agreed to settle  various  disputes  with  executive
officers,  stockholders and third parties.  See "Legal  Proceedings." As part of
the settlement of some these  disputes,  we entered into  settlement  agreements
pursuant  to which we must make  substantial  cash  payments  in the near future
totalling  $636,000.  We may in the future be required to pay additional amounts
in settlement or satisfaction of other pending litigations.  We do not currently
have sufficient cash on hand to satisfy these obligations.  We cannot assure you
that we will be able to raise  sufficient  capital on acceptable terms or at all
to  satisfy  such  obligations.  If we are  unable  to fully  perform  under our
settlement  agreements,  the counterparties may seek court action to enforce the
terms of such agreements.

 Significant fluctuation in the market price of our common stock could result in
securities class action claims against us.

  Significant  price and value  fluctuations  have  occurred with respect to our
common stock over the past year and often occurs with respect to the  securities
of Internet-related  companies.  Our common stock price is likely to be volatile
in the future.  In the past,  following  periods of downward  volatility  in the
market price of a company's  securities,  class action litigation has often been
pursued against such companies.  If similar  litigation were pursued against us,
it could  result  in  substantial  costs  and a  diversion  of our  management's
attention and resources.

 We could be subject to successor  liability with regard to liabilities of Orbit
Network.

  We have  acquired  from Mark  Savoretti,  a  creditor  of Orbit  Network,  the
intellectual  property assets relating to the TravelFile  website formerly owned
by Orbit Network.  Mr.  Savoretti  acquired these assets from Orbit Network in a
judicial  foreclosure  proceeding on January 13, 2000 after Orbit Network failed
to pay $771,000 owed to Mr. Savoretti. In addition, we have an option to acquire
Orbit Network's GDS and ancillary  contracts and related furniture and equipment
as part of the right to use agreement that we entered into with Orbit Network as
of November 1, 1999.  We also have entered into a  non-binding  letter of intent
with  AnimInet  to  acquire  AnimInet's  3D  animation  asset.   AnimInet  is  a
corporation  formed  solely by Dean Miller,  one of our executive  officers.  We
currently expect the  stockholders of Orbit Network to individually  acquire all
of AnimInet's common stock. We cannot assure you that we will not succeed to any
of the liabilities of Orbit Network.

 The employment  contracts with our executive  officers could have the effect of
precluding  or  otherwise  delaying  a change  in  control  of us that  could be
beneficial to our stockholders.

  The employment  contracts with our executive  officers provide for the payment
of significant  severance  payments in the event these officers are  terminated.
For example, Mr. Cellura's employment agreement, which expires on June 24, 2006,
would require us to pay him upon termination an aggregate severance amount of up
to $2.15  million plus the  remaining  base salary  amounts due to him under the
agreement  if we  terminate  him without  cause.  Even if we are  successful  in
terminating Mr. Cellura's employment with cause, we would be required to pay him
$900,000.  This could  have the effect of  precluding  or  otherwise  delaying a
change of control



                                       18
<PAGE>



of us that would otherwise be in the best interest of our stockholders. See
"Executive Compensation--Employment Contracts."

ITEM 2. DESCRIPTION OF PROPERTY

  Our principal business office is located at 927 Lincoln Road, Suite 200, Miami
Beach, FL 33139.  Our phone number is (305) 538-2727.  We occupy 800 square feet
at this location at a fixed cost of $100 per month on a triple net basis.

  We lease  additional space at One Union Square South 10-J, New York, NY 10003.
Effective  August 1, 1999,  we took  occupancy of less than 1,000 square feet of
newly leased office space at the above  address.  Additionally,  on December 17,
1999, we took  occupancy of less than 1,000 square feet of  additional  space at
the same building  location.  One-year  leases ending July 31, 2000 and December
31,  2000  provide  for  rent  on  a  monthly  basis  of  $5,495,   and  $3,425,
respectively.

  On December 1, 1999,  we leased 6,000 square feet at 100 Second Street East in
Whitefish,  Montana for a term of six months.  This lease  provides  for monthly
rental of $7,500 during the first six months.  The intellectual  property assets
relating to TravelFile are located at our facility in Whitefish.

ITEM 3. LEGAL PROCEEDINGS

  In connection with our February 21, 1996 Agreement in Principle with our three
Pension Fund  Partners,  definitive  agreements  were reached  during the second
quarter of 1996 with regards to two of our four  previously  owned golf courses.
However,  our efforts to interpret the Agreement in Principle and negotiate with
EPI Pension Fund regarding the two other courses were  unsuccessful.  On May 31,
1996,  EPI  Pension  Fund  commenced  an action  against us  claiming  breach of
contract, specific performance, a constructive trust and temporary and permanent
injunctive  relief. At a hearing conducted on July 12, 1996 in the Circuit Court
in and  for  Hillsborough  County,  Florida,  the  court  issued  a  preliminary
injunction  which  required  us to  transfer  to  EPI  Pension  Fund  45% of the
outstanding  equity in our GLV and GMW  subsidiaries  whereby we retained 30% of
the outstanding  equity in each of these two  subsidiaries  and EPI Pension Fund
owned the remaining 70%. We filed an appeal brief to this preliminary injunction
on August 14, 1996 in the 2nd  District  Court of Appeals for the 13th  Judicial
District in and for Hillsborough County, Florida. The District Court denied this
appeal on February 11, 1997. We entered into a settlement agreement with the EPI
Pension Fund on October 15,  1997,  which  purported to resolve all  outstanding
issues  between us and the EPI  Pension  Fund.  We failed to perform  all of our
obligations  under the settlement  agreement.  On February 10, 1998, the Circuit
Court  entered an order  directing  us to perform  fully all of our  obligations
under the settlement agreement prior to February 24, 1998. At a hearing on March
26, 1998, we offered partial  performance  under the settlement  agreement which
was t}22ent  which was taken under  advisement by the Circuit Court and opposing
counsel and will be ruled upon at a hearing to be scheduled in the future.

  We submitted a proposed settlement to the EPI Pension Fund, with a $3,000 good
faith deposit. The terms of the proposed settlement include a down payment to be
made within 30 days of executing the settlement documents with a balloon payment
to be  delivered  at  the  end  of  one  year.  The  deferred  payment  will  be
non-interest  bearing.  We have  requested  that we be  permitted  to prepay the
settled amount at a discount.  We do not know if the settlement will be secured.
A penalty will be imposed upon default on the proposed settlement in addition to
EPI Pension  Fund's  rights to enforce the  original  judgment of  $152,000.  We
cannot  assure you that the  proposed  settlement  will be  accepted  by the EPI
Pension Fund or that the terms will be substantially  similar to those disclosed
above.

  On October 22,  1998,  Robert  Hochstein  filed a complaint  in federal  court
against us, Mr.  Cellura and other entities  controlled by Mr. Cellura  alleging
that we violated  various  federal and state  securities  laws.  On February 16,
2000, we and Mr. Hochstein executed a settlement  pursuant to which we agreed to
pay $150,000 and to issue 850,000 shares of our common stock (of which we issued
400,000 shares in the first quarter of 1999) in settlement



                                       19
<PAGE>



of this dispute. We issued 450,000 shares to Mr. Hochstein on February 25, 2000.
We paid him $100,000 on February 17, 2000 and have agreed to pay the  additional
$50,000  by  June  16,  2000.  If we fail to pay  the  $50,000  when  due or the
remaining  450,000  shares of our common  stock are not freely  tradeable by the
terms of the settlement  agreement,  we have agreed that a judgment for $575,000
may be entered into against us, Mr. Cellura and other entities controlled by Mr.
Cellura. If the price of our common stock falls below 30 cents per share for two
trading days before March 18, 2000, we have agreed to

repurchase up to 400,000 shares of our common stock which Mr.  Hochstein has not
liquidated less than $0.30 per share for two trading days.

  In January and May of 1999, a group of our former  stockholders  and employees
and  stockholders  and employees of various  companies that we acquired in April
1998,  which  formerly  were  controlled  by Mr.  Cellura,  our chief  executive
officer,  filed  three  lawsuits  in the United  States  District  Court for the
Southern  District of New York against us, these various acquired  corporations,
Mr. Cellura and several of our other executive  officers and  stockholders.  The
complaints  alleged,  among  other  things,  that (1) we had  failed to issue an
aggregate of 15.0  million  shares of our common stock (such number of shares is
prior to the effect of a 15-for-1  reverse  stock split  effected with regard to
our common stock on June 2, 1998),  (2) we and our officers  committed  fraud in
the issuance of securities, and (3) various breaches of contract. The parties to
the lawsuit entered into a settlement  agreement as of June 29, 1999 pursuant to
which the plaintiffs  agreed to release the defendants from all of the claims in
the lawsuits in exchange for: (1) a note payable in the amount of $225,000;  (2)
the issuance of 7.65 million shares of our common stock;  and (3) the assignment
by Mr. Cellura of all of his rights,  title or interest to the profits generated
from a few parcels of land in the World Golf Village. Mr. Cellura assigned these
rights to the  plaintiffs on June 24, 1999.  In August 1999,  we instructed  our
transfer agent to issue these shares,  which were ultimately  issued on February
29, 2000.  As of February 16, 2000, we have not repaid any amounts due under the
$225,000 note payable. This note payable currently matures on March 31, 2000. We
cannot assure you that we will have sufficient funds available to repay the note
payable upon  maturity or that we would be able to extend the  maturity  date of
the note payable.  If we are not able to repay the note payable according to its
terms,  we cannot assure you that the  plaintiffs  will not seek court action to
enforce  the  terms of the  settlement  agreement.  We would  incur  substantial
expenses  if we must  defend any  additional  actions in  connection  with these
lawsuits.

  In June 1999, Joseph R. Cellura,  our chief executive  officer,  threatened to
file a lawsuit  against us alleging,  among other things,  that: (1) Mr. Cellura
suffered substantial monetary loss in the defense of the lawsuits we refer to in
the previous paragraph;  (2) Mr. Cellura suffered real and substantial damage to
his  personal  character  as a result of the  filing of these  lawsuits;  (3) we
failed to issue to Mr.  Cellura  and other  stockholders  in  various  companies
controlled  by him an aggregate  of 20.0 million  shares of our common stock and
5.0 million  options to  purchase  shares of our common  stock  (such  number of
shares is prior to the effect of a 15-for-1  reverse  stock split  effected with
regard to our common stock on June 2, 1998);  and (4) we failed to indemnify Mr.
Cellura as required by our indemnity agreement with him in connection with these
lawsuits.  We and Mr.  Cellura  agreed  to enter  into a  settlement  agreement,
effective as of June 29, 1999,  pursuant to which Mr.  Cellura agreed to release
us from  these  claims in  exchange  for:  (1) a note  payable  in the amount of
$250,000;  and (2) the issuance of  approximately  27.34  million  shares of our
common  stock.  As of February  16, 2000,  we have repaid  $64,000 due under the
$250,000 note payable. This note payable currently matures on April 30, 2000. We
cannot  assure you that we will have  sufficient  funds  available  to repay the
remaining  amounts  outstanding  under the note payable upon maturity or that we
would be able to extend the  maturity  date of the note  payable.  If we are not
able to repay the note payable according to its terms, we cannot assure you that
Mr.  Cellura will not seek court  action to enforce the terms of the  settlement
agreement.  We would incur substantial expenses if we must defend any such court
action.

  After we  acquired  Talisman  Tools,  a third party  threatened  to sue us for
patent  infringement  if we sold products based on the design of the repair tool
that we acquired in the Talisman  acquisition.  We subsequently refused to repay
the  remaining  $90,000  that we owed  as  part  of the  acquisition  agreement.
Although  this third party has since  stopped  threatening  to sue us for patent
infringement, the former Talisman shareholders then sued us for failing to repay
these amounts.  The molds that we acquired from Talisman were ultimately  seized
as part of the Miller asset  foreclosure.  We have written off the investment in
Talisman as of December 31, 1998.  We have engaged  local  counsel to vigorously
defend this claim and to seek to rescind the original acquisition



                                       20
<PAGE>



agreement and recover  amounts we paid on the closing date.  Due to the inherent
uncertainties of the litigation process and the judicial system, we are not able
to predict the outcome of this litigation.

  Kirk Scoggins,  a holder of our convertible  preferred stock,  paid $97,915 on
our behalf during 1998 to satisfy some of our payroll  obligations to employees.
In full  satisfaction of the amounts we owe to Mr. Scoggins and other litigation
threatened  by Mr.  Scoggins,  we entered into a settlement  agreement  with Mr.
Scoggins as of January 31, 2000 pursuant to which we have agreed to issue to Mr.
Scoggins approximately 4.5 million shares of our common stock and deliver to Mr.
Scoggins specific items of personal property owned by us and by Mr. Cellura.

  Clifford  F.  Bagnall,  one of our former  directors  and a current  executive
officer,  had  threatened to file a lawsuit  against us alleging that we owe Mr.
Bagnall  amounts  due under his  employment  contract  in force  while he was an
executive officer and that (1) Mr. Bagnall suffered substantial monetary loss in
the  defense  of the May 1999  lawsuits  by the former  stockholders  of various
companies formerly controlled by Mr. Cellura;  (2) Mr. Bagnall suffered real and
substantial  damage to his  personal  character as a result of the filing of the
lawsuits;  and (3) we  failed  to  indemnify  Mr.  Bagnall  as  required  by our
indemnity  agreement  with him in  connection  with these  lawsuits.  We and Mr.
Bagnall agreed to enter into a settlement agreement, effective as of January 31,
2000,  pursuant  to which Mr.  Bagnall  agreed to  release us from this claim in
exchange for: (1) a note payable in the amount of $100,000; and (2) the issuance
of 5.3 million shares of our common stock.  As of February 16, 2000, we have not
repaid any  amounts  due under the  $100,000  note  payable.  This note  payable
currently  matures  on May 15,  2000.  We  cannot  assure  you that we will have
sufficient  funds  available to repay the note payable upon  maturity or that we
would be able to extend the  maturity  date of the note  payable.  If we are not
able to repay the note payable according to its terms, we cannot assure you that
Mr.  Bagnall will not seek court  action to enforce the terms of the  settlement
agreement.  We would incur substantial expenses if we must defend any such court
action.

  Kenneth  Craig,  one of our  former  directors  and  executive  officers,  had
threatened  to file a lawsuit  against us alleging that we owe Mr. Craig amounts
due under his employment contract in force while he was an executive officer. We
and Mr.  Craig  agreed to enter into a  separation  agreement,  effective  as of
September  1, 1999,  pursuant to which Mr.  Craig agreed to release us from this
claim in exchange for: (1) a note payable in the amount of $75,000;  and (2) the
issuance of 3.5 million shares of our common stock.  As of February 16, 2000, we
have not  repaid any  amounts  due under the  $75,000  note  payable.  This note
payable  currently  matures on June 30, 2000.  We cannot assure you that we will
have sufficient  funds available to repay the note payable upon maturity or that
we would be able to extend the maturity date of the note payable.  If we are not
able to repay the note payable according to its terms, we cannot assure you that
Mr.  Craig will not seek court  action to  enforce  the terms of the  settlement
agreement.  We would incur substantial expenses if we must defend any such court
action.

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

  No matters have been  submitted to a vote of the security  holders  since June
1998.  We  currently  expect our board of directors to establish a March 1, 2000
record date for the purpose of determining  which of our stockholders may sign a
non-unanimous  written  consent  action  in  lieu  of a  meeting  approving  the
following matters:

  .  a proposal to change our name to OrbitTravel.com Corporation;

  .  a proposal to ratify the appointment of Ernst & Young LLP as independent
     auditors for 1999;

  .  proposals to ratify the employment agreements of Messrs. Cellura,
     Noosinow and Dollinger; and

  .  proposals to ratify all settlement agreements.

  In addition, we currently expect to call a 1999 annual meeting of stockholders
at which  we  expect  our  stockholders  to vote on,  among  other  things,  the
following matters:

  .  the election of Joseph R. Cellura, David A. Noosinow, Douglas R.
     Dollinger, and two representatives of Teakwood Ventures as our
     directors;

  .  a proposal to effect a reverse stock split of our common stock on an up
     to 20-for-1 basis;



                                       21
<PAGE>



  .  a proposal to ratify the terms of our letter of intent to acquire the 3D
     animation asset from AnimInet; and

  .  a  proposal  to ratify the terms of our right to use  agreement  with Orbit
     Network  pursuant to which we have the right to use,  and have an option to
     purchase, Orbit Network's GDS and ancillary contracts and related furniture
     and equipment.

  We cannot  assure  you that each of these  matters  will be  submitted  to our
stockholders,  whether  at a  meeting  or by a  written  consent,  or,  if  such
proposals are submitted, that they will be approved.



                                       22
<PAGE>



                                     PART II

ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information and Dividends

  On February 16, 2000, we had  approximately  180 stockholders of record of our
common  stock.  We have not  declared or paid any  dividend on our common  stock
since our inception.  We do not anticipate  declaring or paying any dividends on
our common stock for the foreseeable future.

  Prior to March 22,  1999,  trading of our common  stock had been quoted on the
Nasdaq SmallCap Market.  Our common stock was de-listed from the Nasdaq SmallCap
Market as a result of our failure to meeting various listing  requirements.  The
following  table sets  forth,  the  quarterly  range of the high and low closing
prices of the common  stock as reported by the Nasdaq  SmallCap  Market from the
beginning of 1998 until March 22, 1999:

                                                                   Closing Price
                                                                       Per Share

                                                                  -------------
   Period or Quarter                                               High   Low
   -----------------                                              -------------

   First Quarter 1998............................................ $ 9.38 $ 5.63
   Second Quarter 1998...........................................   6.56   1.84
   Third Quarter 1998............................................   2.94    .69
   Fourth Quarter 1998...........................................   1.06    .22
   January 1, 1999 through March 22, 1999........................    .50    .13



  A 1-for-15  reverse stock split was  effectuated on June 16, 1998 to raise the
per  share  price of our  common  stock  and to  increase  the  number of shares
available for issuance.  All dollar amounts in the above table have been revised
to reflect the reverse stock split.

  Since our common stock was  de-listed  on March 22, 1999 from Nasdaq  SmallCap
Market,  our  common  stock has been  traded  over-the-counter  under the symbol
"PUTT." The following  table sets forth the quarterly  high and low sales prices
per share of our common  stock  reported on the  over-the-counter  market  since
March 23, 1999:

                                                                   Closing Price
                                                                       Per Share

                                                                  --------------
   Period or Quarter                                               High    Low
   -----------------                                              ------- ------

   March 23, 1999 through March 31, 1999.........................   $ .22   $.13
   Second Quarter 1999...........................................     .17    .09
   Third Quarter 1999............................................     .14    .09
   Fourth Quarter 1999...........................................     .45    .09
   January 1, 2000 through March 13, 2000........................    1.13    .14



  On March 13, 2000,  the last  reported  sales price of our common stock on the
over-the-counter market was $.25 per share.

  On March 13, 2000, we had 0 shares of convertible preferred stock outstanding.
This  convertible  preferred stock has a liquidation  value of $1,000 per share.
The holders of the  convertible  preferred  stock are entitled to 18% cumulative
dividends  payable  quarterly.  Since the  convertible  preferred  stock carries
rights to cumulative 18% dividends,  dividends that are not paid accrue.  During
1999 and 1998, we accrued  $1,000,000 and $730,000,  respectively,  in dividends
payable.  We would  be  required  to pay  these  accrued  dividends  before  any
dividends  are allowed to be paid on our common  stock.  Our charter  allows the
holders of the  convertible  preferred stock to convert their shares into shares
of our common stock by dividing $1,000 per share of convertible  preferred stock
by the  "conversion  price." The  "conversion  price" is a formula  based on the
lesser of $10.50 or 75% of the average  closing price during the 10  trading-day
period prior to conversion.


                                       23
<PAGE>


  We have offered to issue approximately 52.7 million shares of our common stock
to existing security holders in exchange for all of our outstanding  convertible
preferred  stock. As of February 25, 2000, the holders of all of our convertible
preferred  stock have  accepted this offer.  We currently  expect to issue these
shares on, or within 10 business days after,  the date we have filed this Annual
Report on Form 10-KSB.

Sales of Unregistered Securities

  The following sets forth all of our sales of  unregistered  securities  during
1998 and 1999:

<TABLE>
<CAPTION>
<S>                       <C>                             <C>
                                                           Brief description of the purchaser
          Date                      Securities               and the consideration therefor
------------------------  ------------------------------- -------------------------------------

January 1, 1998               4,020 shares of preferred   Issuance of convertible preferred
 to June 30, 1998         stock                           stock

January 1, 1998--           457,402 shares of common      Issuance of common stock for
 December 31, 1998        stock                           conversions
                                                          of convertible debentures

January 1, 1998--            46,429 shares of common      Conversions of preferred stock
 December 31, 1998        stock

January 16, 1998             50,000 shares of common      Issuance of common stock for funding
                          stock                           related to acquisition of Parcel 11
                                                          at World Golf Village

February 19, 1998            94,304 shares of common      Issuance of common stock for exercise
                          stock                           of warrants under convertible
                                                          debentures.

April 3, 1998                53,333 shares of common      Issuance of common stock for
                          stock                           acquisition
                                                          of Miller Golf

April 20, 1998               10,000 shares of common      Issuance of common stock for
                          stock                           acquisition
                                                          of Talisman Tools

May 4, 1998                   1,933 shares of common      Issuance of stock for right of first
                          stock                           refusal
                                                          on possible land acquisition

July 14, 1998-- July 31,  $1.5 million of our notes       Issuance of notes under private
 1998                                                     placement

July 30, 1998               500,000 shares of common      Issuance of common stock under
                          stock                           private placement

October 30, 1998            354,463 shares of common      Issuance of common stock for
                          stock                           acquisition of possible joint venture

January 1, 1999--         1,293,601 shares of common      Conversions of preferred stock
 December 31, 1999        stock

February 11, 1999         400,000 shares of common stock  Issuance of common stock in
                                                          settlement of litigation

August 24, 1999           7,650,000 shares of common      Issuance of common stock in
                          stock                           settlement of litigation

October 1, 1999--         $1.68 million of OrbitTravel    Issuance of notes under private
 December 31, 1999        convertible notes               placement

</TABLE>

  We believe that we took  reasonable  steps to ensure that each of the offerees
in these transactions were accredited investors under Rule 501 of the Securities
Act.

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

  You should read the following  discussion and analysis in conjunction with the
consolidated  financial  statements  for 1997,  1998 and 1999  included  in this
Annual  Report on Form  10-KSB and in our Annual  Report on Form  10-KSB for the
year ended December 31, 1997.



                                       24
<PAGE>



Overview and Background

  We were incorporated in Delaware on November 12, 1991 under the name "Longview
Golf  Corporation."  We changed our name to  "Brassie  Golf  Holdings,  Ltd." on
September  18,  1992,  and then  again,  on March 29,  1993,  to  "Brassie  Golf
Corporation." On June 2, 1998, we changed our name to "Divot Golf Corporation."

  By mid 1997,  we owned  four golf  courses  and  managed  more than 20 others.
Through  April 1998,  we were  engaged in  acquiring,  designing,  constructing,
operating  and  managing  private,  semi-private  and public golf courses in the
United States. We were also focused on business  opportunities in the World Golf
Village resort. The World Golf Village is a destination golf resort located near
Jacksonville, Florida.

  Due to labor and capital intensive  programs  associated with golf courses and
the poor operating results of our golf course ownership,  design, and management
activities,  we decided to refocus our business strategy. We elected to continue
our efforts in the World Golf Village. But instead of focusing on the ownership,
design,  and  management  of golf  courses,  we decided to focus on  developing,
licensing, and marketing of golf-related products and services. In July 1997, we
sold the division  responsible for managing the third  party-owned golf courses.
In August 1997,  we sold our golf course design  subsidiary.  From November 1997
through April 1998, we sold the golf courses we owned.

  To implement our new strategic  focus,  in April 1998 we acquired  three golf-
related  products  companies,  Divot Golf  Corporation,  Miller  Golf,  Inc. and
Talisman Tools Incorporated. After defaulting on a newly obtained line of credit
with Citizens Bank in February 1999, third parties foreclosed on our Miller Golf
assets after Citizens Bank sold the notes to such third parties. In addition, we
wrote off the newly acquired Divot Golf and Talisman Tools assets as of December
31, 1998. As a result of our poor operating performance in the golf industry and
perceived   opportunities  in  the  e-commerce  industry,  we  have  ceased  our
operations as a golf related products and services company and are repositioning
ourselves  as  a  value  added  services  provider  specializing  in  e-commerce
applications and providing essential distribution services and on-line marketing
solutions to the travel industry worldwide.

Recent Developments

  Acquisition  Activity.  On October 5, 1999,  Orbit Network  publicly  issued a
press  release  stating  that we had  announced  that we had signed a definitive
merger  agreement  to  acquire  Orbit  Network  in a stock for  stock  exchange.
However,  upon completion of our due diligence  review of Orbit Network,  we and
Orbit  Network  mutually  agreed to cancel this merger  agreement  and agreed to
enter into the transactions we discuss below.

  We entered into a right to use agreement  with Orbit Network as of November 1,
1999 pursuant to which we paid $500,000 in cash for a six-month right to use and
operate Orbit  Network's GDS contracts  with Amadeus,  Sabre,  Galileo and World
Span, its services  agreement with AOL and related  furniture and equipment.  As
part of this right to use  agreement,we  operate the  "TravelFile"  website that
provides travel  suppliers and Internet users travel planning  services.  We are
entitled under the right to use agreement to retain any revenues for a six-month
period that may be generated from the GDS and ancillary contracts. Also, as part
of the right to use agreement,  we paid $100,000  (included in the $500,000 paid
on  November  1,  1999)  for an  option  (exercisable  in our sole and  absolute
discretion)  to purchase in Orbit  Network's  rights under the GDS and ancillary
contracts and related furniture and equipment for the assumption of $5.1 million
of Orbit  Network  debt.  This purchase  option  expires on May 1, 2000,  unless
extended by us for an additional  six months.  We cannot assure you that we will
exercise  this  purchase  option or that we will  otherwise  acquire the GDS and
ancillary  contracts  and related  furniture and equipment nor can we assure you
that, if we do not acquire the GDS and ancillary contracts and related furniture
and  equipment,  that we will be able to  extend  the  term of the  right to use
agreement.  See  "Description of Business -- Risk Factors -- We may be unable to
implement our acquisition growth strategy, which would have an adverse effect on
our business and competitive industry."


                                       25
<PAGE>


  On November 17,  1999,  our wholly owned  subsidiary,  OrbitTravel.com,  Inc.,
entered into a joint venture  agreement with Web Travel Systems,  Ltd., a wholly
owned subsidiary of British Airways, pursuant to which we and Web Travel Systems
formed  Bonveno.com,  Ltd. We each own a 50%  interest  in  Bonveno.  Bonveno is
intended to be a European-based online travel information and reservation system
for the  distribution  of  travel-related  information  and services to European
travel product  providers and the traveling  public.  Also on November 17, 1999,
OrbitTravel entered into an operational agreement with Bonveno pursuant to which
we would  provide  technical  support,  licenses and  technical  maintenance,  a
software  development  agreement  pursuant  to which we would  develop  software
applications,  and a  management  agreement  which  sets  forth  an  operational
management structure, marketing policy, content sharing and product distribution
policy for our joint venture.

  On January 27, 2000,  Spartan  Capital  Management,  LLC, a limited  liability
company  controlled  by  David  Noosinow,  one of our  directors  and  executive
officers,  entered into an asset purchase agreement with Mark Savoretti pursuant
to which Spartan  Capital  agreed to acquire the  intellectual  property  assets
related to the TravelFile website previously owned by Orbit Network for $600,000
in cash  and the  issuance  of 3.0  million  shares  of our  common  stock.  Mr.
Savoretti, a creditor of Orbit Network, acquired these assets from Orbit Network
through a judicial  foreclosure  proceeding  on  January  13,  2000 after  Orbit
Network failed to pay $771,000 owed to Mr. Savoretti. Immediately upon execution
of this asset purchase agreement,  Spartan Capital Management,  LLC assigned all
of its rights and  obligations  under the  agreement  to us for $10.  One of the
obligations  assigned is an obligation to enter into consulting  agreements with
Mr.  Savoretti and another person,  under which we would pay a total of $450,000
over three years.  We  thereafter  acquired  the  intellectual  property  assets
related to the TravelFile  website  directly from Mr.  Savoretti in exchange for
$60,000 in cash, a note payable in the amount of $540,000 and 3.0 million shares
of common stock,  which would represent  approximately  0.4% of our common stock
assuming  all  of  the   transactions   described  in  this  Annual  Report  are
consummated.

  On February 24, 2000,  we executed a  non-binding  letter of intent to acquire
from  AnimInet,  Inc.  intellectual  property  assets  related to AnimInet's 3-D
Internet asset for approximately 473.9 million shares of our common stock, which
would  represent  approximately  52.6% of our common  stock  assuming all of the
transactions described in this Annual Report are consummated. These intellectual
property  assets  primarily  include the software being developed by AnimInet to
create  "Streaming  Intelligent  Beings,"  which  are  digital  3D  computerized
personalities that would communicate directly with Internet users. AnimInet is a
corporation  formed  solely by Dean Miller,  one of our executive  officers.  We
currently  expect the  stockholders  of Orbit Network,  who are each  accredited
investors under Rule 501 of the Securities Act, to individually  purchase all of
AnimInet's  common stock. This letter of intent is subject to the execution of a
definitive  agreement and customary  due  diligence.  We currently do not have a
sufficient  number of authorized and unissued shares available under our charter
to  consummate  such an  acquisition.  Although we  currently  expect to ask our
shareholders  to approve a reverse  stock split on an up to 20-for-1  basis,  we
cannot assure you that we would be successful in obtaining such  approval.  This
letter of intent is  subject  to the  execution  of  definitive  agreements  and
customary  due  diligence.  We cannot assure you that this  acquisition  will be
consummated  or that it will be consummated on the terms set forth in the letter
of intent.  See  "Description of Business -- Risk Factors -- We may be unable to
implement our acquisition growth strategy, which would have an adverse effect on
our business and competitive position in the industry."

  On January 31,  2000,  we entered  into an agreement  with  Wilhelmina  Artist
Management LLC pursuant to which we would acquire all of the outstanding  common
stock of its wholly owned subsidiary, WilhelminaTravelFile.com,  in exchange for
approximately  80.0 million  shares of our common stock,  which would  represent
approximately  9.0%  of our  common  stock  assuming  all  of  the  transactions
described in this Annual Report are  consummated.  We believe that Wilhelmena is
one  of  the  world's  leading  talent  management   agencies.   Wilhelmina  and
WilhelminaTravelFile.com  have  entered into an  exclusive  license  pursuant to
which WilhelminaTravelFile would showcase Wilhelmena-provided content through an
Internet website  dedicated to travel  information and services.  We expect that
Wilhelmena  models and other celebrities would act as on-screen hosts for travel
destinations  providing  travel tips and inside  information,  offering  special
promotions and branded



                                       26
<PAGE>



product offerings. Unless the transaction has closed, either party may terminate
the  Wilhelmina  agreement at any time after February 15, 2000. We cannot assure
you that we will be able to  consummate  this  acquisition.  We currently do not
have a sufficient  number of authorized and unissued shares  available under our
charter to consummate such an acquisition.  Although we currently  expect to ask
our stockholders to approve a reverse stock split on an up to 20-for-1 basis, we
cannot assure you that we would be successful in obtaining  such  approval.  See
"Description  of Business -- Risk Factors -- We may be unable to  implement  our
acquisition growth strategy,  which would have an adverse effect on our business
and competitive position in the industry."

  On January 9, 2000, OrbitTravel.com,  our wholly owned subsidiary,  executed a
content  distribution  agreement with  AsiaGateway.com,  Ltd. Under the terms of
this agreement,  we were required to issue 200,000 shares of our common stock 30
days from the execution date of this agreement.  As of February 16, 2000,  since
we have not issued such  shares,  either  party may  terminate  this  agreement.
Assuming  consummation  of this  transaction,  Asiagateway.com  would act as our
distribution,  marketing and sales partner for the Asian region. Asiagateway.com
is a provider of  commerce,  community  and  content for the Asian  marketplace.
Content  produced and compiled by  Asiagateway.com  would be integrated into our
online travel services.  Our online travel services,  in turn, would be featured
in Asiagateway.com.

  On February 7, 2000, OrbitTravel.com,  our wholly owned subsidiary, executed a
three-year  consulting  services  agreement  and joint  content  agreement  with
Laspata/Decaro   Studio   Corporation,   an   organization   of  designers   and
photographers,  pursuant  to which  Laspata/Decaro  would  provide us with media
consulting  services  regarding  brand  building  and  promotion.  In  addition,
Laspata/Decaro would contribute their library of destination images, photography
and  other  content  for use  within  our  TravelFile  service.  We also  expect
LaSpata/Decaro  to assist us in the  creation  of new  video,  multi-media,  and
rich-media  content for our online services.  We are required to issue under the
agreement  2.5  million  shares of our  common  stock  vesting  in equal  annual
installments  over the three-year  term of the agreement,  which would represent
approximately  0.3% of our common  stock  assuming all of the  transactions  and
issuances described in this Annual Report are consummated. In addition, we would
issue to  Laspata/Decaro  an  additional  100,000  shares upon  Laspata/Decaro's
completion  of  each  of  the  following   tasks:   (1)  the   development   and
implementation  of a promotion  and  marketing  plan;  and (2) the  provision of
additional   proprietary  content  and  the  implementation  of  an  agreed-upon
operations strategy.

  Financing  Activity.  On  February  15,  2000,  Teakwood  Ventures,   LLC,  an
accredited  investor under Rule 501 of the Securities  Act, agreed to fund up to
$10 million pursuant to a funding  commitment letter and subscription  agreement
whereby  Teakwood  Ventures  agreed to purchase:  (1)  11,223,334  shares of our
common stock at $0.1782 per share on or before March 30,  2000;  (2)  11,223,334
shares of our common stock at $0.1782 per share on or before June 30, 2000;  and
(3)  18,856,065  shares of our common  stock at  $0.3182  per share on or before
September 30, 2000. Teakwood Ventures' agreement to purchase our common stock on
these  varying dates is subject to several  conditions,  including the condition
that the shares to be issued to Teakwood Ventures must be freely  tradeable.  We
cannot assure you that these conditions will be met. Therefore, we cannot assure
you that we will consummate all or part of this transaction. In addition, if our
total equity market capitalization is less than $200 million on any of the dates
that Teakwood  Ventures  purchases our shares of common stock, we have agreed to
proportionally reduce the per share price of the common stock to be purchased by
Teakwood  Ventures.  For example,  if our total equity market  capitalization is
$100  million on  September  30,  2000,  the  purchase  price per share would be
$0.1591 and we would  consequently  be required  to issue  37,712,130  shares to
Teakwood  Ventures.  In addition,  our agreement with Teakwood Ventures requires
that we appoint two  directors  who are  nominated  by Teakwood  Ventures to our
board.

  Since the end of 1999, we have issued or agreed to issue  approximately  113.8
million shares of common stock for no cash  consideration  to various  executive
officers,  employees,  consultants  and other third parties.  A portion of these
shares  have  been  issued or will be issued  to  settle  various  disputes  and
contingent  liabilities.  See "Legal  Proceedings." We have issued, or expect to
issue,  these shares in a series of unrelated  registered and private offerings.
See  "Description of Business -- Further  issuances and sales into the market of
up to an  additional  166.5  million  shares of our common stock will dilute our
current stockholders and may depress the market price of our common stock."


                                       27
<PAGE>


  In addition,  we have offered to issue  approximately  52.7 million additional
shares of our common stock to existing  security  holders in exchange for all of
our outstanding convertible preferred stock and convertible debt, other than the
notes that  OrbitTravel.com,  our wholly  owned  subsidiary,  has issued.  As of
February 25, 2000, the holders of all of our convertible preferred stock and all
of our convertible  debt have accepted this offer. We currently  expect to issue
these  shares  within 10 business  days after the date we have filed this Annual
Report on Form  10-K.  "See  Description  of  Business--Risk  Factors--  Further
issuances and sales into the market of up to an additional  166.5 million shares
of our common  stock will  dilute our current  stockholders  and may depress the
market price of our common stock.

  Since  its  inception  on  October  6,  1999,  our  wholly  owned  subsidiary,
OrbitTravel.com,   has  issued  approximately  $3.2  million  of  debt  that  is
convertible into approximately 6.4 million shares of our common stock.  However,
we  currently  expect to exchange  these notes for  approximately  70.3  million
shares of our  common  stock.  See  "Management's  Discussion  and  Analysis  of
Financial   Condition  and  Results  of   Operations--   Liquidity  and  Capital
Resources."

  On January 9, 2000,  OrbitTravel  executed an exclusive  content  distribution
agreement with AsiaGateway.  Under the terms of this agreement, we were required
to issue 200,000  shares of our common stock 30 days from the execution  date of
this  agreement.  As of February 16, 2000,  since we had not issued such shares,
either party may terminate this agreement.

  We currently  expect to ask our  stockholders to approve a reverse stock split
on a up to 20-for-1  basis.  We cannot  assure you that we will be successful in
obtaining such approval.  See  "--Liquidity  and Capital  Resources" for a table
setting forth our expected  capitalization  assuming all of the transactions and
issuances  described  in this  Annual  Report  are  consummated  and we effect a
reverse stock split on an up to 20-for-1 basis.

Results of Operations

  During 1998, we derived our revenues primarily from golf-related  products and
services.  As a result of our agreement with Orbit Network  pursuant to which we
have licensed  Orbit  Network's GDS  contracts  since  November 1, 1999, we have
derived  fee  revenues  for  use of the  TravelFile  website.  Because  of  this
transition, we believe that period-to-period  comparisons may not be meaningful.
The period-to-period change in each of our revenue categories is as follows:

Comparison of 1999 to 1998

  Revenues.  Revenues  in 1998  consisted  solely  of the  sale of  golf-related
equipment and  accessories.  Revenues in 1999  consisted  solely of the Internet
related  revenues  generated  under Orbit  Network's GDS contracts  that we have
licensed  under a right to use agreement  from Orbit  Network since  November 1,
1999.  Revenues  decreased by  $5,906,123,  or 98%,  from  $6,036,983 in 1998 to
$130,860 in 1999. We  discontinued  our  golf-related  equipment and accessories
business in December  1998 and did not have any  business  operations  until the
commencement of our Internet business on November 1, 1999.

  Operating  Expenses.  Operating  expenses in 1998  consisted of  $3,841,147 of
golf-related  costs,  $6,715,625  of general  and  administrative  expenses  and
$270,844 of depreciation and amortization  expense.  Operating  expenses in 1999
consisted  of costs of Internet  related  revenues of  $487,812,  $5,951,452  of
general and  administrative  costs and $5,986 of depreciation  and  amortization
expense. Operating expenses decreased by $4,382,366, or 40%, from $10,827,616 in
1998 to  $6,445,250  in 1999.  This decrease was due to the fact that in 1998 we
discontinued our golf related equipment and accessories business.

  Other Expenses.  Other expenses in 1998 consisted of $6,958,750 of expense for
loss on investments, including the losses incurred on the foreclosures of Miller
Golf and the  properties  held at the World Golf Village.  Interest  expense and
amortization  of debt discount  totalled  $3,471,485 and  litigation  settlement
expense was  $740,004.  In addition,  we wrote off  substantially  all our costs
incurred in pursuit of business  ventures in the golf  industry.  These expenses
were offset by a $523,799  gain on sale of golf course and  $135,755 of interest
income.  Other expenses in 1999 consisted of $982,917  related to the settlement
of  litigation  and  $230,211  related to other  costs  incurred  in closing the
corporate offices in Tampa, FL. In addition, interest expense totalled $167,824.



                                       28
<PAGE>



Other  expenses  decreased by  $9,835,902,  or 88%, from  $11,216,294 in 1998 to
$1,380,392  in 1999.  This decrease was due to the  discontinuance  of the golf-
related equipment and accessories business in December 1998.

  Net Loss. Net loss decreased by $8,312,145, or 52%, from $16,006,927 in 1998
to $7,694,782 in 1999.

Comparison of 1998 to 1997

  Revenues.  Revenues in 1997 consisted of golf revenues,  management and design
fees and resident  membership.  Revenues in 1998  consisted of the sale of golf-
related  equipment and accessories.  Revenues  increased by $1,943,384,  or 47%,
from $4,093,599 in 1997 to $6,036,983 in 1998. We discontinued our golf- related
equipment  and  accessories  business  in  December  1998  and did not  have any
business  operations until the commencement of our Internet business on November
1, 1999.

  Operating  Expenses.  Operating  expenses  in 1997  consisted  of golf  course
operating  and  related  expenses  of  $2,384,901,  general  and  administrative
expenses of $3,090,713 and depreciation  and  amortization  expense of $871,222.
Operating  expenses in 1998  consisted  of  $3,841,147  of  golf-related  costs,
$6,715,625 of general and  administrative  expenses and $270,844 of depreciation
and amortization  expense.  Operating expenses increased by $4,167,409,  or 63%,
from  $6,660,207 in 1997 to  $10,827,616  in 1998.  This increase was due to the
compensation  expenses  incurred  as  part  of the  settlements  with  executive
officers.

  Other Expenses.  Other expenses in 1997 consisted of interest expense, loss on
investments and amortization of debt discount on convertible  debentures.  Other
expenses in 1998 consisted of interest expense of $635,926, loss on investments,
including write downs of assets in business  ventures and golf- related business
of $7,664,359 and litigation settlement expenses of $740,004. This was partially
offset by the gain of $523,799 on the sale of a golf course and interest  income
of $135,755. Other expenses increased by $7,795,868, or 228%, from $3,420,426 in
1997 to $11,216,294 in 1998.  This increase was due to the  amortization of debt
discount on convertible  debentures and the losses  incurred on foreclosure  and
write-off of investments in the golf-related  equipment and accessories business
discontinued in December 1998.

  Net Loss. Net loss increased by $10,019,893, or 167%, from $5,987,034 in
1997 to $16,006,927 in 1998.

Liquidity and Capital Resources

  Capitalization. Our charter authorizes the issuance of 200.0 million shares of
common stock and 1.0 million shares of preferred stock. As of February 16, 2000,
we had  approximately  13.8  million  shares of  common  stock  outstanding.  In
addition,  as of such date, we had approximately 5,685 shares of preferred stock
outstanding that are convertible into 42.6 million shares of common stock,  $1.5
million  of notes  outstanding  (other  than  the  OrbitTravel  notes)  that are
convertible  into 10.1 million shares of common stock. In addition,  as of March
13,  2000,  OrbitTravel  had issued $3.2 million of notes  convertible  into 6.4
million  shares.  However,  we  currently  expect to  exchange  these  notes for
approximately 70.3 million shares of our common stock.

  We have offered to issue approximately 52.7 million shares of our common stock
to existing  securityholders in exchange for all of our outstanding  convertible
preferred stock and convertible  debt, other than the notes that OrbitTravel has
issued. As of February 25, 2000, the holders of all of our convertible preferred
stock and all of our  convertible  debt have accepted  this offer.  We currently
expect to issue  these  shares  within 10  business  days after the date we have
filed this Annual Report on Form 10-KSB.

  Since the end of 1999, we have issued or agreed to issue an  additional  113.8
million shares of common stock for no cash  consideration  to various  executive
officers,  employees,  consultants  and other third parties.  A portion of these
shares have been issued or will be issued to settle various disputes. See "Legal
Proceedings."  We have issued,  or expect to issue,  these shares in a series of
unrelated  registered and private offerings.  See "Description of Business--Risk
Factors--Future issuances and sales into the market of up to an additional 166.5
million shares of our common stock will dilute our current  stockholders and may
depress the market price of our common stock."

  On February 15, 2000, we and Teakwood  Ventures,  LLC, an accredited  investor
under Rule 501 of the Securities Act,  executed a funding  commitment letter and
subscription agreement pursuant to which Teakwood


                                       29
<PAGE>


Ventures  agreed to  purchase:  (1)  11,223,334  shares of our  common  stock at
$0.1782 per share on or before  March 30,  2000;  (2)  11,223,334  shares of our
common stock at $0.1782 per share on or before June 30, 2000; and (3) 18,856,065
shares of our common stock at $0.3182 per share on or before September 30, 2000.
Teakwood Ventures' agreement to purchase our common stock on these varying dates
is subject to several conditions,  including the condition that the shares to be
issued to Teakwood Ventures must be freely tradeable.  We cannot assure you that
these  conditions  will be met.  Therefore,  we cannot  assure  you that we will
consummate  all or part of this  transaction.  In addition,  if our total equity
market  capitalization  is less  than  $200  million  on any of the  dates  that
Teakwood  Ventures  purchases  our  shares of common  stock,  we have  agreed to
proportionally reduce the per share price of the common stock to be purchased by
Teakwood  Ventures.  For example,  if our total equity market  capitalization is
$100  million on  September  30,  2000,  the  purchase  price per share would be
$0.1591 and we would  consequently  be required  to issue  37,712,130  shares to
Teakwood Ventures.

  You should  carefully  review our  consolidated  financial  statements and the
accompanying notes for a more complete discussion of our capitalization.

  Current  and  Future  Liquidity  Needs.  We have not  generated  net cash from
operations for any period since 1996. We have primarily  financed our operations
since 1996 through private sales of equity and debt securities.  As of March 13,
2000, our principal source of liquidity was  approximately  $197,000 in cash. We
estimate that monthly operational cash requirements are approximately  $300,000.
As part of our monthly operational cash requirements, we are obligated to pay an
aggregate of approximately  $92,000 to our executive officers under the terms of
their  employment   agreements.   In  addition,  as  discussed  below,  we  have
significant  short-term  financing cash  requirements.  We currently do not have
sufficient  funds to meet our current cash and financing  needs nor do we expect
to generate  sufficient  cash from  operations  to meet these  needs.  We cannot
assure you that we will be able to obtain  funds to finance our current cash and
financing needs on acceptable  terms,  if at all. In addition,  any increases in
anticipated  expenses would further strain our liquidity and capital  resources.
We must raise  additional  capital from public or private equity or debt sources
in order to  finance  operating  losses,  anticipated  growth  and  contemplated
capital  expenditures.   If  such  sources  of  financing  are  insufficient  or
unavailable,  we will be required to modify our  operating  plans in  accordance
with the  extent  of  available  funding.  We may not be able to raise  any such
capital on  acceptable  terms or at all.  Further,  we cannot assure you that we
will be able to raise  sufficient  capital to  continue  our  operations.  If we
cannot continue our operations, we may be forced to discontinue our business and
liquidate our assets.

  All of the notes that have been  issued by  OrbitTravel.com  mature six months
from the date of issuance.  Approximately $500,000 of these notes will mature on
March 29, 2000. We cannot assure you that we will have sufficient capital, or be
able to raise sufficient capital, to repay our obligations under these notes nor
can we assure you that we would be successful in extending the maturity dates of
these  notes.  All of the notes  that have been  issued by  OrbitTravel.com  are
convertible  into shares of our common stock at a  conversion  price of $.50 per
share.  However,  when  OrbitTravel  issued these notes,  we were  contemplating
consummating a merger with Orbit Network.  The stated  conversion  price of $.50
assumed  that  we had  effected  a  recapitalization  of  our  common  stock  in
connection with such a merger.  Upon  completion of our due diligence  review of
Orbit  Network,  we and Orbit  Network  mutually  agreed to  cancel  our  merger
agreement  and  agreed to enter into the other  transactions  we discuss in this
Annual  Report  on Form  10-KSB.  Consequently,  in  order  to  ensure  that the
purchasers of the OrbitTravel notes receive the same proportion of our shares of
common stock that they would have received had we effected a recapitalization of
our common stock,  we currently  expect to offer to exchange such holders' notes
for shares of common stock based on an exchange ratio of $.0455.  Thus,  instead
of issuing  approximately  6.4 million shares upon conversion of these notes, we
expect to exchange  these  notes for  approximately  70.3  million  shares.  The
issuance of any shares of our common stock upon conversion of these  OrbitTravel
notes  could  result in  dilution  in net  tangible  book  value to our  current
stockholders.

  In addition,  we cannot assure you that we will have sufficient capital to pay
the $636,000  that we are required to pay as of February 16, 2000 under  various
settlement agreements with employees,  former employees and other creditors. See
"Legal Proceedings" and "Certain Relationships and Related Party Transactions."



                                       30
<PAGE>



  On January 27, 2000,  Spartan  Capital  Management,  LLC, a limited  liability
company  controlled  by  David  Noosinow,  one of our  directors  and  executive
officers,  entered into an asset purchase agreement with Mark Savoretti pursuant
to which Spartan  Capital  agreed to acquire the  intellectual  property  assets
related to the TravelFile  website previously owned by Orbit Network for $60,000
in cash,  a note  payable  in the amount of  $540,000  and the  issuance  of 3.0
million shares of our common stock. Mr. Savoretti,  a creditor of Orbit Network,
acquired  these  assets  from  Orbit  Network  through  a  judicial  foreclosure
proceeding on January 13, 2000 after Orbit  Network  failed to pay $771,000 owed
to Mr. Savoretti.  Immediately upon execution of this asset purchase  agreement,
Spartan Capital  assigned all of its rights and obligations  under the agreement
to us for $10. One of the  obligations  assigned is an  obligation to enter into
consulting  agreements  with Mark Savoretti and another  person,  under which we
would pay a total of $450,000  over three  years.  We  thereafter  acquired  the
intellectual property assets related to the TravelFile website directly from Mr.
Savoretti  in  exchange  for  $60,000 in cash,  a note  payable in the amount of
$540,000  and 3.0 million  shares of the  Company's  common  stock,  which would
represent   approximately   0.4%  of  our  common  stock  assuming  all  of  the
transactions and issuances  described in this Annual Report are consummated.  On
the date of closing,  we paid Mr.  Savoretti  $60,000 and  executed a promissory
note in the amount of $540,000.  This note is payable in cash upon the effective
date of any  registration  statement of ours registering any of our common stock
under the  Securities  Act.  We cannot  assure you that we will be able to raise
sufficient capital, on acceptable terms or otherwise, to satisfy our obligations
under Mr. Savoretti's note.

  On February 24, 2000,  we executed a  non-binding  letter of intent to acquire
from AnimInet,  intellectual  property assets related to AnimInet's 3-D Internet
asset for  approximately  473.9 million shares of our common stock,  which would
represent   approximately  52.6%  of  our  common  stock  assuming  all  of  the
transactions  and  issuances  described in this Annual  Report are  consummated.
These  intellectual   property  assets  primarily  include  the  software  being
developed  by  AnimInet  to create  "Streaming  Intelligent  Beings,"  which are
digital 3D  computerized  personalities  that would  communicate  directly  with
Internet users.  AnimInet is a corporation  formed solely by Dean Miller, one of
our executive  officers.  We currently expect the stockholders of Orbit Network,
who are each  accredited  investors  under Rule 501 of the  Securities  Act,  to
individually  purchase all of AnimInet's  common stock. This letter of intent is
subject to the execution of a definitive  agreement and customary due diligence.
We cannot assure you that this  acquisition  will be consummated or that it will
be consummated  on the terms set forth in the letter of intent.  We currently do
not have a sufficient  number of authorized and unissued shares  available under
our charter to consummate such an acquisition.  Although we currently  expect to
ask our  stockholders  to  approve a reverse  stock  split on an up to  20-for-1
basis,  we cannot  assure  you that we would be  successful  in  obtaining  such
approval.

  On January 31,  2000,  we entered  into an agreement  with  Wilhelmina  Artist
Management  LLC pursuant  which we would acquire all of the  outstanding  common
stock of  WilhelminaTravelFile.com  in exchange for  approximately  80.0 million
shares of our common stock,  which would  represent  appproximately  9.0% of our
common stock assuming all of the  transactions  and issuances  described in this
Annual Report are consummated.  Unless the transaction has closed,  either party
may terminate the  Wilhelmina  agreement at any time after February 15, 2000. We
cannot  assure  you  that we will be able to  consummate  this  acquisition.  We
currently  do not have a sufficient  number of  authorized  and unissued  shares
available  under our  charter to  consummate  such an  acquisition.  Although we
currently  expect to ask our  stockholders to appove a reverse stock split on an
up to  20-for-1  basis,  we cannot  assure  you that we would be  successful  in
obtaining stockholder approval for any such actions.



                                       31
<PAGE>



  The following  table sets forth the  beneficial  ownership of our common stock
assuming all of the transactions  and issuances  described in this Annual Report
are consummated.

                                                                       Number of
                                                                    Shares Owned

                                             Number of         After
                                            Shares Owned      Reverse    Percent
                                           Before Reverse   Stock Split  of All

Name/Category of Stockholder                Stock Split      of 20 to 1  Shares
----------------------------               --------------   ------------ -------

Current stockholders (1)..................   13,753,642         687,682    1.6%
Officers and directors (2)................   46,797,374       2,339,869    5.3
Other future recipients...................  119,753,749       5,987,687   13.5
AnimInet..................................  473,928,276      23,696,414   53.5
Orbit Travel noteholders (3)..............  109,890,110       5,494,506   12.4
Wilhelmina Artist.........................   80,000,000       4,000,000    9.0
Teakwood Ventures, LLC....................   41,302,733       2,065,136    4.7
                                            -----------      ----------   ----
    Total.................................  885,425,884(4)   44,271,294    100%
                                            ===========      ==========   ====


--------
(1) As of  February  16,  2000.  Includes  2.5  million  shares  issued  to  Mr.
    Dollinger,  our General Counsel,  as part of the settlement of litigation in
    which he served as plaintiff's counsel.

(2) Excludes  2.5  million  shares  issued  to  Mr.  Dollinger  as  part  of the
    settlement of litigation in which he served as plaintiff's counsel.

(3) Assumes the  exchange of all of the  OrbitTravel  notes based on an exchange
    ratio of $.0455  per  share.  Includes  shares of common  stock that will be
    offered in exchange for an additional $1.8 million of debt that we expect to
    issue.

(4) We  currently  expect that if we exercise our option to purchase the GDS and
    ancillary  contracts from Orbit Network for the assumption of  approximately
    $5.1  million  in  Orbit  Network  debt,  we will  exchange  that  debt  for
    approximately 137.4 million shares of our common stock. We cannot assure you
    that we will exercise our option,  or if we do exercise our option,  that we
    will  exchange  the debt for shares.  This number in the table  excludes any
    shares that may be issued in an exchange.

ITEM 7. FINANCIAL STATEMENTS

  See page F-1 of the financial reported included in this Annual Report.

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

  None.


                                       32
<PAGE>


                                    PART III

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

  The following table sets forth  information  regarding our executive  officers
and directors:

              Name               Age                Position
              ----               ---                --------

 Joseph R. Cellura..............  45 Chairman of the Board of Directors and
                                      Chief Executive Officer

 Douglas R. Dollinger...........  44 General Counsel and Director
 David A. Noosinow..............  40 President and Director
 Clifford F. Bagnall............  45 Chief Financial Officer
 Dean E. Miller.................  42 Vice President of Sales


  Joseph R.  Cellura has served as our  Chairman of the Board of  Directors  and
Chief Executive  Officer since June 1999. Mr. Cellura  previously  served as our
Chairman of the Board of Directors  and Chief  Executive  Officer from June 1997
until February 1999.  During the interim period between  serving as our Chairman
of the Board of Directors and Chief Executive Officer, Mr. Cellura independently
sought different business opportunities for us. Mr. Cellura originally joined us
as a result  of our  acquisition  of Divot  Corporation  and  Divot  Development
Corporation.  Mr.  Cellura  had  served  as an  executive  officer,  and owned a
majority  interest of the common stock, of Divot  Corporation  since 1989 and of
Divot  Development  Corporation since 1994. Prior to his coming to work with the
company,  Mr.  Cellura  had been  involved  in  varied  and  progressively  more
responsible  positions  throughout his career with extensive  travel  experience
throughout  the USA,  Europe and Asia. Mr. Cellura is recognized for his vision,
creativity,  marketing,  and  management  leadership,  in  addition  to  several
challenging turn around strategies which have provided  experience and knowledge
in legal stratagem and capital markets. During the period 1976-1992, Mr. Cellura
had a successful  career in investment  banking and the financial  industry with
Shearson & Kidder Peabody & Co. Mr. Cellura attended the University of New York.

  Dean E. Miller has served as our Vice  President  since  January 5, 2000.  Mr.
Miller previously served as our President from September 1, 1999 through October
31,  1999 and as a director  from August 23, 1999  through  January 5, 2000.  In
addition to his duties with us, Mr.  Miller is the  president  and sole owner of
AnimInet,  Inc. We have  entered into an  agreement  to purchase  AnimInet's  3D
animation asset. See "Certain  Relationships and Related  Transactions."  Before
joining us, Mr. Miller served as Vice President of Sales and Corporate Marketing
at  Hitachi  PC.  Before  joining  Hitachi  PC,  Mr.  Miller  worked in  various
capacities in the personal computer industry.

  Douglas R.  Dollinger  has served as our Corporate  Counsel since  December 1,
1999 and as a Director  since July 1999.  Before  joining us, Mr.  Dollinger was
engaged in the private  practice of law. Mr.  Dollinger  received his law degree
from the City University of New York at Queens College in 1988.

  David A. Noosinow has served as our Secretary, and Director, since January
5, 2000 and, since February 1, 2000 is also serving as our President. Since
January 1997, Mr. Noosinow has been the Executive Director of Spartan Capital
Management, LLC. Mr. Noosinow brings to the organization over 15 years of
experience in the financial industry. Previously, Mr. Noosinow was the sole
proprietor and executive director of Spartan Capital Management, LLC, an
investment banking consulting company. Prior to forming Spartan Capital, Mr.
Noosinow had a career in the investment banking industry as Senior Vice
President with Prudential Securities, as Vice President with CS First Boston,
and as Associate Director with Bear Stearns & Company, Inc. Mr. Noosinow holds
a Bachelor's Degree in Business Administration from Northern Arizona
University, with a major in Finance.

  Clifford F. Bagnall has served as our Chief  Financial  Officer  since October
1998. Mr. Bagnall also served as a director from September 1997 through  January
5, 2000 and as our Chief  Operating  Officer from September 1997 through January
5, 2000.  Before joining us, Mr. Bagnall served as an independent  financial and
operational consultant for various public and private companies.



                                       33
<PAGE>



  Each of our  directors  and  executive  officers are required to file with the
SEC, by a specified  date,  reports  regarding  his  transactions  involving our
common stock.  To our knowledge,  based solely on  information  furnished to us,
none of our directors and executive officers filed any such reports during 1999.
We are not aware of any  transactions  involving  our common stock by any of our
directors or executive officers.

  Our  financing  arrangement  with  Teakwood  Ventures  described  above  under
"Description of  Business--Recent  Developments--Financing  Activity" includes a
commitment for the addition of two Teakwood  appointees to our five member board
of directors.

ITEM 10. EXECUTIVE COMPENSATION

  Our  directors  have  served  without   compensation  for  their  services  as
directors,  but have been  reimbursed for expenses  incurred in connection  with
their duties.  It is  anticipated  that directors will continue to serve without
compensation  (other than reimbursement of expenses).  Other than the employment
contracts  described  below,  we had no standard  arrangements  or policies  for
compensation of our executives.  The Board of Directors will, from time to time,
determine the  compensation  of our senior  management  in  accordance  with our
prevailing  financial  condition as the Board shall  determine and provide other
incentives  to promote  successful  management  of our  business.  There were no
bonus,  stock  option  or other  incentive  plans  in  effect  for any  level of
management  as of the end of 1998 or 1999  except for our 1998  Incentive  Stock
Option Plan and 1994 Stock Option Plan and performance  bonuses  included in the
employment agreement of Mr. Cellura as more fully described below.


                                       34
<PAGE>


  The following table sets forth  information with respect to compensation  paid
to each of the persons who served as our Chief Executive Officer during 1998 and
1999. No other  executive  officer  received  compensation in excess of $100,000
during 1998 or 1999.

                           Summary Compensation Table

                                           Annual      Securities
                                        Compensation   Underlying

                                      ----------------  Options     All Other
                                 Year  Salary   Bonus     (#)     Compensation
  Name and Principal Position    ---- -------- ------- ---------- -------------

Joseph R. Cellura............... 1999 $ 53,798 $    --       --     $155,362
 Chief Executive Officer         1998  187,500      --  333,333      199,000
                                 1997   45,406      --       --           --
Jeremiah Daly................... 1999 $     -- $    --       --     $     --
 Former Chief Executive Officer  1998  177,083  65,000  200,000           --
                                 1997   18,750      --       --           --
Kenneth Craig................... 1999 $     -- $    --       --     $ 12,500
 Former Chief Executive Officer  1998       --      --       --       10,500
                                 1997       --      --       --           --
James A. McNulty................ 1999 $     -- $    --       --           --
 Former Chief Financial Officer  1998  104,323      --  233,333     $ 48,500
                                 1997       --      --       --           --
Clifford F. Bagnall............. 1999 $     -- $    --       --     $ 14,000
 Chief Financial Officer         1998  142,552  65,000  200,000           --
                                 1997   41,657      --       --           --



  Mr. Cellura served on our Board of Directors as our Chairman and Chief
Executive Officer from June 1997 until he resigned on February 16, 1999. On
February 17, 1999, the remaining members of the Board elected Jeremiah M.
Daly, another Board member and our then President, to serve as Chairman and
Chief Executive Officer. Mr. Daly resigned from all of those positions,
including as a member of our Board, effective April 28, 1999, at which time
our Board appointed Kenneth Craig to serve as President and Chief Executive
Officer. Mr. Craig was appointed Chairman on May 6, 1999. He was succeeded as
Chairman and Chief Executive Officer by Mr. Cellura on June 24, 1999. Mr.
Craig's service to us was terminated under a separation agreement, dated
September 1, 1999, which settled his claims that we wrongfully dismissed him
from his elected offices. See "Legal Proceedings."

  All  stock  options  that  we have  granted  since  our  inception  have  been
forfeited.  At the end of  1999,  there  were no  unexercised  options  or stock
appreciation rights held by our executives which were outstanding.

Employment Contracts

  We have entered into  employment  agreements  with our  executive  management,
including a seven-year  employment agreement with Mr. Cellura that was effective
as of June 24, 1999. Under our agreement with Mr. Cellura, we have agreed to pay
him an annual base salary of at least $250,000. We have also agreed to



                                       35
<PAGE>



reimburse Mr.  Cellura  approximately  $9,000 per month to enable Mr. Cellura to
maintain an office and residence in New York City. In addition to these amounts,
we have agreed to pay Mr. Cellura an annual  performance/incentive  bonus on the
following terms:

                                                                   Mr. Cellura's

    Our Fiscal Year Revenue                                         Bonus
    -----------------------                                   ------------------

   $0 to $2.0 million........................................ 5% of base salary
   $2.0 million to $5.0 million.............................. 15% of base salary
   $5.0 million to $10.0 million............................. 30% of base salary
   $10.0 million or greater.................................. 50% of base salary


In addition to these revenue-based bonuses, we have agreed to pay Mr. Cellura,
Mr. Noosinow and Mr. Dollinger an aggregate bonus, to share ratably with each
other, equal to two percent of the gross proceeds that we receive in
connection with public and private equity and debt offerings. We have also
agreed to pay Mr. Cellura, Mr. Noosinow and Mr. Dollinger an aggregate bonus,
to share ratably with each other in the event a third party acquires us, equal
to five percent of the purchase price.

  The  employment  agreement  with Mr. Cellura also provides for the issuance of
5.0 million  options to purchase shares of our common stock upon our adoption of
a new stock  option  plan,  all of which will be  immediately  exercisable.  Mr.
Cellura's employment agreement provides anti-dilution  protection to Mr. Cellura
such that in the event we ever issue any additional  shares at a price less than
the exercise price then in effect for the options  granted to Mr.  Cellura,  the
exercise price of his options will be  proportionately  reduced.  In addition to
requiring us to record compensation  expense each time the exercise price of his
options is reduced, this provision could have the effect of discouraging us from
undertaking  various financing  transactions in the future that may otherwise be
in your best interest.

  If we terminate Mr. Cellura's  employment  agreement without cause at any time
during the term of his  seven-year  employment  agreement,  we are  required  to
fulfill the following severance obligations:

    (1) we must continue to reimburse Mr. Cellura after termination of his
  employment for approximately $9,000 per month to enable Mr. Cellura to
  maintain an office and residence in New York City for the balance of the
  term of the agreement;

    (2) in the event Mr. Cellura  continues after  termination of his employment
  to hold  options,  warrants or other  securities  convertible  into our common
  stock, the exercise prices of such securities will be proportionately  reduced
  if we issue  common  stock at a price  lower than the  exercise  price then in
  effect for his convertible securities;

    (3) we must pay Mr. Cellura a lump sum equal to the sum of the present
  value of 100% of his base salary for the balance of the term of the
  employment agreement;

    (4) we must pay Mr. Cellura an additional lump sum equal to $1.25
  million;

    (5) we must execute a UCC-1 financing statement on behalf of Mr. Cellura
  enabling him to record a lien against our assets to secure payment of the
  $1.25 million severance payment;

In addition,  regardless  of whether or not we have  previously  terminated  Mr.
Cellura's employment,  if upon expiration of Mr. Cellura's seven-year employment
term,  we elect not to offer Mr.  Cellura  an  additional  five-year  employment
contract, we must pay him an additional lump sum of $900,000.

  We may only avoid these severance obligations if we terminate Mr. Cellura's
employment for cause. In order for us to terminate Mr. Cellura's employment
for cause, we must follow the procedures set forth in his employment
agreement. We would be required to give Mr. Cellura 90 days' prior written
notice of his termination for cause. Mr. Cellura would have 90 additional days
to elect whether or not to object to his termination. If Mr. Cellura objects,
our board would be required to convene a special meeting within 30 days, at
which Mr. Cellura would have the right to attend, to review his objection and
determine whether or not sufficient evidence exists to terminate Mr. Cellura's
employment for cause. Mr. Cellura may again object to our board's
determination by filing a request for arbitration of this matter within 30
days of the board's determination. The



                                       36
<PAGE>



arbitration  would be  required  to take  place  within 60 days of notice of the
request.  If Mr. Cellura objects to termination of his employment for cause, Mr.
Cellura  would  remain in his  position  as our  chief  executive  officer,  and
continue to receive amounts due to him under the employment agreement, until the
matter has been finally  determined.  This  process  could take up to 10 months.
Even if we are successful in terminating Mr. Cellura's  employment for cause, if
upon expiration of Mr.  Cellura's  seven-year  employment  term, we elect not to
offer Mr. Cellura an additional five-year  employment contract,  we must pay him
an additional lump sum of $900,000.

  In addition to our employment agreement with Mr. Cellura, we have entered into
employment  agreements with each of our other executive officers.  We have filed
each of these  agreements  as an exhibit to this Annual  Report on Form 10- KSB.
Our agreements with Messrs.  Noosinow and Dollinger are substantially similar to
our agreement with Mr. Cellura except as follows: (1) Mr. Noosinow's base salary
is at least $225,000 and his severance  payment upon  termination  without cause
would be $900,000;  and (2) Mr. Dollinger's base salary is at least $180,000 and
his severance payment upon termination without cause would be $900,000.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  We set forth below  information  regarding  the  beneficial  ownership  of our
common stock as of February 16, 2000 by each director,  each executive  officer,
all  executive  officers and directors as a group and each person known to us to
beneficially  own more than 5% percent of our common stock. For purposes of this
table, we assume that the holders of all of our convertible debt and convertible
preferred  stock  (other  than notes  issued by  OrbitTravel,  our wholly  owned
subsidiary) have accepted our offer to exchange such securities for an aggregate
of 52.7  million  shares of our common  stock and that we have  issued all 113.8
million shares of common stock for no cash  consideration  to various  executive
officers,  employees,  consultants and other third parties.  See "Description of
Business--Recent Developments--Financing Activity."

                                                          Number of
                                                            Shares     Percent
                                                         Beneficially   of All
Name of Beneficial Owner                                    Owned     Shares (1)
------------------------                                 ------------ ---------

Joseph R. Cellura.......................................  27,333,333    15.2%
David A. Noosinow.......................................   6,000,000     3.3
Douglas R. Dollinger....................................   6,300,000     3.5
Dean E. Miller..........................................   4,264,041     2.4
Clifford F. Bagnall.....................................   5,400,000     3.0
All executive officers and directors
 as a group (5 persons).................................  49,297,374    27.4


--------
(1) Assumes 180,304,765 shares outstanding.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  On April 15, 1998,  we acquired the issued and  outstanding  capital  stock of
Divot Golf Subsidiary,  Inc., a Florida  corporation,  which was wholly owned by
Mr.  Cellura.  Mr.  Cellura  is our  Chairman  of the Board and Chief  Executive
Officer.  The  purchase  price was  $500,000,  payable  $300,000 in cash and the
remainder in a promissory  note. We delivered to the seller a  good-faith,  non-
refundable  deposit of $300,000 in  November  1997 which was applied  toward the
purchase  price.  The  note  bore  interest  at a rate  of 6% and  provided  for
quarterly payments of interest only. We repaid the note in full prior to October
15, 1998. The assets of DGS included its name,  patent and licensing  rights and
molds for producing a divot repair tool.

  On January 7, 1998, we loaned Mr.  Cellura  $65,388.  This loan was originally
evidenced by an unsecured  promissory  note which bears  interest at the rate of
6%. The terms of the loan require that it be repaid on or



                                       37
<PAGE>



before June 30, 1998. Mr. Cellura did not participate in the Board's decision to
approve  this  loan.  We believe  that the terms of this loan were  commercially
reasonable.   We  forgave   this  note  payable  and  recorded  the  $65,388  as
compensation  expense.  We have also made  advances to Mr.  Cellura and to Divot
Development  Corporation,  a Florida  corporation  which is  wholly-owned by Mr.
Cellura, in the total aggregate amount of $141,500. Effective December 31, 1999,
these  advances have been offset  against  certain  accruals and payables to Mr.
Cellura or discharged as part of his settlement agreement.

  In January and May of 1999, a group of our former  stockholders  and employees
and  stockholders  and employees of various  companies that we acquired in April
1998,  which  formerly  were  controlled  by Mr.  Cellura,  our chief  executive
officer,  filed  three  lawsuits  in the United  States  District  Court for the
Southern  District of New York against us, these various acquired  corporations,
Mr. Cellura and several of our other executive  officers and  stockholders.  The
complaints  alleged,  among  other  things,  that (1) we had  failed to issue an
aggregate of 15.0  million  shares of our common stock (such number of shares is
prior to the effect of a 15-for-1  reverse  stock split  effected with regard to
our common stock on June 2, 1998),  (2) we and our officers  committed  fraud in
the issuance of securities, and (3) various breaches of contract. The parties to
the lawsuit entered into a settlement  agreement as of June 29, 1999 pursuant to
which the plaintiffs  agreed to release the defendants from all of the claims in
the lawsuits in exchange for: (1) a note payable in the amount of $225,000;  (2)
the issuance of 7.65 million shares of our common stock;  and (3) the assignment
by Mr. Cellura of all of his rights,  title or interest to the profits generated
from a few parcels of land in the World Golf Village. Mr. Cellura assigned these
rights to the  plaintiffs on June 24, 1999. We instructed  our transfer agent to
issue the 7.65  million  shares of our  common  stock in August  1999,  and such
shares were ultimately issued February 29, 2000. Jeremiah Daly, our former Chief
Executive  Officer,  received 333,334 shares.  Douglas  Dollinger,  a lawyer who
filed the lawsuit on behalf of the plaintiffs,  received 2.5 million shares. Mr.
Dollinger  currently  serves as our General Counsel and is one of our directors.
As of February 16,  2000,  we have not repaid any amounts due under the $225,000
note payable.  This note payable  currently matures on March 31, 2000. We cannot
assure  you that we will  have  sufficient  funds  available  to repay  the note
payable upon  maturity or that we would be able to extend the  maturity  date of
the note payable.  If we are not able to repay the note payable according to its
terms,  we cannot assure you that the  plaintiffs  will not seek court action to
enforce  the  terms of the  settlement  agreement.  We would  incur  substantial
expenses  if we must  defend any  additional  actions in  connection  with these
lawsuits.

  In June 1999, Joseph R. Cellura,  our chief executive  officer,  threatened to
file a lawsuit  against us alleging,  among other things,  that: (1) Mr. Cellura
had suffered  substantial  monetary loss in the defense of the lawsuits we refer
to in the previous paragraph;  (2) Mr. Cellura had suffered real and substantial
damage to his personal  character  as a result of the filing of these  lawsuits;
(3) we  failed  to  issue to Mr.  Cellura  and  other  stockholders  in  various
companies  controlled  by him an aggregate of 20.0 million  shares of our common
stock and 5.0  million  options to  purchase  shares of our common  stock  (such
number of  shares  is prior to the  effect of a  15-for-1  reverse  stock  split
effected with regard to our common stock on June 2, 1998);  and (4) we failed to
indemnify  Mr.  Cellura  as  required  by our  indemnity  agreement  with him in
connection  with  these  lawsuits.  We and Mr.  Cellura  agreed to enter  into a
settlement  agreement,  effective  as of June 29,  1999,  pursuant  to which Mr.
Cellura  agreed to release  us from these  claims in  exchange  for:  (1) a note
payable in the amount of $250,000;  and (2) the issuance of approximately  27.34
million  shares of our common  stock.  As of February 16,  2000,  we have repaid
$64,000 due under the $250,000 note payable. This note payable currently matures
on April 30,  2000.  We cannot  assure  you that we will have  sufficient  funds
available to repay the remaining amounts outstanding under the note payable upon
maturity  or that we  would  be able to  extend  the  maturity  date of the note
payable. If we are not able to repay the note payable according to its terms, we
cannot  assure you that Mr.  Cellura  will not seek court  action to enforce the
terms of the settlement  agreement.  We would incur  substantial  expenses if we
must defend any such court action.

  Clifford  F.  Bagnall,  one of our  former  directors  and our  current  chief
financial officer,  had threatened to file a lawsuit against us alleging that we
owe Mr. Bagnall amounts due under his employment  contract in force while he was
an  executive  officer.  We and Mr.  Bagnall  agreed to enter into a  settlement
agreement,  effective  as of January 31,  2000,  pursuant  to which Mr.  Bagnall
agreed to release us from this claim in exchange  for: (1) a note payable in the
amount of  $100,000;  and (2) the  issuance of 5.3 million  shares of our common
stock. As of


                                       38
<PAGE>



February  16, 2000,  we have not repaid any amounts due under the $100,000  note
payable.  This note payable  currently matures on May 15, 2000. We cannot assure
you that we will have sufficient  funds available to repay the note payable upon
maturity  or that we  would  be able to  extend  the  maturity  date of the note
payable. If we are not able to repay the note payable according to its terms, we
cannot  assure you that Mr.  Bagnall  will not seek court  action to enforce the
terms of the settlement  agreement.  We would incur  substantial  expenses if we
must defend any such court action.

  Kenneth  Craig,  one of our  former  directors  and  executive  officers,  has
threatened  to file a lawsuit  against us alleging that we owe Mr. Craig amounts
due under his employment contract in force while he was an executive officer. We
and Mr.  Craig  agreed to enter into a  separation  agreement,  effective  as of
September  1, 1999,  pursuant to which Mr.  Craig agreed to release us from this
claim in exchange for: (1) a note payable in the amount of $75,000;  and (2) the
issuance of 3.5 million shares of our common stock.  As of February 16, 2000, we
have not  repaid any  amounts  due under the  $75,000  note  payable.  This note
payable  currently  matures on June 30, 2000.  We cannot assure you that we will
have sufficient  funds available to repay the note payable upon maturity or that
we would be able to extend the maturity date of the note payable.  If we are not
able to repay the note payable according to its terms, we cannot assure you that
Mr.  Craig will not seek court  action to  enforce  the terms of the  settlement
agreement.  We would incur substantial expenses if we must defend any such court
action.

  On February 24, 2000,  we executed a  non-binding  letter of intent to acquire
AnimInet's intellectual property assets related to AnimInet's 3-D Internet asset
for  approximately  473.9  million  shares  of our  common  stock,  which  would
represent   approximately  53.3%  of  our  common  stock  assuming  all  of  the
transactions  and  issuances  described in this Annual  Report are  consummated.
AnimInet is a  corporation  formed  solely by Dean Miller,  one of our executive
officers.  We currently expect the  stockholders of Orbit Network,  who are each
accredited  investors  under Rule 501 of the  Securities  Act,  to  individually
purchase  all of  AnimInet's  common  stock.  Mr.  Miller will likely  receive a
portion  of the  cash  proceeds  from  such  an  offering  in  exchange  for the
cancellation of his shares of AnimInet common stock.

  On January 27, 2000,  Spartan  Capital  Management,  LLC, a limited  liability
company  controlled  by  David  Noosinow,  one of our  directors  and  executive
officers,  entered into an asset purchase agreement with Mark Savoretti pursuant
to which Spartan  Capital  agreed to acquire the  intellectual  property  assets
related to the TravelFile website previously owned by Orbit Network for $600,000
in cash  and the  issuance  of 3.0  million  shares  of our  common  stock.  Mr.
Savoretti, a creditor of Orbit Network, acquired these assets from Orbit Network
through a judicial  foreclosure  proceeding  on  January  13,  2000 after  Orbit
Network failed to pay approximately $770,000 owed to Mr. Savoretti.  Immediately
upon execution of this asset purchase agreement, Spartan Capital Management, LLC
assigned all of its rights and  obligations  under the  agreement to us for $10.
One of the  obligations  assigned  is an  obligation  to enter  into  consulting
agreements  with Mr.  Savoretti and another  person,  under which we would pay a
total of $450,000  over three years.  We  thereafter  acquired the  intellectual
property assets related to the TravelFile website directly from Mr. Savoretti in
exchange  for $60,000 in cash,  a note payable in the amount of $540,000 and 3.0
million shares of common stock, which would represent  approximately 0.4% of our
common stock assuming all of the  transactions  and issuances  described in this
Annual Report are consummated.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

 (a) Exhibits

  2.1(1) Stock Purchase Agreement effective as of April 20, 1998 by and among
         us, Talisman Tools Incorporated and Daniel S. Shedd and Dixon Newbold
  2.2(2) Stock Purchase Agreement effective as of April 15, 1998 by and among
         us, Divot Golf Corporation, a Florida corporation, and Joseph R.
         Cellura

  2.3(3) Stock Purchase Agreement effective as of January 28, 1998 by and among
         us, Miller Golf, Inc. and Robert Marchetti, Louis Katon and John
         Carroll
  2.4    Sale and Assignment Agreement dated as of January 27, 2000 by and among
         Mark Savoretti and Spartan Capital Management, LLC



                                       39
<PAGE>



  2.5     Assignment Agreement dated as of January 27, 2000 by and among us and
          Spartan Capital Management, LLC

  2.6     Right to Use Agreement dated as of November 1, 1999 by and among us
          and Orbit Network, Inc.
  2.7     Letter of Intent dated as of February 9, 2000 by and among us and
          AnimInet, Inc.
  2.8     Stock Acquisition Agreement dated as of January 31, 2000 by and among
          us and Wilhelmina Artist Management LLC
  3.1(4)  Our Certificate of Incorporation
  3.2(4)  Our Bylaws

  3.3(5)  Amendment to our Certificate of Incorporation filed July 18, 1994
  4.1(6)  Certificate of Designations, Preferences and Rights of our 1997
          Convertible Preferred Stock dated December 29, 1997
  4.2(6)  Certificate of Designations, Preferences and Rights of 10,500 shares
          of our 1997 Convertible Preferred Stock dated January 13, 1998
  4.3     Form of Exchange Letter between us and the holders of our 1997
          Convertible Preferred Stock

  4.4     Funding Commitment Letter and Subscription Agreement as of February
          15, 2000 by and between us and Teakwood Ventures, LLC
 10.1(7) Form of Warrant issued to the Summit  Stockholders  dated June 30, 1995
 10.2(7) Form of Warrant and Registration Rights Agreement issued to financial

          advisor dated June 30, 1995
 10.3(8)  Agreement in  Principle  dated  February  21, 1996 between us,  Gordon
          Ewart,  our four golf course  subsidiaries  and our three pension fund
          partners.

 10.4(6)  Form of  Convertible  Debenture  Agreement  dated  November  18,  1997
          between  us and the  signatories,  with form of  warrant  to  purchase
          shares of our common stock

 10.5(6)  Form of Private  Placement  Purchase  Agreement dated December 3, 1997
          between  us and the  signatories,  with form of  warrant  to  purchase
          shares of our common stock

 10.6(3)  Form of Private  Placement  Memorandum  dated April 3, 1998 between us
          and the  signatories,  with form of warrant to purchase  shares of our
          common stock.

 10.7(10) Employment Agreement dated June 24, 1999 between us and Joseph R.

          Cellura

 10.8(10) Employment Agreement dated November 1, 1999 between us and Dean E.

          Miller

 10.9(10) Employment Agreement dated November 1, 1999 between us and David A.

          Noosinow

 10.10(10)Employment Agreement dated December 1, 1999 between us and Douglas R.
          Dollinger
 10.11(10)Intentionally Omitted
 10.12(10)Intentionally Omitted

 10.13(10)Form of Exchange Letter between us and the holders of our convertible
          debt

 10.14(10)Settlement Agreement dated as of June 24, 1999 between us and Joseph
          R. Cellura

 10.15(10)Separation Agreement dated as of September 1, 1999 between us and
          Kenneth Craig

 10.16(10)Settlement Agreement dated as of January 31, 2000 between us and
          Clifford F. Bagnall

 10.17(10)Settlement Agreement dated as of January 31, 2000 between us and Kirk
          Scoggins

 10.18(10)Memorandum of Settlement dated as of June 29, 1999 between us and the
          Plaintiff Group

 10.19(9) Our 1998 Incentive Stock Option Plan
 10.20(10)Form of OrbitTravel.com, Inc. Convertible Note

 10.21(10)Management Agreement dated November 17, 1999 between OrbitTravel.com,
          Inc. and Bonveno.com Limited
 10.22(10)European Specific Software Development Agreement dated November 17,
          1999 between OrbitTravel.com, Inc. and Bonveno.com Limited
 10.23(10)Operational Agreement dated November 17, 1999 between
          OrbitTravel.com, Inc. and Bonveno.com Limited

 10.24(10)Interactive Services Agreement between America Online, Inc. and Orbit
          Network, Inc. dated as of May 1, 1999
 10.25(10)Agreement dated as of July 1, 1996 between Applied Information
          Services, Inc. and Amadeus Marketing, S.A.
 10.26(10)Associate Distribution and Services Agreement dated as of April 2,
          1998 between Orbit Network, Inc. and The Sabre Group, Inc.




                                       40
<PAGE>


 10.27(10)Services Display and Reservations Agreement dated as of November 24,
          1998 between Orbit Network, Inc. and Galileo International, L.L.C.
 10.28(10)Associate Participation Global Reference System Agreement dated as of
          August 2, 1999 between Orbit Network, Inc. and WorldSpan, L.P.
 10.29(10)Certificate of Incorporation of OrbitTravel.com, Inc.
 10.30(10)Bylaws of OrbitTravel.com, Inc.
 10.31(10)Joint Venture Agreement dated November 17, 1999 among WebTravel
          Systems Limited, OrbitTravel.com, Inc. and Bonveno.com Limited
 10.32(10)Form of Indemnification Agreement
 10.33(10)Joint Content Distribution Agreement dated January 9, 2000 between

          OrbitTravel.com, Inc. and AsiaGateway.com, Ltd.
 10.34(10)Consulting  Services  Agreement  and  Joint  Consent  Agreement  dated
          February 7, 2000 by and among  OrbitTravel and  Laspata/Decaro  Studio
          Corp.

 21(10)   Our subsidiaries
 27    Financial Data Schedule

--------
(1) Incorporated  by reference  from our Current  Report on Form 8-K dated April
    20, 1998.

(2) Incorporated  by reference  from our Current  Report on Form 8-K dated April
    15, 1998.

(3) Incorporated by reference from our Current Report on Form 8-K dated April 8,
    1998.

(4) Incorporated by reference from our Form 10 filed on December 13, 1993.
(5) Incorporated by reference from our Form 10 filed on September 15, 1994.
(6) Incorporated by reference from our Annual Report on Form 10-KSB for 1997.
(7) Incorporated by reference from our Annual Report on Form 10-K for 1995.
(8) Incorporated by reference from our Current Report on Form 8-K dated August
    30, 1996.

(9) Incorporated by reference from our Registration  Statement on Form S-8 filed
    September 1, 1998.

(10) Incorporated by reference from our Annual Report on Form 10-KSB for 1999.

 (b) Reports on Form 8-K

We filed the following Form 8-K's during the fourth quarter of 1998

  Dated 10/20/1998
  Dated 10/28/1998




                                       41
<PAGE>



                                   SIGNATURES

  In  accordance  with Section 13 or 15(d) of the Exchange  Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized on March 29, 2000.

                                          DIVOT GOLF CORPORATION

                                                 /s/ Joseph R. Cellura
                                          By: ---------------------------------
                                                     Joseph R. Cellura
                                                  Chief Executive Officer

  In  accordance  with the  Exchange  Act,  this  report has been  signed by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated:

             Signature                  Title                      Date
             ---------                  -----                      ----


     /s/ Joseph R. Cellura      Chairman of the Board of         March 29, 2000
----------------------------    Directors and Chief Executive
         Joseph R. Cellura          Officer

    /s/ Douglas R. Dollinger     General Counsel and Director    March 29, 2000
----------------------------------
        Douglas R. Dollinger

    /s/ David A. Noosinow        President and Director          March 29, 2000
----------------------------------
         David A. Noosinow

    /s/ Clifford F. Bagnall      Chief Financial Officer         March 29, 2000
----------------------------------   (principal accounting officer)
        Clifford F. Bagnall


                                       42
<PAGE>


INDEX

CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED

               DECEMBER 31, 1999 and 1998                             F-1
              DECEMBER 31, 1997 and 1996                             F-20


                                       43
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Divot Golf Corporation

  We have audited the  accompanying  consolidated  balance  sheets of Divot Golf
Corporation  and  subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations,  shareholders' deficit and cash flows for
each of the two years in the period ended  December 31,  1999.  These  financial
statements  are  the  responsibility  of  the  Corporation's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

  We  conducted  our audits in  accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audits 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 financial statements referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position  of Divot  Golf
Corporation and subsidiaries at December 31, 1999 and 1998, and the consolidated
results  of their  operations  and their cash flows for each of the two years in
the period ended  December 31, 1999 in  conformity  with  accounting  principles
generally accepted in the United States.

  The accompanying consolidated financial statements have been prepared assuming
that the Corporation  will continue as a going concern.  As more fully described
in Note 1, the Corporation has incurred recurring  operating losses, has pending
litigation,  has a shareholders' deficit of approximately $13 million, and has a
working capital  deficiency.  These conditions raise substantial doubt about the
Corporation's  ability to continue  as a going  concern.  Management's  plans in
regard to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments to reflect the possible future effects
on  the   recoverability  and  classification  of  assets  or  the  amounts  and
classification  of  liabilities  that  may  result  from  the  outcome  of  this
uncertainty.

                                          ERNST & YOUNG LLP

Raleigh, North Carolina
February 10, 2000,
except for Note 11, as to which the date is
February 29, 2000

                                       F-1

                                       44
<PAGE>

                             DIVOT GOLF CORPORATION

                           CONSOLIDATED BALANCE SHEET

                                                          December 31,
                                                    --------------------------
                                                        1999          1998
                                                    ------------  ------------

                      ASSETS

Current assets:
  Cash............................................. $    174,492  $        568
  Trade accounts receivable, net...................       82,608           --
  Accounts receivable from related parties.........      114,332       155,362
  Prepaid expenses and other current assets........      288,442           --
                                                    ------------  ------------
    Total current assets...........................      659,874       155,930
Furniture and equipment at cost:
  Furniture and equipment..........................       94,850       114,366
  Less accumulated depreciation ...................      (22,827)      (16,843)
                                                    ------------  ------------
                                                          72,023        97,523
Other assets.......................................      136,425           --
                                                    ------------  ------------
    Total assets................................... $    868,322  $    253,453
                                                    ============  ============
       LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
  Accounts payable................................. $  1,210,614  $    914,216
  Accrued expenses.................................    1,562,666     1,252,127
  Accrued compensation and payroll.................    5,328,122       188,708
  Amounts due to related parties...................       60,500        34,000
  Dividends payable................................    1,730,000       730,000
  Notes payable....................................    3,392,504     1,717,504
  Notes payable to related parties.................      661,800       410,000
                                                    ------------  ------------
    Total current liabilities......................   13,946,206     5,246,555
Other liabilities..................................          --        200,000
Commitments and Contingencies (Note 10)
Shareholders' deficit:
  Convertible  Preferred Stock,  $.001 par value;  1,000,000 shares  authorized;
   286,835 and 287,025  shares  issued and  outstanding  (aggregate  liquidation
   preference of $5,585,000 and $5,775,000) at December 31, 1999 and 1998,

   respectively....................................          287           287
  Common Stock, $.001 par value; 200,000,000 shares
   authorized; 13,753,642 and 4,410,041 shares
   issued and outstanding at December 31, 1999 and
   1998, respectively..............................       13,754         4,410
  Additional paid-in capital.......................   42,523,558    41,722,902
  Accumulated deficit..............................  (55,404,546)  (46,709,764)
  Convertible Preferred Stock held in treasury,
   281,250 shares..................................     (210,937)     (210,937)
                                                    ------------  ------------
    Total shareholders' deficit....................  (13,077,884)   (5,193,102)
                                                    ------------  ------------
    Total liabilities and shareholders' deficit.... $    868,322  $    253,453
                                                    ============  ============



                             See accompanying notes.

                                       F-2

                                       45
<PAGE>

                             DIVOT GOLF CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                     Year Ended December 31,
                                                     -------------------------
                                                        1999          1998
                                                     -----------  ------------

Operating revenues:
  Golf product revenues............................. $       --   $  6,036,983
  Internet related revenues.........................     130,860           --
                                                     -----------  ------------
    Total operating revenues........................     130,860     6,036,983
Operating expenses:
  Cost of golf product revenues.....................         --      3,841,147
  Cost of internet related revenues.................     487,812           --
  General and administrative expenses...............   5,951,452     6,715,625
  Depreciation and amortization expense.............       5,986       270,844
                                                     -----------  ------------
    Total operating expenses........................   6,445,250    10,827,616
                                                     -----------  ------------
                                                      (6,314,390)   (4,790,633)
Other income (expense):
  Interest expense -- contractual...................    (167,824)     (635,926)
  Amortization of debt discount on convertible
   debentures.......................................         --     (2,835,559)
  Loss on investments...............................         --     (6,958,750)
  Write down of assets..............................         --       (705,609)
  Gain on sale of golf course.......................         --        523,799
  Interest and other income.........................         560       135,755
  Litigation settlement expense.....................    (982,917)     (740,004)
  Other expense.....................................    (230,211)          --
                                                     -----------  ------------
                                                      (1,380,392)  (11,216,294)
                                                     -----------  ------------
  Net loss.......................................... $(7,694,782) $(16,006,927)
                                                     -----------  ------------
Basic and diluted loss per common share............. $     (1.03) $      (4.78)
                                                     ===========  ============
Weighted average number of common shares
 outstanding........................................   8,469,500     3,641,700
                                                     ===========  ============



                             See accompanying notes.

                                       F-3

                                       46
<PAGE>

                             DIVOT GOLF CORPORATION

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT


<TABLE>
<CAPTION>

                                                                                           Convertible
                                            Convertible                                     Preferred
                          Common Stock    Preferred Stock    Additional                   Treasury Stock
                       ------------------ ------------------   Paid-in    Accumulated   -------------------
                         Shares   Amount   Shares    Amount    Capital      Deficit      Shares    Amount       Total
                      ---------- ------- ---------  ------- -----------  ------------   --------  ---------     -------
<S>                   <C>         <C>      <C>      <C>     <C>         <C>             <C>       <C>           <C>

Balance at December
 31, 1997.............  2,842,167 $ 2,842   283,170   $  283 $32,083,757  $(29,285,060) (281,250) $(210,937)$  2,590,885
Net loss..............        --      --        --       --          --    (16,006,927)      --         --   (16,006,927)

Issuance of Warrants
 in connection with
 issuance of debt.....        --      --        --       --    1,907,328           --        --         --      1,907,328

Issuance of Common
 Stock in connection
 with a private
 placement............    551,933     552       --       --    1,431,346           --        --         --      1,431,898

Issuance of Preferred
 Stock in connection
 with acquisition.....        --      --      3,000        3   2,999,997           --        --         --      3,000,000

Issuance of Preferred
 Stock in connection
 with a private
 placement............        --      --      1,020        1   1,019,999           --        --         --      1,020,000

Accrued Preferred
 Stock dividends in
 arrears..............        --      --        --       --          --       (730,000)      --         --       (730,000)

Preferred Stock
 dividend --
  conversion
 discount.............        --      --        --       --      687,777      (687,777)      --         --            --
Issuance of Common
 Stock in connection
 with Warrant
 exercise.............     94,304      94       --       --          (94)          --        --         --            --
Issuance of Common
 Stock in connection
 with conversion of
 debentures...........    457,412     458       --       --    1,058,055           --        --         --      1,058,513

Issuance of Common
 Stock in connection
 with conversion of
 Preferred Stock......     46,429      46      (165)     --          (46)          --        --         --            --
Issuance of Common
 Stock for
 acquisitions.........    417,796     418       --       --      534,783           --        --         --        535,201
                       ---------- ------- ---------   ------ -----------  ------------  --------  ---------  -------------
Balance at December
 31, 1998.............  4,410,041 $ 4,410   287,025   $  287 $41,722,902  $(46,709,764) (281,250) $(210,937) $ (5,193,102)
Net loss..............        --      --        --       --          --     (7,694,782)      --         --     (7,694,782)

Issuance of Common
 Stock in connection
 with conversion of
 Preferred Stock......  1,293,601   1,294      (190)     --       (1,294)          --        --         --            --
Accrued Preferred
 Stock dividends in
 arrears..............        --      --        --       --                 (1,000,000)      --         --     (1,000,000)

Issuance of Common
 Stock in connection
 with settlement of
 litigation...........  8,050,000   8,050       --       --      801,950           --        --         --        810,000
                       ---------- ------- ---------   ------ -----------  ------------  --------  ---------   ------------
Balance at December
 31, 1999............. 13,753,642 $13,754   286,835   $  287 $42,523,558  $(55,404,546) (281,250) $(210,937)  $(13,077,884)
                       ========== ======= =========   ====== ===========  ============  ========  =========   ============

</TABLE>


                             See accompanying notes.

                                       F-4

                                       47
<PAGE>

                             DIVOT GOLF CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    Year Ended December 31,
                                                    -------------------------
                                                       1999          1998
                                                    -----------  ------------

Operating Activities

Net loss........................................... $(7,694,782) $(16,006,927)
Adjustments to reconcile net loss to net cash used
 in operating activities:
  Discount on convertible debentures...............         --      2,835,559
  Loss on investments .............................         --      6,958,750
  Loss on disposal of furniture and equipment......      40,378           --
  Issuance of shares in settlement of litigation...     810,000           --
  Depreciation and amortization....................       5,986       270,844
  Gain on sale of golf course......................         --       (523,799)
  Writedown of license, deposits and property and
   equipment.......................................         --        705,609
  Trade accounts receivable........................     (82,608)      352,018
  Accounts receivable from related parties.........      41,030         5,181
  Prepaid expenses and other assets................    (424,867)      133,780
  Accounts payable.................................     296,398       625,007
  Accrued expenses and other liabilities...........     110,539       743,039
  Accrued compensation.............................   5,139,414           --
  Amounts due to related parties...................      26,500        34,000
                                                    -----------  ------------
Net cash used in operating activities..............  (1,732,012)  (3,866,939)
                                                    -----------  ------------
Investing Activities

Payments for intangible assets.....................         --            --
Purchases of property and equipment, net...........     (20,864)   (2,245,966)
Change in restricted cash..........................         --        135,019
Proceeds from sale of subsidiaries.................         --      1,875,913
                                                    -----------  ------------
Net cash used in investing activities..............     (20,864)     (235,034)
                                                    -----------  ------------
Financing Activities

Proceeds from borrowings...........................   1,675,000     1,717,504
Payments on borrowings.............................         --     (4,065,328)
Proceeds from notes payable to related parties.....     251,800       410,000
Proceeds from issuance of common stock.............         --      1,967,099
Proceeds from sale of convertible preferred stock,
 net...............................................         --      4,020,000
                                                    -----------  ------------
Net cash provided by financing activities..........   1,926,800     4,049,275
                                                    -----------  ------------
Increase (decrease) in cash........................     173,924       (52,698)
Cash at beginning of year..........................         568        53,266
                                                    -----------  ------------
Cash at end of year................................ $   174,492  $        568
                                                    -----------  ------------
Supplemental Disclosure of Cash Flow Information

Cash paid during the period for interest........... $       --   $    463,643
                                                    ===========  ============



                             See accompanying notes.

                                       F-5

                                       48
<PAGE>

                             DIVOT GOLF CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1999

1. BUSINESS OF THE COMPANY, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
   POLICIES

  Divot  Golf  Corporation  ("the  Company")  is  engaged  in  the  development,
licensing and marketing of golf-related  businesses.  Additionally,  the Company
plans to reposition itself by providing specialized e-commerce  applications and
providing essential distribution services and on-line marketing solutions to the
travel industry worldwide.

  As of December 31, 1999, the Company has a net working  capital  deficiency of
$13,286,332  and a  shareholders'  deficit of  $13,077,884.  The Company has had
recurring  net  losses,  pending  litigation  and is not  generating  sufficient
revenues from its  operations to fund its  activities and therefore is dependent
on additional financing from external sources.  These factors among others raise
substantial  doubt about the Company's  ability to continue as a going  concern.
The consolidated financial statements do not include any adjustments relating to
the  recoverability  and  classification  of liabilities that might be necessary
should the  Company be unable to  continue  as a going  concern.  The Company is
actively  working  to  raise  additional  equity  and  debt  financing  and,  if
successful, management believes that the Company will have adequate resources to
continue to meet its current  debt  obligation,  fund capital  improvements  and
expand and develop its  businesses.  There is no assurance that such  additional
funding will be completed and the inability to obtain such financing  would have
a material adverse effect on the Company.

 Principles of Consolidation

  The consolidated  financial statements include the accounts of the Company and
all wholly and majority-owned  subsidiaries.  All material intercompany accounts
and transactions are eliminated in consolidation.

 Furniture and Equipment

  Furniture  and  equipment is recorded at cost.  Depreciation  on furniture and
equipment  begins  when the  assets are placed  into  service  and is charged to
operations  over the  estimated  useful  lives  of the  assets  (3 to 5  years),
utilizing  the  straight-line   method  for  financial  reporting  purposes  and
accelerated methods for tax purposes.

 Other Assets

  Other assets  consist  primarily of financing  costs and an option to purchase
assets of Orbit Network,  Inc.  (Note 9). Costs incurred in obtaining  long-term
debt  obligations  are  capitalized  at cost and amortized over the lives of the
respective loans.

 Cash and Cash Equivalents

  The Company considers highly liquid, short-term investments with a maturity of
three months or less when purchased to be cash equivalents.

 Revenues

  Revenues  for  product  related  sales,  net of  allowance  for  returns,  are
recognized at the time merchandise is shipped to the customer.

  Internet related  revenues are derived from  development of Internet  services
including creating,  hosting and maintaining Web sites,  informational listings,
banner advertising and transactions including fees for online brochure ordering.
Certain  advertising  contracts  include  guarantees  of  a  minimum  number  of
impressions.  To the extent  minimum  guaranteed  impressions  are not met,  the
Company defers revenue  recognition  until the guaranteed  impression levels are
achieved.  Contract  terms  range  from  one  to  twelve  months.  Revenues  are
recognized ratably over the term of each contract.

                                       F-6

                                       49
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


 Stock Based Compensation

  On January 1, 1996,  the company  adopted  Statement of  Financial  Accounting
Standards No. 123,  Accounting for Stock-Based  Compensation  ("FAS 123"), which
requires  companies to  recognize  as expense the fair value of all  stock-based
awards on the date of grant,  or continue to apply the  provisions of Accounting
Principles  Board Opinion No. 25 ("APB 25") and provide pro forma net income and
pro forma earnings per share  disclosures for employee stock option grants as if
the fair-value-based method defined in FAS 123 had been applied. The Company has
elected to continue to apply the  provisions of APB 25 and provide the pro forma
disclosure provisions of FAS 123 (See Note 7, "Stock Options").

 Advertising Expense

  The cost of advertising is expensed as incurred.  The Company  incurred $4,000
and $100,000 in  advertising  costs during the years ended December 31, 1999 and
1998, respectively.

 Use of Estimates

  The  preparation  of the financial  statements in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

 Concentration of Credit Risk

  The Company's primary financial instrument subject to potential  concentration
of credit risk is trade accounts  receivable  which are  unsecured.  The Company
provides an allowance for doubtful accounts based on its analysis of potentially
uncollectible  accounts.  The Company's trade receivables arise principally from
the  development  of Internet  related  services.  As of December 31, 1999,  the
Company had no  significant  concentrations  of credit risk with any  individual
customers.

 Net Loss Per Share

  In  1997,  the  Financial  Accounting  Standards  Board  issued  Statement  of
Financial  Accounting Standards No. 128, Earnings per Share ("FAS 128"). FAS 128
replaced the  calculation  of primary and fully diluted  earnings per share with
basic and diluted earnings per share.  Unlike primary earnings per share,  basic
earnings  per share  excludes  any  dilutive  effects of options,  warrants  and
convertible  securities.  Diluted  earnings  per  share is very  similar  to the
previously  reported  fully diluted  earnings per share.  All earnings per share
amounts  for  all  periods  have  been  presented  to  conform  to the  FAS  128
requirements.  Stock  options,  warrants  and  the  convertible  debentures  are
considered   anti-dilutive   and  therefore   have  not  been  included  in  the
computation.

 Long Lived Assets

  Impairment losses are recognized when expected future cash flows are less than
the assets'  carrying  value.  Accordingly,  when  indicators of impairment  are
present,  the Company evaluates the carrying value of furniture and equipment in
relation to the operating  performance and future undiscounted cash flows of the
underlying  business.  The Company  adjusts the net book value of the underlying
assets if the sum of expected future cash flows is less than book value.

                                       F-7

                                       50
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 Fair Value of Debt

  The Company  estimates that the fair value of notes payable  approximates  the
carrying  value based upon its effective  current  borrowing  rate for debt with
similar terms and remaining maturities. Disclosure about fair value of financial
instruments is based upon information available to management as of December 31,
1999.  Although  management is not aware of any factors that would significantly
affect the fair value of amounts,  such  amounts  have not been  comprehensively
revalued for purposes of these financial statements since that date.

 Comprehensive Income

  In June 1997, the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 130, Reporting  Comprehensive  Income ("FAS
130"). FAS 130 requires that total comprehensive income and comprehensive income
per share be  disclosed  with equal  prominence  as net income and  earnings per
share.  Comprehensive  income is  defined as  changes  in  stockholders'  equity
exclusive  of  transactions  with  owners  such  as  capital  contributions  and
dividends. The Company adopted this Standard in 1998. The Company did not report
any items of other comprehensive income in any of the years presented.

 Segment Reporting

  Effective  January  1,  1998,  the  Company  adopted  Statement  of  Financial
Accounting  Standards No. 131,  Disclosure  about  Segments of an Enterprise and
Related  Information  ("FAS  131"),  which  superceded  Statement  of  Financial
Accounting  Standards  No. 14,  Financial  Reporting  for  Segments  of Business
Enterprise.   FAS  131  establishes   standards  for  the  public  reporting  of
information about operating segments in annual financial statements and requires
that those enterprises  report selected  information about operating segments in
interim financial reports.  Since the Company only operates in one segment,  the
adoption of FAS 131 did not affect the Company's net loss or financial position.

 Impact of Recently Issued Accounting Standards

  In June 1998, the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and  Hedging  Activities  ("FAS  133").  FAS 133  establishes  a new  model  for
accounting  for  derivatives  and  hedging  activities  and  supercedes  several
existing standards.  FAS 133, as amended by FAS 137, is effective for all fiscal
quarters of fiscal years  beginning  after June 15,  2000.  The Company does not
expect  that  the  adoption  of FAS  133  will  have a  material  impact  on the
consolidated financial statements.

2. NOTES PAYABLE

  Notes payable consists of the following at December 31:

                                                            1999       1998
                                                         ---------- ----------

Unsecured convertible 7% and 9% debentures due at
 various dates in 2000, principal and interest payable
 at maturity, unless converted into common stock........ $1,675,000 $      --
Unsecured 7% notes payable due January 1999, principal
 and interest payable at maturity.......................  1,527,500  1,527,500
Other notes payable.....................................    190,004    190,004
                                                         ---------- ----------
                                                         $3,392,504 $1,717,504
                                                         ========== ==========




                                       F-8

                                       51
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Notes payable to related parties consists of the following at December 31:

                                                               1999     1998
                                                             -------- --------

Unsecured 6% notes, with principal and interest payable on
 demand..................................................... $410,000 $410,000
Unsecured 12% note to former employee due March 2000, with
 principal and interest payable at maturity.................  225,000      --
Other notes payable.........................................   26,800      --
                                                             -------- --------
                                                             $661,800 $410,000
                                                             ======== ========



Convertible Debentures

  During November 1997, the Company issued $2,269,995 of convertible  debentures
payable on December  31,  1998.  The holders of the  debentures  are entitled to
convert the  debentures  into common stock of the Company at a conversion  price
equal to the  lesser of (i) $2.55 per share or (ii) 70% of the  average  closing
bid of the common stock  during the last five trading days prior to  conversion.
The debentures accrue interest, payable quarterly commencing March 1, 1998, at a
rate of 5% per annum. If the Company does not file a Registration Statement with
the  Securities  and Exchange  Commission  ("SEC") to register  securities  in a
public  offering within 120 days from November 18, 1997, the interest rate shall
increase to 18% per annum. If the Effective Date of the  Registration  Statement
has not occurred by the 180th day after  November  18,  1997,  then the interest
rate shall  further  increase to 24% per annum  until the  Effective  Date.  The
accrued  interest is  convertible  into common  stock of the Company at the same
conversion price as the debenture principal. In any event, each holder cannot as
a  result  of such  conversions  beneficially  own more  than  4.99% of the then
outstanding  common stock.  In the event that the debenture  holder  proposes to
convert all or any portion of the principal  and interest at a conversion  price
of less than $0.05,  the Company shall have the option to redeem all or any part
of the amount  proposed to be  converted  at a  redemption  price of 125% of the
amount of the principal and interest proposed to be converted.

  As of December 31, 1997,  $1,259,346  of the  debentures'  principal  had been
converted  into  shares of  common  stock,  leaving  $1,010,649  of  convertible
debentures outstanding.

  During the year ended  December  31, 1998,  the  remaining  $1,010,649  of the
debentures were converted into 457,412 shares of common stock,  which equated to
$1,058,513 in equity,  including  accrued  interest on discount,  net of finance
fees.

  During  1998,  the  Company  issued $3 million  of  convertible  notes.  These
convertible  notes were secured by a subordinated  pledge of the common stock of
Miller Golf,  Inc. (see Note 8), which matured on December 31, 1999, and accrued
interest at 7% per annum, payable quarterly beginning on July 1, 1998. The notes
were  convertible  into shares of the  Company's  common  stock at the lesser of
$7.50 per share or 75% of the  average  closing  bid price of the  common  stock
during the last five  trading days prior to  conversion.  The  convertible  note
holders  also  received  warrants to purchase  98,182  shares of common stock at
$7.50 per share.  On May 31 and June 9, 1998,  the holders of these  convertible
debentures and warrants  exchanged the debt and warrants for 3,000 shares of the
Company's 7% Cumulative  Convertible  Preferred  Stock  ("Preferred  Stock") and
warrants to purchase  approximately 133,000 shares of the Company's common stock
at $15.00 per share, exercisable for three years from the date of issuance.

  From October through December of 1999, the Company issued $1,675,000 of 7% and
9%  convertible   debentures  maturing  at  various  dates  through  June  2000.
Immediately upon the closing of a merger  transaction  between  OrbitTravel.com,
Inc., a wholly owned  subsidiary,  and the Company,  the debenture holders shall
automatically  convert all  principal  and  interest  into  common  stock of the
Company at a fixed  conversion  price of $.50 per common share. In the event the
merger has not occurred by the maturity date, all principal and unpaid

                                       F-9

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

interest  shall be payable on demand.  If, by the maturity  date, the conversion
has not taken place or the  principal  and interest  have not been  repaid,  the
interest  rate  attributable  to the  principal  sum  shall  continue  to accrue
thereafter  at a rate of 12% per annum.  Certain  debenture  agreements  contain
covenants  which require the Company to perform a reverse split of not less than
fifteen  shares of the  Company's  common  stock for one share of common  stock.
Certain   debenture   agreements   also  contain   additional   terms  including
registration rights and default provisions.

Notes Payable

  During July and August of 1998, the Company issued  $1,527,500 of unsecured 7%
notes  maturing in January 1999.  The Company is in default on these notes as of
December 31, 1999.  In  connection  with the issuance of the notes,  the Company
issued warrants to purchase  1,222,000  shares of common stock of the Company at
$1.25 per share.  The warrants are  exercisable for a period of three years from
the date of issuance.  The estimated fair value of these  warrants,  $1,793,328,
has been recorded as paid-in-capital.

3. LEASES

  The Company rents office space under operating  leases which expire at various
times through 2000. Total rent expense for the Company was approximately $32,000
and $388,000 for the years ended December 31, 1999 and 1998, respectively.

4. RELATED PARTY TRANSACTIONS

  The Company funded expenses on behalf of certain entities  affiliated  through
common  ownership.  Accounts  receivable  from related parties were $114,332 and
$155,362  at  December  31, 1999 and 1998,  respectively.  The  Company  expects
payment of the amount  outstanding  at December  31, 1999 within the next twelve
months; accordingly, the amounts are classified as current assets.

  In January 2000, the Company executed three settlement  agreements relating to
1999 and 1998  employment  contracts  with a former  employee and two executives
currently  employed by the Company.  The Company  agreed to pay $425,000  during
2000 and issue  36,133,333  shares of common  stock that the Company  expects to
issue in the first  quarter of 2000.  The Company  recorded an  additional  $4.7
million of  compensation  expense in the  Statement of  Operations  for the year
ended December 31, 1999 and has accrued $5.1 million in accrued  compensation at
December 31, 1999 for these settlement agreements.

5. INCOME TAXES

  Under Financial  Accounting  Standards Board Statement No. 109, Accounting for
Income Taxes, the liability method is used in accounting for income taxes. Under
this  method,  deferred  tax  assets and  liabilities  are  determined  based on
differences  between financial reporting and tax bases of assets and liabilities
and are  measured  using the  enacted  tax rates and laws that will be in effect
when the differences are expected to reverse.

                                      F-10

                                       52
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial  reporting purposes
and the amounts  used for income tax  purposes.  Significant  components  of the
Company's deferred tax liabilities and assets are as follows:

                                                            DECEMBER 31,
                                                      -------------------------
                                                         1999          1998
                                                      -----------  ------------

Deferred tax liabilities:
  Tax over book depreciation and amortization........ $       --    $       --
                                                      -----------  ------------
                                                      $       --    $       --
                                                      ===========  ============

Deferred tax assets:
  Book over tax depreciation and amortization........ $       --   $    130,000
  Net operating loss carryforwards...................  11,850,000     8,000,000
  Loss on forfeiture.................................      80,000     1,920,000
  Legal contingency..................................     530,000       436,000
  Other..............................................         --          4,000
                                                      -----------  ------------
Total deferred tax assets............................  12,460,000    10,490,000
                                                      ===========  ============
Valuation allowance for deferred tax assets.......... (12,460,000)  (10,490,000)
                                                      ===========  ============
Net deferred tax assets..............................         --            --
                                                      ===========  ============
Net deferred taxes                                    $       --    $       --
                                                      ===========  ============



  At December 31, 1999, the Company has a net operating loss carryforward of $29
million  which will begin to expire in the year 2007.  Given the  changes in the
business and  ownership,  management  believes it is highly  unlikely that $11.1
million of the net operating loss will be available to offset future losses. The
tax  benefits of these items are  reflected  in the above table of deferred  tax
assets and  liabilities.  U.S.  tax rules impose  limitations  on the use of net
operating  losses  following  certain changes in ownership.  If a change were to
occur,  the  limitation  could reduce the amount of these benefits that would be
available to offset future taxable  income each year,  starting with the year of
ownership change.

  The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense is:



                                                          DECEMBER 31,
                                                     ------------------------
                                                        1999         1998
                                                     -----------  -----------

Income tax benefit at U.S. statutory rate........... $(1,730,000) $(5,153,000)
Amortization and write-off of goodwill..............         --       105,000
State tax benefit, net..............................    (250,000)    (736,000)
Interest expense for which no tax benefit was
 provided...........................................         --       176,000
Excess compensation.................................     953,000          --
Other items.........................................       3,900       12,100
Change in valuation allowance.......................   1,023,100    5,595,900
                                                     -----------  -----------
Tax expense......................................... $       --   $       --
                                                     ===========  ===========




                                      F-11

                                       53
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. SHAREHOLDERS' DEFICIT

  Effective  June 2, 1998,  the Company  increased  the number of common  shares
authorized  from 50 million to 200  million.  During  1998,  the Company  issued
551,933  shares of common  stock with a value of  $1,431,898,  of which  501,933
shares were issued to accredited  investors in a private placement  offering for
proceeds of $1,014,969  and 50,000 shares,  with a fair value of $422,000,  were
issued in  connection  with the  issuance of notes  payable.  In  addition,  the
Company  issued  417,796  shares of common  stock  with a value of  $535,201  in
connection with acquisitions. The value of the issued stock was determined based
on the fair market value of the Company's stock on the date of the transaction.

  During 1998, the Company closed on 68 units of private placement  offerings of
7% Cumulative Convertible Preferred Stock ("Preferred Stock") for $1,020,000. In
addition,  the  Company  issued 200 units of  private  placement  offerings  for
$3,000,000,  in exchange for  $3,000,000 of convertible  debentures  obtained in
1998 in order to finance  the  Miller  acquisition  (see Note 8). The  Preferred
Stock was offered in units of 15 Preferred Shares, with each such share having a
liquidation value of $1,000 and 667 warrants, for a price of $15,000 per unit.

  In connection  with the sale and issuance of the Preferred  Stock in 1998, the
Company issued warrants,  exercisable immediately, to purchase 178,756 shares of
common stock of the Company at $15.00 per share for a period of three years from
the date of issuance.

  The holders of the Preferred  Stock are entitled to a cash  dividend  equal to
$180 per share payable quarterly  commencing April 1, 1998, although the Company
has the option to utilize shares of its common stock, under certain  conditions,
to satisfy the dividend requirement.  The purchaser has the right to convert the
Preferred  Stock  immediately  into a number of shares of the  Company's  common
stock equal to $1,000 per share of  Preferred  Stock  divided by the  Conversion
Price.  The  Conversion  Price  means the lesser of (1) $10.50 or (2) 75% of the
average of the closing bid price of a share of the Company's common stock during
the ten trading days prior to such  conversion  provided that the holder can not
as a result of such  conversion  beneficially  own more  than  4.99% of the then
outstanding  common stock. In the event the Conversion  Price falls below $7.50,
the  Company  may  redeem,  at $1,250  per share  plus any  accrued  but  unpaid
dividends,  all (but not any  part)  of  shares  proposed  to be  converted.  In
conjunction  with the discount  allowed on the conversion of the Preferred Stock
into common stock, the Company has recorded dividends of $687,777. The Preferred
Stock does not carry any voting  rights.  As of December 31, 1999,  393 units of
Preferred  Stock had been sold.  The Company  recorded  preferred  dividends  in
arrears of $1,000,000 and $730,000,  or $.07 and $.16 per share of common stock,
during 1999 and 1998, respectively.

  As of  December  31,  1999,  warrants  to  purchase  4,002,332  shares  of the
Company's  common stock were  outstanding.  These warrants have exercise  prices
ranging from $2.55 to $36.00 per share;  66,667 warrants expire January 20, 2000
(exercise  prices range from $11.25 to $22.50);  60,000 warrants expire June 30,
2000 (exercise price equals $36.00 per share);  16,667 warrants expire September
28, 2000  (exercise  price equals  $36.00 per share);  908,438  warrants  expire
November 18, 2000  (exercise  price equals $2.55 per share or 70% of the average
closing  bid of the  common  stock  during the last five  trading  days prior to
conversion);  1,002,742 warrants expire November 18, 2000 (exercise price equals
$5.10 per share or 70% of the average closing bid of the common stock during the
last five trading days prior to conversion); 264,000 warrants expire December 3,
2000 (exercise  price equals $15.00 per share);  56,667  warrants expire January
28, 2001 (exercise price equals $3.00 per share);  181,818 warrants expire April
2, 2002 (exercise  price equals $6.00 per share);  and 223,333  warrants  expire
January  28,  2003  (exercise  prices  range  from  $2.81 to $3.00  per  share);
1,222,000  warrants  expire from July 14, 2001 through  July 30, 2001  (exercise
price equals $15.00 per share).

  Subsequent to March 22, 1999,  the Company's  common stock was de-listed  from
the Nasdaq SmallCap Market as a result of the Company's  failure to meet various
listing requirements.

                                      F-12

                                       54
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Loss per Share

  The following table sets forth the  computation of basic and diluted  earnings
per share in accordance with Statement No. 128, Earnings per Share:

                                                           December 31
                                                     -------------------------
                                                        1999          1998
                                                     -----------  ------------

   Numerator:
     Net loss......................................  $(7,694,782) $(16,006,927)
     Accrued preferred stock dividends in arrears..   (1,000,000)     (730,000)
     Preferred stock dividends--conversion
      discount.....................................          --       (687,777)
                                                     -----------  ------------
     Numerator for basic and dilutive earnings per
      share--income available to common
      stockholders.................................  $(8,694,782) $(17,424,704)
   Denominator:
     Denominator for basic and diluted earnings per
      share--weighted-average shares...............    8,469,500     3,641,700
                                                     -----------  ------------
     Basic and diluted loss per share..............  $     (1.03) $      (4.78)
                                                     ===========  ============



  The following number of potentially convertible shares of common stock related
to convertible  preferred stock,  convertible  debentures,  warrants,  and stock
options are as follows at:

                                                      December 31, December 31,
                                                          1999         1998
                                                      ------------ ------------

For conversion of convertible preferred stock........  48,136,178   30,422,758
For conversion of convertible debentures.............   4,290,000          --
Outstanding warrants.................................   4,002,332    4,012,332
Outstanding stock options............................         --       818,500
Possible future issuance under stock option plan.....   1,600,000      781,500
                                                       ----------   ----------
  Total shares potentially convertible...............  58,028,510   36,035,090
                                                       ==========   ==========



  As of December 31, 1999, the Company had 128,217,848  common shares  available
to be issued.

7. STOCK OPTIONS

Stock Option Plan

  On June 3, 1994,  the Board of Directors and the  stockholders  of the Company
adopted the Brassie  Golf  Corporation  1994 Stock Option and  Restricted  Stock
Purchase Plan (the "1994 Stock Option Plan") as an incentive for key  employees.
The purchase  price for any Stock Awards and the exercise  price for any Options
may not be less than the fair market  value for the common  stock on the date of
grant.  Unless otherwise  agreed between the grantee and the Company,  the Stock
Awards  and  Options   expire  90  days  after   termination  of  the  grantee's
relationship  with the  Company.  The 1994 Stock  Option Plan  provides  that an
aggregate of 100,000 shares be reserved for future issuance.

  During  April 1998,  the Board of  Directors  and  shareholders  approved  the
formation of the Divot Golf Corporation 1998 Stock Option Plan (the "1998 Plan")
for the  purpose of  attracting  and  retaining  certain  key  employees  of the
Company.  The 1998 Plan provides that an aggregate of 1,500,000 of the Company's
authorized  shares be  reserved  for  future  issuance.  In the case of  initial
grants,  the exercise  price will be fixed by the Board of Directors on the date
of grant.

                                      F-13

                                       55
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  On May 22, 1998,  the Company issued a total of 16,000 options to employees of
the Company  under the 1994 Stock Option Plan.  These  options vest over a three
year period and have an exercise  price of $2.55 per share,  which  approximates
the fair value of the stock price on the date of grant.

  On June 15, 1998, the Company issued a total of 733,333 options with immediate
vesting to certain  officers  and key  employees  of the Company  under the 1998
Plan.  These options have an exercise  price of $2.81 per share which equals the
fair value of the stock price on the date of grant.  On September  2, 1998,  the
Company  issued a total of 240,000  options  with  immediate  vesting to certain
officers and key  employees of the Company  under the 1998 Plan.  These  options
have an exercise price ranging from $1.50 to $2.81 per share,  which exceeds the
fair value of the stock price on the date of grant.

  On  September  3,  1998,  the  Company  issued a total of  69,167  options  to
employees and consultants to the Company under the 1998 Plan. These options vest
over a three year  period and have an exercise  price of $2.81 per share,  which
exceeds the fair value of the stock price on the date of grant.

Options Outstanding, Common Stock

                                                          Options Outstanding

                                                          ----------------------
                                                                        Weighted

                                                Shares                  Average
                                              Available     Number     Exercise
                                              For Grant   Of Shares      Price
                                              ----------  -----------  ---------

Balances at December 31, 1997................     60,383       39,617   $  2.90
  1998 Plan adopted..........................  1,500,000          --        --
  Options granted............................ (1,058,500)   1,058,500     $2.77
  Options forfeited..........................    279,617     (279,617)    $2.67
  Options exercised..........................        --           --        --
                                              ----------  -----------   -------
Balances at December 31, 1998................    781,500      818,500     $2.81
                                              ----------  -----------   -------
  Options granted............................        --           --        --
  Options forfeited..........................    818,500     (818,500)    $2.81
  Options exercised..........................        --           --        --
                                              ----------  -----------   -------
Balances at December 31, 1999................  1,600,000          --      $ --
                                              ==========  ===========   =======



  The weighted average fair values of options granted during 1998 were $1.63. No
options  were  granted  during  1999.  The  estimated  fair value of each option
granted  is  calculated  using  the  Black-Scholes   option-pricing  model.  The
weighted-average assumptions used in the model were as follows:

                                                                            1998

                                                                           ----

Risk-free interest rate................................................... 5.11%
Expected years until exercise.............................................    3
Expected stock volatility................................................. 1.19
Dividend yield............................................................    0%



                                      F-14

                                       56
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Since the stock  options  granted  during 1998 had exercise  prices which were
greater  than or  equal to the fair  value  of the  common  stock on the date of
grant, no compensation  expense was recognized  during 1998. The following table
reflects  pro forma net loss had the  Company  elected  to adopt the fair  value
approach of FAS 123:

                                                         1999          1998
                                                      -----------  ------------

Net loss:
  As reported........................................ $(7,694,782) $(16,006,927)
  Pro forma..........................................  (7,458,336)  (16,243,370)
Diluted loss per share:
  As reported........................................ $     (1.03) $      (4.78)
  Pro forma..........................................       (1.00)        (4.85)



  These pro forma amounts may not be representative of future  disclosures since
the  estimated  fair value of stock  options is  amortized  to expense  over the
vesting period, and additional options may be granted in future years.

8. LOSS ON INVESTMENTS

  On April 8, 1998,  the Company  completed its $4.3 million  acquisition of all
the  issued  and  outstanding  stock  of  Miller  Golf,  Inc.  ("Miller").  This
transaction  was  accounted  for using the purchase  method of  accounting  with
results of operations of Miller  included in the Company's  operations  from the
date of acquisition. The Company recorded the acquired assets and liabilities at
their estimated fair value. The excess of the purchase price over the fair value
of net assets  acquired was recorded as goodwill.  The Miller stock was acquired
from its  shareholders  for a  combination  of $3 million in cash, $1 million in
notes  payable to the sellers and 53,333  shares of the  Company's  common stock
which,  in the  aggregate,  had a fair  market  value of $300,000 at the date of
closing. The sellers' notes were paid in full on September 16, 1998.

  Prior to the  acquisition  of Miller,  a $2 million line of credit was entered
into between Miller and a financial institution. This line of credit was secured
by Miller's assets and included  certain  covenants.  Miller violated a covenant
prohibiting  Miller from paying more than $100,000 in dividends or  intercompany
advances by  advancing  the company  $500,000 in 1998.  In 1999,  the  financial
institution  sold the debt to a third  party  who  foreclosed  on the  Company's
interest in Miller. Since the default occurred during 1998, the assets of Miller
were  written  off as of  December  31,  1998.  The  Company  recorded a loss of
approximately  $3.8  million  in  connection  with  this  foreclosure,  which is
reflected in loss on investments in the 1998 consolidated financial statements.

  On April 15, 1998,  the Company  completed its $500,000  stock  acquisition of
Divot Golf Subsidiary,  Inc. ("DGS"), which was accounted for using the purchase
method of accounting.  Accordingly, the Company recorded the acquired assets and
liabilities at their  estimated fair value.  The DGS stock was acquired from its
sole  shareholder,  Joseph R. Cellura,  who serves as Director,  Chairman of the
Board, and Chief Executive Officer of the Company.  The purchase price consisted
of a combination of (i) $300,000 in cash and (ii) a short term  promissory  note
in the principal amount of $200,000 (the "Note"). The Note provides for interest
accruing at 6% per annum,  payable  quarterly  beginning June 30, 1998. The Note
was paid in full as of September 30, 1998.  The assets of DGS included its name,
certain  patent and  licensing  rights,  and molds for  producing a divot repair
tool. When Miller's assets were seized due to the foreclosure, the assets of DGS
were also seized.  Therefore,  the assets of DGS were written off as of December
31, 1998. Since no activity  occurred in DGS prior to the seizure of its assets,
no operations have been recorded in the Company's statements of operations.  The
Company  recorded  a loss of  approximately  $500,000  in  connection  with this
seizure of assets,  which is included in the loss on  write-off  of  investments
line item in the 1998 consolidated financial statements.

                                      F-15

                                       57
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  On April 20, 1998,  the Company  completed its $136,879  acquisition of all of
the issued and outstanding  stock of Talisman Tools  Incorporated  ("Talisman"),
which was accounted for using the purchase  method of  accounting.  Accordingly,
the Company recorded the acquired assets and liabilities at their estimated fair
value.  The Talisman stock was acquired for a combination of (i) two short-term,
non-interest bearing promissory notes in the aggregate amount of $55,000 payable
on May 20, 1998 (ii) $46,875 of the Company's common stock (10,000 shares valued
at the date of  closing)  and (iii)  assumed  notes of  $35,004.  Talisman  is a
manufacturer  of  high-quality  greens  repair  tools.  The  assets of  Talisman
included  a  pending  patent  on the  specialized  divot  repair  tool  and  the
proprietary  process of  producing  the divot  repair  tool.  Subsequent  to the
purchase,  the Company was threatened to be sued for patent  infringement if the
Company  sold  products  based on the design of the repair tool that the Company
acquired as part of the Talisman  acquisition.  As a result,  the Company ceased
making payments on the loan to the sellers of Talisman.  The sellers of Talisman
sued  Divot for  failing  to pay them  consideration  still  due them  under the
acquisition  agreement.  The molds that the Company  acquired from Talisman were
ultimately  seized  as part of the  Miller  asset  foreclosure.  The  assets  of
Talisman were written off as of December 31, 1998. Since no activity occurred in
Talisman prior to the lawsuit and write-off of assets,  no operations  have been
recorded in the Company's statements of operations.  The Company recorded a loss
of approximately  $140,000 in connection with this write-off,  which is included
in loss on investments in the 1998 consolidated financial statements.

  During 1998,  the Company was  delinquent  on two loans payable to banks which
were secured by land.  During 1999, the loans were  foreclosed upon and the land
was seized by the banks.  Since the purported  event of default was in 1998, the
Company  wrote off the land as of December 31,  1998.  In  connection  with this
foreclosure, the Company recognized a loss of approximately $1,500,000, which is
included in loss on investments in the 1998 consolidated financial statements.

  The Company recorded approximately  $1,000,000 as a loss on investments in the
1998  consolidated  financial  statements for amounts spent on possible business
ventures which were aborted during 1998 as follows:

Divot-RFG Joint Venture, L.L.C. .................................... $  200,000
Mobilesuites........................................................    190,000
Tour Tavern.........................................................    150,000
Honma J.V. .........................................................    100,000
Other...............................................................    360,000
                                                                     ----------
                                                                      $1,000,000

                                                                     ==========



  Due to the aborted business interests during 1998, certain licenses,  deposits
and fixed assets were written off in the amount of $705,609 which represents the
net book value of the assets at December 31, 1998.  The loss is reflected in the
write down of assets line item in the 1998 consolidated financial statements.

9. ACQUISITION AND DISPOSITION OF ASSETS

  On April 2, 1998,  the Company sold its leasehold  interest in the golf course
assets at The Gauntlet at Curtis Park, a wholly owned subsidiary, for $5,400,000
of which approximately $4,800,000 was used to reduce the Company's debt. The net
realized gain on the sale of the golf course was approximately $524,000.

  On November 1, 1999,  the Company  entered into a right to use agreement  with
Orbit  Network,  Inc.  pursuant to which the Company paid $500,000 in cash for a
six-month right to use and operate Orbit Network's Global  Distribution  Systems
("GDS")  contracts with various travel agencies and tourism  organizations,  its
services  agreement with America OnLine and related furniture and equipment.  As
part of this right to use agreement,  the Company will operate the  "TravelFile"
website that provides travel suppliers and Internet users travel planning

                                      F-16

                                       58
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

services. The Company is entitled under the right to use agreement to retain any
revenues  for a  six-month  period  that may be  generated  from  these  GDS and
ancillary  contracts.  Also, as part of the right to use agreement,  the Company
paid  $100,000  (included in $500,000  paid  November 1, 1999) for the option to
purchase in its sole and absolute discretion the GDS and ancillary contracts and
related  furniture  and  equipment  for the  assumption of $5.1 million of Orbit
Network debt.  This purchase  option  expires on May 1, 2000,  unless  otherwise
extended.

10. COMMITMENTS AND CONTINGENCIES

  The Company has employment  agreements with certain of its executive officers,
the  terms of which  expire  at  various  times  through  June  24,  2006.  Such
agreements  provide for minimum salary levels,  as well as for incentive bonuses
which are payable if specified management goals are attained.  In addition,  the
Company is required to issue 18 million stock options to these executives during
2000 to purchase the  Company's  common stock at an exercise  price equal to the
fair  market  value at the date of  issuance.  Minimum  commitments  for  future
salaries,  excluding  bonuses,  by  year  and in the  aggregate  consist  of the
following at December 31, 1999:

2000................................................................. $  835,000
2001.................................................................    835,000
2002.................................................................    835,000
Thereafter...........................................................  1,957,000
                                                                      ----------
                                                                      $4,462,000

                                                                      ==========



  In connection with the Company's February 21, 1996 Agreement in Principle with
the Company's  three Pension Fund Partners,  definitive  agreements were reached
during the  second  quarter of 1996 with  regards to two of the  Company's  four
previously owned golf courses.  However,  the Company's efforts to interpret the
Agreement in Principle  and  negotiate  with EPI Pension Fund  regarding the two
other courses were unsuccessful.  On May 31, 1996, EPI Pension Fund commenced an
action against the Company claiming breach of contract,  specific performance, a
constructive  trust and temporary and permanent  injunctive relief. At a hearing
conducted on July 12,  1996,  the court issued a  preliminary  injunction  which
required  the Company to transfer  to EPI  Pension  Fund 45% of the  outstanding
equity in the Company's GLV and GMW  subsidiaries  whereby the Company  retained
30% of the outstanding  equity in each of these two subsidiaries and EPI Pension
Fund  owned  the  remaining  70%.  The  Company  filed an  appeal  brief to this
preliminary  injunction  on August 14,  1996.  The court  denied  this appeal on
February 11, 1997. The Company entered into a settlement  agreement with the EPI
Pension  Fund on October 15,  1997,  which  intended to resolve all  outstanding
issues  between  the Company and the EPI  Pension  Fund.  The Company  failed to
perform all of the Company's  obligations  under the  settlement  agreement.  On
February 10, 1998,  the court entered an order  directing the Company to perform
fully all of the Company's  obligations under the settlement  agreement prior to
February 24, 1998. At a hearing on March 26, 1998, the Company  offered  partial
performance  under the settlement  agreement which was taken under advisement by
the  court  and  opposing  counsel  and will be ruled  upon at a  hearing  to be
scheduled in the future.

  The Company  submitted a proposed  settlement to the EPI Pension Fund,  with a
$3,000 good faith deposit.  The terms of the proposed  settlement include a down
payment to be made within 30 days of executing the  settlement  documents with a
balloon  payment to be  delivered at the end of one year.  The deferred  payment
will be non-interest  bearing. The Company has requested that it be permitted to
prepay  the  settled  amount at a  discount.  The  Company  does not know if the
settlement  will be  secured.  A penalty  will be  imposed  upon  default on the
proposed  settlement  in addition to EPI  Pension  Fund's  rights to enforce the
original  judgment of $152,000.  The Company cannot be assured that the proposed
settlement  will be accepted  by the EPI Pension  Fund or that the terms will be
substantially similar to those disclosed above.

                                      F-17

                                       59
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  The Company is involved  in other  legal  proceedings  as a part of its normal
course of business.  Management does not believe that the ultimate resolution of
these matters will have a material impact on the Company's results of operations
or financial position in any quarterly or annual period.

11. SUBSEQUENT EVENTS

  On January 9, 2000,  OrbitTravel.com,  the Company's wholly owned  subsidiary,
executed  a  content  distribution  agreement  for a term of  three  years  with
AsiaGateway.com,  Ltd.  Under  the  terms of this  agreement,  the  Company  was
required to issue 200,000  shares of its common stock 30 days from the execution
of this  agreement.  As of February 16,  2000,  since the Company has not issued
such shares, either party may terminate this agreement.

  On January 27, 2000,  Spartan  Capital  Management,  LLC, a limited  liability
company  controlled  by one of the Company's  directors and executive  officers,
assigned to the Company its rights and  obligations  under an agreement dated as
of the same  date  pursuant  to which the  Company  purchased  the  intellectual
property  assets related to the  TravelFile  website  previously  owned by Orbit
Network  for  $60,000  in cash,  a note  payable  due in 2000 in the  amount  of
$540,000,  and the future issuance of 3,000,000  shares of the Company's  common
stock.  A creditor of Orbit  Network  acquired  these assets from Orbit  Network
through a judicial  foreclosure  proceeding on January 13, 2000. Under the terms
of the agreement,  the Company is required to pay two independent  contractors a
total of  $450,000  over three  years in exchange  for  professional  consulting
services to the Company.

  A holder of the  Company's  convertible  preferred  stock ("the  holder") paid
$97,915 on the  Company's  behalf  during 1998 to satisfy some of the  Company's
payroll  obligations  to  employees.  In full  satisfaction  of the  amounts the
Company owes to the holder and other  litigation  threatened by the holder,  the
Company  entered into a settlement  agreement  with the holder as of January 31,
2000  pursuant  to  which  the  Company  has  agreed  to  issue  to  the  holder
approximately  4.5 million  shares of the Company's  common stock and deliver to
the holder  specific items of personal  property owned by the Company and by the
Chairman and CEO of the Company.

  On January 31, 2000,  the Company  entered into an agreement  with  Wilhelmina
Artist  Management  LLC pursuant to which the Company  would  acquire all of the
outstanding     common    stock    of    its    wholly     owned     subsidiary,
WilhelminaTravelFile.com, in exchange for approximately 80 million shares of the
Company's  common stock.  Unless the  transaction  has closed,  either party may
terminate the Wilhelmina agreement at any time after February 15, 2000.

  On February 7, 2000, OrbitTravel.com executed a three-year consulting services
agreement and joint content agreement with Laspata/Decaro Studio Corporation, an
organization of designers and  photographers,  pursuant to which  Laspata/Decaro
would  provide  the  Company  with media  consulting  services  regarding  brand
building and  promotion.  In addition,  Laspata/Decaro  would  contribute  their
library of destination  images,  photography  and other content for use with the
Company's  TravelFile service.  Under the agreement,  the Company will issue 2.5
million   shares  of  the  Company's   common  stock  vesting  in  equal  annual
installments over the three-year term of the agreement. In addition, the Company
has verbally agreed to issue  Laspata/Decaro  an additional  100,000 shares upon
Laspata/Decaro's  completion of each of the following tasks: (1) the development
and  implementation  of a promotion and marketing plan; and (2) the provision of
additional   proprietary  content  and  the  implementation  of  an  agreed-upon
operations strategy.

  On February 15, 2000, an accredited  investor agreed to fund up to $10 million
pursuant to a funding  commitment letter and subscription  agreement whereby the
investor agreed to purchase: (1) 11,223,334 shares of the Company's common stock
at $0.1782 per share on or before March 30, 2000; (2)  11,223,334  shares of the
Company's  common stock at $0.1782 per share on or before June 30, 2000; and (3)
18,856,065 shares of the

                                      F-18

                                       60
<PAGE>

                             DIVOT GOLF CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company's common stock at $0.3182 per share on or before September 30, 2000. The
investor's  agreement to purchase the Company common stock is subject to several
conditions, including the condition that the shares to be issued to the investor
must be freely  tradeable.  In addition,  if the  Company's  total equity market
capitalization  is less  than  $200  million  on any  dates  that  the  investor
purchases the Company's common stock,  the Company has agreed to  proportionally
reduce the per share price of the common stock to be purchased by the  investor.
The  agreement  also  requires  that the Company  appoint two  directors who are
nominated by the investor to the Company's board.

  On February 24, 2000, the Company  executed a non-binding  letter of intent to
acquire from AnimInet,  Inc.  intellectual property assets related to AnimInet's
3-D Internet  asset for  approximately  473.9  million  shares of the  Company's
common stock. These intellectual  property assets primarily include the software
being developed by AnimInet to create "Streaming  Intelligent Beings," which are
digital 3D  computerized  personalities  that would  communicate  directly  with
Internet users.  AnimInet is a corporation formed solely by one of the Company's
executive officers. This letter of intent expires on May 1, 2000.

  On October 22, 1998, an individual ("the plaintiff") filed a complaint against
the Company,  the Chairman and CEO of the Company and other entities  controlled
by him alleging that the Company  violated  various federal and state securities
laws. On February 16, 2000, the Company and the plaintiff  executed a settlement
pursuant to which the Company  agreed to pay  $150,000  during 2000 and to issue
850,000 shares of the Company's  common stock in settlement of this dispute.  Of
these shares,  400,000 shares were issued during 1999 and the remaining  450,000
shares were issued on February 25, 2000. If the Company fails to pay the amounts
due in 2000 or 450,000  shares of the  850,000  shares of the  Company's  common
stock are not freely  tradeable by the terms of the  settlement  agreement,  the
Company has agreed that a judgment  for $575,000 may be entered into against the
Company,  the Chairman and CEO of the Company and other  entities  controlled by
him. If the price of the  Company's  common stock falls below 30 cents per share
for two trading days before March 18, 2000, the Company has agreed to repurchase
400,000  shares of the  Company's  common  stock  for a minimum  of 30 cents per
share.

  In  January  and May of 1999,  a group of former  stockholders  and  employees
(including a former  officer of the Company) and  stockholders  and employees of
various companies,  formerly  controlled by the Chairman and CEO of the Company,
filed three lawsuits against the Company,  these various acquired  corporations,
the  Chairman  and  several  of  the  Company's  other  executive  officers  and
stockholders.  The complaints alleged,  among other things, that (1) the Company
had failed to issue an aggregate of 15 million  shares of the  Company's  common
stock (such number of shares is prior to the effect of a 15-for-1  reverse stock
split effected with regard to the Company's  common stock on June 2, 1998),  (2)
the Company and its officers had committed  fraud in the issuance of securities,
and (3) various breaches of contract.  The parties to the lawsuit entered into a
settlement agreement as of June 29, 1999 pursuant to which the plaintiffs agreed
to release  the  defendants  from all of the claims in the  lawsuits in exchange
for:  (1) a note  payable to a former  officer  of the  Company in the amount of
$225,000;  (2) the issuance of 7.65 million shares of the Company's common stock
(of which 333,334 shares were issuable to the Company's former officer); and (3)
the  assignment  by the  Chairman of the Company of all of his rights,  title or
interest to the profits  generated  from a few parcels of land in the World Golf
Village.  The Chairman assigned these rights to the plaintiffs on June 24, 1999.
The  Company  ordered  the 7.65  million  shares to be issued in August 1999 and
those shares were  delivered on February 29, 2000. As of February 10, 2000,  the
Company has not repaid any amounts due under the  $225,000  note  payable.  This
note payable currently matures on March 31, 2000.

                                      F-19

                                       61
<PAGE>

 REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Divot Golf Corporation

     We have audited the accompanying  consolidated  balance sheet of Divot Golf
Corporation   and   subsidiaries  as  of  December  31,  1997  and  the  related
consolidated  statements of operations,  shareholders' equity and cash flows for
the years ended December 31, 1997 and 1996.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits 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.

     As  discussed  in Note 10 to the  consolidated  financial  statements,  the
Company  changed  its method of  accounting  for two  previously  majority-owned
subsidiaries.

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

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming  that the  Company  will  continue  as a going  concern.  As more fully
described in Note 1, the Company has incurred recurring operating losses and has
a working capital deficiency. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.  Management's  plans in regard
to these  matters  are also  described  in Note 1.  The  consolidated  financial
statements do not include any adjustments to reflect the possible future effects
on  the   recoverability  and  classification  of  assets  or  the  amounts  and
classification  of  liabilities  that  may  result  from  the  outcome  of  this
uncertainty.

                                          [ERNST & YOUNG LLP]
                                            ERNST & YOUNG LLP

Raleigh, North Carolina
January 12, 1998

                                      F-20

                                       62
<PAGE>

                             DIVOT GOLF CORPORATION

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 1997

                                     ASSETS

Current assets:

  Cash......................................................  $    53,266
  Cash -- restricted........................................      135,019
  Trade accounts receivable, net of allowance for doubtful
     accounts of $150,800...................................      352,018
  Accounts receivable from related parties..................      160,543
  Inventories...............................................       31,611
  Prepaid expenses and other current assets.................    1,038,588
                                                              -----------
          Total current assets..............................    1,771,045
Property and equipment at cost:
  Land and land improvements................................    2,789,069
  Depreciable golf course improvements......................      828,681
  Buildings.................................................    1,426,369
  Furniture, machinery and equipment........................      986,642
                                                              -----------
                                                                6,030,761

Less accumulated depreciation and amortization..............      742,956
                                                              -----------
                                                                5,287,805

Intangible assets, net of accumulated amortization of
  $270,000..................................................      583,400
Goodwill....................................................      331,250
                                                              -----------
          Total assets......................................  $ 7,973,500
                                                              ===========
                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

  Accounts payable and accrued expenses.....................  $   772,460
  Accrued interest payable..................................       32,751
  Income tax payable........................................      181,793
  Current portion of long-term debt.........................      757,023
  Current maturities of capital lease obligations...........       21,510
  Accrued discount on convertible debentures................      104,037
                                                              -----------
          Total current liabilities.........................    1,869,574

Long-term debt, less current portion........................    3,477,256
Long-term capital lease obligations, less current portion...       35,785

Commitments and Contingencies
Shareholders' equity:

  Convertible Preferred Stock, $.001 par value; 1,000,000
     shares authorized; 283,170 shares issued and
     outstanding (aggregate liquidation
     preference of $1,920,000)..............................          283
  Common Stock, $.001 par value; 50,000,000 shares

     authorized; 42,632,503 shares issued and outstanding...       42,633
  Additional paid-in capital................................   32,043,966
  Accumulated deficit.......................................  (29,176,276)
  Less cost of Convertible Preferred Stock held in treasury,
     281,250 shares.........................................     (210,937)
  Foreign currency translation adjustment...................     (108,784)
                                                              -----------
          Total shareholders' equity........................    2,590,885
                                                              -----------
          Total liabilities and shareholders' equity........  $ 7,973,500
                                                              ===========



                             See accompanying notes.

                                      F-21

                                       63
<PAGE>

                             DIVOT GOLF CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                               YEAR ENDED DECEMBER 31,
                                                              --------------------------
                                                                 1997           1996
                                                              -----------   ------------
<S>                                                           <C>          <C>

Operating revenues:

  Golf revenues.............................................  $ 1,833,010   $  1,878,273
  Food and beverage revenues................................      485,737        508,911
  Proshop revenues..........................................      259,099        277,188
  Membership sales and dues.................................      372,233        294,594
  Resident membership fees..................................      327,500        480,000
  Management and design fees................................      809,660      1,785,818
  Other.....................................................        6,360          7,118
                                                              -----------   ------------
          Total operating revenues..........................    4,093,599      5,231,902
Operating expenses:
  Golf course operations....................................    1,293,975      1,328,564
  Cost of food and beverage sales...........................      195,869        203,660
  Cost of proshop sales.....................................      193,886        173,812
  Advertising expense.......................................      313,351        216,254
  Management and design expenses............................      701,191      1,553,821
  General and administrative expenses.......................    3,090,713      2,487,003
  Depreciation and amortization expense.....................      871,222      1,042,891
  Write down of goodwill....................................           --      4,050,000
                                                              -----------   ------------
          Total operating expenses..........................    6,660,207     11,056,005
                                                              -----------   ------------
Operating loss..............................................   (2,566,608)    (5,824,103)
Other income (expense):
  Interest expense -- contractual...........................     (683,755)      (916,301)
  Interest expense -- discount on convertible debentures....           --     (1,400,000)
  Amortization of debt discount on convertible debentures...     (892,709)            --
  Loss on equity investment in subsidiaries.................     (116,318)      (966,579)
  Loss on sale of subsidiaries..............................   (1,826,164)            --
  Bad debt recoveries.......................................           --        510,000
  Interest income...........................................       98,520        149,266
                                                              -----------   ------------
  Loss before minority interest.............................   (5,987,034)    (8,447,717)
  Minority interest expense.................................           --        (68,015)
                                                              -----------   ------------
  Loss before income taxes..................................   (5,987,034)    (8,515,732)
  Provision for income taxes................................           --       (110,000)
                                                              -----------   ------------
Net loss....................................................  $(5,987,034)  $ (8,625,732)
                                                              ===========   ============
Basic and diluted loss per common share.....................  $      (.22)  $       (.43)
                                                              ===========   ============
Weighted average number of common shares outstanding........   29,724,100     20,005,900
                                                              ===========   ============



                             See accompanying notes.

                                      F-22

                                       64
<PAGE>

                             DIVOT GOLF CORPORATION

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY





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

Balance at December 31, 1995.......  17,678,066   $17,678    375,000    $375    $21,857,456   $(13,893,582)      --   $      --
Net loss...........................          --       --          --      --             --     (8,625,732)      --          --
Issuance of Common Stock in
 connection with conversion of
 convertible debentures............   6,350,564    6,351          --      --      2,490,434          --          --          --
Issuance of Common Stock in lieu of
 compensation......................      50,000       50          --      --         58,545          --          --          --
Unrealized gain on investments.....          --       --          --      --             --          --          --          --
Translation of foreign currency
 financial statements..............          --       --          --      --             --          --          --          --
                                     ----------   -------   --------    ----    -----------   ------------  --------   ---------
Balance at December 31, 1996.......  24,078,630   $24,079    375,000    $375    $24,406,435   $(22,519,314)      --   $      --
                                     ==========   =======   ========    ====    ===========   ============  ========   =========
Net loss...........................          --       --          --      --             --     (5,987,034)      --          --
Conversion of Preferred Stock
 to Common Stock...................     468,750      469     (93,750)    (94)          (375)          --         --          --
Repurchase of Preferred Stock......          --       --          --      --             --           --    (281,250)   (210,937)
Issuance of Preferred Shares in
 connection with a private
 placement.........................          --       --       1,920       2      1,754,998           --         --          --
Preferred Stock Dividend
 -- conversion discount............          --       --          --      --        669,928       (669,928)      --          --
Issuance of Common Stock
 in connection with conversion
 of convertible debentures.........  13,432,995   13,433          --      --      3,423,317           --         --          --
Issuance of 30,082,268 warrants
 in connection with convertible
 debentures........................          --       --          --      --      1,203,291           --         --          --
Issuance of Common Stock
 in connection with the convertible
 debenture agreement...............   1,652,128    1,652          --      --        308,122           --         --          --
Issuance of Common Stock
 in connection with the purchase of
 Divot Spa WGV, Inc................   3,000,000    3,000          --      --        278,250           --         --          --
Unrealized gain on investments.....          --       --          --      --             --           --         --          --
Translation of foreign currency
 financial statements..............          --       --          --      --             --           --         --          --
                                     ----------   -------   --------    ----    -----------   ------------   -------   ---------
Balance at December 31, 1997.......  42,632,503   $42,633    283,170    $283    $32,043,966   $(29,176,276) (281,250)  $(210,937)
                                     ==========   =======   ========    ====    ===========   ============   ========  ==========
</TABLE>



                                       FOREIGN     UNREALIZED
                                      CURRENCY     GAIN (LOSS)
                                     TRANSLATION       ON
                                     ADJUSTMENT    INVESTMENTS     TOTAL
                                     -----------   -----------   ----------

Balance at December 31, 1995.......   $(259,664)      $(593)     $7,721,670
Net loss...........................          --          --      (8,625,732)
Issuance of Common Stock in
 connection with conversion of

 convertible debentures............          --          --       2,496,785
Issuance of Common Stock in lieu of
 compensation......................          --          --          58,595
Unrealized gain on investments.....          --         356             356
Translation of foreign currency
 financial statements..............     191,617          --         191,617
                                      ---------       -----      ----------
Balance at December 31, 1996.......   $ (68,047)      $(237)     $1,843,291
                                      =========       =====      ==========
Net loss...........................          --          --      (5,987,034)
Conversion of Preferred Stock
 to Common Stock...................          --          --              --
Repurchase of Preferred Stock......          --          --        (210,937)
Issuance of Preferred Shares in
 connection with a private
 placement.........................          --          --       1,755,000
Preferred Stock Dividend
 -- conversion discount............          --          --              --
Issuance of Common Stock
 in connection with conversion
 of convertible debentures.........          --          --       3,436,750
Issuance of 30,082,268 warrants
 in connection with convertible
 debentures........................          --          --       1,203,291
Issuance of Common Stock
 in connection with the convertible
 debenture agreement...............          --          --         309,774
Issuance of Common Stock
 in connection with the purchase of
 Divot Spa WGV, Inc................          --          --         281,250
Unrealized gain on investments.....          --         237             237
Translation of foreign currency
 financial statements..............     (40,737)         --         (40,737)
                                      ---------       -----      ----------
Balance at December 31, 1997.......   $(108,784)      $  --      $2,590,885
                                      =========       =====      ==========



                             See accompanying notes.

                                      F-23

                                       65
<PAGE>

                             DIVOT GOLF CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                YEAR ENDED DECEMBER 31,
                                                              ---------------------------
                                                                  1997           1996
                                                              ------------   ------------
<S>                                                          <C>            <C>
OPERATING ACTIVITIES
Net loss....................................................  $ (5,987,034)  $ (8,625,732)

Adjustments to reconcile net loss to net cash used in
  operating activities:

  Loss on sales of subsidiaries.............................     1,826,164             --
  Amortization of debt discount.............................       892,709             --
  Loss on equity investments in subsidiaries................       116,318        966,579
  Depreciation..............................................       520,959        535,293
  Amortization..............................................       350,263        507,598
  Writedown of goodwill.....................................            --      4,050,000
  Bad debt expense..........................................       372,161         65,000
  Loss on sale of marketable equity securities..............        21,404            182
  Trade accounts receivable.................................      (197,388)        66,826
  Accounts receivable from related parties..................       (10,543)       107,258
  Inventories and other current assets......................      (953,044)       (55,202)
  Accounts payable and accrued expenses.....................       280,744       (368,480)
  Accrued interest payable..................................       103,774      1,024,133
  Income tax payable........................................       (15,919)       197,712
                                                              ------------   ------------
Net cash used in operating activities.......................    (2,679,432)    (1,528,833)
INVESTING ACTIVITIES
Payments for intangible assets..............................      (260,006)      (571,293)
Purchases of property and equipment, net....................      (366,612)      (698,630)
Change in restricted cash...................................      (135,019)            --
Additional investments in subsidiaries......................        33,682       (486,770)
Proceeds from sale of marketable equity securities..........        18,271             --
Proceeds from sale of subsidiaries..........................     3,550,000             --
                                                              ------------   ------------
Net cash provided by (used in) investing activities.........     2,840,316     (1,756,693)
FINANCING ACTIVITIES
Additions to long-term borrowings...........................     3,417,480      5,480,388
Payments on long-term borrowings and capital leases.........    (4,540,608)    (4,836,509)
Issuance of common stock....................................            --      2,555,380
Payments on loans from officers and shareholders............    (1,293,895)       648,121
Proceeds from sales of convertible preferred stock..........     1,920,000             --
Payment for stock issuance costs............................      (165,000)            --
Payments made to retire preferred stock.....................      (210,937)            --
                                                              ------------   ------------
Net cash (used in) provided by financing activities.........      (872,960)     3,847,380
Effect of foreign currency exchange rate changes on cash....       (40,737)       191,617
                                                              ------------   ------------
(Decrease) Increase in cash.................................      (752,813)       753,471
Cash at beginning of year...................................       806,079         52,608
                                                              ------------   ------------
Cash at end of year.........................................  $     53,266   $    806,079
                                                              ------------   ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for interest....................  $    580,581   $    938,071
                                                              ============   ============
</TABLE>



                             See accompanying notes.

                                      F-24

                                       66
<PAGE>

                             DIVOT GOLF CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1997

1.  BUSINESS OF THE COMPANY, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING

    POLICIES

     Divot Golf  Corporation  ("the Company") owns and operates golf courses and
is  engaged  in  the  development,   licensing  and  marketing  of  golf-related
businesses.  The Company also holds certain  exclusive  licensing  rights in the
United States and internationally.

     As of December 31, 1997, the Company has a net working  capital  deficiency
of  $98,529.  The  Company  is  not  generating  sufficient  revenues  from  its
operations  to fund its  activities  and  therefore is  dependent on  additional
financing from external sources.  Such factors raise substantial doubt about the
Company's  ability to continue as a going  concern.  The  Company  secured  $1.9
million of funding in a private  placement  transaction  in December  1997.  The
Company expects to raise additional  amounts from private placements in 1998. If
the  Company  is  successful  in  raising  additional  equity  capital  in 1998,
management believes that the Company will have adequate resources to continue to
meet its current  debt  obligation,  fund  capital  improvements  and expand and
develop its businesses.  There is no assurance that such additional funding will
be completed  and the inability to obtain such  financing  would have a material
adverse effect on the Company.

  Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and all  wholly  and  majority-owned  subsidiaries.  All  material  intercompany
accounts and transactions are eliminated in consolidation.  The subsidiaries and
related  percentage  of  ownership  by the Company at  December  31, 1997 are as
follows:

<TABLE>
<CAPTION>
                                                                   OWNERSHIP PERCENTAGE
                                                                              AT
                                                                       DECEMBER 31,
                                                                   ---------------------
COMPANY NAME                                        ABBREVIATION     1997        1996
------------                                        ------------   ---------   ---------
<S>                                                <C>             <C>         <C>

The Gauntlet at St. James, Inc. ..................   St. James        100%         80%
The Gauntlet at Curtis Park, Inc. ................  Curtis Park       100         100
Brassie Golf Management Services, Inc. ...........     BGMS            --         100
Summit Golf Corporation...........................    Summit           --         100
Hale Irwin Golf Services, Inc. ...................     HIGSI           --         100
Brassie Construction Management Services, Inc. ...     BCMS           100         100
Amalgamated Equity Golf (a British Columbia
  Corporation)....................................  Amalgamated       100         100
Divot Properties WGV, Inc. .......................  Properties        100         100
</TABLE>




     Minority  interest  expense in 1996  represents the 20% interest in the St.
James golf course owned by a related entity.  The Company received the remaining
20%  Minority  interest  in St.  James as part of the sale of the golf course in
1997 (see Note 9, "Disposition of Assets").

     The Company's 30% investments in The Gauntlet at Laurel Valley, Inc., a
golf course located in Greenville, S.C., and The Gauntlet at Myrtle West, Inc.,
a golf course located in Myrtle Beach, S.C., are accounted for using the equity
method (See Note 10 "Change in Reporting Entity").

  Property and Equipment

     Property  and  equipment  is  recorded  at  cost.  Costs  relating  to  the
acquisition and development of golf courses,  including the cost of real estate,
related  legal  fees,  construction  costs,  interest,  and other  direct  costs
associated  with the  development of the golf courses are capitalized as part of
the cost of the course.  Depreciable  golf  course  improvements  are  comprised
primarily of irrigation

                                                     F-25


                                       67
<PAGE>


                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

systems,  cart paths,  bridges,  and other land  improvements.  Depreciation  on
property  and  equipment  begins when the assets are placed into  service and is
charged to  operations  over the  estimated  useful lives of the assets (5 to 20
years),  utilizing the straight-line method for financial reporting purposes and
accelerated methods for tax purposes.  All other costs are charged to expense as
incurred.

  Intangible Assets

     Intangible  assets consist primarily of financing costs and licensing fees.
Costs incurred in obtaining  long-term debt  obligations are capitalized at cost
and amortized over the lives of the respective loans.  Significant  additions to
financing  costs during 1997 resulted  primarily  from costs  incurred to obtain
financing on more favorable terms.

  Goodwill

     The Company  initially  records goodwill at its cost and amortizes the cost
over the  estimated  useful  life of the  asset.  At the end of each  accounting
period,  the Company  reviews the  carrying  value of the  goodwill for possible
impairment.  The Company's  policy for the valuation of goodwill is to calculate
the  undiscounted  projected future cash flows expected to be generated over the
life of the goodwill.  This amount is then compared to the carrying value of the
goodwill to determine if the asset is impaired.

     The Company has  classified,  as  goodwill,  the cost in excess of the fair
value  of the  net  assets  of  SPA,  which  was  acquired  through  a  purchase
transaction during 1997 (see Note 8,  "Acquisitions",  for further  discussion).
Goodwill is being amortized on a straight-line basis over 15 years. Amortization
charged to  continuing  operations  amounted to $18,092 and $255,226 in 1997 and
1996, respectively.

     During 1996,  the Company  recorded a goodwill  writedown of  $4,050,000 on
Summit,   leaving  a  remaining   balance  of  $626,245,   net  of   accumulated
amortization,  at December 31, 1996 which reflects  estimated future  discounted
cash  flows.  The  writedown  is  included  in  the  accompanying  statement  of
operations for the year ended December 31, 1996.

     In July  1997,  the  Company  sold its  golf  course  management  division,
consisting of Brassie Golf Management  Services.  Inc. and Summit. The Company's
remaining goodwill associated with the Summit was written off in connection with
the sale (See Note 9, "Disposition of Assets").

  Restricted Cash

     Restricted cash  represents  escrow accounts of Curtis Park and Saint James
on behalf of certain lending institutions  pursuant to loan and sale agreements,
respectively.  Such  amounts are to be recorded as expense  when earned over the
terms of the  agreements and are  recoverable by the Company upon  occurrence of
certain events specified in the respective escrow agreements.

  Cash and Cash Equivalents

     The Company considers highly liquid, short-term investments with a maturity
of three months or less when purchased to be cash equivalents.

  Marketable Equity Securities

     The   Company's    marketable   equity   securities   are   classified   as
available-for-sale   and   carried  at  fair  value.   The  ending   balance  of
shareholders'  equity has been  adjusted to reflect the net  unrealized  holding
gain or loss on securities classified as available-for-sale.

                                      F-26

                                       68
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     During 1997, the Company sold all of its marketable equity securities.  Net
realized gains, determined by specific identification, were not material.

     The  Company  maintains  cash  and  short-term   investments  with  various
financial  institutions.  These financial  institutions are located in different
areas of the U.S. and Canada,  and Company  policy is designed to limit exposure
to any  one  institution.  The  Company  performs  periodic  evaluations  of the
relative  credit  standing  of  those  financial  institutions  utilized  in the
Company's investment strategy.

  Inventories

     Inventories  are stated at the lower of cost or market as determined  using
the specific identification method.

     Inventory at December 31, 1997 consists of:

Proshop merchandise.........................................  $ 27,415
Food and beverage inventory.................................     4,196
                                                              --------
                                                              $ 31,611
                                                              ========



  Revenues

     Revenues of the Company include daily golf fees, proshop  merchandise sales
and food and beverage  sales.  Golf fees include  revenue  generated  from green
fees,  cart fees and range fees.  Revenues also include sales of memberships and
annual dues charged to members and golf course management and design fees.

     Golf  fees,  proshop  merchandise  sales  and food and  beverage  sales are
recognized  when  received.  Annual  membership  dues are  recognized and earned
ratably over a  twelve-month  period.  Membership  dues collected in advance are
deferred as  "unearned  income" and  recognized  over the period of  prepayment.
Membership  fees that are  non-refundable  are  recognized  by the Company  when
received.  Golf course management and design fees are recognized as services are
performed.

     As part of an agreement  with the developer of the  residential  lots,  the
Company  receives $5,000 in membership fees for each residential lot sold in the
immediate area of the St. James golf course through  November 23, 1997 (See Note
9, "Disposition of Assets").

  Stock Based Compensation

     On January 1, 1996, the company adopted  Statement of Financial  Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which
requires  companies to  recognize  as expense the fair value of all  stock-based
awards on the date of grant,  or continue to apply the  provisions of Accounting
Principles  Board Opinion No. 25 ("APB 25") and provide pro forma net income and
pro forma earnings per share  disclosures for employee stock option grants as if
the  fair-value-based  method defined in SFAS 123 had been applied.  The Company
has elected to continue  to apply the  provisions  of APB 25 and provide the pro
forma disclosure provisions of SFAS 123 (See Note 7, "Stock Options").

  Advertising Expense

     The cost of  advertising  is expensed  as  incurred.  The Company  incurred
$313,000 and $216,000 in  advertising  costs during the years ended December 31,
1997 and 1996, respectively.

                                      F-27

                                       69
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Use of Estimates

     The  preparation of the financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

  Concentration of Credit Risk

     The   Company's   primary   financial   instrument   subject  to  potential
concentration  of credit risk is trade accounts  receivable which are unsecured.
The Company provides an allowance for doubtful accounts based on its analysis of
potentially  uncollectible  accounts.  The  Company's  trade  receivables  arise
principally from its golf course management operations. As of December 31, 1997,
the Company had no significant concentrations of credit risk with any individual
customers.

  Foreign and Domestic Operations

     Net (loss) income from the Company's foreign  subsidiary  (Amalgamated) was
approximately  $(201,000) and $339,000 for the years ended December 31, 1997 and
1996,  respectively.   Net  loss  from  domestic  operations  was  approximately
$5,786,000 and $8,965,000, respectively, for the same periods.

  Translation of Foreign Currencies

     Foreign currency  transactions and financial  statements of Amalgamated are
translated from the local currency,  Canadian dollars,  into U.S. dollars at the
current  exchange  rates  except  for  revenues,  costs and  expenses  which are
translated at average exchange rates. Adjustments resulting from translations of
financial  statements  are  reflected as a separate  component of  shareholders'
equity.

  Net Loss Per Share

     In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share.  Statement 128 replaced the calculation of primary and fully
diluted  earnings per share with basic and diluted  earnings  per share.  Unlike
primary  earnings  per share,  basic  earnings  per share  excludes any dilutive
effects of options,  warrants and convertible  securities.  Diluted earnings per
share is very similar to the  previously  reported  fully  diluted  earnings per
share.  All earnings per share amounts for all periods have been presented,  and
where appropriate,  restated to conform to the Statement 128 requirements. Stock
options,  warrants and the five percent  convertible  debentures  are considered
anti-dilutive and therefore have not been included in the computation.

  Long Lived Assets

     In 1996,  the Company  adopted FASB  Statement No. 121,  Accounting for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to be Disposed Of.
Under the provisions of the  Statement,  impairment  losses are recognized  when
expected   future  cash  flows  are  less  than  the  assets'   carrying  value.
Accordingly,  when indicators of impairment are present,  the Company  evaluates
the carrying value of property and equipment and  intangibles in relation to the
operating  performance  and future  undiscounted  cash  flows of the  underlying
business. The Company adjusts the net book value of the underlying assets if the
sum of  expected  future  cash  flows  is less  than  book  value.  Based on the
application of the Statement,  goodwill was adjusted to its estimated fair value
which resulted in a write-down of $4,050,000 in 1996.

                                      F-28

                                       70
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Fair Value of Debt

     The Company estimates that the fair value of notes payable approximates the
carrying  value based upon its effective  current  borrowing  rate for debt with
similar terms and remaining maturities. Disclosure about fair value of financial
instruments is based upon information available to management as of December 31,
1997.  Although  management is not aware of any factors that would significantly
affect the fair value of amounts,  such  amounts  have not been  comprehensively
revalued for purposes of these financial statements since that date.

  Impact of Recently Issued Accounting Standards

     In 1997,  the FASB  issued  Statements  No. 130,  "Reporting  Comprehensive
Income" ("SFAS 130") and No. 131, "Disclosures About Statements of an Enterprise
and Related Information" ("SFAS 131"), which are both effective for fiscal years
beginning after December 15, 1997. SFAS 130 addresses reporting amounts of other
comprehensive income and SFAS 131 addresses reporting segment  information.  The
Company does not believe that the  adoption of these new  standards  will have a
material impact on its financial statements.

2.  LONG-TERM DEBT

     Long-term  debt with  financial  institutions  and other  third  parties at
December 31, 1997 consists of the following:

Loan to Curtis Park from bank, payable in monthly payments

  of $26,124, which includes principal and interest
  beginning December 1, 1997 with remaining principal and
  interest due October 1, 2007; collateralized by leasehold
  interest in land and land improvements. Interest is
  payable monthly at 8.37% per annum........................  $3,276,753
Unsecured convertible 5% debentures due December 31, 1998,
  unless converted into common stock, interest payable
  quarterly and incrementally based upon conversions with
  the balance due, if any, at maturity, net of unamortized
  discount of $620,356......................................     390,293
Unsecured operating term loan from bank, with interest at
  10.75%, payable in monthly installments of $16,723, which
  includes principal and interest, through January 1999.....     220,366
Other notes payable.........................................     346,867
                                                              ----------
                                                               4,234,279

Less current portion........................................     757,023
                                                              ----------
                                                              $3,477,256
                                                              ==========



     Principal maturities of all the indebtedness  detailed above during each of
the following five years and thereafter are as follows:

1998........................................................   $  757,023
1999........................................................       77,455
2000........................................................      242,850
2001........................................................       47,422
2002........................................................       51,607
Thereafter..................................................    3,057,922
                                                               ----------
                                                               $4,234,279
                                                               ==========



CONVERTIBLE DEBENTURE EXCHANGE

     During  March  1996,  the  Company  issued  $5.5  million  in  six  percent
convertible  debentures to finance the  operations of the Company.  During 1996,
the holders of the  debentures  converted  $2,034,262 of the debt into 6,350,564
shares which  equated to $2,496,785 in equity,  net of financing  fees.  Through
March 1, 1998, the six percent debentures were convertible into shares of common
stock at discounts ranging from 15%-35% of its current market value. The Company
recorded $1.4 million in interest  expense  during 1996 to reflect the discounts
upon conversion of the

                                      F-29

                                       71
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's  common  stock.  As of December 31, 1996,  $3,465,738  of  convertible
debentures were outstanding.

     From January through October 1997, the holders of the debentures  converted
$1,195,743  of the debt into  4,972,107  shares which  equated to  $1,573,308 in
equity, net of financing fees. During November 1997, the remaining $2,269,995 of
outstanding  debentures  were  transferred  to new debenture  holders in a third
party  transaction.  Simultaneously,  the  Company  retired  the 1996  debenture
agreements and replaced them with new debenture agreements containing new terms.

     The new debentures are payable on December 31, 1998.  Through  December 31,
1998, the holders of the debentures are entitled to convert the debentures  into
common  stock of the  Company at a  conversion  price equal to the lesser of (1)
$0.17 per share or (2) 70% of the average closing bid of the common stock during
the last five trading days prior to conversion.  The debentures accrue interest,
payable  quarterly  commencing  March 1, 1998, at a rate of 5% per annum. If the
Company  does  not  file a  Registration  Statement  with  the  SEC to  register
securities  in a public  offering  within 120 days from  November 18, 1997,  the
interest  rate shall  increase to 18% per annum.  If the  Effective  Date of the
Registration  Statement  has not  occurred by the 180th day after  November  18,
1997,  then the interest rate shall further  increase to 24% per annum until the
Effective  Date. The accrued  interest is  convertible  into common stock of the
Company at the same conversion price as the debenture  principal.  In any event,
each holder cannot as a result of such  conversions  beneficially  own more than
4.99% of the then  outstanding  common  stock.  In the event that the  debenture
holder proposes to convert all or any portion of the principal and interest at a
conversion price of less than $0.05, the Company shall have the option to redeem
all or any part of the amount proposed to be converted at a redemption  price of
125% of the amount of the  principal and interest  proposed to be converted.  In
conjunction with these debenture agreements, the Company incurred issuance costs
totaling  $27,000.  These issuance  costs are being  amortized as a component of
interest expense over the term of the debentures.

     From  November  through  December  1997,   $1,259,346  of  the  debentures'
principal  had been  converted  into  8,460,888  shares of common  stock,  which
equated to $1,863,442 in equity, net of financing fees. As of December 31, 1997,
$1,010,649 of convertible debentures were outstanding.

     In connection with the sale of the debenture agreements, the Company issued
(1) warrants to purchase 15,041,134 shares of common stock of the Company at the
lesser of $0.17 per share of 70% of the average  closing bid price of the common
stock  during the last five  trading  days prior to  exercise,  (2)  warrants to
purchase 15,041,134 shares of common stock of the Company at the lesser of $0.34
per share of 70% of the average closing bid price of the common stock during the
last five  trading  days prior to exercise  and (3)  1,672,128  shares of common
stock. The warrants are exercisable for a period of three years from the date of
issuance.  The estimated  value of these warrants and common stock,  $1,513,065,
has been recorded as additional paid-in capital.

3.  LEASES

     The Company  leases certain  equipment used in the daily  operations of the
Company  under  capital  leases which are included in  furniture,  machinery and
equipment.   Leased  equipment  under  capital  leases  included  in  furniture,
machinery and equipment at December 31, 1997 consists of the following:

Equipment...................................................  $69,683
Less accumulated amortization...............................    5,203
                                                              -------
                                                              $64,480
                                                              =======



                                      F-30

                                       72
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The accumulated  amortization with respect to these  capitalized  leases is
included in "accumulated  depreciation  and  amortization"  in the  accompanying
balance sheet. Amortization expense is included in depreciation and amortization
expense in the accompanying statement of operations.

     Future minimum lease payments, by year and in the aggregate,  under capital
leases, consist of the following at December 31, 1997:

1998........................................................  $ 28,228
1999........................................................    25,236
2000........................................................    16,148

                                                              --------
Total minimum lease payments................................    69,612
Amounts representing interest...............................   (12,317)
                                                              --------
                                                                57,295

Less current portion........................................   (21,510)
                                                               --------
                                                               $ 35,785
                                                               ========



     The  Company  also  rents  certain  facilities,  land and  equipment  under
operating  leases which expire at various times through 2027. Total rent expense
for the Company was  approximately  $283,200 and  $207,500,  for the years ended
December 31, 1997 and 1996, respectively.

     Future  minimum  lease  payments,  by  year  and  in the  aggregate,  under
operating leases consist of the following at December 31, 1997:

1998........................................................  $  272,200
1999........................................................     284,674
2000........................................................     242,428
2001........................................................     187,356
2002........................................................     180,566
Thereafter..................................................     600,000
                                                              ----------
                                                              $1,767,224
                                                              ==========



4.  RELATED PARTY TRANSACTIONS

     The  Company  funded  expenses  on behalf of  certain  entities  affiliated
through common ownership. Accounts receivable from related parties were $160,543
at December 31, 1997. The Company expects  payment of the amount  outstanding at
December 31, 1997 within the next twelve  months;  accordingly,  the amounts are
classified as short-term assets.

     The Company provided  management  services to related parties  resulting in
approximately $77,000 and $190,000 in management fee revenue for the years ended
December 31, 1997 and 1996, respectively.

5.  INCOME TAXES

     Under Financial  Accounting  Standards Board Statement No. 109, "Accounting
for Income Taxes," the liability  method is used in accounting for income taxes.
Under this method,  deferred tax assets and liabilities are determined  based on
differences  between financial reporting and tax bases of assets and liabilities
and are  measured  using the  enacted  tax rates and laws that will be in effect
when the differences are expected to reverse.

     Deferred  income  taxes  reflect the net effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income

                                      F-31

                                       73
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tax purposes. Significant components of the Company's deferred tax liabilities
and assets at December 31, 1997 are as follows:




Deferred tax liabilities:

  Tax over book depreciation and amortization...............  $        --
                                                              -----------
                                                              $        --
                                                              ===========
Deferred tax assets:

  Book over tax depreciation and amortization...............  $   130,000
  Net operating loss carryforwards..........................    4,400,000
  Bad debt allowance........................................       60,000
  Other.....................................................        4,700
                                                              -----------
Total deferred tax assets...................................    4,594,700
Valuation allowance for deferred tax assets.................   (4,594,700)
                                                              -----------
Net deferred tax assets.....................................           --
                                                              ===========
Net deferred taxes..........................................  $        --
                                                              ===========



     At December 31, 1997 the Company has a net operating loss  carryforward  of
$11,000,000  which will begin to expire in the year 2007.  The tax  benefits  of
these  items are  reflected  in the  above  table of  deferred  tax  assets  and
liabilities.  U.S.  tax rules  impose  limitations  on the use of net  operating
losses  following  certain changes in ownership.  If a change were to occur, the
limitation  could reduce the amount of these benefits that would be available to
offset  future  taxable  income each year,  starting  with the year of ownership
change.

     The reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense is:


<TABLE>
<CAPTION>


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

Income tax benefit at U.S. statutory rate..............  $(2,040,000)   $(2,895,000)
Amortization and write-off of goodwill.................           --      1,722,000
State tax benefit, net.................................     (360,000)      (492,000)
Equity income..........................................       47,000        326,000
Interest expense for which no tax benefit was

  provided.............................................      357,000        648,000
Impact of foreign losses for which a current tax
  benefit is not available.............................       80,000             --
Impact of sale of stock in subsidiaries................      460,000             --
Other items............................................      141,000        438,300
Change in valuation allowance..........................    1,315,000        252,700
Foreign tax............................................           --        110,000
                                                         -----------    -----------
Tax expense............................................  $        --    $   110,000
                                                         ===========    ===========
</TABLE>



                                      F-32

                                       74
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  SHAREHOLDERS' EQUITY

     During 1996,  the Company issued 50,000 shares of common stock with a value
of $58,595 in lieu of compensation for consulting services performed.  The value
of the issued stock was based on the fair market value of the  Company's  common
stock on the date that the  consulting  services were performed and reflects the
value of services  received.  The  Company  recognized  $58,595 in  compensation
expense related to the transaction.

     During December 1997, the Company closed on a private placement offering of
7% Cumulative Convertible Preferred Stock ("Preferred Stock") for $1.92 million.
The Preferred Stock was offered in units of 15 Preferred Shares,  with each such
share having a liquidation value of $1,000, and 10,000 warrants,  for a price of
$15,000 per unit.

     The holders of the Preferred Stock are entitled to a cash dividend equal to
$70 per share payable quarterly  commencing April 1, 1998,  although the Company
has the option to utilize shares of its common stock, under certain  conditions,
to satisfy the dividend requirement. If the Company has not filed a Registration
Statement with the SEC to register  securities in a public  offering  within 180
days of issuance,  the Preferred Stock shall accrue  dividends at an annual rate
of $180 per share.  The purchaser  has the right to convert the Preferred  Stock
immediately  into a number of  shares of the  Company's  common  stock  equal to
$1,000 per share converted divided by the Conversion Price. The Conversion Price
means the lesser of (1) $0.70 or (2) 75% of the average of the closing bid price
of a share of the  Company's  common  stock during the ten trading days prior to
such conversion  provided that the holder can not as a result of such conversion
beneficially  own more than 4.99% of the then  outstanding  common stock. In the
event the Conversion Price falls below $0.50, the Company may redeem,  at $1,250
per share  plus any  accrued  but  unpaid  dividends,  all (but not any part) of
shares proposed to be converted. In conjunction with the discount allowed on the
conversion  of the Preferred  Stock into common stock,  the Company has recorded
dividends of $669,928.  The Preferred Stock does not carry any voting rights. As
of  December  31,  1997,  128 units of  Preferred  Stock had been sold  while no
conversions of shares of the Company's common stock had taken place.

     In  connection  with the sale and  issuance  of the  Preferred  Stock,  the
Company issued warrants,  exercisable immediately,  to purchase 1,280,000 shares
of common  stock of the  Company at $1.00 per share for a period of three  years
from the date of  issuance.  The  Company  incurred  approximately  $165,000  in
additional  costs  related to the  issuance of the  Preferred  Stock,  which are
offset against  additional  paid-in  capital in the  consolidated  statements of
shareholders' equity.

     As of December  31,  1997,  warrants to purchase  33,550,268  shares of the
Company's  common stock were  outstanding.  These warrants have exercise  prices
ranging from $.17 to $3.25 per share; 100,000 warrants expire September 28, 1998
(exercise  price equals $2.40 per share);  238,000  warrants expire November 17,
1998 (exercise price equals $2.40 per share); 50,000 warrants expire December 5,
1998; (exercise price equals $1.00 per share);  150,000 warrants expire June 30,
1999 (exercise price equals $2.00 per share); 1,400,000 warrants expire June 30,
2000  (exercise  prices range from $2.40 to $3.25 per share),  250,000  warrants
expire  September 28, 2000 (exercise  price equals $2.40 per share);  15,041,134
warrants expire November 18, 2000 (exercise price equals the lesser of $0.17 per
share or 70% of the average closing bid of the common stock during the last five
trading days prior to conversion);  15,041,134 warrants expire November 18, 2000
(exercise  price  equals  the  lesser of $0.34  per share or 70% of the  average
closing  bid of the  common  stock  during the last five  trading  days prior to
conversion);  and 1,280,000  warrants  expire  December 3, 2000 (exercise  price
equals $1.00 per share).

                                      F-33

                                       75
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Loss per Share

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share in accordance with Statement No. 128, Earnings per Share:

<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                         --------------------------
                                                            1997           1996
                                                         -----------    -----------
<S>                                                     <C>             <C>

Numerator:

  Net loss.............................................  $(5,987,034)   $(8,625,732)
  Preferred stock dividends -- conversion discount.....     (669,928)            --
                                                         -----------    -----------
  Numerator for basic and dilutive earnings per share--

     income available to common stockholders...........  $(6,656,962)   $(8,625,732)

Denominator:

  Denominator for basic and diluted earnings per

     share -- weighted-average shares..................   29,724,100     20,005,900
                                                         -----------    -----------
  Basic and diluted loss per share.....................  $      (.22)   $      (.43)
                                                         ===========    ===========

</TABLE>


     The  following  number of  potentially  convertible  shares of common stock
related to convertible preferred stock,  convertible  debentures,  warrants, and
stock options are as follows at December 31, 1997:

     For conversion of convertible preferred stock..........   4,873,096
     For conversion of convertible debentures...............   5,944,994
     Outstanding warrants...................................  33,550,268
     Outstanding stock options..............................     594,261
     Possible future issuance under stock option plan.......     905,739
                                                              ----------
       Total shares potentially convertible.................  45,868,358

                                                              ==========



     As of December  31,  1997,  the Company had only  7,367,497  common  shares
available to be issued.

7.  STOCK OPTIONS

     On June 3, 1994, the Board of Directors and the stockholders of the Company
adopted  the Divot Golf  Corporation  1994 Stock  Option  and  Restricted  Stock
Purchase Plan (the "Stock Option Plan") as an incentive for key  employees.  The
purchase  price for any Stock Awards and the exercise  price for any Options may
not be less  than the fair  market  value  for the  common  stock on the date of
grant.  Unless otherwise  agreed between the grantee and the Company,  the Stock
Awards  and  Options   expire  90  days  after   termination  of  the  grantee's
relationship with the

                                      F-34

                                       76
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company. Because no options were issued during the years ended December 31, 1997
and 1996, no pro forma disclosures are required under SFAS 123.

  Options Outstanding, Common Stock
<TABLE>
<CAPTION>

                                                                       OPTIONS OUTSTANDING
                                                         SHARES     --------------------------
                                                        AVAILABLE    NUMBER         PRICE
                                                        FOR GRANT   OF SHARES     PER SHARE
                                                        ---------   ---------   --------------
<S>                                                     <C>         <C>         <C>

Balances at December 31, 1995.........................    217,475   1,282,525   $2.00 to $3.80
  Options granted.....................................         --          --               --
  Options canceled....................................     47,000     (47,000)              --
  Options exercised...................................         --          --               --
                                                        ---------   ---------   --------------
Balances at December 31, 1996.........................    264,475   1,235,525   $2.00 to $3.80
                                                        ---------   ---------   --------------
  Options granted.....................................         --          --               --
  Options canceled....................................    641,264    (641,264)              --
  Options exercised...................................         --          --               --
                                                        ---------   ---------   --------------
Balances at December 31, 1997.........................    905,739     594,261   $2.00 to $3.80
                                                        =========   =========   ==============
</TABLE>



8.  ACQUISITIONS

     On December 26, 1997,  the Company  acquired  from a related  party certain
licensing and development  rights on Parcel 11-A of the World Golf Village,  the
Spa  Tournament  Championship  development  program,  and the Spa  Products  and
Catalog from Divot Spa WGV, Inc., for approximately $356,000. The purchase price
of which  approximately  $331,000 and $25,000 has been allocated to goodwill and
licensing  fees,  respectively,  consisted of 3,000,000  shares of the Company's
common  stock and cash of  $75,000.  No  expense  was  recorded  during  1997 in
connection with this goodwill. The goodwill will be amortized using the straight
line method over a period of 15 years.

     On December  28,  1997,  the Company  executed a letter of intent with Lady
Fairway Golf to purchase 100% of the outstanding  stock of Lady Fairway Golf. In
connection  with this  agreement,  the Company paid a  nonrefundable  deposit of
$100,000  which is included in the other  assets of the  Company's  consolidated
balance  sheet at December  31,  1997.  The Company  contemplates  closing  this
transaction in the first quarter 1998.

                                      F-35

                                       77
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9.  DISPOSITION OF ASSETS

     During the year ended  December  31,  1997,  the Company  disposed of three
subsidiaries and  substantially all of the assets of St. James in three separate
transactions for an aggregate amount of approximately  $3,800,000 ($3,550,000 in
cash and $250,000 in accounts receivable).  In addition, the Company is entitled
to receive a certain  percentage of future  contract  revenue of Hale Irwin Golf
Services,  Inc. The Company  recognized a loss of $1,826,164 in connection  with
the disposition of these  subsidiaries.  This loss is reflected in the statement
of operations.  The operating  results of the subsidiaries  were included in the
consolidated  statements  of  operations  of  the  Company  from  the  dates  of
acquisition  through the dates of  disposition.  The proceeds  from the sale and
related gain (loss) are recorded as follows:

<TABLE>
<CAPTION>
                                                                 PROCEEDS
                                                                FROM SALE     GAIN/(LOSS)
                                                                ----------    -----------

<S>                                                            <C>           <C>

Brassie Golf Management Services, Inc. and Summit Golf

  Corporation...............................................    $  850,000    $   125,000
The Gauntlet at St. James...................................     2,950,000     (1,931,875)
Hale Irwin Golf Services, Inc...............................            --        (19,289)
                                                                ----------    -----------
                                                                $3,800,000    $(1,826,164)
                                                                ==========    ===========

</TABLE>


10.  CHANGE IN REPORTING ENTITY

     In 1995, the Company consolidated two 75% owned subsidiaries,  The Gauntlet
at Laurel  Valley and The Gauntlet at Myrtle West in accordance  with  Financial
Accounting Standards Board Statement 94. In 1996, the Company transferred 45% of
the ownership interest in the subsidiaries to the minority shareholder to comply
with a mandatory  injunction  issued by the 13th Circuit  Court of  Hillsborough
County of Florida.  Accordingly,  the  financial  statements  for 1996 have been
restated to reflect the Company's ownership in the subsidiaries under the equity
method of accounting.  In 1996, the Company recognized a loss of $310,888 on the
transference of the interest in the subsidiaries.  The Company's interest in the
net  losses  of  these  entities  is  recorded  at  75% up  until  the  date  of
transference and at 30% thereafter.

     Due to the recurring  operating losses and working capital  deficiencies of
the entities, the Company assessed the net realizable value of these investments
at December  31,  1996 to be -0-.  Therefore,  on the  Company's  assessment,  a
write-down of $116,318 and $505,691 was recorded in 1997 and 1996,  respectively
to reflect the net  realizable  value of these  investments.  The  write-down is
included  in the loss on  equity  investment  in  subsidiaries  line item on the
Company's 1997 and 1996 statement of operations.

     The components of the line item, Loss on equity investment in subsidiaries,
as reported in the consolidated statements of operations are as follows:
<TABLE>
<CAPTION>

                                                                1996       1997
                                                              --------   --------
<S>                                                           <C>       <C>

Pro rata share of net loss..................................  $310,888   $     --
Write-down to carrying value ...............................   505,691    116,318
Reserve for ongoing litigation..............................   150,000         --
                                                              --------   --------
Loss on equity investment in subsidiaries...................  $966,579   $116,318
                                                              ========   ========
</TABLE>



                                      F-36

                                       78
<PAGE>

                             DIVOT GOLF CORPORATION

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  COMMITMENTS AND CONTINGENCIES

     The Company has  employment  agreements  with its executive  officers,  the
terms of  which  expire  at  various  times  through  September  3,  2004.  Such
agreements  provide for minimum salary levels,  as well as for incentive bonuses
which  are  payable  if  specified   management  goals  are  attained.   Minimum
commitments for future salaries, excluding bonuses, by year and in the aggregate
consist of the following at December 31, 1997:

1998........................................................  $  650,000
1999........................................................     650,000
2000........................................................     591,667
2001........................................................     475,000
2002........................................................     454,167
Thereafter..................................................     375,000
                                                              ----------
                                                              $3,195,834
                                                              ==========



     The  Company,  in the ordinary  course of  business,  is the subject of, or
party to, various pending or threatened claims and litigation. In the opinion of
management,  settlement of such claims and  litigation  will not have a material
effect on the Company's operations or financial position.

                                                     F-37


                                       79
<PAGE>