<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549


                                   FORM 10-KSB

(Mark One)

     [ X ]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

               FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

     [   ]     Transition report under Section 13 or 15(d) of the Securities
               Exchange Act of 1934 (No Fee Required)

               For the transitional period from _____________ to ____________

                           Commission File No. 1-13362
                                              ---------

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                      -------------------------------------
           (Name of Small Business Issuer as specified in its charter)

             Nevada                                    04-3226365
--------------------------------------------------------------------------------
(State or other jurisdiction             (I.R.S. Employer Identification Number)
incorporation or organization)

             822 Boylston Street, Suite 300, Chestnut Hill, MA 02167
          -------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (617) 266-3600
                                 --------------
                (Issuer's Telephone Number, Including Area Code)


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


                                            Name of each exchange on
Title of Each Class                         which registered
--------------------------------------------------------------------

Common Stock, $.001 par value               Boston Stock Exchange

Redeemable Warrants to
  Purchase Common Stock                     Boston Stock Exchange

                                      -1-
<PAGE>   2

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

                                      None

 Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

Yes  x             No
-------            -------

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

The registrant had total operating revenues of $5,376,947 and interest income of
$6,502 for its most recent fiscal year ended December 31, 1997.

The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the average bid and asked prices of such stock, as of
March 20, 1998, based on the closing price for the stock on such date as
reported on the NASDAQ Small-Cap Market of $2.9375 was $6,811,402. Shares of
Common Stock held by each officer and director and by each person who owns 5% or
more of the outstanding Common Stock have been excluded in that such persons may
be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

     As of March 20, 1998 there were 3,751,169 outstanding shares of Common
Stock, $.001 par value.


                       DOCUMENTS INCORPORATED BY REFERENCE

                                 Not Applicable




             Transitional Small Business Issuer Format (check one):

Yes               No  x
-------           -------

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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.
-------  ------------------------

         Background
         ----------

         Senior Tour Players Development, Inc. ( the "Company") was organized as
a Nevada corporation on April 6, 1994 for the purpose of developing or acquiring
and then operating public, semiprivate, resort and private golf courses and golf
practice facilities throughout the United States. The Company may also acquire
interests in, or participate in the marketing of, golf course residential
communities.

         On November 16, 1994, the Company completed an initial public offering
of 1,600,000 shares of common stock and 1,600,000 redeemable common stock
purchase warrants in a firm-commitment underwriting managed by Dickinson & Co.
On December 28, 1994, the underwriter exercised its over-allotment option for
the purchase of an additional 153,200 redeemable common stock purchase warrants.
The offering, including the exercise of the over-allotment, raised net proceeds
of $6,572,249 (gross proceeds of $8,175,320 less underwriting discounts,
commissions and other expenses of $1,603,071).

         On November 30, 1994, following the Company's initial public offering,
the Company commenced construction of its initial golf course development
project, The Badlands Golf Club located in Las Vegas, Nevada. The course was
designed by Johnny Miller Design, Ltd. in consultation with Chi Chi Rodriguez.
The course is situated in the middle of a mixed use development located
approximately ten miles from the Las Vegas strip at which approximately 1,200
single family residential units have been built and sold, and an additional
3,000 residential units, a 1.2 million square foot regional mall and destination
resort hotel-casino are being planned. The Company does not have any economic
interest in this development. The course is located on approximately 253 acres
which the Company has leased from the developer of the residential community.
See "Item 2. Description of Property."

         Recent Activity
         ---------------

Harbor Links Golf Course - North Hempstead, New York
----------------------------------------------------

         Effective January 27, 1998, the Company entered into a Golf Facilities
Management Agreement (the Management Agreement) with the Town of North Hempstead
in New York (the Town). The Town is constructing a new municipal golf facility
in the Town of North Hempstead, New York which will include an 18-hole golf
course, a 9-hole executive golf course, driving range, clubhouse, maintenance
building, practice and learning center, parking lot and related golf facilities,
five athletic fields, the surrounding cliff areas, and at the discretion of the
Town, a miniature golf course, collectively referred to as the "Facility." The
Company is engaged to manage the Facility for the Town including but not limited
to marketing, maintaining the 18-hole golf course, 9-hole executive course,
driving range, clubhouse and possibly a future miniature golf course. The
Company is required to provide the Town with a performance bond at the Town's
expense (with respect to the premiums) in an amount not less than $1,000,000,
which secures the operational and other responsibilities of the Company and an
initial capital contribution to the Facility of $1,000,000 under the Agreement.
The Company is entitled to receive a return of the initial capital contribution
in five equal annual installments of $200,000 payable on March 1 of each year
commencing March 1, 2001. The Company is also entitled to receive interest

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on the outstanding portion of such initial capital contribution, which has not
been returned to the Company at an interest rate equal to the lessor of 2% above
the prime rate as reported by the Federal Reserve Bank or the actual interest
rate paid by the Company on financing obtained to fund the initial capital
contribution to the facility. Payment of such interest shall be made quarterly
in arrears commencing March 1, 1999. In consideration for the management
services to be provided by the Company, the Town is required to compensate the
Company a base amount of $125,000 per annum and actual out-of-pocket costs,
commencing 60 days prior to the opening of the facility, which is anticipated in
the Summer of 1998. The base amount shall increase by $25,000 every three years
starting in 1999 and additional incentive management fee payable starting in
1999 equal to 10% of the base amount, if the gross revenue for the immediately
preceding calendar year exceeds a specified threshold amount for the preceding
calendar year. The agreement, which has a ten year term expiring on December 31,
2007, can be terminated yearly by the Town upon 30 days written notice to the
Company.

Forest Lakes Golf Club - Sarasota, Florida
------------------------------------------

          On December 17, 1996 the Company consummated the sale of Forest Lakes.
The sale was structured as a sale of substantially all of the assets of Forest
Lakes Limited Partnership. The buyer was BST Associates, an Illinois general
partnership. The cash contract purchase price was $4,000,000 payable in full at
closing. Broker commissions and closing costs relating to the sale totaled
$172,318 resulting in net sale proceeds to the Partnership of $3,827,682.
Included in the Company's consolidated financial statements for the year ended
December 31, 1996 is a gain on the sale of Partnership assets of approximately
$439,000. The Company received cash proceeds of approximately $149,500 in
January 1997 against its Partnership investment of $252,438.

         Under the terms of the Forest Lakes Limited Partnership Agreement, the
sale of all of the Partnership's property and the conversion of all proceeds
into cash requires that the Partnership be dissolved. Accordingly, as General
Partner, the Company dissolved the Partnership in 1997, and made a distribution
of all available cash proceeds to the partners.

New England Country Club - Bellingham, Massachusetts
----------------------------------------------------

         In February 1995, the Company entered into an agreement to manage New
England Country Club in Bellingham, Massachusetts which is a championship
18-hole golf course designed by three-time U.S. Open Champion Hale Irwin. The
management agreement is for a five year term, and can be terminated on ninety
days' notice by either party. As compensation for the Company's services, the
Company is paid 5.0% of the Club's gross revenues and is also paid a monthly
accounting fee.

The Badlands Golf Club - Las Vegas, Nevada
------------------------------------------

         On October 14, 1995 the Company opened for public play the 18-hole
Badlands Golf Club, its initial and flagship golf course in Las Vegas, Nevada
(the "Badlands"). During 1997, the Company completed construction on an
additional nine holes at The Badlands. The Badlands Golf Club includes an
27-hole championship golf course, practice range, and 7,500 sq. ft. clubhouse
and related maintenance facilities. (See Note 9(c) of the Notes to the
Consolidated Financial Statements included in this report regarding proposed
sale of The Badlands Golf Club.)

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The Legends Golf Club - Stonebridge Ranch, McKinney, Texas
----------------------------------------------------------

         On March 12, 1996 the Company signed a purchase and sale agreement and
related documents with Stonebridge Ranch Development Corporation, a residential
development group of the Mobil Land organization, an affiliate of Mobil
Corporation, for the proposed development of an 18-hole or 27-hole championship
golf facility located within the Stonebridge Ranch Development in McKinney,
Texas, approximately 25 miles north of Dallas. The Purchase and Sale Agreement
expired on August 15, 1997, and to date, no development has commenced. During
November, 1996, Westerra Holdings, LLC ("Westerra") purchased and succeeded to
the interest of Mobil Land in the Stonebridge Ranch development.

         The Company is currently negotiating with Westerra. Under the terms of
these negotiations, the Company has agreed to assign any and all rights to the
development to Westerra. In consideration for the assignment, Westerra has
agreed to reimburse the Company's actual costs incurred to date, and to assume
certain unpaid liabilities related to the development. As of December 31, 1997,
the Company has capitalized $323,099 related to this development, which is
included in construction in progress. See Financial Statements set forth on
pages F1 through F28 hereof.

Golftown Practice Center - Saugus, Massachusetts
------------------------------------------------

         During July 1996, the Company entered into an agreement with Golftown,
Inc., a Massachusetts corporation that owns and operates a driving range
facility located in Saugus, Massachusetts, approximately eight miles north of
Boston (the Facility). The Company has entered into an agreement to guaranty a
loan in an amount not to exceed $295,000 made to Golftown, in exchange for a 25%
equity interest in Golftown. Under the terms of the agreement with Golftown and
its lender, the Company has the opportunity to cure any default under the loan,
and in the event of a default, the Company may assume day-to-day management of
the Project and receive a management fee for such services. In addition, the
Company received a pledge of voting rights to a majority of the voting interests
of Golftown, which pledge becomes effective in the event of a default under the
loan being guaranteed by the Company. The President and majority shareholder of
Golftown is Jeffrey Abrams, who is the son of Stanton V. Abrams, President and
Chairman of the Board of Directors of Senior Tour Players Development, Inc. The
driving range opened during August, 1996.

         During 1997 various capital contributions were advanced by Golftown's
stockholders and the Company invested approximately $17,500 which was not
sufficient to maintain its equity ownership resulting in a reduced ownership
interest of 21.8% at December 31, 1997. As of December 31, 1997 the Company had
written its investment down to $0 to reflect the Company's portion of the losses
incurred by Golftown.

Las Vegas International Golf Center - Las Vegas, Nevada
-------------------------------------------------------

         On December 31, 1996 the Company consummated the acquisition, and
simultaneous disposition of certain ownership interests in the Las Vegas Golf
Center, LLC, a Delaware limited liability corporation (the "LLC"), which owns a
golf practice facility located in Las Vegas, Nevada (the "Center"). The Center
is situated on approximately 42 acres of land leased from Clark County, Nevada,
located on the corner of Tropicana and Paradise Avenues, directly across the
street from the McCarran International Airport, and approximately one mile from
Las Vegas Boulevard (the "Strip"). The Center

                                      -5-
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includes a driving range with approximately 120 tee stations on two tiers, a
golf teaching area and a 6,500 sq. ft. clubhouse. The Center opened for business
on January 17, 1997.

         The Company acquired a 21.5% membership interest in the LLC from
unrelated individual shareholders of Golf Centers of America, Inc., a California
corporation, for an aggregate purchase price of $400,000 cash consideration, and
323,289 shares of the Company's common stock, $.001 par value per share ("STPD
Shares"), payable to sellers as follows:

         Cash Consideration     $ 20,000 paid on December 13, 1996
                                $180,000 paid on January 15, 1997
                                $200,000 payable on or before January 15, 1998

         STPD Shares            161,645 shares due on or before January 15, 1997
                                161,644 shares due on or before January 15, 1998

See Item 3. Legal Proceedings

         In addition to the 21.5% membership interest described above, the
Company also acquired a 48.5% membership interest in the LLC from unrelated
individual shareholders of Selleck Properties, Inc., a California corporation,
for an aggregate purchase price of $1,532,050 cash consideration, and 369,547
shares of the Company's Common Stock, which was issued on February 14, 1997.

         All shares issued or payable in connection with these transactions are
restricted securities, as defined in Rule 144 promulgated under the Securities
Act of 1933, as amended. The Company has granted sellers of the interests the
right to demand registration of their Common Stock on a Form S-3 registration
statement or similar Form at any time after May 1, 1997. The Company received
such a request during May 1997, and filed a registration statement which became
effective in August 1997. The sellers of the 21.5% interest and 48.5% interest
have agreed, pursuant to shareholder agreements, to vote their Common Stock for
the slate of directors proposed by management of the Company through December
31, 1998 (in case of the 21.5% interest) or the first to occur of (i) June 30,
1999, or (ii) the date on which Stanton V. Abrams ceases to serve as the
President and Chief Executive Officer of the Company (in the case of the 48.5%
interest).

         Immediately after the acquisition of the 48.5% membership interest, the
Company subsequently sold the 48.5% membership interest to Paul Fireman
("Fireman"), an individual investor, who beneficially owned 250,000 shares of
the outstanding Common Stock as of March 20, 1998, for cash consideration of
$2,167,953. The Company also received a $200,000 consulting fee from Fireman for
services rendered in connection with certain services rendered in connection
with structuring and implementing the transaction, as well as for arranging
certain financing for the LLC. A substantial amount of the cash received from
Fireman financed a significant portion of the total cash consideration paid by
the Company in connection with the Company's acquisition of its interest in the
LLC.

         In consideration of 50,000 shares of Common Stock of the Company,
payable to Fireman, the Company received an option to buy back from Fireman a
13.5% interest in the LLC (the "Option"). The Company did not exercise the
option on or before December 31, 1997; if the Company had exercised the Option,
the price for a 13.5% LLC interest would have been $900,000. If the Company
exercises the Option after December 31, 1997 but on or before December 31, 1998,
the price for a 13.5% LLC interest

                                      -6-
<PAGE>   7

shall be $1,075,000. If the Company exercises the Option after December 31, 1998
but on or before December 31, 1999, the purchase price for a 13.5% LLC interest
shall be $1,350,000. In 1997, the Company wrote off the carrying value of the
Option because it has no intent to exercise.

         Additionally, in consideration of certain consulting services and
modification of existing contractual rights relating to the acquisition of the
Company's 21.5% membership interest in the LLC and the financing of the golf
practice facility owned and operated by the LLC, the Company issued in May 1997
to the Ranchito Company, LLC (Ranchito), 50,000 shares of Common Stock of the
Company. Ranchito is the owner of the remaining 30% membership interest in the
LLC which was not acquired on December 31, 1996.

         The Company has been designated the Managing Member of the LLC, and is
responsible for the day-to-day management, marketing, and operation of the
Center. The Company receives a management fee equal to 5% of gross revenues
generated by the LLC, and is reimbursed for certain accounting and out-of-pocket
expenses.

Brad Faxon Golf Center - Cranston, Rhode Island
-----------------------------------------------

         During 1997, the Company was unsuccessful in its attempts to negotiate
a lease with the landowner of the proposed site of a family golf and recreation
center in Cranston, Rhode Island. Accordingly, the Company has halted all
engineering, legal and permitting costs associated with this development. As of
December 31, 1997, all costs incurred to date, associated with this proposed
development have been expensed. (See Item 6 - Results of Operations.)

         Business Strategy
         -----------------

         Effective March 16, 1998, the Company announced that it has received a
proposal from an outside party to purchase The Badlands Golf Club, in Las Vegas,
Nevada, and that it has engaged an investment banking firm to assist the Company
in evaluating this proposal, and to assess additional alternatives. Accordingly,
the Company's current business strategy is to concentrate the Company's efforts
on evaluating this potential sale transaction. Furthermore, in light of this
potential sale transaction the Company has temporarily suspended the pursuit of
any new development deals, and will concentrate its efforts on its existing
owned and managed properties (see Item 2 Properties), and will consider other
alternative strategies as events unfold.

Employees
---------

         As of March 20, 1998, the Company had 85 full time employees, including
five assigned to the Company's headquarters in Boston, Massachusetts, 67 at The
Badlands Golf Club in Las Vegas, Nevada, and 13 assigned to the Las Vegas
International Golf Center. The Company intends to maintain a streamlined
business organization by continuing to manage the Company with the minimum
number of salaried executive employees possible.

Government Regulation
---------------------

         Development and operation of golf course facilities and golf practice
centers are subject to a variety of land use, zoning, and licensing regulations
at the state and local level, as well as

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environmental regulations at the federal and state level. The Company believes
it is currently in material compliance with all such applicable laws, rules and
regulations. The sanctions for failure to comply with such laws, rules and
regulations include denial of the right to conduct business, significant fines
and/or penalties, as well as the costs for remediation of environmental
problems. Additionally, a change in such laws, rules or regulations could
adversely affect the Company's business.

         The Company is subject to the Fair Labor Standards Act and various
state laws governing such matters as minimum wage requirements, overtime and
other working conditions and citizenship requirements. In addition, at the
Company's courses where alcoholic beverages are served, the Company will be
subject to certain state "dram-shop" laws, which provide a person injured by an
intoxicated individual the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated individual.

ITEM 2.  PROPERTIES.
-------  -----------

         THE BADLANDS GOLF CLUB. The Badlands is located in Las Vegas, Nevada
and is 100% owned by The Badlands Golf Club, Inc., a wholly owned corporate
subsidiary of the Company. This 27-hole championship golf course, includes a
driving range, clubhouse, and maintenance facilities. The initial 18 holes was
completed and opened for play on October 14, 1995. The clubhouse and maintenance
facilities were completed in September, 1996. The additional nine holes was
completed and opened for public play on September 25, 1997. The approximately
253 acres of land on which the course is situated is leased under two land
leases expiring in July, 2045. Both leases contain four extension options of ten
years each. The property is subject to a first mortgage in favor of
NationsCredit. The Badlands has a full liquor license.

         LAS VEGAS INTERNATIONAL GOLF CENTER. The Golf Center is a state-of-the
art golf practice center located in downtown Las Vegas, at the corner of
Paradise and Tropicana Avenues, across the street from the Thomas and Mack
Center at the University of Las Vegas Nevada, and also across the street from
the entrance to McCarran International Airport. The Center has 120 tee stations,
46 natural grass tees and 74 artificial turf fees, 24 of which are on a second
tier. The range is fully lighted, and is presently operating 24-hours per day.
Approximately 50 of the tees are shaded and equipped with cooling misters for
use during the desert summer season, and many are equipped with heaters for
24-hour use during the cooler months. The Center's landing area for the range is
over 300 yards long and 200 yards wide, and features eight target greens. The
Center also has a 10,000 sq. ft. putting green and a short game practice area
with practice greens, sand traps, and a chipping area. There is presently a
6,500 sq.. ft clubhouse which contains a food & beverage snack area, golf
school, control desk, and administrative offices. The Golf Center has entered
into a long-term lease agreement with Pro Golf of America for a retail golf
store containing approximately 20,000 sq. ft., which was constructed as an
addition to the existing clubhouse. The retail store is expected to open in the
Spring of 1998. The cost of construction was funded in part through proceeds of
a construction loan provided by US Bank of Nevada, and in part through cash
equity provided by the lessee, Pro Golf of America. The Center is owned by Las
Vegas Golf Center, LLC, a Delaware Limited Liability Company (the "LLC"), in
which the Company holds a 21.5% ownership interest. The Company is responsible
for the management, marketing, and day-to-day operation of the Center under a
management agreement with the LLC.

         GOLFTOWN. Golftown is a driving range complex located on Route 1 in
Saugus, Massachusetts, approximately 8 miles North of Boston. The facility is
operated by its majority stockholder, Golftown,

                                      -8-
<PAGE>   9

Inc., a Massachusetts corporation. The Company owns a 21.8% ownership interest
in the property. Golftown encompasses 50 lighted tee areas on two levels, two
practice greens, two sand bunkers, and a chipping area. Golftown opened during
August 1996.

         NEW ENGLAND COUNTRY CLUB. The New England Country Club is an 18-hole
championship golf course designed by Hale Irwin and located in Bellingham,
Massachusetts. The Club is managed by the Company under a 5-year management
agreement which commenced March 1, 1995, and is cancelable by either party on 90
days' notice. Under the Agreement, as amended in 1996, the Company receives 5.0%
of gross revenues, plus a monthly fee for accounting services.

         HARBOR LINKS GOLF COURSE - NORTH HEMPSTEAD, NEW YORK. The Harbor Links
Golf Course is a newly constructed 18 hole golf course, 9-hole executive golf
course, driving range, clubhouse, maintenance building, practice and learning
center, five athletic fields and related golf facilities (the "Facility"). The
Facility is managed by the Company under a ten year management agreement which
commenced in January 1998. Under the agreement the Company receives a base
compensation of $125,000 per annum commencing 60 days prior to the opening of
the facility, which is anticipated to be in the summer of 1998. The base amount
shall increase $25,000 every three years starting 1999.

         HEADQUARTERS OFFICES. The Company maintains its corporate headquarters
at 822 Boylston Street, Suite 300, Chestnut Hill, Massachusetts in premises
leased through March 31, 2003. Annual rental payments are $30,000 commencing
April 1, 1998, and increase 4% per year through the term of the lease. In
addition, the Company is responsible for a share of real estate taxes increases
over the base year (1997) amount, up to a maximum of 9% in any year.

         Each of the properties owned or controlled by the Company is covered by
appropriate property and liability insurance, and at insurance levels deemed
appropriate by management. Coverage at all properties include property and
liability, automotive, and workers compensation, and at projects with
construction in process, builders risk insurance. The Company also maintains
Officers and Directors Liability coverage in the amount of $5,000,000.

ITEM 3.  LEGAL PROCEEDINGS.
-------  ------------------

         On March 3, 1998, the Company brought an action in the United States
District Court for the District of Nevada against unrelated individual
shareholders of Golf Centers of America, Inc., a California corporation, (the
"Sellers") seeking damages and declaratory relief and alleging breach of
contract, fraud and misrepresentation and breach of warranty under the terms of
an agreement dated November 29, 1996 between the Sellers and the Company by
which the Company purchased the Seller's membership interests in Las Vegas Golf
Center, LLC. The Company expects the Sellers to defend the Complaint with
counterclaims seeking to require the Company to make a payment due under the
Agreement in the amount of $200,000 and to deliver certain shares of stock of
the Company, which were due to be issued by January 15, 1998. See Item 1.
Description of Business - Las Vegas International Golf Center, Las Vegas,
Nevada.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
-------  ------------------------------------------------------

         No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, whether through the
solicitation of proxies or otherwise.

                                      -9-
<PAGE>   10

                                     PART II

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

         The Company's Common Stock has been traded on the Boston Stock
Exchange ("BSE") under the symbol SEN and on the National Association of
Securities Dealers Automated Quotation System Small-Cap Market (the "NASDAQ
Small-Cap Market") under the symbol SRTR since November 16, 1994. Prior to that
time, there was no public market for the Company's Common Stock. The table below
presents the range of high and low closing prices for the Company's Common Stock
by quarter since November 16, 1994 (the date of the Company's initial public
offering) through December 31, 1997:

         1994                                               High          Low
         ----                                               ----          ---

         4th Quarter (Beginning Nov. 16, 1994)............ $5.00         $2.25

         1995
         ----

         First Quarter.................................... $3.25         $1.8125
         Second Quarter................................... $4.50         $2.00
         Third Quarter.................................... $5.50         $3.75
         Fourth Quarter................................... $5.125        $3.00

         1996
         ----

         First Quarter.................................... $3.75         $3.00
         Second Quarter................................... $4.6875       $3.125
         Third Quarter.................................... $3.75         $2.375
         Fourth Quarter................................... $2.75         $1.9375

         1997
         ----

         First Quarter.................................... $2.625        $1.6875
         Second Quarter................................... $2.8125       $1.625
         Third Quarter.................................... $2.0625       $1.75
         Fourth Quarter................................... $2.5625       $1.50

         As of March 20, 1998, the Company had in excess of 1,000 stockholders
of record.

         The Company has paid no cash dividends since its inception on April 6,
1994. The Company currently intends to retain future earnings, if any, to invest
in new development and acquisition opportunities and, therefore, does not
anticipate paying any cash dividends for the foreseeable future. Any future
payment of dividends will be determined by the Company's Board of Directors and
will depend on the Company's financial condition, results of operations and
other factors deemed relevant by its Board of Directors.

                                      -10-
<PAGE>   11

         During 1996, the Company issued or agreed to issue a total of 767,836
shares of Common Stock without registration under the Securities Act of 1933, as
amended (the "Securities Act"). All of such shares were issued as "restricted
securities" as defined in Rule 144 under the Securities Act. Of these shares,
742,836 were issued or agreed to be issued in connection with the Company's
acquisition of its interest in the Las Vegas Golf Center, LLC, and 25,000 were
issued under an agreement for design services being rendered at The Badlands.
During 1997, the Company issued an additional 50,000 shares of common stock in
connection with the purchase of the investment in the Las Vegas Golf Center,
LLC. (See Item 1 - Description of Business - Las Vegas International Golf
Center.) Effective as of August 21, 1997, the Company registered all 767,836 of
the restricted shares under the Securities Act for purposes of potential resale
on the NASDAQ Small-Cap Market.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
-------  -----------------------------------------------------------

RISK FACTORS AND CAUTIONARY STATEMENTS

         This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected, anticipated, or implicit, in the forward-looking statements as a
result of the risk factors set forth below and elsewhere in this report.

         The industry in which the Company competes is highly competitive and
capital intensive. The Company's future growth and profitability will be
dependent upon future developments and / or acquisitions of additional golf
courses and golf practice facilities. The number of attractive and profitable
acquisition and development opportunities may be limited and the Company may
have to compete with other potential buyers whose financial and management
resources may be substantially larger than those of the Company. There can be no
assurance that the Company will be successful in developing or acquiring any
particular project or that any projects acquired or developed by the Company
will be profitable. Additionally, the Company will be dependent upon third-party
funding in the form of equity participation and/or debt to finance its
development and acquisition of future golf courses and golf practice facilities.
Until funding is obtained for new golf courses and golf practice facilities, the
Company may be unable to proceed with those projects.

         In addition to competing with the Company at the acquisition and
development stage, competitors could also acquire and/or develop golf courses
and/or golf practice facilities in the same market as a Company facility, and
put the Company at a competitive disadvantage with respect to pricing and costs
of operation. The Company's future revenue may also be significantly dependent
on industry factors which are beyond its control such as the availability of
discretionary income for golf, a sustained level of popularity for golf, and
shifting consumer preferences.

LIQUIDITY AND CAPITAL RESOURCES

         The Company believes that is has sufficient cash and committed
financing to meet its current operating needs.

         At December 31, 1997, the Company had $177,174 in cash and cash
equivalents. Additionally, in January 1998, the Company qualified for $750,000
of the $1,000,000 Earnout Advance from

                                      -11-
<PAGE>   12

NationsCredit (defined below) of which the Company has borrowed approximately
$435,000 through March 20, 1998.

         On November 15, 1996, The Badlands Golf Club, Inc., a wholly owned
corporate subsidiary of the Company, entered into a loan agreement with
NationsCredit, a NationsBank company, for a construction and permanent loan in
the amount of $5,000,000. At closing, the loan provided the Company with
$4,000,000 to fund the costs of construction of an additional nine holes at The
Badlands, which was completed in September 1997.

          In addition to the $4,000,000 made available at closing, the loan
provides for the availability to the Company of an additional $1,000,000 in
"Earnout Advances". In January 1998, the Company had qualified for $750,000 of
the Earnout Advance and borrowed approximately $435,000. The remaining earnout
funds will be made available to the Company over a period of thirty months
following the loan closing so long as certain operating results at The Badlands
are achieved, including minimum debt service coverage ratios, and other revenue
and cash flow criteria, as defined in the loan agreement. The construction loan
is subject to a 20-year amortization, which began on December 1, 1996 and has a
fixed interest rate of 10.95%.

         It is the Company's practice to lease golf carts, turf maintenance
equipment, office equipment, and other golf equipment at its owned golf
facilities. The Company is leasing substantially all of its turf maintenance
equipment and certain other furniture, fixtures and equipment at The Badlands
Golf Club under various capital lease obligations. As of December 31, 1997 the
Company had approximately $650,000 outstanding under these capital lease
agreements. The Company has leased its golf cart fleet at The Badlands Golf Club
under an operating lease. See Notes To Consolidated Financial Statements
included in this report.

PLAN OF OPERATION.
------------------

         The Company's plan of operation for the next twelve months with regards
to existing properties will include continued ownership and operation of the
27-hole golf facility at The Badlands Golf Club in Las Vegas (See Note 9 (c) of
the Notes to the Consolidated Financial Statements included in this report
regarding proposed sale of The Badlands Golf Club.); continued marketing and
management of the Las Vegas International Golf Center, in which the Company has
a 21.5% ownership interest, and serves as the day-to-day manager of the
facility; completion of the planned improvements and amenities at the Las Vegas
International Golf Center, including a 20,000 sq. ft. clubhouse addition which
will be leased to Pro Golf of America, Inc., for the sale of golf merchandise;
continued management of New England Country Club in Bellingham, Massachusetts
which the Company operates under a management contract which commenced in March,
1995; and the management of the newly constructed Harbor Links Golf Course in
North Hempstead, New York, scheduled to open in the Summer of 1998, which the
Company signed to a 10-year management contract commencing January 1998.

RESULTS OF OPERATIONS
---------------------

         The Company was deemed to be a development stage company as described
in Statement of Financial Accounting Standards No. 7, Accounting and Reporting
by Development Stage Enterprises, from its inception on April 6, 1994 until the
fourth quarter of 1995 when The Badlands Golf Club commenced full operations.
Development stage status was appropriate prior to the fourth quarter of

                                      -12-
<PAGE>   13

1995 since the Company's operations had generated an insignificant amount of
revenue since the date of inception and the Company had devoted most of its
activities and efforts to establishing the business, raising capital, financial
planning, and employee training.

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

         NET REVENUES for the year ended  December 31, 1997 totaled  $5,376,947
compared to $6,697,425 for the year ended December 31, 1996, a decrease of
$1,320,478.

         The major reason for the decrease, which was anticipated by management,
was due to the sale of the Forest Lakes Golf Club during December 1996, offset
by increased sales at The Badlands Golf Club. During 1996, Forest Lakes
generated revenues of $1,980,322 compared to $0 in 1997. Revenues at The
Badlands in Las Vegas, Nevada during 1997 totaled $5,186,000, versus $4,302,370
in 1996, an increase of $883,630 (or 21%).

         Corporate revenues in 1997 totaled $190,947 and included management and
accounting fees related to the New England Country Club of approximately
$137,000, and Las Vegas Golf Center, LLC of approximately $53,600. During 1996
corporate revenues totaled $414,733, of which $94,032 related to the New England
Country Club management agreement, and $312,500 were nonrecurring revenues
generated form consulting and development fees related to the Las Vegas Golf
Center, LLC.

         OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES for the year ended
December 31, 1997 were $6,729,167 compared to $5,752,139 for the year ended
December 31, 1996, an increase of $977,028. Badlands operating expenses totaled
$4,528,072 during 1997 compared to $3,544,640 during 1996, an increase of
$983,432. The increased costs are primarily due to the increased sales volume
associated with the opening of our clubhouse in September 1996 and the
completion of the third nine holes in September of 1997. Forest Lakes expenses
during 1996 totaled $978,660 compared to $0 during 1997. Forest Lakes was sold
by the Company on December 16, 1996.

         STPD corporate expenses for the year ended December 31, 1997 totaled
$2,201,095 compared to $1,228,839 during 1996, an increase of $972,256. The
majority of the increase is due to a $645,000 reserve, established in 1997, in
anticipation of a possible write down of the Company's investment in golf
facilities and related guarantees, a $72,000 charge to write off the Company's
option to purchase an additional 13.5% of the Las Vegas Golf Center, LLC,
$101,286 incurred in connection with a proposed development of golf practice
centers in Cranston, Rhode Island and $65,919 of costs associated with a
proposed driving range and golf entertainment center in Houston, Texas.

         NONCASH COMPENSATION CREDIT - MANAGEMENT STOCK OPTIONS. Effective June
20, 1994, the Company entered into employee stock option agreements with certain
officers and key employees granting them options to acquire up to 1,111,111
shares of the Company's common stock for an exercise price of $1.00 per share.

         During the year ended December 31, 1996 the Company recorded a non-cash
compensation credit adjustment of $1,250,000 representing an adjustment to the
reserve initially established in 1995 to account for the probable future vesting
of these options. At December 31, 1996, the Company's balance sheet reflected an
accrual of $1,250,000 including in stockholders' equity relating to the
management options. The $1,250,000 balance at December 31, 1996 was calculated
based on the market price of the

                                      -13-
<PAGE>   14

Company's common stock on December 31, 1996 ($2.125), less the exercise price of
$1.00 per share, multiplied by the number of shares subject to the options
(1,111,111).

         At December 31, 1996, 555,555 (representing 50%) of the management
options issued in 1994 vested, as the Company achieved certain financial
benchmarks called for under the option agreements for the year ended December
31, 1996. On March 19, 1997 a vote was adopted by the Company's Compensation
Committee, and then ratified by the Board of Directors, to amend the option
agreements in order to delete the financial benchmarks as described in the
option agreements. The Board voted to accept the option holders' delay of 10% of
their vested option shares and to replace the benchmarks with an extended
vesting schedule, based on continuing employment with the Company. Under the
revised vesting schedule, 40% or 444,445 of the options vested December 31,
1996, and 60% or 666,666 vested pro rata on December 31, 1997, 1998 and 1999. At
the time these options are exercised, the proceeds will be credited to the
capital accounts. Except as described below, this change will result in no
further charges or credits against earnings related to these management stock
options. During 1997 one of the officers, who had been granted a total of 55,555
options, resigned. As of December 31, 1997, a total of 22,222 (or 40%) of the
officer's options had vested. Accordingly, during 1997, the Company recorded a
$37,500 noncash compensation credit to reverse the compensation expense related
to the unvested options.

         During 1997 and 1996, the Company also recorded a noncash compensation
charge of $4,242, and $29,688, respectively, relating to the stock options
granted to an executive officer of the Company during 1996. See Note 5 (g) of
Notes to Consolidated Financial Statements.

         INTEREST EXPENSE totaled $827,738 for the year ended December 31, 1997
compared to $785,607 during the year ended December 31, 1996, an increase of
$42,131. Forest Lakes interest totaled $313,022 in 1996 versus $0 in 1997.
Interest expense relating to The Badlands totaled $827,738 during 1997 versus
$472,585 during 1996. Interest at The Badlands relates to a first mortgage of
the golf course; a working capital line of credit; an obligation incurred in
connection with the purchase of water rights; and interest on capital leases
relating to turf maintenance equipment, furniture, fixtures, and other
equipment. The Company also incurred and capitalized approximately $147,000 of
interest relating to construction of the additional nine holes at The Badlands
which was completed in September of 1997. See Notes 3 and 4 to the Consolidated
Financial Statements included herein.

         INTEREST INCOME totaled $6,502 during the year ended December 31, 1997
compared to $18,151 in 1996.

         EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES. On December 31, 1996 the
Company purchased and retained a minority 21.5% ownership interest in the Las
Vegas Golf Center (the "Center"), a golf practice center located in Las Vegas,
Nevada. The Center opened for business on January 17, 1997. The Company accounts
for its ownership interest in the Center under the equity method. Under this
method, the original investment in the Center was recorded at cost and is
adjusted periodically to recognize the Company's share of earnings or losses
after the date of acquisition. For the year ended December 31, 1997, the Company
recorded a $190,331 loss representing the Company's pro rata share in the
Center's startup operations. See Note 2(b) to Consolidated Financial Statements
included herein. At December 31, 1997 the Company had capitalized $1,057,242
related to this investment, which is carried as Investment in Golf Facilities on
the balance sheet included with the Consolidated Financial Statements included
herein. See Item 3 - Legal Proceedings

                                      -14-
<PAGE>   15

         Also in 1997 the Company invested $17,646 in Golftown, Inc., a golf
driving range facility in Saugus, Massachusetts, in which the Company has a
21.8% ownership interest. As of December 31, 1997, the Company had written its
investment down to zero to reflect the Company's portion of the loss incurred by
Golftown.

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------  --------------------------------------------

         The information required by this item is incorporated by reference to
the Financial Statements set forth on pages F-1 through F-28 hereof.

RISK FACTORS AND CAUTIONARY STATEMENTS

         When used in this Form 10-KSB and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases,
quarterly newsletters and broker conference calls, and in oral statements made
with the approval of an authorized executive officer, the words or phrases "will
likely result", "are expected to", "will continue", "is anticipated",
"estimate", "project", and similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, including those discussed under the caption "Risk Factors and
Cautionary Statements" at the beginning of Item 2 of this report. These risks
and uncertainties could cause actual results to differ materially from
historical results and those results and events anticipated or projected.

         The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company also wishes to advise readers that the factors contained in this report
could affect the Company's financial performance and could cause the Company's
actual results and financial position to differ materially from any opinions or
statements expressed with respect to future periods in any current statements.

         The Company will not undertake and specifically declines any obligation
to publicly release the results of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

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

         Not applicable.

                                      -15-
<PAGE>   16

                                    PART III
                                    --------

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

         The current directors, executive officers and significant employees of
the Company are as follows:

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

Stanton V. Abrams        56       President, Chief Executive Officer        III
                                  and Chairman the Board of Directors

Michael J. Meluskey      35       Treasurer, Secretary, Director            II

Brendan Kissane          30       Controller                                N/A

Stanley Bernstein        54       Director                                  III

Arnold Mullen            51       Director                                  III

Robert L. Seelert        55       Director                                  II

Alan Stanzler            55       Director                                  I

         The Company currently has six directors. Messrs. Bernstein, Mullen, and
Seelert have served as independent directors since January 1995. Mr. Stanzler
has been an independent director since June 1995. All directors were reelected
at the annual stockholders' meeting on June 27, 1997. Effective with the June
27, 1997 Annual Meeting of Shareholders, the Directors of the Company were
divided into three classes, the first (Class I) are elected for a term of one
year, the second (Class II) are elected for a term of two years, and the third
(Class III) are elected for a term of three years.

         The following is a brief account of the business experience of each
director and executive officer named above.

STANTON V. ABRAMS. Mr. Abrams, founder of the Company, has served as President
and Chief Executive Officer and Chairman of the Board of the Company since its
organization in April 1994. From 1977 to 1982 Mr. Abrams was involved in
developing various real estate projects from housing for the elderly to
condominium conversions. During 1982 and prior to entering the golf industry,
Mr. Abrams was Vice President of Marketing, for the A.D. Gosman Company, a real
estate development company serving New England. From 1972 to 1977 Mr. Abrams was
Vice President of Development of The Drucker Company of Boston, a real estate
development firm specializing in shopping centers and hotels. Beginning in late
1982 when the Senior PGA Tour was in its infancy, Mr. Abrams served as the
exclusive representative to many of the Senior Tour golfing professionals,
including Sam Snead, Billy Casper, Julius Boros, Bob Goalby, Bob Toski and Jerry
Barber to establish a relationship with a golf course which would serve as their
home base and practice site as they prepared for the emerging Senior PGA Tour.
From 1983 to May 15, 1994, Mr. Abrams was president of Senior Tour Players,
Inc., a golf

                                      -16-
<PAGE>   17

real estate investment and marketing company which he founded, and of which he
remains the sole owner, whose focus has been on Senior Professional Golfers and
the marketing potential associated with their name recognition and popularity.
Mr. Abrams, a former two-time Rhode Island State Amateur Champion, with a
background in golf, real estate, and law has been instrumental in the promotion,
management and acquisition of numerous golf projects both nationally and
internationally. Mr. Abrams holds a B.A. degree, cum laude from Harvard College
and a J.D. degree from the University of Pennsylvania Law School. He attended
Harvard Graduate School of Design's selected courses in golf course design.

MICHAEL J. MELUSKEY. Mr. Meluskey has served as Treasurer and Secretary and
Director of the Company since its organization in April 1994. From 1986 to the
present, Mr. Meluskey has been closely involved in all aspects of the operations
of Senior Tour Players, Inc., currently as President. His responsibilities have
included identifying golf course acquisitions, managing STP-owned courses,
financial budgeting and planning, and serving as tournament director for
STP-organized events. He holds a B.S. degree in accounting, cum laude, from
Northeastern University.

BRENDAN KISSANE. Mr. Kissane has served as the Company's Controller since June
1997. From May 1996 through June 1997, Mr. Kissane was an Audit Manager with the
accounting firm of Leonard Mulherin & Greene P.C. where he specialized in
privately held businesses and initial public offerings. Prior to that Mr.
Kissane was an In-Charge Auditor for ITT Sheraton Corporation, in the Internal
Audit Department. From 1990 to May 1995 Mr. Kissane was with the accounting firm
of Ranalli & Company where he was employed as a Senior Auditor. Mr. Kissane
holds a B.S. in Accounting from Bentley College.

STANLEY BERNSTEIN. Mr. Bernstein, a Director of the Company since January 1995,
has been Chairman of the Board and Chief Executive Officer of the Biltrite
Corporation since 1985. He is also Chairman of the Board of Alliance
International Group, Inc. and a director of K-Swiss, Inc. Mr. Bernstein holds an
A.B. from Brown University and a J.D. from the University of Pennsylvania Law
School.

ARNOLD MULLEN. Mr. Mullen, a Director of the Company since January 1995, is the
Chief Executive Officer of PFP Associates, a private investment and financial
management firm. He has been a financial consultant and business advisor since
1973. Mr. Mullen, a CPA, began his career 25 years ago with Arthur Andersen &
Co., specializing in taxation. He was an assistant professor of accounting and
holds a BBA degree and an MBA degree from the University of Wisconsin at
Milwaukee.

ROBERT L. SEELERT. Mr. Seelert, a Director of the Company since January 1995,
has been Chief Executive Officer of Cordiant plc, an advertising and marketing
communications firm, since July 1995. Mr. Seelert was a private investor from
February 1994 to July 1995, President and Chief Executive Officer of Kayser-Roth
Corporation, a legwear company from May 1991 to February 1994. He is also a
director of Cordiant plc and the Stride Rite Corporation. Mr. Seelert holds a
B.A. degree from Harvard College and an M.B.A. degree from the Harvard Business
School.

ALAN STANZLER. Mr. Stanzler, a Director of the Company since June 1995, is an
attorney at law and a member of the firm of Davis, Malm & D'Agostine, P.C.
Boston, Massachusetts. Mr. Stanzler holds an A.B. degree from Brown University
and a J.D. degree from Harvard Law School.

                                      -17-
<PAGE>   18

         Stanton V. Abrams failed on one occasion with respect to fiscal 1997 to
make a timely report on Form 4 of a sale of the Company's Common Stock. Mr.
Abrams subsequently filed a Form 4 reporting such transaction.

ITEM 10. EXECUTIVE COMPENSATION.
-------- -----------------------

SUMMARY COMPENSATION TABLE

         The following table sets forth the compensation paid by the Company for
the years ended December 31, 1997, 1996, and 1995, to the Chief Executive
Officer and to each of the individuals who served as an executive officer during
such period.

<TABLE>
<CAPTION>
                                                                                        Long-Term
                                                        Annual Compensation             Compensation
                                                     --------------------------         Awards (1)
Name & Principal Position           Year             Salary ($)       Bonus ($)         Stock Options (#)
-------------------------           ----             ----------       ---------         -----------------

<S>                                  <C>             <C>              <C>               <C>
Stanton V. Abrams
Chairman, Chief Executive           1995             $196,007         ---               ---
Officer and President               1996             $212,308         ---               ---
                                    1997             $212,132         ---               ---

Lawrence P. Butler (2)
Chief Financial Officer             1995             $ 66,154         $15,000           ---
                                    1996             $106,629         ---               120,000(2)
                                    1997             $ 78,888         ---               ---

Richard B. Rogers (3)
Senior Vice President               1995             $54,999          ---               ---
                                    1996             $99,423          ---               30,000(3)
                                    1997(3)          $53,953          ---               ---

Michael J. Meluskey
Treasurer & Secretary               1995             $59,538          $10,000           ---
                                    1996             $78,654          ---               10,000
                                    1997             $75,750          ---               ---

Brendan Kissane
Controller                          1997(4)          $31,731          ---               ---
</TABLE>


(1)      In addition to the option awards presented in the table, at its
         inception in 1994 the Company issued 568,413, 35,000 and 106,500
         restricted shares of the Company's Common Stock to Stanton V. Abrams,
         Richard B. Rogers, and Michael J. Meluskey, respectively. At that time,
         there was no market for the Company's Common Stock. Such shares in each
         case had a value at December 31, 1997 (based on the closing price of
         $2.0625 for such shares as reported on the NASDAQ Small-Cap Market on
         December 31, 1997) of $1,172,352 (Mr. Abrams), $72,188 (Mr. Rogers),
         and $219,656 (Mr. Meluskey), respectively.

(2)      Mr. Butler, who had joined the Company on March 6, 1995, resigned from
         the Company in June 1997. Accordingly, 91,428 of the options granted to
         Mr. Butler in 1996 terminated.

                                      -18-
<PAGE>   19

(3)      Mr. Rogers resigned from the Company in May 1997. As a result, 33,333
         of the 55,555 options granted to Mr. Rogers in 1994, and the 30,000
         options granted in 1996 terminated.

(4)      Mr. Kissane joined the Company in June 1997.

OPTION GRANTS, OPTION EXERCISES AND FISCAL YEAR-END VALUES

         No stock options were granted during 1997 to any executive officers of
the Company. No executive officers exercised options during 1997. The following
table sets forth, for each of the executive officers named in the Summary
Compensation Table above, the year-end value of unexercised options:

                            Number of                  Value of Unexercised
                       Unexercised Options             In-The-Money Options
      Name               at Year-End (1)           at Year-end(1)(2)(3)(4)(5)(6)
      ----               ---------------           -----------------------------

Stanton V. Abrams           873,890                           $928,508

Richard B. Rogers            22,222                           $ 23,611

Michael J. Meluskey         176,666                           $177,083

Lawrence P. Butler           28,572                           $ 30,358

(1) At December 31, 1997 675,128 options in the above table was currently
exercisable.

(2) Based on the closing price for the underlying Common Stock on the NASDAQ
Small-Cap Market on December 31, 1997 ($2.0625) minus the exercise price of the
in-the-money options (in each case $1.00 per share), multiplied by the number of
underlying shares. See Note 5 of Notes to Consolidated Financial Statements and
Item 6. Management's Discussion and Analysis or Plan of Operation - Noncash
Compensation Charges and Credits.

(3) Does not include the value of 60,000 out-of-the money stock options issued
during December, 1996.

(4) For each of the named individuals, the in-the-money options vest and become
exercisable in the following amounts :

                               Shares Vested     Shares Vested     Shares Vested
         Option Holder         at 12/31/97       at 12/31/98       at 12/31/99
         -----------------------------------------------------------------------

         Stanton V Abrams          524,334           174,778           174,778
         Michael J Meluskey        100,000            33,333            33,333
         Richard B Rogers           22,222               ---               ---
         Lawrence P Butler          28,572               ---               ---

(5) During May 1997, Mr. Rogers resigned from the Company resulting in the
termination of (i) 33,333 of the 55,555 in-the-money options granted in 1994,
and (ii) the entire 30,000 out-of-the-money options granted in 1996.

(6) During June 1997, Mr. Butler resigned from the Company resulting in the
termination of (i) 71,428 of the 100,000 in-the-money options granted in 1996,
and (ii) the entire 20,000 out-of-the-money options granted in 1996.

                                      -19-
<PAGE>   20
LONG-TERM INCENTIVE PLAN AWARDS

         The Company's stock option plan was adopted by the Board of Directors
and stockholders of the Company as of June 20, 1994 as an incentive for officers
and other key employees. The stock option plan will be administered by the
Independent Directors. The Independent Directors will have sole discretion to
determine employees eligible for grants of options and all terms of the options.
The stock option plan enables the Independent Directors to grant either
incentive or non-qualified stock options. Generally, the exercise price of
incentive stock options must be at least 100% of fair market value of the Common
Stock on the date of grant, while non-qualified stock options may have an
exercise price of nominal consideration. The stock option plan reserves an
aggregate of 350,000 shares which may be subject to options. To date, there have
been granted 195,000 options under the Plan. During 1997, three of the employees
who had been granted options under the Plan resigned from the Company, resulting
in the termination of 131,428 options.

DIRECTOR COMPENSATION

         On November 10, 1996, the Board of Directors of the Company adopted,
subject to shareholder approval, the 1996 Non-Employee Director Stock Option
Plan, (the Nonemployee Plan) which was subsequently approved at the June 27,
1997 Annual Meeting of Shareholders. Under the Nonemployee Plan, options for a
maximum of 200,000 shares of common stock may be granted. On December 11, 1996,
the Compensation Committee granted stock options for the purchase of 40,000
shares of common stock to four members of the Board of Directors under the
Nonemployee Plan. The options were granted with an exercise price of $2.1875 per
share, the fair market value on the date of grant and vested immediately. On
January 1, 1997, the Compensation Committee granted stock options for the
purchase of an additional 20,000 shares of common stock to the four members of
the Board of Directors number the Nonemployee Plan. The options were granted
with an exercise price of $2.125 per share, the fair market value on the date of
the grant, and vest immediately.

         Other than the stock option discussed herein, the Company's Directors
do not receive any cash compensation for service on the Board of Directors or
any committee thereof, but Directors may also be reimbursed for certain
out-of-pocket expenses incurred in connection with attendance at Board and
Committee meetings.

EMPLOYMENT CONTRACTS

         The Company presently does not have any employment agreements.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-------- ---------------------------------------------------------------

         The following table sets forth certain information known to the Company
regarding the beneficial ownership of the Common Stock of the Company as of
March 20, 1998 by: (1) each person known by the Company to be the beneficial
owner of more than 5% of its outstanding capital stock; (2) each director of the
Company; (3) each of the current executive officers of the Company named in the
Summary Compensation Table under Executive Compensation, and (4) all current
directors and executive officers of the Company as a group.

                                      -20-
<PAGE>   21

         Name and Address of           Beneficially           Percentage of
         Beneficial Owner (1)            Owned (5)        Outstanding Shares (6)
         --------------------            ---------        ----------------------

         Stanton V. Abrams (2)           1,042,681                23.16%

         Stanley Bernstein                 320,000                 7.11%

         Paul Fireman (3)                  250,000                 5.55%

         Donald A. Weber                   274,341                 6.09%

         Michael J. Meluskey               208,500                 4.63%

         Robert L. Seelert                  18,000                  .40%

         Arnold Mullen (4)                  50,000                 1.11%

         Alan Stanzler                      20,000                  .44%

         All directors and
         officers as a group             1,659,181                36.85%
           (6 persons)

(1) Except as set forth below, each person listed has sole voting and investment
power with respect to the shares shown. The business address of each of these
individuals is 822 Boylston Street, Suite 300, Chestnut Hill, Massachusetts,
02167.

(2) Exclusive of 4,171 shares owned by member of Mr. Abrams' immediate family.

(3) Includes 30,000 shares and warrants owned by a partnership of which Mr.
Fireman is a partner.

(4) Includes 30,000 shares and warrants owned by a partnership of which Mr.
Mullen is a partner.

(5) Includes shares under management options and options granted under the
Company's stock option plan and Nonemployee Directors Stock Option Plan,
provided that such options were vested as of December 31, 1997 and exercisable
within 60 days.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------- ----------------------------------------------

         In April 1994 the Company issued 568,413 shares to Stanton V. Abrams,
the Company's Chief Executive Officer and Chairman of the Board of Directors,
and 106,500, 35,500 and 9,585 shares, respectively, to Michael J. Meluskey,
Richard B. Rogers and JoAnn M. Parks, each of whom were then officers or
employees of the Company, in consideration of their contribution to the Company
of their respective know how as to golf course operation and management; the
Company issued 305,000 shares of Common Stock to Stanley J. Bernstein, for an
aggregate sales price of $325,000; and the Company issued 175,000 shares of
Common Stock to Paul Fireman for an aggregate sales price of $250,000. Also in
April, 1994, Mr. Abrams sold 10,000 of his shares of the Company's Common Stock
to his sister.

                                      -21-
<PAGE>   22

Messrs. Bernstein and Fireman are beneficial owners of more than five percent
(5%) of its Common Stock.

         In January 1995, the Company acquired 97% of STP's general partnership
interest in Forest Lakes Limited Partnership and STP's contract to manage Forest
Lakes Golf Club in Sarasota, Florida. See "Item 1. Description of Business.
Recent Activity."

         During July 1996, the Company entered into a guaranty agreement with
Golftown, Inc., a Massachusetts corporation that owns and operates a driving
range facility located in Saugus, Massachusetts, approximately eight miles north
of Boston (the "Project"). The Company has agreed to guaranty a loan in an
amount not to exceed $295,000 made to Golftown, in exchange for a 25% equity
interest in the Project. The President and majority shareholder of Golftown is
Jeffrey Abrams, who is the son of Stanton V. Abrams, President and Chairman of
the Board of Directors of Senior Tour Players Development, Inc. The driving
range opened during August, 1996. In 1997, various capital contributions were
drawn from Golftown's shareholders, and the Company invested approximately
$17,500 which was not sufficient to maintain its equity ownership resulting in a
reduced ownership interest of 21.8% at the end of the calendar year. As of
December 31, 1997 the Company had written its investment down to $0 to reflect
the Company's portion of the loss incurred by Golftown.
(See Item 1 - Description of Business.)

         During the past fiscal year, the Company paid legal fees in the
aggregate amount of $84,484 to Davis, Malm & D'Agostine, P.C., a law firm of
which Alan L. Stanzler, a director of the Company, is a member. During the
fiscal year ended December 31, 1996, the Company paid $126,130 in legal fees to
Davis, Malm & D'Agostine, P.C. It is anticipated that the Company will continue
to pay legal fees to Davis, Malm & D'Agostine, P.C. in the future.

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

         (a)  The following documents are filed as part of this report.

              1.   Financial Statements.
                   ---------------------

              Description                                               Page No.
              -----------                                               --------

              Report of Independent Public Accountants                  F-1

              Consolidated Balance Sheets as of
              December 31, 1997 and 1996                                F-2

              Consolidated Statements of Operations for the Year Ended
              December 31, 1997 and 1996                                F-3

              Statement of Stockholders' Equity for the Year            F-4
              Ended December 31, 1997 and 1996

              Consolidated Statements of  Cash Flows for the Year
              Ended December 31, 1997 and 1996                          F-5

              Notes to Consolidate Financial Statements                 F-7

                                      -22-
<PAGE>   23

         2. EXHIBITS The exhibits appearing on the following Exhibit Index are
filed as part of, or incorporated by reference into this report (and appear at
the sequential page numbers indicated).


                                  EXHIBIT INDEX
                                  -------------

Exhibit                                                                 Page No.
-------                                                                 --------

3.1      Articles of Incorporation*
3.2      By-laws*
4.1      Common Stock Certificate**
4.2      Pages from Articles of Incorporation (and by-laws)
         defining rights of holders of Common Stock*
4.3      Form of Underwriters Warrant Agreement**
4.4      Warrant Agreement**
4.5      Master Agreement Among Underwriters**
4.6      Master Selected Dealers Agreement**
10.1     Peccole Ranch Ground Lease*
10.2     Water Rights Agreement*
10.9     Form of Management Stock Option Agreement**
10.10    1994 Stock Option Plan*
10.12    Amendment to Peccole Ranch Ground Lease***
10.15    Management Agreement for New England Country Club***
10.19    Loan Agreement with Greyrock Capital Group, Inc. ****
10.20    Promissory Note (in favor of Greyrock Capital Group, Inc) ****
10.21    Management Agreement for The Badlands Golf Club****
10.23    Purchase and Sale Agreement for Stonebridge
         Ranch Development ****
10.24    Purchase Agreement - Las Vegas Golf Center *****
10.25    First Amended And Restated Limited Liability Company
         Agreement of Las Vegas Golf Center, LLC *****
10.26    Las Vegas Golf Center, L.L.C. Membership
         Interests Purchase and Sale *****
10.27    Letter of Understanding - Membership Interest
         Purchase & Purchase Option Agreement *****
10.28    Management Agreement for Harbor Links Golf
         Course, North Hempstead, New York
10.29    Guarantee of Loan to Las Vegas Golf Center, L.L.C. *******
21       List of subsidiaries of Registrant ****
23.1     Consent of Independent Public Accountants *******

         *        Previously filed as an exhibit to Registrant's Registration
                  Statement on Form SB-2 (No. 33-81934) and hereby incorporated
                  by this reference.

         **       Previously filed as an exhibit to Registrant's Registration
                  Statement on Form SB-2 (No. 33-13362) and hereby incorporated
                  by this reference.

         ***      Previously filed as an exhibit to Registrant's Form 10-KSB for
                  the year ended December 31, 1994 and hereby incorporated by
                  this reference.

                                      -23-
<PAGE>   24

         ****     Previously filed as an exhibit to Registrant's Form 10-KSB for
                  the year ended December 31, 1995 and hereby incorporated by
                  this reference.

         *****    Previously filed as a simiarly numbered exhibit to
                  Registrant's Amendment #1 to it report on Form 8-K dated March
                  20, 1997 and hereby incorporated by this reference.

         ******   Previously filed a similarly numbered exhibit to Registrant's
                  Form 10-KSB for year ended December 31, 1996, and hereby
                  incorporated by this reference.

         *******  Filed herewith.

         (b)  No report on Form 8-K was filed during the last quarter of the
              period covered by this report.


                                      -24-
<PAGE>   25

                                   SIGNATURES

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



                                       SENIOR TOUR PLAYERS DEVELOPMENT, INC.


Date:  March 30, 1998                  By: /s/ Stanton V. Abrams
                                           ------------------------------------
                                           Stanton V. Abrams, President,
                                           Chief Executive Officer and Director

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

/s/ Stanton V. Abrams
----------------------------- President, Chief Executive         March 30, 1998
Stanton V. Abrams             Officer and Director

/s/ Brendan Kissane
----------------------------- Controller                         March 30, 1998
Brendan Kissane               (Principal Accounting Officer)

/s/ Michael J. Meluskey
----------------------------- Treasurer (Principal               March 30, 1998
Michael J. Meluskey           Financial Officer) and Director

/s/ Stanley Bernstein
----------------------------- Director                           March 30, 1998
Stanley Bernstein

----------------------------- Director
Arnold Mullen


----------------------------- Director
Robert Seelert

/s/ Alan Stanzler
----------------------------- Director                           March 30, 1998
Alan Stanzler

                                      -25-



<PAGE>   26

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 1997 AND 1996
                         TOGETHER WITH AUDITORS' REPORT


<PAGE>   27

                                      INDEX


                                                                            PAGE

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                     F-1

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996                 F-2

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996                                                   F-3

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996                                                   F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996                                                   F-5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                   F-7

<PAGE>   28

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholders of
Senior Tour Players Development, Inc.:

We have audited the accompanying consolidated balance sheets of Senior Tour
Players Development, Inc. (a Nevada corporation) and subsidiary as of December
31, 1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit 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 financial position of Senior Tour Players
Development, Inc. and subsidiary as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.



Boston, Massachusetts
February 27, 1998 (except with respect to
   the matter discussed in Note 9(b) and
   Note 9(c) as to which the dates are
   March 3, 1998 and March 6, 1998,
   respectively)


                                      F-1
<PAGE>   29

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

             CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 1996

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                  1997           1996
CURRENT ASSETS:
<S>                                                                          <C>            <C>
   Cash and cash equivalents                                                 $     177,174  $   1,585,611
   Interest and other receivables                                                  169,086      1,313,151
   Inventories                                                                     189,651        140,976
   Prepaid expenses and other current assets                                        43,512         59,608
                                                                             -------------  -------------

         Total current assets                                                      579,423      3,099,346
                                                                             -------------  -------------

PROPERTY AND EQUIPMENT:
   Property and equipment, net of accumulated depreciation (Note 1(e))          14,351,321     10,373,925
   Construction in progress                                                        323,580        546,609
                                                                             -------------  -------------

         Property and equipment, net                                            14,674,901     10,920,534
                                                                             -------------  -------------

RESTRICTED CASH                                                                     22,925         20,942
                                                                             -------------  -------------

WATER RIGHTS (Note 3)                                                            1,051,992      1,051,992
                                                                             -------------  -------------

INVESTMENT IN GOLF FACILITIES                                                    1,057,242      1,029,075
                                                                             -------------  -------------

OTHER ASSETS                                                                       262,178        389,956
                                                                             -------------  -------------

                                                                             $  17,648,661  $  16,511,845
                                                                             =============  =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable and accrued expenses                                     $   1,556,682  $   1,032,705
   Current portion of long-term debt                                               890,310      1,711,745
   Current portion of obligation under water rights agreement                       85,186         77,915
   Deferred revenue                                                                174,219        174,928
                                                                             -------------  -------------

         Total current liabilities                                               2,706,397      2,997,293
                                                                             -------------  -------------

LONG-TERM LIABILITIES:
   Obligation under water rights agreement                                         784,307        869,493
   Other long-term liabilities                                                     645,000        200,000
   Long-term debt                                                                8,996,982      5,269,705
                                                                             -------------  -------------

         Total long-term liabilities                                            10,426,289      6,339,198
                                                                             -------------  -------------

MINORITY INTEREST                                                                        -        349,946
                                                                             -------------  -------------

COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS' EQUITY:
   Preferred stock, $.10 par value-
     Authorized--5,000,000 shares
   Common stock, $.001 par value-
     Authorized--15,000,000 shares
     Issued and outstanding--3,751,169 and 3,701,169 shares                          3,751          3,701
       at December 31, 1997 and 1996, respectively (Note 1(j))
   Additional paid-in capital                                                    8,949,973      8,962,843
   Management stock options                                                      1,212,500      1,250,000
   Deferred compensation                                                                 -        (89,062)
   Accumulated deficit                                                          (5,650,249)    (3,302,074)
                                                                             -------------  -------------

         Total stockholders' equity                                              4,515,975      6,825,408
                                                                             -------------  -------------

                                                                             $  17,648,661  $  16,511,845
                                                                             =============  =============
</TABLE>

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


                                      F-2
<PAGE>   30

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                                         1997          1996

<S>                                                                                  <C>           <C>
NET REVENUES                                                                         $  5,376,947  $  6,697,425

COSTS AND EXPENSES:
   Operating, general and administrative expenses                                       6,729,167     5,752,139
   Noncash compensation credit                                                            (33,258)   (1,220,312)
                                                                                     ------------  ------------

         Operating (loss) income                                                       (1,318,962)    2,165,598

INTEREST INCOME                                                                             6,502        18,151

INTEREST EXPENSE                                                                         (827,738)     (785,607)
                                                                                     ------------  ------------

         (Loss) income before equity in losses from unconsolidated affiliates and      (2,140,198)    1,398,142
         minority interest

EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATES                                            (207,977)            -

MINORITY INTEREST IN PARTNERSHIP'S NET INCOME                                                   -      (349,946)
                                                                                     ------------  ------------

         Net (loss) income                                                           $ (2,348,175) $  1,048,196
                                                                                     ============  ============

NET (LOSS) INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
   Basic                                                                             $      (0.63) $       0.36
                                                                                     ============  ============
   Diluted                                                                           $      (0.63) $       0.28
                                                                                     ============  ============

WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING:
   Basic                                                                                3,734,046     2,937,834
                                                                                     ============  ============
   Diluted                                                                              3,734,046     3,681,661
                                                                                     ============  ============
</TABLE>

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

                                      F-3
<PAGE>   31

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                       STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996


<TABLE>
<CAPTION>
                                               COMMON STOCK       ADDITIONAL                                               TOTAL
                                           NUMBER OF  $.001 PAR     PAID-IN     MANAGEMENT    DEFERRED    ACCUMULATED  STOCKHOLDERS'
                                             SHARES     VALUE       CAPITAL       OPTIONS   COMPENSATION    DEFICIT        EQUITY

<S>                                        <C>         <C>        <C>           <C>           <C>         <C>           <C>
BALANCE, DECEMBER 31, 1995                 2,933,333   $  2,933   $ 7,545,040   $ 2,500,000   $       -   $(4,350,270)  $ 5,697,703

   Noncash compensation credit                     -          -             -    (1,250,000)          -             -    (1,250,000)

   Deferred compensation related to                -          -       118,750             -    (118,750)            -             -
   issuance of stock options

   Amortization of deferred compensation           -          -             -             -      29,688             -        29,688

   Issuance of common stock                  767,836        768     1,299,053             -           -             -     1,299,821

   Net income                                      -          -             -             -           -     1,048,196     1,048,196
                                         -----------   --------   -----------   -----------   ---------   -----------   -----------

BALANCE, DECEMBER 31, 1996                 3,701,169      3,701     8,962,843     1,250,000     (89,062)   (3,302,074)    6,825,408

   Noncash compensation credit                     -          -             -       (37,500)          -             -       (37,500)
   from cancellation of unvested
   management options

   Amortization of deferred compensation           -          -             -             -       4,242             -         4,242

   Reduction of deferred compensation              -          -       (84,820)            -      84,820             -             -
   upon termination of employment

   Issuance of common stock                   50,000         50        71,950             -           -             -        72,000

   Net loss                                        -          -             -             -           -    (2,348,175)   (2,348,175)
                                         -----------   --------   -----------   -----------   ---------   -----------   -----------

BALANCE, DECEMBER 31, 1997                 3,751,169   $  3,751   $ 8,949,973   $ 1,212,500   $       -   $(5,650,249)  $ 4,515,975
                                         ===========   ========   ===========   ===========   =========   ===========   ===========
</TABLE>


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

                                      F-4
<PAGE>   32

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996


<TABLE>
<CAPTION>
                                                                                1997             1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                          <C>              <C>
   Net (loss) income                                                         $(2,348,175)     $ 1,048,196
   Adjustments to reconcile net (loss) income to net cash provided
   by (used in) operating activities-
     Depreciation and amortization                                               505,445          654,500
     Write-off of Las Vegas Golf Center, LLC purchase option                      72,000               --
     Noncash compensation credit                                                 (33,258)      (1,220,312)
     Distribution of minority interest in Partnership's net income              (349,946)              --
     Equity in losses of unconsolidated affiliates                               207,977               --
     Gain on sale of Forest Lakes Limited Partnership                                 --         (788,946)
     Minority interest in Partnership's net income                                    --          349,946
     Net proceeds from sale of Forest Lakes Limited Partnership                       --          499,577
     Gain on sale of fixed assets                                                     --           (6,761)
     Changes in assets and liabilities-
       Interest and other receivables                                          1,126,419       (1,215,491)
       Inventories                                                               (48,675)         (77,724)
       Prepaid expenses and other current assets                                  16,096           36,613
       Accounts payable and accrued expenses                                     968,977           92,432
       Deferred revenue                                                             (709)         153,527
                                                                             -----------      -----------

            Net cash provided by (used in) operating activities                  116,151         (474,443)
                                                                             -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment, net                                   (3,891,973)      (2,250,507)
   Golf course development costs capitalized in construction in progress         (46,750)        (546,609)
   Increase in restricted cash                                                    (1,983)          (8,377)
   Increase in other assets                                                       (2,511)         (91,058)
   Proceeds from sale of fixed assets                                                 --           47,500
   Investments in unconsolidated affiliate                                      (146,498)              --
   Cash paid for interest in the Las Vegas Golf Center, LLC                           --       (1,639,247)
   Proceeds from sale of interest in the Las Vegas Golf Center, LLC                   --        2,167,993
                                                                             -----------      -----------

            Net cash used in investing activities                             (4,089,715)      (2,320,305)
                                                                             -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt                                                4,384,885        3,221,555
   Repayment of long-term debt                                                (1,819,758)        (314,580)
                                                                             -----------      -----------

            Net cash provided by financing activities                          2,565,127        2,906,975
                                                                             -----------      -----------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                          (1,408,437)         112,227

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                 1,585,611        1,473,384
                                                                             -----------      -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                     $   177,174      $ 1,585,611
                                                                             ===========      ===========
</TABLE>

                                      F-5
<PAGE>   33

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

                                   (Continued)


<TABLE>
<CAPTION>
                                                                                           1997                 1996
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
<S>                                                                                    <C>                  <C>
   Deferred compensation related to issuance of stock options                          $        --          $   118,750
                                                                                       ===========          ===========
   Equipment acquired under capital lease                                              $   262,800          $    25,876
                                                                                       ===========          ===========
   Common stock issued for services                                                    $        --          $    50,000
                                                                                       ===========          ===========
   Common stock issued for Las Vegas Golf Center, LLC purchase option                  $        --          $    72,000
                                                                                       ===========          ===========
   Lapse of deferred compensation upon termination of employment                       $    84,820          $        --
                                                                                       ===========          ===========
   Inconnection with the sale of Forest Lakes Limited Partnership in fiscal
     1996 (see Note 2), the following noncash transaction occurred-
     Book value of assets sold                                                         $        --          $ 3,038,736
     Payment of partnership liabilities                                                         --           (3,328,105)
                                                                                       -----------          -----------

           Investment                                                                           --             (289,369)

     Net proceeds from sale of Forest Lakes Limited Partnership                                 --             (499,577)
                                                                                       -----------          -----------

            Gross gain on sale of Forest Lakes Limited Partnership                              --             (788,946)

     Minority interest                                                                          --              349,946
                                                                                       -----------          -----------

            Gain on sale of Forest Lakes Limited Partnership                           $        --          $  (439,000)
                                                                                       ===========          ===========

   In connection with the acquisition of the 21.5% and 48.5% interests in the
   Las Vegas Golf Center, LLC in fiscal 1996 (see Note 2), the following noncash
   transaction occurred-
     Fair value of assets acquired                                                     $   (72,000)         $(3,197,068)
     Common stock issued                                                                    72,000            1,177,821
     Consideration payable                                                                      --              380,000
                                                                                       -----------          -----------

            Cash paid for interest in the Las Vegas Golf Center, LLC                   $        --          $(1,639,247)
                                                                                       ===========          ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid for-
     Interest (net of capitalized interest of $144,913 and $128,971, respectively)     $   793,288          $   738,446
                                                                                       ===========          ===========
</TABLE>

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

                                      F-6
<PAGE>   34

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997




(1)    OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

       Senior Tour Players Development, Inc. and subsidiary (the Company) was
       organized as a Nevada corporation on April 6, 1994 for the purposes of
       developing, acquiring, and managing semiprivate, private and public golf
       courses and golf practice facilities throughout the United States. The
       Company also provides golf course management services and marketing
       services for golf course residential development projects.

       The accompanying consolidated financial statements include the accounts
       of the Company and its wholly owned subsidiary, The Badlands Golf Club,
       Inc. (The Badlands), which was established in 1995, and is located in Las
       Vegas, Nevada. For the period from January 1995 through December 16, 1996
       (the ownership period), the Company owned a majority (53.5%) interest in
       the Forest Lakes Limited Partnership (Forest Lakes). Accordingly, the
       financial information presented herein includes the revenue and expense
       of Forest Lakes during the ownership period. The Company sold its
       interest in Forest Lakes on December 16, 1996 (Note 2(a)). All
       significant intercompany transactions and balances have been eliminated
       in consolidation. See Note 9-- Subsequent Events.

       The accompanying consolidated financial statements reflect the
       application of certain accounting policies described in this note and
       elsewhere in the accompanying notes to consolidated financial statements.

       (a)    Management Estimates

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

       (b)    Concentrations of Risk

              Statement of Financial Accounting Standards (SFAS) No. 105,
              Disclosure of Information About Financial Instruments with
              Off-Balance-Sheet Risk and Financial Instruments with
              Concentrations of Credit Risk, requires disclosure of any
              significant off-balance-sheet and credit risk concentrations. The
              Company has no significant off-balance-sheet concentration of
              credit risk, such as foreign exchange contracts, options contracts
              or other foreign hedging arrangements, except for the loan
              guarantee discussed in Note 7(b) of commitment and contingencies.

                                      F-7
<PAGE>   35

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


       (c)    Cash and Cash Equivalents

              The Company considers all highly liquid debt instruments purchased
              with an original maturity of three months or less to be cash
              equivalents.

       (d)    Inventories

              Inventories are stated at the lower of cost or market, and consist
              of food and beverage, golf equipment, clothing and accessories,
              all sold at retail.

       (e)    Property, Equipment and Depreciation

              Property and equipment are stated at cost. Depreciation is
              computed using the straight-line method over the estimated useful
              lives of the assets. Interest costs, during the construction
              period, on borrowings used to finance construction of facilities
              are included in the cost of the constructed facilities.

              Property, equipment and accumulated depreciation consist of the
              following at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                                ESTIMATED
                                                                                 USEFUL
                                                   1997           1996            LIVES

         <S>                                   <C>             <C>             <C>
         Land improvements                     $11,406,045     $ 7,308,935     15-40 years
         Buildings                               2,634,228       2,632,228      31.5 years
         Golf carts and equipment                  835,357         527,175      3-15 years
         Furniture, fixtures and equipment         192,433         180,461       5-7 years
         Office and computer equipment             119,939         114,651         5 years
         Leasehold improvements                     12,559          12,559         3 years
                                               -----------     -----------

                                                15,200,561      10,776,009

         Less--Accumulated depreciation            849,240         402,084
                                               -----------     -----------

                                               $14,351,321     $10,373,925
                                               ===========     ===========
</TABLE>

                                      F-8
<PAGE>   36

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


       (f)    Construction in Progress

              At December 31, 1997, construction in progress consisted of
              design, construction and other costs incurred in connection with
              the design, engineering and planning costs incurred in connection
              with the Company's planned golf course development project in
              McKinney, Texas (see Note 2(b)).

       (g)    Other Assets

              Other assets consist of the following at December 31, 1997 and
              1996:

<TABLE>
<CAPTION>
                                                                                     1997            1996

                <S>                                                               <C>             <C>
                Deferred debt financing costs, net of accumulated amortization    $  172,828      $  224,036
                   of $84,510 and $33,043, respectively
                Organization costs, net of accumulated amortization of $22,175        11,943          18,765
                   and $15,353, respectively
                Las Vegas Golf Center, LLC purchase option                                 -          72,000
                Deposits                                                              75,503          73,513
                Other                                                                  1,904           1,642
                                                                                  ----------      ----------

                                                                                  $  262,178      $  389,956
                                                                                  ==========      ==========
</TABLE>

              Deferred financing costs consist of costs incurred in connection
              with the Badlands financing agreements (see Note 3(c)), which are
              being amortized over the five-year initial term of the loans.
              Organization costs at December 31, 1997 and 1996, consist of legal
              and other costs incurred in connection with the organization of
              the Company. These costs are being amortized using the
              straight-line method over five years.

       (h)    Net Revenues

              Net revenues consists primarily of green fees, membership dues,
              golf cart rental fees, golf course management and development
              fees, food and beverage sales and pro shop merchandise sales.
              Deferred revenues consist of prepaid membership dues, which are
              recognized ratably over the term of the membership.


                                      F-9
<PAGE>   37

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


       (i)    Net (Loss) Income per Common and Common Equivalent Share

              In 1997, the Company adopted SFAS No. 128, Earnings per Share,
              effective December 15, 1997. SFAS No. 128 establishes standards
              for computing and presenting earning per share and applies to
              entities with publicly held common stock or potential common
              stock. The Company has applied the provisions of SFAS No. 128
              retroactively to all periods presented. The dilutive effect of
              potential common shares in 1997, consisting of outstanding stock
              options is determined using the treasury method and the
              if-converted method, respectively, in accordance with SFAS No.
              128. Diluted weighted average shares outstanding for 1997 and 1996
              exclude the potential common shares from stock options because to
              do so would have been antidilutive for the years presented.
              Calculations of basic, dilutive and pro forma diluted net (loss)
              income per common share and potential common share are as follows:

<TABLE>
<CAPTION>
                                                                          1997              1996

                 <S>                                                  <C>               <C>
                 Net (loss) income                                    $ (2,348,175)     $  1,048,196
                                                                      ============      ============

                 Weighted average common shares outstanding              3,734,046         2,937,834

                 Potential common shares related to stock options               --           743,827
                                                                      ------------      ------------

                 Diluted weighted average shares                         3,734,046         3,681,661
                                                                      ============      ============

                 Basic net (loss) income per common share             $      (0.63)     $       0.36
                                                                      ============      ============
                 Diluted net (loss) income per share and
                 potential common share                               $      (0.63)     $       0.28
                                                                      ============      ============
</TABLE>

       (j)    Common Stock

              Shares issued and outstanding at December 31, 1997 include 161,644
              shares to be issued in January 1998 in accordance with the
              Company's purchase of the 21.5% interest in the Las Vegas Golf
              Center, LLC, a Delaware limited liability company (the LLC),
              during 1996 (see Note 2(c)). However, the issuance of these shares
              has been delayed pending the outcome of legal action brought by
              the Company against the prior owners of the LLC (see Note 9(b)).

                                      F-10
<PAGE>   38

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)

       (k)    Recently Issued Accounting Standards

              The Financial Accounting Standards Board (FASB) issued SFAS No.
              130, Reporting Comprehensive Income, and is required to be adopted
              by the Company no later than fiscal year 1998. This statement
              establishes standards for reporting and display of comprehensive
              income and its components in a full set of general purpose
              financial statements. Comprehensive income is the total of net
              income and all other nonowner changes in equity. The Company plans
              to adopt this statement in the first quarter of fiscal year 1998.

              The FASB issued SFAS No. 131, Disclosures About Segments of an
              Enterprise and Related Information, which is required to be
              adopted by the Company no later than fiscal year 1998. This
              statement introduces a new model for segment reporting, called the
              "management approach." The management approach is based on the way
              that the chief operating decision maker organizes segments within
              a company for making operating decisions and assessing
              performance. Reportable segments can be based upon any manner in
              which management disaggregates the Company. Such segments could
              include products and services, geography, legal structure and
              management structure. The Company plans to adopt this statement in
              the first quarter of 1998.

(2)    ACQUISITIONS AND SALES

       (a)    Sale of Forest Lakes Partnership Interest

              In January 1995, the Company acquired a combined 53.5% interest in
              Forest Lakes.

              On December 16, 1996, the Company sold its interest in Forest
              Lakes. The sale was structured as a sale of substantially all of
              the assets of Forest Lakes Limited Partnership. The buyer was BST
              Associates, an Illinois general partnership. The cash purchase
              price was $4,000,000 paid at closing. Broker commissions and
              direct costs relating to the sale totaled $172,318 and proceeds
              allocated to retire Partnership liabilities totaled $3,328,105,
              resulting in net sale proceeds to the Partnership of $499,577.

              Under the terms of the Forest Lakes Limited Partnership Agreement,
              the sale of all of the Partnership's property and the conversion
              of all proceeds into cash requires that the Partnership be
              dissolved. Accordingly, as General Partner, the Company dissolved
              the Partnership and caused a distribution of all available cash
              proceeds to the partners during 1997.

                                      F-11
<PAGE>   39

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


       (b)    Proposed Golf Course Development--McKinney, Texas

              During March 1996, the Company signed a purchase and sale
              agreement and related documents for the proposed development of an
              18-hole championship golf facility (the Property) located within
              the Stonebridge Ranch Development in McKinney, Texas,
              approximately 25 miles north of Dallas.

              In November 1996, the original property owner of Stonebridge Ranch
              Development sold their interest in the entire development. The
              Company is currently negotiating with the new owners to assign the
              Company's rights to develop the property to the new owners. In
              consideration, the new owners agree to reimburse the Company's
              actual costs incurred to date and to assume certain unpaid
              liabilities related to this development. As of December 31, 1997,
              the Company has capitalized approximately $323,100 related to this
              development, which is included in construction in process.

       (c)    Purchase and Sale of Investment in Las Vegas Golf Center, LLC

              On December 31, 1996, the Company acquired a 21.5% interest and a
              48.5% interest, and subsequently sold the 48.5% interest in 1997,
              in the Las Vegas Golf Center (the Center), a golf practice
              facility located in Las Vegas, Nevada. The Center is situated on
              approximately 42 acres of land leased from Clark County, Nevada.
              The Center is owned by the LLC. The Center includes a driving
              range with approximately 120 tee stations on two tiers, a golf
              school teaching area and a 6,500 sq. ft. clubhouse. The Center
              opened for business on January 17, 1997.

              The Company acquired a 21.5% interest in the LLC from unrelated
              individual shareholders of Golf Centers of America, Inc., a
              California corporation, for an aggregate purchase price of
              $400,000 cash consideration, and 323,289 shares of the Company's
              common stock, $.001 par value per share (STPD Shares), payable as
              follows:

<TABLE>
<CAPTION>
                  <S>                      <C>
                  Cash Consideration       $20,000 paid on December 13, 1996
                                           $180,000 paid on January 15, 1997
                                           $200,000 payable on or before January 15, 1998

                  STPD Shares              161,645 shares issued on January 15, 1997
                                           161,644 shares to be issued on or before January 15, 1998
</TABLE>


                                      F-12
<PAGE>   40

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              As of December 31, 1997 and 1996, the Company has capitalized
              $1,057,242 and $1,029,075 related to this investment, which is
              included in investment in golf facilities on the accompanying
              balance sheet as of December 31, 1997 and 1996.

              The Company also acquired an additional 48.5% interest in the LLC
              from unrelated individual shareholders of Selleck Properties,
              Inc., a California corporation, for an aggregate purchase price of
              $1,532,050 cash consideration, and 369,547 shares of the Company's
              common stock, $.001 par value per share.

              All of the shares issued or payable in connection with these
              transactions are restricted securities, as defined in Rule 144
              promulgated under the Securities Act of 1933, as amended. Because
              the STPD Shares are restricted, the Company obtained an
              independent appraisal valuing the STPD Shares at a discount from
              their traded fair value at the transaction date. The Company has
              used a 20% discount in recording the value of the STPD Shares
              issued. The Company has granted the sellers of the interests the
              right to demand registration of their common stock on a Form S-3
              registration statement or similar form at any time after May 1,
              1997. The Company received this request during May 1997 and filed
              a registration statement that became effective in August 1997. The
              sellers of the 21.5% interest and 48.5% interest have agreed,
              pursuant to shareholder agreements, to vote their common stock for
              the slate of directors proposed by management of the Company
              through December 31, 1998 (in the case of the 21.5% interest) or
              the first to occur of (i) June 30, 1999, or (ii) the date on which
              Stanton V. Abrams ceases to serve as the President and Chief
              Executive Officer of the Company (in the case of the 48.5%
              interest).

              Immediately following the acquisition of the 48.5% interests, the
              Company sold a 48.5% interest in the LLC to Paul Fireman, an
              individual investor and Company stockholder, for cash
              consideration of $2,167,953. In addition, the Company received a
              $200,000 consulting fee from Fireman in consideration of certain
              services rendered in connection with the structuring and
              implementation of the transaction, as well as for arranging
              certain financing for the LLC. This fee has been included in
              revenue in the accompanying consolidated statement of operations
              for the year ended December 31, 1996. See Note 8(b)--Related Party
              Transactions.

              In consideration of 50,000 shares of common stock of the Company,
              $.001 par value per share, the Company shall have the option to
              purchase from Paul Fireman a 13.5% interest in the LLC (the
              Option). The Company did not exercise the Option on or before
              December 31, 1997. If the Company had exercised the option, the
              price for a 13.5% LLC interest would have been $900,000. If the
              Company exercises the Option after December 31, 1997 but on or
              before December 31, 1998, the price for a 13.5% LLC interest shall
              be $1,075,000. If the Company exercises the Option after December
              31, 1998 but on or before December 31, 1999, the price for

                                      F-13
<PAGE>   41

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              a 13.5% LLC interest shall be $1,350,000. In 1997, the Company
              wrote off the carrying values of the option because it has no
              intent to exercise.

              Additionally, in consideration of certain consulting services and
              modification of existing contractual rights relating to the
              acquisition of the Company's 21.5% membership interest in the LLC
              and the financing of the golf practice facility owned and operated
              by the LLC, the Company issued in May 1997 to the Ranchito
              Company, LLC (Ranchito), 50,000 shares of common stock of the
              Company. Ranchito is the owner of the remaining 30% membership
              interest in the LLC that was not acquired on December 31, 1996.

              The Company has been designated the Managing Member of the LLC,
              and shall be responsible for the day-to-day management, marketing
              and operation of the Center. The Company shall receive a
              management fee equal to 5% of gross revenues generated by the LLC
              as compensation under the terms of the management agreement and
              shall also be reimbursed for certain accounting and out-of-pocket
              expenses. The Company has also agreed to provide accounting
              services to the LLC at $1,200 per month. During 1997, the Company
              recognized approximately $35,600 of management fees and
              approximately $18,000 of accounting fees from the LLC (see Note
              7(b)).

(3)    GOLF COURSE DEVELOPMENT COSTS

       In connection with the original eighteen whole facility at the Badlands
       Golf Club, which was completed in October 1995, and the additional nine
       holes, which were completed in September, 1997, the Company has entered
       into the following significant contracts and agreements:

       (a)    Badlands Land Lease Agreement

              The Company leases 186 acres of land in Las Vegas, Nevada, for a
              term of 50 years, expiring in July 2045. The lease agreement
              contains four 10-year options to extend the term of the lease
              based on certain terms, as defined. The lease requires minimum
              rental payments of $240,000 per annum, commencing July 1, 1995,
              with an increase every three years based on the increase in the
              Consumer Price Index.

              During June 1996, the Company leased an additional 67 acres
              abutting The Badlands, which was used to develop an additional
              nine holes that was completed in September 1997. The term of the
              lease will be co-terminous with the existing lease, expiring in
              July 2045, with four 10-year extension options. The lease requires
              minimum rental payments of $120,000 per annum,

                                      F-14
<PAGE>   42

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)

              commencing on October 1, 1997 with an increase every three years
              based on the increase in the Consumer Price Index.

              Both leases contain a contingent rental clause requiring the
              Company to pay an amount equal to the amount by which 6% of annual
              gross receipts, as defined, at The Badlands exceeds the minimum
              annual rental of $360,000. The lease also requires the Company to
              pay real estate taxes, assessments and other charges in connection
              with the leased property. Total rent expense related to the land
              agreements were $324,248 and $240,000 for the years ended December
              31, 1997 and 1996, respectively.

              Minimum payments required under The Badlands two land lease
              agreements are as follows:

<TABLE>
<CAPTION>
                                                      18 HOLES      9 HOLES         TOTAL
                 Year ended December 31,
                 <S>                                <C>           <C>           <C>
                    1998                            $    240,000  $   120,000   $    360,000
                    1999                                 240,000      120,000        360,000
                    2000                                 240,000      120,000        360,000
                    2001                                 240,000      120,000        360,000
                    2002                                 240,000      120,000        360,000
                    Thereafter                        10,200,000    5,100,000     15,300,000
                                                    ------------  -----------   ------------

                          Total                     $ 11,400,000  $ 5,700,000   $ 17,100,000
                                                    ============  ===========   ============
</TABLE>

       (b)    Water Rights Agreement

              The Company has purchased 399 acre-feet of water rights under a
              water rights agreement (the Agreement) for use at The Badlands.
              The Agreement requires the Company to pay $13,300 per month
              commencing on July 1, 1995 and continuing for 10 years through
              July 2005. The obligation under the water rights agreement has
              been capitalized in the accompanying consolidated balance sheets.
              The capitalized water rights will not be amortized since the asset
              has an indefinite and indeterminable life span and is transferable
              by the Company subject to certain restrictions in the Agreement.

                                      F-15
<PAGE>   43

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              As of December 31, 1997, future minimum payments under the water
              rights agreement are as follows:

<TABLE>
<CAPTION>
                 Year ended December 31,
                 <S>                                                                <C>
                    1998                                                            $  159,600
                    1999                                                               159,600
                    2000                                                               159,600
                    2001                                                               159,600
                    2002                                                               159,600
                    Thereafter                                                         399,000
                                                                                    ----------

                          Total obligation under the water rights agreement          1,197,000

                 Less--Amount representing interest calculated at the
                 Company's incremental borrowing rate                                  327,507
                                                                                    ----------

                          Present value of minimum payments                            869,493

                 Less--Current obligation                                               85,186

                          Long-term obligation                                      $  784,307
                                                                                    ==========
</TABLE>

       (c)    Construction and Term Loan Agreements

              In December 1995, the Company entered into a $6,700,000 loan
              agreement (the loan) with NationsCredit. At the closing, the loan
              provided the Company with $3,384,000, which was used to (i) pay
              off the then outstanding Badlands construction loan; (ii) return
              approximately $1,200,000 in cash to the Company; and (iii) provide
              $1,616,000 to complete construction of The Badlands clubhouse and
              other structures. In November 1996, the loan was modified to run
              concurrently with the construction loan discussed below. Under the
              modification agreement, the lender has capped the borrowings at
              approximately $5,000,000. The loan is subject to a 20-year
              amortization, which began on December 1, 1996 and has a fixed
              interest rate of 10.78%.

              In November 1996, the Company entered into a $5,000,000
              construction and permanent loan agreement (the construction loan)
              with NationsCredit for development of an additional nine holes at
              The Badlands. The construction loan provided for up to $4,000,000
              for construction and other indirect costs associated with the
              development of the additional nine holes at The Badlands, and also
              provides for the availability of up to $1,000,000 in Earnout
              Advances. In

                                      F-16
<PAGE>   44

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              January 1998, the Company had qualified for $750,000 of the
              Earnout Advance and borrowed approximately $435,000. The remaining
              earnout funds will be made available to the Company over a period
              of thirty months following the loan closing so long as certain
              operating results at The Badlands are achieved, including minimum
              debt service coverage ratios and other revenue and cash flow
              criteria, as defined in the loan agreement. The construction loan
              is subject to a 20-year amortization, which began on December 1,
              1996 and has a fixed interest rate of 10.95%.

              The loan term for each of the NationsCredit loans is five years
              with the remaining principal due at maturity on December 1, 2001;
              however, the Company may extend the term of each loan for an
              additional five years upon payment of an extension fee of .5% of
              the outstanding balance due and assuming the Company meets certain
              terms and conditions, as defined in the agreements. Borrowings are
              collateralized by a Deed of Trust and a security interest in
              substantially all assets of The Badlands. Each loan is
              cross-collateralized and cross-defaulted with the other.

(4)    LONG-TERM DEBT

       Long-term debt consists of the following at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                                    1997             1996

          <S>                                                                   <C>              <C>
          Mortgage note payable to NationsCredit, secured by The Badlands
          (see Note 3(c)), interest is at 10.78%, with principal and interest
          of approximately $47,800 due monthly, with the balance due at
          maturity on December 1, 2001                                          $ 4,875,067      $ 4,807,188

          Construction note payable to NationsCredit, secured by The Badlands
          (see Note 3(c)), interest is at 10.95%, with principal and interest
          of approximately $48,250 due monthly, with the balance due at
          maturity on December 1, 2001                                            3,859,012          205,364

          Capital lease obligation for turf maintenance and other equipment,
          principal and interest payments of approximately $12,660 due
          monthly, final maturity date of September 30, 1999                        239,787          356,729

          Capital lease obligation for furniture, fixtures and other
          equipment, principal and interest payments of approximately $3,995
          due monthly, final maturity date of January 1, 2002                       156,050          188,093
</TABLE>

                                      F-17
<PAGE>   45

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)



<TABLE>
<CAPTION>
          <S>                                                                   <C>              <C>
          Capital lease obligation for equipment principal and interest
          payments of approximately $1,040 due monthly, final maturity date
          of June 13, 2001                                                      $    39,227      $         -

          Capital lease obligation for equipment principal and interest
          payments of approximately $130 due monthly, final maturity date of
          May 31, 2002                                                                5,434                -

          Capital lease obligation for turf maintenance and other equipment
          principal and interest payments of approximately $4,460 due
          monthly, final maturity date of June 1, 2002                              192,793                -

          Capital lease obligation for telephone equipment, principal and
          interest payments of approximately $595 due monthly, final maturity
          date of September 11, 2001                                                 19,922      $    24,318

          Unsecured line of credit, with interest at the prime rate (8.5% at
          December 31, 1997) plus 1.5%, final maturity date of October 31,
          1998                                                                      500,000        1,399,758
                                                                                -----------      -----------

                   Total debt                                                     9,887,292        6,981,450

          Less--Current portion                                                     890,310        1,711,745
                                                                                -----------      -----------

                   Total long-term debt                                         $ 8,996,982      $ 5,269,705
                                                                                ===========      ===========
</TABLE>

       On October 1, 1997, the Company entered into a credit agreement with a
       commercial bank for an unsecured line of credit of $500,000, expiring
       October 31, 1998. Borrowings under the agreement bear interest at the
       prime rate plus 1.5%.

                                      F-18
<PAGE>   46

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


       Future maturities of long-term debt as of December 31, 1997 are as
       follows:

                                          NOTES         CAPITAL
                                         PAYABLE         LEASES         TOTAL

                1998                   $   681,136    $   209,174    $   890,310
                1999                       198,104        201,299        399,403
                2000                       223,056        102,611        325,667
                2001                     8,131,783        109,519      8,241,302
                2002                             -         30,610         30,610
                                       -----------    -----------    -----------

                        Total          $ 9,234,079    $   653,213    $ 9,887,292
                                       ===========    ===========    ===========

(5)    STOCKHOLDERS' EQUITY

       (a)    Common Stock

              In November 1994, the Company sold 1,600,000 shares of common
              stock and warrants at a price of $5.00 per common share and $.10
              per warrant through an initial public offering. Each warrant
              entitles the holder to purchase one share of the Company's common
              stock at an exercise price of $5.50, subject to adjustment, at any
              time until November 16, 1999, at which time the warrants expire.
              The warrants are subject to redemption by the Company at a
              redemption price of $5.10 per warrant on 30 days' written notice,
              provided the average of the closing bid prices of the common stock
              of the Company equals or exceeds $8.00 for 20 consecutive trading
              days preceding the notice of redemption.

              During 1996, the Company issued 742,836 shares of common stock in
              connection with the purchase and sale of investment in the Las
              Vegas Golf Center, LLC (LVGC) discussed in Note 2(c). In addition,
              the Company issued 25,000 shares to Johnny Miller Design, Ltd. for
              design services rendered at The Badlands.

              During 1997, the Company issued an additional 50,000 shares of
              common stock in connection with the purchase of the investment in
              the LVGC, discussed in Note 2(c).

                                      F-19
<PAGE>   47

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


       (b)    Underwriter's Warrants

              In connection with the Company's initial public offering in
              November 1994, the Company issued 160,000 warrants to the
              underwriter (the Underwriter's Warrants). Each Underwriter's
              Warrant entitles the Underwriter to purchase one share of common
              stock for $7.25 and one warrant for $.15.

       (c)    Overallotment Option

              In addition to the Underwriter's Warrants, the Company granted an
              overallotment option (the Overallotment Option) to the
              Underwriter. The Overallotment Option entitled the Underwriter to
              purchase additional shares of common stock and/or additional
              warrants at the public offering price less the underwriting
              discounts and commissions, as defined. In December 1994, the
              Underwriter exercised its option and purchased 153,200 warrants
              for $13,351 net of discounts and commissions.

       (d)    Preferred Stock

              The Company is authorized to issue 5,000,000 shares of preferred
              stock with such designations, voting and other rights and
              preferences as may be determined from time to time by the Board of
              Directors.

       (e)    Stock Option Plans

              On June 20, 1994, the Company adopted the 1994 Employee Stock
              Option Plan (the Employee Plan) that provides for the granting of
              nonqualified and incentive stock options, as defined by the
              Internal Revenue Code, to key employees at prices determined by
              the Compensation Committee of the Board of Directors. Under the
              Employee Plan, options for a maximum of 350,000 shares of common
              stock may be granted over a period not to exceed 10 years. At
              December 31, 1997, 195,000 options have been granted under this
              plan. During 1997, three of the employees who had been granted
              options under the plan resigned from the Company, resulting in the
              termination of 131,428 options. For the remaining options granted
              under the Employee Plan, 35,000 options had an exercise price of
              $2.1875 per share, the fair market value on the date of grant and
              vest in five annual equal installments beginning in December 1997.
              At December 31, 1997, 7,000 of these options had vested. The terms
              of the other remaining 28,572 options issued under the Employee
              Plan are detailed in Note 5(g).

                                      F-20
<PAGE>   48

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              On November 10, 1996, the Board of Directors of the Company
              adopted, subject to shareholder approval, the 1996 Non-Employee
              Director Stock Option Plan (the Nonemployee Plan) which was
              subsequently ratified by the shareholders. Under the Nonemployee
              Plan, options for a maximum of 200,000 shares of common stock may
              be granted. On December 11, 1996, the Compensation Committee
              granted stock options for the purchase of 40,000 shares of common
              stock to four members of the Board of Directors under the
              Nonemployee Plan. The options were granted with an exercise price
              of $2.1875 per share, the fair market value on the date of grant
              and vested immediately. On January 1, 1997, the Compensation
              Committee granted stock options for the purchase of an additional
              20,000 shares of common stock to the four members of the Board of
              Directors under the Nonemployee Plan. The options were granted
              with an exercise price of $2.125 per share, the fair market value
              on the date of grant, and vested immediately.

       (f)    Stock Option Agreements--Management Options

              Effective June 20, 1994, the Company entered into employee stock
              option agreements with certain officers and key employees granting
              them options to acquire up to 1,111,111 shares of the Company's
              common stock for an exercise price of $1.00 per share. Under these
              agreements, each employee's options vest and become exercisable
              based on the Company achieving certain financial benchmarks, as
              defined. The options must be exercised by December 31, 2004.

              During the fourth quarter of 1995, in accordance with Accounting
              Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
              to Employees, the Company recorded a noncash compensation charge
              for $2,500,000 based on its estimate of the value related to the
              probable future vesting of stock options granted to these
              individuals. The noncash compensation charge at December 31, 1995
              was calculated based on the market price of the Company's common
              stock on December 31, 1995 ($3.25), less the exercise price of
              $1.00 per share, multiplied by the number of shares subject to the
              options (1,111,111).

              During the year ended December 31, 1996, the Company recorded a
              noncash compensation credit of $1,250,000. The adjustment
              reflected a decrease in the market price of the Company's common
              stock of $1.125 per share from the closing price on December 31,
              1995 ($3.25) compared to the closing price on December 31, 1996
              ($2.125).

              At December 31, 1996, the Company's balance sheet reflected an
              accrual of $1,250,000 included in stockholders' equity relating to
              the management options. The $1,250,000 balance at December 31,
              1996 was calculated based on the market price of the Company's
              common stock on December 31, 1996 ($2.125), less the exercise
              price of $1.00 per share, multiplied by the number of shares
              subject to the options (1,111,111).

                                      F-21
<PAGE>   49

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              At December 31, 1996, 555,555 (representing 50%) of the management
              stock options vested, as the Company achieved the financial
              benchmarks called for under the option agreements for the year
              ended December 31, 1996. On March 19, 1997, a vote was adopted by
              the Company's Compensation Committee, and then ratified by the
              Board of Directors, to amend the option agreements in order to
              delete the Benchmarks, as described in the option agreements. The
              Board voted to accept the optionholders' delay of 10% of their
              vested option shares and to replace the Benchmarks with an
              extended vesting schedule, based on continued employment by the
              Company. Under the revised vesting schedule, 40% or 444,445 of the
              options vested as of December 31, 1996, and the remaining 666,666
              options will vest pro rata on December 31, 1997, 1998 and 1999. At
              the time these options are exercised the proceeds will be credited
              to the additional paid-in capital account. Except under the
              circumstances described below, this change will result in no
              further charges or credits against earnings related to the
              management options. During 1997, one of the officers, who had been
              granted a total of 55,555 options, resigned. As of December 31,
              1997, a total of 22,222 (or 40%) of the officer's options had
              vested. Accordingly, during the year ended December 31 1997, the
              Company recorded a $37,500 noncash compensation credit to reverse
              the compensation expense related to the unvested options.

              The following is a summary of all stock option activity during the
              two years ended December 31, 1997:

<TABLE>
<CAPTION>
                                                                                           WEIGHTED
                                                                                            AVERAGE
                                                          NUMBER OF         OPTION          OPTION
                                                            SHARES           PRICE           PRICE

                 <S>                                       <C>               <C>            <C>
                 Outstanding, December 31, 1995            1,111,111         $1.00          $  1.00
                    Granted                                  235,000        1.00-2.19          1.68
                                                           ---------    -------------       -------

                 Outstanding, December 31, 1996            1,346,111    $   1.00-2.19       $  1.12
                   Granted                                    20,000        2.125             2.125
                   Terminated                               (164,761)       1.00-2.19          1.43
                                                           ---------    -------------       -------

                 Outstanding, December 31, 1997            1,201,350    $   1.00-2.19       $  1.09
                                                           =========    =============       =======

                 Exercisable, December 31, 1997              751,128    $   1.00-2.19       $  1.10
                                                           =========    =============       =======
</TABLE>

              In October 1995, the FASB issued SFAS No. 123, Accounting for
              Stock-Based Compensation, which requires the measurement of the
              fair value of stock options or warrants to be included in

                                      F-22
<PAGE>   50

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              the statement of income or disclosed in the notes to the financial
              statements. The Company has determined that it will continue to
              account for stock-based compensation for employees under APB
              Opinion No. 25 and elect the disclosure only alternative under
              SFAS No. 123 for options granted in 1997 and 1996 using the
              Black-Scholes option pricing model prescribed by SFAS No. 123.
              Based on the use of the Black-Scholes option pricing model,
              options granted in 1997 with an exercise price of $2.125 had a
              fair value of $1.77. The weighted average assumptions are as
              follows:

                                                      1997              1996

                   Risk-free interest rate            6.45%             6.2%
                   Expected dividend yield              -                -
                   Expected lives                    7 years          7 years
                   Expected volatility                94.0%            63.5%

              Had compensation cost for these plans been determined consistent
              with SFAS No. 123, the Company's net (loss) income and net (loss)
              income per share would have been (increased) reduced to the
              following pro forma amounts:

<TABLE>
<CAPTION>
                                                                        1997             1996

                   <S>                           <C>                  <C>               <C>
                   Net (loss) income             As reported       $ (2,348,175)     $ 1,048,196
                                                 Pro forma           (2,414,906)         974,284

                   Net (loss) income per share   As reported       $      (0.63)     $      0.28
                                                 Pro forma                (0.65)            0.26
</TABLE>

              Because the method prescribed by SFAS No. 123 has not been applied
              to options granted prior to January 1, 1995, the resulting pro
              forma compensation cost may not be representative of that to be
              expected in future years.

       (g)    Deferred Compensation

              Effective December 11, 1996, the Company granted stock options to
              an officer of the Company granting options to acquire up to
              100,000 shares of the Company's common stock for an exercise price
              of $1.00 per share. Under the stock option agreement, the options
              vest pro rata over seven years beginning March 5, 1995.

                                      F-23
<PAGE>   51

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              At December 31, 1996, the Company recorded a charge to deferred
              compensation and a corresponding credit to additional paid-in
              capital in the amount of $89,062, net of amortization, which
              represents the difference between the market price of the
              Company's common stock on December 11, 1996, the date of the
              option grant ($2.1875) and the exercise price of $1.00 per share,
              multiplied by the number of shares subject to the option
              (100,000). During 1997, the officer resigned from the Company,
              resulting in no future vesting of these options. As of December
              31, 1997, a total of 28,572 shares had vested. Accordingly, for
              the years ended December 31, 1997 and 1996, the Company recorded a
              noncash compensation charge of $4,242 and $29,668, respectively
              with a corresponding reduction of deferred compensation to reflect
              the pro rata recognition of expense for the 24-month period
              beginning March 1995 and ending March 1997.

(6)    INCOME TAXES

       At December 31, 1997, the Company had a net operating loss carryforward
       available for federal tax purposes of approximately $3,300,000 with
       expiration dates beginning in 2009.

       The deferred tax asset consists of the following components at December
       31, 1997 and 1996:

                                                         1997           1996

            Net operating loss carryforwards         $ 1,143,000     $  458,000
            Timing differences                            26,000        250,000
                                                     -----------     ----------

                                                       1,169,000        708,000

            Valuation allowance                       (1,169,000)      (708,000)
                                                     -----------     ----------

                                                     $         -     $        -
                                                     ===========     ==========

       Net operating loss carryforwards may be limited in the event of certain
       changes in ownership interests of significant stockholders.

       A full valuation allowance has been provided due to the uncertainty
       surrounding the realization of the deferred tax asset.

                                      F-24
<PAGE>   52

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


(7)    COMMITMENTS AND CONTINGENCIES

       (a)    Operating Leases

              The Company has entered into various leases for office space,
              office and golf equipment, golf carts and telephone systems all
              under noncancelable operating leases that expire at various dates
              through September 2005. Rent expense under these leases was
              approximately $543,000 and $472,000 in 1997 and 1996,
              respectively. Approximate future minimum lease payments for all
              operating leases as of December 31, 1997 are as follows:

                     1998                                      $   223,000
                     1999                                          217,000
                     2000                                          146,000
                     2001                                          111,000
                     2002                                           56,000
                     Thereafter                                     10,000
                                                               -----------

                              Total                            $   763,000
                                                               ===========

       (b)    Loan Guarantee--Las Vegas Golf Center, LLC

              During 1997, the LLC, an affiliate of the Company (see Note 2(c)),
              entered into a $4,000,000 construction and permanent loan
              agreement (the Agreement) with US Bank of Nevada, for the purpose
              of paying certain costs incurred in constructing a golf driving
              range located in Las Vegas, Nevada. Under the terms of the
              Agreement, the loan is collateralized against substantially all of
              the assets of the LLC and the personal guarantees of the Company
              and Lod Cook, joint and severally, and Paul Fireman limited to
              $1,500,000.

(8)    RELATED PARTY TRANSACTIONS

       (a)    Golftown Driving Range

              During July 1996, the Company entered into an agreement with
              Golftown, Inc. (Golftown), a Massachusetts corporation, which is
              the owner and operator of a driving range facility (the Facility)
              in Saugus, Massachusetts. The Company has agreed to guaranty a
              loan in an amount of $295,000 made to Golftown, in exchange for a
              25% equity interest in Golftown. Under the terms of the agreement
              with Golftown and its lender, the Company has the opportunity to
              cure any default under the loan, and in the event of a default,
              the Company may assume day-to-day

                                      F-25
<PAGE>   53

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              management of the Facility and receive a management fee for such
              services in addition to its 25% interest in Facility profits. In
              addition, the Company has entered into an agreement for a pledge
              of voting rights to a majority of the voting interest of Golftown,
              which pledge becomes effective in the event of a default under the
              loan being guaranteed by the Company. The President and majority
              stockholder of Golftown, Inc. is Jeffrey Abrams, the son of
              Stanton V. Abrams, the President and Chairman of the Board of
              Directors of Senior Tour Players Development, Inc. The driving
              range opened to the general public during August 1996. In 1997,
              various capital contributions were drawn from Golftown's
              stockholders and the Company invested approximately $17,500 which
              was not sufficient to maintain its equity ownership resulting in a
              reduced ownership interest of 21.8% at the end of the calendar
              year. As of December 31, 1997, the Company had written down its
              investment to zero to reflect the Company's portion of the loss
              incurred by Golftown.

       (b)    Las Vegas Golf Center, LLC

              During December 1996, the Company acquired, and simultaneously
              sold, a 48.5% interest in the LLC to Paul Fireman, a significant
              shareholder of the Company, who owned 205,000 shares of the
              outstanding common stock of the Company at December 31, 1996. In
              consideration of 50,000 shares of the common stock of the Company
              issued to Mr. Fireman, the Company retained an option to
              repurchase up to a maximum 13.5% interest in the LLC (see Note
              2(c)). In addition, the Company entered into a consulting
              agreement with Mr. Fireman for services rendered in connection
              with the structuring and implementation of the transaction, as
              well as for arranging certain financing for the LLC. Included in
              net revenues of the Company for 1996 is $200,000 related to this
              consulting agreement. Included in equity in losses of
              unconsolidated affiliate for the Company for 1997 is the Company's
              share of the LLC's 1997 loss ($190,331). In addition, the Company
              wrote off the carrying values of the option.

(9)    SUBSEQUENT EVENTS

       (a)    Management Agreement--Harbor Links Golf Course of North Hempstead,
              New York

              Effective January 27, 1998, the Company entered into a Golf
              Facilities Management Agreement (the Management Agreement) with
              the Town of North Hempstead in New York (the Town). The Town is
              constructing a new municipal golf facility in the Town of
              Hempstead, New York which will include an 18-hole golf course, a
              9-hole executive golf course, driving range, clubhouse,
              maintenance building, practice and learning center, parking lot
              and related golf facilities, five athletic fields, the surrounding
              cliff areas and at the discretion of the Town, a miniature golf
              course, collectively referred to as the "Facility." The Company is
              engaged to manage the

                                      F-26
<PAGE>   54

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


              Facility for the Town including but not limited to marketing,
              maintaining the golf course, clubhouse and golf facilities. The
              Company is required to provide the Town a performance bond at the
              Town's expense (with respect to the premiums) in an amount not
              less than $1,000,000, which secures the operational and other
              responsibilities of the Company and an initial capital
              contribution to the Facility of $1,000,000 on July 1, 1998 (or
              such later date as the Town shall, in its sole discretion, decide
              and so notify the Company) under the Agreement. The Company is
              entitled to receive a return of the initial capital contribution
              in five equal annual installments of $200,000 payable on March 1
              of each year commencing March 1, 2001. The Company is also
              entitled to receive interest on the outstanding portion of such
              initial capital contribution, which has not been returned to the
              Company at an interest rate equal to the lesser of 2% above the
              prime rate as reported by the Federal Reserve Bank or the actual
              interest rate paid by the Company on financing obtained to fund
              the initial capital contribution to the facility. Payment of such
              interest shall be made quarterly in arrears commencing March 1,
              1999. In consideration for the management services to be provided
              by the Company, the Town is required to compensate the Company a
              base amount of $125,000 per annum including actual out-of-pocket
              costs commencing 60 days prior to the opening of the Facility,
              which is anticipated in the summer of 1998. The base amount shall
              increase by $25,000 every three years starting in 1999 and
              additional incentive management fee payable starting in 1999 equal
              to 10% of the base amount, if the gross revenue for the
              immediately preceding calendar year exceeds a specified threshold
              amount for the preceding calendar year. The agreement, which has a
              10-year term, expiring on December 31, 2007, can be terminated
              yearly by the Town upon 30 days' notice to the Company.

       (b)    Pending Litigation

              On March 3, 1998, the Company brought an action against unrelated
              individual shareholders of Golf Centers of America, Inc., a
              California corporation (the Sellers), seeking damages and
              declaratory relief and alleging breach of contract, fraud and
              misrepresentation and breach of warranty under the terms of an
              agreement dated November 29, 1996, between the Sellers and the
              Company by which the Company purchased the Sellers' membership
              interest in the LLC (see Note 2(c)). The Company expects the
              Sellers to defend the Complaint with counterclaims seeking to
              require the Company to make a payment due under the Agreement in
              the amount of approximately $200,000 (see Note 2(c)) and to
              deliver certain shares of stock of the Company which were due to
              be issued by January 15, 1998 (see Note 1(j)).

                                      F-27
<PAGE>   55

                      SENIOR TOUR PLAYERS DEVELOPMENT, INC.
                                 AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997

                                   (Continued)


       (c)    Proposal to Purchase The Badlands Golf Club

              On March 6, 1998, the Company announced that it has received a
              proposal from an outside party to purchase The Badlands, and that
              it has engaged an investment banking firm to assist the Company in
              evaluating this proposal, and to assess additional strategic
              alternatives. Accordingly, the Company's current business strategy
              is to concentrate its efforts on evaluating this potential sale
              transaction and has temporarily suspended the pursuit of any new
              development deals and will concentrate its efforts on its existing
              owned and managed properties. There can be no assurance that any
              transaction will be agreed or consummated as a result of the other
              party pursuing this purchase proposal.

                                      F-28