Carbite Golf Inc – ‘10SB12G/A’ on 1/13/00

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Amendment to Registration of Securities of a Small-Business Issuer   —   Form 10-SB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10SB12G/A   Amendment No. 1 to Form 10-Sb                         61    307K 
 2: EX-10.11    Commercial Security Agreement                         18±    74K 

10SB12G/A   —   Amendment No. 1 to Form 10-Sb
Document Table of Contents

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As filed with the Securities and Exchange Commission on January 13, 2000  

================================================================================

SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549    

_______________________ 

AMENDMENT NO. 1 TO THE  

FORM 10-SB  

________________________  

GENERAL FORM OF REGISTRATION OF 
SECURITIES OF SMALL BUSINESS ISSUERS  
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 

CARBITE GOLF, INC.  

(Name of Small Business Issuer in its charter)  

British Columbia, Canada                                    33-0770893          
(State or other jurisdiction                             (I.R.S. Employer       
of incorporation or organization)                        Identification No.)    

6330 NANCY RIDGE DRIVE, SUITE 107 
                       SAN DIEGO, CA                         92121

             (Address of principal executive offices)         (Zip code)

Issuer's telephone number (858) 625-0065  

SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:  None 

SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT: 

Common Stock, No Par Value  
(Title of class)  

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PART I  

Forward-Looking Statements                                                      

    This document contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can    
identify forward-looking statements by terminology such as "may," "will,"       
"should," "except," "plan," "anticipate," "believe," "estimate," "predict,"     
"potential" or "continue," the negative of such terms or other comparable       
terminology. These statements are only predictions. Actual events or results may
differ materially.                                                              

    These forward-looking statements are based on management's expectations as
of the date hereof, and the Company does not undertake any responsibility to    
update these statements in the future.  Actual future performance and results   
could differ materially from those contained in or suggested by these forward-  
looking statements as a result of the factors set forth in this Form 10-SB,     
including without limitation the disclosures made under the captions            
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and "Factors That May Affect Future Results and Financial Condition"
and the other risks detailed in the Company's reports to be filed with the      
Securities and Exchange Commission.                                             

DESCRIPTION OF BUSINESS 

Overview                                                                        

 Carbite Golf, Inc. (the "Company"), through its wholly-owned subsidiary
Carbite, Inc., designs, develops, and markets high quality innovative golf clubs
based on its proprietary powder metallurgy technology. The products currently   
include wedges, putters, utility woods, wood sets and iron sets.                

The Company does not manufacture the principal components of its clubs
(clubheads, shafts, and grips), but purchases the components from outside       
suppliers and then assembles, packages and ships the products at the San Diego, 
California headquarters.                                                        

     The Company markets and sells its products through a diverse combination of
(i) wholesale sales to on-course and off-course golf retail shops and selected  
sporting goods retailers; and (ii) direct response sales to consumers through   
television infomercials, direct mail, telemarketing and the internet.           

The Company is a holding company and all of the golf club operations  
described herein are conducted through its wholly-owned subsidiary, Carbite,    
Inc.                                                                            

Organization                                                                    

    The Company was incorporated in 1985 in British Columbia, Canada under the
name Q Data Systems, Inc. In 1986, the Company conducted a public offering in   
Canada only. Its stock has been publicly traded on the Vancouver Stock Exchange 
since 1986. The current trading symbol is "CAB".                                

From 1985 to 1996, the Company was involved in a variety of non-golf  
businesses, including electronic devices and an automobile dealership. In 1991, 
the name was changed to Consolidated Q Data Systems, Inc.                       

     In September, 1997, the Company completed the acquisition of two privately-
held, California corporations involved in the golf equipment business: (i)      
Carbite, Inc., which had developed a line of wedges and other golf clubs using  
patented powder metallurgy technology; and (ii) Advanced Golf Systems, Inc.     
which was Carbite's joint venture                                               

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partner in a television infomercial selling golf clubs under the name ViperBite.
In connection with these acquisitions, the Company changed its name to Carbite  
Golf, Inc., effective January 4, 1996.                                          

   By December 31, 1998, the Company's only assets were its ownership of all
the stock in Carbite, Inc. and Advanced Golf Systems.  Since Advanced Golf's    
only asset is its joint venture with Carbite, it is considered a discontinued   
operation and the Company intends to formally dissolve it in 1999.              

Proprietary Technology Applied to Golf Clubs                                    

  After its incorporation in 1988, Carbite, Inc. began developing products
using the proprietary metallurgical technology developed by its founder, Chester
S. Shira, a metallurgist with an avid interest in golf.  Mr. Shira's original   
concept was that a tungsten carbide surface inserted on the face of a golf club 
would improve performance by increasing ball control through backspin.  By 1992,
Mr. Shira had secured six patents and the USGA had approved the inserts as      
conforming to the Rules of Golf.  Carbite, Inc. introduced its first products in
mid-1992 and by year end 1998 had grown to annual sales of $15 million.         

Inserts                                                                         

    The Company's initial innovation was a friction-enhancing insert for irons
designed to increase backspin. The insert combines tungsten carbide particles in
a bronze alloy matrix, creating a slightly abrasive, but durable, club face     
designed to create more backspin than traditional non-sandblasted clubs. The    
Company believes that greater backspin assists in greater control for players at
all skill levels.                                                               

   The insert has been primarily applied to wedge products where the Company
believes extra spin is particularly helpful.  The inaugural insert product was  
the Check-Mate wedge, introduced in 1992, with a traditional head shape/size    
offered in four loft configurations.  Two other Check-Mate models (CS-100 and   
CS-200) were added in 1995.  In 1997, the insert technology was extended to two 
new products - the Diatanium wedge which combines titanium and diamond particles
designed to decrease weight and increase durability and ball control; and the JS
Series Putters which feature a soft bronze version of the insert designed to    
optimize softness of feel and playability.                                      

Taylor Made Golf has licensed the insert for use on its "Tour Wedge"  
product. Professional golfers have also used the club in competition - the      
Company believes that more than 60 players on the PGA Tour, Senior Tour, LPGA   
and Nike Tour currently use wedges which incorporate inserts using Carbite      
technology.                                                                     

Surface Technology and Plating                                                  

   The Company has developed a surface plating process which is designed for
performance benefits similar to the insert, but which are less expensive to     
manufacture. This technology was first used on the ViperBite, an oversized      
wedge, which was introduced in mid-1995 through a television infomercial. The   
success of the wedge helped create a market for ViperBite iron sets, introduced 
in mid-1996.                                                                    

 In March, 1997 the Company launched a utility wood, since discontinued,
called the Gyroseven, which combined the surface plating with a keel-shaped sole
and offset head designed to create an easy-to-hit alternative to the long iron. 
This design has since been extended to a full line of Carbite Gear Effect Metal 
Woods (1-3-4-5-7-9).                                                            

Dual Density - Polar Balanced                                                   

The Company is the assignee of all rights to a patent on a process to 
fabricate and join dissimilar metals with different densities in a single club. 
The Company believes that such technology (which it refers to as "Dual Density")
has significant potential as the industry continues to move toward club heads   
with bigger "sweet spots" which are more                                        

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forgiving on off-center hits. Dual Density is designed to achieve this by       
combining lightweight metals in the hitting area and denser materials in the    
heel and toe.                                                                   

  The Company's first application of this technology is to a new family of
Polar Balanced Putters which combine lightweight titanium or aluminum in the    
hitting area with dense tungsten in the heel and toe. This combination is       
designed to produce an increase in resistance to twisting at the moment of      
impact (in metallurgical parlance, the "Moment of Inertia;" in golf parlance, a 
bigger "Sweet Spot"). The complete product line (titanium and aluminum models)  
was introduced in January, 1998.                                                

    The Company believes there are significant opportunities in the production
of full iron sets with the Dual Density process. This opportunity has been      
highlighted by the introduction of multiple material irons from various industry
leaders. The Company's first products in this area are its Tungsten Tour Irons  
(a full line of irons) which are designed to bias the weight of the club head to
help square the club at impact.                                                 

Products                                                                        

    The Company operates in the golf club segment within the golf industry and
offers wedges, putters, irons, and woods. These clubs are designed and priced to
compete at the premium and middle range price levels. The Company sells         
substantially all of its golf clubs under the Carbite brand name.               

   The following table sets forth the contribution to net sales attributable
to the Company's product groups for the periods indicated:                      

                                                        [Enlarge/Download Table]


                               Year Ended December 31,                          Nine Months Ended     
                        1998                             1997                   September 30, 1999    
           ---------------------------        -------------------------   --------------------------- 
                                                                                                      
Putters      $12,370,000            79%        $  428,396             5%    $11,522,556            82%

Woods        $ 1,942,000            12%        $3,632,203            43%    $   505,910             4%

Wedges       $ 1,172,000             7%        $4,419,319            52%    $ 1,766,515            12%

Other        $   178,000             2%        $        0             0%    $   267,652             2%

Net Sales    $14,527,670           100%        $8,480,111           100%    $14,062,633           100%
             ===========           ===         ==========           ===     ===========           === 

The Company currently offers the following products:                  

Polar Balanced Putters                                                          

In the Polar Balanced Putter, 70% of the total putter-head weight is  
strategically placed at the toe and heel. Tungsten weights, with twice the      
density of lead, are molecularly bonded to an ultra light center section of     
aluminum. This technology is designed to reduce club head rotation at impact,   
even on off-center hits. The Polar Balanced series of putters are designed to   
have a higher moment of inertia than most conventionally shaped putters which   
the Company believes make them more accurate and forgiving than other putters.  

  Polar Balanced Putters are available in four models (ZG, ZH, ZI and ZM),
all with steel or aluminum shafts.                                              

Tour Insert Wedges                                                              

     The Tour Insert Wedge Series stresses performance through design, materials
and technology. Carbite's patented high-friction insert blends powdered soft    
bronze with diamond and tungsten carbide particles designed to                  

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deliver extended wear and coefficient of friction. This technology was designed 
to provide performance through spin control so the ball holds the green from any
approach shot.                                                                  

    Tour Insert Wedges are available in three loft configurations (52(degrees)
Approach, 56(degrees) Sand and 60(degrees) Lob) with steel or graphite shafts.  

Gear Effect Metal Woods                                                         

   Gear Effect Metal Woods are designed to impart proper spin on the ball at
the point of impact that keeps it working to the center of the fairway. A mis-  
hit towards the toe will generally move back to the intended target line. The   
Company believes this feature helps to ensure more consistent directional       
control instead of slices or hooks. The exclusive high friction club face grips 
the ball at impact. The offset head is designed to prevent slices by keeping the
hands ahead of the ball at impact. The lightweight grip and shaft are designed  
to provide for greater club head speed for increased distance. A radiused keel- 
shaped sole is designed to pick the ball cleanly from the tightest lies to the  
deepest rough.                                                                  

    Gear Effect Metal Woods are available in Driver, 3 Wood, 4 Wood, 5 Wood, 7
Wood and 9 Wood, all in graphite shafts.                                        

Tungsten Tour Irons                                                             

    Tungsten Tour Irons are designed to bias the weight toward the heel or toe
to help square the club face at impact. Unique weighted inserts made from a     
blend of 70% copper and 30% tungsten are designed to modify the club handling   
with the goal of reducing hooks and slices.                                     

 For the long irons, the weighting is moved toward the heel. For shorter
clubs, the weight is shifted toward the toe. These irons also feature a         
progressive offset with a mid-size cavity back head.                            

   Tungsten Tour Irons are available in full sets of 3-Iron through Pitching
Wedge, in graphite or steel shaft.                                              

New Products                                                                    

   For 1999, Carbite introduced an assortment of new products which added to
the wedge and putter lines and expanded the overall product line to include wood
and iron sets: two new models of the Polar Balanced Putter (the ZI and the ZM); 
Tour Insert Wedges offered in three configurations; Tungsten Tour Iron Sets; and
Gear Effect Metal Woods offered in six lofts. See Discussion at "Products", page
4-5.                                                                            

    The Polar Balanced Putter accounted for 81.9% and 66% of net sales for the
nine months ended September 30, 1999 and the fiscal year ended December 31,     
1998. A decline in the demand for, or a decline in the average selling price of,
these putters would have a material adverse impact on the Company's business,   
operations and financial condition.                                             

Product Design and Development                                                  

    The Company believes that the development of new products and the on-going
enhancement of its product lines are necessary for its growth and success.      
Product design at the Company is a result of the integrated efforts of its      
product design team, marketing departments and outside manufacturers, all of    
which work together to generate new ideas for golf equipment. The Company's     
research and development expenses for the nine months ended September 30, 1999, 
and for the fiscal years ended December 31, 1998 and 1997 were $341,703,        
$345,000 and $243,000,                                                          

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respectively. The Company intends to invest significant amounts in its research 
and development activities through the remainder of 1999 and beyond.            

The product design effort is headed by Chester S. Shira, the Company's
Chairman who has over 40 years experience as a metallurgist engineer, and Joe   
Sery, Vice President of Engineering, a mechanical engineer and industrial       
engineer.  The Company also employs on an as-needed basis outside consultants   
who work on specific design features of new products.                           

     The design team assimilates ideas from many sources, including professional
golfers, sales personnel, and the marketing department, and incorporates the    
golf equipment standards developed by the USGA.  Once the basic design          
parameters and materials are determined, working designs are formulated,        
generally with computer-aided design software, followed by brass models and     
prototype molds.  A small number of sample club heads are created and used for  
testing.  After field testing, any design changes are implemented and the       
specifications are given to potential outside manufacturers who are selected    
based on price and quality.  Once the initial products are inspected and        
approved, mass production may begin.                                            

     The regular introduction of new products does, however, have certain risks.
Prior designs of the Company, even if successful, may be rendered obsolete      
within a relatively short period of time as new products are introduced.  Basic 
design changes in existing golf equipment and new models may be met with        
consumer rejection.  New products with lower prices can decrease revenues even  
with increased unit sales.  The rapid introduction of new products could result 
in closeouts of existing inventories for wholesale and retail sales.  Such      
closeouts could reduce margins on sales of older products and reduce sales of   
new products.  Such events could have a material adverse impact on the Company's
operations.                                                                     

 The Company plans its orders to manufacturers based upon the forecasted
demand for its products.  Actual demand may be more or less than forecasted     
demand.  Since the Company's overseas club-head vendors generally require 30-45 
day lead times to produce heads after a purchase order is placed, and since     
shipments from these vendors average 25-30 days, the Company's ability to       
quickly expand its manufacturing capacity for new products is limited.  If the  
Company is unable to produce sufficient quantities of new products in time to   
fulfill actual demand, it could limit the Company's sales and adversely affect  
its financial performance.  If actual demand is less than forecasted, the       
Company could have excess inventories and related obsolescent charges that could
adversely affect financial performance.                                         

Sales and Marketing                                                             

 The Company sells its products through wholesale sales to on-course and
off-course golf retail shops and selected sporting goods retailers and through  
direct sales to consumers using television infomercials, direct mail,           
telemarketing and the Company's web site.                                       

 Retail Sales.  A significant portion of the Company's sales are to U.S.
retailers.  To generate retailer loyalty and maintain its high quality          
reputation, the Company does not currently sell to price sensitive general      
discount warehouses or membership chains.  For the nine months ended September  
30, 1999 and for the fiscal years ended December 31, 1998 and 1997, sales to    
retailers accounted for approximately 71%, 46% and 57%, respectively, of total  
sales.                                                                          

Retail accounts are handled by a national network of independent sales
representatives supported by the Company's executive office and a telemarketing 
team of 12 employees in San Diego.  At September 30, 1999, the Company had 32   
independent sales representatives who receive a commission on qualifying sales  
and are free to sell for other golf equipment companies.  Although the Company  
works closely with its sales representatives, it cannot directly control or     
insure the effectiveness of their sales and marketing activities.               

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All product orders from retailers and other customers are subject to  
cancellation or rescheduling by the customer prior to shipment with limited or  
no penalties.  While the Company believes its relationships with its customers  
are satisfactory, there can be no assurance the Company will be able to maintain
such relationships in the future.                                               

   International Sales.  The Company markets its products outside the United
States through independent distributors.  The primary foreign market is Japan.  
Sales have also been made in Korea, United Kingdom, Germany, Sweden, Puerto Rico
and the Phillippines.  International sales accounted for 14.7%, 6% and 2.3% of  
the Company's net sales for the nine months ended September 30, 1999, and for   
the 1998 and 1997 fiscal years, respectively.                                   

     The Company's primary foreign distributor is a United States company, which
sells the Polar Balanced putter and other products through infomercials in      
Japan.  Sales to this distributor were approximately $1,704,619 (12.4% of       
overall net sales) for the nine months ended September 30, 1999 and             
approximately $1,122,993 (9% of overall net sales) for the fiscal year 1998.    

The Company's foreign operations increase the Company's exposure to   
fluctuations in exchange rates for various foreign currencies which could result
in losses, and in turn, adversely impact the Company's business, financial      
conditions and results of operations.                                           

Customer Service Support.  The Company believes that superior customer
service can significantly enhance its marketing efforts.  The Company maintains 
an in-house customer service department for both wholesale and direct consumer  
trade.  A 24-hour 7-day-a-week inbound telemarketing company answers customer   
calls generated by the Company's infomercials.  The Company's sales             
representatives directly service the retail accounts.                           

Advertising and Promotion.  The Company seeks to promote its products 
through a cost-effective combination of public relations, promotion, print      
advertising, and printed sales materials which invoke the theme of a "material  
advantage" through technology.  To date, the Company has avoided general image  
advertising (in television or print), choosing instead to focus its marketing   
budget on direct response advertising which the Company believes has a more     
predictable impact on sales and can be a cost-effective way to simultaneously   
build brand name recognition, communicate a product story, and sell product.    
The Company regularly places direct response advertisements in national print   
publications such as Golf Digest and Golf World and has used television         
infomercials for specific products.                                             

     Infomercials.  The Company has successfully used television infomercials to
launch new products.  The ViperBite in 1995, the Gyroseven utility wood in 1997,
and the Polar Balanced Putter in 1998 were all introduced to the market through 
infomercials.  The Company believes that good infomercials can enhance consumer 
awareness of its products, make immediate sales, and expand the retail customer 
base.  Infomercials are typically 28 minutes long, feature celebrities, pro     
athletes and/or golf professionals and are shown primarily on the Golf Channel  
and major regional sports channels.  During their economic life, they are often 
aired every day, particularly on weekends.                                      

   Direct Response.  In addition to direct response advertising, the Company
pursues direct consumer sales with sophisticated direct mail and telemarketing  
programs, spearheaded by the Company's in-house telemarketing department in San 
Diego.  Since most direct response sales are made by credit card, the Company is
able to secure cash payment before shipment without any credit risk or accounts 
receivable management.                                                          

  Product Endorsements.  The Company promotes its products to touring golf
professionals. In August, 1999, the Company entered into a five-year Endorsement
Agreement with professional golfer Fuzzy Zoeller whereby Zoeller will play,     
endorse, and assist in the development of Carbite products worldwide.  The      
Agreement calls for payments to Zoeller in a combination of cash and stock of   
$138,000 for the first six months (August, 1999 to February 2000) and five      
annual payments of cash and stock thereafter with a dollar value of $300,000 in 
Year 2, $300,000 in Year 3,                                                     

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$500,000 in Year 4, $550,000 in Year 5 and $575,000 in Year 6. The Company has  
the right to terminate the arrangement if 2001 sales do not reach $25 million.  

  Carbite Golf Web Site.   The Company's products are promoted and offered
for sale on the Company's internet web site (www.carbitegolf.com).              

The Company's total advertising and marketing related expenses were   
approximately $5.3 million and $3.0 million for the fiscal years 1998 and 1997, 
and $4.6 million for the nine months ended September 30, 1999.                  

Manufacturing, Assembly and Raw Materials                                       

  The principal components for the Company's golf clubs (clubheads, shafts
and grips) are manufactured by outside suppliers and shipped to the Company for 
assembly.  The suppliers are selected based on the quality of the finished      
products, materials, dependability and pricing.  All clubheads are designed by  
the Company which provides the manufacturers with detailed specifications.  They
are inspected prior to shipment by a quality control inspector employed by the  
Company in Taiwan.                                                              

     All assembly operations, including painting, stenciling and the application
of trade dress, are completed at the Company's facility in San Diego,           
California.  All components are inspected upon arrival from the suppliers and   
are assembled under the supervision of a full-time quality control inspector who
conducts numerous visual inspections at various points along the assembly       
process.                                                                        

     The Company is dependent on a limited number of suppliers and does not have
prior written agreements with them.  The principal clubhead suppliers, all based
in Taiwan, are CIPA, New Abiding, Tibest International and Ever Ring.  The      
principal shaft suppliers are True Temper, Neo Fiber and Titan.  The principal  
grip suppliers are Rubberon, Eaton and Lamkin.  Some of the Company's products  
require specifically developed manufacturing techniques and processes which make
it difficult to identify and utilize alternative suppliers quickly.  The Company
believes that suitable clubheads, shafts and grips could be obtained from       
alternative manufacturers, but any significant production delay or disruption   
caused by the inability of current suppliers to deliver or the transition to    
other suppliers could have a material adverse effect on the Company's business, 
results of operations and financial position.                                   

Dependence on Major Customers                                                   

During the fiscal years ended December 31, 1998 and 1997, no customer 
accounted for more than 10% of net sales revenue.  For the nine months ended    
September 30, 1999, one foreign distributor accounted for approximately 12.4% of
net sales.                                                                      

Patents and Trademarks                                                          

    The Company is the exclusive assignee, subject to a royalty obligation, of
the following seven U.S. registered patents owned by Chester S. Shira which give
the Company the exclusive right to produce golf clubs incorporating the         
proprietary powder metallurgy processes set forth in these patents: No.         
4,768,787 (issued 9/6/88); No. 4,992,236 (issued 2/12/91); No. 5,062,638 (issued
11/5/91); No. 5,094,810 (issued 3/10/92); No. 5,217,227 (issued 6/8/93); No.    
5,669,825 (issued 9/23/97); and No. 5,755,626 (issued 5/26/98).  Eight          
additional patent applications are pending, but have not been issued.           

   The Company's ability to compete effectively in the golf club market will
depend, in part, on its ability to maintain the proprietary nature of its       
technologies and products covered by these patents.  There can be no assurance, 
however, as to the degree of protection afforded by these patents or as to the  
likelihood that patents will be issued from                                     

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the pending patent applications. Moreover, these patents may have limited       
commercial value or may lack sufficient breadth to adequately protect the       
aspects of the Company's products to which the patents relate.                  

There can be no assurance that competitors, many of which have        
substantially greater resources than the Company and have made substantial      
investments in competing products, will not apply for and obtain patents of     
their own that will prevent, limit or interfere with the Company's ability to   
make and sell its products.  The Company is aware of numerous patents held by   
third parties that relate to products competitive to the Company's.  There is no
assurance that these patents would not be used as a basis to challenge the      
validity or limit the scope the Company's patent rights. A successful challenge 
to the validity of the Company's patents may adversely affect the Company's     
competitive position.  Moreover, there can be no assurance that such patent     
holders or other third parties will not claim infringement by the Company with  
respect to current and future products.  Because U.S. patent applications are   
held and examined in secrecy, it is also possible that presently-pending U.S.   
applications will eventually issue with claims that will be infringed by the    
Company's products or technologies.  The defense and prosecution of patent suits
is costly and time-consuming, even if the ultimate outcome is favorable.  This  
is particularly true in foreign countries where expenses associated with such   
proceedings can be prohibitive.  An adverse outcome in the defense of a patent  
suit could subject the Company to significant liabilities to third parties,     
require the Company to cease selling products or require disputed rights to be  
licensed from third parties.  Such licenses may not be available on satisfactory
terms, or at all.  The Company also relies on unpatented proprietary technology.
Third parties could develop the same or similar technology or otherwise obtain  
access to the Company's proprietary technology.                                 

   The Company's products are principally sold under the Carbite brand name.
The Company is the owner of the following U.S. trademarks registered with the   
U.S. Patent office: "Carbite;" "Check Mate;" "Multi Density;" "Dual Density;"   
and "Diatanium."  The "Carbite" mark is also registered in Japan and Germany.   

  The Company has applied for U.S. registration of the following marks and
such applications are pending: "Ti-Gear;" "Di-Gear;" "Nomis;" "Yipless;" "Multi 
Density;" "Dual Density;" "Polar Balanced;" "Dovetail Design;" "Enerlite;" and  
"Mometal."  There can be no assurance that any such pending trademarks will be  
granted.                                                                        

     In 1997, Orlimar Golf Company advised the Company that it believed that the
Gyroseven wood infringed Orlimar's rights in the trademark "Gyro" which Orlimar 
had previously used on a putter product.  To resolve this matter, the Company   
agreed to cease production of additional Gyrosevens and paid a royalty to       
Orlimar totaling $25,000.  The Company no longer uses the Gyroseven name.       

The Company has developed procedures to maintain the secrecy of its   
confidential business information.  These procedures include criteria for access
to and distribution of information and require written confidentiality          
agreements with certain employees and vendors.  There can be no assurance these 
measures will prove adequate in all instances to protect the Company's          
confidential information.                                                       

Licenses                                                                        

In January, 1995, the Company licensed to Taylor Made Golf Company the
rights to use its bronze high friction inserts under the Taylor Made brand name 
on irons.  In March, 1997, that agreement was extended through December 31,     
1999.  Taylor Made may purchase the inserts directly from the supplier, subject 
to certain exceptions.  For the fiscal years ended December 31, 1998 and 1997,  
and for the nine months ended September 30, 1999, the Company received royalty  
fees of $60,101, $202,778 and $5,000 from Taylor Made.                          

    In October 28, 1998, the Company entered into a License Agreement with KZG
Golf, Inc. for the brazing of copper tungsten wood heads manufactured for       
Orlimar Golf's TriMetal wood products.  The term of the License Agreement is    
five years and requires a minimum annual payment of $5,000.  The License        
Agreement may be terminated by either party in the event of a material breach.  
For the fiscal year ended December 31, 1998 and for the nine months             

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ended September 30, 1999, the Company was paid $221,308 and $161,571,           
respectively, in royalties pursuant to this License Agreement.                  

Daiwa Agreements                                                                

In September, 1999, the Company entered into two agreements with Daiwa
Seiko of Japan:                                                                 

  A Trademark License Agreement which permits the Company to use the Daiwa
name and other trademarks of Daiwa on golf products in the United States.  The  
term is five years with an option for an additional five-year term.  The Company
is obligated to pay a royalty of 6% of the Company's FOB purchase price on all  
products sold under the license.  The agreement is subject to termination upon  
certain events, including failure to meet certain minimum royalty amounts       
($75,000 in Year 1, $225,000 in Year 2, $250,000 in Year 3, $375,000 in Year 4  
and $450,000 in Year 5).                                                        

A Distribution Agreement which designates the Company as the exclusive
distributor of Daiwa golf products in the United States for a term of five years
with an option to renew for an additional five years.  The agreement is subject 
to termination upon certain events, including the failure for two consecutive   
years to undertake to meet certain minimum purchase obligations, which begin at 
$1.75 million for the first year of the agreement and escalate substantially    
each year thereafter.  The agreement grants Daiwa an option, exercisable through
September, 2002, to buy 300,000 shares of the Company's common stock at fair    
market value.  The Company must also pay 10% of Daiwa net sales for advertising 
and promotion of Daiwa products in the United States.                           

Competition                                                                     

  The Company operates in a highly-competitive market which is served by a
number of well-established and well-financed companies with recognized brand    
names, as well as new companies with popular products.  The Company believes it 
competes in the mid-priced to premium-priced segment of the golf club industry. 
The majority of the Company's competitors have substantially greater capital    
resources, depth of management and brand name identification in the golf        
industry than the Company.  The Company believes it competes primarily on the   
basis of performance, quality, price and brand name recognition.  The Company's 
competitors include Callaway, Taylor Made, Ping, Titleist, Odyssey and          
Cleveland.                                                                      

   The golf club industry is generally characterized by rapid and widespread
imitation of popular technologies, designs and product concepts developed by    
both new and/or existing competitors.  Occasionally, new market entrants may    
develop innovative club designs which meet with acceptance from golf club       
purchasers, leading to unanticipated changes in consumer preferences.  Many     
purchasers of golf clubs desire golf clubs that feature the latest technological
innovations and cosmetic designs, and their purchasing decisions are often the  
result of highly subjective preferences which can be influenced by many factors,
including, advertising, media and product endorsements. The Company could,      
therefore, face substantial competition from existing or new competitors who    
successfully introduce new clubs perceived to offer performance advantages and  
greater aesthetic appeal. Golf club manufacturers which do not currently compete
directly with the Company could pose significant competition in the future if   
they were to enter the market of medium to premium-priced high-quality clubs.   
There can be no assurance the Company will compete successfully in the future.  

Seasonality                                                                     

Golf generally is regarded as a warm weather sport and sales of golf  
equipment historically have been strongest during the second and third quarters,
with the weakest sales occurring during the fourth quarter.  As a result, the   
Company's operating results are highly seasonal.  Sales of golf clubs are also  
dependent on discretionary consumer spending, which may be affected by general  
economic conditions.  A decrease in consumer spending generally could result in 
decreased spending on golf equipment, which could have a material adverse effect
on the Company's business, operating results and financial condition.  The      
Company's future results of operations could also be affected by a              

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number of other factors, such as the unseasonal "El Nino" weather patterns      
experienced during the winter of 1997-1998; new product introductions by the    
Company's competitors; competitive pressures resulting in lower than expected   
average selling prices; and a reduction in sales volume.                        

     Because most operating expenses are relatively fixed in the short term, the
Company may be unable to adjust spending sufficiently in a timely manner to     
compensate for any unexpected sales shortfall.  Technological advances by       
competitors or other competitive factors may require the Company to invest      
significantly greater resources than anticipated in research and development or 
sales and marketing efforts.  Accordingly, the Company believes that period-to- 
period comparisons of its results of operations should not be relied upon as an 
indication of future performance.  Likewise, the results of any quarter are not 
indicative of results to be expected for a full fiscal year.                    

Product Warranty                                                                

    The Company supports all of its golf clubs with a limited two year written
warranty to the original purchaser.  To date, the Company has experienced only  
nominal warranty claims which are generally resolved with a replacement product.
The Company monitors the level and nature of any products breakage and, where   
appropriate, seeks to incorporate design and product changes to assure its      
customers of the highest quality products.  If Carbite clubs were to experience 
a significant increase in the incidence of breakage or other product problems,  
the Company's sales and image with golfers could be materially adversely        
affected.                                                                       

Regulatory Matters                                                              

The design of new golf clubs is subject to various regulations by the 
United States Golf Association ("USGA") relating to materials, construction,    
size and weight of golf clubs.  Although the equipment standards established by 
the USGA generally apply only to competitive events sanctioned by that          
organization, the Company believes it is critical for its success that its clubs
comply with USGA standards.  The Company's current products all comply with USGA
standards.                                                                      

  The process of securing a favorable ruling from the USGA on a given product is
subjective and no assurance can be given that any new products will receive USGA
approval or that existing USGA standards will not be altered in ways that could 
adversely affect the sales of the Company's products in the future.  If any of  
the Company's clubs were found to be non-conforming to USGA standards, it could 
have a materially adverse effect on the Company's sales, image and overall      
financial performance.                                                          

   The Company's facilities are subject to numerous federal, state and local
laws and regulations designed to protect the environment from waste and         
emissions and hazardous substances.  The Company is also subject to the federal 
Occupational Safety and Health Act and other laws and regulations affecting the 
safety and health of employees in the production areas of its facilities.  The  
Company believes it is in compliance in all material respects with all          
applicable environmental and occupational safety regulations.                   

Employees                                                                       

     As of September 30, 1999, the Company had 83 full-time employees, including
36 in product assembly and shipping, 29 in sales and marketing, and 18 in       
management, finance and administration.  None of the Company's employees are    
represented by a union, and the Company has not experienced any work stoppages. 
The Company considers its relations with its employees to be satisfactory.      

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Acquisitions                                                                    

The Company regularly reviews possible acquisition opportunities to   
potentially expand its business.  The Company may make acquisitions of, or      
strategic alliances with, complementary services, technologies, product designs 
or businesses in the future, but only if such are available on advantageous     
terms and can substantially aid the Company in expanding its market share and   
product line.  There can be no assurance, however, that any future acquisition  
or other arrangement will be completed or that, if completed, any such          
acquisition will be effectively assimilated into the Company's business.        

     Acquisitions involve numerous risks, including loss of key personnel of the
acquired company, the difficulty associated with assimilating the personnel and 
operations of the acquired company, the potential disruption of the Company's   
ongoing business, the maintenance of uniform standards, controls, procedures and
policies, and the impairment of the Company's reputation and relationships with 
employees and customers.  Any future acquisitions could also result in the      
issuance of dilutive equity securities, the incurrence of debt or contingent    
liabilities, and amortization expenses related to goodwill and other intangible 
assets, any of which could have a material adverse effect on the Company's      
business, operating results or financial condition.                             

Enforceability of Certain Civil Liabilities                                     

   The Company is a Canadian corporation.  One of its five directors and its
accountants referenced herein reside outside of the United States.              
Substantially all of the assets of these persons are located outside of the     
United States.  However, the sole asset of the Company, Carbite, Inc. and all of
the Carbite, Inc.'s assets are located in the United States.  It may not be     
possible for investors to effect services of process within the United States   
upon the director and the accountants who reside outside of the United States,  
or to enforce against the Company or such persons judgments obtained in a United
States court predicated upon the liability provisions of the United States      
securities laws.  The Company believes there is doubt as to the enforceability  
in British Columbia, Canada, where the Company's principal executive offices are
located, of judgments against the Company or its directors or accountants named 
herein who are not residents of the United States, predicated solely on the     
civil liability provisions of these laws.                                       

Additional Information                                                          

 The Company furnishes its shareholders with an annual report containing
audited financial statements prepared in accordance with generally accepted     
accounting principles in Canada ("Canadian G.A.A.P.") that have been reported on
by its independent chartered accountants that will include, if applicable, a    
reconciliation between the presentation made in accordance with Canadian        
G.A.A.P. and one made in accordance with generally accepted accounting          
principles in the United States ("G.A.A.P.").  The Company also furnishes its   
shareholders with quarterly reports for the first three quarters of each fiscal 
year containing unaudited summary financial information.                        

  Upon completion of this registration, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and, in accordance therewith, will file reports, proxy statements and     
other information with the Securities and Exchange Commission ("Commission").   
Such reports, proxy statements and other information may be inspected at public 
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street     
N.W., Washington, DC 20549; Northwest Atrium Center, 500 West Madison Street,   
Suite 1400, Chicago, Illinois 60661; 7 World Trade Center, New York, New York   
10048; and 5670 Wilshire Boulevard, Los Angeles, California 90036.  Copies of   
such material can be obtained from the Public Reference Section of the          
Commission at Judiciary Plaza, 450 Fifth Street N.W., Washington, DC 20549 at   
prescribed rates.                                                               

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATION  

   The following management's discussion and analysis of financial condition
and results of operations addresses the performance of the Company for the Nine 
Months Ended September 30, 1999 and 1998, and the fiscal years ended December   
31, 1998 and 1997, and should be read in conjunction with the Company's         
Consolidated Financial Statements and Notes thereto appearing elsewhere in this 
Registration Statement.                                                         

Overview                                                                        

     The Company was originally incorporated in British Columbia, Canada in 1985
as Q Data Systems, Inc. and its stock has been publicly traded on the Vancouver 
Stock Exchange since 1986.  The Company's original business was the development 
and sale of an electronic stock quotation device.  In 1992, the Company changed 
its name to Consolidated Q Data Systems, Inc. and expanded its business with the
acquisition of an automobile dealership.  Both of those businesses were         
discontinued in 1996.                                                           

In June 1994, the Company invested $1.4 million through a series of   
transactions to acquire 50% of the outstanding equity in Carbite, Inc. and      
secured an option to purchase the remaining 50%.  In January 1996, the Company  
changed its name to Carbite Golf, Inc.                                          

   In a transaction that closed September 3, 1997, the Company completed its
acquisition of Carbite, Inc. through a share exchange of 6.78 million shares of 
the Company's common stock at a price of $.90 Canadian for all the outstanding  
shares of Carbite, Inc.  Simultaneously, the Company completed its acquisition  
of Advanced Golf Systems, Inc. through a share exchange of 700,000 shares of the
Company's common stock at a price of $.90 Canadian for all the outstanding      
shares of Advanced Golf Systems, Inc. and warrants to purchase an additional    
700,000 shares, all of which expired unexercised in September, 1999.  The merger
of the Company with Carbite, Inc. and Advanced Golf Systems, Inc. was approved  
by the Vancouver Stock Exchange and the California Department of Corporations in
September 1997, and in connection with the merger, the Company obtained a       
fairness opinion from KPMG LLP.                                                 

In August 1997, the Company acquired the assets of Printer Graphics, a
printing business based in Vancouver, Canada which printing business was        
subsequently discontinued in September 1998.                                    

  The Company's financial results are derived primarily from the operating
results of its wholly-owned subsidiary, Carbite, Inc., whose operating results  
are included in the consolidated financial statements only from September 3,    
1997 forward, the date the Company completed its merger with Carbite, Inc.  The 
other wholly-owned subsidiary of the Company, Advanced Golf Systems, a          
California corporation, has no on-going operations and the Company intends to   
dissolve it in 1999.                                                            

Carbite, Inc.'s net sales are primarily derived from sales of golf    
equipment to on-course and off-course golf shops, selected sporting goods       
retailers, international distributors and direct sales to consumers.  Carbite,  
Inc.'s sales increased to $10.6 million for 1996 from $2.9 million for 1995,    
decreased to $8.7 million in 1997 and then increased to $15.6 million in 1998.  
For the nine months ended September 30, 1999 sales increased to $14.1 million   
from $12.2 million for the nine months ended September 30, 1998.  Carbite,      
Inc.'s net sales are accounted for on an accrual basis for all wholesale sales  
and on a cash basis for direct consumer sales.                                  

 Carbite, Inc. does not currently manufacture the components required to
assemble its golf clubs, relying instead on component suppliers.  Costs of the  
clubs consist primarily of component parts, including the head, shaft and grip. 
The Company's cost of goods sold includes labor and occupancy costs in          
connection with the inspection, testing and assembly of component parts at its  
facility in San Diego, California.  Operating expenses are composed primarily of
selling and royalty expenses, general and administrative expenses, research and 
development expenses.  Selling and                                              

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royalty expenses include advertising and marketing expenses, salaries and       
commissions, and royalties and consulting fees paid to talent and the producer  
of the Company's infomercials. During the fiscal years ended December 31, 1997, 
December 31, 1998 and for the nine months ended September 30, 1999, royalties   
were approximately 1% of net sales.                                             

Results of Operations                                                           

Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998                                                                            

     The following table sets forth the Company's operating results expressed as
a percentage of net sales for the Nine Months Ending September 30, 1999 compared
with the Nine Months Ending September 30, 1998.  The Company believes this is   
the first nine-month period to period comparison of consolidated results that is
generally indicative of the relative financial components of the Company's      
operations since Carbite, Inc. results were included in the Company's           
consolidated financial statements only as of September 3, 1997.                 

                                   Statement of Operations

                                                        [Enlarge/Download Table]

                                                  Nine Months Ending September 30,        
                                                  1999                        1998        
                                             ---------------------------------------------
                                                                                          
                                                                (US Dollars)              
Net Sales                                     $14,062,812   100.00%  $12,168,503   100.00%
Cost of goods sold                              7,142,713    50.79%    5,017,305    41.23%

Gross profit                                    6,920,099    49.21%    7,151,198    58.77%

Selling expenses                                4,405,246    31.33%    5,059,820    41.58%

Operating expenses                              1,325,623     9.42%      920,285     7.56%

Net operating income                            1,189,230     8.46%    1,171,093     9.62%

Research and development                         (341,703)   -2.43%     (241,744)   -1.99%

Other expenses                                     (7,866)   -0.06%      (39,372)   -0.32%

Amortization of goodwill and deferred costs      (304,883)   -2.17%     (304,868)   -2.51%

Gain on discontinued printing operation            68,138     0.48%           --     0.00%

Loss on disposal of fixed assets                       --     0.00%      (31,670)   -0.26%

Income (loss) before income taxes                 602,916     4.29%      553,439     4.54%

Income taxes                                     (397,722)   -2.83%           --     0.00%

Net income (loss)                                 205,194     1.46%      553,439     4.54%


  Net sales increased to $14.1 million for the Nine Months Ended September
30, 1999 from $12.2 million for the comparable period of 1998, primarily due to 
strong wholesale sales of the Polar Balanced Putters.  Sales of the Polar       
Balanced Putter began with an infomercial marketing campaign in March 1998 and  
for the nine months ended September 30, 1999, direct consumer sales of the      
putters were $443,000 and wholesale sales to distributors were $3,048,000.  In  
the first quarter of 1998, the Company was still running the infomercial        
campaign for the Gyroseven Wood, which produced $375,000 in direct consumer     
sales and $107,000 in wholesale sales.  The Gyroseven infomercial was not used  
in 1999.                                                                        

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Cost of goods sold increased to $7,142,713 for the nine months ended  
September 30, 1999 compared to $5,017,305 for the comparable period in 1998.    
The increase is the result of the increase in sales and a change in the mix of  
sales described below.  Gross profit decreased to $6,920,099 for the nine months
ending September 30, 1999, from $7,151,198 for the comparable period in 1998.   
The gross profit percentages were 49.2% and 58.8% respectively.  The reason for 
the decrease in gross profit percentage is due to the sales mix changing to a   
greater percentage of wholesale sales versus direct consumer sales in 1999.     
Wholesale sales have a gross profit ranging from 40-55% compared to 250-400% for
direct consumer sales.                                                          

Operating income increased to $1,189,230 for the nine months ended    
September 30, 1999 from $1,171,093 for the comparable period in 1998.  Total    
operating expenses including selling expenses decreased to $5.7 million for the 
nine months ended September 30, 1999 from $6 million for the comparable period  
in 1998 which represented 40.8% and 49.1% of net sales respectively.  The       
decrease in operating expenses as a percentage of sales in the first nine months
of 1999 versus 1998 is due to selling expenses being cut to $4.4 million from   
$5.9 million.  The effectiveness of the Polar Balanced Putter infomercial       
decreased in 1999, so the media spent on buying television time decreased.  The 
operating results include a reserve of $120,000 against a potentially           
uncollectible receivable of approximately $372,000 from a customer; the entire  
amount may be uncollectible.  Net income after taxes for the nine months ended  
September 30, 1999 decreased to $205,194 from $553,439 for the comparable period
in 1998.  The decrease is primarily due to $397,722 provision for income taxes  
in 1999.  In 1998, the company benefitted from net operating loss carryforwards,
which offset all of the federal and state taxes that would have been due.       

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997           

The following table sets forth the operating results expressed as a   
percentage of net sales for the periods indicated for Carbite Golf, Inc.        

                     Statement of Operations

                                                        [Enlarge/Download Table]


                                                           Year Ended December 31,                  
                                                     1998                            1997           
                                         -----------------------------      ----------------------  
                                                                                                    

Net Sales                                   $15,790,853        100.0%      $ 2,345,014        100.0%

Cost of goods sold                            7,157,329         45.3%        1,287,030         54.9%

Gross profit                                  8,633,524         54.7%        1,057,984         45.1%

Operating expenses                            1,154,649          7.3%          578,616         24.7%

Net operating income                          1,296,438          8.2%         (774,406)       -33.0%

Research and development                       (345,900)        -2.2%          (95,536)        -4.1%

Other expenses                                  (69,406)        -0.4%         (210,365)        -9.0%

Amortization of goodwill and def costs         (531,860)        -3.4%         (262,726)       -11.2%

Gain on discontinued printing operation             ---          0.0%              ---          0.0%

Loss on disposal of fixed assets                (57,954)        -0.4%              ---          0.0%

Income (loss) before income taxes               291,318          1.8%       (1,343,033)       -57.3%

Income taxes                                    (52,800)        -0.3%           (8,423)        -0.4%

Net income (loss)                               238,518          1.5%       (1,351,456)       -57.6%

Net consolidated sales for Carbite Golf Inc. for the fiscal year ended 1998 were
$15.7 million compared to $2.3 million for fiscal 1997.  The increase was the   
result of only the operations of Carbite, Inc. from September 3, 1997 through   

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December 31, 1997 being included in the consolidated financial statements for   
1997. Thus, the comparison is of the fourth quarter of 1997 to a full year of   
operations for 1998.                                                            

  Cost of goods sold was $7,157,329 for the fiscal year ended December 31,
1998 compared to $1,287,030 for fiscal 1997. The increase is the result of only 
the operations of Carbite, Inc. from September 3, 1997 through December 31, 1997
being included in the consolidated financial statements for 1997. Thus, the     
comparison is of the fourth quarter of 1997 to a full year of operations for    
1998. Gross profit was $8.6 million for the fiscal year ended 1998 compared to  
1.0 million for fiscal 1997. Operating expenses increased to $1,154,649 for the 
fiscal year ended December 31, 1998 compared to $578,616 for fiscal 1997. The   
increase was the result of only the operations of Carbite, Inc. from September  
3, 1997 through December 31, 1997 being included in the consolidated financial  
statements for 1997. Thus, the comparison is of the fourth quarter of 1997 to a 
full year of operations for 1998. Net income was $238,518 in the fiscal year    
ended 1998 compared to a loss of $1.35 million in fiscal 1997. The loss in 1997 
was caused by (i) the fact that the consolidated statements for 1997 included   
only the post-merger fourth quarter for Carbite, Inc. (generally the weakest    
sales quarter in the golf industry); (ii) merger costs; (iii) amortization of   
goodwill; (iv) year-end write offs and inventory adjustments.                   

   Consolidated Q Data did not have any operating companies in 1996 and thus
no revenues. It incurred $229,000 in losses related to raising capital and      
maintaining its good status as a listed corporation on the Vancouver Stock      
Exchange. Under other income, it reported a minority interest income from       
Carbite, Inc. of $73,000. The net loss including amortization of previously     
deferred costs was $238,000.                                                    

The Company believes this comparison of the Company's consolidated    
financials from 1997 to 1998 does not fully describe overall operating results  
because the 1997 consolidated statement only included the final quarter for     
Carbite, Inc., the golf operating company. Net sales for Carbite, Inc. increased
to $15.64 million for fiscal 1998 from $8.8 million in fiscal 1997, due         
primarily to the Polar Balanced Putter infomercial which produced $7.1 million  
in direct consumer sales and $5.2 million in retail sales in fiscal 1998. Gross 
profit for Carbite, Inc. increased to $8.9 million (56.7%) in 1998 from $4.3    
million (49.1%) in 1997. Operating expenses increased to $1,002,092 in 1998 from
$789,700 in 1997, but decreased as a percent of sales to 6.3% from 9.0%. Net    
operating income increased to $1,502,089 from a $595,949 loss in 1997. Net      
income after taxes increased to $879,833 in 1998 from a loss of $881,875 in     
1997.                                                                           

Quarterly Results and Seasonality                                               

Golf generally is regarded as a warm weather sport and sales of golf  
equipment historically have been strongest during the second and third quarters,
with the weakest sales occurring during the fourth quarter. The results of any  
one quarter, therefore, are not necessarily indicative of annual results or     
continuing trends. In addition, sales of golf clubs are dependent on            
discretionary consumer spending, which may be affected by general economic      
conditions. A decrease in consumer spending generally could result in decreased 
spending on golf equipment, which could have a material adverse effect on the   
Company's business, operating results and financial condition. In addition, the 
Company's future results of operations could be affected by a number of other   
factors such as unseasonal weather patterns, new product introductions by the   
Company's competitors, competitive pressures resulting in lower than expected   
average selling prices, and the volume of orders that are received and that can 
be fulfilled in a quarter. Any one or more of these factors could result in the 
Company failing to achieve its expectations as to future sales or net income.   

     Because most operating expenses are relatively fixed in the short term, the
Company may be unable to adjust spending sufficiently in a timely manner to     
compensate for any unexpected sales shortfall, which could materially adversely 
affect quarterly results of operations. If technological advances by competitors
or other competitive factors require the Company to invest significantly greater
resources than anticipated in research and development or sales and marketing   
efforts, the company's business, operating results or financial condition could 
be materially adversely affected. Accordingly, the Company believes that period-
to-period comparisons of its results of operations should not                   

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be relied upon as an indication of future performance. In addition, the results 
of any quarter are not indicative of results to be expected for a full fiscal   
year. As a result of fluctuating operating results or other factors discussed   
above and below, in certain future quarters the Company's results of operations 
may be below the expectations of public market analysts or investors. In such   
event, the market price of the Company's Common Stock would be materially       
adversely affected.                                                             

Computer Systems and Year 2000 Compliance                                       

As of May 1, 1999, the Company initiated a system-wide upgrade of all 
computer systems which are intended to provide the Company with state-of-the-art
systems and hardware for financial, manufacturing, customer services and        
telemarketing functions. The system is designed to be fully "Year 2000"         
compliant. The system was fully operational by December 1, 1999. Total costs    
associated with the new system, including Year 2000 compliance, were            
approximately $100,000.                                                         

   The Company believes that its manufacturing operations could be adversely
affected by external supplier systems that are not Year 2000 compliant, and     
believes its overseas suppliers involve Year 2000 risk factors.                 

   There can be no assurance that the Company's efforts to achieve Year 2000
compliance will be successful or that third parties with whom the Company has   
material relationships will be Year 2000 compliant by January 1, 2000, which    
could have a material adverse impact on the business and operations of the      
Company.                                                                        

Liquidity and Capital Resources                                                 

   The Company has historically financed its business through cash flow from
operations and the private placement of equity and/or debt securities. Such     
funds have been supplemented from time to time with short-term borrowings from  
commercial lenders.                                                             

  In February, 1998, $842,000 was raised through private equity placements
made outside the United States. In February 1999, an additional equity of       
approximately $530,000 was raised through the exercise of 1,454,545 warrants    
issued in a February, 1997 private placement made outside the United States. An 
additional $100,000 of equity was raised in March, 1999 through the exercise of 
employee options.                                                               

  Net cash provided by operating activities was $11,000 for the year ended
December 31, 1998 compared to net cash used in 1997 and 1996 of $663,000 and    
$158,000, respectively.                                                         

In April, 1998, the Company borrowed $500,000 from a private party to 
finance the initial launch of the Polar Balanced putter infomercial. The Loan   
Agreement dated August 14, 1998 with James A. Henderson and Susan V. Henderson, 
as Co-Trustees of The Henderson Living Trust, ("Henderson") provided for a term 
of one year at an interest rate of 10% and included a conversion provision      
whereby Henderson had the right to convert the loan to units of the Company's   
stock and warrants to purchase an additional share. In November, 1998, Henderson
converted $250,000 of the loan to 678,750 units. In December, 1998, the Company 
repaid the remaining $250,000 of the loan.                                      

     The Company has two commercial credit facilities, both with Scripps Bank in
San Diego, California, including a $1,000,000 Revolving Credit Facility, which  
expires on May 15, 2000 and a $60,000 term equipment loan due November 15, 2002.
As of September 30, 1999, the Company had drawn $193,000 under the Credit       
Facility and the full balance of $60,000 remained due on the equipment loan.    
Both credit facilities are at the lender's general refinance rate of interest   
and are collateralized by substantially all of the Company's assets,            
receivables, inventory and equipment.                                           

The Company's capital expenditures amounted to $354,115, $256,000 and 
$35,000 for the nine months ended September 30, 1999 and the fiscal years ended 
December 31, 1998 and 1997, respectively.                                       

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The Company believes that cash flow from operations, and the Company's
$1,000,000 credit facility will be sufficient to meet operating needs and       
capital expenditures to maintain sales at the current levels.                   

    To finance growth and new product introduction planned for the fiscal year
2000, the Company believes it will require approximately $1,000,000 in equity or
debt private placement financing, for which there are presently no firm         
commitments as of December 15, 1999 and there can be no assurance that any such 
financing will be secured.                                                      

Factors that May Affect Future Results and Financial Condition                  

The Company's operations and financial results are subject to numerous
risks, many of which are beyond the Company's control, including:               

Dependence on New Product Introductions; Uncertain Consumer Acceptance          

    During the nine months ended September 30, 1999 and the fiscal years ended
December 31, 1998 and 1997, approximately 81.9%, 66% and 0%, respectively, of   
the Company's net sales were derived from the sale of Polar Balanced Putter.    
Sales of this product line are expected to account for a substantial portion of 
the Company's net sales for some time. A decline in demand for, or average      
selling prices of, the Polar Balanced Putter line of products would have a      
material adverse effect on the Company's business, operating results and        
financial condition. Accordingly, the Company's continued growth and success    
depend, in large part, on its ability to successfully develop and introduce new 
products accepted in the marketplace. Historically, a large portion of new golf 
club technologies and product designs have been met with consumer rejection. No 
assurance can be given that the new products currently under development will   
meet with market acceptance or that the Company will be able to continue to     
design, manufacture and introduce new products that will meet with market       
acceptance. Failure by the Company to identify and develop innovative new       
products that achieve widespread market acceptance would adversely affect the   
Company's future growth and profitability. Additionally, successful             
technologies, designs and product concepts are likely to be copied by           
competitors. Accordingly, the Company's operating results could fluctuate as a  
result of the amount, timing and market acceptance of new product introductions 
by the Company or its competitors. The design of new golf clubs is also greatly 
influenced by the rules and interpretations of the U.S. Golf Association        
("USGA"). Although the golf equipment standards established by the USGA         
generally apply only to competitive events sanctioned by that organization, the 
Company believes that it is critical for its future success that new clubs      
introduced by the Company comply with USGA standards. No assurance can be given 
that any new products will receive USGA approval or that existing USGA standards
will not be altered in ways that adversely affect the sales of the Company's    
products.                                                                       

Patents and Protection of Proprietary Technology                                

   The Company's ability to compete effectively in the golf club market will
depend, in large part, on its ability to maintain the proprietary nature of its 
technologies and products. The Company is currently the assignee, subject to the
obligation to pay a royalty, of seven U.S. patents relating to certain of its   
products and proprietary technologies. There can be no assurance, however, as to
the degree of protection afforded by these patents. Moreover, these patents may 
have limited commercial value or may lack sufficient breadth to adequately      
protect the aspects of the Company's products to which the patents relate. The  
Company's U.S. patent rights do not preclude competitors from developing or     
marketing products similar to the Company's products in international markets.  

There can be no assurance that competitors, many of which have        
substantially greater resources than the Company and have made substantial      
investments in competing products, will not apply for and obtain patents that   
will prevent, limit or interfere with the Company's ability to make and sell its
products. The Company is aware of numerous patents held by third parties that   
relate to products competitive to the Company's. There is no assurance that     
these patents would not be used as a basis to challenge the validity of one or  
more of the Company's patent rights, to limit the scope of the Company's patent 
rights or to limit the Company's ability to obtain additional or broader patent 
rights.                                                                         

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A successful challenge to the validity of the Company's patent rights may       
adversely affect the Company's competitive position. Moreover, there can be no  
assurance that such patent holders or other third parties will not claim        
infringement by the Company with respect to current and future products. Because
U.S. patent applications are held and examined in secrecy, it is also possible  
that presently pending U.S. applications will eventually issue with claims that 
will be infringed by the Company's products or technologies. The defense and    
prosecution of patent suits is costly and time-consuming, even if the outcome is
favorable. This is particularly true in foreign countries where the expenses    
associated with such proceedings can be prohibitive. An adverse outcome in the  
defense of a patent suit could subject the Company to significant liabilities to
third parties, require the Company to cease selling products or require disputed
rights to be licensed from third parties. Such licenses may not be available on 
satisfactory terms, or at all. The Company also relies on unpatented proprietary
technology. Third parties could develop the same or similar technology or       
otherwise obtain access to the Company's proprietary technology. See "Business--
Patents and Trademarks."                                                        

Highly Competitive Industry; Significant Price Competition                      

    The market for golf clubs is highly competitive. The Company's competitors
include a number of established companies, most of which have greater financial 
and other resources than the Company. The purchasing decisions of many golfers  
are often the result of highly subjective preferences, which can be influenced  
by many factors, including, among others, advertising, media, promotions and    
product endorsements. The Company could therefore face substantial competition  
from existing or new competitors that introduce and successfully promote golf   
clubs that achieve market acceptance. Further, there can be no assurance that   
the Company's marketing strategy will not be emulated by others, thereby        
diluting the Company's message or forcing the Company to adopt a new marketing  
strategy. Such competition could result in significant price erosion or         
increased promotional expenditures, either of which could have a material       
adverse effect on the Company's business, operating results and financial       
condition. There can be no assurance that the Company will be able to compete   
successfully against current and future sources of competition or that its      
business, operating results or financial condition will not be adversely        
affected by increased competition in the markets in which it operates. See      
"Business--Competition."                                                        

Seasonality and Quarterly Fluctuations; Discretionary Consumer Spending         

Golf generally is regarded as a warm weather sport and sales of golf  
equipment historically have been strongest during the second and third quarters,
with the weakest sales occurring during the fourth quarter. In addition, sales  
of golf clubs are dependent on discretionary consumer spending, which may be    
affected by general economic conditions. A decrease in consumer spending        
generally could result in decreased spending on golf equipment, which could have
a material adverse effect on the Company's business, operating results and      
financial condition. In addition, the Company's future results of operations    
could be affected by a number of other factors, such as unseasonal weather      
patterns; demand for and market acceptance of the Company's existing and future 
products; new product introductions by the Company's competitors; competitive   
pressures resulting in lower than expected average selling prices; and the      
volume of orders that are received and that can be fulfilled in a quarter. Any  
one or more of these factors could result in the Company failing to achieve its 
expectations as to future sales or net income. Because most operating expenses  
are relatively fixed in the short term, the Company may be unable to adjust     
spending sufficiently in a timely manner to compensate for any unexpected sales 
shortfall, which could materially adversely affect quarterly results of         
operations. If technological advances by competitors or other competitive       
factors require the Company to invest significantly greater resources than      
anticipated in research and development or sales and marketing efforts, the     
Company's business, operating results or financial condition could be materially
adversely affected. Accordingly, the Company believes that period- to-period    
comparisons of its results of operations should not be relied upon as an        
indication of future performance. In addition, the results of any quarter are   
not indicative of results to be expected for a full fiscal year. As a result of 
fluctuating operating results or other factors discussed above and below, in    
certain future quarters the Company's results of operations may be below the    
expectations of public market analysts or investors. In such event, the market  
price of the Company's Common Stock would be materially adversely affected. See 
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations."                                                                    

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Future Capital Needs; Need for Additional Financing                             

    The Company estimates that it may need significant funding, in addition to
its present capital, to be able to fully develop and expand its business. The   
Company's future capital requirements will depend upon many factors, including  
the extent and timing of acceptance of the Company's products in the market,    
commitments to third parties to develop and manufacture products, the progress  
of the Company's product development efforts, the Company's operating results   
and the status of competitive products. Between January 1, 1999 and September   
30, 1999 the Company raised approximately $942,000 in additional capital. While 
the Company is currently attempting to raise additional funding, the Company has
no commitment for such additional funding. There is no assurance that the       
Company will be able to obtain such funding; if obtained, such funding could    
dilute the ownership of present shareholders.                                   

Dependence on Golf Industry                                                     

  The financial performance of the Company is dependent in large part upon
the current and anticipated market demand for golf equipment. During 1998 and   
early 1999, the golf equipment industry experienced periods of oversupply. The  
Company believes that the golf equipment industry will continue to be subject to
this period of oversupply through the end of 1999. The golf equipment industry  
has experienced significant growth but demonstrated a slowdown in demand in 1998
and early 1999. There can be no assurance that such growth will return and that 
the slowdown will not continue. A reduced rate of growth in the demand for golf 
equipment due, for example, to competitive factors, technological change or     
otherwise, may materially adversely affect the markets for the Company's        
products. Accordingly, any factor adversely affecting the golf equipment        
industry may materially adversely affect the Company's business, financial      
condition and results of operations. There can be no assurance that the         
Company's net sales and results of operations will not be materially adversely  
affected if downturns or slowdowns in the golf equipment industry continue or   
occur again in the future.                                                      

Ability to Manage Growth                                                        

The Company has recently experienced a period of rapid growth that has
resulted in new and increased responsibilities for existing management          
personnel. The Company's growth has placed, and is expected to continue to      
place, a strain on the Company's systems and resources to accommodate this      
recent growth. To compete effectively and manage future growth, if any, the     
Company will be required to continue to implement and improve its operational,  
financial and management information systems, procedures and controls on a      
timely basis and to expend, train, motivate and manage its workforce. There can 
be no assurance the Company's personnel, systems, procedures and controls will  
be adequate to support its existing or future operations. Any failure to        
implement and improve the Company's financial and management systems or to      
expand, train, motivate or manage employees could have a material adverse effect
on the Company's business, operating results or financial condition.            

Dependence on Key Personnel                                                     

    The Company's success depends to a significant extent upon the performance
of its senior management team, particularly the Company's founder, Chester S.   
Shira, and its President, Michael A. Spacciapolli. Mr. Shira leads the Company's
products development efforts. Mr. Spacciapolli directs day to day affairs of the
Company. The loss or unavailability of Mr. Shira or Mr. Spacciapolli would      
adversely affect the Company's business and prospects. The Company does not     
maintain life insurance on either Mr. Shira or Mr. Spacciapolli. Mr. Shira and  
Mr. Spacciapolli are bound by employment agreements with the Company, but they  
expire on September 3, 2000. In addition, there is strong competition for       
qualified personnel in the golf club industry, and the inability to continue to 
attract, retain and motivate other key personnel could adversely affect the     
Company's business, operating results or financial condition.                   

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Risks Associated with Acquisitions                                              

  The Company regularly reviews possible acquisition opportunities and may
make future acquisitions of complementary services, technologies, product       
designs or businesses in the future. The Company has no letters of intent or    
agreements for any acquisitions. There can be no assurance that future          
acquisitions, if any, will be completed or that, if completed, any such         
acquisition will be effectively assimilated into the Company's business.        
Acquisitions involve numerous risks, including, among others, loss of key       
personnel of the acquired company, the difficulty associated with assimilating  
the personnel and operations of the acquired company, the potential disruption  
of the Company's ongoing business, the maintenance of uniform standards,        
controls, procedures and policies, and the impairment of the Company's          
reputation and relationships with employees and customers. In addition, any     
future acquisitions could result in the issuance of dilutive equity securities, 
the incurrence of debt or contingent liabilities, and amortization expenses     
related to goodwill and other intangible assets, any of which could have a      
material adverse effect on the Company's business, operating results or         
financial condition.                                                            

Effect of Outstanding Options and Warrants                                      

As of September 30, 1999, there are outstanding options to purchase an
aggregate of 2,864,240 shares of Common Stock and outstanding warrants to       
purchase an aggregate of 791,250 shares of Common Stock. As of September 30,    
1999, the Company had 22,426,486 shares of Common Stock outstanding. The        
exercise of such outstanding options and warrants would dilute the percentage   
ownership of the Company's stock, and any sales in the public market of Common  
Stock underlying such stock options could adversely affect prevailing market    
prices for the Common Stock. Moreover, the terms upon which the Company would be
able to obtain additional equity capital could be adversely affected by the     
existence of such options or warrants.                                          

Credit Risk                                                                     

  The Company primarily sells its products to golf equipment retailers and
distributors, and directly to customers via infomercials. The Company performs  
ongoing credit evaluations of its customers' financial condition and generally  
requires no collateral from these customers. The 1998-1999 downturn in the      
retail golf equipment market has resulted in delinquent or uncollectible        
accounts for some of the Company's customers. Management does not foresee any   
significant improvement in the golf equipment market during 1999, and therefore 
expects this trend to continue. Accordingly, there can be no assurance that the 
Company's results of operations or cash flows will not be adversely impacted by 
the failure of its customers to meet their obligations to the Company.          

Technological Changes                                                           

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

Risks of Technical Problems or Product Defects                                  

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

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or that advancements by competitors will not erode the Company's position or    
render the Company's products and services obsolete.                            

Dependence on Limited Number of Component Suppliers                             

The Company assembles all of its clubs at its San Diego facility. The 
Company does not manufacture the components required to assemble its golf clubs.
The Company relies on three suppliers for heads and three suppliers each for    
shafts and grips. The Company does not have written supply agreements with any  
of its current suppliers. Therefore, the Company's success will be dependent on 
maintaining its relationships with existing suppliers and developing            
relationships with new suppliers. The Company believes that there are readily   
available alternative sources for each of the components used in the manufacture
and assembly of its clubs, although, of this, there can be no assurance. Any    
significant delay or disruption in the supply of components from the Company's  
suppliers or any diminution of quality resulting from such supplier's           
insufficient controls or inadequate component testing, would have a material    
adverse effect on the Company's business, operating results and financial       
condition. Further, given the highly seasonal nature of the golf equipment      
industry, such adverse effect would be exacerbated should any supply delay or   
quality problem occur immediately prior to or during the nine month period      
ending September 30 (the period during which sales of golf equipment generally  
are expected to be the highest). See "Management's Discussion and Analysis of   
Financial Condition and Plan of Operations."                                    

Reliance on Independent Domestic Sales Representatives                          

   Sales of the Company's products are dependent, in part, on its nationwide
network of independent sales representatives. While the Company believes that   
its relationships with its sales representatives and customers are satisfactory,
there can be no assurance that the Company will be able to maintain such        
relationships in the future. The Company's sales representatives are not        
exclusive and may also provide services for other golf club equipment           
manufacturers that offer product lines competitive with those of the Company.   
Although the Company works closely with its sales representatives, the Company  
cannot directly control such representatives' sales and marketing activities.   
There can be no assurance that these representatives will effectively manage the
sale of the Company's products or that their selling efforts will prove         
effective. See "Business--Sales and Marketing."                                 

International Sales; Reliance on Limited Number of Foreign Distributors         

    During the nine months ended September 30, 1999 and the fiscal years ended
December 31, 1998 and 1997, sales to international customers, primarily through 
one customer which markets products in Japan, accounted for approximately 12.4%,
6.0% and 2.3% of the Company's net sales, respectively. Accordingly, if this    
distributor ceases to purchase golf clubs from the Company, the Company's sales 
will be reduced significantly. The Company relies exclusively on this and other 
foreign distributors to market and sell the Company's products outside the      
United States. Although the Company works closely with its foreign distributors,
the Company cannot directly control such distributors' sales and marketing      
activities and, accordingly, cannot manage the Company's product sales in       
foreign markets. The Company's foreign distributors may also distribute, either 
on behalf of themselves or other golf club equipment manufacturers, other       
product lines, including product lines that may be competitive with those of the
Company. There can be no assurance that these distributors will effectively     
manage the sale of the Company's products worldwide or that their marketing     
efforts will prove effective. Additionally, the Company's international sales   
may be disrupted or adversely affected by events beyond the Company's control,  
including currency fluctuations and political or regulatory changes. See        
"Business--Sales and Marketing."                                                

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DESCRIPTION OF PROPERTY 

 The Company's principal executive offices presently are located at 6330
Nancy Ridge Drive, San Diego, California, where it leases approximately 17,000  
square feet of office, warehouse, manufacturing and research and development    
space. That lease carries a base rent of $12,400 per month and runs through     
January 30, 2000. The Company has completed plans to move its headquarters upon 
expiration of the current lease on January 30, 2000 and has entered into a four-
year lease commencing February 1, 2000 for a 26,000 square foot facility in the 
same area which the Company believes will accommodate the Company's expected    
growth. Base rent under the new lease will be $20,185 per month with 4% annual  
increases.                                                                      

SECURITY OWNERSHIP OF CERTAIN 
BENEFICIAL OWNERS AND MANAGEMENT  

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 30, 1999 by: 
(i) each person who is known by the Company to own beneficially more than five  
percent of the Company's Common Stock; (ii) each of the Company's directors;    
(iii) each named executive officer; and (iv) all directors and executive        
officers as a group.                                                            

                                                        [Enlarge/Download Table]


                                                                 Amount of                       
                                                                Common Stock      Approximate    
                                                                and Nature of      Percent of    
                                                                 Beneficial        Beneficial    
Name and Address of Beneficial Owner/(1)/                         Ownership       Ownership/(2)/ 
-----------------------------------------                       ---------------  ----------------
                                                                                                 
Chester S. Shira/(3)/..........................................    4,718,130            21.04%   
Michael A. Spacciapolli/(4)/...................................    1,867,694             6.89%   
Randie Burrell/(5)/............................................      224,400             1.00%   
David Nairne/(6)/..............................................      349,570             1.56%   
James Henderson/(7)/...........................................    1,465,072             6.53%   
All directors and executive officers as a group (5 persons)....    8,077,366            36.02%   

_______________                                                                 
(1)  Unless otherwise indicated, the address of each person is in care of the   
    Company at 6330 Nancy Ridge Drive, Suite 107, San Diego, California 92121.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or   
investment power with respect to securities.  Shares of Common Stock  
   subject to options, warrants or convertible securities that are currently
     exercisable, or exercisable within 60 days of September 30, 1999 are deemed
outstanding for computing the percentage of the person holding such   
    options, warrants or convertible securities but are not deemed outstanding
     for computing the percentage owned by any other shareholder listed.  Except
as indicated by footnote and subject to community property laws where 
    applicable, the persons named in the table have sole voting and investment
 power with respect to all shares of Common Stock shares as beneficially
owned by them.                                                        

(2)  Percentage ownership is based in 22,426,486 shares outstanding as of       
September 30, 1999.                                                   

(3)  Includes 389,620 shares which Mr. Shira has the right to acquire upon      
   exercise of outstanding options, and all of such options were exercisable
as of September 30, 1999.                                             

(4)  Includes 1,444,120 shares which Mr. Spacciapolli has the right to acquire  
upon exercise of outstanding options and all of such options were     
exercisable as of September 30, 1999.                                 

(5)  Includes 67,500 shares which Mr. Burrell has the right to acquire upon     
   exercise of outstanding options, and all of such options were exercisable
as of September 30, 1999.                                             

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(6)  Includes 20,000 shares which Mr. Nairne has the right to acquire upon      
   exercise of outstanding options, and all of such options were exercisable
as of September 30, 1999.                                             

(7)  Includes a warrant to acquire 678,750 shares of Common Stock exercisable at
$.80 per share through April, 1999, and exercisable at $.95 per share 
through April, 2000, and all of the shares underlying the warrant are 
exercisable as of September 30, 1999.                                 

DIRECTORS, EXECUTIVE OFFICERS,  
PROMOTERS AND CONTROL PERSONS   

The directors and executive officers of the Company are as follows:   

                                                        [Enlarge/Download Table]


Name                            Age                       Position                                 
----                            ---  --------------------------------------------------            
                                                                                                   
Chester S. Shira............... 71   Director of Research and Development and Chairman of the Board

Michael A. Spacciapolli........ 47   President, Chief Executive Officer and Director               

Randie Burrell................. 47   Chief Financial Officer                                       

David Nairne................... 45   Director                                                      

James Henderson................ 48   Director                                                      

   Chester S. Shira is the founder of the Company's wholly-owned subsidiary,
Carbite, Inc., and has been its Chairman of the Board since 1988.  From 1988 to 
1994 he also served as President and Chief Executive Officer of Carbite, Inc.   
Mr. Shira has been Chairman of the Board and Director of Research and           
Development of the Company since 1997.  Mr. Shira spent 11 years managing all   
aspects of welding, forging and metal finishing development for North American  
Rockwell and four years with Lincoln Electric Company, working in the areas of  
application engineering and process controls.  He has over 40 years experience  
as a metallurgist and welding engineer.  Mr. Shira has a BA from Ohio State     
University, and is a registered professional metallurgical engineer in          
California and Ohio.                                                            

Michael A. Spacciapolli joined Carbite, Inc. in 1992 as Executive Vice
President.  He has been the President, Chief Executive Officer and a Director of
Carbite, Inc. since 1995 and was the Chief Financial Officer from 1992 to 1998. 
Mr. Spacciapolli has been the President, Chief Executive Officer and a Director 
of the Company since 1997.  From 1988 to 1992, Mr. Spacciapolli was the Director
of Business Development for the accounting firm of Sterres, Alpert and Carne.   
Prior to joining Sterres, Alpert and Carne, Mr. Spacciapolli was a Vice         
President and District Manager for Wells Fargo Bank with responsibility for 18  
branch locations and over 200 employees in San Diego.  Mr. Spacciapolli has a BS
in Accounting from Rochester Institute of Technology.                           

     Randie Burrell joined the Company as Chief Financial Officer in 1998.  From
June 1995 through August 1997 he was the Managing Partner of the ViperBite      
Company, a partnership between Advanced Golf Systems, Inc. and Carbite, Inc.    
From 1993 to 1995 he was the Chief Financial Officer for Advanced Golf Systems, 
Inc.                                                                            

    David Nairne was appointed as a director in 1996.  Mr. Nairne is President
of Cedaridge Development and Management LTD, a private company in real estate   
based in Vancouver, Canada.  Cedaridge provides equity financing to other       
developers, as well as undertaking developments for its own account in both     
Canada and the United States.  Prior to joining Cedaridge, Mr. Nairne was Vice  
President of Communities Southwest in Irvine, California from August, 1993 to   
November, 1995.  Communities Southwest was a major developer of residential     
communities throughout southern California.  Mr. Nairne received his Bachelor of
Commerce degree in 1997 and his Bachelor of Laws degree in 1978.                

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   James Henderson was elected as a director in May, 1999.  Mr Henderson was
the Chief Executive Officer of Advanced Machine Programming from 1980- 1996.    
From 1996 to present, Mr. Henderson has been a consultant.                      

EXECUTIVE COMPENSATION  

 The following table sets forth compensation paid by the Company for the
fiscal years ended December 31, 1998, 1997 and 1996 to the Chief Executive      
Officer and the other executive officers (collectively the "Named Executive     
Officers") whose total annual salary and bonus exceed $100,000 in the fiscal    
year ended December 31, 1998.                                                   

            Summary Compensation Table

                                                        [Enlarge/Download Table]

                                                                                  Long Term                
                                                                                Compensation               
                                 Annual Compensation(2)                            Awards                  
                                 ----------------------                        --------------              

                                                                                 Securities                
                                                                 Other Annual    Underlying     All other  
                                               Salary    Bonus   Compensation  Options/SAR's   Compensation
Name and Principal Position       Year           ($)      ($)       ($)(3)          ($)           ($)(1)   
---------------------------       ----         -------   ------  ------------  -------------   ------------
                                                                                                           
Chester S. Shira, Director of     1998         128,817   30,000       168,445         75,000               
Research and Development          1997         128,817                124,181        164,620               
                                  1996          69,692                                                     

Michael A. Spacciapolli, Chief    1998         140,719   60,000                      125,000               
Executive Officer and President   1997         140,719                               164,620               
                                  1996          69,692                                                     

Randie Burrell, Chief Financial   1998          96,000                                47,500               
Officer(1)                        1997                                                20,000               
                                  1996                                                                     

_____________                                                                   
(1)  Mr. Burrell joined the Company in 1998.                                    

(2)  The compensation described in this table does not include certain perks and
     other personal benefits received by the Named Executive Officers, the value
     of which does not exceed the lesser of $50,000 or 10% of the Name Executive
Officers total annual salary and bonus.                               

(3)  Represents royalties paid to Mr. Shira pursuant to the Royalty Agreement   
dated March 1, 1993 between the Company and Mr. Shira.                

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Option Grants                                                                   

   The following table sets forth information concerning stock option grants
made to the Company's Chief Executive Officer and each of the other Named       
Executive Officers for the fiscal year ended December 1998:                     

Option/SAR Grants in Last Fiscal Year 

                                                        [Enlarge/Download Table]

                                                     Individual Grants                             
                         --------------------------------------------------------------------------

                           Number of          % of Total                                           
                          Securities         Options/SAR's                                         
                          Underlying          Granted to                                           
                         Options/SAR's         Employees          Exercise or                      
Name                      Granted (#)       in Fiscal Year     Base Price ($/Sh)    Expiration Date
----                     ------------       --------------     ----------------    ----------------
                                                                                                   
Chester S. Shira          75,000                  8.0%         $0.60 (Cdn)         November 3, 2003

Michael A. Spacciapolli  125,000                 13.0%         $0.60 (Cdn)         November 3, 2003

Randie Burrell            30,000                  3.2%         $0.60 (Cdn)         November 3, 2003

Option Exercise and Holdings                                                    

    The following table sets forth information concerning option exercises and
option holdings for the year ended December 31, 1998, with respect to the       
Company's Chief Executive Officer and the Named Executive Officers:             

                                                        [Enlarge/Download Table]

                                           Aggregate Option/SAR Exercises in Last Fiscal Year                       
                                                  and Fiscal Year End Option/SAR Values                             
                                       ------------------------------------------------------------------------     

                                       Value Realized       Number of Unexercised         Value of unexercised      
                             Shares     Market Price at        Options/SAR's at           In-The-Money Options/SAR's
                          Acquired on   Exercise less         Fiscal Year End             at Fiscal End ($U.S.)(1)  
                                                              ---------------             -----------------------   
Name                     Exercise (#)  Exercise Price($)   Exercisable  Unexercisable   Exercisable  Unexercisable  
-----                    ------------  -----------------   --------------------------   --------------------------  
                                                                                                                    

Chester S. Shira                  ___             ---      239,620       ---            $123,004      ---           

Michael A. Spacciapolli           ---             ___      896,620       ---            $460,265      ---           

Randie Burrell                    ---             ---       67,500       ---            $ 34,650      ---           

_______________                                                                 
(1)  Based on the closing price of $.77 Canadian on the Vancouver Stock Exchange
on December 31, 1998 with a U.S. conversion rate of 1.50.             

Compensation of Directors                                                       

     All directors of the Company receive $500 for each meeting attended and are
reimbursed for their expenses to attend meetings.                               

Employment Agreements                                                           

    The Company has employment agreements with Messrs. Spacciapolli and Shira,
which provide for employment by the Company for a three year term beginning     
September 3, 1997, at an annual salary of not less than $125,000, and such other
periodic and extraordinary compensation deemed appropriate by the Board of      
Directors.  Following the three year term, their employment shall renew         
automatically for one year on each anniversary date unless either party provides
notice of non-renewal.                                                          

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     Messrs. Spacciapolli and Shira's employment agreements also provide that in
the event their employment is terminated pursuant to the employment agreement,  
or a notice of non-renewal is issued by the Company they shall each receive six 
months severance pay.  In the event either of them are terminated other than    
pursuant to the employment agreements, they shall each receive the compensation 
provided for in their employment agreements for the remainder of the term.      

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  

     Pursuant to a Royalty Agreement with Carbite, Inc. dated March 1, 1993, the
Company pays patent royalties to Chester S. Shira, Director of Research and     
Development and Chairman of the Board.  Mr. Shira is the inventor of the        
technology used by Company in the design, manufacture and sale of its golf      
equipment, and the owner of 7 U.S. patents, all of which have been assigned to  
the Company in connection with the Royalty Agreement.  The Royalty Agreement    
provides for a royalty of $.50 per club on clubs sold by the Company employing  
his inventions during the life of the patents.  All royalty payments are        
current.  Mr. Shira can terminate the Royalty Agreement and regain possession of
the patents in the event Carbite, Inc. fails to timely pay his royalties or when
Carbite does not comply with a term or condition of the Royalty Agreement.  For 
the fiscal years ended December 31, 1998 and 1997, Mr. Shira was paid a total of
U.S. $168,455 and $124,181, respectively, in royalties.  For the nine months    
ended September 30, 1999, the Company paid $153,221 in royalties to Mr. Shira.  
To date, substantially all of the Company's club sales have been subject to the 
royalty.                                                                        

    By an Agreement dated April 14, 1998, James A. Henderson (a Director as of
May 19, 1999) and Susan V. Henderson as Co-Trustees of the Henderson Living     
Trust ("Henderson") made a loan to the Company in the amount of $500,000.  The  
loan term was for a period of one year (callable after six months) at an        
interest rate of 10%.  The loan agreement included a conversion provision under 
which Henderson had the right to convert the loan amount into units consisting  
of one share of common stock and one two-year warrant (collectively, "Units") to
purchase an additional common share at CDN $.80 in the first year and CDN $.95  
in the second year at a price per unit of CDN $.80 per unit.  In November, 1998,
the units were repriced to $.52 Canadian with the warrant repriced at $.52 in   
the first year and $.50 Canadian in the second year.  As incentive to make the  
loan, Henderson was paid a "Bonus" equal to 12% of the $500,000 loan, paid in   
shares of common stock at a per share price of CDN $.80 per share, which was    
reduced to $.52 per share in March, 1998.  In November, 1998, Henderson         
converted $250,000 of the loan to 678,750 Units, which included one share of    
common stock at $.52 Canadian per share with one two-year warrant to purchase an
additional share at $.52 Canadian in the first year and $.60 Canadian in the    
second year.  The remaining $250,000 of the loan was repaid by the Company on   
December 4, 1998.  The proceeds of this loan were used to finance the initial   
launch of the Polar Balanced Putter infomercial at a time when the Company did  
not have ready access to adequate credit or capital to launch the infomercial.  

The Company has entered into Employment Agreements with its Chairman, 
Chester S. Shira, and its President, Michael A. Spacciapolli, that run through  
September 3, 2000 which provide for compensation to each of at least $125,000   
per year.  During the year ended December 31, 1998, Mr. Spacciapolli was paid   
$200,719 U.S. and Mr. Shira was paid $158,817 U.S., by Carbite, Inc.            

Randie Burrell, the Chief Financial Officer of the Company, has been  
granted options to acquire a total of 67,500 shares of Common Stock, of which   
17,500 shares are exercisable at $.80 Canadian per share, and the remaining     
50,000 shares are exercisable at $.60 Canadian per share.                       

  Mr. Nairne, a director, has been granted an option to acquire a total of
20,000 shares of Common Stock at $.85 Canadian per share.                       

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  Chester S. Shira, Director of Research and Development and a Director of
the Company, has been granted options to acquire a total of 389,620 shares of   
Common Stock, of which 150,000 shares are exercisable at $.87 Canadian per      
share, and the remaining 239,620 shares are exercisable at $.60 Canadian per    
share.                                                                          

Michael A. Spacciapolli, the President, Chief Executive Officer and a 
director, has been granted options to acquire a total of 1,444,120 shares of    
Common Stock.  607,000 shares are exercisable at $.01 Canadian per share;       
139,620 shares are exercisable at $.60 Canadian per share; 247,500 shares are   
exercisable at $.77 Canadian per share, and 450,000 shares are exercisable at   
$.85 Canadian per share.                                                        

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DESCRIPTION OF SECURITIES 

 The Company's authorized capital stock consists of 50,000,000 shares of
common stock, no par value ("Common Stock").                                    

Common Stock                                                                    

    The holders of Common Stock are entitled to one vote for each share on all
matters submitted to a vote of the shareholders and are entitled to receive such
dividends, if any, as may be declared by the Board of Directors from time to    
time out of legally available funds.  Upon liquidation, dissolution or winding  
up of the Company, the holders of Common Stock are entitled to share in all     
assets of the Company that are legally available for distribution.  The holders 
of Common Stock have no preemptive, subscription, redemption or conversion      
rights.  The outstanding shares are fully paid and nonassessable.               

As of September 30, 1999, there were 22,426,486 shares of Common Stock
issued and outstanding, held of record by approximately 1,100 persons.          

At its Annual General Meeting on May 19, 1999, the shareholders of the
Company authorized the Board of Directors to approve a reverse stock split of   
both the authorized and issued share capital of the Company using a ratio of    
4:1, such that the authorized shares would be reduced to 12,500,000 from        
50,000,000, and the issued shares would be reduced from 22,426,486 to           
approximately 5,597,246 shares if and when the reverse stock split is authorized
by the Board of Directors, assuming a 4:1 reverse split.  The shareholders also 
approved a post-consolidation increase in the authorized capital of the Company 
to 50,000,000 common shares.  As of September 30, 1999, the Board has not       
proceeded with any share consolidation.                                         

Stock Transfer Agent                                                            

The Company's transfer agent and registrar is Pacific Corporate Trust 
Company, 625 Howe Street, Vancouver, British Columbia, Canada V6C 3B8.          

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PART II 

MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S  
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS 

The Company's Common Stock is traded on the Vancouver Stock Exchange, 
Canada under the symbol "CAB."  The following table sets forth for the last two 
fiscal years and for the nine months ended September 30, 1999, the high and low 
sale prices for the Common Stock as reported on the Vancouver Stock Exchange.   
The sale prices quoted are in Canadian dollars and are based on information     
provided by the Vancouver Stock Exchange.                                       

                                                                [Download Table]

Fiscal Year 1997                          High        Low   
----------------                          ----        ---   
                                                            
First Quarter                               $2.35      $1.50
Second Quarter                               1.90       1.55
Third Quarter                                1.55        .90
Fourth Quarter                               1.10        .55

Fiscal Year 1998                                            
----------------                                            

First Quarter                               $1.02      $ .50
Second Quarter                                .80        .60
Third Quarter                                1.02        .60
Fourth Quarter                                .80        .40

Nine Months ended September 30, 1999                        
------------------------------------                        

First Quarter                               $1.16      $ .55
Second Quarter                               1.05        .62
Third Quarter                                 .80        .53

 As of September 30, 1999, there were approximately 1,100 holders of the
Company's Common Stock.                                                         

    The Company has never declared or paid cash dividends on its Common Stock.
The Company currently anticipates it will retain all further earnings, if any,  
for use in the operation and expansion of it business and does not anticipate   
paying any cash dividends in the foreseeable future.                            

LEGAL PROCEEDINGS 

None.                                                                 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 

  There were no changes in or disagreements with accountants on accounting
and financial disclosure.                                                       

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RECENT SALES OF UNREGISTERED SECURITIES 

Sales to United States Residents                                                

Since December 1, 1996, the Company has sold or issued the following  
securities to persons or entities who are resident in the United States:        

1.  In January, 1997, the Company granted an option to purchase 50,000
shares of common stock at an exercise price of $1.50 Canadian per share to a    
director.  The option expired unexercised.                                      

2.  In August, 1997, in connection with the Company's acquisition of  
Carbite, Inc., the Company issued an aggregate of 6,263,872 shares of common    
stock to the shareholders of Carbite Inc. in exchange for all of the then issued
and outstanding shares of Carbite, Inc.                                         

3.  In August, 1997, in connection with the Company's acquisition of  
Advanced Golf Systems, Inc. ("Advanced"), the Company issued an aggregate of    
700,000 shares of its common stock and warrants to purchase an additional       
700,000 shares to the shareholders of Advanced in exchange for all of the then  
issued and outstanding shares of Advanced.  The warrants expired unexercised.   

4.  In August, 1997, the Company granted an option to purchase 450,000
shares of common stock at an exercise price of $1.50 Canadian per share to a    
director.  The option expired unexercised.                                      

 5.  In September, 1997, in connection with the Company's acquisition of
Carbite, Inc., the Company granted an option to purchase 607,000 shares of      
common stock at an exercise price of $.01 Canadian per share to Michael A.      
Spacciapolli, the Company's President.                                          

    6.  In October, 1997, the Company granted options to purchase an aggregate
of 435,000 shares of common stock at an exercise price of $1.00 Canadian per    
share to officers, directors and employees and ten consultants of the Company.  

7.  In December, 1997, the Company granted an option to purchase 7,500
shares of common stock at an exercise price of $.75 Canadian per share to a     
consultant to the Company.                                                      

     8.  In February, 1998, the Company granted options to Michael Spacciapolli,
its President, and Chester Shira, its Chairman, to each acquire 87,620 shares of
common stock at an exercise price of $1.00 Canadian per share; reduced the      
option granted to a director in August, 1997 from 450,000 shares to 250,000     
shares; and reduced the exercise price of all outstanding options as of February
28, 1998 (except for the option to acquire 607,000 shares at $.01 granted to the
Company's President in September, 1997) to $.60 Canadian per share.  All        
exercise price re-pricings were approved by the Vancouver Stock Exchange.       

  9.  In April, 1998, the Company issued an aggregate of 190,666 shares of
common stock (at a rate of $0.60 Canadian of principal indebtedness per share)  
to the following in cancellation of certain indebtedness of the Company to them:
2M Group; Lewis, England & Associates, Inc.; Luce, Forward, Hamilton & Scripps, 
LLP; and Shimshon Hasson.                                                       

   10.  In April, 1998, the Company granted options to purchase an aggregate
of 162,500 shares of common stock at an exercise price of $.80 Canadian per     
share to an officer, employees and one consultant of the Company.               

     11.  In July, 1998, the Company granted an option to purchase 35,000 shares
of common stock at an exercise price of $.85 Canadian to a director; granted an 
option to purchase 5,000 shares of common stock at an exercise price            

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of $.85 Canadian to an employee; and issued 67,500 shares to a consultant to the
Company upon the exercise of stock options for an aggregate exercise price of   
$40,500 Canadian.                                                               

    12.  In August, 1998, the Company issued 107,572 shares of common stock to
James A. Henderson and Susan V. Henderson as Co-Trustees of The Henderson Living
Trust ("Henderson") dated April 3, 1990 in consideration for entering into a    
Loan Agreement dated August 14, 1998 whereby Henderson loaned the Company       
$500,000 U.S.                                                                   

13.  In November, 1998, the Company granted options to purchase an    
aggregate of 559,000 shares of common stock at an exercise price of $.60        
Canadian per share to officers, directors, employees and six consultants of the 
Company.                                                                        

   14.  In December, 1998, the Company granted an option to purchase 100,000
shares of common stock at an exercise price of $.70 Canadian per share to a     
consultant of the Company.                                                      

  15.  In January, 1999, the Company issued 678,750 shares of common stock
(at a rate of $0.52 Canadian of principal indebtedness per share) and warrants  
to purchase an additional 678,750 shares of common stock to James A. Henderson  
and Susan V. Henderson as Co-Trustees of The Henderson Living Trust             
("Henderson") in cancellation of certain indebtedness of the Company to         
Henderson.                                                                      

16. In March, 1999, the Company issued 150,000 shares to Michael      
Spacciapolli, the Company's President, in exchange for $90,000 Canadian upon    
exercise of a stock option; granted the Company's President, Michael            
Spacciapolli, options to acquire an aggregate of 847,500 shares at an average   
exercise price of $.82 Canadian; granted the Company's Chairman, Chester Shira, 
an option to acquire 150,000 shares at an exercise price of $.87 Canadian per   
share; and granted a consultant to the Company an option to acquire 2,500 shares
at an exercise price of $.77 Canadian.                                          

   17.  In March, 1999, the Company issued an aggregate of 150,000 shares of
common stock and warrants to purchase an additional 150,000 shares of common    
stock in a private placement to four investors for an aggregate purchase price  
of $60,000 Canadian.                                                            

  18.  In April, 1999, the Company issued 37,500 shares of common stock to
one investor upon the exercise of stock warrants for an aggregate exercise price
of $15,000 Canadian.                                                            

     19.  In June, 1999, the Company granted an option to purchase 50,000 shares
of common stock at an exercise price of $.70 Canadian per share to a director.  

  20.  The Company is obligated, upon regulatory approval by the Vancouver
Stock Exchange, to issue approximately 195,000 shares of common stock to golf   
professional Fuzzy Zoeller for his services during the first six months of his  
Endorsement Agreement dated August 20, 1999.                                    

  For paragraphs 1 and 4 - 20 herein, no underwriters were used with these
transactions, and the registrant relied upon the exemptions provided by Section 
4(2) and/or Regulation D of the Securities Act.  For paragraphs 2 and 3, the    
registrant relied upon the exemption provided by Section 3(a)(10) of the        
Securities Act.  All references are to Canadian dollars.                        

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Sales to Non-United States Residents                                            

Since December 1, 1996, the Company has sold or issued the following  
securities outside of the United States to persons or entities who are resident 
outside the United States:                                                      

1.  In January, 1997, the Company granted an option to purchase an    
aggregate of 450,000 shares of common stock at an exercise price of $1.50       
Canadian per share to two officers who reside in Canada.                        

  2.  In May, 1997, the Company issued 350,000 shares of common stock to a
Canadian company upon exercise of warrants for an aggregate exercise price of   
$402,500 Canadian.                                                              

    3.  In June, 1997, the Company issued 100,000 shares of common stock to an
officer resident in Canada upon exercise of stock options for an aggregate      
exercise price of $150,000 Canadian.                                            

     4.  In August, 1997, the Company issued 150,000 shares of common stock to a
director resident in Canada for services to the Company.                        

     5.  In September, 1997, the Company issued 80,000 shares of common stock to
a former director resident in Canada who is now deceased, upon exercise of stock
options for an aggregate exercise price of $48,000 Canadian.                    

    6.  In October, 1997, the Company granted options to purchase an aggregate
of 635,000 shares of common stock at an exercise price of $1.00 Canadian per    
share to four officers and directors resident in Canada.                        

7.  In February, 1998, the Company amended a prior option granted to a
director resident in Canada to increase the options granted from 50,000 shares  
at $1.00 Canadian to 100,000 shares at $1.00 Canadian.                          

  8.  In April, 1998, the Company sold an aggregate of 1,454,545 shares of
common stock and warrants to purchase an additional 1,454,545 shares of common  
stock to six investors resident outside the United States for an aggregate      
purchase price of $800,000 Canadian.                                            

  9.  In April, 1998, the Company issued an aggregate of 168,000 shares of
common stock (at a rate of $0.60 Canadian of principal indebtedness per share)  
to the following firms resident in Canada in cancellation of certain            
indebtedness of the Company to them:  Martyn Element & Associates Corporate &   
Project Finance Limited and Alexander, Holburn, Beaudin & Lang.                 

  10.  In July, 1998, the Company issued an aggregate of 415,000 shares of
common stock to three officers resident in Canada upon exercise of stock options
for an aggregate exercise price of $249,000 Canadian.                           

11.  In November, 1998, the Company granted options to purchase an    
aggregate of 220,000 shares of common stock at an exercise price of $.60        
Canadian per share to an officer and a director, both resident in Canada.       

     12.  In February, 1999, the Company issued an aggregate of 1,454,545 shares
of common stock to six investors resident outside the United States upon the    
exercise of stock warrants for an aggregate exercise price of $800,000 Canadian.

13.  In April, 1999, the Company granted an option to purchase 100,000
shares of common stock at an exercise price of $.70 Canadian per share to an    
officer resident in Canada.                                                     

   14.  In April, 1999, the Company issued 100,000 shares of common stock to
an officer resident in Canada upon the exercise of stock options at an aggregate
exercise price of $60,000 Canadian.                                             

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    15.  In September, 1999, the Company granted an option to purchase 150,000
shares of common stock at an exercise price of $.70 Canadian per share to a     
consultant to the Company resident in Canada.                                   

     16.  In July, 1999, the Company granted an option to purchase 20,000 shares
of common stock at an exercise price of $.85 Canadian per share to a consultant 
to the Company resident in England.                                             

  17.  The Company is obligated, upon regulatory approval by the Vancouver
Stock Exchange, to grant to Daiwa Seiko of Japan an option to purchase 300,000  
shares of the Company's common stock at an exercise price equal to the closing  
price on September 16, 1999.                                                    

    For paragraphs 1 - 17 under the Non-United States Residents heading, there
were no underwriters used and the registrant relied upon the exemptions provided
by Regulation S and/or Section 4(2) of the Securities Act.  All references are  
to Canadian dollars.                                                            

INDEMNIFICATION OF DIRECTORS AND OFFICERS 

The Company Act for the Province of British Columbia, Canada, the     
jurisdiction for which the Company is incorporated and the Company's Articles   
govern the indemnification of directors.  Section 128 of the Company Act permits
a company to, with the approval of the court, indemnify a director against all  
costs, charges and expenses because of being or having been a director,         
including an action brought by the company or corporation if:                   

           the person acted honestly and in good faith with the best interests
        of the corporation of which the person is or was a director, and

         in the case of a criminal or administrative action or proceeding,
           the person had a reasonable grounds for believing that the person's
conduct was lawful.                                     

The Company's Articles contain the following regarding the personal   
liability of a director to the extent approved by the Court pursuant to the     
Company Act:                                                                    

     "11.1  The Company shall indemnify any director, officer, employee or agent
          of the Company who was or is a party or is threatened to be made a
          party to any threatened, pending or completed action or proceeding
            and whether civil, criminal or administrative, by reason of the fact
       that he is or was a director, officer, employee or agent of the
         Company or any act or thing occurring at a time when he is or was
     serving at the request of the Company as a director, officer,
    employee or agent of another corporation, partnership, joint
          venture, trust or other enterprise, against all costs, charges and
        expenses, including legal fees and any amount paid to settle the
          action or proceeding or satisfy judgment, if he acted honestly and
            in good faith with a view of the best interest of the corporation or
           other legal entity or enterprise as aforesaid of which he is or was
       a director, officer, employee or agent, as the case may be, and
      exercise the case, diligence and skill of a reasonably prudent
            person, and with respect to any criminal or administrative action or
            proceeding, he had reasonable grounds for believing that his conduct
            was lawful; provided that no indemnification of a director or former
    director of the Company, or director or former director of a
          corporation in which the Company is or was a shareholder, shall be
         made accepted to the extent approved by the court pursuant to the
          Company Act or any other statute. The determination of any action,
        suit or proceeding by judgment, order, settlement, conviction or
           otherwise shall not of itself, create a presumption that the person
           did not act honestly and in good faith and in the best interests of
           the Company and did not exercise the care, diligence and skill of a
          reasonably prudent person and, with respect to any criminal action
            or proceeding, did not have a reasonable grounds to believe that the
conduct was lawful.                                     

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11.2   The Company shall indemnify any person in respect of any loss, 
            damage, costs or expenses whatsoever incurred by him while acting as
       an officer, employee or agent for the Company unless such loss,
          damage, costs or expenses shall arise out of the failure to comply
          with instructions, willful act or default or fraud by such person,
            in any of which events the Company shall only indemnify such persons
       if the directors, in their absolute discretion so decide or the
Company by ordinary resolution so direct.               

11.3   The indemnification provided by this part shall not be deemed  
            exclusive of any other rights to which those seeking indemnification
     may be entitled under any other part, or any valid and lawful
           agreement, vote of members or disinterested directors or otherwise,
        both as to actions in his official capacity and as to actions in
            another capacity while holding such office, and shall continue as to
           a person who has ceased to be a director, office, employee or agent
  and shall inure to the benefit of the heirs, executors and
           administrators of such person. The indemnification provided by this
           article shall not be exclusive of any powers, rights, agreements or
           undertakings which may be allegedly permissible or authorized by or
          under any applicable law. Notwithstanding any other provisions set
       forth in this part, the indemnification authorized by this part
            shall be applicable only to the extent that any such indemnification
            shall not duplicate indemnity or reimbursement which that person has
 received or shall receive otherwise than under this part.

    11.4   The directors are authorized from time to time to cause the Company
        to give indemnities to any director, officer, employee, agent or
    other person who has undertaken or is about to undertake any
           liability on behalf of the Company or any corporation controlled by
it.                                                     

   11.5   Subject to the Company Act, no director or officer or employee for
   the time being of the Company shall be liable for the acts,
          receipts, neglects or defaults of any other director or officer or
         employee, or for joining in any receipt or act for conformity, or
            for any loss, damage or expense happening to the Company through the
        insufficiency or deficiency of title to any property acquired by
      order of the Board for the Company or for the insufficiency or
           deficiency of any security in or upon which any of the moneys of or
      belongings to the Company shall be invested or for any loss or
          damages arising from the bankruptcy, insolvency or tortuous act of
       any person, firm or corporation which whom or which any moneys,
          securities or effects shall be lodged or deposited or for any loss
           occasioned by any error of judgment or oversight on his part or for
         any other loss, damage or misfortune whatever which may happen in
           the execution of the duties of his respective office or trust or in
           relation thereto unless the same shall happen by or through his own
        willful act or default, negligence, breach of trust or breach of
duty.                                                   

11.6   Directors may rely upon the accuracy of any statement of fact  
      represented by an officer of the Company to be correct or upon
        statements in a written report of the auditor of the Company and
         shall not be responsible or have liability for any loss or damage
         resulting from the paying of any dividends or otherwise acting in
good faith upon any such statement.                     

11.7   The directors may cause the Company to purchase and maintain   
         insurance for the benefit of any person who is or was a director,
          officer, employee or agent of the Company is or was serving at the
           request of the Company as a director, officer, employee or agent of
       another corporation, partnership, joint venture, trust or other
       enterprise against any liability incurred by him as a director,
office, employee or agent.                              

  The Company has a currently effective directors' and officers' liability
insurance policy.                                                               

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PART FS 

INDEX TO FINANCIAL STATEMENTS 

The following index lists the financial statements of the Company included in   
this Registration Statement:                                                    

                                                        [Enlarge/Download Table]
                                                                                                   
Independent Auditor's Report.................................................................   F-2

Consolidated Balance Sheets as of December 31, 1998 and 1997.................................   F-3

Consolidated Statements of Operations and Deficit for the years ended                              
December 31, 1998, 1997 and 1996.............................................................   F-4

Consolidated Statements of Changes in Financial Position for the years ended                       
December 31, 1998, 1997 and 1996.............................................................   F-5

Notes to Consolidated Financial Statements...................................................   F-6

Unaudited Consolidated Balance Sheets for the nine months ended September 30, 1999 and 1998... F-22

Unaudited Consolidated Statements of Operations for the nine months ended                          
September 30, 1999 and 1998..................................................................  F-23

Unaudited Consolidated Statements of Changes in Financial Position for the                         
nine months ended September 30, 1999 and 1998................................................  F-24

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AUDITORS' REPORT                                                                

To the Shareholders of                                                          

Carbite Golf Inc.                                                               

We have audited the consolidated balance sheets of Carbite Golf Inc. as at      
December 31, 1998 and 1997 and the consolidated statements of operations and    
deficit and changes in financial position for each of the years in the three    
year period ended December 31, 1998. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 an audit to obtain  
reasonable assurance 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. 

In our opinion, these consolidated financial statements present fairly, in all  
material respects, the financial position of the Company as at December 31, 1998
and 1997 and the results of its operations and the changes in its financial     
position for each of the years in the three year period ended December 31, 1998,
in accordance with generally accepted accounting principles in Canada. As       
required by the Company Act (British Columbia), we report that, in our opinion, 
these principles have been applied on a consistent basis.                       

Chartered Accountants                                                           

Abbotsford, Canada                                                              
March 2, 1999                                                                   

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CARBITE GOLF INC.                                                               
Consolidated Balance Sheets                                                     
(Expressed in U.S. Dollars)                                                     

December 31, 1998 and 1997                                                      

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------- 
                                                               1998                1997 
--------------------------------------------------------------------------------------- 
                                                                                        
Assets                                                                                  

Current assets:                                                                         
    Cash and cash equivalents                           $ 1,154,678         $   403,814 
    Accounts receivable                                   1,304,595             530,911 
    Inventory (Note 4)                                    1,999,251           2,071,667 
    Prepaid expenses                                        204,029             142,996 
    ----------------------------------------------------------------------------------- 
                                                          4,662,553           3,149,388 

Capital assets (Note 5)                                     385,106             305,409 

Patents and trademarks, net of accumulated                                              
amortization of $68,603 (1997 - $54,143)                     76,000              23,980 

Deferred costs, net of accumulated amortization of                                      
$500,783 (1997 - $273,383)                                  353,766             500,266 

Goodwill, net of accumulated amortization of $335,481                                   
(1997 - $45,481)                                          2,512,804           2,802,805 

--------------------------------------------------------------------------------------- 
                                                        $ 7,990,229         $ 6,781,848 
======================================================================================= 

Liabilities and Shareholders' Equity                                                    

Current liabilities:                                                                    
    Bank loan                                           $         -         $    18,846 
    Accounts payable and accrued liabilities                615,488             769,520 
    Current portion of long-term debt (Note 6)               12,960                   - 
    Lease obligation                                              -               6,857 
    ----------------------------------------------------------------------------------- 
                                                            628,448             795,223 

Long-term debt (Note 6)                                      44,590                   - 

Shareholders' equity:                                                                   
    Share capital (Note 7)                                9,777,421           8,685,374 
    Deficit                                              (2,460,230)         (2,698,749)
    ----------------------------------------------------------------------------------- 
                                                          7,317,191           5,986,625 
Commitments (Note 10)                                                                   
Subsequent event (Note 13)                                                              
Contingency (Note 15)                                                                   

--------------------------------------------------------------------------------------- 
                                                        $ 7,990,229         $ 6,781,848 
======================================================================================= 

See accompanying notes to consolidated financial statements.                    

Approved on behalf of the Board:                                                

______________________  Director                                                

______________________  Director                                                

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CARBITE GOLF INC.                                                               
Consolidated Statements of Operations and Deficit                               
(Expressed in U.S. Dollars)                                                     

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------------------- 
                                                              Year end December 31                       
                                                            1998                1997                1996 
-------------------------------------------------------------------------------------------------------- 
                                                                                                         
Revenue                                              $15,662,361         $ 2,230,232         $         - 
Cost of sales                                          8,133,194           1,474,979                   - 

-------------------------------------------------------------------------------------------------------- 
Gross margin                                           7,529,167             755,253                   - 

Expenses:                                                                                                
  Advertising and promotion                            5,110,717             992,527             116,272 
  Bad debts                                               41,221              50,741                   - 
  Bank charges and interest                               85,943               9,525                 789 
  Consulting fees, wages and commissions                 545,900             202,589              56,179 
  Depreciation                                            23,751               7,332                 999 
  Insurance                                               34,423               5,645                   - 
  Listing                                                  9,710               2,859               5,650 
  Office and miscellaneous                               217,173              18,226               5,442 
  Printing                                                     -               6,780               1,306 
  Professional fees                                       50,739             140,758              18,452 
  Rent                                                    67,906              24,442               8,801 
  Repairs and maintenance                                 10,414               4,255               1,024 
  Telephone and utilities                                 27,238               8,242               1,488 
  Transfer agent fees                                      4,132               8,845               6,875 
  Travel                                                  20,143              22,168               6,004 
  ------------------------------------------------------------------------------------------------------ 
                                                       6,249,410           1,504,934             229,281 

-------------------------------------------------------------------------------------------------------- 
Income (loss) from operations                          1,279,757            (749,681)           (229,281)

Other income (expenses):                                                                                 
  Printing operations (Note 8)                           (52,025)            (24,077)                  - 
  Research and development                              (345,900)            (95,536)                  - 
  Equity in earnings (loss) of Carbite, Inc.                   -            (226,240)             72,736 
  Amortization of deferred costs                        (227,400)           (163,102)           (110,281)
  Amortization of goodwill, patents and trademarks      (304,460)            (99,624)                  - 
  Interest and other income                                2,959              18,515              16,277 
  Loss (gain) on disposal of assets                      (57,954)                  -              18,335 
  Foreign exchange loss                                   (3,658)            (11,712)             (5,919)
  ------------------------------------------------------------------------------------------------------ 
                                                        (988,438)           (601,776)             (8,852)

-------------------------------------------------------------------------------------------------------- 
Net income (loss) before income taxes                    291,319          (1,351,457)           (238,133)

Income taxes (Note 9)                                     52,800                   -                   - 
-------------------------------------------------------------------------------------------------------- 
Net income (loss)                                        238,519          (1,351,457)           (238,133)

Deficit, beginning of year                            (2,698,749)         (1,347,292)         (1,109,159)

-------------------------------------------------------------------------------------------------------- 
Deficit, end of year                                 $(2,460,230)        $(2,698,749)        $(1,347,292)
======================================================================================================== 

Earnings (loss) per share (Note 11)                  $      0.01         $     (0.11)        $     (0.03)
======================================================================================================== 

See accompanying notes to consolidated financial statements.                    

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CARBITE GOLF INC.                                                               
Consolidated Statements of Changes in Financial Position                        
(Expressed in U.S. Dollars)                                                     

                                                        [Enlarge/Download Table]

----------------------------------------------------------------------------------------------------------------- 
                                                                  Year ended December 31                          
                                                                 1998                1997                1996     
----------------------------------------------------------------------------------------------------------------- 
Cash provided by (used in)                                                                                        
                                                                                                                  
Operating activities:                                                                                             
  Net income (loss)                                       $   238,519        $ (1,351,457)            $  (238,133)
  Add (deduct):                                                                                                   
     Items not affecting working capital:                                                                         
        Depreciation                                           98,979              23,129                     999 
        Equity in loss (earnings) of Carbite Inc.                   -             226,240                 (72,736)
        Amortization                                          531,860             262,726                 110,281 
        Gain on disposal of joint venture investment                -                   -                 (18,335)
        Loss on disposal of capital assets                     57,954                   -                       - 
     Net changes in non-cash working capital balances                                                             
     relating to operations:                                                                                      
        Accounts receivable                                  (773,684)            320,139                   3,008 
        Inventory                                              72,416              18,735                       - 
        Prepaid expenses                                      (61,033)            126,813                  23,430 
        Accounts payable and accrued liabilities             (154,032)           (289,488)                 33,474 
        --------------------------------------------------------------------------------------------------------- 
                                                               10,979            (663,163)               (158,012)

Investing activities:                                                                                             
  Acquisition of net non-cash assets of                                                                           
  subsidiaries (Note 2(a))                                          -          (3,260,256)                      - 
  Proceeds on sale of marketable securities                         -              29,184                       - 
  Deferred costs incurred                                     (80,900)            (73,596)               (121,091)
  Patent and trademark costs incurred                         (66,479)                  -                       - 
  Investment in Carbite, Inc.                                       -                   -                (225,000)
  Proceeds on disposal of joint venture investment                  -                   -                  18,335 
  Purchase of capital assets                                 (256,467)            (35,254)                      - 
  Proceeds on disposal of capital assets                       19,837                   -                       - 
  --------------------------------------------------------------------------------------------------------------- 
                                                             (384,009)         (3,339,922)               (327,756)

Financing activities:                                                                                             
  Issuance of common shares, net of share                                                                         
  subscriptions                                               842,047           4,489,690               1,326,098 
  Proceeds on convertible debenture                           500,000                   -                       - 
  Repayment of convertible debenture                         (250,000)                  -                       - 
  Proceeds on long-term debt                                   60,000                   -                       - 
  Repayments on long-term debt                                 (2,450)                  -                       - 
  Decrease in promissory note receivable                            -              80,257                     388 
  Advances to associated companies                                  -          (1,036,029)                      - 
  Decrease in lease obligation                                 (6,857)             (3,610)                      - 
  Decrease in bank loan                                       (18,846)             (9,160)                      - 
  --------------------------------------------------------------------------------------------------------------- 
                                                            1,123,894           3,521,148               1,326,486 

----------------------------------------------------------------------------------------------------------------- 
Increase (decrease) in cash during the year                   750,864            (481,937)                840,718 

Cash and cash equivalents, beginning of year                  403,814             885,751                  45,033 

----------------------------------------------------------------------------------------------------------------- 
Cash and cash equivalents, end of year                    $ 1,154,678        $    403,814             $   885,751 
================================================================================================================= 

See accompanying notes to consolidated financial statements.                    

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

1.   Operations:                                                                

    The Company is incorporated under the laws of British Columbia, Canada and
     its primary business activity is the development and sales of a proprietary
brand of golf clubs.                                                  

2.   Significant accounting policies:                                           

(a)  Basis of presentation:                                           

         The consolidated financial statements are prepared in accordance with
       accounting principles generally accepted in Canada which conform in
          all material respects with accounting principles generally accepted in
the United States, except as disclosed in Note 12.          

     The consolidated financial statements include the accounts of the
Company and the following subsidiaries:                     

                 Subsidiary                           Percentage ownership
                 ----------                           --------------------

        Carbite, Inc.                               100%
        AGS Acquisition Corp.                       100%
        Printer Graphics Inc.                        90%

   All material intercorporate transactions and balances have been
eliminated upon consolidation.                              

      During the year ended December 31, 1997 the following transactions
occurred:                                                   

         (i)   On August 29, 1997, the Company acquired 90% of the outstanding
shares of Printer Graphics Inc. for $7,615.     

        (ii)  On September 3, 1997 the Company's newly incorporated, wholly-
             owned subsidiary, AGS Acquisition Corp., acquired 100% of the
                outstanding shares of Advanced Golf Systems Inc. in exchange for
               700,000 common shares of the Company and 700,000 share purchase
        warrants, for a total deemed purchase price of $362,460.
            Immediately following the acquisition, Advanced Golf Systems
Inc. was merged into AGS Acquisition Corp.      

         (iii) On September 3, 1997, the Company's newly incorporated, wholly-
         owned subsidiary, Carbite Acquisition Corp., acquired the
           remaining 50% of the outstanding shares of Carbite, Inc. in
              exchange for 7,078,872 shares of the Company and 912,524 share
       purchase warrants, for a total deemed purchase price of
            $3,665,435. As part of the purchase, the Company also issued
                607,000 share options to a director, who previously held 607,000
               options of Carbite, Inc. Immediately following the acquisition,
          Carbite, Inc. was merged into Carbite Acquisition Corp. In
          fiscal 1998, Carbite Acquisition Corp. changed its name to
Carbite Inc.                                    

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

2.   Significant accounting policies (continued):                               

(a)  Basis of presentation (continued):                               

        These transactions have been accounted for using the purchase method
        with the results of operations of the acquired subsidiaries included
        in the financial statements from the dates of acquisition. Aggregate
acquisition costs of $3,260,256 were allocated as follows:  

                                                        [Enlarge/Download Table]

--------------------------------------------------------------------------------------
                                  Printer Graphics  Advanced Golf              Carbite
                                              Inc.   Systems Inc.                 Inc.
--------------------------------------------------------------------------------------
                                                                                      
Assets acquired:                                                                      
  Non-cash current assets                $  75,399      $  15,000          $ 3,112,748
  Capital assets                            45,038              -              245,135
  Investment in joint venture                    -        944,077                    -
  Goodwill                                  12,325       (589,138)           2,974,384
  Deferred costs                                 -              -              148,647
  ------------------------------------------------------------------------------------
                                           132,762        369,939            6,480,914

Liabilities assumed:                                                                  
  Current liabilities                       98,913          9,036              902,367
  Non-current liabilities                   47,303              -            1,004,005
  50% Existing equity ownership                  -              -            1,661,735
  ------------------------------------------------------------------------------------
                                           146,216          9,036            3,568,107

--------------------------------------------------------------------------------------
Net non-cash assets acquired             $ (13,454)     $ 360,903          $ 2,912,807
======================================================================================

          Advanced Golf Systems Inc. held a 49% interest in the Viper Bite joint
      venture with Carbite Inc., which held the other 51% interest. This
         joint venture was effectively terminated upon the completion of these
acquisitions.                                               

(b)  Inventory:                                                       

      Inventory is valued at the lower of cost and net realizable value.

(c)  Investment in Carbite, Inc.:                                     

  From March 15, 1996 up to the completion of the acquisition of
  Carbite, Inc. (Note 2(a)), the investment in Carbite, Inc. was
       accounted for using the equity method. Prior to March'15, 1996, the
        investment was accounted for using the cost method. Under the equity
          method, the original cost of the shares was adjusted for the Company's
         share of post-acquisition earnings or losses less dividends received.
      The excess of the cost of the shares of Carbite, Inc. over the net
        book values of the net assets on the date of acquisition amounted to
        $538,481. This excess related to the goodwill and certain intangible
      assets of Carbite, Inc. and was being amortized on a straight-line
     basis over ten years. Upon the completion of the acquisition, the
unamortized balance was added to goodwill.                  

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

2.   Significant accounting policies (continued):                               

(d)  Deferred costs:                                                  

      Deferred costs are related to the development and promotion of the
          products of Carbite, Inc. The costs are being amortized on a straight-
          line basis over a maximum five year period, depending on the nature of
the costs.                                                  

(e)  Capital assets:                                                  

        Capital assets are stated at cost. Depreciation is provided over the
estimated useful lives of the assets.                       

(f)  Goodwill:                                                        

Goodwill, representing the excess of cost over net assets of
     subsidiaries acquired and certain intangible assets purchased, is
        amortized using the straight-line method over ten years. The Company
      assesses the continuing value of goodwill each year by considering
       current operating results, trends, and prospects. In the year of an
    impairment in value, the goodwill will be reduced by a charge to
earnings.                                                   

(g)  Patents and trademarks:                                          

       Patents and trademarks represent all costs incurred to obtain these
         intangible assets. The patents and trademarks are amortized using the
 straight-line method over ten years. The Company assesses the
       continuing value of patents and trademarks each year by considering
          operating results, trends, and prospects. In the year of an impairment
  in value, the patents will be reduced by a charge to earnings.

(h)  Foreign currency translation:                                    

     The Company has adopted the United States dollar as its reporting
         currency (Note 3), which is also its functional currency. The Company
       and its subsidiaries are considered to be integrated operations and
     the accounts are translated using the temporal method. Under this
          method, monetary assets and liabilities are translated at the rates of
        exchange in effect at the balance sheet date; non-monetary assets at
       historical rates and revenue and expense items at the average rates
     for the period other than depreciation and amortization which are
       translated at the same rates of exchange as the related assets. The
         net effect of the foreign currency translation is included in current
operations.                                                 

(i)  Use of estimates:                                                

    These financial statements have been prepared in accordance with
        generally accepted accounting principles which require 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.                  

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

3.   Change in reporting currency:                                              

Prior to January 1, 1997 the consolidated financial statements of the 
Company were expressed in Canadian ("Cdn") dollars. As a result of a  
   significant portion of revenues, expenses and assets being denominated in
United States ("U.S.") dollars, the U.S. dollar became the principal  
currency of the Company's business. Accordingly, the U.S. dollar was  
     adopted as the reporting currency for the consolidated financial statements
of the Company effective for its fiscal year ended December 31, 1997. 

   The 1996 financial statements were restated to reflect the U.S. dollar as
 the reporting currency. The accounts were translated using the temporal
method (Note 2(h)).                                                   

4.   Inventory:                                                                 

--------------------------------------------------------------------- 
                                            1998                1997
--------------------------------------------------------------------- 

Golf inventory:                                                       
 Raw materials                       $   936,237          $1,058,663
 Finished goods                        1,063,014           1,001,127
 -------------------------------------------------------------------
                                       1,999,251           2,059,790

Printing supply inventory                       -              11,877 

--------------------------------------------------------------------- 
                                     $ 1,999,251          $2,071,667
--------------------------------------------------------------------- 

5.   Capital assets:                                                            

--------------------------------------------------------------------- 
                                            1998                1997
--------------------------------------------------------------------- 

Office and computer equipment         $   151,523          $  162,513 
Manufacturing equipment                   432,936             248,457 
Printing equipment                              -              58,575 
Automotive equipment                        6,785               6,785 
Leasehold improvements                     20,430              39,406 
--------------------------------------------------------------------- 
                                         611,674             515,736

Less:  accumulated depreciation           226,568             210,327 

--------------------------------------------------------------------- 
                                     $   385,106          $  305,409
===================================================================== 

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

6.   Long-term debt:                                                            

--------------------------------------------------------------------  
                                                  1998        1997
--------------------------------------------------------------------  
Bank loan, payable in monthly                                         
instalments of $1,501 including interest                            
at bank prime rate plus 1.75% per annum,                            
due November 2002                              $ 57,550      $    - 

Less current portion                              12,960           -  

--------------------------------------------------------------------  
                                              $ 44,590      $    -
====================================================================  

The Company has secured an operating line of credit of $300,000. The  
operating line of credit bears interest at bank prime rate plus 2% per
annum. The Company has not drawn on the operating line as at year end.

     The above bank loan and operating line of credit, are secured by assignment
     of inventories, accounts receivable, equipment, and assignment of insurance
proceeds.                                                             

Principal repayments for the next four years are as follows:          
1999                                       $ 12,960         
2000                                       $ 14,250         
2001                                       $ 15,700         
2002                                       $ 14,640         

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

7.   Share capital:                                                             

Authorized:                                                           
50,000,000 Common shares with no par value                            

Issued:                                                               

                                                                [Download Table]

-------------------------------------------------------------------------
                                                      Number             
                                                   of shares       Amount
-------------------------------------------------------------------------
                                                                         
Balance, December 31, 1995                         5,586,751   $2,274,790

Issued in 1996:                                                          
  For cash (net of offering costs of $46,468)      3,381,785    1,893,302
  For services                                       150,000       27,592

-------------------------------------------------------------------------
Balance, December 31, 1996                         9,118,536    4,195,684

Issued in 1997:                                                          
  For cash                                           530,000      434,826
  For acquisition of subsidiaries                  7,778,872    4,027,895
  For services                                       150,000      26,969 

-------------------------------------------------------------------------
Balance, December 31, 1997                        17,577,408    8,685,374

Escrow shares cancelled (Note 7(a))                 (125,000)           -
Issued in 1998:                                                          
  For cash (net of offering costs of $92,770)      2,044,617      691,537
  For settlement of debt                             358,666      150,510
  For conversion of debenture                        678,750      250,000

-------------------------------------------------------------------------
Balance, December 31, 1998                        20,534,441   $9,777,421
=========================================================================

(a)  Escrow shares:                                                   

   As at December 31, 1997, 125,000 of the issued shares were held
  subject to an escrow agreement. The approval of the regulatory
         authorities was required for the transfer or release of these shares.
In fiscal 1998, these shares were cancelled.                

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

7.   Share capital (continued):                                                 

(b)  Share options:                                                   

                                                                [Download Table]

---------------------------------------------------------------
                                      Number      Price range  
                                  of options        (CAD $'s)  
---------------------------------------------------------------
                                                               
Balance, December 31, 1995          395,000                    
Granted                             225,000              $1.35 
Exercised                          (292,500)    $0.60 to $0.94 
Cancelled/expired                    (2,500)             $0.60 

---------------------------------------------------------------
Balance, December 31, 1996          325,000                    
Granted                           1,527,500     $0.75 to $1.50 
Granted                             607,000              $0.01 
Exercised                           (80,000)             $0.60 
Cancelled/expired                   (20,000)             $0.69 

---------------------------------------------------------------
Balance, December 31, 1997        2,359,500                    
Granted                           1,071,500     $0.60 to $0.80 
Exercised                          (482,500)             $0.60 
Cancelled/expired                  (537,260)             $0.60 

---------------------------------------------------------------
Balance, December 31, 1998        2,411,240                    
===============================================================

          During fiscal 1998, a resolution was passed to reprice all outstanding
share options to CAD $0.60.                                 

      The following share options were outstanding at December 31, 1998:

       -------------------------------------------------------------------
                             Number     Exercise                  Expiry
                          of Shares        Price                    Date
       -------------------------------------------------------------------
                  (CAD$)

      Director               20,000         0.60         October 1, 1999
      Employees             162,500         0.80          April 14, 2000
      Director              250,000         0.60            July 1, 2000
      Directors             329,240         0.60         October 1, 2002
      Employees             126,000         0.60         October 1, 2002
      Employees               7,500         0.60        December 9, 2002
      Director              607,000         0.01           March 1, 2003
      Directors             250,000         0.60           March 3, 2003
      Employees             659,000         0.60           March 3, 2003

       -------------------------------------------------------------------
2,411,240           
       -------------------------------------------------------------------

No compensation resulted in the granting of these options.  

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

7.   Share capital (continued):                                                 

(c) Share purchase warrants:                                          

       The following share purchase warrants were outstanding at December 31
1998:                                                         

                                                                [Download Table]

--------------------------------------------------------------
                    Number      Exercise               Expiry 
                 of Shares         Price                 Date 
--------------------------------------------------------------
                                  (CAD$)                      
                                                              
Warrants         1,454,545          0.55    February 20, 1999 
Warrants           700,000          0.80       August 5, 1999 
Warrants           678,750          0.52    November 30, 2000 

--------------------------------------------------------------
                 2,833,295                                    
--------------------------------------------------------------

8.   Printing operations:                                                       

    --------------------------------------------------------------------------
                                        Six months ended   Four months ended
                                           June 30, 1998   December 31, 1997
    --------------------------------------------------------------------------

   Revenue                                      $128,492            $114,782
   Cost of sales                                  95,856              73,298
    --------------------------------------------------------------------------
                                                  32,636              41,484
   General and administrative expenses            84,661              65,561

    --------------------------------------------------------------------------
    Loss from printing operations                $(52,025)           $(24,077)
    --------------------------------------------------------------------------

In June 1998 the Company ceased its printing operations.              

9.   Income taxes and investment tax credits:                                   

The 1998 income tax expense provision is comprised of California State
   income tax. No provision has been recorded for U.S. Federal Income Taxes,
   as the taxable income has been applied against Federal net operating loss
carryforwards which were previously not reflected in the accounts.    

 The Company has losses for tax purposes of approximately CAD $2,010,000
which are available to offset future years' taxable income in Canada  
expiring as follows:                                                  

1999                         CAD $  142,000     
2000                                113,000     
2001                                 97,000     
2002                                172,000     
2003                                475,000     
2004                                641,000     
2005                                370,000     
                            ----------
                        CAD $2,010,000
                            ----------

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

9.   Income taxes and investment tax credits (continued):                       

The Company has unclaimed research and development expenditures of    
     approximately CAD $474,000 which can be deducted for income tax purposes in
Canada in future years at the Company's discretion.                   

     The possible future income tax benefits of the Canadian losses and Canadian
    unclaimed research and development expenditures have not been reflected in
the accounts.                                                         

10.  Related party transactions:                                                

   The following amounts were paid to directors and officers of the Company:

    --------------------------------------------------------------------------
                                        1998         1997       1996
    --------------------------------------------------------------------------

  Wages and fees to directors           $ 14,231       $41,528    $ 34,910

Management salaries paid to                                           
directors post Carbite, Inc.                                      
    acquisition (Note 2(a))             $375,215       $70,486    $      -

Royalties paid to a director post                                     
Carbite, Inc. acquisition                                         
    (Note 2(a))                         $168,445       $30,199    $      -

Consulting fees paid to a company                                     
controlled by a director                                          
                                        $      -       $30,000    $      -

Wages and fees paid to an officer                                     
                                        $ 84,537       $20,945    $      -

  Interest paid to directors            $  3,548       $     -    $      -
    --------------------------------------------------------------------------

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

These transactions occurred in the normal course of operations and are
   measured at the exchange amount, which is the amount of the consideration
established and agreed to by the related parties.                     

   The royalty agreement with one of the directors pays a fixed fee per club
   sold, in exchange for the exclusive assignment of all the patents made by
  the director. It also pays 1/3 of royalties received by the Company from
competitors using the Company's patented technology.                  

11.  Earnings per share:                                                        

  The earnings per share figures are calculated using the weighted average
  monthly number of shares outstanding during the respective fiscal years,
  which was 19,074,032 in 1998, 12,186,147 in 1997, and 7,914,341 in 1996.
 The effect of the exercise of share options and share purchase warrants
  outstanding is not materially dilutive in 1998, and antidilutive in 1997
and 1996.                                                             

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

12.   Differences between generally accepted accounting principles in Canada and
the United States:                                                  

  The consolidated financial statements have been prepared in accordance
    with accounting principles generally accepted in Canada (Canadian basis)
     which differ in certain respects from those principles and practices that
     the Company would have followed had its consolidated financial statements
been prepared in accordance with accounting principles and practices
generally accepted in the United States (U.S. basis).               

     Had the Company followed the U.S. basis, the deferred cost section of the
      balance sheet contained within the consolidated financial statements would
have been reported as follows:                                      

                                                                [Download Table]

-------------------------------------------------------------------------
                                      1998                   1997        
                              Canadian      U.S.     Canadian      U.S.  
                                 Basis     Basis        Basis     Basis  
-------------------------------------------------------------------------
                                                                         
Deferred costs (Note 12(c))  $ 353,766   $     -     $500,266     $   -  
-------------------------------------------------------------------------

     Had the Company followed the U.S. basis, the shareholders' equity section
of the balance sheet contained within the consolidated financial    
statements would have been reported as follows:                     

                                                                [Download Table]

-------------------------------------------------------------------------
                                   1998                      1997        
                          Canadian         U.S.     Canadian        U.S. 
                             Basis        Basis        Basis       Basis 
-------------------------------------------------------------------------
                                                                         
Shareholders' equity:                                                    
  Share capital         $9,777,421   $9,777,421   $8,685,374  $8,685,374 
  Deficit (Note 12(c))  (2,460,230)  (2,813,996)  (2,698,749) (3,199,015)

-------------------------------------------------------------------------
                        $7,317,191   $6,963,425   $5,986,625  $5,486,359 
-------------------------------------------------------------------------

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

12.          Differences between generally accepted accounting principles in    
Canada and the United States (continued):             

   Had the Company followed the U.S. basis, the statement of
           operations contained within the consolidated financial statements
would have been reported as follows:                  

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------
                                                   1998               1997               1996  
-----------------------------------------------------------------------------------------------
                                                                                               
Income (loss) from operations                                                                  
 under Canadian basis                       $1,279,757         $  (749,681)         $(229,281) 

Printing operations (Note 12(d))               (52,025)            (24,077)                 -  

Research and development (Note                                                                 
 12(d))                                       (345,900)            (95,536)                 -  

Amortization of goodwill, patents                                                              
 and trademarks (Note 12(d))                  (304,460)            (99,624)                 -  

Deferred costs incurred (Note 12(c))           (80,900)            (73,596)          (121,091) 

-----------------------------------------------------------------------------------------------
Income (loss) from operations                                                                  
 under U.S. basis                           $  496,472         $(1,042,514)         $(350,372) 
-----------------------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------
                                               1998                   1997           1996      
-----------------------------------------------------------------------------------------------
                                                                                               
Net income (loss) under Canadian                                                               
 basis                                      $  238,519         $(1,351,457)         $(238,133) 

Deferred costs incurred (Note 12(c))           (80,900)            (73,596)          (121,091) 

Amortization of deferred costs                                                                 
 (Note 12(c))                                  227,400             163,102            110,281  

-----------------------------------------------------------------------------------------------
Net income (loss) under U.S. basis          $  385,019         $(1,261,951)         $(248,943) 
-----------------------------------------------------------------------------------------------

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

12.          Differences between generally accepted accounting principles in    
Canada and the United States (continued):             

             Had the Company followed the U.S. basis, the statement of cash flow
           contained within the consolidated financial statements would have
been reported as follows:                             

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------
                                                   1998                 1997              1996 
-----------------------------------------------------------------------------------------------
                                                                                               
Cash provided by (used in) operating                                                           
 activities under Canadian basis             $   10,979          $  (663,163)        $(158,012)

Deferred costs incurred                                                                        
 (Note 12(b) and (c))                           (80,900)             (46,627)          (93,499)

-----------------------------------------------------------------------------------------------
Cash used in operating activities                                                              
 under U.S. basis                            $  (69,921)         $  (709,790)        $(251,511)
-----------------------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------
                                                   1998                 1997              1996 
-----------------------------------------------------------------------------------------------
                                                                                               
Cash used in investing activities                                                              
 under Canadian basis                        $ (384,009)         $(3,339,922)        $(327,756)

Acquisition of net non-cash assets                                                             
 of subsidiaries (Note12(b))                          -            3,273,710                 - 

Deferred costs incurred                                                                        
 (Note 12(c))                                    80,900               73,596           121,091 

-----------------------------------------------------------------------------------------------
Cash provided by (used in) investing                                                           
 activities under U.S. basis                 $ (303,109)         $     7,384         $(206,665)
-----------------------------------------------------------------------------------------------

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

12.          Differences between generally accepted accounting principles in    
Canada and the United States (continued):             

                                                        [Enlarge/Download Table]

-----------------------------------------------------------------------------------------------
                                                   1998                1997               1996 
-----------------------------------------------------------------------------------------------
                                                                                               
Cash provided by financing                                                                     
activities under Canadian basis              $1,123,894         $ 3,521,148         $1,326,486 

Issuance of common shares for                                                                  
 acquisition of net non-cash assets                                                            
 of subsidiaries                                                                               
 (Note 12(b))                                         -          (3,273,710)                 - 

Issuance of common shares for                                                                  
 services (Note 12(b))                                -             (26,969)           (27,592)

-----------------------------------------------------------------------------------------------
Cash provided by financing                                                                     
 activities under U.S. basis                 $1,123,894         $   220,469         $1,298,894 
-----------------------------------------------------------------------------------------------

(a) Accounting for income taxes:                      

                Under the asset and liability method of Statement of Financial
                Standards No. 109 ("SFAS 109"), deferred income tax assets and
                 liabilities are measured using enacted tax rates for the future
               income tax consequences attributed to differences between the
            financial statement carrying amount of existing assets and
                liabilities and their respective tax basis. There is no effect
        of applying the provision of SFAS 109 on the Company's
               financial statements as the recognition criteria for deferred
tax assets has not been met.                  

              Components of the Company's deferred income tax asset are as
follows:                                      

                                                        [Enlarge/Download Table]

-------------------------------------------------------------------------------------------
                                                                1998                1997   
-------------------------------------------------------------------------------------------
                                                                                           
Deferred tax asset:                                                                        
  Federal net operating loss carryforwards:                                                
    Canada                                                 $ 685,538           $ 655,769   
    United States                                                  -             329,827   

-------------------------------------------------------------------------------------------
                                                             685,538             985,596   

Less valuation allowance                                    (685,538)           (985,596)  

-------------------------------------------------------------------------------------------
                                                           $       -           $       -   
-------------------------------------------------------------------------------------------

               A valuation allowance had been recorded to reduce the Federal
              net operating loss carryforwards to an amount expected to be
               realized through the reversal of temporary differences. As at
         December 31, 1997, Carbite, Inc. had net operating loss
              carryforwards of $942,362 in the United States. These losses
           were fully used to offset Federal taxable income in 1998.

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

12.       Differences between generally accepted accounting principles in       
Canada and the United States (continued):             

(a)  Accounting for income taxes (continued):         

               The Company's provisions (benefits) for income taxes differ
               from amounts computed by applying U.S. corporate income tax
                 rate of 35% and Canadian corporate income tax rate of 52% for
the following reasons:                      

                                                        [Enlarge/Download Table]

------------------------------------------------------------------------------------------
                                                                 1998                1997 
------------------------------------------------------------------------------------------
                                                                                          
Income tax provision (benefit) at the statutory rate:                                     
 United States                                              $ 326,422          $ (334,759)
 Canada                                                      (126,205)           (234,211)
------------------------------------------------------------------------------------------
                                                              200,217            (568,970)

Increase (decrease) in valuation allowance for net                                        
 deferred tax assets                                         (300,058)            554,182 

Decrease in net deferred tax assets due to expiry of                                      
 loss carry-forwards and changes in exchange rates                                        
                                                               96,436                   - 

Nondeductible expenses and other                                3,405              14,788 

------------------------------------------------------------------------------------------
Actual tax provision (benefit)                              $       -          $        - 
------------------------------------------------------------------------------------------

(b)  Shares issued for non-cash consideration:        

                Under U.S. GAAP, the issue of common shares as consideration
                 for the acquisition of net non-cash assets of subsidiaries or
              for services does not impact the Company's cash flows, and
         accordingly, these transactions are excluded from the
statement of cash flow.                     

(c)  Deferred costs:                                  

            Under U.S. GAAP, the expenditures that were deferred and
                 amortized under Canadian GAAP would have been expensed in the
                 year incurred against operations and accordingly, there would
           be no amortization of deferred costs. Included in these
             deferred costs were amounts for services for which common
      shares were issued as consideration. (Note 12(b)).

(d)  Income from operations:                          

              Under U.S. GAAP, research and development and amortization
                expenses, along with loss from printing operations, would be
            included in income from operations, rather than reported
separately as other expenses.               

13.       Subsequent event:                                                     
     Subsequent to December 31, 1998 warrants were exercised for
           1,159,398 common shares at CAD $.55 per share, for total proceeds
of CAD $637,669.                                      

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CARBITE GOLF INC.                                                               
Notes to Consolidated Financial Statements                                      
(Expressed in U.S. dollars unless otherwise noted)                              

Years ended December 31, 1998, 1997 and 1996                                    

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

14.          Fair value of financial instruments:                               

      For certain of the Company's financial instruments including
            accounts receivable, accounts payable and accrued liabilities, and
           lease obligation, the carrying amounts approximate fair value due
    to the immediate or short-term maturity of these financial
instruments.                                          

       The carrying value for long-term debt approximates fair value
    because the borrowing rate is similar to the current rates
             presently available to the Company for loans with similar terms and
maturity.                                             

15.          Uncertainty due to the Year 2000 Issue:                            

          The Year 2000 Issue arises because many computerized systems use
        two digits rather than four to identify a year. Date-sensitive
         systems may recognize the year 2000 as 1900 or some other date,
       resulting in errors when information using year 2000 dates is
            processed. In addition, similar problems may arise in some systems
             which use certain dates in 1999 to represent something other than a
             date. The effects of the Year 2000 Issue may be experienced before,
            on, or after January 1, 2000, and, if not addressed, the impact on
           operations and financial reporting may range from minor errors to
            significant systems failure which could affect an entity's ability
         to conduct normal business operations. It is not possible to be
       certain that all aspects of the Year 2000 Issue affecting the
      entity, including those related to the efforts of customers,
    suppliers, or other third parties, will be fully resolved.

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CARBITE GOLF INC. 
CONSOLIDATED BALANCE SHEETS (Stated in US Dollars)  
September 30, 1999 and 1998 
(Unaudited) 

                                                                [Download Table]

ASSETS                                  September 30          September 30  
                                            1999                  1998      
                                        ----------------------------------- 
                                                                            
CURRENT ASSETS                                                              
        Cash                            $   1,066,715         $   1,360,824 
        Trade Receivables                   2,049,588             1,075,695 
        Inventory                           2,684,377             2,087,290 
        Other Receivables                     116,368               113,897 
        Prepaid Expenses                      291,459               458,663 

                                        ----------------------------------- 
        Total Current Assets                6,208,507             5,096,369 
                                        ----------------------------------- 

CAPITAL ASSETS (Net of Depr)                  616,508               403,723 

OTHER ASSETS                                                                
        Goodwill                            2,295,304             2,585,319 
        Investment in Carbite Inc.                                          
        Deferred Costs - Merger               151,986               268,447 
        Notes Receivable - Carbite Inc.                                     
        Patents                                70,095                18,077 
        Infomercial (Net of Amort)             63,584               150,248 
        Deposits                                2,016                 2,016 

                                        ----------------------------------- 
        Total Other Assets                  2,582,985             3,024,107 
                                        ----------------------------------- 

                                        ----------------------------------- 
TOTAL ASSETS                            $   9,408,000         $   8,524,199 
                                        =================================== 

        LIABILITIES AND EQUITY                                              

LIABILITIES                                                                 
        Accounts Payable                      554,445            $  604,728 
        Accrued Expenses                       23,581                       
        Line of Credit                        240,865                       
        Income Taxes Payable                  396,122                       
        Short Term Note Payable                                     500,000 

                                        ----------------------------------- 
        Total Liabilities                   1,215,013             1,104,728 
                                        ----------------------------------- 

SHAREHOLDERS EQUITY                                                         
        Share Capital                      10,437,829             9,562,649 
        Retained Earnings (Def)            (2,457,542)           (2,699,172)
        Foreign Exchange Adjustment             7,506                 2,555 
        Net Income (Loss) - YTD               205,194               553,439 

                                        ----------------------------------- 
        Total Stockholders Equity           8,192,987             7,419,471 
                                        ----------------------------------- 

                                        ----------------------------------- 
TOTAL LIABILITIES & EQUITY              $   9,408,000         $   8,524,199 
                                        =================================== 

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CARBITE GOLF INC. 
CONSOLIDATED STATEMENTS OF OPERATIONS (Stated in US Dollars)  
NINE MONTHS ENDING SEPTEMBER 30, 1999 with comparative figures for 1998 
(Unaudited) 

                                                                [Download Table]

                                           September 30          September 30  
                                                1999                 1998      
                                           ----------------------------------- 
                                                                               
Sales                                      $  14,062,812         $  12,168,503 

Cost of Sales                                  7,142,713             5,017,305 
                                           ----------------------------------- 

Gross Profit                                   6,920,099             7,151,198 

Operating Expenses                             5,730,869             5,980,105 

                                           ----------------------------------- 
Net Income from Operations                     1,189,230             1,171,093 
                                           ----------------------------------- 

Other Income (Expenses)                           (7,866)              (39,372)
Research and Development                        (341,703)             (241,744)
Amortization of Goodwill & Deferred Costs       (304,883)             (304,868)
Gain on Discontinued Printing Operations          68,138                       
Loss on Disposal of Fixed Assets                                       (31,670)
                                           ----------------------------------- 
Net Income before Taxes                          602,916               553,439 
                                           ----------------------------------- 
Provision for Income Taxes                      (397,722)                    0 
                                           =================================== 
Net Income after Taxes                     $     205,194         $     553,439 
                                           =================================== 

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CARBITE GOLF INC. 
STATEMENT OF CHANGES IN FINANCIAL POSITION (Stated in US Dollars) 
NINE MONTHS ENDED SEPTEMBER 30, 1999 with comparative figures for 1998  
(Unaudited) 

                                                        [Enlarge/Download Table]

                                                  September 30          September 30  
Cash provided by (used for):                          1999                  1998      
                                                  ----------------------------------- 
                                                                                      
Operating Activities                                                                  
        Income (Loss)                             $     205,194         $     553,439 
        Add (deduct)                                                                  
        Items not affecting working capital                                           
        Depreciation                                    122,713                38,808 
        Amortization                                    113,203                89,787 
        Gain on discontinued printing operations        (68,138)                      
        Net increase in non-cash operating                                            
        working capital relating to operations       (1,603,243)           (1,180,466)

        Subtotal                                     (1,230,271)             (498,432)
                                                  ----------------------------------- 

Investing Activities                                                                  
        Purchase of capital assets                     (370,285)             (181,793)
        Leasehold Improvements                                                (20,430)
        Disposed Assets                                                        65,101 
        Amortization of Deferred Costs                  304,845               304,868 
        Other Assets                                    (42,292)              (92,134)
                                                  ----------------------------------- 
        Total                                          (107,732)               75,612 
                                                  ----------------------------------- 

Financing Activities                                                                  
        Issuance of Common Shares                       660,408               877,275 
        Short Term Note Payable                                               500,000 
        Bank Line of Credit                             183,315                       
        Income Taxes Payable                            396,122                       
        Adjustment in Retained Earnings                   2,689                       
        Foreign Exchange Adjustment                       7,506                 2,555 
                                                  ----------------------------------- 
        Total                                         1,250,040             1,379,830 
                                                  ----------------------------------- 

Increase (decrease) in cash position                    (87,963)              957,010 
Cash position at beginning of period                  1,154,678               403,814 
                                                  ----------------------------------- 
Cash position at end of period                        1,066,715         $   1,360,824 
                                                  =================================== 

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PART III  

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

    2.1        Agreement and Plan of Merger between Carbite, Inc., Carbite Golf,
    Inc. and Carbite Acquisition Corp. dated June 6, 1996*

  2.2        Agreement between Advanced Golf Systems, Inc. and Carbite Golf,
Inc. dated September 24, 1996*                    

   3.1        Amended and Restated Articles of Incorporation and Bylaws of the
Company*                                          

4.1        Specimen Common Stock Certificate*                           

4.2        Form of Warrant*                                             

10.1        Royalty Agreement between Carbite, Inc. and C. S. Shira dated 
March 1, 1993*                                    

10.2        Employment Agreement between the Company and Chester S. Shira 
dated September 3, 1997*                          

10.3        Employment Agreement between the Company and Michael A.       
Spacciapolli dated September 3, 1997*             

10.4        License Agreement between Carbite Golf Company and Taylor Made
           Golf dated January 1, 1995 and Amendment dated March 4, 1997*

  10.5        License Agreement between Carbite, Inc. and K Z Golf, Inc. dated
October 28, 1998*                                 

 10.6        Endorsement Agreement between Carbite Golf, Inc., Carbite, Inc.
        and Fuzzy Zoeller Productions, Inc. dated August 20, 1999*

   10.7        Loan Agreement dated April 13, 1998 between the Company and James
              A. and Susan V. Henderson as Co-Trustees of the Henderson Living
Trust*                                            

 10.8        Lease Agreement dated January 6, 1998 between Carbite, Inc. and
              Nancy Ridge Technology Center, LLC relating to the facilities at
6330 Nancy Ridge Road, San Diego, CA 92121*       

10.9        Form of Stock Option Agreement*                               

10.10       Employee Confidentiality and Invention Agreement*             

 10.11       Commercial Security Agreement between Carbite, Inc. and Scripps
Bank dated May 15, 1999**                         

  10.12       Trademark License Agreement between Carbite Golf, Inc. and Daiwa
Seiko, Inc. dated September 16, 1999*             

 10.13       Exclusive Distribution Agreement between Carbite Golf, Inc. and
Daiwa Seiko, Inc. dated September 16, 1999*       

13.         Form F-X Appointment of Agent for Service of Process and      
Undertaking*                                      

27.         Financial Data Schedule*                                      

____________________                                                            

*   Previously filed                                                            
**  Filed herewith                                                              

III-1 

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SIGNATURES  

   In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Amendment No. 1 to this registration statement to be     
signed on its behalf by the undersigned, thereunto duly authorized.             

                            CARBITE GOLF, INC.

Date: January 7, 2000                        By: /s/ Michael A. Spacciapolli    
                                             -----------------------------
                                         Michael A. Spacciapolli
                                         Chief Executive Officer

                                                        [Enlarge/Download Table]

         Signature                            Title                            Date   
                                                                                      
 /s/ Michael A. Spacciapolli    Director and Chief Executive Officer   January 7, 2000
------------------------------                                                        
Michael A. Spacciapolli                                                               

 /s/ Chester S. Shira           Chairman of the Board and Director of  January 7, 2000
------------------------------                                                        
Chester S. Shira                Research and Development                              

By: Michael A. Spacciapolli                                                           
       Attorney-in-Fact                                                               

 /s/ Randie Burrell             Chief Financial Officer                January 7, 2000
------------------------------                                                        
Randie Burrell                                                                        

 /s/ David Nairne               Director                               January 7, 2000
------------------------------                                                        
David Nairne                                                                          
By: Michael A. Spacciapolli                                                           
    Attorney-in-Fact                                                                  

 /s/ James Henderson            Director                               January 7, 2000
------------------------------                                                        
James Henderson                                                                       

By: Michael A. Spacciapolli                                                           
    Attorney-in-Fact                                                                  

III-2 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10SB12G/A’ Filing		Date		First		Last			Other Filings
		11/3/03		26
		3/3/03		47
		3/1/03		47
		12/9/02		47
		11/15/02		17
		10/1/02		47
		11/30/00		48
		9/3/00		20		27
		7/1/00		47
		5/15/00		17
		4/14/00		47
		2/1/00		23
		1/30/00		23
Filed on:		1/13/00		1
		1/7/00		61
		1/1/00		17		56
		12/31/99		9					NT 10-K
		12/15/99		18
		12/1/99		17
		10/1/99		47
		9/30/99		4		59
		9/16/99		34		60
		8/20/99		32		60
		8/5/99		48
		5/19/99		27		29
		5/15/99		60
		5/1/99		17
		3/2/99		37
		2/20/99		48
		1/1/99		20
		12/31/98		3		56
		12/4/98		27
		10/28/98		9		60
		9/30/98		13		57
		8/14/98		17		32
		6/30/98		48
		4/14/98		27
		4/13/98		60
		2/28/98		31
		1/6/98		60
		12/31/97		5		56
		9/3/97		13		60
		8/29/97		41
		3/4/97		60
		1/1/97		44
		12/31/96		25		56
		12/1/96		31		33
		9/24/96		60
		6/6/96		60
		3/15/96		42
		1/4/96		3
		1/1/95		60
		3/1/93		25		60
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