NATURAL GOLF CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

 

(unaudited)

 

		Six Months Ended May 31,
			2004			2003
Cash Flows from Operating Activities :
Net loss		$	(4,513,613	)	$	(2,528,978	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash items included in net loss:
Depreciation and amortization			154,611			130,044
Amortization of debt discount/deferred financing costs			1,006,601			505,470
Imputed interest on director’s advances			–			3,450
Provision for doubtful accounts			(5,000	)		(1,400	)
Warrants issued to holders of investor notes			474,250			–
Employee compensation related to options and restricted share grants			198,450			–
Compensation related to warrants and options issued for services			17,300			25,600
Common stock and options to be issued for infomercial talent			(37,000	)		599,500
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable			8,788			7,132
Inventories			29,356			289,664
Prepaid expenses			(1,602,531	)		49,779
Deposits			537			(200	)
Increase (decrease) in liabilities:
Accounts payable			(1,434,477	)		58,709
Deferred revenue			(95,418	)		21,724
Accrued expenses			(633,282	)		603,892
Net cash used in operating activities			(6,431,428	)		(235,614	)
Cash Flows from Investing Activities :
Cash purchases of property and equipment			(13,195	)		–
Increase in product masters			(33,843	)		(196,017	)
Net cash used in investing activities			(47,038	)		(196,017	)
Cash Flows from Financing Activities :
Proceeds from issuance of common stock			10,931,188			–
Proceeds from notes issued			114,958			257,000
Proceeds from secured debentures issued			–			400,000
Payments on notes payable			(3,579,138	)		(197,040	)
Debt issue costs incurred			–			(28,329	)
Net cash provided by financing activities			7,467,008			431,631
Net Increase (Decrease) in Cash			988,542			–
Cash , at beginning of period			400			400
Cash , at end of period		$	988,942		$	400
Supplemental Schedule of Cash Flow Information :
Cash paid during the period for interest		$	230,323		$	48,789
Supplemental Schedule of Non-Cash Investing and Financing Activities :
Stock issued in payment of notes and accrued interest		$	245,248		$	1,380,702
Warrants issued in payment of financing costs		$	–		$	52,448
Conversion of notes to secured debentures		$	–		$	905,000
Debt discount		$	–		$	1,047,568