SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X]  Annual Report under Section 13 or 15(d) of the  Securities  Exchange Act of
     1934

     For the fiscal year ended: May 31, 2001

[ ]  Transition Report under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934

     For the transition period from __________ to __________

                        Commission file number: 0-22889

                              ROYAL PRECISION, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                    Delaware                                     06-1453896
         (State or Other Jurisdiction of                      (I.R.S. Employer
          Incorporation or Organization)                     Identification No.)

15170 North Hayden Road, Suite 1, Scottsdale, Arizona              85260
      (Address of Principal Executive Offices)                   (Zip Code)

                                 (480) 627-0200
              (Registrant's Telephone Number, Including Area Code)

   Securities registered pursuant to Section 12(b) of the Exchange Act: None

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

                    Common Stock, par value $0.001 per share
                                (Title of Class)

     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required  to be filed by  Section  13 or 15(d) of the  Securities  Exchange  Act
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The aggregate market value of shares of Common Stock held by non-affiliates
of the Registrant on August 1, 2001 was $3.7 million.

     The  number of shares of  Common  Stock  outstanding  on August 1, 2001 was
5,681,711.

                      Documents incorporated by reference:

Portions of the Registrant's Proxy Statement relating to the 2001 Annual Meeting
of Stockholders have been incorporated by reference into Part III, Items 10, 11,
12 and 13.
<PAGE>
                                     PART I

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor" for forward-looking statements.  Management believes that this Form 10-K
includes forward-looking  statements which reflect the views of the Company with
respect  to future  events  and  financial  performance.  These  forward-looking
statements  are  subject to  uncertainties  and other  factors  that could cause
actual results to differ  materially from such statements.  These  uncertainties
and other factors  include,  but are not limited to,  statements  concerning the
Company's  future  results from  operations;  the  adequacy of existing  capital
resources and credit lines;  anticipated  future  customer  orders;  anticipated
future capital  expenditures;  anticipated costs of environmental matters at our
manufacturing   facilities  and  expectations   regarding  future  environmental
reports;  and our ability to generate  sufficient  cash flow from  operations to
repay indebtedness and fund operations.  Statements in this Form 10-K, including
the Notes to Consolidated  Financial Statements and Management's  Discussion and
Analysis of Financial  Condition and Results of  Operations,  describe  factors,
among others,  that could  contribute to or cause such  differences.  Additional
factors  that  could  cause  actual  results  to differ  materially  from  those
expressed in such  forward-looking  statements are included in Exhibit 99.1. The
words  "believe,"  "expect,"  "anticipate,"  "project," and similar  expressions
identify  forward-looking  statements,  which  speak  only  as of the  date  the
statement was made. The Company  undertakes no obligation to publicly  update or
revise any forward-looking  statements,  whether as a result of new information,
future events, or otherwise.

ITEM 1. BUSINESS.

     Royal  Precision,  Inc.  ("RP")  is a holding  company  that  conducts  its
business  operations through its three wholly-owned  subsidiaries  (collectively
the "Company"),  which are FM Precision Golf  Manufacturing  Corp.  ("FMP"),  FM
Precision  Golf Sales  Corp.  ("FMP  Sales")  and Royal Grip,  Inc.  ("RG").  In
addition,  RG  has  a  wholly-owned  subsidiary,  Royal  Grip  Headwear  Company
(formerly  known  as  Roxxi,  Inc.,  "Roxxi").   RP,  FMP  and  FMP  Sales  were
incorporated  in Delaware on May 3, 1996 by a group of investors  who  acquired,
through such companies,  substantially  all of the assets of the golf club shaft
manufacturing  business  of  Brunswick  Corporation.  RP  acquired  RG, a Nevada
corporation,  on August 29, 1997 (the "RG Acquisition").  As discussed in Note 1
to the consolidated financial statements,  the Company disposed of the operating
assets of Roxxi, a Nevada corporation,  in March 1999. Results of operations for
Roxxi  in all  periods  through  May 31,  1999  are  reflected  as  discontinued
operations.

PRINCIPAL PRODUCTS; MARKETS

     The  Company  sells two main types of  products,  golf club shafts and golf
club grips.

     GOLF CLUB SHAFTS.  The Company designs,  manufactures and distributes steel
golf club shafts,  sales of which represented 86%, 84% and 82% of total revenues
during the fiscal years ended May 31, 2001,  2000, and 1999,  respectively.  The
Company developed and patented the "Rifle", the first modern stepless steel golf
club  shaft in the  industry.  Management  believes  that  these  shafts are the
premier  steel  shafts  available  in the  market  today  due to their  patented
internal  and  external   design   characteristics   which  result  in  superior
performance,  consistency and strength compared to other steel golf club shafts.
The Company  also  pioneered,  patented,  and now  licenses  the  technology  of
Frequency  Coefficient  Matching  ("FCM") golf club shafts  using an  electronic
analyzer.  Management  believes that FCM is more accurate than any other sorting
method, in that it ensures  identical shaft flex from club-to-club  throughout a
set,  allowing  the  golfer  to  maintain  a  consistent,  natural  swing  tempo
regardless of the club chosen.

     The Company also designs and distributes  graphite golf club shafts,  sales
of which  represented 1% of total revenues during both of the fiscal years ended
May 31, 2001 and 2000.  The Company  first  introduced a filament  wound "Rifle"
Graphite shaft in February 2000.  During the fiscal year ended May 31, 2001, the
Company  expanded its line of "Rifle"  Graphite  shafts to include sheet wrapped
products.  Management  believes that these  products  have superior  consistency
properties  based on the proprietary  filament  winding and finishing  processes
utilized in their  manufacture  that give the shafts  uniform wall thickness and
oscillation characteristics.

     GOLF CLUB GRIPS. The Company designs and distributes golf club grips, sales
of which  represented 13%, 15% and 18% of total revenues during the fiscal years
ended May 31, 2001, 2000 and 1999, respectively. In 1989, RG introduced a rubber
wrap  golf grip that  gained  widespread  acceptance  in the golf  industry  and
enabled RG to achieve brand name  recognition.  The Company  currently  offers a
wide variety of standard and custom  models,  all of which  management  believes
feature  durability and a distinctive feel and appearance.  These grips are sold
principally  into the  replacement  market which serves those golfers seeking to
replace grips that have become worn and slick due to prolonged use.
<PAGE>
     Additional  information about the Company's reportable business segments is
included in Note 14 to the consolidated financial statements.

     Sales to original  equipment  manufacturers  ("OEMs")  account for the vast
majority of the Company's  sales,  with the remainder of the sales being made to
distributors,  custom club assemblers, pro shops and repair shops. The Company's
products  are sold by OEMs as a component  of the  complete  golf club through a
variety of channels including sporting goods stores, discount stores, mail order
catalogs, pro shops and mass merchandisers.

     Of the  Company's  top ten  customers  during the fiscal year ended May 31,
2001, one is international.  The Company's exclusive Japanese distributor is its
second largest customer (see "Principal  Suppliers and Customers").  The Company
also has a presence in Europe,  Australia,  and Canada through other distributor
relationships.  Additional  information  about the  Company's  foreign  sales is
included in Note 12 to the consolidated financial statements.

BACKLOG

     As of May 31,  2001,  the Company had open orders from  customers  totaling
$4.0  million for  shipment  during the fiscal year  ending May 31,  2002.  Open
orders as of May 31, 2000 for shipment during the fiscal year ended May 31, 2001
were $4.2 million.

COMPETITION

     The golf  equipment  industry  is highly  competitive.  There are  numerous
companies  competing in various segments of the golf equipment markets including
those which manufacture and sell the golf club component parts which are shafts,
grips  and  heads.   Some  of  the  Company's   competitors  have  greater  name
recognition,   more   extensive   engineering,   manufacturing   and   marketing
capabilities, and greater financial,  technological and personnel resources than
the Company.  The Company  competes  primarily on the basis of product  quality,
product  specifications and design,  on-time deliveries,  customer relationships
and price.

     The Company competes  primarily with three companies which  manufacture and
distribute  steel golf club shafts to OEMs. The Company  believes that it is the
second  largest  producer  of steel  shafts,  after  True  Temper  Sports,  Inc.
Management  believes  that  its  worldwide  market  share  in  steel  shafts  is
approximately  22% while True Temper's  market share in steel shafts is believed
to be approximately  65%. Other  competitors  which  manufacture steel golf club
shafts include Nippon Shaft Co., Ltd. and Far East Machinery Co., Ltd.,  both of
which are located in Asia.

     The Company's  principal  competitors  in the golf club grip market include
Eaton/Golf Pride and Lamkin Corp.  Management believes that its worldwide market
share in golf  club  grips is  approximately  3% while  Eaton/Golf  Pride's  and
Lamkin's  market  shares  are  believed  to  be   approximately   56%  and  20%,
respectively.

     The  Company  competes  with  several   companies  which   manufacture  and
distribute  graphite  golf club  shafts.  Management  believes  that the largest
competitors  in this  fragmented  industry  segment  are Aldila,  HST,  and True
Temper/Grafalloy with 18%, 13%, and 12% of worldwide market share, respectively.

PRINCIPAL SUPPLIERS AND CUSTOMERS

     From January 1997 to February 2000, the Company  utilized  Acushnet  Rubber
Company  ("Acushnet")  as its  primary  supplier  of golf  club  grips  under an
exclusive  manufacturing  and supply  agreement.  In May 1999,  the  Company and
Acushnet  terminated  their  relationship.  The Company has  identified  several
alternative  manufacturers and currently  purchases its grip inventory from five
different  suppliers.  Although  the  Company  does  not have  long-term  supply
contracts with any of these  companies,  management  believes it has an adequate
source of supply to meet its  current and  anticipated  future  customer  needs.
However, there can be no assurance that a disruption of supply from any of these
companies  will not result in the loss of sales and key  customers,  which would
have a material adverse effect on the Company's  financial condition and results
of operations.

     The Company currently utilizes two manufacturers to supply its inventory of
graphite golf club shafts.  Management  believes that there are other acceptable
supply sources at comparable prices and quality. Sales of these products to date
have been  insignificant  to the  Company's  financial  condition and results of
operations.  However, there can be no assurance that a disruption of supply from
either of these companies will not result in the loss of sales and key customers
or hinder the  Company's  efforts to expand its  business  into this new product
segment.

                                       2
<PAGE>
     The  Company  uses  Worthington  Industries,  Inc.  ("Worthington")  as its
primary supplier for strip steel,  but has no supply contract with  Worthington.
Should  Worthington  fail  to  deliver  steel,  there  may  be a  disruption  of
operations at the Company's  manufacturing  facility until an alternate supplier
is procured.  Worthington  provides steel from two separate plant locations.  If
one Worthington plant becomes unable to fill the necessary requirements,  orders
could be filled from the alternate location. Although the Company has elected to
use Worthington as its primary supplier of strip steel, management believes that
there are other acceptable  supply sources at comparable  prices and quality and
that the loss of  Worthington  as a supplier  would not have a material  adverse
effect on the Company's financial condition and results of operations.

     The  Company  has a  ten-year  agreement  with  Precision  FM  Japan,  Ltd.
("Precision  FM") which  grants  exclusive  distribution  rights for sale of the
Company's  golf club  grips in Japan and  certain  other  Asian  countries.  The
Company also has a five-year  agreement with Marubeni  Corporation  ("Marubeni")
and Precision Japan,  Ltd.  ("Precision")  which grants  exclusive  distribution
rights for sale of the  Company's  golf club shafts in Japan and  certain  other
Asian  countries.  Precision  FM and  Precision  are  subsidiaries  of  Marubeni
(collectively  "Precision Japan").  The grip and shaft agreements with Precision
Japan expire in January 2002 and July 2002,  respectively.  Precision  Japan may
renew the grip agreement for successive  two-year  terms.  The grip agreement is
terminable  by either  party for  cause or if they  fail to agree  upon  pricing
terms,  or by  Precision  Japan at any time upon six months  prior notice to the
Company.  Precision Japan may renew the shaft agreement for successive  two-year
terms.  The shaft  agreement is  terminable  by either party for cause or by the
Company if Precision Japan fails to meet certain minimum purchase requirements.

     The  Company  is  significantly  dependent  on  sales to  Precision  Japan,
TaylorMade - adidas Golf  ("TaylorMade") and Callaway Golf Company  ("Callaway")
which, in the aggregate, represented 60%, 50% and 49% of the Company's total net
sales for the fiscal  years  ended May 31,  2001,  2000 and 1999,  respectively.
Precision  Japan accounted for 20%, 27% and 25% of total net sales during fiscal
2001, 2000 and 1999, respectively.  TaylorMade accounted for 21%, 18% and 15% of
total net sales  during  the fiscal  years  ended May 31,  2001,  2000 and 1999,
respectively.  Callaway  accounted  for 19%, 5% and 9% of total net sales during
fiscal 2001, 2000 and 1999,  respectively.  The outstanding  receivable balances
from  TaylorMade,  Precision  Japan and  Callaway  as of May 31,  2001 were $0.8
million, $0.6 million and $1.6 million, respectively. To reduce its credit risk,
the Company  requires  letter of credit  agreements  from Precision  Japan.  The
Company does not have supply agreements with TaylorMade or Callaway. The loss of
sales to any of these companies  could have a significant  adverse impact on the
Company's financial condition and results of operations.

     Sales of golf equipment  historically  have been dependent on discretionary
spending by  consumers,  which may be  adversely  affected  by general  economic
conditions  and the  popularity  of golf in  general.  A  decrease  in  consumer
spending  on golf  equipment  could  have an  adverse  effect  on the  Company's
business  and  operating  results.  Sales in the golf  equipment  industry  have
historically  been seasonal in nature with consumer demand for product being the
strongest during the spring and summer months.

PATENTS, TRADEMARKS

     The  Company  has  obtained  a  trademark  and  a  utility  patent  on  the
manufacture  and  design  of its  "Rifle"  steel  golf club  shafts.  Management
believes  that its  "Rifle"  products  are  superior  to other  steel  shafts in
performance,  consistency and strength, which provides the Company a competitive
advantage in the golf equipment  industry.  Management believes that some of the
shaft patents  material to its future  success are:

     *    its patent which enables a club maker to take  frequency  sorted steel
          shafts and calculate what new frequency shafts are needed to produce a
          set of Frequency Matched products,
     *    its  patent  which  relates  to the same  frequency  sorting,  but for
          graphite golf club shafts, and
     *    its patent  which  relates to the  manipulation  of flex  distribution
          within a shaft or set of shafts.

     These  patents  expire on May 9, 2006,  October 19,  2008,  and January 12,
2016, respectively.

     The Company  also  relies  upon  trademarks  to  establish  and protect its
proprietary rights in its golf club grip products and technologies.  The RG logo
and the name  "Royal  Grip" have been  registered  as  trademarks  in the United
States, Japan and in other foreign countries. In addition, the Company has filed
trademark  applications  relating to the names and  configurations of several of
its grip  products  in the United  States and in  foreign  countries,  including
Japan.  The Company has also  obtained  design  patents on some of its grips and
applied for others,  which are pending.  The Company  protects  its  proprietary
rubber  compound  and  related  technologies  as  trade  secrets.  Despite  such
safeguards,  there  can be no  assurance  that  competitors  will not be able to
produce  golf club grips that  successfully  imitate the  Company's  designs and
materials without infringing the Company's proprietary rights.

                                       3
<PAGE>
REGULATIONS

     The  design  of  new  golf  clubs  is  greatly   influenced  by  rules  and
interpretations  of the United States Golf  Association  ("USGA").  Although the
golf  equipment  standards  established  by the  USGA  generally  apply  only to
competitive events sanctioned by that organization, for marketing reasons it has
become  critical for  designers of new products to assure  compliance  with USGA
standards.  Although the Company  believes  that all of its golf club shafts and
grips comply with current 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.

RESEARCH AND DEVELOPMENT

     The Company's engineering, sales and other staff, together with independent
consultants engaged by the Company,  work to conceive new product  opportunities
by creating  prototypes  and masters and by working with suppliers and customers
to design and produce finished products.  New golf club shaft and golf club grip
products are tested through the Company's sales force with customers and various
tour players. The Company continues to investigate new manufacturing  techniques
and component  materials  used in the  manufacture  of its products.  During the
fiscal years ended May 31, 2001, 2000 and 1999, the Company spent  approximately
$0.8  million,  $0.7  million  and $0.6  million on  research  and  development,
respectively.

EMPLOYEES

As of May 31,  2001,  the Company had 310  employees.  Approximately  70% of the
Company's  work force is  covered by a  collective  bargaining  agreement  which
expires in  November  2002.  The  Company  believes  its  relationship  with its
employees is good.

ITEM 2. PROPERTIES.

     The  Company's  golf club shaft  manufacturing  facility  is located at 535
Migeon Avenue, Torrington, Connecticut and is approximately 230,000 square feet.
The manufacturing facility is owned by the Company subject to a mortgage granted
to Wells Fargo Business Credit,  Inc. See Note 7 to the  consolidated  financial
statements.

     The Company's principal executive and administrative offices are located at
15170 North  Hayden Road,  Suite 1,  Scottsdale,  Arizona and are  approximately
8,000  square  feet.   The  offices  are  leased  with  a  monthly   payment  of
approximately $23,000 under a lease term expiring in May 2004.

     The Company also leases  approximately 9,000 square feet of warehouse space
located  at 7861 East Gray  Road,  Suites  107-111,  Scottsdale,  Arizona.  This
facility  serves as a  distribution  point from which  product is shipped to the
Company's  West  Coast  customers.  The  monthly  payment  under  the  lease  is
approximately  $9,000 and the term of the lease  expires in November  2001.  The
Company  does  not  anticipate  renewing  the  lease of this  facility  and will
consolidate  all  warehousing  and  distribution  functions  in its  Torrington,
Connecticut facility.

     In the opinion of  management,  these  facilities are suitable and adequate
for the Company's intended use and are adequately covered by insurance.

ITEM 3. LEGAL PROCEEDINGS.

LITIGATION

     The  Company  is  from  time  to  time a party  to  various  routine  legal
proceedings,  incidental to the Company's  business.  Management  believes that,
other  than the  environmental  matters  discussed  below,  none of the  current
routine  proceedings  will  have a  material  adverse  effect  on the  Company's
financial condition or future operating results.

ENVIRONMENTAL MATTERS

     In May 1996, the Company acquired  substantially all the assets of the golf
club shaft  manufacturing  business of  Brunswick  Corporation  (NYSE:  BC) (the
"Brunswick  Acquisition").  Included in the acquired assets were land, buildings

                                       4
<PAGE>
and equipment at the Company's Torrington,  Connecticut  manufacturing  facility
(the "FMP plant").  In  conjunction  with the Brunswick  Acquisition,  Brunswick
Corporation  ("Brunswick")  agreed  to  indemnify  the  Company  from  potential
liability  arising from certain  environmental  matters and to remediate certain
environmental  conditions  which  existed  at  the  FMP  plant  on the  date  of
acquisition.  Brunswick has engaged an environmental  consulting firm to perform
testing  at the  FMP  plant  and is in  the  process  of  developing  a plan  of
remediation.  The Company has engaged an environmental consulting firm to assist
in the development of the plan of  remediation.  Failure of Brunswick to fulfill
its obligations  under the asset purchase contract could have a material adverse
effect on the Company's financial condition and results of operations.

     Prior to the  Brunswick  Acquisition,  the FMP plant was listed in the U.S.
Environmental Protection Agency's ("EPA") Comprehensive  Environmental Response,
Compensation and Liability Information System ("CERCLIS").  A contractor for the
EPA  performed an assessment of the FMP plant in January 1992 and, in June 1992,
the  site  was  deferred  from  the  CERCLIS  inventory  to the  EPA's  Resource
Conservation  and Recovery Act ("RCRA")  program.  During calendar 2000, the EPA
reviewed the status of the property, concluded that the FMP plant is not subject
to  corrective  action under RCRA and  returned  the site to its active  CERCLIS
inventory.  In November 2000 and April 2001, a contractor  for the EPA performed
another site assessment and took samples from the property of the FMP plant. The
Company  anticipates  that a report  from the EPA with the  results of this work
will be received prior to April 2002. The Company believes that, pursuant to the
Brunswick  Acquisition   agreement,   Brunswick  has  an  obligation  under  the
Connecticut  Transfer Act (the "Act") to remediate any environmental issues that
fall  within  the  scope  of the  Act.  The  Company  expects  that,  if the EPA
identifies any environmental  issues,  they would be issues that fall within the
scope of the Act. There is not sufficient  information at this time to determine
what action,  if any, the EPA may pursue and what effect, if any, it may have on
the Company's financial condition and results of operations.

     In April 2000, the Company submitted information regarding the disposal and
treatment of waste  materials  from the FMP plant during the period from 1982 to
1997 to assist the EPA in its investigation of the former National Oil Services,
Inc. Superfund site in West Haven, Connecticut. National Oil Services, Inc. was,
prior to its bankruptcy, a contractor used by Brunswick, and to a limited degree
by the Company,  to treat and dispose of  non-hazardous  waste oils from the FMP
plant.  In June 2001,  the  Company  executed a consent  decree with the EPA and
agreed to pay  approximately  $5,000 in full satisfaction of its liability under
this matter.  The Company is currently  negotiating  with Brunswick to determine
the portion of the payment for which each party is responsible.

     In October 2000,  the Company  received a notice of violation  ("NOV") from
the State of Connecticut Department of Environmental Protection ("DEP") alleging
that various effluent  discharge  samples during the period from January 2000 to
September 2000 were in violation of authorized  limits under an existing  permit
for the  discharge  of  treated  wastewater  from  the FMP  plant.  The  Company
submitted  its  response  to the NOV in December  2000 and,  in April 2001,  the
Company received a draft consent order from the DEP related to this matter.  The
Company is  currently  negotiating  with the DEP prior to entering  into a final
consent order. The Company does not anticipate,  however, that the conditions of
the draft  consent  order  will be  significantly  modified.  Terms of the draft
consent order include,  among other things, that the Company pay a civil penalty
of $0.2 million, submit to various compliance audits, and complete a feasibility
study to determine if the discharge of treated wastewater from the FMP plant can
be reduced,  diverted to another source or eliminated  entirely.  The Company is
currently evaluating its options to reach compliance with the terms of the draft
consent  order.  Management  believes it is  possible  that the  proposed  civil
penalty will be slightly  reduced when the final  consent  order is executed.  A
provision  has been  recorded in the amount of $0.15  million  for the  proposed
civil  penalty and is  reflected as a component  of  Environmental  Costs in the
accompanying  consolidated statement of operations for the fiscal year ended May
31, 2001.  Management  believes that significant future capital  expenditures in
excess of $0.3  million  may be made at the FMP plant  during  the  fiscal  year
ending May 31, 2002 to comply with the terms of the consent order.

     In February  2001,  the Company  received a  reimbursement  from  Brunswick
totaling  $0.2  million  for costs  incurred to resolve a prior NOV from the DEP
which the Company settled in June 2000. Of the funds received,  $0.1 million was
recorded as a reimbursement of  environmental  related expenses and is reflected
as  a  reduction  of  Environmental  Costs  in  the  accompanying  statement  of
operations  for the  fiscal  year  ended May 31,  2001.  The  remaining  balance
received was  recorded as a partial  reimbursement  of the capital  expenditures
incurred at the FMP plant to complete the remedial measures specified in the NOV
settlement.

     Environmental  Costs related to the various matters discussed above totaled
$0.4 million and $0.1 million, net of recoveries,  during the fiscal years ended
May 31, 2001 and 2000, respectively.

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

     No matters  were  submitted  to a vote of the  Company's  security  holders
during the fourth fiscal quarter.

                                       5
<PAGE>
                                     PART II

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

     The common stock is traded on The Nasdaq  National Market under the trading
symbol "RIFL".  The prices set forth below reflect the high and low sales prices
for shares of common stock for each quarter  during the past two fiscal years as
reported by The Nasdaq National Market.

                                                       HIGH      LOW
                                                      ------    ------
          FISCAL YEAR ENDED MAY 31, 2001
          First Quarter                               $ 3.25    $ 1.88
          Second Quarter                                3.25      1.81
          Third Quarter                                 3.09      1.63
          Fourth Quarter                                2.35      1.90

          FISCAL YEAR ENDED MAY 31, 2000
          First Quarter                               $ 4.00    $ 1.75
          Second Quarter                                2.88      2.00
          Third Quarter                                 3.50      2.31
          Fourth Quarter                                3.50      2.50

     As of August 1, 2001, the Company had approximately 80 holders of record of
common stock.

     The Company  has not paid any  dividends  on its common  stock and does not
anticipate  paying  cash  dividends  in  the  foreseeable  future.  The  Company
currently  intends to retain any earnings to finance the growth of its business.
Any  determination  as to the payment of  dividends  will depend upon the future
results of  operations,  capital  requirements  and  financial  condition of the
Company  and such  other  facts as the Board of  Directors  of the  Company  may
consider,  including any contractual or statutory  restrictions on the Company's
ability to pay  dividends.  The Company's two credit  facilities  each limit the
Company's ability to pay dividends on its common stock.

ITEM 6. SELECTED FINANCIAL DATA.

     The selected  consolidated  financial data presented  below is derived from
the Company's  consolidated  financial  statements.  This data should be read in
conjunction  with  the  consolidated  financial  statements  and  notes  thereto
included in Item 8 of this Form 10-K.

                     ROYAL PRECISION, INC. AND SUBSIDIARIES
                      SELECTED CONSOLIDATED FINANCIAL DATA
                  YEARS ENDED MAY 31, 2001, 2000, 1999 AND 1998
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                       2001        2000       1999       1998
                                                     --------    --------   --------   --------
<S>                                                  <C>         <C>        <C>        <C>
Net sales                                            $ 29,997    $ 30,099   $ 23,395   $ 24,973
Income (loss) from continuing operations                 (584)        870        276        268
Income (loss) from continuing operations per share      (0.10)       0.15       0.05       0.05
Total assets                                           25,207      24,942     24,610     25,886
Long-term debt                                          7,705       6,027      6,191      3,171
Total liabilities                                      11,366      10,530     11,158     11,559
</TABLE>

                                       6
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

OVERVIEW --

     The Company manufactures and distributes steel golf club shafts and designs
and  distributes  golf club  grips and  graphite  golf club  shafts  for sale to
original equipment  manufacturers ("OEMs") and to distributors and retailers for
use in the replacement  market.  The Company's  products are sold throughout the
United States as well as internationally,  primarily in Japan, Europe, Australia
and Canada.

FISCAL YEAR ENDED MAY 31, 2001 COMPARED TO THE FISCAL YEAR ENDED MAY 31, 2000 --

     NET  SALES.  Net sales for the fiscal  year  ended May 31,  2001 were $30.0
million,  a decrease of $0.1 million or 0.3% from net sales of $30.1  million in
2000.  Net sales of golf club  shafts  increased  by $0.5  million or 2% and net
sales of golf club grips  decreased by $0.6 million or 14%. The  increased  golf
club shaft sales reflect  continued strong demand for the Company's  proprietary
"Rifle" shafts.  Net sales of the Company's  higher priced,  pro grade golf club
shafts  including the "Rifle"  increased by $0.9 million or 4%. Net sales of the
Company's  lower  priced,  commercial  grade golf club shafts  decreased by $0.4
million  or 13% due  primarily  to  declines  in orders  from one  international
distributor that is now focusing more heavily on sales of pro-grade shafts.  The
decreased golf club grip sales is primarily  attributable  to declines in orders
from the Company's  exclusive Japanese  distributor due to slow general economic
conditions in Asia.

     COST OF SALES.  Cost of sales for the fiscal  year  ended May 31,  2001 was
$22.0  million,  an increase  of $1.3  million or 6% over cost of sales of $20.7
million  in  2000.  As  discussed  in  Note  3  to  the  consolidated  financial
statements,  the Company  recorded  write-downs  totaling  $0.5 million and $0.3
million to reduce the carrying value of finished goods  inventories to estimated
net  realizable  value  during the  fiscal  years  ended May 31,  2001 and 2000,
respectively. Excluding the write-downs of $0.4 million and $0.3 million related
to shaft  inventories  in fiscal 2001 and 2000,  respectively,  the cost of golf
club shaft sales increased by $1.2 million or 7% primarily as a result of higher
total net sales,  an  increased  cost of natural gas fuel and higher  health and
worker's  compensation  insurance  premiums.  Excluding  the  write-down of $0.1
million related to grip inventories, the cost of golf club grips sales decreased
by $0.1 million or 5% as a result of lower total net sales.

     GROSS PROFIT.  Gross profit for the fiscal year ended May 31, 2001 was $8.0
million,  a decrease of $1.4 million or 15% from gross profit of $9.4 million in
2000.  Gross profit from sales of golf club shafts  decreased by $0.9 million or
11% to $7.1 million.  Excluding the  inventory  write-downs  of $0.4 million and
$0.3 million in fiscal 2001 and 2000,  respectively,  gross profit from sales of
golf club  shafts  decreased  by $0.7  million to 29% of sales from 32% of sales
last year.  This decline in margin is partially  attributable  to a $0.3 million
increase in the cost of natural  gas fuel used at the FMP plant  which  resulted
from significantly  higher rates charged by the utility provider.  Additionally,
health and workers'  compensation  insurance  premiums increased by $0.3 million
due to general increases in medical provider costs and more employees at the FMP
plant.

     Gross profit from sales of golf club grips decreased by $0.5 million or 38%
to $0.9  million.  Excluding the  inventory  write-down  of $0.1 million,  gross
profit from sales of golf club grips  decreased  by $0.4 million to 24% of sales
from 31% of sales last year.  This  decline in margin is  attributable  to fixed
costs being  spread over lower unit sales  volume and $0.2  million of operating
costs at the Company's West Coast distribution center.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses  for the  fiscal  year  ended  May 31,  2001  were $6.6
million,  a  decrease  of  $0.3  million,  or  5%,  from  selling,  general  and
administrative  expenses of $6.9  million in 2000.  This  decrease is  primarily
attributable  to a  reduction  in  management  bonuses  paid under an  incentive
compensation plan based on the profitability of the Company and reduced spending
on print  advertising  in the current year.  Expressed as a percentage of sales,
selling, general and administrative expenses declined from 23% during the fiscal
year ended May 31, 2000 to 22% in 2001.

     AMORTIZATION OF GOODWILL. Goodwill was reduced in the fourth quarter of the
fiscal year ended May 31, 2000 as a result of the  utilization  of net operating
loss  carryforwards  established  prior to the RG Acquisition  ("Pre-Acquisition
NOLs") and  partial  reversal  of the  valuation  allowance  on  pre-acquisition
deferred  tax assets.  Therefore,  amortization  expense  was reduced  from $0.5
million during the fiscal year ended May 31, 2000 to $0.4 million in 2001.

     ENVIRONMENTAL COSTS. As discussed in Note 16 to the consolidated  financial
statements,  costs totaling $0.4 million and $0.1 million were incurred  related
to various  environmental matters during the fiscal years ended May 31, 2001 and

                                       7
<PAGE>
2000,  respectively.  The amount for fiscal 2001  includes a provision  of $0.15
million for a proposed  civil  penalty that was  stipulated  in a draft  consent
order from the State of Connecticut Department of Environmental Protection which
the Company is negotiating to resolve.

     NONRECURRING EXPENSES. As discussed in Note 5 to the consolidated financial
statements,  expenses totaling $0.5 million were recorded during the fiscal year
ended May 31, 2001 to reduce the carrying  value of  equipment  held for sale to
estimated net realizable value and to write-off the accumulated costs related to
various product development projects.

     INTEREST  EXPENSE.  Interest expense increased from $0.6 million during the
fiscal  year  ended  May 31,  2000 to $0.9  million  in 2001.  The $0.3  million
increase is primarily the result of an increase in the Company's annual interest
rate on its bank credit  facilities.  Beginning  November 1, 2000,  following an
event of default of a financial loan  covenant,  the Company's  annual  interest
rate was increased 2% on these facilities.  Additionally, during the period from
December  2000 to May 2001,  the  Company  had  outstanding  borrowings  under a
revolving  subordinated  promissory note with an annual interest rate of 13% for
which interest expense of $0.1 million was recorded.

     TERMINATED  MERGER EXPENSES.  Legal and other  professional fees associated
with a proposed acquisition of PH Group Inc. totaling $0.1 million were expensed
during the fiscal year ended May 31, 2001.

     OTHER INCOME.  Other income of $0.3 million during each of the fiscal years
ended May 31, 2001 and 2000 is  principally  comprised  of  royalties  earned on
sales of Roxxi  headwear  products as well as royalty fees from other  contracts
which license certain Company technology and products.

     PROVISION  FOR INCOME  TAXES.  Income tax  provisions  of $33,000  and $0.6
million  were  recorded  during the fiscal  years  ended May 31,  2001 and 2000,
respectively.  Taxes are provided based on the estimated  effective tax rate for
the year, which considers the effect of nondeductible goodwill amortization and,
during  fiscal  2001,   the  effect  of  a   nondeductible   civil  penalty  for
environmental  matters.  During the fiscal year ended May 31, 2000,  the Company
utilized  approximately $0.5 million of Pre-Acquisition NOLs and also determined
that  approximately  $1.9 million of  Pre-Acquisition  NOLs were realizable.  As
such,  the Company  reduced the valuation  allowance on its deferred  income tax
assets by  approximately  $0.7 million  (see Notes 2 and 10 to the  consolidated
financial  statements).  During  fiscal  2000,  the  Company  also  reduced  the
valuation  allowance on other deferred income tax assets,  not related to the RG
Acquisition,  by  approximately  $0.2 million.  No  adjustments to the valuation
allowance on deferred tax assets were recorded  during the fiscal year ended May
31, 2001.

FISCAL YEAR ENDED MAY 31, 2000 COMPARED TO THE FISCAL YEAR ENDED MAY 31, 1999 --

     NET SALES.  Net sales from continuing  operations for the fiscal year ended
May 31, 2000 were $30.1  million,  an  increase of $6.7  million or 29% over net
sales from  continuing  operations of $23.4  million in 1999.  Net sales of golf
club shafts  increased  by $6.4  million or 33% and net sales of golf club grips
increased by $0.3  million or 8%. The  increased  golf club shaft sales  reflect
continued strong demand for the Company's  proprietary "Rifle" shafts. Net sales
of the Company's higher priced, pro grade golf club shafts including the "Rifle"
increased by $6.7 million or 42%.

     COST OF SALES. Cost of sales from continuing operations for the fiscal year
ended May 31, 2000 was $20.7  million,  an increase of $5.5  million or 36% over
cost of sales sold from continuing operations of $15.2 million in 1999. The cost
of golf club shafts sales increased by $4.7 million or 37% primarily as a result
of higher total net sales.  The cost of golf club grips sales  increased by $0.8
million or 32% due to higher  total net sales and  additional  costs  associated
with the  opening  of a new West Coast  distribution  center in  December  1999.
Acushnet Rubber Company  ("Acushnet") had previously  warehoused and distributed
the Company's grips under an exclusive  manufacturing and supply agreement.  The
Company assumed  responsibility for these functions following the termination of
the Acushnet contracts.  (See Note 4 to the consolidated  financial statements.)
Approximately  $0.1 million in additional  costs was incurred related to the new
distribution  facility  during  the  fiscal  year  ended  May  31,  2000.  Also,
depreciation  expense of $0.2  million was  recorded  on the grip  manufacturing
equipment  while in use by  Acushnet  during the fiscal  year ended May 31, 2000
whereas no depreciation  expense was recorded in 1999 when the Acushnet  capital
lease contract was in effect.

     GROSS PROFIT.  Gross profit from continuing  operations for the fiscal year
ended May 31, 2000 was $9.4  million,  an  increase of $1.2  million or 15% over
gross profit from  continuing  operations of $8.2 million in 1999.  Gross profit
from sales of golf club shafts  increased by $1.6 million or 26% to $8.0 million
due to higher total net sales.  Expressed as a  percentage  of sales,  the gross
profit on sales of golf club shafts decreased from 33% to 31% due principally to
a change in the mix of products sold. Sales of a particular pro grade shaft that
is  not  subject  to  the  Company's  Frequency   Coefficient  Matching  ("FCM")
technology  and is sold at a lower  price  and a lower  profit  margin  than the
Company's other pro grade products totaled approximately $4.3 million, or 17% of
total shaft sales  during the fiscal year ended May 31, 2000,  whereas  sales of

                                       8
<PAGE>
this  product in 1999 were  approximately  $1.8  million,  or 9% of total  shaft
sales. Additionally,  inventory write-downs of $0.3 million were recorded during
the fiscal year ended May 31, 2000 to reduce to estimated net  realizable  value
certain  graphite shafts  purchased for resale prior to the  introduction of the
"Rifle" Graphite. Overtime pay and workers' compensation insurance premiums also
increased  significantly  during fiscal 2000 as production was increased to meet
the higher sales demand.

     Gross profit from sales of golf club grips decreased by $0.4 million or 23%
to $1.4 million  despite an increase in net sales.  Expressed as a percentage of
sales,  the gross profit on sales of golf club grips  decreased from 44% to 31%.
This decreased  margin reflects the additional  warehouse costs and depreciation
expense  discussed  above as well as a different mix of products sold during the
two periods.  Beginning in November  1998,  the Company  introduced a new buffed
product for the Japanese market which is being manufactured at a higher cost and
is being sold at a lower profit margin than other grip  products.  Sales of this
product  represented  38% of sales  during  the fiscal  year ended May 31,  2000
compared to only 14% in 1999.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses  for the  fiscal  year  ended  May 31,  2000  were $6.9
million, an increase of 17% over selling, general and administrative expenses of
$5.9  million  in  1999.  This  $1.0  million  increase  consists  primarily  of
additional  marketing and advertising  costs  including a television  commercial
campaign which first aired in January 2000 and  management  bonuses earned under
an incentive  compensation plan based on the profitability of the Company.  As a
percentage of sales, selling,  general and administrative expenses declined from
25% during the fiscal year ended May 31, 1999 to 23% in 2000.

     AMORTIZATION OF GOODWILL. Goodwill was reduced in the fourth quarter of the
fiscal year ended May 31, 1999 as a result of the  utilization  of net operating
loss carryforwards  established prior to the RG Acquisition and partial reversal
of the valuation  allowance on pre-acquisition  deferred tax assets.  Therefore,
amortization  expense was reduced from $521,000 during the fiscal year ended May
31, 1999, to $486,000 in 2000.

     ENVIRONMENTAL COSTS. As discussed in Note 16 to the consolidated  financial
statements,  costs totaling $0.1 were incurred related to various  environmental
matters  during  the fiscal  year  ended May 31,  2000.  No such  expenses  were
incurred in 1999.

     GAIN ON TERMINATION OF MANUFACTURING SUPPLY CONTRACT.  As discussed in Note
4 to the consolidated financial statements,  the Company and Acushnet executed a
mutual release agreement  terminating the manufacturing and supply agreement and
capital lease agreement in May 1999. The Company recognized a one-time aggregate
gain of $0.9  million  during the fiscal  year ended May 31, 1999 as a result of
this Termination Agreement.

     INTEREST  EXPENSE.  In October 1998, FMP entered into a new credit facility
with RG's lender and paid off all existing  loans to FMP's  previous  lender.  A
prepayment  penalty of $0.1 million was incurred related to this transaction and
is  reflected as a component of the $0.8  million  interest  expense  during the
fiscal year ended May 31, 1999. Interest expense in 2000 was $0.6 million.

     TERMINATED MERGER EXPENSES.  The Company incurred professional fees of $1.0
million  during the fiscal year ended May 31, 1999 related to a proposed  merger
agreement  with Coyote Sports,  Inc. (the  "RP-Coyote  Merger").  These expenses
represent  costs  incurred for due  diligence,  negotiation  of  agreements  and
preparation of a registration statement for the contemplated merger.

     OTHER  INCOME.  Other  income of $0.3 million for the fiscal year ended May
31, 2000 is principally comprised of royalties earned on sales of Roxxi headwear
products as well as royalty  fees from other  contracts  which  license  certain
Company  technology  and  products.  Other income of $0.2 million for the fiscal
year ended May 31, 1999  primarily  represents  interest  income on the Acushnet
capital lease receivable.

     PROVISION FOR INCOME TAXES. Provisions of $0.6 million and $0.8 million for
taxes on income from continuing operations were recorded during the fiscal years
ended May 31,  2000 and 1999,  respectively.  During  fiscal  2000,  the Company
utilized  approximately $0.5 million of Pre-Acquisition NOLs and also determined
that  approximately  $1.9 million of  Pre-Acquisition  NOLs were realizable.  As
such,  the Company  reduced the valuation  allowance on its deferred  income tax
assets by  approximately  $0.7 million  (see Notes 2 and 10 to the  consolidated
financial  statements).  During  fiscal  2000,  the  Company  also  reduced  the
valuation  allowance on other deferred income tax assets,  not related to the RG
Acquisition,  by  approximately  $0.2 million.  During fiscal 1999,  the Company
utilized  approximately $0.9 million of Pre-Acquisition NOLs and also determined
that  approximately  $1.0 million of  Pre-Acquisition  NOLs were realizable and,
therefore,  reduced the valuation allowance on its deferred income tax assets by
an  aggregate  of $0.7  million.  Taxes  are  provided  based  on the  estimated
effective tax rate for the year,  which  considers  the effect of  nondeductible
goodwill amortization.

                                       9
<PAGE>
     DISCONTINUED  OPERATIONS.  As  discussed  in  Note  1 to  the  consolidated
financial  statements,  the Company disposed of the operating assets of Roxxi in
March  1999.  A loss of $0.8  million was  recorded  on this sale,  net of a tax
benefit of $0.4  million,  reflecting a  write-down  of the excess book value of
assets sold over the cash received.  Losses from the operations of Roxxi for the
fiscal year ended May 31, 1999 were $0.4  million,  net of an income tax benefit
of $0.2 million.

INFLATION --

     The Company  believes that  inflation has not had a material  impact on its
financial condition and results of operations to date.

LIQUIDITY AND CAPITAL RESOURCES --

     At May 31,  2001,  the Company had  working  capital of $7.7  million and a
current  ratio of 3.1 to 1 as compared to working  capital of $6.0 million and a
current ratio of 2.3 to 1 at May 31, 2000.

     The Company's  primary  borrowing  arrangement  consists of two bank credit
facilities.  Borrowings under the FMP and RG bank credit  facilities are secured
by substantially  all of the Company's assets and contain certain  financial and
other covenants which, among other things, limit annual capital expenditures and
dividends and require the maintenance of minimum monthly and quarterly  earnings
and quarterly debt service coverage ratios, as defined.  The Company believes it
is in compliance  with all  financial  loan  covenants as of May 31, 2001.  Most
recently in November  2000,  the Company did not achieve the  operating  results
necessary  for  compliance  with  certain  financial  loan  covenants,  but  was
successful  in obtaining  the  necessary  waivers and  amendments to remedy such
default.  There can be no assurance,  however, that the Company would be able to
obtain the  necessary  waivers or amendments  upon the  occurrence of any future
events of  default  of  financial  loan  covenants  which  could have a material
adverse effect on the Company's financial condition and results of operations.

     FMP's bank  credit  facility  consists  of two term  loans and a  revolving
line-of-credit.  The  outstanding  principal  balance of the first FMP term loan
("FMP  Term 1") of $2.7  million  at May 31,  2001 is due in  monthly  principal
installments  of $46,850 plus interest until its maturity in September 2004. The
outstanding principal balance of the second FMP term loan ("FMP Term 2") of $0.4
million at May 31, 2001 is due in monthly principal  installments of $6,667 plus
interest beginning June 2001 until its maturity in September 2004.

     The amount available for borrowings under the FMP revolving  line-of-credit
is based upon the levels of eligible FMP accounts receivable and inventories, as
defined,  subject to a maximum  borrowing  base of $6.5  million.  Beginning  on
November 1 of each year,  a seasonal  over-advance  of $0.5 million is available
until May 31 of the  following  year.  As of May 31, 2001,  FMP had $4.5 million
outstanding  under its revolving  line-of-credit  and $1.5 million available for
additional borrowings. The FMP line-of-credit expires in September 2004.

     RG's  bank  credit  facility  consists  of a  term  loan  and  a  revolving
line-of-credit.  The RG  term  loan of $0.3  million  at May 31,  2001 is due in
monthly principal  installments of $10,500 plus interest until it is paid off in
July  2003.  The  amount   available  for  borrowings  under  the  RG  revolving
line-of-credit  is based upon the levels of eligible RG accounts  receivable and
inventories, as defined, subject to a maximum borrowing base of $1.5 million. As
of  May  31,  2001,  RG  had  $0.6  million   outstanding  under  its  revolving
line-of-credit  and $0.2 million  available for  additional  borrowings.  The RG
line-of-credit expires in September 2004.

     Borrowings  under both  lines-of-credit  and FMP Term 2 bear  interest at a
rate per annum  equal to the  prime  rate  (7.0% at May 31,  2001)  plus  2.25%.
Borrowings  under  the RG term loan and FMP Term 1 bear  interest  at a rate per
annum  equal to the prime rate plus  2.75%.  Borrowings  under the FMP  seasonal
over-advance  bear  interest  at a rate per annum  equal to the prime  rate plus
4.25%.

     In December  2000,  the Company  borrowed  $1.0  million  under a revolving
subordinated  promissory  note  ("Subordinated  Note") with the Johnston  Family
Charitable  Remainder  Unitrust  #3  ("Johnston  Trust"),  of which  Richard  P.
Johnston, a director, and the CEO and Chairman of the Board of the Company, is a
Trustee.  Partial  repayments  of the  Subordinated  Note were made in March and
April  2001 and the  balance  was repaid in full  during May 2001.  While it was
outstanding,  the  Subordinated  Note accrued interest at a fixed annual rate of
13% and was  subordinate  to both  the FMP and RG bank  credit  facilities.  The
Johnston Trust had an option to convert the indebtedness into RP common stock at

                                       10
<PAGE>
an exchange  ratio of one share for every  $1.00 of  outstanding  principal  and
accrued  interest  that was not  repaid in full on or before May 31,  2001.  The
Johnston  Trust  conversion  rights  were  limited  to  25,000  shares  prior to
stockholder approval.

     The Company believes that its existing  capital  resources and credit lines
available are sufficient to fund its operations and capital requirements for its
business  as  presently  planned  over  the  next  twelve  months.  The  Company
anticipates a seasonal  decline in operating  results and  liquidity  during the
upcoming  fall and winter  months  similar to that which has  occurred  in prior
years.  Therefore,  it is  likely  that the  Company  will draw  funds  from the
over-advance  provision of the FMP bank credit  facility  during the period from
November 2001 to May 2002 when the over-advance is available.

     During  the  fiscal  year ended May 31,  2001,  net cash used in  operating
activities  was $0.4 million  which  primarily  resulted from a net loss of $0.6
million, an increase in inventories of $1.3 million,  and a decrease in accounts
payable and accrued  liabilities  of $0.7  million.  Net cash used in  operating
activities  was  reduced  by  depreciation  and  amortization  of $1.1  million,
write-downs  of equipment and  inventories  of $1.0 million,  and an increase in
accounts receivable of $0.1 million.

     Net cash used in investing  activities  of $1.1 million for the fiscal year
ended  May 31,  2001 was  primarily  for the  purchase  of  property,  plant and
equipment.  The Company estimates that capital  expenditures for the fiscal year
ending May 31, 2002 will be approximately $0.9 million. The Company is assessing
its steel golf club shaft  manufacturing  capacities compared to the current and
anticipated  future volume of customer orders.  Based on this assessment and the
success of ongoing projects to increase production  volumes,  significant future
capital  expenditures may be made at the FMP manufacturing  facility to increase
production  capacity  for pro grade steel golf club  shafts.  Additionally,  the
Company is currently  evaluating its options to reach  compliance with the terms
of a draft consent order to resolve an outstanding NOV with the DEP.  Management
believes that capital  expenditures in excess of $0.3 million may be required at
the FMP plant during the fiscal year ended May 31, 2002 related to this issue.

     Net cash provided by financing activities for the fiscal year ended May 31,
2001, was $1.5 million  resulting from net borrowings under  lines-of-credit  of
$1.2 million and proceeds from issuance of long term debt and subordinated  debt
of $1.2 million and $1.0  million,  respectively,  offset by  repayments of long
term debt and subordinated debt of $0.9 million and $1.0 million,  respectively.
The Company is  investigating  certain  potential  acquisitions.  Any  potential
acquisitions  may require the use of existing capital  resources,  assumption of
debt or issuance of new debt  instruments,  any of which could adversely  impact
the Company's liquidity and capital resources.

ENVIRONMENTAL MATTERS --

     Environmental  Costs  related to various  matters  totaled $0.4 million and
$0.1 million, net of recoveries,  during the fiscal years ended May 31, 2001 and
2000,   respectively.   Management  believes  that  significant  future  capital
expenditures  in excess of $0.3  million may be made at the FMP plant during the
fiscal year ending May 31, 2002  (see Item 3 - Legal Proceedings).

                                       11
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

QUANTITATIVE INFORMATION REGARDING MARKET RISK --

     At May 31,  2001,  the  Company  did not  participate  in any  market  risk
sensitive financial instruments or other financial and commodity instruments for
which fair value  disclosure  would be required  under  Statement  of  Financial
Accounting  Standards No. 107. The Company holds no investment  securities  that
would require disclosure of market risk.

QUALITATIVE INFORMATION REGARDING MARKET RISK --

     The Company's  primary  market risk  exposure  relates to its variable rate
debt  obligations  which are described in Note 7 to the  consolidated  financial
statements.  A one percent change in the prime lending rate would have an effect
of $0.1  million on interest  expense for each of the fiscal years ended May 31,
2001 and 2000.

                                       12
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Royal Precision, Inc.:

We have audited the accompanying consolidated balance sheets of Royal Precision,
Inc. (a Delaware  corporation)  and subsidiaries as of May 31, 2001 and 2000 and
the  related  consolidated  statements  of  operations,   stockholders'  equity,
comprehensive  income  (loss) and cash  flows for the three  years in the period
ended May 31, 2001.  These financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Royal  Precision,  Inc. and
subsidiaries  as of May 31, 2001 and 2000,  and the results of their  operations
and their cash flows for the three  years in the  period  ended May 31,  2001 in
conformity with accounting principles generally accepted in the United States.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements taken as a whole. The schedule of valuation and qualifying
accounts and reserves on page S-1 is  presented  for purposes of complying  with
the  Securities  and  Exchange  Commission's  rules and is not part of the basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in the audits of the basic financial  statements and, in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic  financial  statements  taken as a
whole.


                                        /s/ ARTHUR ANDERSEN LLP


Phoenix, Arizona
July 30, 2001

                                       13
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           AS OF MAY 31, 2001 AND 2000
                             (DOLLARS IN THOUSANDS)

                                                            2001         2000
                                                          --------     --------
                                     ASSETS

CURRENT ASSETS:
   Cash                                                   $     33     $     36
   Accounts receivable, net of allowance for
     doubtful accounts of $187 and $274 at
     May 31, 2001 and 2000, respectively                     4,988        5,100
   Inventories                                               5,920        5,124
   Other current assets                                        215          155
   Deferred income taxes                                       224          106
                                                          --------     --------
       Total current assets                                 11,380       10,521
                                                          --------     --------
PROPERTY, PLANT AND EQUIPMENT:
  Land                                                         123          123
  Furniture, fixtures and office equipment                     614          455
  Buildings and improvements                                   955          840
  Machinery and equipment                                    5,733        4,278
  Equipment held for sale                                      120          500
  Construction in progress                                     371        1,081
                                                          --------     --------
                                                             7,916        7,277
  Less - Accumulated depreciation                           (1,912)      (1,264)
                                                          --------     --------
                                                             6,004        6,013
                                                          --------     --------

GOODWILL, net                                                7,187        7,629
                                                          --------     --------

DEFERRED INCOME TAXES                                          582          701
                                                          --------     --------

OTHER ASSETS                                                    54           78
                                                          --------     --------
       Total assets                                       $ 25,207     $ 24,942
                                                          ========     ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                       $    768     $    906
  Accounts payable                                           1,534        1,714
  Accrued salaries and benefits                                529        1,290
  Accrued pension liability                                    198          176
  Accrued environmental costs                                  272           --
  Other accrued expenses                                       360          417
                                                          --------     --------
       Total current liabilities                             3,661        4,503

LONG-TERM DEBT, net of current portion                       7,705        6,027
                                                          --------     --------
       Total liabilities                                    11,366       10,530
                                                          --------     --------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $0.001 par value; 1,000,000
    shares authorized; no shares issued                         --           --
  Common stock, $0.001 par value; 10,000,000
    shares authorized; 5,681,711 and 5,678,956
    shares issued and outstanding at May 31, 2001
    and 2000, respectively                                       6            6
  Additional paid-in capital                                13,977       13,940
  Retained earnings (accumulated deficit)                     (118)         466
  Accumulated other comprehensive loss                         (24)          --
                                                          --------     --------
       Total stockholders' equity                           13,841       14,412
                                                          --------     --------
       Total liabilities and stockholders' equity         $ 25,207     $ 24,942
                                                          ========     ========

              The accompanying notes are an integral part of these
                          consolidated balance sheets.

                                       14
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED MAY 31, 2001, 2000 AND 1999
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                             2001           2000           1999
                                                                          -----------    -----------    -----------
<S>                                                                       <C>            <C>            <C>
NET SALES:
  Golf club shafts                                                        $    26,070    $    25,559    $    19,185
  Golf club grips                                                               3,927          4,540          4,210
                                                                          -----------    -----------    -----------
                                                                               29,997         30,099         23,395
                                                                          -----------    -----------    -----------
COST OF SALES:
  Golf club shafts                                                             18,927         17,562         12,820
  Golf club grips                                                               3,056          3,137          2,384
                                                                          -----------    -----------    -----------
                                                                               21,983         20,699         15,204
                                                                          -----------    -----------    -----------
      Gross profit                                                              8,014          9,400          8,191

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                    6,589          6,946          5,929

AMORTIZATION OF GOODWILL                                                          442            486            521

ENVIRONMENTAL COSTS                                                               409            105             --

GAIN ON TERMINATION OF MANUFACTURING SUPPLY CONTRACT                               --             --           (865)

NONRECURRING EXPENSES                                                             477             --             --
                                                                          -----------    -----------    -----------

      Operating income                                                             97          1,863          2,606

INTEREST EXPENSE                                                                  888            644            794

TERMINATED MERGER EXPENSES                                                         79             --            975

OTHER INCOME                                                                     (319)          (267)          (243)
                                                                          -----------    -----------    -----------

      Income (loss) from continuing operations
        before provision for income taxes                                        (551)         1,486          1,080

PROVISION FOR INCOME TAXES                                                         33            616            804
                                                                          -----------    -----------    -----------

      Income (loss) from continuing operations                                   (584)           870            276
                                                                          -----------    -----------    -----------

DISCONTINUED OPERATIONS:
  Loss from operations of Roxxi, Inc., net of tax benefit of $164                  --             --            352
  Loss on disposal of assets of Roxxi, Inc., net of tax benefit of $386            --             --            828
                                                                          -----------    -----------    -----------
      Loss from discontinued operations                                            --             --          1,180
                                                                          -----------    -----------    -----------
      Net income (loss)                                                   $      (584)   $       870    $      (904)
                                                                          ===========    ===========    ===========

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
  Income (loss) from continuing operations                                $     (0.10)   $      0.15    $      0.05
  Loss from discontinued operations                                                --             --          (0.21)
                                                                          -----------    -----------    -----------
      Net income (loss)                                                   $     (0.10)   $      0.15    $     (0.16)
                                                                          ===========    ===========    ===========

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  USED TO COMPUTE PER SHARE INFORMATION:
      BASIC                                                                 5,679,077      5,672,580      5,649,756
                                                                          ===========    ===========    ===========
      DILUTED                                                               5,679,077      5,814,862      5,649,756
                                                                          ===========    ===========    ===========
</TABLE>

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

                                       15
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
                 FOR THE YEARS ENDED MAY 31, 2001, 2000 AND 1999
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                          RETAINED      ACCUMULATED
                                          COMMON STOCK      ADDITIONAL    EARNINGS         OTHER
                                      -------------------    PAID-IN    (ACCUMULATED   COMPREHENSIVE              COMPREHENSIVE
                                       SHARES     AMOUNT     CAPITAL       DEFICIT)     INCOME (LOSS)    TOTAL     INCOME (LOSS)
                                      --------   --------    --------      --------     -------------   --------   -------------
<S>                                   <C>        <C>         <C>           <C>            <C>           <C>          <C>
Balance, May 31, 1998                    5,602   $      6    $ 13,821      $    500       $     --      $ 14,327

Exercise of common stock options            65         --          16            --             --            16

Tax benefit from exercise of
  common stock options                      --         --          45            --             --            45

Stock based compensation                    --         --          15            --             --            15

Minimum pension liability adjustment,
 net of tax benefit of $31                  --         --          --            --            (47)          (47)    $    (47)

Net loss                                    --         --          --          (904)            --          (904)        (904)
                                                                                                                     --------
Comprehensive loss                          --         --          --            --             --            --         (951)
                                      --------   --------    --------      --------       --------      --------     ========

Balance, May 31, 1999                    5,667          6      13,897          (404)           (47)       13,452

Exercise of common stock options            12         --           4            --             --             4

Tax benefit from exercise of
  common stock options                      --         --          11            --             --            11

Stock based compensation                    --         --          28            --             --            28

Minimum pension liability adjustment,
 net of tax expense of $31                  --         --          --            --             47            47           47

Net income                                  --         --          --           870             --           870          870
                                                                                                                     --------
Comprehensive income                        --         --          --            --             --            --          917
                                      --------   --------    --------      --------       --------      --------     ========

Balance, May 31, 2000                    5,679          6      13,940           466             --        14,412

Exercise of common stock options             3         --           1            --             --             1

Tax benefit from exercise of
  common stock options                      --         --           1            --             --             1

Stock based compensation                    --         --          35            --             --            35

Minimum pension liability adjustment,
 net of tax benefit of $16                  --         --          --            --            (24)          (24)         (24)

Net loss                                    --         --          --          (584)            --          (584)        (584)
                                                                                                                     --------
Comprehensive loss                          --         --          --            --             --            --     $   (608)
                                      --------   --------    --------      --------       --------      --------     ========

Balance, May 31, 2001                    5,682   $      6    $ 13,977      $   (118)      $    (24)     $ 13,841
                                      ========   ========    ========      ========       ========      ========
</TABLE>

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

                                       16
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED MAY 31, 2001, 2000 AND 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         2001       2000       1999
                                                                        -------    -------    -------
<S>                                                                     <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                     $  (584)   $   870    $  (904)
  Adjustments to reconcile net income (loss) to net cash provided by
   (used in) operating activities of continuing operations:
    Depreciation and amortization                                         1,106      1,158        939
    Deferred income taxes                                                    17        592        719
    Loss (gain) on retirement or sale of fixed assets                        (3)        14         --
    Stock based compensation                                                 35         28         15
    Tax benefit from exercise of common stock options                         1         11         45
    Write-down of equipment and inventories                                 962         --         --
    Increase (decrease) in cash resulting from a change in operating
    assets and liabilities -
      Accounts receivable, net                                              112       (293)      (575)
      Inventories                                                        (1,273)      (110)      (970)
      Other assets                                                          (36)        79        (19)
      Accounts payable and accrued expenses                                (744)       110        102
    Loss from discontinued operations                                        --         --        352
    Loss on sale of discontinued operations                                  --         --        828
    Gain on termination of manufacturing supply contract                     --         --       (865)
    Terminated merger expenses                                               --         --        975
                                                                        -------    -------    -------
        Net cash provided by (used in) operating activities of
        continuing operations                                              (407)     2,459        642
                                                                        -------    -------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of machinery and equipment, net                              (1,187)    (2,165)      (940)
  Terminated merger costs                                                    --         --       (975)
  Payments from net investment in capital lease                              --         --        198
  Payments from termination of manufacturing supply contract                 --         --      1,500
  Proceeds from sale of assets of discontinued operations                    --         --        300
  Proceeds from sale of fixed assets                                         50         15         --
                                                                        -------    -------    -------
       Net cash provided by (used in) investing activities of
        continuing operations                                            (1,137)    (2,150)        83
                                                                        -------    -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from exercise of common stock options and warrants                 1          4         16
  Proceeds from issuance of long-term debt                                1,204         --      5,140
  Proceeds from issuance of subordinated debt                             1,000         --         --
  Borrowings (repayments) under lines-of-credit, net                      1,243        742       (359)
  Repayments of subordinated debt                                        (1,000)        --         --
  Repayments of long-term debt                                             (907)    (1,203)    (5,067)
                                                                        -------    -------    -------
       Net cash provided by (used in) financing activities of
        continuing operations                                             1,541       (457)      (270)
                                                                        -------    -------    -------

NET CASH USED IN DISCONTINUED OPERATIONS                                     --         --       (299)
                                                                        -------    -------    -------
INCREASE (DECREASE) IN CASH                                                  (3)      (148)       156

CASH, beginning of year                                                      36        184         28
                                                                        -------    -------    -------
CASH, end of year                                                       $    33    $    36    $   184
                                                                        =======    =======    =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:
     Interest                                                           $   819    $   633    $   870
                                                                        =======    =======    =======
     Income taxes                                                       $     5    $    48    $    40
                                                                        =======    =======    =======
  Non-cash investing and financing transactions:
     Reduction in goodwill due to utilization of pre-acquisition net
     operating loss carryforwards and reversal of valuation allowance
     on pre-acquisition deferred income tax assets                      $    --    $   742    $   650
                                                                        =======    =======    =======
</TABLE>

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

                                       17
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS:

ORGANIZATION -

     The accompanying consolidated financial statements include Royal Precision,
Inc.  ("RP")  and  its  three   wholly-owned   subsidiaries   (collectively  the
"Company"),  which  are  FM  Precision  Golf  Manufacturing  Corp.  ("FMP"),  FM
Precision  Golf Sales  Corp.  ("FMP  Sales")  and Royal Grip,  Inc.  ("RG").  In
addition,  RG,  has a  wholly-owned  subsidiary,  Royal  Grip  Headwear  Company
(formerly known as Roxxi, Inc., "Roxxi"). RP acquired RG on August 29, 1997 (the
"RG Acquisition").

BUSINESS -

     RP is a holding company that conducts its business  operations  through its
subsidiaries.  The Company designs, manufactures and distributes steel golf club
shafts and designs and distributes golf club grips and graphite golf club shafts
for sale to original  equipment  manufacturers  ("OEMs") and to distributors and
retailers for use in the  replacement  market.  The Company's  products are sold
throughout  the United  States as well as  internationally,  primarily in Japan,
Australia, Europe and Canada.

DISCONTINUED OPERATIONS -

     In March 1999,  the operating  assets of Roxxi were disposed of through two
separate  transactions.  The Company sold the Roxxi trade name,  customer  list,
design database and related computer  software and hardware for a royalty of 16%
of the buyer's net sales of  Roxxi-licensed  products  for the  two-year  period
beginning May 1, 1999.  The Company also sold Roxxi's  manufacturing  equipment,
finished goods inventory and raw materials to another buyer for $0.3 million and
a royalty of 2% of the buyer's net sales until the buyer has paid an  additional
$0.2  million.  Subsequently,  Roxxi's  name was changed to Royal Grip  Headwear
Company.

     During the fiscal year ended May 31, 1999,  the Company  recorded a loss on
disposal  of  assets  of Roxxi of $0.8  million,  net of a tax  benefit  of $0.4
million.  This expense represents a $1.1 million write-down of the excess of the
carrying  value of inventory  and fixed  assets over the cash  received and $0.1
million for estimated  transaction costs and estimated  operating expenses to be
incurred during the phase-out  period of this business  segment.  For the fiscal
years ended May 31, 2001, 2000 and 1999, royalties related to Roxxi of $115,000,
$151,000 and $20,000,  respectively,  were  recorded and are  reflected as other
income in the accompanying consolidated statements of operations.

     Selected  financial data for the discontinued  operations is as follows for
the fiscal year ended May 31, 1999 (in thousands):

Net sales                                                          $ 2,381
                                                                   =======
Loss from operations before income taxes                           $  (516)
Income tax benefit                                                     164
                                                                   -------
Loss from operations                                               $  (352)
                                                                   =======
Net cash flow                                                      $  (299)
                                                                   =======

DEPENDENCE ON "RIFLE" SHAFT SALES -

     The Company is substantially dependent on sales of "Rifle" golf club shafts
which  constituted  67%, 62% and 56% of the Company's total net sales during the
fiscal years ended May 31, 2001, 2000 and 1999,  respectively.  While management
believes  that  demand for the  "Rifle"  shaft  should  remain high for the next
several  years,  there can be no assurance  that sales of the "Rifle" shaft will
continue to grow or that the product will retain its profitability.  If sales or
profitability of the "Rifle" shaft decrease  without the Company's  introduction
of new profitable products, the Company's overall financial performance would be
materially adversely affected.

                                       18
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION -

     All significant intercompany balances and transactions have been eliminated
in consolidation.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -

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

INVENTORIES --

     Inventories  are valued at the lower of cost or market.  Cost is determined
on the first-in, first-out method.

PROPERTY, PLANT AND EQUIPMENT -

     Property, plant and equipment are carried at acquired cost. Major additions
and betterments are  capitalized,  while  replacements,  maintenance and repairs
that do not extend the useful lives of the assets are charged to  operations  as
incurred. Upon the disposition of property,  plant and equipment,  any resulting
gain or loss is recognized in income.

     Depreciation  of plant and equipment is provided for,  commencing when such
assets are placed in service,  using the straight-line  basis over the following
estimated useful lives:

                                                               USEFUL LIVES
                                                               ------------
Buildings and improvements                                     27.5-40 years
Machinery and equipment                                        3-12 years
Furniture, fixtures and office equipment                       3-12 years

     Depreciation expense was $0.7 million, $0.7 million and $0.4 million during
the fiscal years ended May 31, 2001, 2000 and 1999, respectively.

GOODWILL -

     Goodwill  of  $10.4  million  was  recorded  in  conjunction  with  the  RG
acquisition.  This  balance  was  subsequently  reduced by $1.4  million  due to
utilization  of  pre-acquisition  net  operating  loss  ("NOL")   carryforwards.
Goodwill  is  being  amortized  over 20 years  and,  at May 31,  2001 and  2000,
accumulated amortization was $1.8 million and $1.4 million, respectively.

LONG-LIVED ASSETS -

     The Company reviews long-lived assets and certain  identifiable  intangible
assets to be held and used or  disposed  of for  impairment  whenever  events or
changes in  circumstances  indicate that the carrying amount of an asset may not
be recoverable.  Impairment  losses are recognized when the undiscounted  future
cash flows,  excluding interest costs,  exceed the carrying value of the related
assets.

     The Company  evaluates the goodwill  asset for  impairment by reviewing the
estimated future cash flows of the acquired  operations on a quarterly basis. As
of May 31, 2001, the Company believes no impairment exists.

INCOME TAXES -

     The Company  accounts  for income  taxes in  accordance  with  Statement of
Financial  Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
This  statement  requires  the  Company  to  recognize  deferred  tax assets and
liabilities  for the expected  future tax  consequences of events that have been
recognized in the  Company's  financial  statements  or tax returns.  Under this
method,  deferred  tax  assets  and  liabilities  are  determined  based  on the
difference  between the financial  statement  carrying  amounts and tax bases of
assets and  liabilities  and tax NOL  carryforwards  available for tax reporting
purposes,  using applicable tax rates for the years in which the differences are

                                       19
<PAGE>
expected to reverse.  A valuation  allowance  is recorded on deferred tax assets
unless realization is more likely than not.

STOCK-BASED COMPENSATION -

     The  Company  accounts  for  stock-based  compensation  for  employees  and
directors  under  Accounting  Principles  Board Opinion No. 25,  "Accounting for
Stock  Issued  to  Employees,"   and  Financial   Accounting   Standards   Board
Interpretation  No. 44,  "Accounting  for Certain  Transactions  Involving Stock
Compensation  (an  Interpretation  of APB Opinion No.  25)," and has elected the
disclosure-only  alternative  under SFAS No.  123,  "Accounting  for Stock Based
Compensation."  The Company  accounts for stock  options  granted to those other
than employees and directors in accordance with SFAS No. 123.

REVENUE RECOGNITION -

     The Company recognizes  revenue when persuasive  evidence of an arrangement
exists,   delivery  has  occurred,   the  fee  is  fixed  or  determinable   and
collectability  is  probable.  All of these  conditions  are met at the time the
Company ships products to its customers.

RESEARCH AND DEVELOPMENT -

     The  Company  expenses  costs of  research  and  development  as  incurred.
Research and development  expense was approximately  $0.8 million,  $0.7 million
and $0.6  million  for the  fiscal  years  ended  May 31,  2001,  2000 and 1999,
respectively.

ADVERTISING -

     The Company  expenses  production  costs of advertising  the first date the
advertisements  take place.  Advertising and marketing costs were  approximately
$2.1  million,  $2.3 million and $1.6 million for the fiscal years ended May 31,
2001, 2000 and 1999, respectively.

NET EARNINGS (LOSS) PER SHARE -

     The Company  accounts for earnings (loss) per share in accordance with SFAS
No. 128,  "Earnings Per Share." Basic earnings (loss) per share are based on the
weighted average number of common shares  outstanding  during the year.  Diluted
earnings  (loss) per share  considers,  in addition to the above,  the  dilutive
effect of common share  equivalents  during the year.  Common share  equivalents
represent dilutive stock options using the treasury stock method.

     Loss per share for the fiscal  years  ended May 31,  2001 and 1999 were not
affected  by  approximately  732,000  and  147,000  outstanding  stock  options,
respectively,  because their effect was anti-dilutive. For the fiscal year ended
May 31, 2000, options to purchase  approximately  620,000 shares of common stock
were excluded  from the  computation  of diluted  earnings per share because the
exercise  prices of those options were greater than the average  market price of
the Company's common stock.

COMPREHENSIVE INCOME (LOSS) -

     Under  SFAS No.  130,  "Reporting  Comprehensive  Income,"  the  Company is
required  to  report  comprehensive  income  (loss)  and its  components  in its
consolidated   financial   statements   in  addition   to  net  income   (loss).
Comprehensive  income  (loss)  is  included  in  the  accompanying  consolidated
statements of stockholders' equity and comprehensive income (loss).

RECLASSIFICATIONS -

     Certain  prior year  balances  have been  reclassified  to conform with the
current year presentation.

NEW ACCOUNTING PRONOUNCEMENTS -

     In December 1999, the  Securities  and Exchange  Commission  ("SEC") issued
Staff  Accounting  Bulletin ("SAB") No. 101,  "Revenue  Recognition in Financial
Statements."  SAB No.  101  summarizes  certain of the SEC's  views in  applying
accounting  principles  generally  accepted  in the  United  States  to  revenue
recognition in financial statements. The Company adopted SAB No. 101 on March 1,
2001.  The  adoption  of SAB No.  101  did not  have a  material  impact  on the
Company's results of operation or its financial position.

                                       20
<PAGE>
     In July 2000,  the  Emerging  Issues  Task Force  ("EITF")  reached a final
consensus on Issue No.  00-10,  "Accounting  for Shipping and Handling  Fees and
Costs"  ("EITF No.  00-10").  When  adopted,  EITF No. 00-10  requires  that all
amounts  billed to  customers  in sale  transactions  related  to  shipping  and
handling be classified  as revenue.  In addition,  EITF No. 00-10  requires that
shipping and handling fees and costs in financial  statements  for prior periods
presented  for  comparative  purposes be  reclassified.  EITF No.  00-10 must be
adopted prior to, or concurrent  with,  the adoption of SAB No. 101. The Company
elected to early  adopt EITF No.  00-10  during the first  quarter of the fiscal
year ended May 31, 2001. As such, the consolidated  statements of operations for
the fiscal years ended May 31, 2000 and 1999 have been  reclassified  to reflect
the adoption of EITF No. 00-10. Shipping and handling expenses are classified as
part of cost of sales.

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  133 (as  amended  by SFAS  Nos.137  and 138),  "Accounting  for  Derivative
Instruments and Hedging Activities," which requires that an entity recognize all
derivatives  as either assets or  liabilities  and measure those  instruments at
fair value.  The Company  adopted SFAS No. 133 on June 1, 2001.  The adoption of
SFAS  No.  133 did not  have a  material  impact  on the  Company's  results  of
operations or its financial position.

     In June 2001, the FASB issued SFAS No. 141,  "Business  Combinations,"  and
SFAS No. 142,  "Goodwill  and Other  Intangible  Assets."  SFAS No. 141 requires
companies  to  apply  the  purchase   method  of  accounting  for  all  business
combinations  initiated  after  June  30,  2001  and  prohibits  the  use of the
pooling-of-interest  method.  SFAS No. 142 changes the method by which companies
may recognize intangible assets in purchase business  combinations and generally
requires  identifiable  intangible  assets  to  be  recognized  separately  from
goodwill.  In addition it eliminates the  amortization of all existing and newly
acquired  goodwill  on a  prospective  basis and  requires  companies  to assess
goodwill  for  impairment,  at least  annually,  based on the fair  value of the
reporting  unit.  The Company will be required to adopt SFAS Nos. 141 and 142 on
June  1,  2002,  however,  early  adoption  as of June  1,  2001  is  permitted.
Management  has not  determined the impact the adoption of SFAS Nos. 141 and 142
will have on the Company's  financial  statements or when the Company will elect
to adopt these statements.

3. INVENTORIES:

     Inventories  as of May 31, 2001 and 2000  consisted  of the  following  (in
thousands):

                                      2001        2000
                                    ------      ------
Raw materials                       $  814      $  525
Work-in-process                      1,215       1,655
Finished goods                       3,891       2,944
                                    ------      ------
                                    $5,920      $5,124
                                    ======      ======

     During the fiscal year ended May 31, 2001, the Company recorded write-downs
totaling  $0.5 million to reduce the carrying  value of certain  steel golf club
shafts  and  golf  club  grips  finished  goods  inventories  to  estimated  net
realizable  value.  During  the  fiscal  year ended May 31,  2000,  the  Company
recorded  write-downs  totaling  $0.3  million to reduce the  carrying  value of
certain  graphite shafts  purchased for resale prior to the  introduction of the
"Rifle"  Graphite,  to estimated net realizable  value.  These  write-downs  are
reflected  as a component  of cost of sales in the  consolidated  statements  of
operations.

4. MANUFACTURING SUPPLY CONTRACTS:

     In December  1996,  the Company and Acushnet  Rubber  Company  ("Acushnet")
entered into a manufacturing and supply agreement whereby the Company outsourced
the  manufacture  of its golf  club  grips to  Acushnet.  Additionally,  the two
parties  entered  into an agreement  resulting in the transfer of the  Company's
grip manufacturing equipment to Acushnet under a capital lease. In May 1999, the
Company and  Acushnet  executed a mutual  release  agreement  terminating  their
manufacturing and supply agreement and capital lease agreement (the "Termination
Agreement").  Pursuant to the Termination  Agreement,  the Company received $1.5
million  in  cash  and  $1.0  million  in  purchase   credits   from   Acushnet.
Additionally,  Acushnet's  obligation  to make payments to the Company under the
capital lease was  terminated,  but Acushnet was required to continue  producing
grips through February 2000 at which time the equipment was returned to the

                                       21
<PAGE>
Company.  The Company  recognized an aggregate  gain of $0.9 million  during the
fiscal year ended May 31,  1999 as a result of the  Termination  Agreement.  The
grip manufacturing equipment returned to the Company from Acushnet is classified
as equipment held for sale in the consolidated balance sheets as of May 31, 2001
and 2000.

     From January 1997 to February  2000, the Company  utilized  Acushnet as its
primary  supplier  of golf  club  grips.  The  Company  has  identified  several
alternative  manufacturers and currently  purchases its grip inventory from five
different  suppliers.  Although  the  Company  does  not have  long-term  supply
contracts with any of these  companies,  management  believes it has an adequate
source of supply to meet its  current and  anticipated  future  customer  needs.
However, there can be no assurance that a disruption of supply from any of these
companies  will not result in the loss of sales and key  customers,  which would
have a material adverse effect on the Company's  financial condition and results
of operations.

     The Company currently utilizes two manufacturers to supply its inventory of
graphite golf club shafts.  Management  believes that there are other acceptable
supply sources at comparable prices and quality. Sales of these products to date
have been  insignificant  to the  Company's  financial  condition and results of
operations.  However, there can be no assurance that a disruption of supply from
either of these companies will not result in the loss of sales and key customers
or hinder the  Company's  efforts to expand its  business  into this new product
segment.

     The  Company  uses  Worthington  Industries,  Inc.  ("Worthington")  as its
primary supplier for strip steel,  but has no supply contract with  Worthington.
Should  Worthington  fail  to  deliver  steel,  there  may  be a  disruption  of
operations at the Company's  manufacturing  facility until an alternate supplier
is procured.  Worthington  provides steel from two separate plant locations.  If
one Worthington plant becomes unable to fill the necessary requirements,  orders
could be filled from the alternate location. Although the Company has elected to
use Worthington as its primary supplier of strip steel, management believes that
there are other acceptable  supply sources at comparable  prices and quality and
that the loss of  Worthington  as a supplier  would not have a material  adverse
effect on the Company's financial condition and results of operations.

5. EQUIPMENT WRITE-DOWNS:

     During  the  fiscal  year  ended May 31,  2001,  the  Company  recorded  an
impairment  write-down  of $0.4  million  on  equipment  held  for  sale,  which
represents rubber injection presses previously used to manufacture the Company's
golf club grips.  Also during the fiscal  year ended May 31,  2001,  the Company
recorded an expense of $0.1 million to write-off the accumulated cost of various
projects under  development to design and construct  tooling for the manufacture
of golf club grips. These write-downs are reflected as nonrecurring  expenses in
the consolidated statement of operations for the fiscal year ended May 31, 2001.

6. TERMINATED MERGER AGREEMENTS:

     In February 1999, the Company and Coyote Sports,  Inc.  ("Coyote")  entered
into a  merger  agreement  pursuant  to which  RP  would  become a  wholly-owned
subsidiary  of Coyote (the  "RP-Coyote  Merger").  In June 1999,  the  RP-Coyote
Merger  agreement was terminated at the request of the Company due to a material
change in the  business  of  Coyote  that  resulted  in an  inability  to obtain
suitable  long-term  financing.  The Company incurred  professional fees of $1.0
million  related to the  RP-Coyote  Merger,  which are  reflected as  terminated
merger expenses in the accompanying consolidated statement of operations for the
fiscal year ended May 31, 1999.

     In  September  2000,  the  Company  signed a letter of intent to acquire PH
Group Inc.  ("PHG"),  a manufacturer of hydraulic  presses and injection molding
machines. The Company terminated the letter of intent and ceased negotiations to
acquire PHG in November 2000. Legal and other  professional fees associated with
the due diligence efforts of the proposed  acquisition  totaled $0.1 million and
are reflected as terminated  merger  expenses in the  consolidated  statement of
operations for the fiscal year ended May 31, 2001.

7. LONG-TERM DEBT:

     The Company's  primary  borrowing  arrangement  consists of two bank credit
facilities.  Borrowings under the FMP and RG bank credit  facilities are secured
by substantially  all of the Company's assets and contain certain  financial and
other covenants which, among other things, limit annual capital expenditures and
dividends and require the maintenance of minimum monthly and quarterly  earnings
and quarterly debt service coverage ratios, as defined. The Company believes it

                                       22
<PAGE>
is in compliance  with all  financial  loan  covenants as of May 31, 2001.  Most
recently in November  2000,  the Company did not achieve the  operating  results
necessary  for  compliance  with  certain  financial  loan  covenants,  but  was
successful  in obtaining  the  necessary  waivers and  amendments to remedy such
default.  There can be no assurance,  however, that the Company would be able to
obtain the  necessary  waivers or amendments  upon the  occurrence of any future
events of  default  of  financial  loan  covenants  which  could have a material
adverse effect on the Company's financial condition and results of operations.

     FMP's bank  credit  facility  consists  of two term  loans and a  revolving
line-of-credit.  The  outstanding  principal  balance of the first FMP term loan
("FMP  Term 1") of $2.7  million  at May 31,  2001 is due in  monthly  principal
installments  of $46,850 plus interest until its maturity in September 2004. The
outstanding principal balance of the second FMP term loan ("FMP Term 2") of $0.4
million at May 31, 2001 is due in monthly principal  installments of $6,667 plus
interest beginning June 2001 until its maturity in September 2004.

     The amount available for borrowings under the FMP revolving  line-of-credit
is based upon the levels of eligible FMP accounts receivable and inventories, as
defined,  subject to a maximum  borrowing  base of $6.5  million.  Beginning  on
November 1 of each year,  a seasonal  over-advance  of $0.5 million is available
until May 31 of the  following  year.  As of May 31, 2001,  FMP had $4.5 million
outstanding  under its revolving  line-of-credit  and $1.5 million available for
additional borrowings. The FMP line-of-credit expires in September 2004.

     RG's  bank  credit  facility  consists  of a  term  loan  and  a  revolving
line-of-credit.  The RG  term  loan of $0.3  million  at May 31,  2001 is due in
monthly principal  installments of $10,500 plus interest until it is paid off in
July  2003.  The  amount   available  for  borrowings  under  the  RG  revolving
line-of-credit  is based upon the levels of eligible RG accounts  receivable and
inventories, as defined, subject to a maximum borrowing base of $1.5 million. As
of  May  31,  2001,  RG  had  $0.6  million   outstanding  under  its  revolving
line-of-credit  and $0.2 million  available for  additional  borrowings.  The RG
line-of-credit expires in September 2004.

     Borrowings  under both  lines-of-credit  and FMP Term 2 bear  interest at a
rate per annum  equal to the  prime  rate  (7.0% at May 31,  2001)  plus  2.25%.
Borrowings  under  the RG term loan and FMP Term 1 bear  interest  at a rate per
annum  equal to the prime rate plus  2.75%.  Borrowings  under the FMP  seasonal
over-advance  bear  interest  at a rate per annum  equal to the prime  rate plus
4.25%.

     Total  indebtedness of the Company as of May 31, 2001 and 2000 consisted of
the following (in thousands):

                                       2001         2000
                                     -------      -------
FMP:
Line-of-credit                       $ 4,520      $ 3,740
FMP Term 1                             2,717        2,657
FMP Term 2                               400           --

RG:
Line-of-credit                           568          105
Term loan                                268          431
                                     -------      -------
                                       8,473        6,933
Less - Current portion                  (768)        (906)
                                     -------      -------
Total long-term debt                 $ 7,705      $ 6,027
                                     =======      =======

     Scheduled  maturities of the Company's  indebtedness at May 31, 2001 are as
follows (in thousands):

  YEARS ENDING
    MAY 31,
    -------
     2002                     $  768
     2003                        768
     2004                        658
     2005                      6,279
                              ------
                              $8,473
                              ======

                                       23
<PAGE>
     As of May 31, 2001 and 2000, the carrying value of the  line-of-credit  and
term loans  approximated  their fair  market  value since the  obligations  bear
interest at a variable rate of interest.

8. OPERATING LEASES:

     The  Company  leases its  corporate  offices,  its West Coast  distribution
center and various office  equipment under operating lease  agreements.  Minimum
annual  rental  commitments  under  noncancellable  leases  are as  follows  (in
thousands):

  YEARS ENDING
    MAY 31,
    -------
     2002                     $  328
     2003                        275
     2004                        275
     2005                          1
                              ------
                              $  879
                              ======

     Rental expense under operating leases totaled  approximately  $0.3 million,
$0.2 million and $0.3 million for the fiscal years ended May 31, 2001,  2000 and
1999, respectively.

9. STOCK OPTION PLANS:

     In connection with the RG Acquisition,  options to purchase 41 shares of FM
Precision Golf Corp. common stock outstanding as of the RG Acquisition date were
converted into options to purchase  169,761 shares of RP common stock. As of May
31, 2001,  87,553  shares of common  stock are  reserved  for issuance  upon the
exercise of the remaining options outstanding, which expire through May 2005.

     In  connection  with the RG  Acquisition,  options and warrants to purchase
982,250 shares of RG common stock outstanding as of the RG Acquisition date were
converted  into  options and  warrants to purchase  491,124  shares of RP common
stock.  As of May 31,  2001,  266,124  shares of common  stock are  reserved for
issuance upon the exercise of the remaining  options  outstanding,  which expire
through March 2007.

In October 1997, the Company adopted the Royal Precision, Inc. Stock Option Plan
(the "RP  Plan").  The RP Plan is  administered  by the Board of  Directors  and
provides for the granting of nonqualified or incentive stock options to purchase
shares of the  Company's  common  stock to certain  employees,  consultants  and
directors. In October 2000, the Company's stockholders authorized an increase in
the  number of shares of the  Company's  common  stock  available  for  issuance
pursuant to the RP Plan from 750,000 to 1.5 million. As of May 31, 2001, 945,773
shares of common stock are  reserved  for issuance  upon the exercise of options
outstanding under the RP Plan. As of May 31, 2001, an additional  553,666 shares
of common stock are reserved for options not yet granted under the RP Plan.

     In December 1999, warrants to purchase 25,000 shares were granted to a firm
which provided consulting services to the Company.  None of the warrants,  which
expire in December 2004, had been exercised as of May 31, 2001.

                                       24
<PAGE>
     Stock option and warrant  activity for the three fiscal years ended May 31,
2001 is as follows:

<TABLE>
<CAPTION>
                                  FM PRECISION                                                           WEIGHTED-
                                   GOLF CORP.       RG                                      TOTAL         AVERAGE
                                   CONVERTED     CONVERTED      RP PLAN                   OPTIONS AND    EXERCISE
                                    OPTIONS       OPTIONS       OPTIONS      WARRANTS      WARRANTS        PRICE
                                  ----------    ----------    ----------    ----------    ----------     --------
<S>                               <C>           <C>           <C>           <C>           <C>            <C>
Outstanding at May 31, 1998          167,006       436,749            --            --       603,755     $  6.13
      Granted                             --       178,083       104,980            --       283,063        3.25
      Exercised                      (65,678)           --            --            --       (65,678)       0.24
      Cancelled                           --      (323,833)       (1,000)           --      (324,833)       7.47
      Expired                             --       (21,125)           --            --       (21,125)      19.15
                                  ----------    ----------    ----------    ----------    ----------
Outstanding at May 31, 1999          101,328       269,874       103,980            --       475,182        3.73
      Granted                             --            --       615,933        25,000       640,933        2.53
      Exercised                      (11,020)           --          (561)           --       (11,581)       0.32
      Cancelled                           --            --       (24,179)           --       (24,179)       2.03
                                  ----------    ----------    ----------    ----------    ----------
Outstanding at May 31, 2000           90,308       269,874       695,173        25,000     1,080,355        3.10
      Granted                             --            --       275,600            --       275,600        2.26
      Exercised                       (2,755)           --            --            --        (2,755)       0.24
      Cancelled                           --            --       (25,000)           --       (25,000)       2.40
      Expired                             --        (3,750)           --            --        (3,750)      10.85
                                  ----------    ----------    ----------    ----------    ----------
Outstanding at May 31, 2001           87,553       266,124       945,773        25,000     1,324,450        2.92
                                  ==========    ==========    ==========    ==========    ==========
</TABLE>

     A summary of information about stock options outstanding at May 31, 2001 is
as follows:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                -----------------------------------------  ---------------------------
                                   WEIGHTED-
                                    AVERAGE     WEIGHTED-                    WEIGHTED-
  RANGE OF           NUMBER        REMAINING     AVERAGE       NUMBER         AVERAGE
  EXERCISE        OUTSTANDING     CONTRACTUAL   EXERCISE     EXERCISABLE     EXERCISE
   PRICES       AT MAY 31, 2001      LIFE        PRICE     AT MAY 31, 2001     PRICE
  --------      ---------------   -----------   --------   ---------------   --------
<S>             <C>               <C>           <C>        <C>               <C>
$        0.24        87,553        5.8 years     $ 0.24         87,553        $ 0.24
 1.81 -  1.88        66,740        6.6 years       1.83         52,799          1.84
 2.01 -  2.13       149,600        8.3 years       2.06         44,822          2.06
         2.25       200,600        9.2 years       2.25             --            --
         2.38        87,500        7.2 years       2.38         25,833          2.38
         2.63       125,000        6.7 years       2.63         54,965          2.63
         2.75       215,000        8.7 years       2.75         71,595          2.75
 3.00 -  3.19       249,416        7.8 years       3.15        199,070          3.18
 4.50 - 24.50       143,041        2.9 years       7.35        123,841          7.76
                 ----------                                   --------
                  1,324,450                                    660,478
                 ==========                                   ========
</TABLE>

     The Company has computed the pro forma disclosures  required under SFAS No.
123 for all of the options  granted to employees and  directors  using the Black
Scholes option pricing model as prescribed by SFAS No. 123. The weighted average
assumptions  used are as follows  for the fiscal  years  ended May 31,  2001 and
2000:

                                                  2001            2000
                                                  ----            ----
Risk free interest rate                            5.4%            6.5%
Expected dividend yield                           None            None
Expected life                                 10 years        10 years
Expected volatility                                 61%             55%

     Had  compensation  cost for the  Company's  stock  plan  been  recorded  in
accordance  with SFAS No. 123,  the  Company's  net income  (loss) and basic and
diluted  net income  (loss) per share  would have been the  following  pro forma
amounts for the fiscal  years ended May 31, 2001,  2000 and 1999 (in  thousands,
except per share data):

                                                   2001      2000      1999
                                                   ----      ----      ----
Net income (loss):
   As reported                                   $  (584)   $  870   $  (904)
   Pro forma                                      (1,130)      555    (1,383)

Basic and diluted net income (loss) per share:
   As reported                                     (0.10)     0.15     (0.16)
   Pro forma                                       (0.20)     0.10     (0.24)

     The resulting pro forma compensation cost may not be representative of that
to be expected in future  years  because the pro forma  amounts do not  consider
options granted prior to fiscal 1997 or in future years.

                                       25
<PAGE>
     As of May 31,  2001 and 2000,  there were  outstanding  options to purchase
170,583  shares of the Company's  common stock at an exercise price of $3.19 per
share which are subject to variable plan accounting  until they are exercised or
expire in January  2004.  No  compensation  costs have been  recognized  to date
related to these options.

10. INCOME TAXES:

     The components of the provision for income taxes from continuing operations
are as follows for the three fiscal years ended May 31, 2001 (in thousands):

                    2001      2000      1999
                    ----      ----      ----
Current             $ 16      $ 13      $ 25
Deferred              17       603       779
                    ----      ----      ----
                    $ 33      $616      $804
                    ====      ====      ====

     The Company's effective income tax rate, as a percent of pretax income from
continuing  operations,  differs from the statutory  federal rate as follows for
the three fiscal years ended May 31, 2001:

                                               2001      2000      1999
                                               ----      ----      ----
Statutory federal income tax rate               (34)%      34%       34%
State taxes, net of federal benefit              (6)        6        --
Nondeductible goodwill amortization              29        11        16
Nondeductible environmental civil penalty        14        --        --
Change in valuation allowance                    --       (11)       28
Other                                             3         1        (4)
                                               ----      ----      ----
Effective income tax rate                         6%       41%       74%
                                               ====      ====      ====

     The components of deferred  income tax assets  (liabilities)  as of May 31,
2001 and 2000 are as follows (in thousands):

                                                               2001       2000
                                                             -------    -------
Current asset (liability) -
   Financial reserves and accruals not
    currently deductible                                     $   523    $   582
   Other                                                          --        (72)
   Valuation allowance                                          (299)      (404)
                                                             -------    -------
                                                                 224        106
                                                             -------    -------
Long-term asset (liability) -
   Tax effect of net operating loss carryforwards              2,309      2,230
   Book basis in excess of tax basis for property,
    plant and equipment                                         (585)      (441)
   Compensation expense related to grant of
    stock options                                                 94         94
   Other                                                         210        159
   Valuation allowance                                        (1,446)    (1,341)
                                                             -------    -------
                                                                 582        701
                                                             -------    -------
                                                             $   806    $   807
                                                             =======    =======

     As of May 31, 2001, the Company has federal and state NOL  carryforwards of
approximately  $5.8 million of which $4.9 million relate to RG for periods prior
to the RG Acquisition  ("Pre-Acquisition NOLs"). The use of such Pre-Acquisition
NOLs is limited to $0.8  million  per annum under  Section  382 of the  Internal
Revenue Code. As of May 31, 2001,  approximately $1.9 million of Pre-Acquisition
NOLs are available under Section 382. The NOLs, if unused,  expire  beginning in
2009 through 2020.

     As of May 31, 1998,  a valuation  allowance of $2.8 million was recorded to
fully  offset NOL  carryforwards  and other net  deferred  tax assets as of such
date, due to uncertainty of their realization.  During the fiscal year ended May
31, 1999, the Company  utilized  approximately  $0.9 million of  Pre-Acquisition
NOLs and also determined that approximately $1.0 million of Pre-Acquisition NOLs

                                       26
<PAGE>
were  realizable.  As such, the Company reduced the valuation  allowance by $0.7
million and recorded a corresponding reduction of goodwill.  During fiscal 1999,
the Company also increased the valuation allowance on certain other deferred tax
assets,  not  related to the RG  Acquisition,  by  approximately  $0.5  million,
resulting in a valuation allowance of $2.6 million as of May 31, 1999.

     During  the  fiscal  year  ended  May  31,  2000,   the  Company   utilized
approximately  $0.4 million of  Pre-Acquisition  NOLs and also  determined  that
approximately $1.9 million of Pre-Acquisition NOLs were realizable. As such, the
Company  reduced  the  valuation  allowance  by  $0.7  million  and  recorded  a
corresponding  reduction  of  goodwill.  During  fiscal  2000,  the Company also
reduced the  valuation  allowance  on certain  other  deferred  tax assets,  not
related to the RG Acquisition,  by  approximately  $0.2 million,  resulting in a
valuation allowance of $1.7 million as of May 31, 2000.

     No  adjustments  to the  valuation  allowance  on deferred  tax assets were
recorded  during  the fiscal  year ended May 31,  2001.  Future  recognition  of
additional amounts of Pre-Acquisition NOLs would result in further reductions of
goodwill of up to $1.4 million and  reductions in the provision for income taxes
of $0.3 million.

11. RELATED PARTY TRANSACTIONS:

     Professional and advisory fees and expense  reimbursements of approximately
$0.4 million, $0.3 million and $0.3 million were paid to certain stockholders or
their  affiliates  during the fiscal  years ended May 31,  2001,  2000 and 1999,
respectively.

     In December  2000,  the Company  borrowed  $1.0  million  under a revolving
subordinated  promissory  note  ("Subordinated  Note") with the Johnston  Family
Charitable  Remainder  Unitrust  #3  ("Johnston  Trust"),  of which  Richard  P.
Johnston, a director, and the CEO and Chairman of the Board of the Company, is a
Trustee.  Partial  repayments  of the  Subordinated  Note were made in March and
April  2001 and the  balance  was repaid in full  during May 2001.  While it was
outstanding,  the  Subordinated  Note accrued interest at a fixed annual rate of
13% and was  subordinate  to both  the FMP and RG bank  credit  facilities.  The
Johnston Trust had an option to convert the indebtedness into RP common stock at
an exchange  ratio of one share for every  $1.00 of  outstanding  principal  and
accrued  interest  that was not  repaid in full on or before May 31,  2001.  The
Johnston  Trust  conversion  rights  were  limited  to  25,000  shares  prior to
stockholder approval.

12. FOREIGN SALES:

     The Company has export  sales to  customers  located  primarily  throughout
Japan,   Australia,   the  United   Kingdom  and  Canada.   Foreign  sales  were
approximately 23%, 32% and 29% of the Company's sales for the fiscal years ended
May 31, 2001, 2000 and 1999,  respectively.  The following table  summarizes the
Company's sales by major worldwide  regions for the three fiscal years ended May
31, 2001 (in thousands):

                        2001         2000         1999
                      -------      -------      -------
United States         $23,144      $20,334      $16,607
Japan                   5,869        8,210        5,797
Other                     984        1,555          991
                      -------      -------      -------
Total                 $29,997      $30,099      $23,395
                      =======      =======      =======

13. BENEFIT PLANS:

401(K) PLAN -

     The Company  sponsors a defined  contribution  benefit  plan under  Section
401(k) of the Internal Revenue Code. Each year, eligible  participants may elect
to make salary  reduction  contributions up to the lesser of 15% of compensation
or the annual maximum contribution  established by the Internal Revenue Service.
Participants  may also make  voluntary  after-tax  contributions  to the defined
contribution  benefit plan.  Employer  contributions are  discretionary  and, to
date, the Company has not contributed to the defined contribution benefit plan.

                                       27
<PAGE>
PENSION PLAN -

     Approximately  70% of the  Company's  work force is covered by a collective
bargaining  agreement.  The Company sponsors the FM Precision Golf Manufacturing
Corp.  Pension Plan for Represented Hourly Wage Employees (the "Union Plan") for
the benefit of its union  employees.  The Company  funds the Union Plan based on
actuarial  determined  amounts  sufficient  to meet the  benefits  to be paid to
participants  under the Union Plan.  Contributions  are  intended to provide not
only for benefits  attributed to service to date but also for those  expected to
be earned in the future.

     For the  years  ended  May 31,  2001 and 2000,  the  reconciliation  of the
projected benefit obligation was (in thousands):

                                                      2001      2000
                                                     -----     -----
Beginning of year projected benefit obligation       $ 368     $ 382
Service cost                                            92        98
Interest cost                                           29        22
Actuarial (gain) loss                                   60      (134)
                                                     -----     -----
End of year projected benefit obligation             $ 549     $ 368
                                                     =====     =====

     The  reconciliation  of the  funded  status of the Union Plan as of May 31,
2001 and 2000 was (in thousands):

                                                      2001      2000
                                                     -----     -----
Projected benefit obligation                         $(549)    $(368)
Plan assets at fair value                              351       265
                                                     -----     -----
Funded status (accrued benefit cost)                  (198)     (103)
Minimum pension liability adjustment                    --       (73)
                                                     -----     -----
Net amount recognized                                $(198)    $(176)
                                                     =====     =====

     The  reconciliation of fair value of assets of the Union Plan as of May 31,
2001 and 2000 was (in thousands):

                                                      2001      2000
                                                     -----     -----
Beginning of year fair value of assets               $ 265     $ 131
Employer contributions                                 114       119
Actual return on plan assets                           (28)       15
                                                     -----     -----
End of year fair value of assets                     $ 351     $ 265
                                                     =====     =====

     The components of net pension cost for the three fiscal years ended May 31,
2001 were (in thousands):

                                            2001      2000      1999
                                           -----     -----     -----
Service cost                               $  92     $  98     $  88
Interest cost                                 29        22        13
Expected return on assets                    (17)       (4)       (3)
Prior year (gain) loss                        (2)       --        --
                                           -----     -----     -----
Net periodic pension cost                  $ 102     $ 116     $  98
                                           =====     =====     =====

     A summary of the Company's key  actuarial  assumptions  as of May 31, 2001,
2000 and 1999 were as follows:

                                                    2001       2000       1999
                                                    ----       ----       ----
Discount rate                                       7.16%      7.75%      6.75%
Expected long-term rate of return on assets         9.00%      9.00%      9.00%

14. INFORMATION ON SEGMENTS:

     The Company has two reportable segments in continuing operations: golf club
shafts and golf club grips. The accounting policies of the segments are the same
as those  described  in the  summary of  significant  accounting  policies.  The
Company  evaluates the performance of these segments based on segment  operating
income or loss and cash flows. The Company allocates certain administrative

                                       28
<PAGE>
expenses  to  segments.  The  amounts in this  illustration  are the  amounts in
reports used by the chief operating officer (in thousands):

                                               YEAR ENDED MAY 31, 2001
                                          --------------------------------
                                          GOLF CLUB   GOLF CLUB
                                           SHAFTS       GRIPS       TOTAL
                                          --------    --------    --------
Net sales                                 $ 26,070    $  3,927    $ 29,997
Depreciation and amortization                  564         542       1,106
Nonrecurring expenses                           --         477         477
Operating income (loss)                      1,042        (945)         97
Interest expense                               799          89         888
Assets                                      14,560      16,563      31,123
Capital expenditures                           691         496       1,187

Total assets for reportable segments                              $ 31,123
Assets of discontinued operations                                       19
Elimination of investment in subsidiary                             (5,935)
                                                                  --------
Consolidated total assets                                         $ 25,207
                                                                  ========

                                               YEAR ENDED MAY 31, 2000
                                          --------------------------------
                                          GOLF CLUB   GOLF CLUB
                                           SHAFTS       GRIPS       TOTAL
                                          --------    --------    --------
Net sales                                 $ 25,559    $  4,540    $ 30,099
Depreciation and amortization                  384         774       1,158
Operating income (loss)                      2,004        (141)      1,863
Interest expense                               575          69         644
Assets                                      13,488      17,475      30,963
Capital expenditures                         1,838         327       2,165

Total assets for reportable segments                              $ 30,963
Assets of discontinued operations                                       43
Elimination of investment in subsidiary                             (6,064)
                                                                  --------
Consolidated total assets                                         $ 24,942
                                                                  ========

                                               YEAR ENDED MAY 31, 1999
                                          --------------------------------
                                          GOLF CLUB   GOLF CLUB
                                           SHAFTS       GRIPS       TOTAL
                                          --------    --------    --------
Net sales                                 $ 19,185    $  4,210    $ 23,395
Depreciation and amortization                  288         651         939
Gain on termination of manufacturing
  supply contract                               --         865         865
Operating income                             1,494       1,112       2,606
Interest expense                               708          86         794
Assets                                      11,815      18,927      30,742
Capital expenditures                           789         151         940

Total assets for reportable segments                              $ 30,742
Assets of discontinued operations                                      162
Elimination of investment in subsidiary                             (6,294)
                                                                  --------
Consolidated total assets                                         $ 24,610
                                                                  ========

                                       29
<PAGE>
15.  CONCENTRATION OF CREDIT RISK:

     The  Company is subject to a  concentration  of credit  risk as a result of
sales  to  its  significant   customers  including   TaylorMade  -  adidas  Golf
("TaylorMade"),  its  exclusive  Japanese  distributor  ("Precision  Japan") and
Callaway Golf Company ("Callaway") which, in the aggregate, represented 60%, 50%
and 49% of the  Company's  total net sales for the  fiscal  years  ended May 31,
2001, 2000 and 1999, respectively.  TaylorMade accounted for 21%, 18% and 15% of
total net sales  during  the fiscal  years  ended May 31,  2001,  2000 and 1999,
respectively.  Precision Japan accounted for 20%, 27% and 25% of total net sales
during fiscal 2001, 2000 and 1999, respectively.  Callaway accounted for 19%, 5%
and 9% of total net sales during fiscal 2001, 2000 and 1999,  respectively.  The
outstanding receivable balances from TaylorMade, Precision Japan and Callaway as
of May 31, 2001 were $0.8 million, $0.6 million and $1.6 million,  respectively.
To reduce its credit risk, the Company requires letter of credit agreements from
Precision Japan.

     The Company has two long-term  agreements  with Precision Japan which grant
exclusive distribution rights for sale of the Company's golf club grips and golf
club  shafts in Japan and  certain  other  Asian  countries.  The grip and shaft
agreements expire in January 2002 and July 2002, respectively.  The Company does
not have supply agreements with TaylorMade or Callaway. The loss of sales to any
of these  companies  could have a  significant  adverse  impact on the Company's
financial condition and results of operations.

16.  COMMITMENTS AND CONTINGENCIES:

LITIGATION -

     The  Company  is  from  time  to  time a party  to  various  routine  legal
proceedings which are incidental to the Company's business.  Management consults
with legal counsel on all such matters and management  believes,  except for the
following  environmental  matters,  that none of the current routine proceedings
will have a material  adverse  effect on the  Company's  financial  condition or
future operating results.

ENVIRONMENTAL MATTERS -

     In May 1996, the Company acquired  substantially all the assets of the golf
club shaft  manufacturing  business of  Brunswick  Corporation  (NYSE:  BC) (the
"Brunswick  Acquisition").  Included in the acquired assets were land, buildings
and equipment at the Company's Torrington,  Connecticut  manufacturing  facility
(the "FMP plant").  In  conjunction  with the Brunswick  Acquisition,  Brunswick
Corporation  ("Brunswick")  agreed  to  indemnify  the  Company  from  potential
liability  arising from certain  environmental  matters and to remediate certain
environmental  conditions  which  existed  at  the  FMP  plant  on the  date  of
acquisition.  Brunswick has engaged an environmental  consulting firm to perform
testing  at the  FMP  plant  and is in  the  process  of  developing  a plan  of
remediation.  The Company has engaged an environmental consulting firm to assist
in the development of the plan of  remediation.  Failure of Brunswick to fulfill
its obligations  under the asset purchase contract could have a material adverse
effect on the Company's financial condition and results of operations.

     Prior to the  Brunswick  Acquisition,  the FMP plant was listed in the U.S.
Environmental Protection Agency's ("EPA") Comprehensive  Environmental Response,
Compensation and Liability Information System ("CERCLIS").  A contractor for the
EPA  performed an assessment of the FMP plant in January 1992 and, in June 1992,
the  site  was  deferred  from  the  CERCLIS  inventory  to the  EPA's  Resource
Conservation  and Recovery Act ("RCRA")  program.  During calendar 2000, the EPA
reviewed the status of the property, concluded that the FMP plant is not subject
to  corrective  action under RCRA and  returned  the site to its active  CERCLIS
inventory.  In November 2000 and April 2001, a contractor  for the EPA performed
another site assessment and took samples from the property of the FMP plant. The
Company  anticipates  that a report  from the EPA with the  results of this work
will be received prior to April 2002. The Company believes that, pursuant to the
Brunswick  Acquisition   agreement,   Brunswick  has  an  obligation  under  the
Connecticut  Transfer Act (the "Act") to remediate any environmental issues that
fall  within  the  scope  of the  Act.  The  Company  expects  that,  if the EPA
identifies any environmental  issues,  they would be issues that fall within the
scope of the Act. There is not sufficient  information at this time to determine
what action,  if any, the EPA may pursue and what effect, if any, it may have on
the Company's financial condition and results of operations.

     In April 2000, the Company submitted information regarding the disposal and
treatment of waste  materials  from the FMP plant during the period from 1982 to
1997 to assist the EPA in its investigation of the former National Oil Services,

                                       30
<PAGE>
Inc. Superfund site in West Haven, Connecticut. National Oil Services, Inc. was,
prior to its bankruptcy, a contractor used by Brunswick, and to a limited degree
by the Company,  to treat and dispose of  non-hazardous  waste oils from the FMP
plant.  In June 2001,  the  Company  executed a consent  decree with the EPA and
agreed to pay  approximately  $5,000 in full satisfaction of its liability under
this matter.  The Company is currently  negotiating  with Brunswick to determine
the portion of the payment for which each party is responsible.

     In October 2000,  the Company  received a notice of violation  ("NOV") from
the State of Connecticut Department of Environmental Protection ("DEP") alleging
that various effluent  discharge  samples during the period from January 2000 to
September 2000 were in violation of authorized  limits under an existing  permit
for the  discharge  of  treated  wastewater  from  the FMP  plant.  The  Company
submitted  its  response  to the NOV in December  2000 and,  in April 2001,  the
Company received a draft consent order from the DEP related to this matter.  The
Company is  currently  negotiating  with the DEP prior to entering  into a final
consent order. The Company does not anticipate,  however, that the conditions of
the draft  consent  order  will be  significantly  modified.  Terms of the draft
consent order include,  among other things, that the Company pay a civil penalty
of $0.2 million, submit to various compliance audits, and complete a feasibility
study to determine if the discharge of treated wastewater from the FMP plant can
be reduced,  diverted to another source or eliminated  entirely.  The Company is
currently evaluating its options to reach compliance with the terms of the draft
consent  order.  Management  believes it is  possible  that the  proposed  civil
penalty will be slightly  reduced when the final  consent  order is executed.  A
provision  has been  recorded in the amount of $0.15  million  for the  proposed
civil  penalty and is  reflected as a component  of  Environmental  Costs in the
accompanying  consolidated statement of operations for the fiscal year ended May
31, 2001.  Management  believes that significant future capital  expenditures in
excess of $0.3  million  may be made at the FMP plant  during  the  fiscal  year
ending May 31, 2002 to comply with the terms of the consent order.

     Environmental  Costs related to the various matters discussed above totaled
$0.4 million and $0.1 million, net of recoveries,  during the fiscal years ended
May 31, 2001 and 2000, respectively.

17.  QUARTERLY FINANCIAL DATA (UNAUDITED):

     Provided below is selected unaudited quarterly financial data for the three
fiscal years ended May 31, 2001 (in thousands except per share data):

<TABLE>
<CAPTION>
                                                             YEAR ENDED MAY 31, 2001
                                             -------------------------------------------------------
                                               FIRST      SECOND       THIRD      FOURTH      TOTAL
                                             --------    --------    --------    --------   --------
<S>                                          <C>         <C>         <C>         <C>        <C>
Net sales                                    $  6,978    $  5,492    $  7,715    $  9,812   $ 29,997
Gross profit                                    2,407         640       2,057       2,910      8,014
Net income (loss)                                 105      (1,202)        151         362       (584)

Per share information:
    Basic and diluted -
      Net income (loss)                          0.02       (0.21)       0.03        0.06      (0.10)

                                                             YEAR ENDED MAY 31, 2000
                                             -------------------------------------------------------
                                               FIRST      SECOND       THIRD      FOURTH      TOTAL
                                             --------    --------    --------    --------   --------
Net sales                                    $  6,559    $  6,443    $  7,041    $ 10,056   $ 30,099
Gross profit                                    2,447       1,824       1,987       3,142      9,400
Net income                                        294          64          35         477        870

Per share information:
    Basic and diluted -
      Net income                                 0.05        0.01        0.01        0.08       0.15

                                                             YEAR ENDED MAY 31, 1999
                                             -------------------------------------------------------
                                               FIRST      SECOND       THIRD      FOURTH      TOTAL
                                             --------    --------    --------    --------   --------
Net sales                                    $  6,095    $  3,883    $  5,148    $  8,269   $ 23,395
Gross profit                                    2,213       1,479       1,454       3,045      8,191
Income (loss) from continuing operations          213        (112)       (812)        987        276
Income (loss) from discontinued operations       (210)       (179)       (127)    164 (a)       (352)
Loss on sale of discontinued operations            --          --      (1,214)    386 (a)       (828)
                                             --------    --------    --------    --------   --------
Net income (loss)                                   3        (291)     (2,153)      1,537       (904)

Per share information:
    Basic and diluted -
      Income (loss) from continuing
       operations                                0.04       (0.02)      (0.14)       0.17       0.05
      Net income (loss)                          0.00       (0.05)      (0.38)       0.27      (0.16)
</TABLE>

----------
(a)  Represents tax benefits realized from discontinued  operations,  which were
     not available prior to the fourth quarter of fiscal 1999.

                                       31
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information  regarding the Company's directors is set forth at "ELECTION OF
DIRECTORS;   Business  Experience,"  and  information  regarding  the  Company's
executive officers is set forth at "ELECTION OF DIRECTORS;  Executive  Officers"
in the Company's  Proxy  Statement for its 2001 Annual  Meeting of  Stockholders
(the  "2001  Proxy  Statement")  which  information  is  incorporated  herein by
reference.   With  the  exception  of  the  foregoing  information  specifically
incorporated  by reference into this Form 10-K Report,  the Company's 2001 Proxy
Statement is not being filed as a part hereof.

     Information  relating to compliance  with Section 16(a) of the Exchange Act
is set forth at "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" in the
2001 Proxy Statement which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

     The  information   required  by  this  item  is  set  forth  at  "EXECUTIVE
COMPENSATION" and "COMPENSATION  COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION"
in the  2001  Proxy  Statement  which  information  is  incorporated  herein  by
reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information  required by this item is set forth at "SECURITY  OWNERSHIP
OF PRINCIPAL  STOCKHOLDERS,  DIRECTORS,  NOMINEES AND EXECUTIVE OFFICERS" in the
2001 Proxy Statement which information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The   information   required   by  this  item  is  set  forth  at  "CERTAIN
TRANSACTIONS" and "COMPENSATION  COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION"
in the  2001  Proxy  Statement  which  information  is  incorporated  herein  by
reference.

                                       32
<PAGE>
                                     PART IV

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

     (a) Financial Statements.

         Report of Independent Public Accountants...........................  13
         Consolidated Balance Sheets........................................  14
         Consolidated Statements of Operations..............................  15
         Consolidated Statements of Stockholders' Equity and
          Comprehensive Income (Loss).......................................  16
         Consolidated Statements of Cash Flows..............................  17
         Notes to Consolidated Financial Statements.........................  18

     (b) Reports on Form 8-K.

     No current  reports on Form 8-K were filed  during the last  quarter of the
period covered by this report.

     (c) Exhibits.

     The Index to Exhibits and required  Exhibits  are  included  following  the
Financial Statement Schedule beginning on page 37 of this report.

     (d) Financial Statement Schedule.

         Schedule II - Valuation and Qualifying Accounts and Reserves......  S-1

                                       33
<PAGE>
                                   SIGNATURES

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

Dated: August 1, 2001                         ROYAL PRECISION, INC.
                                                (the "Registrant")

                                              By /s/ Thomas A. Schneider
                                                 -------------------------------
                                                 Thomas A. Schneider, President
                                                 and Chief Operating Officer

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities indicated on the 1st day of August, 2001.

              NAME                                TITLE (CAPACITY)
              ----                                ----------------

/s/ Thomas A. Schneider                 President and Chief Operating Officer
----------------------------------      (Principal Executive officer)
Thomas A. Schneider


/s/ Kevin L. Neill *                    Vice President-finance, Chief Financial
----------------------------------      Officer (Principal financial officer)
Kevin L. Neill


/s/ Richard P. Johnston *               Director
----------------------------------
Richard P. Johnston

/s/ David E. Johnston *                 Director
----------------------------------
David E. Johnston

/s/ Raymond J. Minella *                Director
----------------------------------
Raymond J. Minella

/s/ Charles S. Mechem, Jr. *            Director
----------------------------------
Charles S. Mechem, Jr.

/s/ Christopher A. Johnston *           Director
----------------------------------
Christopher A. Johnston

/s/ Kenneth J. Warren *                 Director
----------------------------------
Kenneth J. Warren

*    Thomas A. Schneider, by signing his name hereto, does sign this document on
     behalf of the persons  indicated above pursuant to a Power of Attorney duly
     executed by such persons.

By: /s/ Thomas A. Schneider
    ---------------------------------------
    Thomas A. Schneider, Attorney in Fact
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES

                                   SCHEDULE II
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                 FOR THE YEARS ENDED MAY 31, 2001, 2000 AND 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           CHARGED TO
                                            BALANCE AT     (DEDUCTED                                BALANCE AT
                                           BEGINNING OF   FROM) COSTS      OTHER       OTHER          END OF
                                              PERIOD      AND EXPENSES   ADDITIONS   DEDUCTIONS       PERIOD
                                              ------      ------------   ---------   ----------       ------
<S>                                        <C>            <C>            <C>         <C>            <C>
Allowance for doubtful accounts:
     Year ended May 31, 1999                  $  602         $   24      $     --      $ (193)        $  433
     Year ended May 31, 2000                     433             40            --        (199)           274
     Year ended May 31, 2001                     274             14            --        (101)           187



Deferred tax asset valuation allowance:
     Year ended May 31, 1999                  $2,821         $  478      $     --      $ (650)(a)     $2,649
     Year ended May 31, 2000                   2,649           (162)           --        (742)(a)      1,745
     Year ended May 31, 2001                   1,745             --            --          --          1,745
</TABLE>

----------
(a)  Reduction  in  goodwill  related  to  preacquisition   net  operating  loss
     carryforwards.

                                       S-1
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                           PAGE IN
                                                                                         SEQUENTIALLY
EXHIBIT                                                                                  NUMBERED COPY
-------                                                                                  -------------
<S>            <C>                                                                       <C>
(3)            Certificate of Incorporation and Bylaws                                         *

3.1            Amended and Restated  Certificate of  Incorporation of registrant               *
               (incorporated  by  reference  to Exhibit 3.1 to the  registrant's
               Form 10-Q for the quarter ended  November 30, 1999; the "November
               1999 10-Q").

3.2            Bylaws of Royal  Precision,  Inc.  (incorporated  by reference to               *
               Exhibit 3.2 to Form S-4, No. 333-28841; the "Form S-4").

(4)            Instruments defining the rights of holders                                      *

4.1            See  Articles  FOUR,  FIVE and SEVEN of the Amended and  Restated               *
               Certificate of Incorporation  of the registrant  (incorporated by
               reference to Exhibit 3.1 to the November 1999 10-Q).

4.2            See Article I, Sections 2.1 and 2.2 of Article II and Section 7.3               *
               of  Article   VII  of  the  Bylaws  of  Royal   Precision,   Inc.
               (incorporated by reference to Exhibit 3.2 to the Form S-4).

(10)           Material Contracts                                                              *

10.1           Asset  Purchase  Agreement  dated  May 31,  1996  with  Brunswick               *
               Corporation  (incorporated  by reference to Exhibit 10.1.1 of the
               Form S-4).

10.2           Management  Stockholders Agreement dated May 29, 1996 with Ronald               *
               L. Chalmers,  et al. (incorporated by reference to Exhibit 10.2.4
               of the Form S-4).

10.3           1997 Stock  Option  Plan dated March 13,  1997  (incorporated  by               *
               reference to Exhibit 10.2.5 of the Form S-4). **

10.4           Form of Option Agreement with those not parties to the Management               *
               Stockholders  Agreement  (incorporated  by  reference  to Exhibit
               10.2.6 of the Form S-4).

10.5           Form of  Option  Agreement  with  those  who are  parties  to the               *
               Management  Stockholders Agreement  (incorporated by reference to
               Exhibit 10.2.7 of the Form S-4).

10.6           Credit and Security  Agreement  dated as of October 8, 1998 among               *
               FM Precision Golf  Manufacturing  Corp.,  FM Precision Golf Sales
               Corp.  and  Norwest  Business  Credit,   Inc.   (incorporated  by
               reference to Exhibit 10.1 of the registrant's Form 10-QSB for the
               quarter ended August 31, 1998; the "August 1998 10-QSB").

10.7           Amended and Restated  Credit and Security  Agreement  dated as of               *
               October 8, 1998 among Royal Grip, Inc.,  Roxxi,  Inc. and Norwest
               Business Credit, Inc.  (incorporated by reference to Exhibit 10.2
               of the August 1998 10-QSB).

10.8           Agreement  between Royal Grip, Inc. and Precision FM Japan,  Ltd.               *
               dated July 12, 1991 (incorporated by reference to Exhibit 10.7 to
               RG's 1996 Form 10-K).

10.9           Manufacturers'  Representative Agreement dated March 1, 1979 with               *
               Union Tubular  Products,  Brunswick  Corporation  and M.A.  Clark
               (incorporated by reference to Exhibit 10.4.6 of the Form S-4).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                           PAGE IN
                                                                                         SEQUENTIALLY
EXHIBIT                                                                                  NUMBERED COPY
-------                                                                                  -------------
<S>            <C>                                                                       <C>
10.10          Distributor  Agreement  effective  August 20, 1990 with Brunswick               *
               and Infiniti Golf (incorporated by reference to Exhibit 10.4.7 of
               the Form S-4).

10.11          Royal  Precision,  Inc.  Stock Option Plan dated  October 5, 1997               *
               (incorporated  by reference to Exhibit 10.32 of the  registrant's
               Form 10-KSB for the year ended May 31, 1998). **

10.12          Asset Purchase  Agreement  dated February 26, 1999 between Roxxi,               *
               Inc. and Paramount Headwear,  Inc.  (incorporated by reference to
               Exhibit 2.1 of the registrant's Form 8-K dated March 22, 1999).

10.13          Asset Purchase Agreement dated March 11, 1999 between Roxxi, Inc.               *
               and Big Play, Inc.  (incorporated  by reference to Exhibit 2.2 of
               the registrant's Form 8-K dated March 22, 1999).

10.14          Guaranty by the Registrant dated March 11, 1999  (incorporated by               *
               reference to Exhibit 2.3 of the registrant's Form 8-K dated March
               22, 1999).

10.15          First  Amendment  to Amended  and  Restated  Credit and  Security               *
               Agreement and Waiver of Defaults between Royal Grip, Inc., Roxxi,
               Inc. and Norwest Business  Credit,  Inc. and  Acknowledgment  and
               Agreement  of  Guarantor  dated March 16, 1999  (incorporated  by
               reference to Exhibit  10.16 of the  registrant's  Form 10-KSB for
               the year ended May 31, 1999; the "1999 Form 10-KSB").

10.16          Second  Amendment to Credit and Security  Agreement and Waiver of               *
               Defaults  between Royal Grip, Inc.,  Roxxi,  Inc. and Wells Fargo
               Business Credit, Inc. (formerly known as Norwest Business Credit,
               Inc.) dated as of April 13, 1999  (incorporated  by  reference to
               Exhibit 10.17 of the 1999 Form 10-KSB).

10.17          Amendment to Credit and Security Agreement and Waiver of Defaults               *
               between FM Precision Golf Manufacturing  Corp., FM Precision Golf
               Sales Corp. and Wells Fargo Business Credit, Inc. (formerly known
               as Norwest  Business  Credit,  Inc.)  dated as of April 13,  1999
               (incorporated  by  reference  to  Exhibit  10.18 of the 1999 Form
               10-KSB).

10.18          Personal  Services  Agreement  entered into as of August 31, 1999               *
               between Danny Edwards and Royal Precision,  Inc. (incorporated by
               reference to Exhibit 10.1 of the  registrant's  Form 10-Q for the
               quarter ended August 31, 1999). **

10.19          Royal  Precision,  Inc.  Stock  Option Plan  (restated to reflect               *
               amendments  adopted by the Board of  Directors  on  November  30,
               1999)  (incorporated by reference to Exhibit 10.1 of the November
               1999 10-Q).

10.20          Second  Amendment  to Credit and  Security  Agreement  between FM               *
               Precision Golf Manufacturing Corp., FM Precision Golf Sales Corp.
               and Wells Fargo  Business  Credit,  Inc.  dated November 10, 1999
               (incorporated  by reference to Exhibit 10.2 of the November  1999
               10-Q).

10.21          Third  Amendment  to Amended  and  Restated  Credit and  Security               *
               Agreement  between Royal Grip,  Inc., Royal Grip Headwear Company
               and Wells Fargo  Business  Credit,  Inc.  dated November 10, 1999
               (incorporated  by reference to Exhibit 10.3 of the November  1999
               10-Q).

10.22          Third  Amendment  to Credit  and  Security  Agreement  between FM               *
               Precision Golf Manufacturing Corp., FM Precision Golf Sales Corp.
               and Wells  Fargo  Business  Credit,  Inc.,  dated  March 24, 2000
               (incorporated  by reference to Exhibit 10.1 of registrant's  Form
               10-Q for the quarter ended  February 29, 2000; the "February 2000
               10-Q").
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10.23          Fourth  Amendment  to Amended and  Restated  Credit and  Security               *
               Agreement  between Royal Grip,  Inc., Royal Grip Headwear Company
               and Wells  Fargo  Business  Credit,  Inc.  dated  March 24,  2000
               (incorporated  by reference to Exhibit 10.2 of the February  2000
               10-Q).

10.24          Fourth  Amendment  to Credit and  Security  Agreement  between FM               *
               Precision Golf Manufacturing Corp., FM Precision Golf Sales Corp.
               and  Wells  Fargo  Business  Credit,  Inc.  dated  August 3, 2000
               (incorporated  by reference to Exhibit 10.24 of the  registrant's
               Form 10-K for the year ended May 31, 2000; the "2000 Form 10-K").

10.25          Fifth  Amendment  to Amended  and  Restated  Credit and  Security               *
               Agreement  between Royal Grip,  Inc., Royal Grip Headwear Company
               and  Wells  Fargo  Business  Credit,  Inc.  dated  August 3, 2000
               (incorporated  by  reference  to  Exhibit  10.25 of the 2000 Form
               10-K.

10.26          Royal  Precision,  Inc.  Stock  Option Plan  (restated to reflect               *
               amendments approved by stockholders to increase shares covered by
               Plan)   (incorporated   by  reference  to  Exhibit  10.1  of  the
               registrant's Form 10-Q for the quarter ended August 31, 2000). **

10.27          Fifth  Amendment  to Credit  and  Security  Agreement  between FM
               Precision Golf Manufacturing Corp., FM Precision Golf Sales Corp.
               and Wells Fargo  Business  Credit,  Inc.  dated  November 8, 2000
               (incorporated  by reference  to Exhibit 10.1 of the  registrant's
               Form 10-Q for the quarter ended  November 30, 2000; the "November
               2000 10-Q").

10.28          Sixth  Amendment  to Amended  and  Restated  Credit and  Security               *
               Agreement  between Royal Grip,  Inc., Royal Grip Headwear Company
               and Wells Fargo  Business  Credit,  Inc.  dated  November 8, 2000
               (incorporated  by reference to Exhibit 10.2 of the November  2000
               10-Q).

10.29          Revolving Subordinated Promissory Note from Royal Precision, Inc.               *
               to the Johnston  Family  Charitable  Remainder  Unitrust #3 dated
               December 7, 2000  (incorporated  by  reference to Exhibit 10.3 of
               the November 2000 10-Q).

10.30          Subordination  Agreement  dated  December 7, 2000 by the Johnston               *
               Family Charitable  Remainder Unitrust #3 for the benefit of Wells
               Fargo Business Credit, Inc. (incorporated by reference to Exhibit
               10.4 of the November 2000 10-Q).

10.31          Sixth  Amendment  to Credit  and  Security  Agreement  between FM               *
               Precision Golf Manufacturing Corp., FM Precision Golf Sales Corp.
               and  Wells  Fargo  Business  Credit,  Inc.  dated  March 9,  2001
               (incorporated  by reference  to Exhibit 10.1 of the  registrant's
               Form 10-Q for the quarter ended  February 28, 2001; the "February
               2001 10-Q").

10.32          Seventh  Amendment  to Amended and  Restated  Credit and Security               *
               Agreement  between Royal Grip,  Inc., Royal Grip Headwear Company
               and  Wells  Fargo  Business  Credit,  Inc.  dated  March 9,  2001
               (incorporated  by reference to Exhibit 10.2 of the February  2001
               10-Q).

10.33          Amendment No. 1 to Revolving  Subordinated  Promissory  Note from               *
               Royal Precision, Inc. to the Johnston Family Charitable Remainder
               Unitrust #3 dated March 16, 2001  (incorporated  by  reference to
               Exhibit 10.3 of the February 2001 10-Q).

10.34          Amendment,  Assignment and Assumption of Lease  Agreement by Bell             41
               Sports,  Inc.,  Royal Grip,  Inc.  and Howard Lake Ranch,  L.L.C.
               dated April 27, 2001.

10.35          Seventh  Amendment  to Credit and Security  Agreement  between FM             46
               Precision Golf Manufacturing Corp., FM Precision Golf Sales Corp.
               and Wells Fargo Business Credit, Inc. dated May 30, 2001.
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10.36          Eighth  Amendment  to Amended and  Restated  Credit and  Security             57
               Agreement  between Royal Grip,  Inc., Royal Grip Headwear Company
               and Wells Fargo Business Credit, Inc. dated May 30, 2001.

10.37          Amendment No. 1, dated July 11, 2001, to Agreement  between Royal             66
               Grip,  Inc.  and  Precision FM Japan,  Ltd.  dated July 12, 1991.

21             Subsidiaries of the Registrant.                                               67

(23)           Consents

23.1           Consent of Independent  Public  Accountants - Arthur Andersen LLP             68

(24)           Powers of Attorney

24.1           Powers of Attorney                                                            69

24.2           Certified  resolution  of the  Registrant's  Board  of  Directors             76
               authorizing  officers  and  directors  signing  on  behalf of the
               Company to sign pursuant to a power of attorney.

99.1           Private  Securities  Litigation  Reform  Act of 1995 safe  harbor             77
               compliance statement for forward-looking statements.
</TABLE>

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*    Incorporated by reference.
**   Compensatory plan for executive officers and directors.

The Registrant  will furnish a copy of any exhibit to a beneficial  owner of its
securities or to any person from whom a proxy was  solicited in connection  with
the Registrant's  most recent Annual Meeting of Stockholders upon the payment of
a fee of fifty cents ($.50) a page.